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, 1999
[ ] 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 - 60,427,612 as of May 13, 1999.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
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RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value and per share amounts)
Mar. 31, Dec. 31,
1999 1998
-------- --------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 9,190 $15,237
Accounts receivable, less allowances
of $219 and $134, respectively 3,771 726
Inventories 4,923 5,304
Prepaid expenses 159 170
Other current assets 94 94
--------- ---------
Total current assets 18,137 21,531
Property, plant and equipment, net 6,900 7,158
Intangible assets, net 4,771 4,658
--------- ---------
$29,808 $33,347
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 2,309 $ 2,535
Accrued liabilities 760 1,784
Accrued royalties 280 305
License rights -- 550
Deferred revenue 843 760
Common stock price adjustment 3,224 3,224
Promissory note and accrued interest, related party 7,292 7,127
--------- ---------
Total liabilities 14,708 16,285
--------- ---------
Stockholders' Equity:
Preferred stock, $0.01 par value,
10,000 shares authorized: 10 and 10 shares
issued and outstanding, respectively; entitled
to $1,000 per share plus accrued and unpaid
dividends in liquidation 9,484 8,966
Common stock, $0.01 par value, 75,000 shares
Authorized; 60,428 and 60,428 shares issued
and outstanding, respectively 604 604
Additional paid-in capital 165,433 165,433
Accumulated deficit (160,421) (157,941)
--------- ---------
Total stockholders' equity 15,100 17,062
--------- ---------
$29,808 $33,347
========= =========
See accompanying notes to consolidated financial statements.
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RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
(in thousands, except per share amounts)
1999 1998
-------- --------
Revenue:
Product sales $ 4,233 $ 4,273
License and development fees 500 --
Customer-sponsored research and development 806 589
---------- ----------
5,539 4,862
---------- ----------
Costs and expenses:
Cost of product sales 2,417 2,626
Research and development 1,797 2,671
Customer-sponsored research and development 806 501
Sales, general and administrative 2,442 1,907
---------- ----------
7,462 7,705
---------- ----------
Operating loss (1,923) (2,843)
Interest expense, related party (165) (165)
Other income, net 128 126
---------- ----------
Net loss $(1,960) $(2,882)
========== ==========
Loss per common share:
Net loss $(1,960) $(2,882)
Dividends on convertible preferred stock (146) (100)
Accretion of discount on convertible
preferred stock (374) (220)
---------- ----------
Net loss applicable to common shares $(2,480) $(3,202)
========== ==========
Net loss per share - basic and diluted $(0.04) $(0.08)
========== ==========
Weighted average shares outstanding 60,428 37,946
========== ==========
See accompanying notes to consolidated financial statements.
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RAMTRON INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
(in thousands)
1999 1998
-------- --------
Cash flows from operating activities:
Net loss $(1,960) $(2,882)
Adjustments used to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 560 638
Loss on manufacturing contract (486) --
Changes in assets and liabilities:
Accounts receivable (3,045) 1,874
Inventories 382 (214)
Prepaid expenses 11 44
Accounts payable and accrued liabilities (788) (943)
Accrued interest, related party 165 165
Deferred revenue 83 14
Other (3) (99)
--------- ---------
Net cash used in operating activities (5,081) (1,403)
--------- ---------
Cash flows from investing activities:
Purchase of property, plant and equipment (97) (429)
Intellectual property (319) (93)
--------- ---------
Net cash used in investing activities (416) (522)
--------- ---------
Cash flows from financing activities:
Issuance of capital stock, net of expenses -- 16,022
Payments on license rights payable (550) --
--------- ---------
Net cash provided by (used in) financing activities (550) 16,022
--------- ---------
Net increase in cash and cash equivalents (6,047) 14,097
Cash and cash equivalents, beginning of period 15,237 6,193
--------- ---------
Cash and cash equivalents, end of period $ 9,190 $20,290
========= =========
See accompanying notes to consolidated financial statements.
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RAMTRON INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
- -----------------------------------------------------------------------------
NOTE 1. BASIS OF PRESENTATION AND MANAGEMENT OPINION
The accompanying consolidated financial statements at March 31, 1999 and 1998
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, 1998. The
results of operations for the period ended March 31, 1999 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 No. 130"). The purpose of SFAS No. 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 No. 130 during the first
quarter of 1998. For the periods ended March 31, 1999 and 1998, the Company
did not have any material transactions that were required to be reported in
comprehensive income as compared to its net loss.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"
("SOP 98-5"). This statement is effective for financial statements for fiscal
years beginning after December 15, 1998. In general, SOP 98-5 requires costs
of start-up activities and organization costs to be expensed as incurred.
Initial application of SOP 98-5 is reported as the cumulative effect of a
change in accounting principle. Adoption of SOP 98-5 did not have a material
impact on the Company's financial statements.
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In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133") effective for fiscal years beginning
after June 15, 1999. SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. It also
requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate and assess the
effectiveness of transactions that receive hedge accounting. SFAS No. 133 may
not be applied retroactively, and must be applied to (i) derivative
instruments and (ii) certain derivative instruments embedded in hybrid
contracts that were issued, acquired or substantively modified after
December 31, 1997 (and, at the company's election, before January 1, 1998).
Management is currently evaluating the effect SFAS No. 133 will have on the
Company's financial statements.
NOTE 3. INVENTORIES
Inventories consist of:
March 31, Dec. 31,
1999 1998
-------- --------
(in thousands)
(Unaudited)
Finished goods $2,451 $3,595
Work in process 2,472 1,660
Raw material -- 49
------ ------
Total $4,923 $5,304
====== ======
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 million bearing
interest at 12% per annum. The outstanding principal balance and accrued
interest as of March 31, 1999 under the Fund Credit Facility was $5.5 million
and $1.8 million, respectively. Pursuant to the terms of the Fund Credit
Facility, no additional borrowings are available to the Company under the
credit facility. The Fund Credit Facility is secured by a first priority 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 at a conversion price equal to
$10.5125 for each share of common stock. The amended maturity date of the
loan is June 30, 1999.
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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
The Company calculates its loss per share pursuant to Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS No. 128"). Under
SFAS No. 128, basic earnings per share is computed by dividing reported
earnings available to common stockholders by weighted average shares
outstanding. 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 including warrants and stock
options, would be anti-dilutive and thus, excluded from diluted earnings per
share.
As of March 31, 1999, the Company had several financial instruments or
obligations that could create future dilution to the Company's common
shareholders and are not currently classified as outstanding common shares of
the Company. The following table details such instruments and obligations and
the common stock comparative for each. The common stock number is based on
specific conversion or issuance assumptions pursuant to the corresponding
terms of each individual instrument or obligation.
Instrument or Obligation Common Stock
- ---------------------------------------------------- ------------
(in thousands)
Warrants, 6,989,701 exercisable at $4.15 per share
and 80,000 exercisable at $0.23 per share 7,070
Stock options outstanding as of March 31, 1999
with a weighted average exercise price per
share of $5.78 4,062
Series A Convertible Preferred Stock, 9,878 shares
outstanding as of March 31, 1999 29,804(1)
Preferred stock warrants to purchase 1,742 shares
of Series A Convertible Preferred Stock with an
exercise price of $1,000 per share 4,932(2)
Promissory note, related party, principal and
accrued interest as of March 31, 1999 totaling
$7,291,636 with a conversion price of $10.5125 694
Common stock price adjustment 2,332
------
Total 48,894
======
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(1) If all of the outstanding Preferred Stock had been converted pursuant to
the terms of the Preferred Stock agreement using the lowest closing stock
price of the first quarter 1999, ($.406 per share), the total number of
shares of common stock required for such conversion, with applicable
discount and, including accrued dividends at March 31, 1999, would have
been 29,804,406.
(2) If all of the outstanding Preferred Stock Warrants had been converted
pursuant to the terms of the Preferred Stock warrant agreements, and all
of such resulting Preferred Stock had been converted pursuant to the
terms of the Preferred Stock agreement using the lowest closing stock
price of the first quarter 1999, ($.406), the total number of shares of
common stock required for such conversion, with applicable discount, at
March 31, 1999, would have been 4,931,771.
NOTE 7. STOCKHOLDERS' EQUITY
PREFERRED STOCK PLACEMENT. In February 1998, the Company issued and sold in a
private placement 17,425 shares of Series A Convertible Preferred Stock
("Preferred Stock"), resulting in gross proceeds of approximately $17.4
million. Each share of Preferred Stock is entitled to receive cumulative
dividends at the rate of 6% per annum, payable in shares of Preferred Stock.
During the first quarter of 1999, the Company recorded $146,000 in dividends.
Except for certain exceptions, the holders of the Preferred Stock have no
voting rights. The shares of 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 Preferred
Stock remain outstanding at that time. Until September 1, 1998, the Preferred
Stock was convertible at a Conversion Price of $10.00. Thereafter, subject to
a maximum conversion price, as defined, the Conversion Price is equal to the
lowest trading price of the common stock for the 22-trading days immediately
preceding the conversion date, less a discount of 7% (beginning September 1,
1998) and increasing by 1% per month to 15% (on or after May 1, 1999). The
terms of the Preferred Stock include a cash redemption feature which allows
the Company, at its option, in lieu of the issuance of common stock, to honor
such conversions through a cash payment.
Each purchaser of the Preferred Stock has agreed to trading limitations for
the offer or sale of common stock resulting from the conversion of the
Preferred Stock. In addition, the purchasers of the 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 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.
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The conversion discount of the Preferred Stock is considered to be an
additional preferred stock dividend. During the quarter ended March 31, 1999,
the Company recorded preferred stock non-cash imputed dividends and accretion
of discount totaling $146,000 and $374,000, respectively. The imputed
dividend and accretion of discount results from certain provisions of the
Company's 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 discount computed at issuance of $3,075,000 is recorded as a
reduction of preferred stock and an increase to additional paid-in-capital.
The discount is being recognized ratably as a non-cash deemed dividend over
the applicable fourteen-month period. If shares are converted prior to the
full accretion, no additional discount is taken during the fourteen-month
period.
On October 21, 1998, the Company suspended conversions of the Preferred Stock
because the Company had issued, from its authorized shares, the maximum number
of common shares available for such conversions (22,473,840 shares). No
further conversions of the Preferred Stock will be effected until and unless
the Company's shareholders approve an authorization of additional common
stock. At the time of suspension of the Preferred Stock conversions, and as
of March 31, 1999, approximately $9.9 million face value of Preferred Stock,
plus accrued dividends, remained outstanding.
NOTE 8. CONTINGENCIES
PATENT INTERFERENCE PROCEEDING. 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.
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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 was issued
on November 19, 1998, again holding that all of the claims were patentable to
National. On January 9, 1999, the Company appealed the decision of the Patent
Office on one of the interference counts directly to the Court of Appeals for
the Federal Circuit. The Company also filed complaints in Federal District
Court seeking a review of the decision of the Patent Office on the remaining
interference counts. 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.
If the Company's patent rights that are the subject of the interference
proceeding are ultimately lost or significantly compromised, the Company would
be precluded from producing FRAM products in the United States using the
Company's existing design architecture, absent being able to obtain a suitable
license to exploit such rights. If such patent rights are ultimately awarded
to National, and if a license to such rights is not subsequently entered into
by the Company with National, National could use the patent to prevent the
manufacture, use or sale by the Company within the United States of any
products that come within the scope of such patent rights, which would include
all FRAM products as currently designed, and which would materially adversely
affect the Company. The Company has vigorously defended its patent rights in
this interference contest and will continue such efforts. 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.
PATENT INFRINGEMENT PROCEEDING. In October 1998, the Company filed a claim
for patent infringement in the United States District Court, Northern District
of California against NEC Corporation, NEC Electronics, Inc. and NEC USA, Inc.
(collectively "NEC"). The complaint claims that NEC infringed and continues
to infringe on certain patents of the Company by offering to sell and/or
selling NEC's Virtual Channel SDRAM products, and by actively inducing others
to infringe on such patents without authority or license from the Company.
The complaint seeks relief from NEC to cease its infringement activities and
requests damages be awarded to the Company resulting from the infringement
activities. The relief also asks for reimbursement of attorney's fees and
certain other relief the court deems proper. NEC has responded by denying the
infringement claims brought against them by the Company. NEC also filed
certain counterclaims against the Company, which were subsequently retracted
or stayed by the court. The Company has vigorously pursued its rights
pursuant to its intellectual property and will continue such efforts. The
Company is uncertain as to the ultimate outcome of the infringement
proceedings, as well as to the resulting effects upon the Company's financial
position or results of operations.
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LITIGATION. In November 1998, Deere Park Capital Management LLC ("Deere
Park"), a holder of the Company's Preferred Stock, filed a lawsuit against the
Company in the Court of Chancery of the State of Delaware seeking a
declaratory judgement and specific performance of the Company's alleged
obligation to convert a portion of Deere Park's shares of Preferred Stock to
common stock, as well as damages of $2.4 million plus costs and attorneys
fees. On December 16, 1998, the Company filed its answer denying the
allegations of the complaint and asserting, among other things, that the
Company had fully performed its contractual obligations with respect to the
conversions alleged in the complaint. On January 20, 1999, Deere Park moved
for permission to file an amended complaint. Shortly thereafter, in early
February 1999, Deere Park filed a second action against the Company in the
Court of Chancery for the State of Delaware. Like the proposed amended
complaint in its original lawsuit, Deere Park alleges in this second action
that the Company breached certain obligations to convert Deere Park's shares
of Preferred Stock; however, Deere Park's new complaint adds a claim for
relief and relies on different facts to support the claims asserted therein.
On February 23, 1999, the Company answered Deere Park's second action by
denying the substance of Deere Park's new allegations and raising certain
affirmative defenses that the Company previously had not raised.
While the Company believes that it has a good defense to the allegations
made by Deere Park, there can be no assurances that the Company will
ultimately prevail in this action. A successful action by Deere Park against
the Company in this matter may have a material adverse effect on the Company.
NASDAQ LISTING REQUIREMENTS. The Company must maintain certain requirements
in order to remain listed on The Nasdaq Stock Market ("Nasdaq"). These
requirements include maintaining a specified level of net tangible assets, as
defined, market capitalization or net income. Additionally, the Company must
maintain a specified level of publicly traded shares, market value of the
publicly traded shares, minimum bid price, number of market makers and
shareholders. On December 2, 1998, the Company received notification from
Nasdaq that it failed to meet the Nasdaq listing requirements for minimum bid
price. The Company requested a meeting with Nasdaq with respect to these
issues and a meeting with Nasdaq was held on April 30, 1999. At the meeting,
the Company presented its plan for compliance and requested a listing
extension from Nasdaq until July 31, 1999. Nasdaq is currently taking into
consideration the Company's Plan for compliance and request for extension and
is expected to officially notify the Company of its decision within two weeks
of April 30, 1999.
NOTE 9. SEGMENT INFORMATION
Ramtron is engaged primarily in the design, development, manufacture and sale
of specialty high-performance semiconductor memory devices. Ramtron has two
principal businesses, ferroelectric nonvolatile random access memory ("FRAM")
technology and products, and high-speed DRAM products called Enhanced-DRAM
("EDRAM") products.
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The accounting policies for determining segment net income (loss) are the same
used in the consolidated financial statements. There are no internal sales
between segments.
The following table represents segment information for the three months ended
March 31, 1999 and 1998.
1999 1998
------------------ ------------------
FRAM EDRAM FRAM EDRAM
-------- -------- -------- --------
(in thousands)
Product revenue $1,050 $3,183 $ 686 $3,587
Technology license and
development revenue 500 -- -- --
Customer-sponsored research
and development revenue 806 -- 589 --
-------- -------- -------- --------
2,356 3,183 1,275 3,587
-------- -------- -------- --------
Operating costs 3,861 3,551 4,353 3,352
-------- -------- -------- --------
Operating profit (loss) (1,505) (368) (3,078) 235
Other (50) 16 23 --
-------- -------- -------- --------
Net profit (loss) (1,555) (352) (3,055) 235
======== ======== ======== ========
Net profit (loss) excludes interest income, interest expense and special
charges of $53,000 and $62,000 in 1999 and 1998, respectively, not allocated
to business segments.
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.
Words such as "expects," "plans," "anticipates," "believes," "estimates" and
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variations of such words are intended to represent forward-looking statements.
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 might cause such a
difference include but are not limited to: (i) the timely completion of the
development and qualification for manufacturing of the Company's new EDRAM and
FRAM products; (ii) broader customer acceptance of its EDRAM and ESDRAM
products and low-density FRAM products; (iii) acceptance of new high-density
FRAM products, which may be developed; (iv) the Company's ability to
manufacture its products on a cost-effective and timely basis at 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 alliance partners' willingness to continue development
activities as they relate to their license agreements with the Company;
(vii) the effects on the Company from the common stock price adjustment with
respect to the holders of common stock issued in a December 1997 private
placement; (viii) the effect on the Company from its obligations pursuant to
its outstanding Series A Convertible Preferred Stock; (ix) the willingness of
a principal shareholder to extend the due date of an outstanding loan to the
Company; (x) future potential changes in the Company's capital structure;
(xi) the availability and related cost of future financing; (xii) the
retention of key personnel; (xiii) the outcome of the Company's patent
interference, patent infringement and litigation proceedings, and
(xiv) 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
Revenue for the first quarter of 1999 increased by 14% to $5.5 million from
the respective period in 1998. Revenues for the quarter were comprised of
product sales, a FRAM license milestone fee pursuant to an existing license
agreement and customer-sponsored research and development fees. For the same
period in 1998, revenues consisted primarily from product revenues and
customer-sponsored research and development fees. Customer-sponsored research
and development revenue for the quarter totaled $.8 million and resulted from
process development activities with one of the Company's existing FRAM
licensees. For the respective period in 1998, customer-sponsored research and
development revenues totaled $.6 million resulting primarily from FRAM
specialty design services and FRAM foundry services.
Product sales revenues for the first quarter of 1999 remained flat as compared
to the respective period in 1998 at approximately $4.3 million. Product sales
revenue for the quarter ended March 31, 1999, consisted of $3.2 million of
EDRAM product sales and $1.1 million of FRAM product sales. For the
respective period in 1998, EDRAM products sales totaled $3.6 million and FRAM
product sales totaled $.7 million.
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EDRAM unit shipments decreased by approximately 11% during the first quarter
ended March 31, 1999, when compared to the respective period in 1998 and
average selling prices remained flat in the first quarter when compared with
the same period a year ago. The decrease in product revenues for the first
quarter resulted primarily from a decrease in the volume of 4-megabit EDRAM
products sold to customers for use in communications equipment, voice
messaging systems and RAID disc controllers. A decreasing demand for the
Company's 4-megabit EDRAM products is expected to continue to occur in future
periods as the Company's 16-megabit ESDRAM products become available and as
customers seek higher density memories. The Company anticipates the average
selling prices of its 4-megabit EDRAM products will gradually decline in
future periods resulting from a decrease in industry demand and from
aggressive pricing of certain competing products. The Company began
engineering sample shipments of its 16-megabit ESDRAM products during March
1999 and production shipments of the Company's 16-megabit ESDRAM products are
expected to commence during the second quarter of 1999.
FRAM product revenues for the first quarter ended March 31, 1999, increased to
$1.1 million, representing an increase of 53% over the respective period in
1998. Such increases resulted from the increased availability of FRAM
products from one of the Company's foundry sources and from renewed sales and
marketing activities in response to increased FRAM product availability. As a
result of the FRAM foundry manufacturing capacity now available from one of
the Company's FRAM licensing partners, and the expected future foundry
capacity from the Company's other FRAM alliance partners, the Company ceased
FRAM product production from its Colorado Springs fabrication facility during
the quarter ended March 31, 1999 due to the facility's corresponding high cost
of production and low volume capabilities. The Company's Colorado Springs
fabrication facility will now be used primarily for ferroelectric research and
development activities.
Cost of product sales as a percentage of product revenues during the first
quarter was 57% compared with 61% for the same period in 1998. The decrease
in cost of product sales as a percentage of product revenues in the first
quarter compared with the same period in 1998 resulted primarily from lower
costs of manufacturing for the Company's EDRAM and FRAM products and
relatively stable average selling prices of those products. Cost of product
sales associated with the Company's FRAM products improved during the quarter
to 86% when compared to 98% for the same period in 1998 resulting primarily
from the manufacturing of a greater portion of FRAM products through an
alliance foundry manufacturing facility. Cost of product sales as a
percentage of product revenues for FRAM products is expected to continue to
decrease in future periods as a greater quantity and mix of FRAM products sold
will be manufactured at the Company's lower cost alliance foundry
manufacturing facilities.
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Combined research and development expenses decreased by $569,000 or 18% to
$2.6 million in the first quarter when compared with the same period in 1998.
The primary reason for the decrease relates to a reduction in research and
development wafer processing activities and fabrication facility utilization
during the planning phase of the Company's new FRAM joint development program
with Fujitsu. As a partial offset to such decreases, the Company incurred
increases in research and development expenses during the quarter when
compared with the same period in 1998, resulting from increased costs
associated with the design and development of the Company's 16-megabit
Enhanced Synchronous DRAM ("ESDRAM") products. Increased expenses
associated with the Company's 16-megabit ESDRAM development include additional
design resources, mask production, prototype wafer production and test program
development.
Sales, general and administrative ("SG&A") expenses for the first quarter
increased by $535,000 (28%) as compared with the same period in 1998. The
increase in SG&A expenses for the first quarter resulted primarily from
approximately $450,000 in financial advisory and legal expenses pertaining to
the Company's preferred stock restructuring efforts and from an increase in
foreign withholding taxes totaling $50,000 from the recognition of $500,000 of
license fee revenue during the period. No such expenses were recorded during
the same period in 1998. During the first quarter of 1998, there were no
license and development fee revenues recorded and, therefore, no foreign
withholding tax expense recorded.
Related party interest expense and other income remained flat during the first
quarter when compared to the same period in 1998.
During the first quarter of 1999, the Company recorded preferred stock non-
cash dividends and accretion of discount totaling $520,000 or ($.01) per
share, respectively, 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 the outstanding Preferred Stock. The discount is being recognized ratably
as a non-cash deemed dividend over the applicable fourteen-month period (see
"Note 7").
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents balance as of March 31, 1999 was
approximately $9.2 million, representing a $6.0 million decrease from
December 31, 1998. The Company used approximately $5.0 million in operations
during the first three months of 1999 compared with a use of $1.4 million in
operations for the respective period in 1998. The use of $5.0 million in
operations during the three month period ended March 31, 1999 resulted
primarily from (i) the funding of losses of $2.0 million, less $74,000 in non-
cash adjustments, (ii) an increase in accounts receivable of $3.0 million, and
(iii) the reduction in accounts payable and accrued liabilities totaling $0.8
million. Such uses of cash during the three month period were partially
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<PAGE>
offset by a $0.4 million decrease in inventories. The increase in accounts
receivable resulted primarily from an increase in product sales and from a
$0.8 million receivable from a FRAM license partner associated with customer-
sponsored research and development activities. The decrease in inventories of
$0.4 million resulted from inventory reduction measures taken by the Company
during the quarter associated with the Company's EDRAM and FRAM products.
Approximately $0.4 million was used in investing activities during the first
quarter ended March 31, 1999 compared with $0.6 million in the respective
period in 1998. Such use of cash in 1999 resulted primarily from capitalized
filing fees and legal costs associated with the Company's FRAM and EDRAM
patent activities. The Company also made a final payment during the quarter
of $550,000 regarding certain purchased license rights associated with the
Company's ferroelectric technology. As of March 31, 1999, the Company had
working capital of approximately $3.4 million and total stockholders' equity
of $15.1 million.
The Company intends to finance its operations and working capital requirements
during the remainder of 1999 and into 2000 by relying on its existing cash and
cash equivalent resources as of March 31, 1999 of $9.2 million, payments from
existing and future license and development agreements and from the sale of
the Company's FRAM and EDRAM products.
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, 1999. The Company has requested a long-term
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 a long-term extension of the payment date, or
conversion into equity of amounts owed under the Fund's credit facility.
In April 1999, the Company entered into an agreement with Talisman Capital
Opportunity Fund, LLC ("Talisman"), a holder of the Company's outstanding
preferred stock, to settle pending litigation. The Company made a cash
payment to Talisman in consideration for the cancellation of all Talisman's
remaining shares of preferred stock. The settlement of the Talisman
litigation did not materially adversely effect the Company's liquidity (see
"ITEM 1 - LEGAL PROCEEDINGS").
Page-16
<PAGE>
The Company's future capital requirements include financing the growth of
working capital items such as accounts receivable and inventory, the funding
of continued research and development efforts, the costs associated with
currently existing and any future patent infringement and interference
proceedings, and the costs associated with restructuring of the Company's
capital base. 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. 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.
YEAR 2000
The Company utilizes software and related technologies throughout its business
and relies on suppliers of services and materials that will be affected by the
date change in the year 2000 or prior. The Year 2000 issue exists because
many computer systems and applications currently use two-digit fields to
designate a year. As the century date change occurs, date sensitive systems
will recognize the year 2000 as 1900, or not at all. This inability to
recognize the year 2000 may cause systems to process critical financial and
operational information incorrectly. The Company has initiated a Year 2000
project to address the Year 2000 issues as they relate to the Company.
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<PAGE>
The Company's Year 2000 project is being managed by a team of internal staff.
The team's activities are designed to ensure that there are no adverse effects
on the Company's operations and that transactions with customers, vendors and
financial institutions are fully supported. The Company has initiated formal
communications with vendors, customers and financial institutions to ensure
that those parties have appropriate plans to remediate Year 2000 issues as
such issues interface with the Company's systems or otherwise effect the
Company.
The Company has completed the assessment and testing phases of its Year 2000
project and is currently in the remediation and contingency planning phase of
the project. The Company anticipates that its remediation activities together
with a contingency plan will be completed prior to mid-year 1999. The Company
believes, based on progress to date, that the costs of complying with the Year
2000 issues will not have a material effect on the Company's financial
position. The Company believes that the estimated total cost of compliance
for Year 2000 will be less than $250,000.
The Company has determined that certain of its software and hardware will have
to be replaced or updated so that its systems will operate properly with
respect to dates in the periods prior to the year 2000 and beyond. The
Company does not currently use any third-party custom written software in its
operations and, therefore, does not believe that a significant exposure exists
in becoming Year 2000 compliant as the majority of its software is issued with
frequent updates, which have or are expected to address the Year 2000
compliance issue. The Company believes that with updates to new software or
replacement or modification to certain non-compliant hardware, the Year 2000
issue will not pose a significant operational problem for the Company's
systems. However, if such updates, replacements or modifications are
not made in a timely manner, the Year 2000 issue could have a material impact
on the operations of the Company. The Company believes that its primary
exposure from the Year 2000 issue lies in its product test equipment, major
suppliers and subcontractors. Failure to properly address these exposures for
Year 2000 compliance could result in delays in product deliveries during the
period immediately following December 31, 1999. The Company believes that its
most reasonably likely worst case scenario would be that one or several of its
subcontractors are unable to supply product or services to the Company for an
extended period of time. Such failure to supply product or services,
depending on the length of delay, could exhaust the Company's product
inventories and, therefore, cause delays in product shipments to the Company's
customers.
MARKET RISK
There have been no material changes in market risk related to the Company's
financial instruments since December 31, 1998.
Page-18
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
On January 29, 1999, Talisman Capital Opportunity Fund, LLC ("Talisman"), a
holder of the Company's outstanding Preferred Stock, filed a suit against the
Company in United States District Court for the Southern District of New York,
alleging that the Company failed to honor its obligations to convert shares of
its Preferred Stock and seeking damages of over $1.5 million plus costs and
attorney's fees. In its answer served on February 22, 1999, the Company
denied the substance of Talisman's allegations an asserted several affirmative
defenses. On April 7, 1999, the Company entered into an agreement with
Talisman to settle the pending litigation. Pursuant to the terms of a
confidential settlement agreement, the Company agreed to make a cash payment
to Talisman in consideration for the cancellation of all Talisman's remaining
shares of Preferred Stock. Accordingly, Talisman's suit against the Company
has been dismissed and Talisman is no longer a holder of the Company's
Preferred Stock.
ITEMS 2 - 4 NONE
ITEM 5 - Other Information
On March 5, 1999 the Company entered into a joint development agreement with
Fujitsu Limited to establish a cooperative program pursuant to which the
parties will jointly develop advanced processes and technologies for
ferroelectric integrated circuit devices. The parties will cooperate in
developing a first generation 0.35 micron technology for ferroelectric
integrated circuit devices. The program will be based in part at Ramtron's
facility in Colorado Springs, Colorado, and in part at Fujitsu's facility in
Iwate, Japan. The cooperative agreement is scheduled to last until the end of
the year 2000 and may be renewed and extended upon the mutual agreement of the
parties.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1* Joint Development Agreement between the
Fujitsu Limited and the Registrant dated
March 5, 1999.
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 March 2, 1999, the Registrant filed a report on Form 8-K.
The item reported was Item 5 - "Other Events."
Page-19
<PAGE>
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 14, 1999 /S/ Richard L. Mohr
Richard L. Mohr
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
Page-20
* 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.
JOINT DEVELOPMENT AGREEMENT
THIS JOINT DEVELOPMENT AGREEMENT (the "JDA") is entered into as of the
5th day of March, 1999, by and between RAMTRON INTERNATIONAL
CORPORATION, a Delaware corporation having its principal place of
business at 1850 Ramtron Drive, Colorado Springs, Colorado 80921
("Ramtron") and FUJITSU LIMITED, a Japanese corporation having its
registered office at 1-1, Kamikodanaka 4-chome, Nakahara-ku,
Kawasaki-shi, Kanagawa-ken 211-8588, Japan ("Fujitsu").
RECITALS:
A. Ramtron and Fujitsu entered into that certain FRAM Technology
License Agreement executed by Ramtron on December 6, 1995 and by
Fujitsu on December 19, 1995, pursuant to which Ramtron licensed to
Fujitsu certain of Ramtron's proprietary ferroelectric technology for
the design, development, manufacture and sale of products based upon
such ferroelectric technology.
B. Ramtron and Fujitsu entered into that certain Amendment to
Agreement dated August 30, 1996, wherein the parties expanded their
cooperative arrangement to include use by Fujitsu of the licensed
ferroelectric technology in connection with embedded FRAM products (the
FRAM Technology License Agreement, as amended, modified and
supplemented by the Amendment to Agreement, shall be hereinafter
referred to as the "FRAM Agreement").
C. Ramtron and Fujitsu now wish to enter into a further cooperative
development agreement pertaining to the development of certain advanced
ferroelectric processes and technologies.
NOW, THEREFORE, Ramtron and Fujitsu agree as follows:
1. DEFINITIONS. Defined terms used herein shall have the meanings
ascribed to such terms in the FRAM Agreement, unless otherwise
specifically provided herein. In addition, the following terms shall
be defined as follows:
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<PAGE>
a) "Development Plan" shall have the meaning ascribed thereto in
Section 3 hereof.
b) "Fujitsu Intellectual Property Rights" shall have the meaning
ascribed thereto in Section 8a) hereof.
c) "Fujitsu Sole Improvements" shall have the meaning ascribed
thereto in Section 8b) hereof.
d) "Program" shall have the meaning ascribed thereto in Section 2
hereof.
e) " ** " shall have the meaning ascribed thereto
in Section 9 hereof.
2. SCOPE OF AGREEMENT. Fujitsu and Ramtron hereby establish a
cooperative program (the "Program") pursuant to which the parties shall
jointly develop certain advanced processes and technologies for
ferroelectric integrated circuit devices. Specifically, the parties
shall cooperate in developing a first generation 0.35 micron technology
for ferroelectric integrated circuit devices **
** . The
Program shall be based in part in Fujitsu's existing facility in Iwate,
Japan ("Iwate") and in part in Ramtron's existing facility in Colorado
Springs, Colorado ("Northgate"), and shall be staffed and funded in the
manner set forth in this JDA. Fujitsu and Ramtron acknowledge that,
subject to earlier termination in accordance with Section 11 below, the
Program shall consist of a cooperative effort between the parties
lasting until the end of calendar year 2000, and that the Program may
be renewed and extended upon the mutual agreement of Fujitsu and
Ramtron.
3. DEVELOPMENT PLAN. Fujitsu and Ramtron have prepared and agreed
to an initial development plan (the "Development Plan") for the
Program. A copy of the Development Plan is attached hereto as
Exhibit A. The Development Plan defines technical milestones, tasks to
be undertaken by each of Fujitsu and Ramtron, deliverables, schedules
and other undertakings of the parties for the efficient operation and
administration of the Program. Fujitsu and Ramtron each agree to make
best efforts to meet each of the milestones and to provide each of the
deliverables set forth for them in the Development Plan. Fujitsu and
Ramtron shall conduct by the end of each calendar quarter quarterly
reviews of the Development Plan, including review of the progress made
in accomplishing development milestones set out in the Development
Plan, the allocation of staffing contemplated by the Development Plan,
the development focus and timetable for development efforts
contemplated by the Development Plan, and the development budget
associated with the various components of the Development Plan.
Fujitsu and Ramtron anticipate that, from time to time, they may by
mutual agreement refine and modify the objectives and/or specifics of
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<PAGE>
the Development Plan. Fujitsu and Ramtron agree to negotiate in good
faith any additions or changes to the Development Plan and any
schedule, staffing assignments, equipment needs and budget impacts
resulting therefrom; provided, that any material reduction in the scope
of the Development Plan will require the concurrence of Ramtron. From
time to time, as necessary, Fujitsu and Ramtron may amend the
Development Plan in writing; and, upon the written approval of any such
amendment by each of Fujitsu and Ramtron, the amended Development Plan
shall become part of this JDA and shall replace the then-current
Development Plan.
4. UNDERTAKINGS OF RAMTRON. Ramtron acknowledges and agrees that,
as part of the Program and as outlined in the Development Plan, Ramtron
shall provide Program management for that portion of the Program that
takes place at the Northgate facility, as well as the various items of
equipment and Ramtron personnel specified in the Development Plan. All
of such items and services shall be provided by Ramtron at Ramtron's
actual cost with respect thereto, all as more specifically set forth in
the Development Plan and in this JDA. Ramtron's contributions shall
include the following:
a) Facilities and Equipment. Ramtron shall make available to the
Program portions of Ramtron's existing Northgate fabrication
Facilities in Colorado Springs, Colorado and refit the
Northgate facility to the extent specified in the Development
Plan. Ramtron shall also make available to the Program the
processing equipment presently located in Northgate and
specified for Ramtron in the Development Plan. All additional
equipment necessary or useful for carrying out the Program
shall be provided or made available by Fujitsu, as described in
Section 5 below, or by other arrangements with third party
equipment vendors as mutually agreed.
b) Program Management. Ramtron shall provide Program management
and oversight for that portion of the Program that takes place
at the Northgate facility, as described in the Development
Plan. Ramtron and Fujitsu agree that **
** , shall serve as the Ramtron Program
Manager, whose responsibilities shall include management,
supervision and oversight for that portion of the Program that
takes place at the Northgate facility. Fujitsu and Ramtron
agree that the scope and frequency of Program management
reporting of budget performance and milestone progress shall be
as specified in the Development Plan.
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<PAGE>
c) Personnel. Ramtron shall make available to the Program those
Ramtron personnel specified in the Development Plan. The
parties acknowledge that amendments to the Development Plan, as
described above, may necessitate personnel changes over the
course of the Program. The parties shall negotiate in good
faith to agree upon any such changes.
d) Ferroelectric Process/Materials Technology. Ramtron shall
provide and make available to the Program Ramtron's FRAM
technology, to the extent the same has been licensed to Fujitsu
pursuant to the FRAM Agreement.
5. UNDERTAKINGS OF FUJITSU. Fujitsu acknowledges and agrees that, as
part of the Program and as outlined in the Development Plan, Fujitsu
shall provide Program management for that portion of the Program that
takes place at the Iwate facility, as well as the various items of
equipment, Fujitsu personnel, CMOS underlayer wafers, certain CMOS
process technology and development funding, as more specifically set
forth in the Development Plan and in this JDA, all at no cost to
Ramtron. Fujitsu's contributions shall include the following:
a) Facilities and Equipment. Fujitsu shall make available to the
Program portions of Fujitsu's existing Iwate fabrication
facilities, as specified in the Development Plan. Fujitsu
shall provide to the Program the equipment and materials
specified for Fujitsu in the Development Plan. Certain items
of equipment to be provided by Fujitsu are identified in the
Development Plan as equipment to be installed by Ramtron at the
Northgate facility. Fujitsu acknowledges and agrees that, from
time to time, the items of equipment required to attain Program
objectives may change, and the parties may agree upon certain
additional or substitute items of equipment to be provided by
Fujitsu and to be installed by Ramtron. All such equipment
provided by Fujitsu for installation at the Northgate facility
shall remain the exclusive property of Fujitsu and, upon
completion or earlier termination of the Program, unless
otherwise agreed, such items of equipment shall be removed by
Fujitsu; provided that the disconnection of such equipment
shall be performed by Ramtron at its cost.
b) Program Management. Fujitsu shall provide Program management
and oversight for that portion of the Program that takes place
at the Iwate facility, as described in the Development Plan.
Fujitsu and Ramtron agree that **
** , shall serve as the
Fujitsu Program Manager, whose responsibilities shall include
management, supervision and oversight for that portion of the
Program that takes place at the Iwate facility. Fujitsu and
Ramtron agree that the scope and frequency of Program
management reporting of budget performance and milestone
progress shall be as specified in the Development Plan.
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<PAGE>
c) Personnel. Fujitsu shall provide such personnel and expertise
as may from time to time be necessary to re-qualify any items
of equipment described in subsection a) above that are
installed at Northgate. Fujitsu shall also provide the
personnel and expertise that may from time to time be necessary
to transfer to the Northgate facility the CMOS process
technology described in subsection e) below. Further, Fujitsu
shall make available to the Program those Fujitsu personnel
specified in the Development Plan. The parties acknowledge
that amendments to the Development Plan, as described above,
may necessitate personnel changes over the course of the
Program. The parties shall negotiate in good faith to agree
upon any such changes.
d) Wafer Supply. Fujitsu shall provide such quantities of CMOS
underlayers as are necessary or useful in connection with the
Program, as outlined in the Development Plan.
e) CMOS Process Technology: Fujitsu shall provide and make
available to the Program Fujitsu's existing 0.50/0.35 micron
CMOS process technology as relates to backend ferroelectric
processing, as more specifically described in the Development
Plan.
f) Development Funding. Fujitsu shall from time to time provide
development funding for the Program, as more specifically set
forth in Section 7 below.
6. THIRD PARTY PARTICIPANTS. Fujitsu and Ramtron acknowledge that one
or more third parties may be invited to participate in the Program.
Such additional participants may include equipment vendors, materials
suppliers and the like. Participation in the Program by any such third
party and the terms and conditions thereof shall be subject to the
mutual written agreement of Fujitsu and Ramtron.
7. FUNDING. Fujitsu and Ramtron have established an initial budget
for the Program in the amount of ** , as outlined in the
Development Plan. Fujitsu agrees to provide development funding to
Ramtron for the Program to compensate Ramtron's actual costs of
development for each calendar quarter for the duration of the Program;
provided, that the development funding to be provided by Fujitsu for
the Development Plan has an overall ceiling of **
** and such funding shall not exceed
** in either of the two
calendar years. Fujitsu and Ramtron shall, in accordance with the
Development Plan, establish a quarterly budget for the Program based on
anticipated development expense requirements during each calendar
quarter and Ramtron shall invoice Fujitsu for the amount budgeted
thirty (30) days in advance of each calendar quarter. Fujitsu shall
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<PAGE>
pay the Ramtron invoice within ten (10) business days after the first
day of such calendar quarter. Notwithstanding the forgoing, Ramtron
shall invoice Fujitsu for the budgeted amount for the first calendar
quarter of 1999 upon execution of this JDA by both Ramtron and Fujitsu,
and Fujitsu shall pay the amount so invoiced within two (2) weeks after
receipt by Fujitsu of such invoice. As described in Section 3 above,
Fujitsu and Ramtron shall review the progress against the Development
Plan, including budget performance with respect thereto, at the end of
each calendar quarter and, to the extent necessary, shall modify and
reset the development budget for the Program for the subsequent
calendar quarters during the duration of the Program. Any modification
of a previously-approved Program budget must be in writing, signed by
both Fujitsu and Ramtron.
8. INTELLECTUAL PROPERTY.
a) Ownership of Intellectual Property Developed Within Program.
If, during the course of and directly in connection with the
Program, **
** , and such
intellectual property rights (hereinafter referred to as the
" ** Intellectual Property Rights") shall be and remain the
exclusive property of ** ; provided, however, that if, at
any time after the date that is ** after the
completion of the ** is unable or unwilling, for
whatever reason, to support ** . **
in respect of such licensed technology shall be as specified in
Section 9 below.
** .
** responsible for any and all costs
associated with the preparation and filing of all patent
applications and other actions or filings intended to perfect
** ownership of and rights in the ** .
b) Ownership of Intellectual Property Developed Outside Program.
Except as set forth below, if either party makes any
developments, inventions or discoveries outside of the Program
(either independently or jointly with a third party), including
developments, inventions or discoveries constituting
improvements or enhancements of such party's existing
technology, the rights of the parties regarding such
developments, inventions and discoveries shall be governed by
Article IV of the FRAM Agreement. Notwithstanding the preceding
sentence, if ** makes any developments, inventions or
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<PAGE>
discoveries outside of the Program (either independently or
jointly with a third party), which developments, inventions or
discoveries constitute improvements or enhancements of the
** , then such developments,
inventions and discoveries (the " ** Sole Improvements")
shall be subject to and included within the scope of the
** described in Section 8(a) above; provided that
** right to use ** shall be
exclusive of ** relating to **
** . **
in respect of such licensed technology shall be as specified in
Section 9 below.
9. ROYALTIES.
a) Payment of Royalties ** . Fujitsu and Ramtron
acknowledge and agree that nothing in this JDA is intended to
modify, amend, supersede or make inapplicable any of the
royalty provisions set forth in Article V of the FRAM
Agreement.
b) ** :
(i) **
(ii) ** .
** .
** .
** :
(1) **
(2) ** .
** .
** .
** .
10. MANUFACTURING SERVICES. Fujitsu acknowledges and agrees that
Ramtron shall have capacity rights to products that employ or
incorporate any technology or invention resulting from the Program,
consistent with Ramtron's capacity rights under Article VI of the FRAM
Agreement.
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<PAGE>
11. TERM AND TERMINATION.
a) Term. This JDA shall remain in effect until the end of
calendar year 2000, unless earlier terminated in accordance
with subsection b) below; provided that this JDA and the
Program may be extended upon the mutual agreement of Fujitsu
and Ramtron.
b) Termination. Notwithstanding the intended duration of the
Program, Fujitsu shall have the right to terminate the Program
under the following circumstances. If, through no fault of
Fujitsu, Ramtron fails to meet one or more quarterly milestones
to be accomplished by Ramtron during, or by the end of, a
calendar quarter (the "Subject Quarter") pursuant to the
Development Plan, Fujitsu may give Ramtron written notice of
such failure within fifteen (15) days after the end of the
Subject Quarter. Such notice (a "Delinquency Notice") shall
identify the particular milestone(s) that Fujitsu believes
Ramtron has failed to meet (the "Delinquent Milestones") and
shall set out the details with respect to such failure.
Ramtron shall then have until the end of the calendar quarter
following the Subject Quarter to cure the identified defaults
and satisfy the Delinquent Milestones that are the subject of
the Delinquency Notice. If Ramtron does not cure such defaults
and satisfy the Delinquent Milestones within the applicable
grace period, then Fujitsu may terminate the Program by
providing written notice of such termination to Ramtron.
In addition, either party may terminate this JDA at any time by
giving the other party written notice to that effect, effective
on the date of such notice, upon or after any of the following
events: (i) the filing by the other party of a voluntary
petition in bankruptcy or insolvency; (ii) any adjudication
that the other party is bankrupt or insolvent; (iii) the
appointment of a receiver or trustee for all or substantially
all of the property of the other party; (iv) any assignment or
attempted assignment by the other party for the benefit of
creditors; (v) the institution of any proceedings for the
liquidation or winding up of the other party's business or for
the termination of its corporate character; or (vi) the other
party is in material default under this JDA (in the case of
Ramtron, other than a default of the type described in the
first paragraph of this subsection (b)) and fails to correct
such material default within thirty (30) days after receiving
written notice thereof from the other party. Moreover, upon
the occurrence of any of the events described in items
(i) through (v) above with respect to **
during the course of and directly in connection with
the ** .
Page 1-8
<PAGE>
Except as set forth above in this subsection b), neither party
shall have the right to terminate this JDA.
c) Survival. Notwithstanding anything contained in subsection a)
or subsection b) above to the contrary, the following Sections
shall survive the expiration or earlier termination of this
JDA: Sections 8, 9, 12, 13 and 14. In addition to the
foregoing, and notwithstanding anything contained in this JDA
or elsewhere to the contrary, if ** terminates this JDA
pursuant to subsection b) above, then any and all inventions or
discoveries made jointly by the parties or independently by
** during the course of and directly in connection with
the Program shall, effective upon the date of such termination,
constitute and be considered to be "Joint Improvements" under
the FRAM License, exclusive of ** , and the
respective rights of the parties with respect to such Joint
Improvements shall be governed in all respects by the terms of
the FRAM Agreement.
d) Limitation of Damages. Fujitsu and Ramtron agree that,
notwithstanding any breach or default by either party under
this JDA, neither Fujitsu nor Ramtron shall be liable to the
other with respect to any subject matter of this JDA or the
Program, for any incidental, indirect, punitive or
consequential damages, whether under contract, negligence,
strict liability or any other theory, and whether or not such
party had notice or knowledge of the possibility of such
damages.
12. CONFIDENTIALITY. Fujitsu and Ramtron hereby incorporate by
reference the general terms and conditions of Article IX of the FRAM
Agreement and agree that such general terms and conditions shall be
incorporated into and apply to this JDA the same as if such general
terms and conditions were set forth fully herein; provided, however,
that for purposes of this JDA, all Fujitsu Intellectual Property Rights
and Fujitsu Sole Improvements shall be deemed to be "Confidential Data"
disclosed by Fujitsu to Ramtron, and shall be treated accordingly by
Ramtron; and provided further, however, that any disclosure of the
Fujitsu Intellectual Property Rights and/or the Fujitsu Sole
Improvements made by Fujitsu to any third party shall not include
disclosure of any portion of the FRAM Technology, Ramtron Intellectual
Property Rights, or Ramtron's Improvements, and Fujitsu shall take
appropriate measures to ensure that Fujitsu does not, without the prior
written consent of Ramtron, make any intentional or inadvertent
disclosure of any portion of the FRAM Technology, Ramtron Intellectual
Property Rights or Ramtron's Sole Improvements, subject to the
aforesaid general terms and conditions.
Page 1-9
<PAGE>
13. PUBLIC ANNOUNCEMENT. The parties agree that the terms and
conditions of this JDA shall be confidential to any third party and
that, if necessary, all notices to third parties and all publicity
concerning the terms and conditions of this JDA shall be jointly
planned and coordinated by and between the parties. Neither of the
parties shall act unilaterally in this regard without the prior written
approval of the other party. However, Fujitsu and Ramtron shall
mutually agree upon a press release, and its contents, regarding the
subject matter of this JDA, which press release shall be issued within
seven (7) days following execution of this JDA.
14. MISCELLANEOUS. Fujitsu and Ramtron hereby incorporate by
reference the general terms and conditions set forth in Article XIII of
the FRAM Agreement, and agree that such general terms and conditions
shall be incorporated into and apply to this JDA the same as if such
general terms and conditions were set forth fully herein; provided,
however, that, notwithstanding the foregoing, the terms of Sections
13.11 and 13.14 of the FRAM Agreement shall be superseded by the terms
of Section 13 above.
FUJITSU LIMITED
By: /S/ Kazunari Shirai
Name: Kazunari Shirai
Title: Senior Vice President
RAMTRON INTERNATIONAL CORPORATION
By: /S/ Greg B. Jones
Greg B. Jones, President
Page 1-10
<PAGE>
EXHIBIT A
0.35 micron FRAM (registered trademark) Co-Development Program Definition
1. This document describes the co-development activity to be
undertaken by Fujitsu and Ramtron and identified herein as the
Joint Development Agreement (JDA) Program.
1.1 The JDA Program is comprised of one focused project to be
outlined below in Section 2.
1.2 The JDA Program is defined as a two-year program with
milestones scheduled as described in Section 3.
1.3 Budgetary estimates and payment schedules are provided in
Section 4.
1.4 Intellectual Property Handling and Material Transfer Procedure
are as specified in Section 5.
2. JDA Program: Project description.
2.1. 0.35 micron FRAM Development at Colorado Springs. This project
involves design, material and process development for the
first generation of 0.35um FRAM process **
** . The goal is to ** .
2.1.1. Certain ** requirements for
successful ** at 0.35 micron have been identified
as follows:
2.1.1.1. **
2.1.1.2. **
2.1.1.3. **
2.1.1.4. **
2.1.1.5. **
2.1.2. The above requirements drive the project components
as listed here.
2.1.2.1. **.
2.1.2.2. **.
2.1.2.3. **.
2.1.2.4. **.
2.1.2.5. **.
2.1.2.6. **.
2.1.2.6.1. **.
2.1.2.6.2. **.
2.1.2.6.3. **.
2.1.2.6.4. **.
2.1.2.6.5. **.
2.1.2.7. **.
2.1.2.8. Ramtron will incorporate the skill sets of
the following groups. (The average number
of Ramtron's engineers to be assigned to
the JDA Program will be ** during the JDA
Program.)
2.1.2.8.1. **
2.1.2.8.2. **
Page 1-11
<PAGE>
2.1.2.8.3. **
2.1.2.8.4. **
2.1.2.8.5. **
2.1.2.8.6. **
2.1.2.9. A major portion of the ** cleanroom,
together with associated facilities and
equipment, will be reconfigured by Ramtron
for use by JDA Program activities,
specifically providing ** . List
of existing equipment for such
reconfiguration is as follows:
2.1.2.9.1. **
2.1.2.9.2. **
2.1.2.9.3. **
2.1.2.9.4. **
2.1.2.9.5. **
2.1.2.9.6. **
2.1.2.9.7. **
2.1.2.9.8. **
2.1.2.9.9. **
2.1.2.9.10. **
2.1.2.9.11. **
2.1.2.9.12. **
2.1.2.9.13. **
2.1.2.10. ** .
2.1.2.11. ** .
2.1.2.12. ** .
2.1.2.13. The list of equipment to be installed at
Ramtron's facility in Colorado Springs is
preliminarily identified as follows:
2.1.2.13.1. **
2.1.2.13.2. **
2.1.2.13.3. **
2.1.2.13.4. **
2.1.2.13.5. **
2.1.2.13.6. **
2.1.2.13.7. **
2.1.2.13.8. **
2.1.2.13.9. **.
2.1.2.14. ** will install, and ** will
set-up and condition, the equipment listed
above in Section 2.1.2.13, and **
will provide cross training to ** on
the equipment.
2.1.2.15. ** .
Page 1-12
<PAGE>
2.1.2.16. ** shall be responsible for the
maintenance and calibration of such
equipment. (According to the maintenance
cost history for such equipment, the
estimated costs for the maintenance to be
borne by ** will be around **
per year.) However, ** and **
may, upon ** written request,
discuss and, by mutual written agreement,
alter the allocation of the maintenance
costs if the actual costs for the
maintenance exceed the above estimation.
2.2. The above effort outlined in Section 2.1 entails the
** .
2.2.1. ** .
2.2.2. ** .
3. The program will be evaluated by use of the milestones as stated in
this section.
3.1. Milestone list with target dates. ** .
3.1.1. ** :
3.1.1.1. **
3.1.1.2. **
3.1.1.3. **
3.1.1.4. **
3.1.1.5. **
3.1.2. ** :
3.1.2.1. **
3.1.2.2. **
3.1.3. ** :
3.1.3.1. **
3.1.4. ** :
3.1.4.1. **
3.1.5. ** :
3.1.5.1. **
3.1.5.2. **
3.1.5.3. **
3.1.5.4. **
3.1.5.5. **
3.1.6. ** :
3.1.6.1. **
3.1.7. ** :
3.1.7.1. **
3.1.7.2. **
3.1.7.3. **
3.1.8. ** :
3.1.8.1. **
3.1.8.2. **
3.2. The milestones will be reviewed and evaluated during
quarterly review meetings.
Page 1-13
<PAGE>
4. Budgetary estimate, review and payment schedule.
4.1. The budget by quarter is set below.
4.1.1. **
4.1.2. **
4.1.3. **
4.1.4. **
4.1.5. **
4.1.6. **
4.1.7. **
4.1.8. **
4.2. Quarterly invoices will be issued ** days prior to the start
of each quarter (except for ** which will invoice
** .
4.3. Quarterly payments are due within ** business days after the
first day of the quarter (except for ** which will be due
within ** after receipt by ** of relevant invoice).
4.4. Quarterly accounting of actual expenditures will occur during
quarterly review meetings.
4.5. Subsequent invoices will reflect any quarter to quarter
adjustment except as stated below regarding year-to-year
restrictions.
4.6. ** .
5. Intellectual Property Handling and Material Transfer Procedure.
5.1. Each party will designate a contact person for material and
document transfer and intellectual property (IP) handling.
5.2. ** . To facilitate the aforementioned transfer, Ramtron and
Fujitsu will follow the procedure as stated below. ** .
5.2.1. Both parties' contact persons will have a weekly
review session by appropriate means (e.g. in person
or TV conference or phone call) to confirm such
developments, inventions and discoveries made by
** as well as the progress thereof.
5.2.2. ** personnel will make and maintain sufficient
descriptive documents of such developments,
inventions and discoveries, as soon as possible after
each such development, invention or discovery.
5.2.3. ** will permit ** contact person to have
access to all the materials and documents maintained
by ** personnel relating to the JDA Program.
** .
5.3. Within the JDA Program, Ramtron will create an Office for
Document Control.
5.4. All company confidential documents, materials and IP will be
acknowledged by the Office.
5.5. Protocol for documents and materials:
5.5.1. ** .
5.5.2. All such reports, other documents and materials will
be addressed to document control, assigned a control
number, and distributed according to prescription.
5.5.2.1. ** .
5.5.2.2. All such reports, other documents and
materials will be distributed at Ramtron
only to the appropriate JDA Program
engineering list which is maintained by
Ramtron's internal Document Control
Department.
Page 1-14
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