SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant / X /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ X / Preliminary Proxy Statement
/ / Confidential. For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Ramtron International Corporation
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ X / No fee required.
/ / Fee computed on table below per Exchange Act Rule 14-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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May XX, 1999
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Ramtron International Corporation, which will be held on June 10, 1999, at
2:00 p.m., Mountain Time, at the principal office of the Company, located at
1850 Ramtron Drive, Colorado Springs, Colorado 80921.
The accompanying Proxy Statement, which you are urged to read carefully,
contains important information regarding matters that will be considered and
voted upon at the Special Meeting.
At the Special Meeting, stockholders will be asked to consider and vote upon
three proposals. The first two proposals, Proposal 1A and Proposal 1B,
constitute integral parts of a proposed restructuring of the Company which
your Board of Directors believes is in the best interests of the Company and
its stockholders. If Proposals 1A and 1B are approved by stockholders, the
Company will have the ability to effect the proposed restructuring which, in
the Board's view, should enhance the Company's financial flexibility and have
a positive impact on the market price for the Common Stock. While Proposals
1A and 1B are separate and distinct proposals upon which stockholders may
vote as they deem appropriate, each of Proposals 1A and 1B are conditioned
upon the other being approved by stockholders since the Company will not be
able to effect the proposed restructuring without the approval of both
Proposals 1A and 1B.
The third proposal, Proposal 2, is an alternative to the restructuring.
Proposal 2 will only be adopted if Proposals 1A and 1B are not approved by
stockholders. Your Board believes that, for the Company and its stockholders,
the proposed restructuring, of which Proposals 1A and 1B constitute integral
parts, is a superior alternative to Proposal 2. The Board therefore
recommends that stockholders vote FOR each of Proposals 1A and 1B. However,
the Board recommends that stockholders who vote against, or abstain with
respect to, the proposed restructuring by voting against, or abstaining with
respect to, either of Proposals 1A or 1B, should vote FOR Proposal 2.
You are requested to complete, date and sign the enclosed BLUE proxy card and
promptly return it in the enclosed envelope, whether or not you plan to attend
the Special meeting. If you attend the Special Meeting, you may vote in
person even if you have returned a proxy card.
On behalf of the Board of Directors, I look forward to seeing you on June 10.
Sincerely,
L. David Sikes
Chairman and Chief Executive Officer
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RAMTRON INTERNATIONAL CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
June 10, 1999
NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders (the
"Special Meeting") of Ramtron International Corporation, a Delaware
corporation (the "Company"), will be held on June 10, 1999, at 2:00 p.m.,
Mountain Time, at the principal office of the Company, located at 1850 Ramtron
Drive, Colorado Springs, Colorado 80921.
NOTICE IS ALSO HEREBY GIVEN that, for the reasons set forth in the attached
Proxy Statement, the previously announced Special Meeting of the Stockholders
of the Company scheduled to be held on March 15, 1999 has been cancelled (the
"March 15 Meeting").
As more fully described in the attached Proxy Statement, the Special Meeting
is being held to provide stockholders of the Company with the opportunity to
vote upon the following proposals:
PROPOSAL 1A: Amend and restate the Company's Certificate of Designation,
Preferences, Rights and Limitations relating to the Company's
Series A Convertible Preferred Stock so as to amend the terms
of the outstanding Series A Convertible Preferred Stock to
provide for, among other things, (i) a fixed rather than
variable rate of conversion to Common Stock, (ii) a limited
cash exchange option, (iii) redemption at the option of the
Company on or after June 30, 2000, (iv) mandatory redemption
on June 30, 2002, (v) a dividend of 11% per annum (which may
increase under certain circumstances), and (vi) fixed
dividend payment dates. Such amended terms are set forth in
their entirety as Exhibit A to the Proxy Statement. Proposal
1A will only be adopted if Proposal 1B is also approved by
stockholders of the Company.
PROPOSAL 1B: Amend the Company's Certificate of Incorporation to effect a
reverse stock split of the Company's Common Stock, whereby
each five shares of Common Stock would be combined, converted
and changed into one share of Common Stock. Proposal 1B will
only be adopted if Proposal 1A is also approved by
stockholders of the Company.
PROPOSAL 2: Amend the Company's Certificate of Incorporation to provide
the Board of Directors of the Company with the authority to
effect, in the Board's sole discretion, at any time prior to
January 1, 2000, a reverse stock split of the Company's Common
Stock, whereby the shares of Common Stock would be combined,
converted and changed into Common Stock in any one of the
following ratios, as selected by the Board of Directors of the
Company in its sole discretion: 1.5:1, 2:1, 2.5:1, 3:1, 3.5:1,
4:1, 4.5:1, or 5:1. Proposal 2 will not be adopted if
Proposals 1A and 1B are approved by the stockholders of the
Company.
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Only record holders of Common Stock at the close of business on May 20, 1999
are entitled to notice of, and to vote at, the Special Meeting and at any
adjournment or adjournments thereof. All stockholders are cordially invited
to attend the Special Meeting in person. Whether or not you expect to attend
the Special Meeting in person, in order to ensure your representation at the
Special Meeting, please mark, sign, date and return the enclosed BLUE proxy
card as promptly as possible in the postage-prepaid envelope enclosed for that
purpose. Any stockholder attending the Special Meeting may vote in person
even if such stockholder has returned a proxy.
Please note that the WHITE proxy card previously included with the Company's
Proxy Statement mailed to stockholders on February 5, 1999 in connection with
the March 15 Meeting may not be used by stockholders for purposes of voting at
the Special Meeting and no WHITE proxy card will be given effect by the
Company for any purpose, including for purposes of determining a quorum or
voting at the Special Meeting.
By Order of the Board of Directors
Richard L. Mohr
Secretary
Colorado Springs, Colorado
May XX, 1999
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RAMTRON INTERNATIONAL CORPORATION
PROXY STATEMENT
GENERAL
The enclosed BLUE proxy is solicited by and on behalf of the Board of
Directors (the "Board") of Ramtron International Corporation, a Delaware
corporation ("Ramtron" or the "Company"), for use at the Special Meeting of
Stockholders (the "Special Meeting") to be held on June 10, 1999, at 2:00
p.m., Mountain Time, or at any adjournment or adjournments thereof, for the
purposes set forth in this Proxy Statement and in the accompanying Notice of
Special Meeting of Stockholders. The Special Meeting will be held at the
principal office of the Company, 1850 Ramtron Drive, Colorado Springs,
Colorado 80921. These proxy solicitation materials were first mailed on or
about May XX, 1999 to all stockholders entitled to vote at the Special
Meeting.
For the reasons set forth in this Proxy Statement, the previously announced
Special Meeting of the Stockholders of the Company scheduled to be held on
March 15, 1999 has been cancelled (the "March 15 Meeting"). The WHITE proxy
card included with the Company's Proxy Statement mailed to stockholders on or
about February 5, 1999 in connection with the March 15 Meeting may not be used
by stockholders for purposes of voting at the Special Meeting and no WHITE
proxy card will be given effect by the Company for any purpose, including for
purposes of determining a quorum or voting at the Special Meeting.
Only stockholders of record at the close of business on May 20, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Special Meeting.
At the Record Date, 60,427,612 shares of Common Stock were issued and
outstanding.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Special Meeting and voting in person.
VOTING AND SOLICITATION
On all matters, each share of common stock of the Company (the "Common Stock")
has one vote. The affirmative vote of a majority of the outstanding shares of
Common Stock is required for the approval of each of the proposals contained
herein (the "Proposals").
Abstentions and broker non-votes are counted as shares that are entitled to
vote for purposes of determining the presence of a quorum at the Special
Meeting. (Broker non-votes are shares held by brokers or nominees that are
present in person or represented by proxy, but are not voted on a particular
matter because instructions were never received by the broker or nominee from
the beneficial owner). Therefore, abstentions and broker non-votes will be
treated as shares which are not voted with respect to the Proposals and will
have the same effect as negative votes.
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The costs of this solicitation will be borne by the Company. The Company has
retained the services of Innisfree M & A Incorporated to assist in
distributing proxy materials to brokerage houses, banks, custodians and other
nominee holders. The estimated cost of such services is $6,000.00 plus out-
of-pocket expenses. Although there are no formal agreements to do so, the
Company may reimburse brokerage houses and other persons representing
beneficial owners of shares for their expenses in forwarding proxy materials
to such beneficial owners. Proxies may also be solicited personally or by
telephone or telegram by certain of the Company's directors, officers and
regular employees, without additional compensation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 25, 1999 by: (i) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of the Company's Common Stock; (ii) each of the Company's
directors; (iii) each of the Company's executive officers; and (iv) all
current directors and executive officers of the Company as a group.
Shares of Common Stock Percent
Name of Beneficial Owner(1) Beneficially Owned of Class(2)
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National Electrical Benefit Fund 12,969,859(3) 19.9%
1125 15th Street, N.W., Room 912
Washington, D.C. 20005
NTC Liquidating Trust 7,489,390(4) 11.8
PricewaterhouseCoopers
200 E. Randolph Dr., Suite 7600
Chicago, IL 60601
Deere Park Capital Management, LLC 5,413,615(5) 8.2
40 Skokie Boulevard, Suite 110
Northbrook, IL 60062
CC Investments, LDC 5,046,815(6) 7.7
77 West Wacker Drive, Suite 4040
Chicago, IL 60601
Credit Suisse Asset Management 3,535,110(7) 5.9
153 East 53rd Street
New York, NY 10022
Benton Liquidating Trust 1,839,621(8) 3.0
PricewaterhouseCoopers
200 E. Randolph Dr., Suite 7600
Chicago, IL 60601
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L. David Sikes 356,750(9) *
George J. Stathakis 250,500(10) *
Richard L. Mohr 156,528(11) *
Greg B. Jones 148,000(12) *
Donald G. Carrigan 119,716(13) *
Craig W. Rhodine 90,320(14) *
William G. Howard 40,000(15) *
Albert J. Hugo-Martinez 13,000(16) *
William G. Tull 0 *
Eric A. Balzer 0 *
All current directors and executive
officers as a group (10 persons) 1,174,814(17) 1.9
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* Less than one percent
(1) Such persons have sole voting and investment power with respect to all
shares of Common Stock shown as being beneficially owned by them, subject
to community property laws where applicable, except as otherwise
indicated in the information contained in these footnotes.
(2) As of April 25, 1999, there were 60,427,612 shares of Common Stock issued
and outstanding. Pursuant to Rule 13d-3(d)(1)(B), shares of Common Stock
issuable upon the exercise of warrants or the conversion of convertible
securities held by each person set forth in the table which are currently
exercisable or convertible or become exercisable or convertible within 60
days are included in the number of shares of Common Stock outstanding for
purposes of determining the percentage ownership of such person.
(3) Includes: (i) 8,193,399 shares of Common Stock owned by the National
Electrical Benefit Fund (the "NEBF"); (ii) 4,028,485 shares of Common
Stock issuable upon exercise of warrants held by the NEBF, which are
currently convertible or become exercisable within 60 days; (iii)
approximately 697,975 shares issuable as of April 25, 1999 upon
conversion of a convertible promissory note dated August 31, 1995 made by
the Company in favor of the NEBF, which is currently convertible or
becomes convertible within 60 days; and (iv) 45,000 shares of Common
Stock issuable to the NEBF pursuant to options, which are currently
exercisable or become exercisable within 60 days. The trustees of the
NEBF share voting and dispositive powers as to such shares. To the best
knowledge of the Company, the trustees of the NEBF are Edwin D. Hill and
John M. Grau. Mr. Tull, a director of the Company, is an Advisor to the
NEBF.
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(4) In an amended Schedule 13D dated June 17, 1998, the NTC Liquidating Trust
reported sole voting and sole dispositive power as to 7,489,390 shares of
Common Stock consisting of: (i) 4,528,174 shares of Common Stock owned
directly by the NTC Liquidating Trust; and (ii) 2,961,216 shares of
Common Stock issuable upon exercise of warrants held by the NTC
Liquidating Trust which are currently exercisable or become exercisable
within 60 days.
(5) Represents shares of Common Stock issuable pursuant to the conversion of
2,450 shares of outstanding Series A Convertible Preferred Stock of the
Company held by Deere Park Capital Management, LLC, as nominee ("Deere
Park"). Each share of Series A Convertible Preferred Stock is currently
convertible into shares of Common Stock at a conversion rate equal to the
stated value thereof ($1,000) plus accrued and unpaid dividends thereon
divided by the lowest trading price for the Common Stock for the 22
consecutive trading days ending on the trading day prior to the
conversion date, reduced by the Applicable Percentage. The Applicable
Percentage is currently 14%, increasing to 15% on May 1, 1999 and
thereafter remaining at 15%. For purposes hereof, the shares of Common
Stock issuable upon conversion of such shares of Series A Convertible
Preferred Stock were determined based upon the closing market prices for
the Common Stock through April 25, 1999 and accrued and unpaid dividends
through such date. The Company suspended conversions of its Series A
Convertible Preferred Stock on October 21, 1998, because the Company has
issued, from its authorized shares, the maximum number of shares of
Common Stock available for such conversions. Therefore, no authorized
shares of Common Stock are available to effect the conversion of the
Series A Convertible Preferred Stock held by Deere Park unless and until
the Company's stockholders approve an amendment to the Company's
Certificate of Incorporation to provide the Company with additional
authorized but unissued shares of Common Stock.
(6) Represents shares of Common Stock issuable pursuant to the conversion of
2,284 shares of outstanding Series A Convertible Preferred Stock of the
Company held by CC Investments, LDC, as nominee ("CC"). Each share of
Series A Convertible Preferred Stock is currently convertible into shares
of Common Stock at a conversion rate equal to the stated value thereof
($1,000) plus accrued and unpaid dividends thereon divided by the lowest
trading price for the Common Stock for the 22 consecutive trading days
ending on the trading day prior to the conversion date, reduced by the
Applicable Percentage. The Applicable Percentage is currently 14%,
increasing to 15% on May 1, 1999 and thereafter remaining at 15%. For
purposes hereof, the shares of Common Stock issuable upon conversion of
such shares of Series A Convertible Preferred Stock were determined based
upon the closing market prices for the Common Stock through April 25,
1999 and accrued and unpaid dividends through such date. The Company
suspended conversions of its Series A Convertible Preferred Stock on
October 21, 1998, because the Company has issued, from its authorized
shares, the maximum number of shares of Common Stock available for such
conversions. Therefore, no authorized shares of Common Stock are
available to effect the conversion of the Series A Convertible Preferred
Stock held by CC unless and until the Company's stockholders approve an
amendment to the Company's Certificate of Incorporation to provide the
Company with additional authorized but unissued shares of Common Stock.
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(7) In a Schedule 13D dated February 16, 1999, Credit Suisse Asset Management
reported sole voting and sole dispositive power as to 3,535,110 shares of
Common Stock.
(8) In an amended Schedule 13D dated June 25, 1998, the Benton Liquidating
Trust reported sole voting and sole dispositive power as to 1,839,621
shares of Common Stock owned directly.
(9) Includes: (i) 10,500 shares of Common Stock owned directly; and
(ii) 346,250 shares issuable to Mr. Sikes pursuant to options which are
currently exercisable or become exercisable within 60 days.
(10) Includes: (i) 10,500 shares of Common Stock owned directly; and
(ii) 240,000 shares issuable to Mr. Stathakis pursuant to options which
are currently exercisable or become exercisable within 60 days.
(11) Includes: (i) 10,890 shares of Common Stock owned directly; and
(ii) 145,638 shares issuable to Mr. Mohr pursuant to options which are
currently exercisable or become exercisable within 60 days.
(12) Includes: (i) 13,000 shares of Common Stock owned directly; and
(ii) 135,000 shares issuable to Mr. Jones pursuant to options which are
currently exercisable or become exercisable within 60 days.
(13) Includes: (i) 10,841 shares of Common Stock owned directly; and
(ii) 108,875 shares issuable to Mr. Carrigan pursuant to options which
are currently exercisable or become exercisable within 60 days.
(14) Includes: (i) 6,000 shares of Common Stock owned directly; and
(ii) 84,320 shares issuable to Mr. Rhodine pursuant to options which are
currently exercisable or become exercisable within 60 days.
(15) Such shares of Common Stock are issuable pursuant to options which are
currently exercisable or become exercisable within 60 days.
(16) Such shares of Common Stock are owned directly.
(17) Includes 1,100,083 shares of Common Stock issuable to current officers
and directors pursuant to options, which are currently exercisable or
become exercisable within 60 days.
SUMMARY OF PROPOSALS
The Board has called the Special Meeting in order to provide the holders of
the outstanding Common Stock with the opportunity to vote upon the Proposals
set forth below and stockholders of the Company may vote upon each of the
Proposals as they deem appropriate.
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As more fully described in "Background" and "The Restructuring," Proposals 1A
and 1B constitute integral parts of a proposed restructuring of the Company.
The proposed restructuring will implement a plan developed by the Company and
its financial advisors which has been negotiated with a majority of the
holders of the Company's Series A Convertible Preferred Stock, par value $.01
per share (the "Series A Preferred"), and the principal creditors of the
Company. There are four parts to the plan (see "The Restructuring -- Elements
of the Restructuring" below). The first part, which constitutes Proposal 1A,
involves a change to the terms of the Series A Preferred which would, among
other things, replace the current variable Common Stock conversion rate that
varies according to the market price of the Common Stock with a fixed
conversion rate (see "Background -- The Issuance of the Series A Preferred"
below), which the Board believes to be in the best interests of the Company
and its stockholders. The second part of the Restructuring, which constitutes
Proposal 1B, is a reverse stock split. The Board believes that Proposal 1B,
if adopted, will provide the Company with sufficient authorized shares of
Common Stock to honor conversion requests of the Series A Preferred, as
proposed to be amended by Proposal 1A. The Board believes that the proposed
restructuring is in the best interests of the Company and its stockholders. If
Proposals 1A and 1B are approved by the stockholders of the Company, the
Company will have the ability to effect the proposed restructuring.
While Proposals 1A and 1B are separate and distinct proposals upon which
stockholders may vote as they deem appropriate, each of Proposals 1A and 1B
are conditioned upon the other being approved by stockholders, since the
Company will not be able to effect the proposed restructuring without the
approval of both Proposals 1A and 1B.
Proposal 2 is an alternative to the proposed restructuring of which Proposals
1A and 1B constitute integral parts. Therefore, if Proposals 1A and 1B are
approved by the stockholders of the Company, the Company will attempt to
effect the proposed restructuring and Proposal 2 will not be adopted, whether
or not Proposal 2 is approved by the stockholders of the Company.
Stockholders should note that, since Proposal 2 will not be adopted if
Proposals 1A and 1B are approved by stockholders, a vote FOR each of Proposal
1A, Proposal 1B and Proposal 2 will increase the likelihood of the adoption of
Proposals 1A and 1B and, therefore, decrease the likelihood of the adoption of
Proposal 2.
The Board believes that, for the Company and its stockholders, the proposed
restructuring, of which Proposals 1A and 1B constitute integral parts, is a
superior alternative to Proposal 2. The Board therefore recommends that
stockholders vote FOR each of Proposals 1A and 1B. However, the Board
recommends that stockholders who vote against, or abstain with respect to, the
proposed restructuring by voting against, or abstaining with respect to,
either of Proposals 1A or 1B, should vote FOR Proposal 2.
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PROPOSAL 1A
AMEND AND RESTATE THE COMPANY'S CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS RELATING TO THE COMPANY'S SERIES A CONVERTIBLE
PREFERRED STOCK SO AS TO AMEND THE TERMS OF THE OUTSTANDING SERIES A
CONVERTIBLE PREFERRED STOCK TO PROVIDE FOR, AMONG OTHER THINGS, (I) A FIXED
RATHER THAN VARIABLE RATE OF CONVERSION TO COMMON STOCK, (II) A LIMITED CASH
EXCHANGE OPTION, (III) REDEMPTION AT THE OPTION OF THE COMPANY ON OR AFTER
JUNE 30, 2000, (IV) MANDATORY REDEMPTION ON JUNE 30, 2002, (V) A DIVIDEND OF
11% PER ANNUM (WHICH MAY INCREASE UNDER CERTAIN CIRCUMSTANCES), AND (VI) FIXED
DIVIDEND PAYMENT DATES. SUCH AMENDED TERMS ARE SET FORTH IN THEIR ENTIRETY AS
EXHIBIT A TO THE PROXY STATEMENT. PROPOSAL 1A WILL ONLY BE ADOPTED IF
PROPOSAL 1B IS ALSO APPROVED BY STOCKHOLDERS OF THE COMPANY.
PROPOSAL 1B
AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK
SPLIT OF THE COMPANY'S COMMON STOCK, WHEREBY EACH FIVE SHARES OF COMMON STOCK
WOULD BE COMBINED, CONVERTED AND CHANGED INTO ONE SHARE OF COMMON STOCK.
PROPOSAL 1B WILL ONLY BE ADOPTED IF PROPOSAL 1A IS ALSO APPROVED BY
STOCKHOLDERS OF THE COMPANY.
PROPOSAL 2
AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO PROVIDE THE BOARD OF
DIRECTORS OF THE COMPANY WITH THE AUTHORITY TO EFFECT, IN THE BOARD'S SOLE
DISCRETION, AT ANY TIME PRIOR TO JANUARY 1, 2000, A REVERSE STOCK SPLIT OF THE
COMPANY'S COMMON STOCK, WHEREBY THE SHARES OF COMMON STOCK WOULD BE COMBINED,
CONVERTED AND CHANGED INTO COMMON STOCK IN ANY ONE OF THE FOLLOWING RATIOS, AS
SELECTED BY THE BOARD OF DIRECTORS OF THE COMPANY IN ITS SOLE DISCRETION:
1.5:1, 2:1, 2.5:1, 3:1, 3.5:1, 4:1, 4.5:1, OR 5:1. PROPOSAL 2 WILL NOT BE
ADOPTED IF PROPOSALS 1A AND 1B ARE APPROVED BY THE STOCKHOLDERS OF THE
COMPANY.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSALS 1A AND
1B AND AGAINST PROPOSAL 2. HOWEVER, THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS WHO VOTE AGAINST, OR ABSTAIN WITH RESPECT TO,
PROPOSALS 1A OR 1B SHOULD VOTE FOR PROPOSAL 2.
BACKGROUND
Set forth below in substantially chronological order are the material events
which describe the background of the Proposals.
INTRODUCTION
The Company is engaged in high technology product development. The
developmental nature of the Company's business generates a substantial need
for cash. This need requires the Company from time to time to raise cash from
external sources and has caused the Company to raise funds through loan
financings and share issuances, as more fully described below (see "NEBF
Credit Facility"; "DFA Contracts" and "The Issuance of the Series A
Preferred").
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NEBF CREDIT FACILITY
In September 1995, the Company and the National Electrical Benefit Fund (the
"NEBF"), then and now a substantial stockholder of the Company, entered into a
Loan Agreement (the "NEBF Credit Facility") pursuant to which the NEBF agreed
to lend to the Company up to $12 million at an interest rate of 12% per annum.
As of April 25, 1999, the outstanding principal balance and accrued interest
under the NEBF Credit Facility were $5.5 million and $1.8 million,
respectively. Pursuant to the terms of the NEBF Credit Facility, no
additional borrowings are currently available to the Company under the NEBF
Credit Facility.
The NEBF Credit Facility is secured by a first priority security lien on the
Company's assets, including the assets of its subsidiary, Enhanced Memory
Systems, Inc. ("EMS"), and by a pledge of the shares of stock of EMS and Racom
Systems, Inc. owned by the Company. Under the NEBF Credit Facility, the NEBF
has the right to convert all or any portion of the amounts outstanding under
the NEBF Credit Facility into shares of Common Stock at any time or times
before maturity of the loan made to the Company under the NEBF Credit Facility
at a conversion rate equal to $10.5125 for each share of Common Stock. The
amended maturity date of the loan is June 30, 1999.
DFA CONTRACTS
Pursuant to the terms of three Stock Purchase Agreements, each dated as of
December 23, 1997 (collectively, the "DFA Contracts"), between the Company and
certain affiliates (the "DFA affiliates") of Dimensional Fund Advisors Inc.
("DFA"), the Company issued and sold in a private placement to such DFA
affiliates 800,000 shares of restricted Common Stock at an issue price of
$4.93 per share in cash, resulting in aggregate gross proceeds to the Company
of $3,944,000. These proceeds have been utilized by the Company in part for
working capital purposes and for funding research and development,
manufacturing, and marketing by the Company.
The DFA Contracts provide, subject to certain exceptions, that if, during the
twelve-month period following the closing of the transaction, the Company
sells any shares of Common Stock for an issue price less than $4.93 per share,
the purchase price per share of the Common Stock acquired by the DFA
affiliates would be adjusted downward to equal such lower issue price. Any
such adjustment would be effected by issuing additional shares of Common Stock
to the DFA affiliates who purchased shares of Common Stock pursuant to the DFA
Contracts. However, under the DFA Contracts, the DFA affiliates are not
required to accept additional shares of Common Stock pursuant to any such
adjustments if the total number of shares of Common Stock held by the DFA
affiliates, which were held by them on the date of the DFA Contracts, or
acquired by them pursuant to the DFA Contracts, would exceed 4.99% of the
total outstanding shares of Common Stock of the Company. If the DFA
affiliates do not accept shares of Common Stock in excess of the 4.99%
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limitation upon any such adjustments, the Company is required to pay to the
DFA affiliates an amount in cash equal to the adjusted lower purchase price
per share multiplied by the number of shares which the DFA affiliates do not
accept pursuant to the 4.99% limitation. The DFA Contracts provide that a
sale of shares for an issue price of less than $4.93 per share includes the
sale or issuance of rights, options, warrants or convertible securities under
which the Company would become obligated to issue shares of Common Stock for
an issue price of less than $4.93. The DFA Contracts also provide that the
issue price of shares of Common Stock issuable upon the exercise or
conversions of rights, options, warrants or convertible securities shall be
the exercise or conversion price thereof plus any consideration received by
the Company upon such sale or issuance. As more fully discussed below (see
"Decrease in Stock Price and Suspension of Conversions"), due to the
significant decrease in the market price for the Common Stock, the holders of
the Company's Series A Convertible Preferred Stock converted a significant
number of such shares into Common Stock at a conversion price of less than
$4.93 per share. As a result of such conversions at such conversion prices,
the Company has the contractual obligation to issue 2,331,689 shares of Common
Stock to the DFA affiliates and to pay the DFA affiliates $3,223,712 in cash
for shares not accepted pursuant to the 4.99% limitation. While the Company's
financial statements have reflected those obligations, the DFA affiliates have
not demanded, and the Company has not effected, such issuances and payment,
pending action on the proposed restructuring.
THE ISSUANCE OF THE SERIES A PREFERRED
In February 1998, the Company issued in a private placement 17,425 shares of
the Series A Preferred, at $1,000 per share in cash. As partial consideration
for placing such securities, the placement agents received five-year warrants
to acquire 1,742 shares of Series A Preferred at an exercise price of $1,000
per share (the "Series A Preferred Warrants"). The net proceeds to the
Company (after cash fees to the placement agents and estimated transaction
expenses) were approximately $16 million. These proceeds have been utilized
by the Company in part for working capital purposes and in the continued
research and development, manufacturing, and marketing of the Company's
ferroelectric random access memory and enhanced dynamic random access memory
technologies. The Company has registered with the Securities and Exchange
Commission (the "SEC") the shares of Common Stock issued or issuable upon
conversion of the Series A Preferred (including the shares of Series A
Preferred issued or issuable upon exercise of the Series A Preferred Warrants)
for resale under the Securities Act of 1933, as amended (the "Securities
Act").
The Series A Preferred is convertible into Common Stock at a variable
conversion rate equal to $1,000, the stated value thereof, plus accrued and
unpaid dividends thereon, divided by the lowest trading price for the Common
Stock for the 22 consecutive trading days ending on the trading day prior to
the conversion date, reduced by an applicable percentage (currently and
hereafter 15%). Thus, the number of shares of Common Stock issuable upon
conversion of the Series A Preferred increases as the market price of the
Common Stock decreases (and decreases as such market price increases).
Page-14
<PAGE>
The Company, at its option, may honor conversion requests in cash where the
conversion price falls below a price designated by the Company on 30 days
prior notice.
The following table sets forth the 1999, 1998 and 1997 ranges of the high and
low closing sales prices for the Common Stock as reported on The Nasdaq Stock
Market.
HIGH LOW
------ -----
1997
- ----
First Quarter $7.63 $6.00
Second Quarter 6.50 4.44
Third Quarter 9.13 4.81
Fourth Quarter 6.25 5.03
1998
- ----
First Quarter $5.81 $4.38
Second Quarter 5.50 3.09
Third Quarter 4.03 .66
Fourth Quarter 1.00 .25
1999
- ----
First Quarter $0.86 $0.41
At the Company's Annual Meeting of Stockholders held on May 28, 1998, the
stockholders of the Company approved the authorization and reservation for
issuance of a number of shares of Common Stock which the Board determined to
be sufficient to satisfy conversions of the Series A Preferred in light of
then existing conditions, including, without limitation, the then existing
market price for the Common Stock ($4.094 per share as of the date of the 1998
Annual Meeting), even if such number exceeded 20% of the Common Stock
outstanding. As indicated in the Proxy Statement for the 1998 Annual Meeting,
the aggregate number of shares of Common Stock issuable as a result of future
conversions of the Series A Preferred cannot be specifically determined
because such number is subject to adjustment mechanisms, principally the
trading price of the Common Stock and the conversion decisions of holders of
the Series A Preferred.
Page-15
<PAGE>
DECREASE IN STOCK PRICE AND SUSPENSION OF CONVERSIONS
The Company's stock price decreased significantly during the period from March
to October 1998, particularly during the period from August to October 1998.
On February 25, 1998, the date of issuance of the Series A Preferred, and
October 21, 1998, the date on which the Company suspended conversions of
Series A Preferred (as described below), the closing sales prices of the
Common Stock as reported on Nasdaq were $5.563 and $.313 per share,
respectively. Thus, during the period from February 25, 1998 through
October 21, 1998, the market price for the Common Stock decreased 94%. As a
result of this substantial decrease in the market price for the Common Stock
during this period, the number of shares of Common Stock issuable upon
conversion of the Series A Preferred substantially increased. For example, on
February 25, 1998, the conversion rate for Series A Preferred was 100
shares of Common Stock for each share of Series A Preferred, such that the
aggregate number of shares of Common Stock into which the outstanding 17,425
shares of Series A Preferred were convertible was 1,742,500. On October 21,
1998, the conversion rate for the Series A Preferred was 4,347 shares of
Common Stock for each share of Series A Preferred, such that the aggregate
number of shares of Common Stock into which the 9,878 outstanding shares
of Series A Preferred were convertible was 42,939,666.
As a result of these factors, the Company issued 22,473,840 shares of Common
Stock in connection with conversion notices received from holders of Series A
Preferred from September 1, 1998, when conversion notices were first received,
through October 21, 1998. The price range for such conversions was $1.16 to
$.23 per share.
By October 21, 1998, the Company did not have sufficient authorized shares of
Common Stock available to issue to holders of Series A Preferred upon
conversions of the Series A Preferred (see "Lack of Authorized Common Stock"
below). On October 21, 1998, the Company gave notice that it had suspended
conversions of Series A Preferred, because of insufficient authorized shares
of Common Stock for such conversions.
LACK OF AUTHORIZED COMMON STOCK
As of the date of this Proxy Statement, approximately 60,427,612 shares of
Common Stock have been issued and are outstanding and approximately 14,572,388
shares of Common Stock are reserved for issuance pursuant to pre-existing
options, warrants, debt conversion under the NEBF Credit Facility, and the
DFA Contracts. Of the 60,427,612 shares of Common Stock issued and
outstanding, 22,473,840 shares are attributable to the conversion of
Series A Preferred. Approximately $8.9 million stated value of Series A
Preferred remains outstanding. If all of the remaining outstanding shares of
Series A Preferred were to be converted pursuant to the terms of the Series A
Preferred using the lowest closing sales price of the Common Stock as reported
on Nasdaq for the first quarter of 1999 ($.41 per share), the total number
of shares of Common Stock required for such conversion, with the applicable
discount and including accrued dividends at April 30, 1999, would be
27,224,025.
Page-16
<PAGE>
Accordingly, the Company currently has no shares of Common Stock available to
be issued for any purposes beyond shares already reserved for stock option
plans, outstanding warrants, debt conversion under the NEBF Credit Facility,
and for issuance pursuant to the DFA Contracts.
The Certificate of Designation, Preferences, Rights and Limitations of the
Company relating to the Series A Preferred (the "Certificate of Designation")
provides for honoring of conversion requests in cash, at the option of the
Company, where the conversion price falls below a price designated by the
Company on 30 days prior notice. The Company, however, has not exercised this
option because (i) such notice in the situation existing prior to the
Company's October 21, 1998 suspension of conversions might have accelerated
the number of conversion requests received, which the Company believes would
not have been in the best interests of the Company and its stockholders, and
(ii) any such exercise would reduce the Company's funds available for working
capital purposes, potentially rendering the Company insolvent, which the
Company also believes would not be in the best interests of the Company and
its stockholders.
Under the Certificate of Designation, the Company is required to "at all times
reserve and keep available out of its authorized but unissued shares of common
stock, solely for the purpose of effecting the conversion of the shares of the
Series A Preferred, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares
of the Series A Preferred . . . ." The Certificate of Designation also states
that "if at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of the Series A Preferred, the Company will take such corporate action
as may, in the opinion of its counsel, be necessary to increase its authorized
but unissued shares of Common Stock to such number of shares as shall be
sufficient for such purpose, including without limitation, engaging in best
efforts to obtain the requisite shareholder approval as promptly as
practicable." In the opinion of the Company and the Company's counsel, the
convening of a special meeting of stockholders to approve such an increase of
authorized Common Stock would be in accordance with this obligation to take
action.
COMMENCEMENT OF NEGOTIATIONS WITH HOLDERS OF SERIES A PREFERRED
In view of the rapid decline in the price of the Common Stock in the third and
fourth quarters of 1998, and the inability of the Company to effect
conversions of the Series A Preferred, the Company attempted to determine
whether a restructuring of the terms of the Series A Preferred could be
negotiated successfully with the holders of the Series A Preferred and
approved by the NEBF and DFA. On November 9, 1998, the Company retained CIBC
Oppenheimer Corp. ("CIBC") as its financial advisor to assist the Company in
those negotiations and in connection with the possible reorganization of the
Company's capital structure.
Page-17
<PAGE>
CIBC, in conjunction with the Company, began discussions with the major
holders of the Series A Preferred, representatives of DFA and the NEBF (in its
capacities as a major stockholder and creditor of the Company), with a view to
reaching agreement on the terms of a restructuring acceptable to all parties.
THE MARCH 15 MEETING
While negotiations between the Company and the holders of the Series A
Preferred continued, in late 1998 and early 1999, the Board believed that a
negotiated restructuring of the terms of the Series A Preferred was not
likely. Consequently, on December 22, 1998 and January 4, 1999, the Board
considered and unanimously adopted resolutions declaring the advisability of a
series of amendments to the Certificate of Incorporation of the Company (the
"Certificate of Incorporation") to effect one of the reverse stock splits
contemplated by Proposal 2, which, if approved by the stockholders of the
Company, would provide the Company with an additional number of authorized but
unissued shares of Common Stock to honor conversions of the Series A
Preferred. On or about February 5, 1999, the Company provided stockholders of
the Company with notice of the March 15 Meeting at which stockholders would
have the opportunity to vote on the reverse stock split contemplated by
Proposal 2. The Company also continued to attempt to negotiate a
restructuring of the terms of the Series A Preferred with the holders thereof.
LITIGATION
In November 1998, Deere Park Capital Management LLC ("Deere Park"), a holder
of Series A Preferred, filed a lawsuit against the Company in the Court of
Chancery of the State of Delaware seeking a declaratory judgment and specific
performance of the Company's alleged obligation to convert a portion of Deere
Park's shares of Series A Preferred 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 obligation
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 Series A Preferred; 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. Deere Park
has subsequently executed the Letter of Intent (Exhibit B) discussed below
under "The Restructuring", in which Deere Park has indicated to the Company
its non-binding intent to support the proposed restructuring, of which
Proposals 1A and 1B constitute integral parts, and to terminate its litigation
with the Company. The Letter of Intent, however, is non-binding and there can
be no assurance that Deere Park will support the proposed restructuring and
terminate its litigation with the Company.
Page-18
<PAGE>
If Deere Park does not terminate its litigation with the Company, the Company
nevertheless believes that it has good defenses to the allegations made by
Deere Park. There can be no assurances, however, that the Company will
ultimately prevail in this action. A successful action by Deere Park against
the Company in this matter may have material adverse effects on the Company.
On January 29, 1999, Talisman Capital Opportunity Fund, LLC ("Talisman"), a
holder of Series A Preferred which purchased such shares under its former name
of Elara, Ltd., filed suit against the Company in the United States District
Court for the Southern District of New York, also alleging that the Company
failed to honor its obligations to convert shares of its Series A Preferred
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 and 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 of Talisman's remaining shares of
Series A Preferred. Accordingly, Talisman's suit against the Company has been
dismissed and Talisman is no longer a holder of Series A Preferred. The
Company believes that the settlement with Talisman is in the best interests of
the Company and its stockholders.
NASDAQ LISTING
In order to remain listed on The Nasdaq Stock Market, the Company's Common
Stock must comply with a minimum bid price of $1.00 per share. During the
1998 calendar year, the closing bid price for the Common Stock on The Nasdaq
Stock Market ranged from $5.75 to $0.25 per share. On December 2, 1998,
the Nasdaq Listing Qualifications Department notified the Company in writing
that the Company's Common Stock had failed to maintain a closing bid price
greater than or equal to $1.00 per share for the preceding 30 days as required
by The Nasdaq Stock Market, and that failure to maintain a closing bid
price of $1.00 per share or greater for a minimum of ten consecutive trading
days within ninety days from the date of the letter would result in the
termination of designation ("delisting") of the Company's Common Stock as a
Nasdaq Stock Market security.
Delisting of the Company's Common Stock as a Nasdaq Stock Market security
can be expected to adversely affect the trading and liquidity of the Common
Stock. Delisting of the Company's Common Stock as a Nasdaq Stock Market
security could also adversely affect the ability of the Company to raise
capital in the future. In the event of such delisting, the Company would seek
to cause the shares of Common Stock to be quoted in the "pink sheets"
maintained by the National Quotation Bureau, Inc. or the NASD Electronic
Bulletin Board, and the spread between the "bid" and "asked" prices of the
shares of Common Stock quoted by market makers is likely to be greater than it
is at present, causing stockholders to experience a greater degree of
difficulty in trading of shares of Common Stock. The Company requested a
hearing 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.
Page-19
<PAGE>
As more fully set forth below in "Proposals 1A and 1B -- Reasons for Proposals
1A and 1B; Effects of Non-Approval of Proposals 1A and 1B" and "Effects of
Proposals 1A and 1B on Market Price and Marketability," the Company believes
that the Restructuring will have a positive impact on the market price of the
shares of Common Stock, which may, in turn, alleviate the problems faced by
the Company with respect to its Nasdaq listing.
THE RESTRUCTURING
THE LETTER OF INTENT
As a result of discussions with the holders of the Series A Preferred, DFA and
the NEBF which took place from December 1998 through early March 1999, based
on the advice of CIBC, the Company reached the conclusion that the holders of
a majority of the Series A Preferred and the NEBF would be willing to
agree to a restructuring of the terms of the Series A Preferred, the DFA
Contracts and the NEBF Credit Facility. Consequently, in early March 1999,
the Company prepared a non-binding letter of intent (the "Letter of Intent")
setting forth the terms of a proposed restructuring (the "Restructuring") as
discussed and negotiated with the holders of Series A Preferred, DFA and the
NEBF. The Company circulated the Letter of Intent to such holders, DFA and
the NEBF. As a result of a series of negotiations regarding the Letter of
Intent with the holders of the Series A Preferred, DFA and the NEBF, the
Company made various revisions to the Letter of Intent.
As of May 7, 1999, the holders of more than a majority of the outstanding
shares of Series A Preferred and the NEBF had executed the Letter of
Intent, thereby indicating their preliminary intention to approve and
consummate the Restructuring. In addition, DFA has verbally indicated its
willingness to enter into the Letter of Intent and the Company believes that
DFA will execute the Letter of Intent shortly. A copy of the executed Letter
of Intent, as amended, is attached as Exhibit B to this Proxy Statement and
incorporated herein by reference. The discussion contained herein respecting
the Letter of Intent and the Restructuring is qualified in its entirety by
reference to the Letter of Intent. The Letter of Intent is non-binding and so
there can be no assurance that the holders of the Series A Preferred, DFA and
the NEBF will ultimately agree to or approve the Restructuring. However, the
Company believes, based upon discussions to date and the advice of CIBC that,
notwithstanding events beyond the control of the Company, the parties to the
Letter of Intent will close the Restructuring.
On March 1, 1999, the Board considered and unanimously adopted resolutions
declaring the advisability of the Restructuring. The Board also unanimously
resolved that Proposal 2, which was the initially proposed reverse stock split
and the subject of the March 15 Meeting, would be submitted to the
stockholders of the Company for approval, but would not be adopted if
Proposals 1A and 1B were approved by the stockholders of the Company. See
"Proposals 1A and 1B -- Reasons for Proposals 1A and 1B; Effects of
Non-Approval of Proposals 1A and 1B" and "Proposal 2 -- Reasons for Proposal
2; Effects of Non-Approval of Proposal 2" below. Accordingly, the March 15
Meeting was cancelled and the Special Meeting was convened to consider
Proposals 1A, 1B and 2.
Page-20
<PAGE>
ELEMENTS OF THE RESTRUCTURING
The Restructuring seeks to address the principal problems faced by the Company
in respect of its obligations to the holders of Series A Preferred, the DFA
affiliates and the NEBF, particularly those arising from the decline in the
market price for the Common Stock, which the Company believes has resulted
from the variable rate conversion feature of the Series A Preferred and the
lack of authorized shares of Common Stock available to fulfill the Company's
obligations under the DFA Contracts and the Certificate of Designation.
There are four parts to the Restructuring. The Letter of Intent provides that
all of the four parts of the Restructuring will be implemented together and
the implementation of each part will be conditioned upon the implementation of
all the other parts. The four parts are:
1. Amending and restating the Certificate of Designation in the form of
Exhibit A hereto (the "New Certificate of Designation") to effect a
change in the terms of the Series A Preferred (the "Series A
Preferred Amendment"). This is Proposal 1A. A majority of the
holders of the Series A Preferred will also have to consent to
Proposal 1A.
2. Amending the Certificate of Incorporation to effect a reverse stock
split of the Common Stock, whereby each five shares of Common Stock
would be combined, converted and changed into one share of Common
Stock (the "Restructuring Reverse Stock Split"). This is Proposal
1B. No approvals, other than the approval of a majority of the
holders of the Common Stock at the Special Meeting, are required to
amend the Certificate of Incorporation.
3. Terminating the DFA Contracts and in consideration thereof, the
Company shall execute and issue to each DFA affiliate unsecured
promissory notes in the aggregate principal amount of $3,223,712,
being the amount of cash currently due under the DFA Contracts (the
"Note"). The Note will bear interest at a rate of 8% per annum, will
be convertible into Common Stock at a conversion rate of one share of
Common Stock for each $1.00 principal amount of the Note and shall
mature and become due and payable on the first anniversary of the
closing of the Restructuring.
4. Amending the NEBF Credit Facility (i) to allow for the payment of
cash to the holders of the new Series A Preferred, as provided in the
amended and restated terms thereof (see "Proposals 1A and 1B --
Series A Preferred Amendment" below and Exhibit A hereto), (ii) to
extend the maturity of the NEBF Credit Facility to March 15, 2002,
and (iii) to release from the collateral pledged as security to the
NEBF the Company's trade account receivables (but not license,
royalty or similar types of payments) and, potentially, the Company's
inventories, upon certain financial targets, to be agreed between the
Company and the NEBF, being obtained. Upon reaching such agreement,
such trade account receivables, and potentially, the Company's
inventories, may be used as collateral with other lenders for future
borrowings. The NEBF's conversion right shall be amended to be at
the rate of $1.00 principle amount of the new Series A Preferred for
each share of Common Stock.
Page-21
<PAGE>
The first and second of these four parts (which comprises Proposals 1A and 1B
respectively) require the approval of stockholders of the Company (see
"Conditions to the Restructuring," (below). These parts are explained in
detail in "Proposals 1A and 1B -- Proposal 1 - Series A Preferred Amendment"
and "Proposals 1A and 1B -- Proposal 2 - Restructuring Reverse Stock Split"
below.
The Letter of Intent estimated a closing date for the Restructuring (the
"Closing Date") in the week of April 19-28, 1999. Due to a full review of
this Proxy Statement by the SEC, the Company is soliciting the holders of the
Series A Preferred, the NEBF and DFA to agree to an extension of the Closing
Date to June 15, 1999.
CONDITION TO THE RESTRUCTURING
In addition to the approval of Proposals 1A and 1B by the holders of a
majority of the outstanding shares of Common Stock at the Special Meeting, the
obligations of the Company to effect the Restructuring are conditioned upon
(i) approval by the holders of a majority of the outstanding shares of Series
A Preferred of Proposal 1A at a duly convened meeting of such stockholders of
the Company or by action by written consent, (ii) the termination with
prejudice of all litigation in effect at the closing of the Restructuring
between any of the holders of Series A Preferred, DFA and the NEBF, their
respective affiliates, associates, stockholders, partners, members or other
related parties, on the one hand, and the Company and its officers, directors,
affiliates, associates, stockholders, partners, members or other related
parties, on the other hand, (iii) execution of appropriate definitive
documentation by the Company, the holders of a majority of the outstanding
shares of Series A Preferred, the DFA affiliates and the NEBF, (iv) releases
and other customary closing conditions, and (v) each of the transactions
contemplated by the Restructuring being effected simultaneously.
Even if the holders of Common Stock approve Proposals 1A and 1B at the Special
Meeting, there can be no assurance that the other conditions to the
Restructuring will be met, including, without limitation, approval of the
holders of Series A Preferred and the execution by the DFA affiliates and the
NEBF of definitive agreements. However, as discussed above, the NEBF and
the holders of a majority of the outstanding shares of Series A Preferred have
executed the Letter of Intent, indicating their preliminary intention to
approve and consummate the Restructuring on the terms set forth therein. In
addition, DFA has verbally indicated its willingness to enter into the Letter
of Intent and the Company believes that DFA will executive the Letter of
Intent shortly. See "The Letter of Intent" above.
Page-22
<PAGE>
IMPLEMENTATION OF THE RESTRUCTURING
If the stockholders of the Company approve Proposals 1A and 1B at the Special
Meeting, the Board intends to cause all definitive documentation necessary for
the Restructuring to be prepared, negotiated and executed as promptly as
practicable thereafter. It is currently anticipated that such definitive
documentation would include the written consent of the holders of a majority
of the outstanding shares of Series A Preferred, in accordance with the
Certificate of Designation and the Delaware General Corporation Law. In
addition, the Board intends to effect the Restructuring as promptly as
practicable after the Special Meeting, with such changes thereto as may be
required as a result of the facts and circumstances existing at the time of
the consummation of the proposed Restructuring, as well as any changes
necessary due to further negotiations requested by the parties to the
Restructuring. In no event, however, will the Board effect the Restructuring
on terms, which are materially different from the Restructuring as outlined in
the Letter of Intent, as determined by the Board on the advice of counsel.
If the Restructuring is duly approved and agreed, and the other conditions to
the Restructuring described above are satisfied, (i) the Certificate of
Designation would be amended and restated as set forth in the New Certificate
of Designation and (ii) Article FOURTH of the Certificate of Incorporation
would be amended as set forth in the Certificate of Amendment to the
Certificate of Incorporation, attached to this Proxy Statement as Exhibit C
(the "Restructuring Certificate of Amendment"); provided, however, in each
case that such forms of New Certificate of Designation and Restructuring
Certificate of Amendment are subject to amendment to include such changes as
may be required by the office of the Secretary of State of the State of
Delaware and as the Board deems necessary and advisable to effect the
Restructuring. The Series A Preferred Amendment and Restructuring Reverse
Stock Split would become effective on the date of filing of the New
Certificate of Designation and the Restructuring Certificate of Amendment (the
"Restructuring Effective Date") with the office of the Secretary of State of
the State of Delaware. In addition, the termination of the DFA Contracts in
exchange for the Note and the amendment of the NEBF Credit Facility would also
become effective as of the Restructuring Effective Date.
PROPOSALS 1A AND 1B
GENERAL
Proposals 1A and 1B constitute two of the four parts of the Restructuring
which require approval of the stockholders of the Company: the Series A
Preferred Amendment (which forms Proposal 1A) and the Restructuring Reverse
Stock Split (which forms Proposal 1B).
Page-23
<PAGE>
As discussed above in "The Restructuring -- Elements of the Restructuring,"
the Restructuring is conditioned on all parts of the Restructuring being
implemented. Accordingly, as discussed in "Summary of the Proposals" above,
each of Proposals 1A and 1B will only be adopted by the Company if both such
proposals are approved by the stockholders of the Company. For these reasons,
the disclosure in this section of the Proxy Statement entitled "Proposals 1A
and 1B" with respect to the reasons for, and the effects of approval and
non-approval of, Proposals 1A and 1B deals with these proposals as an
integrated proposal, notwithstanding that stockholders of the Company have the
opportunity to vote on Proposal 1A and Proposal 1B as separate matters. In
the two sub-sections immediately below entitled "Proposal 1A - Series A
Preferred Amendment" and "Proposal 2 - Restructuring Reverse Stock Split", the
details of Proposal 1A and Proposal 1B, respectively, are separately
explained.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR PROPOSALS 1A AND 1B.
PROPOSAL 1A - SERIES A PREFERRED AMENDMENT
The Series A Preferred Amendment, which constitutes Proposal 1A, will replace
the Certificate of Designation with the New Certificate of Designation, thus
changing certain of the terms of the Series A Preferred. The Series A
Preferred as reconstituted by the New Certificate of Designation (the "New
Series A Preferred") would have different terms and conditions then the Series
A Preferred as currently constituted. The table below provides a comparison
of the principal terms of the Series A Preferred and the New Series A
Preferred. The information in the table is a summary only. The New
Certificate of Designation is attached hereto as Exhibit A hereto and
incorporated herein by reference. Stockholders should read Exhibit A to
obtain full details of the New Series A Preferred.
The Series A Preferred Amendment is being proposed as part of the
Restructuring primarily in order to end the potentially infinite dilution to
the holders of the Common Stock which may occur from conversions of Series A
Preferred Stock as currently constituted.
PROVISION SERIES A PREFERRED NEW SERIES A PREFERRED
============= ======================= =================================
Maximum of 17,425 9,572
issued shares
- ------------------------------------------------------------------------------
Liquidation $1,000 $1,000
preference
- ------------------------------------------------------------------------------
Page-24
<PAGE>
Exchange for Not available. At any time prior to 10 days
cash at option after the Closing Date (the
of holder "Post-Closing Date"),
exchangeable at the option of the
holder for cash in amount equal
to 50% of the face value plus all
accrued but unpaid dividends up
to an aggregate amount of $6.4
million face value (i.e., $3.2
million cash) and accrued and
unpaid dividends (the "Cash
Exchange Option") -- the Company
has discretion to increase up to
$8.0 million face value (i.e., $4
million cash), plus accrued and
unpaid dividends.
- ------------------------------------------------------------------------------
Conversion to Convertible at a At any time prior to the Post-
Common Stock conversion rate equal Closing Date, convertible at the
to the stated value option of the holder at a fixed
thereof plus accrued conversion rate of one share of
and unpaid dividends Common Stock per $.75 face value
thereon divided by the of New Series A Preferred plus
lowest trading price accrued and unpaid dividends (the
for the Common Stock "Common Stock Conversion Option")
for the 22 consecutive
trading days ending on On or after the Post-Closing
the trading day prior Date, holders who do not
to the conversion date, exercise the Cash Exchange Option
reduced by 15%. The or the Common Stock Conversion
Company suspended Option may convert at the rate
conversions on of 1,000 shares of Common Stock
October 21, 1998. per share of New Series A
Preferred (conversion price of
$1.00 per common share). The
Company must use best efforts to
file and cause to become
effective, within 10 days after
the Post-Closing Date, a
registration statement for Common
Stock of the Company issuable
upon exchange or conversion of
the New Series A Preferred to the
extent such shares of Common
Stock are not then freely
tradeable under the federal
securities laws.
- ------------------------------------------------------------------------------
Page-25
<PAGE>
Redemption Not available. At the option of the Company, in
whole or in part, at any time on
or after the first anniversary of
the Post-Closing Date at an
amount equal to its liquidation
preference plus, without
duplication, accumulated and
unpaid dividends to the date of
redemption.
- ------------------------------------------------------------------------------
Mandatory Not available. On the third anniversary of the
redemption Instead, mandatory Closing Date, at a redemption
conversion to Common price equal to 100% of the
Stock (see "Conversion liquidation preference thereof,
to Common Stock") above. plus, without duplication,
accumulated and unpaid dividends
to the date of redemption.
- ------------------------------------------------------------------------------
Dividend $60.00 per share 11% per annum of the liquidation
per annum. preference per share, payable
semi-annually (i.e., $110.00 per
share per annum).
Prior to the first anniversary of
the Closing Date, will be paid in
New Series A Preferred. After
the first anniversary of the
Closing Date, may be paid, at the
Company's option, on any dividend
payment date, either in cash or
by the issuance of additional
shares of New Series A Preferred
(and payment of cash in lieu of
fractional shares) having an
aggregate liquidation preference
equal to the amount of such
dividends.
If after the first anniversary of
the Closing Date, dividends are
paid in additional shares of New
Series A Preferred the dividend
rate will increase by 2% for such
dividend payment period.
If a registration statement
covering shares of Common Stock
issuable upon conversion of the
New Series A Preferred is not
effective within 120 days after
the Post-Closing Date, dividends
will accrue at a rate of 18% per
annum until the registration
statement is declared effective.
- ------------------------------------------------------------------------------
Page-26
<PAGE>
Dividend When and as declared by Semi-annually, commencing six
payment dates the Board of Directors. months after the Closing Date,
with cash dividends from the
first anniversary of the Closing
Date.
- ------------------------------------------------------------------------------
Voting rights Non-voting, except as Non-voting, except as otherwise
otherwise required by required by law and except in
law and except in certain certain circumstances described
circumstances described in in the New Certificate of
the Certificate of Designation, including (i)
Designation, including amending certain rights of the
(i) amending certain New Series A Preferred and (ii)
rights of the holders of the issuance of any class of
the Series A Preferred and equity securities that ranks pari
(ii) the issuance of any passu with or senior to the New
class of equity securities Series A Preferred other than
that ranks pari passu with certain additional shares of New
or senior to the Series A Series A Preferred.
Preferred other than
certain additional shares
of Series A Preferred.
- ------------------------------------------------------------------------------
Ranking With respect to dividend With respect to dividend rights
rights and rights on and rights on liquidation,
liquidation, winding-up, winding-up, and dissolution
and dissolution of the of the Company, will rank senior
Company, will rank senior to any classes of Common Stock
to any classes of Common or any other class or series
Stock or any other class of shares except any class or
or series of shares series entitled to receive
except any class or priority over the New Series
series entitled to receive A Preferred.
priority over the Series
A Preferred.
==============================================================================
On the Restructuring Effective Date, the rights, preferences, terms and
conditions of each share of Series A Preferred issued and outstanding
immediately prior thereto will be amended to provide for the rights,
preferences, terms and conditions set forth in the New Certificate of
Designation.
If the Series A Preferred Amendment is effected, the Series A Preferred
Warrants will be amended to provide the holders of the Series A Preferred
Warrants with the right to elect to receive, upon exercise of the Series A
Preferred Warrants and payment of the exercise price thereof, the same
consideration as would be available to a holder of New Series A Preferred on
the Restructuring Effective Date, i.e., cash, Common Stock, New Series A
Preferred or a combination thereof. The holders of the Series A Preferred
Warrants have verbally indicated to the Company their intention to consent to
the amendment to the Series A Preferred Warrants on the Restructuring
Effective Date if the Restructuring is implemented.
Page-27
<PAGE>
PROPOSAL 1B - RESTRUCTURING REVERSE STOCK SPLIT
The Restructuring Reverse Stock Split, which constitutes Proposal 1B, would
combine, convert and change each five shares of outstanding Common Stock into
one share of Common Stock. To effect this change, the Restructuring
Certificate of Amendment provides for an amendment to Article FOURTH of the
Certificate of Incorporation as set forth in Exhibit C hereto and incorporated
herein by reference
The Restructuring Reverse Stock Split is being proposed as part of the
Restructuring in order to provide the Company with additional authorized but
unissued shares of Common Stock so as to enable the Company to honor
conversions of the New Series A Preferred, as amended pursuant to the
Restructuring, and to provide the Company with additional authorized but
unissued shares of Common Stock for future financing and other purposes.
Except as may result from the payment of cash for fractional shares, as
described below, each holder of Common Stock will hold the same percentage of
Common Stock outstanding immediately following the Restructuring Reverse Stock
Split as each such stockholder held immediately prior to the Restructuring
Reverse Stock Split. Upon effectiveness, the Restructuring Reverse Stock
Split will result in a reduction in the number of shares of Common Stock
issued and outstanding and a corresponding increase in the number of
authorized and unissued shares of the Common Stock. As described more fully
in "Effects of Proposals 1A and 1B on Ownership and Control" below, issuance
of additional shares of Common Stock and conversions of shares of New Series A
Preferred into Common Stock will result in dilution to holders of Common
Stock. The Company believes, however, that the dilution would be
substantially less under Proposals 1A and 1B than under Proposal 2 because of
the likelihood that the stock price would decline significantly without a
fixed rate of conversion for the Series A Preferred.
The foregoing summary of the terms of the Restructuring Reverse Stock Split is
qualified by reference to the Restructuring Certificate of Amendment attached
as Exhibit C hereto.
REASONS FOR PROPOSALS 1A AND 1B; EFFECTS OF NON-APPROVAL OF
PROPOSALS 1A AND 1B
Proposals 1A and 1B are integral parts of the Restructuring. If either of
Proposals 1A and 1B are not approved by the stockholders, the Restructuring
cannot be implemented. After consultation with its financial advisor, CIBC,
the Board has concluded that the Restructuring is a superior alternative to
Proposal 2. The Company believes that the Letter of Intent, as currently
constituted and described herein, represents the most advantageous terms upon
which an agreement may be reached with the holders of the Series A Preferred,
the DFA affiliates and the NEBF respecting the Restructuring. As a result,
the Board determined that, consistent with its fiduciary duties to all
stockholders of the Company, Proposals 1A and 1B should be submitted for
approval of the stockholders of the Company as an alternative to Proposal 2.
Page-28
<PAGE>
The Board has approved the Restructuring, as a superior alternative to
Proposal 2, for the following reasons, among others: (i) the Restructuring
will result in substantially less possible dilution to the holders of the
Common Stock than if Proposal 2 is adopted; (ii) Proposals 1A and 1B will
provide for rights of Series A Preferred holders which, with regard to the
interests of stockholders of the Company generally, and the interests of the
Company as a whole, are more advantageous to the Company than the terms and
conditions currently provided for under the Certificate of Designation, given
the present circumstances and condition of the Company; (iii) depending on the
number and timing of conversions of New Series A Preferred, the Restructuring
should (a) result in a per share price increase sufficient to enable the
Company's Common Stock to remain eligible for listing on The Nasdaq Stock
Market, although any such per share price increase will be dependent on, among
other factors, the Company's operating performance, general market conditions
and other factors affecting the market price of the Company's Common Stock,
and (b) enhance the Company's ability to raise capital in the future by making
available authorized but unissued shares of Common Stock; and (iv) the
Restructuring will provide the Company with increased financial flexibility
than is currently available under (a) the DFA Contracts by extending the date
on which the $3,223,712 is payable to the DFA affiliates from currently to one
year from the Restructuring Effective Date, and providing the option for the
DFA affiliates to convert the Note into shares of Common Stock, which, if
exercised, would increase the Company's working capital position, and (b) the
NEBF Credit Facility by extending the maturity date thereof from June 30,
1999 to March 15, 2002, and releasing certain collateral from the pledge to
the NEBF, which collateral could then possibly be utilized by the Company as
security for other lending arrangements.
It is likely that the Company will require additional capital to finance its
future operations, including its working capital needs and research and
development expenses. In discussions with CIBC, the Company has been advised
that, assuming the Company's operating performance improves, an increase in
the per share price of the Company's Common Stock, which the Company expects
to occur as a consequence of the Restructuring, may enhance the desirability
of the Common Stock in the financial community and the investing public and
broaden the investor pool from which the Company might be able to obtain
additional financing in the future. Additionally, the availability of
additional authorized but unissued shares that will result from the
Restructuring may benefit the Company in the event that it engages in future
debt and/or equity financing and/or acquisitions, mergers or other forms of
business combinations in which instances the availability of additional
authorized but unissued shares should be helpful.
The Company currently has no shares of Common Stock available to be issued for
any purposes beyond shares already reserved for stock option plans,
outstanding warrants, debt conversion, and for issuance pursuant to the DFA
Contracts. Accordingly, if the stockholders of the Company do not approve
Proposals 1A and 1B (or Proposal 2), the Company will be limited in its
ability to (i) honor conversion requests from holders of the Series A
Preferred, (ii) retain listing of its shares on The Nasdaq Stock Market,
and (iii) raise capital through issuance of Common Stock or securities
convertible into Common Stock in the future. Further, failure to approve
Proposals 1A and 1B (or Proposal 2) may result in the respective rights of the
Company and the holders of Series A Preferred being determined through further
litigation or settlement of adverse claims.
Page-29
<PAGE>
EFFECTS OF PROPOSALS 1A AND 1B ON OWNERSHIP AND CONTROL
If the stockholders approve Proposals 1A and 1B, the Company believes that
certain of the holders of New Series A Preferred may elect the Cash Exchange
Option (see summary table above), which will reduce the number of shares of
Common Stock, which may be acquired by New Series A Preferred holders.
However, the Restructuring Reverse Stock Split will have the effect of
increasing the Company's authorized but unissued shares of Common Stock which
the Company can use to honor conversion requests.
The Company believes that upon effecting the Restructuring, some remaining
holders of New Series A Preferred who do not elect the Cash Exchange Option
may exercise the Common Stock Conversion Option (see summary table above) and
if such option is not exercised, may convert New Series A Preferred into
Common Stock on or after the Post-Closing Date. Such conversions will result
in some dilution to the holders of the Common Stock, but not to the same
significant extent the Company believes would occur if Proposal 2 were
effected. See "Proposal 2 -- Effects of Proposal 2 on Ownership and Control"
below.
The maximum possible dilution to the Common Stock under the Restructuring due
to the Series A Preferred conversions would occur if all holders of New Series
A Preferred (including New Series A Preferred acquired upon the exercise of
the Series A Preferred Warrants) did not exercise the Cash Exchange Option and
exercised the Common Stock Conversion Option at $.75 per share, which would
result in the issuance of 12,734,376 shares of Common Stock (not taking
account of any reverse stock split). This is significantly less than the
maximum possible dilution to the holders of Common Stock under Proposal 2.
See "Proposal 2 -- Effects of Proposal 2 on Ownership and Control" below.
Although the Restructuring Reverse Stock Split will increase the number of
authorized but unissued shares of Common Stock, the Restructuring, if given
effect, will also reduce the total number of authorized shares of Common Stock
from 75,000,000 to 50,000,000 (and correspondingly reduce the total number of
authorized shares of the Company from 85,000,000 to 60,000,000). The
10,000,000 authorized shares of preferred stock will remain unchanged under
Proposals 1A and 1B. See Exhibit C.
Due to the increase in the number of authorized but unissued and unreserved
shares of Common Stock that would result from the Restructuring Reverse Stock
Split, the percentage and number of shares of the Company's Common Stock that
are authorized but unissued and unreserved for issuance would increase from 0%
(currently) to approximately 70% or 35,000,000 shares. This effectively
constitutes an increase in the number and proportion of shares of the
Company's Common Stock that are available for future issuance without further
stockholder approval.
Page-30
<PAGE>
The increase in the number of authorized but unissued and unreserved shares of
Common Stock, in and of itself, will not affect any stockholder's
proportionate equity interest in the Company, but the subsequent issuance of
any newly authorized shares, upon conversion of outstanding New Series A
Preferred or otherwise, would have a dilutive effect on the present
stockholders' proportionate equity interests. If and when Proposals 1A and 1B
are approved by the stockholders and the Restructuring Certificate of
Amendment and New Certificate of Designation become effective, the Company
anticipates that additional shares of Common Stock will be issued in
connection with conversions of the New Series A Preferred, which can be
expected to dilute the current stockholders' equity interest in the Company
and, thus, dilute such stockholders control of the Company as well.
Except as set forth above under "Security Ownership of Certain Beneficial
Owners and Management," no one is believed to own more than 5% of the
Company's outstanding Common Stock. Accordingly, the Company does not believe
that any stockholder can individually exercise control of the Company and the
Company is aware of no group acting to influence such control. If the
Restructuring Reverse Stock Split as described herein is adopted, additional
authorized but unissued shares of Common Stock will be available for issuance.
The issuance of those additional shares, upon conversion of the New Series A
Preferred or otherwise, could result in one or more stockholders obtaining
sufficient shares of the Company's Common Stock to exercise control of the
Company. Although no holder of New Series A Preferred may convert New Series
A Preferred if such conversion would result in the holder together with its
affiliates becoming the beneficial owners of 10% or more of the Company's
Common Stock, holders of New Series A Preferred acquiring less than 10% of the
Company's Common Stock through conversion of New Series A Preferred, if they
did not sell but continued to hold such Common Stock, could, in the aggregate,
acquire ownership of a sufficient number of shares of Common Stock to elect a
majority of the members of the Board, giving such holders the ability to
effect a change of control. As of the date of this Proxy Statement, to the
knowledge of the Company, none of the holders of the Series A Preferred have
made filings under Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or otherwise indicated that any of them have
agreed to act in concert or have evidenced any intention to replace the
existing members of the Board.
EFFECTS OF PROPOSALS 1A AND 1B ON MARKET PRICE AND MARKETABILITY
By setting fixed conversion rates for New Series A Preferred into Common Stock
pursuant to Proposal 1A and ending the floating conversion rate currently
provided for in the Certificate of Designation, which floating rate would
continue if Proposal 2 were adopted instead of Proposals 1A and 1B, Proposals
1A and 1B should eliminate the uncertainty and "overhang" resulting from the
potentially indefinite dilution to the holders of Common Stock. See "Effects
of Proposals 1A and 1B on the Series A Preferred Conversion Rate" below. The
Company believes that, all other things being equal, this stabilizing measure
will have a positive effect on the market price for the Common Stock.
However, since there are numerous factors and contingencies, which can affect
the market price for the Company's Common Stock, the effect of Proposals 1A
and 1B upon such price cannot be accurately predicted.
Page-31
<PAGE>
A reduction in the number of issued and outstanding shares of Common Stock
caused by the Restructuring Reverse Stock Split is expected to initially
increase the market price of the Common Stock to a level above the current
market price subject to, among other factors, the timing and extent of
conversions of New Series A Preferred. Stockholders should note, however,
that the effect of the Restructuring Reverse Stock Split upon the market price
for the Company's Common Stock cannot be accurately predicted, since there are
numerous factors and contingencies which can affect such price. In
particular, there is no assurance that the price of shares of the Common Stock
after the Restructuring Reverse Stock Split will be five times the price of
shares of the Common Stock immediately prior to the Restructuring Reverse
Stock Split, that the Company will satisfy the continued listing requirements
of The Nasdaq Stock Market following the Restructuring Reverse Stock Split,
or that the reduced number of shares outstanding after the Restructuring
Reverse Stock Split will not adversely affect the liquidity or market price of
the Common Stock. If the Restructuring Reverse Stock Split is authorized by
the stockholders, the future market price of the Common Stock and the timing
of conversions of the New Series A Preferred may result in unpredictable
fluctuations in the Common Stock price, with unforeseeable consequences.
Thus, depending on the timing and number of New Series A Preferred
conversions, the market price of the Company's Common Stock may not be
sustained at or above the required minimum closing bid price of $1.00 to
remain listed on The Nasdaq Stock Market.
In theory, a decrease in the total number of shares outstanding will not
necessarily affect the marketability of the Common Stock, the type of investor
who acquires it, or the Company's reputation in the financial community. As a
practical matter, however, the Board believes, based in part on advice from
CIBC, that the increased market price of its Common Stock expected as a result
of the Restructuring Reverse Stock Split is likely to improve the
marketability and liquidity of the Company's Common Stock by appealing to a
broader market and will encourage interest and trading in the Common Stock,
particularly if the Restructuring is adopted and given effect. Because of the
trading volatility often associated with low-priced stocks, many brokerage
houses and institutional investors have internal policies and practices that
prohibit them from investing in low-priced stocks or that tend to discourage
individual brokers from recommending low-priced stocks to their customers.
Additionally, the structure of trading commissions tends to have an adverse
impact upon holders of lower-priced stock because the broker's commissions on
low-priced stocks generally represent a higher percentage of the sales price
than commissions on relatively higher-priced issues. The Restructuring
Reverse Stock Split may result in a price level of Common Stock for the Common
Stock that will reduce or mitigate, to some extent, the foregoing policies and
practices of brokerage firms and diminish the adverse impact of trading
commissions on the market for the Common Stock. The expected increased price
level may also encourage interest and trading in the Common Stock and possibly
promote greater liquidity for the Company's stockholders. Some investors,
however, may view the Restructuring Reverse Stock Split negatively, due to the
reduced number of shares that will be available in the public market, and the
increased number of shares available for issuance upon conversion of the New
Series A Preferred or for other reasons. Thus, there is no assurance that the
market price of the Common Stock will proportionately reflect the
Restructuring Reverse Stock Split, or that such price, if it does rise
proportionally, will continue to escalate or be sustained at such levels in
the future.
Page-32
<PAGE>
The Restructuring Reverse Stock Split will result in some stockholders owning
"odd lots" of less than 100 shares of Common Stock received as a result of
such Restructuring Reverse Stock Split. Brokerage commissions and other costs
of transactions in odd lots may be higher, particularly on a per-share basis,
than the cost of transactions in even multiples of 100 shares ("round-lots").
EFFECTS OF PROPOSALS 1A AND 1B ON RECORD HOLDERS
On April 25, 1999, there were 2,381 holders of record of the Company's Common
Stock. There will be no significant change in the number of holders of record
of the Company's Common Stock immediately following the increase in the number
of authorized but unissued and unreserved shares of Common Stock that will
result from the Restructuring Reverse Stock Split. As stated above, however,
the Company anticipates that following the increase in the number of
authorized but unissued and unreserved shares of Common Stock there will be an
increase in the number of record holders of Common Stock resulting from
conversions of New Series A Preferred and subsequent sales of converted Common
Stock by the holders of New Series A Preferred. The Company believes that
such increase will be greater if Proposal 2 is adopted instead of Proposal 1A
and 1B. See "Proposal 2 -- Effects of Proposal 2 on Record Holders" below.
EFFECTS OF PROPOSALS 1A AND 1B ON DIVIDENDS
The issuance of additional authorized but unissued and unreserved shares of
Common Stock might be disadvantageous to current stockholders in that any
additional shares could potentially reduce per share dividends, if any.
Stockholders should consider, however, that the possible impact upon dividends
is likely to be minimal in view of the fact that the Company has never paid
dividends on Common Stock, has not adopted any policy with respect to the
payment of dividends on Common Stock, and does not intend to pay any cash
dividends on Common Stock in the foreseeable future. The Company instead
intends to utilize retained earnings, if any, for use in financing growth and
additional business opportunities.
EFFECTS OF PROPOSALS 1A AND 1B ON TAKEOVERS
Future issuances of additional shares of Common Stock available for issuance
as a result of the Restructuring Reverse Stock Split, while providing
desirable flexibility in carrying out corporate purposes, could potentially
make it more difficult for a third party to acquire, or discourage a third
party from obtaining, a majority of the outstanding Common Stock of the
Company, thereby having an anti-takeover effect. Although the Company's
management does not view this proposal as a means of doing so, the Company
could potentially use the additional authorized but unissued shares of Common
Stock to frustrate persons seeking to effect a takeover or otherwise gain
control of the Company by, for example, privately placing shares with
purchasers who would side with the Board in opposing a hostile takeover bid.
Shares of Common Stock could also be issued to a holder that would thereafter
Page-33
<PAGE>
have sufficient voting power to assure that any proposal to amend or repeal
the By-Laws or certain provisions of the Certificate of Incorporation would
not receive the requisite vote. Such uses of the Common Stock could render
more difficult, or discourage, an attempt to acquire control of the Company,
if such transaction were opposed by the Board. Although the increase in the
number of authorized but unissued shares of Common Stock of the Company could
be construed as having such anti-takeover effects, neither the Board nor the
Company's management views Proposals 1A and 1B in that perspective; rather, as
described above, the Company anticipates that the newly authorized shares of
Common Stock would be used to meet its obligation to the New Series A
Preferred stockholders who elect to convert New Series A Preferred into Common
Stock and for future capital raising activities.
On the other hand, as noted above, the issuance of additional shares of Common
Stock, upon conversion of the New Series A Preferred or otherwise, could
result in one or more stockholders obtaining sufficient shares of the
Company's Common Stock to exercise control of the Company. Although no holder
of New Series A Preferred may convert New Series A Preferred if such
conversion would result in the holder together with its affiliates becoming
the beneficial owners of 10% or more of the Company's Common Stock, holders of
New Series A Preferred acquiring less than 10% of the Company's Common Stock
through conversion of New Series A Preferred, if they did not sell but
continued to hold such Common Stock, could, in the aggregate, acquire
ownership of a sufficient number of shares of Common Stock to elect a majority
of the members of the Board, giving such holders the ability to effect a
change of control. However, the Cash Exchange Option as proposed by Proposal
1A may reduce the number of holders of New Series A Preferred, which may
reduce the possibility of such an occurrence
EFFECTS OF PROPOSALS 1A AND 1B ON REGISTRATION AND VOTING
The Company's Common Stock is currently registered under Section 12(g) of the
Exchange Act, and the Company is subject to the periodic reporting and other
requirements of the Exchange Act. Proposals 1A and 1B will not affect the
registration of the Company's Common Stock under the Exchange Act. After the
implementation of Proposals 1A and 1B, including the Restructuring Reverse
Stock Split, the Company's Common Stock will continue to be reported on The
Nasdaq Stock Market under the symbol "RMTR" (although such continued reporting
would be subject to the Company meeting all applicable listing requirements
and Nasdaq will add the letter "D" to the end of the trading symbol for a
period of 20 trading days to indicate that the Restructuring Reverse Stock
Split has occurred).
Proportionate voting rights and other rights of the holders of Common Stock
will not be affected by the Proposals (other than as a result of the payment
of cash in lieu of fractional shares in the Restructuring Reverse Stock Split,
as described below). Although none of the Proposals will affect the rights of
stockholders or any stockholder's proportionate equity interest in the Company
(subject to the treatment of fractional shares), the Restructuring Reverse
Stock Split will increase the ability of the Board to issue authorized and
unissued shares without further stockholder action. The number of
stockholders of record will not be affected by Proposals 1A and 1B or by
Proposal 2 (except to the extent that any stockholder who, as a result of the
Restructuring Reverse Stock Split, holds only a fractional share interest and,
therefore, receives cash for that interest after the Restructuring Reverse
Stock Split).
Page-34
<PAGE>
EFFECTS OF PROPOSALS 1A AND 1B ON THE SERIES A PREFERRED CONVERSION RATE
The conversion rate of the Series A Preferred currently varies in relation to
the price of the Company's Common Stock, being the lowest trading price of the
Common Stock during the 22 consecutive trading days ending with the trading
date prior to the date of conversion, reduced by a percentage which increases
from 7% during the seventh calendar month after the issuance of the Series A
Preferred up to 15% during and after the fifteenth calendar month after such
issuance. Proposal 1A will change the New Series A Preferred conversion rate
from the floating price as currently operates for Series A Preferred to a rate
of $1.00 per share of Common Stock (or $0.75 during the period before June 25,
1999). These conversion rates will be subject to adjustment for customary
anti-dilution events and will be increased to give effect to the Restructuring
Reverse Stock Split.
EFFECTS OF PROPOSALS 1A AND 1B ON REVERSED SHARES AND PAR VALUE
The Restructuring Reverse Stock Split will effect a reduction in the number of
shares and an increase in the exercise price per share of Common Stock
available for issuance under the Company's employee stock option plans in
proportion to the exchange ratio of the Restructuring Reverse Stock Split. As
of December 31, 1998, the aggregate number of shares of Common Stock currently
authorized for issuance under the employee stock option plans is 4,479,831
(prior to giving effect to the Restructuring Reverse Stock Split).
In addition to outstanding options granted under the Company's employee stock
option plan, the Company also has outstanding warrants to purchase shares of
the Company's Common Stock, debt which may be converted into Common Stock
under the NEBF Credit Facility, and reserved shares of Common Stock issuable
pursuant to the DFA Contracts. Under the terms of the warrants, the
applicable provisions of the NEBF Credit Facility, and the DFA Contracts, the
Restructuring Reverse Stock Split will effect a reduction in the number of
shares and an increase in the price per share of the Company's Common Stock
issuable upon exercise of such warrants, conversion of such debt and issuance
of shares pursuant to the DFA Contracts, in proportion to the Restructuring
Reverse Stock Split ratio. As of December 31, 1998, the weighted average
exercise price of outstanding employee stock options was $5.85 per share
(prior to giving effect to the restructuring reverse stock split).
The par value of the Company's Common Stock and New Series A Preferred will
remain at $.01 per share following the effective time of the Restructuring
Reverse Stock Split, although the number of shares of Common Stock issued and
outstanding will be reduced. Accordingly, the aggregate par value of the
issued and outstanding Common Stock also will be reduced. In addition, the
number of authorized but unissued shares of Common Stock effectively will be
increased by the Restructuring Reverse Stock Split.
Page-35
<PAGE>
PROPOSAL 2
GENERAL
In view of the uncertainty associated with the conditions to the
Restructuring, including, without limitation, approval of the holders of the
Series A Preferred, DFA and the NEBF, and the Company's obligations under the
Certificate of Designation to take action to increase the authorized but
unissued shares of Common Stock so as to enable the Company to effect
conversions of the Series A Preferred, the Board is also providing
stockholders of the Company with the opportunity to vote upon Proposal 2 which
would, in effect, increase the number of shares of Common Stock available to
the Company to effect conversions of the Series A Preferred.
However, since the Board believes that Proposals 1A and 1B, as integral parts
of the Restructuring, will provide substantial additional benefits to the
Company and its stockholders and, therefore, are superior to Proposal 2, the
Board has determined not to effect Proposal 2 if Proposals 1A and 1B are
approved by the requisite vote of the holders of the Common Stock, whether or
not Proposal 2 is approved by the stockholders at the Special Meeting.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSALS 1A AND
1B AND AGAINST PROPOSAL 2. HOWEVER, THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS WHO VOTE AGAINST, OR ABSTAIN WITH RESPECT TO,
PROPOSALS 1A OR 1B SHOULD VOTE FOR PROPOSAL 2.
If Proposals 1A and 1B are not approved by the stockholders and Proposal 2 is
approved by the stockholders, the Board will be authorized in its discretion
to effectuate a reverse stock split in any of the following ratios: 1:1.5,
1:2, 1:2.5, 1:3, 1:3.5, 1:4, 1:4.5, and 1:5. The Board believes that
stockholder approval of a range of exchange ratios (as opposed to a specified
exchange ratio) within which Proposal 2 may be effected will provide the Board
with flexibility to achieve the purposes of Proposal 2. See "Reasons for
Proposal 2; Effects of Non-Approval of Proposal 2" below.
If Proposal 2 is implemented, Article FOURTH of the Company's Certificate of
Incorporation would be amended as set forth in the Certificate of Amendment to
the Certificate of Incorporation (the "Proposal 2 Certificate of Amendment")
attached to this Proxy Statement as Exhibit D; provided, however, that such
form of Proposal 2 Certificate of Amendment is subject to amendment to include
such changes as may be required by the office of the Secretary of State of the
State of Delaware and as the Board deems necessary and advisable to effect
Proposal 2.
Proposal 2 would become effective on the date of filing of the Proposal 2
Certificate of Amendment (the "Proposal 2 Effective Date") as of the time of
filing with the office of the Secretary of State of the State of Delaware.
Except as set forth below with respect to fractional shares, on the Proposal 2
Effective Date, each share of Common Stock issued and outstanding immediately
prior thereto will be automatically and without any action on the part of the
stockholders combined, converted and changed into new shares of Common Stock
in accordance with the Proposal 2 ratio determined by the Board within the
limits set forth in Proposal 2, that is, .67 share, for the ratio 1:1.5,
through and including .2 share, for the ratio 1:5.
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<PAGE>
Except as may result from the payment of cash for fractional shares, as
described below, each holder of Common Stock will hold the same percentage of
Common Stock outstanding immediately following the effectiveness of Proposal 2
as each such stockholder did immediately prior to Proposal 2. Upon
effectiveness, Proposal 2 will result in a reduction of the number of shares
of Common Stock issued and outstanding and a corresponding increase in the
number of authorized and unissued shares of the Company's Common Stock. As
described more fully in "Effects of Proposal 2 on Ownership and Control"
below, conversions of shares of Series A Preferred will result in substantial
dilution to holders of the Company's Common Stock.
If either of Proposals 1A or 1B is not approved by the stockholders at the
Special Meeting and Proposal 2 is approved by the stockholders of the Company
at the Special Meeting, Proposal 2 will be effected, if at all, only upon a
determination by the Board, in consultation with CIBC, that Proposal 2 (in a
reverse split ratio determined by the Board upon advice of its financial
advisor within the limits set forth in Proposal 2) is in the best interests of
the Company and its stockholders. Such determination will be based upon
certain factors, principally including but not limited to (i) whether, failing
approval of Proposals 1A and 1B, an agreement is reached with the holders of
the Series A Preferred regarding conversion and other terms and conditions of
the Series A Preferred, (ii) the likely effect of Proposal 2 on the market
price of the Common Stock, (iii) the Company's working capital needs in light
of the existing and expected marketability and liquidity of the Common Stock
and (iv) prevailing market conditions. In consideration of the reasons as
herein described, the Board has determined the advisability of Proposal 2 in
the event that either of Proposals 1A or 1B is not authorized by the
stockholders and, depending on the foregoing factors and such other reasons
and circumstances as may exist at the time, the Board expects to effect
Proposal 2 if authorized by the stockholders and if Proposal 1A and 1B are
not authorized by the stockholders.
Notwithstanding approval of Proposal 2 by the stockholders at the Special
Meeting, the Board may, in its sole discretion, determine not to effect
Proposal 2 prior to January 1, 2000. If the Board fails to implement Proposal
2 prior to such date, stockholder approval would again be required prior to
implementing any reverse stock split or other change in the Company's
authorized capital stock, other than pursuant to Proposal 1B.
REASONS FOR PROPOSAL 2; EFFECTS OF NON-APPROVAL OF PROPOSAL 2
For the reasons set forth above (see "Proposals 1A and 1B -- Reasons for
Proposals 1A and 1B; Effects of Non-Approval of Proposals 1A and 1B"), the
Company believes that Proposals 1A and 1B are a superior alternative to
Proposal 2 and accordingly, Proposal 2 will be conditional upon Proposals 1A
and 1B not being approved. Therefore, if Proposals 1A and 1B are approved at
the Special Meeting, whether or not Proposal 2 is also approved, Proposal 2
will not be implemented. As described above, the Company believes that
Proposals 1A and 1B would lead to substantially less dilution of the shares of
Common Stock than if Proposal 2 were instead adopted.
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<PAGE>
As noted earlier (see "The Restructuring -- Lack of Authorized Stock"), the
Company is required under the terms of the Certificate of Designation and the
Preferred Stock Investment Agreements to take such action as may be necessary
to ensure that there are sufficient authorized but unissued shares of Common
Stock available for conversion by the holders of the Series A Preferred. The
reverse stock split contemplated by Proposal 2 was originally proposed with
such obligations in mind, and such reverse stock split was to be considered at
the March 15 Meeting. It became apparent, however, that the Restructuring was
a superior alternative to a mere reverse stock split and was more likely to
obtain the approval of stockholders and other interested parties including DFA
and the NEBF. The Company therefore cancelled the March 15 Meeting in order
for Proposals 1A and 1B to be put before stockholders at the Special Meeting.
However, although the Company believes that Proposals 1A and 1B are preferable
to Proposal 2, it is nonetheless submitting Proposal 2 to the stockholders at
the Special Meeting because of such obligations.
The Board has declared the advisability of Proposal 2, in the event that
Proposals 1A and 1B are not approved by the stockholders. Provided that
Proposals 1A and 1B are not approved and Proposal 2 is approved, the Company
will effect Proposal 2, if at all, because it should permit the Company to
satisfy requests to convert Series A Preferred pursuant to the terms of the
Company's Preferred Stock Investment Agreements with the holders of the Series
A Preferred and the Certificate of Designation, and depending on the number
and time of such conversions, it should (a) result in a per share price
increase sufficient to enable the Company's Common Stock to remain eligible
for listing on The Nasdaq Stock Market, although any such per share price
increase will be dependent on, among other factors, the Company's operating
performance, general market conditions and other factors affecting the market
price of the Company's Common Stock, and (b) enhance the Company's ability to
raise capital in the future by making available authorized but unissued shares
of Common Stock. Upon filing of the Proposal 2 Certificate of Amendment, the
Company's suspension of conversions of Series A Preferred will be lifted and
Series A Preferred conversion requests will be honored.
As is the case with the Restructuring Reverse Stock Split, an increase in the
per share price of the Company's Common Stock, which the Company also expects
as a consequence of Proposal 2, may broaden the investor pool from which the
Company might be able to obtain additional financing in the future and provide
greater opportunities for forms of business combinations in which additional
authorized but unissued shares may prove to be helpful. Because the Company
currently has no shares of Common Stock available to be issued for any
purposes beyond shares already reserved for stock option plans, outstanding
warrants, debt conversion, and for issuance pursuant to the DFA Contracts, if
the stockholders of the Company do not approve Proposal 2 (or Proposals 1A and
1B), the Company will be limited in its ability to honor conversion requests
from holders of the Series A Preferred, to retain listing of its shares on The
Nasdaq Stock Market, and to raise capital through issuance of Common Stock
or securities convertible into Common Stock in the future. Further, failure
to approve Proposal 2 (or Proposals 1A and 1B) may result in the respective
rights of the Company and the holders of Series A Preferred being determined
through further litigation or negotiated resolution of adverse claims.
Page-38
<PAGE>
The Board is proposing a range of reverse stock splits under Proposal 2 (as
opposed to approval of a specified reverse stock split), with the particular
reverse stock split ratio to be determined by the Board if and when it decides
to file the applicable Proposal 2 Certificate of Amendment, so as to provide
the Board with flexibility in seeking to achieve the purposes of Proposal 2,
and the Board believes that this is in the best interests of the Company and
its stockholders in the event that Proposals 1A and 1B are not approved. A
range of splits allows for the contingency of a change in the market price of
the Common Stock. For example, if such price were to increase substantially,
a higher ratio of reverse split might not be as desirable as a lower ratio.
EFFECTS OF PROPOSAL 2 ON OWNERSHIP AND CONTROL
If the stockholders approve Proposal 2 (and not Proposals 1A and 1B), it will
have the effect of increasing the Company's authorized but unissued shares of
Common Stock, which the Company can use to honor conversion requests. The
Company believes that if the stockholders do not approve Proposals 1A and 1B
and approve Proposal 2, upon effecting Proposal 2, the holders of the Series A
Preferred will continue to convert the Series A Preferred into Common Stock,
thus resulting in substantial dilution of the holders of the Common Stock and,
based upon the advice of CIBC, increased downward pressure on the market price
for the Common Stock. The Company believes that Proposal 2 would have a
significantly more dilutive effect on the Common Stock than Proposals 1A and
1B. If all of the remaining outstanding shares of Series A Preferred were to
be converted pursuant to the terms of the Series A Preferred using the lowest
closing sales price of the Common Stock as reported on Nasdaq for the first
quarter of 1999 ($0.41 per share), the total number of shares of Common Stock
required for such conversion, with the applicable discount and, including
accrued dividends at April 30, 1999, would be 27,224,025 (not taking account
of any reverse stock split). See "Proposals 1A and 1B -- Effects of Proposals
1A and 1B on Ownership and Control" above.
The increase in the number of authorized but unissued and unreserved shares of
Common Stock that would result from Proposal 2 would increase the percentage
and number of shares of the Company's Common Stock that are authorized but
unissued and unreserved for issuance to increase from 0% (currently) to
between approximately 33% or 25,000,000 shares (if the ratio of 1:1.5 were
effected) and 80% or 60,000,000 shares (if the ratio of 1:5 were effected).
This effectively constitutes an increase in the number and proportion of
shares of the Company's Common Stock that are available for future issuance
without further stockholder approval. The issuance of additional shares, upon
conversion or otherwise, could result in one or more stockholders obtaining
sufficient shares of the Company's Common Stock to exercise control of the
Company. Although no holder of Series A Preferred may convert Series A
Preferred if such conversion would result in the holder together with its
affiliates becoming the beneficial owners of 10% or more of the Company's
Common Stock, holders of Series A Preferred acquiring less than 10% of the
Company's Common Stock through conversion of Series A Preferred, if they did
not sell but continued to hold such Common Stock, could, in the aggregate,
acquire ownership of a sufficient number of shares of Common Stock to elect a
majority of the members of the Board, giving such holders the ability to
effect a change of control.
Page-39
<PAGE>
EFFECTS OF PROPOSAL 2 ON MARKET PRICE AND MARKETABILITY
The possible effects of the reverse stock split contemplated by Proposal 2 on
market price and marketability of the Company will, in the opinion of the
Company, be substantially similar to what would occur with the Restructuring
Reverse Stock Split. See "Proposals 1A and 1B -- Effects of Proposals 1A and
1B on Market Price and Marketability" above. However, the Restructuring, of
which Proposals 1A and 1B are an integral part, provides for measures in
addition to a reverse stock split, such as new arrangements with DFA and the
NEBF, which may better improve the market price and marketability of the
Common Stock of the Company than Proposal 2. In addition, as a condition to
the closing of the Restructuring, all parties to the Letter of Intent are
required to dismiss any litigation against the Company, which may also have a
beneficial effect on the market price and marketability of the Common Stock of
the Company, as compared with the position under Proposal 2.
EFFECTS OF PROPOSAL 2 ON RECORD HOLDERS
The Company believes that Proposal 2 will cause an increase in the number of
record holders of Common Stock as a result of conversions of Series A
Preferred, and because conversions will be greater if Proposal 2 is adopted
instead of Proposals 1A and 1B, the increase in the number of record holders
may also be correspondingly greater. See "Proposals 1A and 1B -- Effects of
Proposals 1A and 1B on Record Holders" above.
EFFECTS OF PROPOSAL 2 ON DIVIDENDS
See "Proposals 1A and 1B -- Effects of Proposals 1A and 1B on Dividends,"
which is equally applicable to Proposal 2.
EFFECTS OF PROPOSAL 2 ON TAKEOVERS
The Company believes that the possible effects of Proposal 2 on takeovers will
be in substantially the same as would occur with Proposals 1A and 1B. See
"Proposals 1A and 1B -- Effects of Proposals 1A and 1B on Takeovers" above.
EFFECTS OF PROPOSAL 2 ON REGISTRATION AND VOTING
The discussion in "Proposals 1A and 1B -- Effects of Proposals 1A and 1B on
Registration and Voting" above is equally applicable to Proposal 2.
EFFECTS OF PROPOSAL 2 ON THE SERIES A PREFERRED CONVERSION RATE
The conversion rate of the Series A Preferred currently varies in relation to
the price of the Company's Common Stock. See "Proposals 1A and 1B -- Effects
of Proposals 1A and 1B on the Series A Preferred Conversion Rate" above. This
floating rate would remain in place if Proposal 2 were given effect. However,
pursuant to the Certificate of Designation, the conversion rate of the Series
A Preferred is subject to adjustment for customary anti-dilution events and
would be proportionately increased to give effect to Proposal 2.
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<PAGE>
EFFECTS OF PROPOSAL 2 ON RESERVED SHARES AND PAR VALUE
Shareholders are encouraged to read "Proposals 1A and 1B -- Effects of
Proposals 1A and 1B on Reserved Shares and Par Value" above. The effects
described therein would, in the opinion of the Company, be equally applicable
to Proposal 2.
INTERESTS OF CERTAIN PERSONS
To the best knowledge of the Company, no executive officer or director of the
Company, or any of their respective affiliates, are holders of the Series A
Preferred, or are in any way affiliated with DFA, the DFA affiliates or the
NEBF, except that Mr. William Tull, a director of the Company, is an Advisor
to the NEBF, and none of DFA, the DFA affiliates or the NEBF, or any of their
respective affiliates, are holders of the Series A Preferred.
MATTERS RELATING TO ALL PROPOSAL
PAYMENT FOR FRACTIONAL SHARES
No fractional shares of Common Stock will be issued as a result of a
Restructuring Reverse Stock Split or Proposal 2 (each a "Reverse Stock
Split"). In lieu of any such fractional share interest, each holder of Common
Stock, who as a result of an Reverse Stock Split would otherwise receive a
fractional share of new Common Stock, will be entitled to receive cash, in
United States Dollars, in an amount equal to the product calculated by
multiplying (i) the closing sales price of the Company's Common Stock on the
Restructuring Effective Date or the Proposal 2 Effective Date, as applicable
(each an "Effective Date"), as reported on The Nasdaq Stock Market or, if
no such sales price exists, the mid-range between the last bid and asked price
on the applicable Effective Date by (ii) the number of shares of Common Stock
held by such holder that would otherwise have been converted into a fractional
share interest. The resulting amount will be paid to such holder in the form
of a check in accordance with the exchange procedures outlined under "Exchange
of Stock Certificates," below.
Page-41
<PAGE>
EXCHANGE OF STOCK CERTIFICATES
Shortly after the applicable Effective Date, each holder of an outstanding
certificate theretofore representing shares of Common Stock ("Old Common
Stock") will receive from the Company or Citibank, N.A., as the Company's
transfer agent (the "Transfer Agent"), instructions regarding the surrender of
such certificate. These instructions will include a form of Transmittal
Letter to be completed and returned to the Transfer Agent or the Company. As
soon as practicable after the surrender of any certificate representing shares
of Old Common Stock, together with a duly executed Transmittal Letter and any
other documents the Transfer Agent may specify, the Transfer Agent will
deliver to the person in whose name such certificate had been issued a new
certificate registered in the name of such person representing the number of
full shares of new Common Stock into which the shares of Old Common Stock
previously represented by the surrendered certificate have been reclassified,
and a check for any amounts to be paid in cash in lieu of any fractional share
interest. Each certificate representing shares of new Common Stock issued in
connection with a Reverse Stock Split will continue to bear any legends
restricting the transfer of such shares that were borne by the surrendered
certificates representing the shares of Old Common Stock. Until surrendered
as contemplated herein, each certificate, which immediately prior to a Reverse
Stock Split represented any shares of Old Common Stock, shall be deemed at and
after the Reverse Stock Split to represent the number of full shares of new
Common Stock contemplated by the preceding sentence and the right to receive
cash in lieu of any fractional share interest.
No service charges, brokerage commissions or transfer taxes will be payable by
any holder of any certificate which, prior to approval of a Reverse Stock
Split, represented any shares of Old Common Stock, except that if any
certificates of new Common Stock are to be issued in a name other than that in
which the certificates for shares of Old Common Stock surrendered are
registered, it shall be a condition of such issuance that (i) the person
requesting such issuance shall pay to the Company any transfer taxes payable
by reason thereof or establish to the satisfaction of the Company that such
taxes have been paid or are not payable, (ii) such transfer shall comply with
all applicable federal and state securities laws, and (iii) such surrendered
certificate shall be properly endorsed and otherwise be in the proper form for
transfer.
NO APPRAISAL RIGHTS
Under Delaware law, stockholders of the Company are not entitled to appraisal
rights with respect to Proposals 1A and 1B or Proposal 2.
Page-42
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSALS
A summary of certain federal income tax consequences of the Reverse Stock
Splits to the Company and to individual stockholders is set forth below. The
following discussion is not intended to be, nor should it be relied on as, a
comprehensive analysis of the tax issues arising from or relating to the
Reverse Stock Splits and is based upon present federal income tax law as
currently interpreted, without taking into account possible changes in such
law or interpretations, including amendments to applicable statutes and
regulations or changes in the judicial or administrative rulings, some of
which may have retroactive effect. The Company has not and will not seek an
opinion of counsel or a ruling from the Internal Revenue Service regarding the
federal income tax consequences of the Reverse Stock Splits. Certain
stockholders such as dealers in securities, insurance companies, financial
institutions, foreign individuals and entities, tax-exempt entities, and
persons who do not hold the Common Stock as a capital asset may be subject to
special rules not discussed below. ACCORDINGLY, STOCKHOLDERS ARE ADVISED TO
CONSULT THEIR OWN TAX ADVISORS FOR MORE INFORMATION REGARDING THE EFFECTS OF
THE REVERSE STOCK SPLITS UNDER APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN
INCOME TAX LAWS.
The Company intends that a Reverse Stock Split will constitute a
reorganization (a "Reorganization") within the meaning of Section 368(a)(1)(E)
of the Internal Revenue Code of 1986, as amended. If a Reverse Stock Split
constitutes a Reorganization, the following federal income tax consequences
should result:
1. A stockholder would not recognize any gain or loss as a result of the
Reverse Stock Split except to the extent that a stockholder receives
cash in lieu of a fractional share. To the extent a stockholder
receives cash in lieu of a fractional share, the stockholder would for
tax purposes be treated as having sold the fractional share to the
Company. Generally, such stockholder would recognize a gain or loss
as a result of the repurchase of a fractional share, equal to the
difference between (i) the stockholder's proportionate adjusted basis
in such fractional share, and (ii) the cash amount received for such
fractional share. Any gain would be treated as short-term capital
gain taxable at a maximum federal income tax rate of 39.6% to a
non-corporate stockholder if the stockholder has held his or her
shares for 18 months or less prior to the Effective Date, or long-term
capital gain taxable at a maximum federal income tax rate of 20% to a
non-corporate stockholder if the stockholder has held his or her
shares for more than 18 months prior to the Effective Date.
Page-43
<PAGE>
2. The aggregate tax basis of the shares of new Common Stock received by
the stockholder pursuant to the Reverse Stock Split would equal the
aggregate tax basis of the shares of Old Common Stock held by the
stockholder immediately prior to the applicable Effective Date of the
Reverse Stock Split reduced by any basis allocated to a fractional
share for which stockholder receives cash. The stockholder could
"tack" the holding period of the Old Common Stock prior to the Reverse
Stock Split to the holding period of the new Common Stock received by
the stockholder as a result of the Reverse Stock Split, provided that
the shares of Old Common Stock constituted capital assets in the hands
of the stockholder.
3. Holders of Series A Preferred or New Series A Preferred would
recognize no income, gain or loss for federal income tax purposes as
a result of the changes to the conversion ratios for such stock
incident to a Reverse Stock Split.
4. The Company would not recognize gain or loss as a result of a Reverse
Stock Split.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of Common
Stock outstanding and entitled to vote is necessary to approve Proposal 1A,
Proposal 1B or Proposal 2.
Proxies solicited by the Board will be voted in favor of Proposals 1A and 1B
and against Proposal 2 unless stockholders specify otherwise.
AT THE SPECIAL MEETING, THE STOCKHOLDERS WILL BE REQUESTED TO CONSIDER AND
VOTE ON THE FOLLOWING RESOLUTIONS:
PROPOSAL 1A: AMEND AND RESTATE THE COMPANY'S CERTIFICATE OF DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS RELATING TO THE COMPANY'S
SERIES A CONVERTIBLE PREFERRED STOCK SO AS TO AMEND THE TERMS
OF THE OUTSTANDING SERIES A CONVERTIBLE PREFERRED STOCK TO
PROVIDE FOR, AMONG OTHER THINGS, (I) A FIXED RATHER THAN
VARIABLE RATE OF CONVERSION TO COMMON STOCK, (II) A LIMITED
CASH EXCHANGE OPTION, (III) REDEMPTION AT THE OPTION OF THE
COMPANY ON OR AFTER JUNE 30, 2000, (IV) MANDATORY REDEMPTION
ON JUNE 30, 2002, (V) A DIVIDEND OF 11% PER ANNUM (WHICH MAY
INCREASE UNDER CERTAIN CIRCUMSTANCES), AND (VI) FIXED DIVIDEND
PAYMENT DATES. SUCH AMENDED TERMS ARE SET FORTH IN THEIR
ENTIRETY AS EXHIBIT A TO THE PROXY STATEMENT. PROPOSAL 1A WILL
ONLY BE ADOPTED IF PROPOSAL 1B IS ALSO APPROVED BY STOCKHOLDERS
OF THE COMPANY.
Page-44
<PAGE>
PROPOSAL 1B: AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT A
REVERSE STOCK SPLIT OF THE COMPANY'S COMMON STOCK, WHEREBY EACH
FIVE SHARES OF COMMON STOCK WOULD BE COMBINED, CONVERTED AND
CHANGED INTO ONE SHARE OF COMMON STOCK. PROPOSAL 1B WILL ONLY
BE ADOPTED IF PROPOSAL 1A IS ALSO APPROVED BY STOCKHOLDERS OF
THE COMPANY.
PROPOSAL 2: AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO PROVIDE THE
BOARD OF DIRECTORS OF THE COMPANY WITH THE AUTHORITY TO EFFECT,
IN THE BOARD'S SOLE DISCRETION, AT ANY TIME PRIOR TO JANUARY 1,
2000, A REVERSE STOCK SPLIT OF THE COMPANY'S COMMON STOCK,
WHEREBY THE SHARES OF COMMON STOCK WOULD BE COMBINED, CONVERTED
AND CHANGED INTO COMMON STOCK IN ONE OF THE FOLLOWING RATIOS,
AS SELECTED BY THE BOARD OF DIRECTORS OF THE COMPANY IN ITS
SOLE DISCRETION: 1.5:1, 2:1, 2.5:1, 3:1, 3.5:1, 4:1, 4.5:1, OR
5:1. PROPOSAL 2 WILL NOT BE ADOPTED IF PROPOSALS 1A AND 1B
ARE APPROVED BY THE STOCKHOLDERS OF THE COMPANY.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSALS 1A AND
1B AND AGAINST PROPOSAL 2. HOWEVER, THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS WHO VOTE AGAINST, OR ABSTAIN WITH RESPECT TO,
PROPOSALS 1A OR 1B SHOULD VOTE FOR PROPOSAL 2.
OTHER MATTERS
The Company currently knows of no matters to be submitted at the Special
Meeting other than those described herein. If any other matters properly come
before the Special Meeting, it is the intention of the persons named on the
enclosed proxy card to vote the shares they represent as the Board may
recommend.
Proposals of stockholders of the Company made under Securities and Exchange
Commission Rule 14a-8, which were intended to be presented by such
stockholders at the next annual meeting of stockholders of the Company to be
held after the Special Meeting, were to be received by the Company not later
than December 15, 1998, in order for such proposals to be included in the
proxy statement and form of proxy relating to that annual meeting. No such
proposals were received by the Company.
All other stockholder proposals to be presented at the 1999 Annual Meeting of
Stockholders must be submitted in writing to the Secretary of the Company at
the Company's principal offices no later than the close of business on (i) the
date that is 60 days in advance of the meeting or (ii) the date that is 10
days after the date on which the notice of the 1999 Annual Meeting is first
given to stockholders, whichever is later. The notice must provide the
information required by the Company's By-laws. A copy of these By-law
requirements will be provided upon request in writing to the Secretary of the
Company at the principal offices of the Company.
Page-45
<PAGE>
The financial statements, supplementary financial information, and
management's discussion and analysis of financial condition and results of
operations included in the Company's Annual Report to Stockholders and in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998, as
filed with the Securities and Exchange Commission and being delivered to
stockholders with this Proxy Statement, are hereby incorporated by reference
herein.
Representatives of Arthur Andersen LLP, the principal accountants of the
Company for the current year and for the most recently completed fiscal year,
are expected to be present at the Special Meeting. If present at the Special
Meeting, such representatives will have the opportunity to make a statement if
they desire to do so, and are expected to be available to respond to
appropriate questions.
Page-46
<PAGE>
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
RAMTRON INTERNATIONAL CORPORATION
June 10, 1999 Special Meeting of Stockholders
The undersigned stockholder(s) of Ramtron International Corporation, a
Delaware corporation (the "Company"), hereby acknowledges receipt of the
Notice of Special Meeting of Stockholders and Proxy Statement, each dated
May XX, 1999, and hereby appoints L. David Sikes and Greg B. Jones, and each
of them, proxies and attorneys-in-fact, with full power to each of
substitution, on behalf and in the name of the undersigned, to represent the
undersigned at the Special Meeting of Stockholders of the Company to be held
on June 10, 1999, at 2:00 p.m., Mountain Time, at the principal office of the
Company, located at 1850 Ramtron Drive, Colorado Springs, Colorado 80921, and
at any adjournment(s) thereof, and to vote all shares of Common Stock to which
the undersigned would be entitled, if then and there personally present, on
the matter set forth on the reverse side.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR PROPOSALS 1A AND 1B AND AGAINST PROPOSAL 2.
HOWEVER, IF PROPOSALS 1A AND 1B ARE NOT APPROVED BY THE REQUISITE VOTE OF
STOCKHOLDERS, THIS PROXY WILL BE VOTED FOR PROPOSAL 2 UNLESS A CONTRARY
DIRECTION IS INDICATED.
DO NOT FOLD, STAPLE OR MUTILATE.
(To be signed on Reverse Side)
SEE REVERSE SIDE
Page-47
<PAGE>
RAMTRON INTERNATIONAL CORPORATION
PLEASE MARK VOTES AS IN THIS EXAMPLE USING DARK INK ONLY.
(X)
PROPOSAL 1A: AMEND AND RESTATE THE COMPANY'S CERTIFICATE OF DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS RELATING TO THE COMPANY'S
SERIES A CONVERTIBLE PREFERRED STOCK SO AS TO AMEND THE TERMS
OF THE OUTSTANDING SERIES A CONVERTIBLE PREFERRED STOCK TO
PROVIDE FOR, AMONG OTHER THINGS, (I) A FIXED RATHER THAN
VARIABLE RATE OF CONVERSION TO COMMON STOCK, (II) A LIMITED
CASH EXCHANGE OPTION, (III) REDEMPTION AT THE OPTION OF THE
COMPANY ON OR AFTER JUNE 30, 2000, (IV) MANDATORY REDEMPTION ON
JUNE 30, 2002, (V) A DIVIDEND OF 11% PER ANNUM (WHICH MAY
INCREASE UNDER CERTAIN CIRCUMSTANCES), AND (VI) FIXED DIVIDEND
PAYMENT DATES. SUCH AMENDED TERMS ARE SET FORTH IN THEIR
ENTIRETY AS EXHIBIT A TO THE PROXY STATEMENT. PROPOSAL 1A WILL
ONLY BE ADOPTED IF PROPOSAL 1B IS ALSO APPROVED BY STOCKHOLDERS
OF THE COMPANY.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PROPOSAL 1B: AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO EFFECT A
REVERSE STOCK SPLIT OF THE COMPANY'S COMMON STOCK, WHEREBY EACH
FIVE SHARES OF COMMON STOCK WOULD BE COMBINED, CONVERTED AND
CHANGED INTO ONE SHARE OF COMMON STOCK. PROPOSAL 1B WILL ONLY
BE ADOPTED IF PROPOSAL 1A IS ALSO APPROVED BY STOCKHOLDERS OF
THE COMPANY.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PROPOSAL 2: AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO PROVIDE THE
BOARD OF DIRECTORS OF THE COMPANY WITH THE AUTHORITY TO EFFECT,
IN THE BOARD'S SOLE DISCRETION, AT ANY TIME PRIOR TO JANUARY 1,
2000, A REVERSE STOCK SPLIT OF THE COMPANY'S COMMON STOCK,
WHEREBY THE SHARES OF COMMON STOCK WOULD BE COMBINED, CONVERTED
AND CHANGED INTO COMMON STOCK IN ONE OF THE FOLLOWING RATIOS,
AS SELECTED BY THE BOARD OF DIRECTORS OF THE COMPANY IN ITS
SOLE DISCRETION: 1.5:1, 2:1, 2.5:1, 3:1, 3.5:1, 4:1, 4.5:1, OR
5:1. PROPOSAL 2 WILL NOT BE ADOPTED IF PROPOSALS 1A AND 1B
ARE APPROVED BY THE STOCKHOLDERS OF THE COMPANY.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Any one of such attorneys-in-fact or substitutes as shall be present and shall
act at said meeting or any adjournment(s) thereof shall have and may exercise
all powers of said attorney-in-fact hereunder.
Dated -------------, 1999
Signature (s)-------------------------------------------
(This Proxy should be marked, dated and signed by the stockholder(s) exactly
as his or her names appear hereon and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign.)
Page-48
<PAGE>
==============================================================================
BY ORDER OF THE BOARD OF DIRECTORS
----------------------------------
Richard L. Mohr
Secretary
Colorado Springs, Colorado
May XX, 1999
Page-49
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A CONVERTIBLE PREFERRED STOCK, $0.01 PAR VALUE
OF
RAMTRON INTERNATIONAL CORPORATION
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware, RAMTRON INTERNATIONAL CORPORATION (hereafter called the
"Corporation"), a corporation organized and existing under the General
Corporation Law of the State of Delaware, does hereby certify:
THAT, pursuant to authority conferred upon the Board of Directors of the
Corporation by the Certificate of Incorporation, as amended, of the
Corporation, and pursuant to the provisions of Section 151 of the Delaware
Corporation Law, said Board of Directors, by unanimous written consent dated
February 10, 1998, duly adopted a resolution providing for the issuance of a
series of 29,000 shares of the Series A Convertible Preferred Stock, $0.01 Par
Value (the "Series A Preferred").
THAT, on February 12, 1998, the Corporation filed with the Secretary of State
of the State of Delaware a Certificate of Designation, Preference, Rights and
Limitations of the Series A Preferred (the "Certificate of Designation").
THAT, the Board of Directors of the Corporation, acting pursuant to the
authority expressly vested in it as aforesaid, has adopted a resolution
amending the Certificate of Designation as follows:
RESOLVED, that the Certificate of Designation is hereby amended and restated
in its entirety to read as follows:
"1. Authorized Shares.
There shall be a series of shares of the Preferred Stock of the Corporation
designated "Series A Convertible Preferred Stock". The number of authorized
shares of such series shall be 29,000 and the rights and preferences of such
series (the "Series A Preferred") and the limitations or restrictions thereon,
shall be as set forth herein.
Page A-1
<PAGE>
2. Dividends.
The holders of the Series A Preferred shall be entitled to receive cumulative
dividends at a rate equal to 11% per annum of the liquidation preference per
share per annum, payable semi-annually on December 31 and June 30, with the
first payment being payable on December 31, 1999, when and as declared by the
Board of Directors. Prior to June 30, 2000, all dividends shall be paid in
Series A Preferred. On and after June 30, 2000 dividends may be paid, at
the Corporation's option, on any dividend payment date, either in cash or by
the issuance of additional shares of Series A Preferred (and payment of cash
in lieu of fractional shares) having an aggregate liquidation preference equal
to the amount of such dividends. In the event that on or after June 15,
2000, dividends are paid in additional shares of Series A Preferred, the
dividend rate shall increase by 2% for such dividend payment period. In the
event that a registration statement is not effective within 130 days after
June 15, 1999 with respect to the conversion rights set forth in Section 6 and
the cash exchange rights set forth in Section 7, the Series A Preferred shall
accrue dividends from and after the end of such 130 day period at a rate of
18% per annum until such time as the registration statement is declared
effective. Dividends as provided by this Section 2 shall accrue on any given
share from the date of effect of this amended and restated Certificate of
Designation (the "Amendment Date"), or from the date of original issuance of
such share, whichever is later, and shall accrue from day to day whether or
not declared. Dividends not theretofore paid shall be paid upon conversion of
any shares of the Series A Preferred and shares of Series A Preferred issued
in payment of such dividends shall be simultaneously converted into Common
Stock together with the shares on which such dividends have accrued.
Dividends accrued in accordance with the terms of the Series A Preferred prior
to the Amendment Date shall not be affected by this Section 2.
3. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of the
Series A Preferred shall be entitled to receive, prior and in
preference to any distribution of any assets of the Corporation to
the holders of the Common Stock or any other class or series of
shares except any class or series which is entitled to priority over
the Series A Preferred, the amount of $1,000 per share plus any
accrued but unpaid dividends (the "Liquidation Preference").
Page A-2
<PAGE>
(b) Subject to the last sentence of this Section 3(b), a consolidation or
merger of the Corporation with or into any other corporation or
corporations, or a sale of all or substantially all of the assets of
the Corporation, shall, at the option of the holders of the Series A
Preferred, be deemed a liquidation, dissolution or winding up within
the meaning of this Section 3 if the shares of stock of the
Corporation (along with all derivative securities) outstanding
immediately prior to such transaction represent immediately after
such transaction less than a majority of the voting power of the
surviving corporation (or of the acquirer of the Corporation's assets
in the case of a sale of assets). Such option may be exercised by
the vote or written consent of holders of a majority of the Series A
Preferred at any time within thirty calendar days after written
notice of the essential terms of such transaction shall have been
given to the holders of the Series A Preferred as provided in Section
8 hereof. Such notice shall be given by the Corporation immediately
following determination of such essential terms. If such option is
exercised, the holders of the Series A Preferred shall be entitled to
receive, in cash, immediately upon the occurrence of such
transaction, an amount per share equal to the Liquidation Preference.
This Section shall not apply to a business combination in which
substantially all the Common Stock of the Corporation is converted
into or exchanged for voting common stock of the corporation
surviving such business combination, if (i) such common stock of the
surviving corporation is listed and traded on The Nasdaq Stock
Market or the New York Stock Exchange, and (ii) the Board of
Directors of the Corporation determines in good faith that the
conversion rights and other rights and preferences of the Series A
Preferred are preserved and not rendered of less value by the terms
of such business combination.
4. Mandatory Redemption.
All of the Series A Preferred outstanding on June 30, 2002 shall be redeemed
by the Corporation at a redemption price equal to 100% of the Liquidation
Preference thereof plus, without duplication, accumulated and unpaid dividends
to the date of redemption.
5. Optional Redemption.
The Series A Preferred shall be redeemable, at the option of the Corporation
and subject to the consent of its lenders, in whole or in part, at any time on
or after June 30, 2000 at an amount equal to its Liquidation Preference
plus, without duplication, accumulated and unpaid dividends to the date of
redemption.
Page A-3
<PAGE>
6. Conversion.
The holders of the Series A Preferred shall have optional conversion rights as
follows:
(a) Conversion Rights.
(i) At any time prior to June 25, 1999, the Series A Preferred
shall be exchangeable at the option of the holder for shares of
Common Stock at an exchange ratio of $.75 face value of Series
A Preferred per share of Common Stock plus accrued and unpaid
dividends to the date of conversion.
(ii) Each holder of record of Series A Preferred shares shall be
entitled to convert Series A Preferred into shares of Common
Stock on or after June 25, 1999 at the conversion rate of 1,000
shares of Common Stock per share of Series A Preferred (i.e.,
$1.00 per share of Common Stock) (such rate of exchange, and
the rate of exchange set forth in paragraph (i), as applicable,
being hereinafter referred to as the "Conversion Rate").
(b) Restriction on Right to Convert. A share of Series A Preferred
shall not be converted into Common Stock if following such
conversion the holder thereof together with affiliates of such
holder would be the beneficial owners (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) of 10% or more of the
Common Stock of the Corporation. A share which may not be converted
because of the preceding sentence will thereafter be convertible by
any holder if at the time such share is submitted for conversion the
preceding sentence is inapplicable.
(c) Mechanics of Conversion. To convert shares of Series A Preferred
into shares of Common Stock, the holder shall give written notice to
the Corporation (which notice may be given by facsimile
transmission) that such holder elects to convert the same and shall
state therein the number of shares to be converted and the name or
names in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. Promptly thereafter the
holder shall surrender the certificate or certificates representing
the shares to be converted, duly endorsed, at the office of the
Corporation or of any transfer agent for such shares, or at such
other place designated by the Corporation. The Corporation shall,
immediately upon receipt of such notice, issue and deliver to or
Page A-4
<PAGE>
upon the order of such holder, against delivery of the certificates
representing the shares which have been converted, a certificate or
certificates for the number of shares of Common Stock to which such
holder shall be entitled, and a certificate representing the shares
of Series A Preferred not so converted, if any. The Corporation
shall effect such issuance immediately and shall transmit the
certificates by messenger or overnight delivery service to reach the
address designated by such holder within three trading days after
the receipt of such notice. Notice of conversion may be given by a
holder at any time of day up to 5:00 p.m. Los Angeles time, and such
conversion shall be deemed to have been made immediately prior to
the close of business on the date such notice of conversion is given
(the "Conversion Date"). The person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such
shares of Common Stock at the close of business on the Conversion
Date.
(d) Determination of Conversion Rate. In the event that the Corporation
shall declare or pay any dividend on the Common Stock payable in
Common Stock or in rights to acquire Common Stock, or shall effect a
stock split or reverse stock split, or a combination, consolidation
or reclassification of the Common Stock, then the Conversion Rate
shall be proportionately decreased or increased, as appropriate, to
give effect to such event, and like adjustment shall be made in any
price per share specified elsewhere herein.
(e) Distributions. In the event the Corporation shall at any time or
from time to time make or issue, or fix a record date for the
determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in securities of the
Corporation or any of its subsidiaries or other property, other than
cash dividends from earnings, then in each such event provision
shall be made so that the holders of Series A Preferred shall
receive, upon the conversion thereof, the securities or other
property which they would have received had they been the owners on
the date of such event of the number of shares of Common Stock
issuable to them upon conversion.
(f) Certificates as to Adjustments. Upon the occurrence of any
adjustments or readjustment of the Conversion Rate pursuant to
Section 6(d) hereof, or any provision for distribution pursuant to
Section 6(e) hereof, or any adjustment of the cash per-share prices
specified herein, the Corporation at its expense shall promptly
compute such adjustment, readjustment or provision in accordance
with the terms hereof and prepare and furnish to each holder of
Series A Preferred a certificate setting forth such adjustment,
readjustment or provision and showing in detail the facts upon which
such adjustment, readjustment or provision is based. The
Page A-5
<PAGE>
Corporation shall, upon the written request at any time of any
holder of Series A Preferred, furnish or cause to be furnished to
such holder a like certificate prepared by the Corporation setting
forth (i) such adjustments and readjustments, and (ii) the number of
other securities and the amount, if any, of other property which at
the time would be received upon the conversion of Series A Preferred
with respect to each share of Common Stock received upon such
conversion. If any holder disputes the computation of such
adjustment or provision the Corporation shall cause independent
public accountants selected by the Corporation to verify and, if
necessary, correct such computation.
(g) Notice of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a cash dividend) or other
distribution, any security or right convertible into or entitling
the holder thereof to receive additional shares of Common Stock, or
any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to
receive any other right, the Corporation shall give notice to each
holder of Series A Preferred at least 10 days prior to such date
specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution, security or right and the
amount and character of such dividend, distribution, security or
right.
(h) Issue Taxes. The Corporation shall pay any and all issue and other
taxes, excluding any income, franchise or similar taxes, that may be
payable in respect of any issue or delivery of shares of Common
Stock on conversion of shares of Series A Preferred pursuant hereto;
provided, however, that the Corporation shall not be obligated to
pay any transfer taxes resulting from any transfer requested by any
holder in connection with any such conversion.
(i) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series A Preferred,
such number of its shares of Common Stock as shall from time to time
be sufficient to effect the conversion of all outstanding shares of
the Series A Preferred, and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of the Series A
Preferred, the Corporation will take such corporate action as may,
in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including, without
limitation, engaging in best efforts to obtain the requisite
shareholder approval as promptly as practicable.
Page A-6
<PAGE>
(j) Fractional Shares. No fractional shares shall be issued upon the
conversion of any share or shares of Series A Preferred. All shares
of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Series A Preferred by a holder
thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share.
If, after the aforementioned aggregation, the conversion would
result in the issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to
the fair market value of such fraction on the date of conversion (as
determined in good faith by the Board of Directors of the
Corporation).
(k) Reorganization or Merger. In case of any reorganization or any
reclassification of the capital stock of the Corporation or any
consolidation or merger of the Corporation with or into any other
corporation or corporations or a sale of all or substantially all of
the assets of the Corporation to any other person, and the holders
of Series A Preferred do not elect to treat such transaction as a
liquidation, dissolution or winding up as provided in Section 3,
then, as part of such reorganization, consolidation, merger or sale,
provision shall be made so that each share of Series A Preferred
shall thereafter be convertible into the number of shares of stock
or other securities or property (including cash) to which a holder
of the number of shares of Common Stock deliverable upon conversion
of such share of Series A Preferred would have been entitled upon
the record date of (or date of, if no record date is fixed) such
event and, in any case, appropriate adjustment (as determined by the
Board of Directors) shall be made in the application of the
provisions herein set forth with respect to the rights and interests
thereafter of the holders of the Series A Preferred, to the end that
the provisions set forth herein shall thereafter be applicable, as
nearly as equivalent as is practicable, in relation to any shares of
stock or the securities or property (including cash) thereafter
deliverable upon the conversion of the shares of Series A Preferred.
The Corporation shall have no obligation to obtain the prior consent
of the holders of the Series A Preferred, individually or as a
class, except as expressly provided herein or as provided by
applicable law.
7. Cash Exchange Rights.
(a) Exchange Rights. At any time prior to June 25, 1999, the Series A
Preferred shall be exchangeable at the option of a holder for cash
in amount per share equal to 50% of the face value of the Series A
Preferred Share plus all accrued but unpaid dividends on the Series
A Preferred Share, up to an aggregate amount of $6.4 million face
value and accrued and unpaid dividends to the date of exchange. If,
in the judgment of the Board of Directors of the Corporation, the
Page A-7
<PAGE>
Corporation's financial condition and results of operations permit
the Corporation to permit the exchange for cash of more than $6.4
million face value (plus accrued dividends) of the Series A
Preferred, the terms of the Series A Preferred will permit the
exchange for cash of up to $8.0 million face value (plus accrued and
unpaid dividends) of the Series A Preferred. To the extent that
holders of Series A Preferred desire to exchange in the aggregate a
greater face value (plus accrued and unpaid dividends) of the Series
A Preferred than is permitted under the terms of the Series A
Preferred, Series A Preferred will be accepted for exchange by the
Corporation for cash on a pro rata basis based upon the aggregate
face value (plus accrued and unpaid dividends) of the Series A
Preferred validly tendered for exchange.
(b) Mechanics of Exchange. To exercise the exchange right set forth in
Section 7(a), the holder shall give written notice to the
Corporation (which notice may be given by facsimile transmission)
that such holder elects to exercise such right and shall state
therein the number of shares to be converted and the name or names
in which such holder wishes the payment to be received. Promptly
thereafter the holder shall surrender the certificate or
certificates representing the shares to be exchanged, duly endorsed,
at the office of the Corporation or of any transfer agent for such
shares, or at such other place designated by the Corporation. The
Corporation shall, immediately upon receipt of such notice, issue
and deliver to or upon the order of such holder, against delivery of
the certificates representing the shares which have been converted,
a check for payment of the cash amount to which such holder shall be
entitled, and a certificate representing the shares of Series A
Preferred not so exchanged, if any. The Corporation shall effect
such payment immediately and shall transmit the check by messenger
or overnight delivery service to reach the address designated by
such holder within three trading days after the receipt of such
notice. Notice of the exercise of exchange rights may be given by a
holder at any time of day up to 5:00 p.m. Los Angeles time, and such
exercise shall be deemed to have been made immediately prior to the
close of business on the date such notice of conversion is given
(the "Exchange Date"). The person or persons entitled to receive
payment upon such exchange shall be treated for all purposes as the
record holder or holders of such shares of Common Stock at the close
of business on the Exchange Date.
8. Notices. Any notice to be given to the holders of the Series A Preferred
shall be (i) mailed by first class mail postage prepaid to each holder of
Series A Preferred at the address shown on the records of the Corporation for
such holder, (ii) transmitted by telecopy or facsimile transmission to any
holder which has supplied a telecopy or facsimile address to the Corporation,
and (iii) unless receipted for by telecopy or facsimile on the date such
notice is given, shall be transmitted by an overnight delivery service or
courier service for delivery at the address shown on the records of the
Corporation for such holder on the first business day following the date such
notice is given, or if delivery in one business day to such address cannot be
effected by such delivery service, then on the earliest day on which such
delivery can be made.
Page A-8
<PAGE>
9. Registration Rights. The Corporation shall use its best efforts to file
and cause to become effective as of no later than 130 days after June 15th a
registration statement for Common Stock of the Corporation issuable upon
exchange or conversion of the Series A Preferred, to the extent such shares of
Common Stock are not then freely tradeable under the federal securities laws.
10. Restrictions and Limitations. The Corporation shall not undertake the
following actions without the consent of the holders of a majority of the
Series A Preferred: (i) modify its Certificate of Incorporation or Bylaws so
as to amend or change any of the rights, preferences, or privileges of the
Series A Preferred, (ii) authorize or issue any other equity security senior
to or ranking on parity with the Series A Preferred, or (iii) pay any
dividends in cash or property on, or purchase or otherwise acquire for value,
any Common Stock purchase or other equity security of the Corporation either
junior to or on a parity with the Series A Preferred except from current or
retained earnings or from the net proceeds of sale of equity securities,
except for purchases of Common Stock from terminating or retiring employees
pursuant to the terms of employee benefit plans in an aggregate amount not
greater than $1 million.
11.Voting Rights. The Series A Preferred shall have no voting rights, except
as otherwise required by law and except in certain circumstances described
herein, including (i) amending certain rights of the holders of the Series A
Preferred and (ii) the issuance of any class of equity securities that ranks
pari passu with or senior to the Series A Preferred other than certain
additional shares of Series A Preferred.
12. Attorneys' Fees. Any holder of Series A Preferred shall be entitled to
recover from the Corporation reasonable attorneys' fees and expenses incurred
by such holder in connection with enforcement by such holder of any obligation
of the Corporation hereunder, if such holder is the prevailing party in an
action or proceeding to compel such enforcement."
THAT, thereafter, the foregoing amendment was ratified and approved at a
meeting of stockholders of the Corporation on June 10, 1999, by the
affirmative vote of the majority of the outstanding shares of each class of
voting stock of the Corporation, including the Series A Preferred.
IN WITNESS WHEREOF, Ramtron International Corporation has caused this
Certificate to be executed by its Chairman of the Board and by its Executive
Vice President, Chief Financial Officer and Secretary, this XX day of XXXX,
1999.
L. David Sikes
Chairman of the Board
Richard L. Mohr
Executive Vice President,
Chief Financial Officer and Secretary
Page A-9
EXHIBIT B
LETTER OF INTENT
February 25, 1999
The Holders of Series A Preferred Stock set forth on Schedule I hereto
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 12th Floor
Santa Monica, California 90401
Attention: Mr. Lawrence Fleischman
National Electrical Benefit Fund
1125 15th Street, N.W.
Washington, D.C. 20005
Attention: Mr. William Tull, Advisor
Re: Proposed Restructuring
Ladies and Gentlemen:
This letter, upon your execution and return, will confirm our Agreement in
Principle regarding the proposed restructuring (the "Restructuring") of
Ramtron International Corporation (the "Company") in respect of (i) the
Company's outstanding Series A Convertible Preferred Stock, par value $.01 per
share (the "Series A Preferred Stock"), (ii) the Company's obligations under
those certain Stock Purchase Agreements (the "DFA Contracts") dated as of
December 23, 1997 by and between the Company and certain persons (each a "DFA
Advised Entity") advised by Dimensional Fund Advisors, Inc. ("DFA"), and
(iii) the $7,000,000 loan (the "NEBF Credit Facility") to the Company from the
National Electrical Benefit Fund (the "NEBF").
References herein to dollar amounts and to shares (whether common or
preferred) are based on the Company's current authorized and outstanding
capital, and would be adjusted for any share authorizations or stock splits
necessary to effect the Restructuring.
1. SERIES A PREFERRED STOCK. On the terms and subject to the conditions set
forth herein, as soon as practicable after the receipt of the approvals of the
Board of Directors of the Company and the stockholders of the Company,
including the holders of the Series A Preferred Stock, referred to in
Paragraph 5, the Company will amend the terms of the Series A Preferred Stock
so that, as amended, the Series A Preferred Stock will have only such rights,
preferences and privileges set forth on Exhibit A hereto (as so amended, the
"New Preferred Stock"). As set forth in Exhibit A hereto, the New Preferred
Stock will offer the holders thereof the options set forth in subparagraphs
(a)-(c) below, as such holder may elect. All references herein to the Series
A Preferred Stock or the New Preferred Stock shall be deemed to include all
rights to dividends or other distributions in respect of such Series A
Preferred Stock or the New Preferred Stock.
Page B-1
<PAGE>
(a) OPTION 1 - CASH. The New Preferred Stock shall be exchangeable at
the option of the holder thereof at any time prior to the date which
is ten days after the Closing Date (as defined in Paragraph 5 below)
for cash in amount equal to 50% of the face value of the New
Preferred Stock plus all accrued but unpaid dividends on the Series A
Preferred Stock, up to an aggregate amount of $6.4 million face value
and accrued and unpaid dividends. If, in the judgment of the Board
of Directors of the Company, the Company's financial condition and
results of operations permit the Company to permit the exchange for
cash of more than $6.4 million face value (plus accrued dividends) of
the New Preferred Stock, the terms of the New Preferred Stock will
permit the exchange for cash of up to $8.0 million face value (plus
accrued and unpaid dividends) of the New Preferred Stock. To the
extent that holders of Series A Preferred Stock desire to exchange in
the aggregate a greater face value (plus accrued and unpaid
dividends) of the New Preferred Stock than is permitted under the
terms of the New Preferred Stock, New Preferred Stock will be
accepted for exchange by the Company for cash on a pro rata basis
based upon the aggregate face value (plus accrued and unpaid
dividends) of the New Preferred Stock tendered for exchange.
(b) OPTION 2 - COMMON STOCK. The New Preferred Stock shall be
exchangeable at the option of the holder thereof at any time prior to
the date which is ten days after the Closing Date for shares of
Common Stock, par value $.01 per share, of the Company (the "Common
Stock") at an exchange ratio of $.75 face value of New Preferred
Stock per share of Common Stock plus dividends accruing to the date
that the Common Stock becomes freely tradeable in accordance with the
provisions of the following sentence. The Company will register with
the Securities and Exchange Commission (the "SEC") such shares of
Common Stock issuable for resale by the holders thereof on SEC Form
S-3 (or other applicable form) to be filed within ten days after the
Closing Date and made effective within not more than 120 days
thereafter, subject to extension if satisfaction of SEC review, if
any, requires additional time (such date of effect being the
"Registration Date").
(c) OPTION 3 - NEW PREFERRED STOCK. The holders of the New Preferred
Stock may elect to retain their New Preferred Stock to the extent not
exchanged for cash and/or Common Stock pursuant to Option 1 and
Option 2 within ten (10) days after the Closing Date. Holders of the
Series A Preferred Stock who do not elect any of Option 1, Option 2
or Option 3 shall be deemed to have elected Option 3 within ten (10)
days after the Closing Date. The New Preferred Stock shall be
convertible into shares of Common Stock and will have such other
terms and conditions as set forth on Exhibit A hereto. The Company
will register the shares of Common Stock into which the New Preferred
Stock is convertible for resale by the holders on SEC Form S-3 (or
other applicable form) to be filed ten days after the Closing Date
and made effective on the Registration Date.
Page B-2
<PAGE>
In the event that a registration statement is not effective within 130 days
following the Closing with respect to Options 2 and 3, the New Preferred Stock
shall accrue dividends from and after the end of such 130 day period at a rate
of 18% per annum, until such time as the registration statement is declared
effective.
2. DFA CONTRACTS. The Company and DFA will agree that, effective on the
Closing Date, the DFA Contracts will be terminated and in consideration
thereof the Company shall execute and issue to each DFA Advised Entity
unsecured promissory notes in the aggregate principal amount of $3,223,712,
being the amount of cash currently due under the DFA Contracts (the "Note").
The Note will bear interest at a rate of 8% per annum, will be convertible
into Common Stock at a conversion rate of one share of Common Stock for each
$1.00 principal amount of the Note and shall mature and become due and payable
on the first anniversary of the Closing. DFA and the Company will agree to
amend the DFA Contracts to provide that the maximum amount of Common Stock
that may be held by DFA and the DFA Advised Entities will be increased from
4.99% to 9.99% of the outstanding shares of Common Stock and the Note will
provide that the Company may, at its option, substitute fully registered and
tradeable Common Stock at the then prevailing market price, for cash in
repayment of the principal and interest payable on the Note prior to its
maturity, up to the 9.99% maximum.
3. NEBF CREDIT FACILITY. The Company and the NEBF will agree to extend the
NEBF Credit Facility, (i) to allow for the payment of cash as set forth in
Paragraph 1(a), above, to the holders of the New Preferred Stock, (ii) to
extend the maturity of the NEBF Credit Facility to March 15, 2002 and (iii) to
release from the collateral pledged as security to the NEBF the Company's
trade account receivables (but not license or royalty payments or similar type
payments) and, potentially the Company's inventories, upon certain financial
targets, to be agreed between the Company and the NEBF, being obtained. Upon
reaching such agreement, such trade account receivables, and potentially, the
Company's inventories, may be used as collateral with other lenders for future
borrowings. The NEBF's conversion right shall be at the rate of $1.00 for
each share of Common Stock; provided, however, that such rate shall be reduced
to the conversion rate of the new Preferred Stock to the extent that the
conversion rate of the New Preferred Stock is decreased below $1.00.
4. CONDITIONS. The obligations of the Company to effect the Restructuring
will be conditioned upon (i) approval by the Board of Directors of the Company
of the Restructuring, (ii) approval by the holders of a majority of the
outstanding shares of Common Stock, at a duly convened meeting of stockholders
of the Company, of the Restructuring, including, without limitation, one or
more reverse stock splits necessary to increase the authorized number of
shares of Common Stock available to the Company to effect the Restructuring,
(iii) approval by the holders of a majority of the outstanding shares of
Series A Preferred Stock of the Restructuring at a duly convened meeting of
stockholders of the Company or by action by written consent, (iv) the
termination with prejudice of all litigation in effect at the Closing (as
Page B-3
<PAGE>
defined in Paragraph 5, below) between any of the parties signatory hereto (or
their respective affiliates, associates, stockholders, partners, members or
other related parties), on the one hand, and the Company and its officers,
directors, affiliates, associates, stockholders, partners, members or other
related parties, on the other hand, (v) execution of appropriate definitive
documentation, and (vi) other customary closing conditions. In addition, the
obligations of the Company and each other party signatory hereto to effect the
Restructuring shall be conditioned upon each of the transactions contemplated
by the Restructuring being effected simultaneously.
5. TIMETABLE. Set forth below is an estimated timetable for completion of
the Restructuring:
March 1 Conditional approval of the Restructuring by a
majority of Series A Preferred Stockholders, DFA
and the NEBF by execution of this letter of intent
March 1 Approval of the Restructuring by the Company's
Board of Directors
March 2 Refiling of an amended Proxy Statement with the
SEC describing the Restructuring
April 7 - 14 Meeting of holders of Common Stock to approve
Restructuring
April 7 - 14 Meeting of, or action by written consent by, the
Series A Preferred Stockholders to approve the
Restructuring
April 14 - 23 Closing of the Restructuring
April 23 - May 3 Filing of a registration statement with the SEC for
Common Stock to be issued in connection with the
Restructuring
As used herein, the term "Closing Date" shall mean the date on which the
closing of the Restructuring (the "Closing") shall occur.
6. STOCKHOLDERS' MEETING. Following the approval of the Board of Directors
of the Company of the Restructuring, the Company will promptly (i) prepare and
file the required proxy materials with the SEC, (ii) mail copies of the
required proxy materials to the Company's stockholders in accordance with
applicable law and the Company's bylaws and (iii) schedule and hold meetings
of holders of Common Stock and Series A Preferred Stock to vote on the
Restructuring.
7. BEST EFFORTS. The Company and the other parties to this letter of intent
(together, the "Parties") will use their best efforts to give effect to the
Restructuring and will cooperate with each other to the fullest extent in the
preparation of all necessary documentation and in obtaining all necessary
consents, approvals and releases from third parties. The Parties will use
their best efforts meet the timetable set forth in Paragraph 5 hereof and to
take all steps necessary to permit the Closing to take place no later than
April 23, 1999.
Page B-4
<PAGE>
8. NO ISSUANCE OF ADDITIONAL SECURITIES. The Parties agree that until such
time as this letter of intent is terminated, the Company will not, and will
not be obliged to, issue any shares of capital stock, including, without
limitation, Common Stock, or options, rights or securities to acquire any
shares of capital stock, including, without limitation, Common Stock, to any
person, except as contemplated by the Restructuring.
9. PUBLIC DISCLOSURE. Except as otherwise required by law or the rules of
the NASD, a Party shall not make a public announcement of the transactions
contemplated by this letter without the prior written approval of the other
Parties, which consent shall not be unreasonably withheld. Notwithstanding
the foregoing, the Company will be entitled to issue such press releases as
may be necessary or appropriate in the sole judgment of management of the
Company without the consent of any other Party.
10. TERMINATION. This letter of intent may be terminated and the
Restructuring may be abandoned or terminated at any time by mutual agreement
of all the Parties or at the option of the Company. This letter of intent
shall terminate automatically if the Closing shall not have occurred on or
prior to April 23, 1999.
11. NATURE OF THIS LETTER. The Company and each recipient hereof understands
and agrees that this letter is not and shall not be deemed to be an offer or
the solicitation of offers to purchase or sell any securities of the Company.
Each recipient of this letter acknowledges that the existence and content of
this letter are non-public information with respect to the Company and subject
to all applicable rules of the Securities Exchange Act of 1934. It is
understood that this letter of intent merely constitutes a statement of our
mutual intentions with respect to the Restructuring, does not contain all
matters upon which agreement must be reached in order for the Restructuring to
be consummated and, therefore, does not constitute an obligation binding on
any Party. Notwithstanding the foregoing, the provisions of Paragraph 8,
Paragraph 9, Paragraph 10, and this Paragraph 11 are agreed to be fully
binding on the Parties upon execution of this letter of intent and shall
survive the termination of this letter of intent unless and until they are
superseded by another agreement between all Parties. This letter of intent
shall be governed by the laws of the State of New York, without regard to
applicable principles of conflict of laws. This letter of intent may be
executed in two or more counterparts, each of which shall constitute an
original and all of which shall constitute one and the same instrument.
Page B-5
<PAGE>
If the foregoing accurately summarizes our understanding, we request that the
recipient approve of this letter of intent and evidence such approval by
causing the enclosed copy of this letter of intent to be signed on behalf of
the recipient, dated and returned to the undersigned.
RAMTRON INTERNATIONAL CORPORATION
By: /S/ L. David Sikes
Name: L. David Sikes
Title: Chairman and CEO
ACCEPTED AND AGREED TO ON THE DATE SET FORTH HEREUNDER:
SERIES A PREFERRED STOCKHOLDERS
By:----------------------
Name:--------------------
Title:------------------- Date:------------
DIMENSIONAL FUND ADVISORS, INC.
By:----------------------
Name:--------------------
Title:------------------- Date:------------
NATIONAL ELECTRICAL BENEFIT FUND
By:----------------------
Name:--------------------
Title:------------------- Date:------------
Page B-6
<PAGE>
SCHEDULE I
SERIES A PREFERRED STOCKHOLDERS
Mr. Alexander L. Cappello Mr. Robert J. Schiller, Jr.
1299 Ocean Avenue, Suite 306 Fayerweather Associates
Santa Monica, CA 90401 Cambridge, MA 02138
Mr. Alfred Romano Mr. Gerard K. Cappello
4 Wagon Wheel Lane 1299 Ocean Avenue, Suite 306
Dix Hills, NY 11746-5017 Santa Monica, CA 90401
Mr. Richard Farber Mr. Jerry Kaplan
Kayne Anderson Non-Traditional 150 Vanderbilt Motor Parkway, Suite 311
Investments, L.P. Hauppauge, NY 11788
1800 Avenue of the Stars
2nd Floor
Los Angeles, CA 90067
CC Investments, LDC Mr. Jonathan Glaser
c/o Mr. John Ziegelman JMG Capital Partners, L.P.
Castle Creek Partners 1999 Avenue of the Stars, Suite 2530
77 W. Wacker Drive, Suite 4040 Los Angeles, CA 90067
Chicago, IL 60601
Mr. Mark S. Zucker Ms. Ann Nicholson
Anvil Investment Partners, L.P. KEYWAY Investments, Ltd.
100 Wilshire Blvd, 15th 19 Mount Havelock
Santa Monica, CA 90401 Douglas, Isle of Man 1M1 2QG
United Kingdom
Mr. Crisostomo B. Garcia, Trustee and Gregory W. Murphy
Crisostomo B. Garcia Trust Martin Peters
Dated 6/8/93
P.O. Box 9248
17950 Circa Oriente
Rancho Santa Fe, CA 92067
Mr. Douglas A. Gerrard Mr. Lawrence K. Fleischman
Deere Park Capital Management, LLC Laredo Capital Partners
40 Skokie Boulevard, Suite 110 150 Vanderbilt Motor Parkway, Suite 311
Northbrook, IL 60062 Hauppauge, NY 11788
Mr. Earl E. Gales, Jr. Lawrence Kaplan and Helaine Kaplan, JT
5933 W. Century Blvd, Suite 1000 17 Riverview Terrace
Los Angeles, CA 90045 Smithtown, NY 11787
Mr. Real A. Rouillard Mr. Joseph M. Fitzgerald
1979 Memorial Drive 1530 Touraine Drive
Chicopee, MA 01020 San Jose, CA 95118
Page B-7
<PAGE>
Mr. Lawrence K. Fleischman Mr. George R. Wong
LICAP Partners 3834 Rawhide Road
150 Vanderbilt Motor Parkway Rocklin, CA 95677
Suite 311
Hauppauge, NY 11788 Mr. Ansel A. Slome
SIL Nominees, Ltd.
Ms. Lisa G. Shine c/o Slome Capital Corporation
2910 Neilson Way, #602 1888 Century Park East, Suite 1108
Santa Monica, CA 90405 Los Angeles, CA 90067
Ms. Loretta Hirsh Shine Mr. Stanley A. Kaplan
5301 Aldea Avenue 4 Spinning Wheel Lane
Encino, CA 91316 Dix Hills, NY 11746
Nancy A. Aossey Mr. Jonathan Glaser
1807 Camden Avenue #2 Triton Capital Holdings, Ltd.
Los Angeles, CA 90025 1999 Avenue of the Stars, Suite 2530
Los Angeles, CA 90067
Mr. Richard Farber
Offense Group Associates, L.P. Mr. Brian Ladin
1800 Avenue of the Stars, ELARA Ltd.
2nd Floor 16101 LaGrande Drive, Suite 100
Los Angeles, CA 90067 Little Rock, AR 72223
Mr. Paul Rajewski
7 Country Meadow Road
Rolling Hills Estates, CA 90274
Mr. Peter J. Cocoziello
1545 State Highway 206, Suite 100
Bedminster, NJ 07921
Mr. Ronald H. Means
2195 Holiday Pines Lane
Camarillo, CA 93012
Page B-8
<PAGE>
EXHIBIT A
11% REDEEMABLE CONVERTIBLE PREFERRED STOCK
Issuer: Ramtron International Corporation
Securities to be Offered: Maximum of 10,456 shares (the "Shares") of
Redeemable Convertible Preferred Stock, par
value $.01 per share, (which includes accrued
dividends through February 15, 1999) plus any
additional shares of such stock issued from time
to time in lieu of cash dividends (the "New
Preferred Stock"). The Shares shall be issued
in exchange (the "Exchange") for outstanding
Series A Convertible Preferred Stock of the
Company.
Liquidation Preference: $1,000 per share, plus accumulated and unpaid
dividends.
Conversion: 1,000 shares of Common Stock per share of New
Preferred Stock ($1.00 per share of Common
Stock).
Exchange Rights (Cash): At any time prior to April XX, 1999, the New
Preferred Stock shall be exchangeable at the
option of the holder for cash in amount equal to
50% of the face value of the New Preferred Stock
plus all accrued but unpaid dividends on the
Series A Preferred Stock, up to an aggregate
amount of $6.4 million face value and accrued
and unpaid dividends. If, in the judgment of
the Board of Directors of the Company, the
Company's financial condition and results of
operations permit the Company to permit the
exchange for cash of more than $6.4 million face
value (plus accrued dividends) of the New
Preferred Stock, the terms of the New Preferred
Stock will permit the exchange for cash of up to
$8.0 million face value (plus accrued and unpaid
dividends) of the New Preferred Stock. To the
extent that holders of Series A Preferred Stock
desire to exchange in the aggregate a greater
face value (plus accrued and unpaid dividends)
of the New Preferred Stock than is permitted
under the terms of the New Preferred Stock, New
Preferred Stock will be accepted for exchange by
the Company for cash on a pro rata basis based
upon the aggregate face value (plus accrued and
unpaid dividends) of the New Preferred Stock
tendered for exchange.
Page B-9
<PAGE>
Exchange Rights
(Common Stock): At any time prior to April XX, 1999, the New
Preferred Stock shall be exchangeable at the
option of the holder for shares of Common Stock,
par value $.01 per share, of the Company (the
"Common Stock") at an exchange ratio of $.75
face value of New Preferred Stock per share of
Common Stock plus accrued and unpaid dividends.
Optional Redemption: The New Preferred Stock is redeemable, at the
option of the Company and subject to the consent
of its lenders, in whole or in part, at any time
on or after April 15, 2000 at an amount equal to
its liquidation preference plus, without
duplication, accumulated and unpaid dividends to
the date of redemption.
Mandatory Redemption: The Company is required, to redeem all of the
New Preferred Stock outstanding on April 15,
2002 at a redemption price equal to 100% of the
liquidation preference thereof, plus, without
duplication, accumulated and unpaid dividends to
the date of redemption.
Dividends: At a rate equal to 11% per annum of the
liquidation preference per share, payable
semi-annually. Prior to April 15, 2000, all
dividends will be paid in New Preferred Stock.
After April 15, 2000, dividends may be paid, at
the Company's option, on any dividend payment
date, either in cash or by the issuance of
additional shares of New Preferred Stock (and
payment of cash in lieu of fractional shares)
having an aggregate liquidation preference equal
to the amount of such dividends. In the event
that after April 15, 2000, dividends are paid in
additional shares of New Preferred Stock the
dividend rate will increase by 2% for such
dividend payment period. In the event that a
registration statement is not effective within
130 days after April XX, 1999 with respect to
the Exchange Rights (Cash) and the Exchange
Rights (Common Stock) described above, the New
Preferred Stock shall accrue dividends from and
after the end of such 130 day period at a rate
of 18% per annum until such time as the
registration statement is declared effective.
Page B-10
<PAGE>
Dividend Payment Date: April 15 and October 15 commencing October 15,
1999. Cash dividends are payable beginning
April 15, 2000.
Voting: The New Preferred Stock will be non-voting,
except as otherwise required by law and except
in certain circumstances described herein,
including (i) amending certain rights of the
holders of the New Preferred Stock and (ii) the
issuance of any class of equity securities that
ranks pari passu with or senior to the New
Preferred Stock other than certain additional
shares of New Preferred Stock.
Ranking: The New Preferred Stock will, with respect to
dividend rights and rights on liquidation,
winding-up, and dissolution of the Company, rank
senior to any classes of Common Stock. The New
Preferred Stock will rank senior to any
subsequent issue of other preferred stock.
Certain Restrictive
Provisions: Pursuant to the Preferred Stock Exchange Offer
Registration Rights Agreement (to be defined),
the Company must use its best efforts to file
and cause to become effective as of the Exchange
Date (as defined) a registration statement for
Common Stock of the Company issuable upon
exchange or conversion of the New Preferred
Stock.
Page B-11
EXHIBIT C
FORM OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
RAMTRON INTERNATIONAL CORPORATION
Ramtron International Corporation, a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify:
FIRST: That the first numbered paragraph of Article FOURTH of the Certificate
of Incorporation, as amended, is hereby deleted and the following is
substituted in lieu thereof:
"FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is 60,000,000, consisting of 50,000,000 shares
of common stock, par value $0.01 per share (the "Common Stock"), and
10,000,000 shares of preferred stock, par value $0.01 per shares (the
"Preferred Stock").
Immediately upon the filing of this Amendment to the Certificate of
Incorporation (the "Effective Time"), each 5 shares of the Common Stock,
issued and outstanding immediately prior to the Effective Time (the "Old
Common Stock"), shall automatically, without further action on the part of the
Corporation or any holder of Old Common Stock, be combined, converted and
changed into one (1) fully paid and nonassessable share of Common Stock (the
"New Common Stock" and the "Reverse Stock Split"), subject to the treatment of
fractional share interests as described below. The conversion of the Old
Common Stock into New Common Stock will be deemed to occur at the Effective
Time regardless of when the certificates representing such Old Common Stock
are physically surrendered to the Corporation in exchange for certificates
representing New Common Stock. After the Effective Time, certificates
representing the Old Common Stock will, until surrendered to the Corporation
in exchange for New Common Stock, represent the number of shares of New Common
Stock into which such Old Common Stock shall have been converted pursuant to
this Amendment and the right to receive cash in lieu of any fractional share
interest. No certificates representing fractional shares of New Common Stock
shall be issued in connection with the Reverse Stock Split. Holders who
otherwise would be entitled to receive fractional share interests of New
Common Stock shall be entitled to receive in lieu of fractional shares and
upon surrender to the Corporation's transfer agent of their certificates
representing Old Common Stock, duly endorsed, a cash payment in an amount
equal to the product calculated by multiplying (i) the closing sales price of
the Corporation's Common Stock on the Effective Date as reported on The Nasdaq
Page C-1
<PAGE>
Stock Market or, if no such sales price exists, the mid-range between the
last bid and asked price on the Effective Date by (ii) the number of shares of
Old Common Stock held by such holder that would otherwise have been converted
into a fractional share interest. Upon surrender by a holder of Old Common
Stock of a certificate or certificates for Old Common Stock, duly endorsed, to
the Corporation's transfer agent, the Corporation shall, as soon as
practicable thereafter, issue and deliver to such holder of Old Common Stock,
or to the nominee or nominees of such holder, a certificate or certificates
for the number of shares of New Common Stock to which such holder shall be
entitled as aforesaid together with cash in lieu of any fractional share
interest."
SECOND: That said Amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
Page C-2
EXHIBIT D
FORM OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
RAMTRON INTERNATIONAL CORPORATION
Ramtron International Corporation, a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify:
FIRST: That the first numbered paragraph of Article FOURTH of the Certificate
of Incorporation, as amended, is hereby deleted and the following is
substituted in lieu thereof:
"FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is 85,000,000, consisting of 75,000,000 shares
of common stock, par value $0.01 per share (the "Common Stock"), and
10,000,000 shares of preferred stock, par value $0.01 per shares (the
"Preferred Stock").
Immediately upon the filing of this Amendment to the Certificate of
Incorporation (the "Effective Time"), each one and one-half (1.5), two (2),
two and one half (2.5), three (3), three and one-half (3.5), four (4), four
and one half (4.5), and five (5) shares of the Common Stock, issued and
outstanding immediately prior to the Effective Time (the "Old Common Stock"),
shall automatically, without further action on the part of the Corporation or
any holder of Old Common Stock, be combined, converted and changed into one
(1) fully paid and nonassessable share of Common Stock (the "New Common Stock"
and the "Reverse Stock Split"), subject to the treatment of fractional share
interests as described below. The conversion of the Old Common Stock into New
Common Stock will be deemed to occur at the Effective Time regardless of when
the certificates representing such Old Common Stock are physically surrendered
to the Corporation in exchange for certificates representing New Common Stock.
After the Effective Time, certificates representing the Old Common Stock will,
until surrendered to the Corporation in exchange for New Common Stock,
represent the number of shares of New Common Stock into which such Old Common
Stock shall have been converted pursuant to this Amendment and the right to
receive cash in lieu of any fractional share interest. No certificates
representing fractional shares of New Common Stock shall be issued in
connection with the Reverse Stock Split. Holders who otherwise would be
entitled to receive fractional share interests of New Common Stock shall be
entitled to receive in lieu of fractional shares and upon surrender to the
Corporation's transfer agent of their certificates representing Old Common
Stock, duly endorsed, a cash payment in an amount equal to the product
calculated by multiplying (i) the closing sales price of the Corporation's
Page D-1
<PAGE>
Common Stock on the Effective Date as reported on The Nasdaq Stock Market
or, if no such sales price exists, the mid-range between the last bid and
asked price on the Effective Date by (ii) the number of shares of Old Common
Stock held by such holder that would otherwise have been converted into a
fractional share interest. Upon surrender by a holder of Old Common Stock of
a certificate or certificates for Old Common Stock, duly endorsed, to the
Corporation's transfer agent, the Corporation shall, as soon as practicable
thereafter, issue and deliver to such holder of Old Common Stock, or to the
nominee or nominees of such holder, a certificate or certificates for the
number of shares of New Common Stock to which such holder shall be entitled as
aforesaid together with cash in lieu of any fractional share interest."
SECOND: That said Amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
Page D-2
