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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<PAGE>
RAMTRON INTERNATIONAL CORPORATION
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
April 19, 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 April 19, 1999, at 2:00 p.m.,
Mountain Standard 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 two proposals:
PROPOSAL 1: Approval of a restructuring of the Company (the "Restructuring")
providing for:
(a) (i) amending and restating the Certificate of Designation,
Preferences, Rights and Limitations of the Company
relating to the Company's Series A Convertible
Preferred Stock (the "Series A Preferred") in the form
of Exhibit A to the attached Proxy Statement; and
(ii) amending the Company's Certificate of Incorporation,
as amended, 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;
(b) the termination of certain contracts (the "DFA Contracts")
between the Company and certain entities (each a "DFA
Entity") advised by Dimensional Fund Advisors, Inc. ("DFA")
pursuant to which the Company is currently obligated to pay
the DFA Entities $3,223,712 in cash, in exchange for
promissory notes (the "DFA Notes") in the aggregate
principal amount of $3,223,712 having a maturity date of
one year from issuance and bearing interest at 8% per
annum; and
<PAGE>
(c) amendment to the Company's existing credit facility (the
"NEBF Credit Facility") with the National Electrical
Benefit Fund (the "NEBF") to (i) extend the maturity of the
NEBF Credit Facility to March 15, 2002, (ii) release
Certain collateral pledged by the Company to the NEBF
pursuant to the NEBF Credit Facility, and (iii) otherwise
provide for NEBF approval of the terms of the
Restructuring.
PROPOSAL 2: If Proposal 1 is not approved by the stockholders of the
Company, amendments to the Company's Certificate of
Incorporation, as amended, to effect, at any time prior to
January 1, 2000, a reverse stock split of the Company's Common
Stock, whereby each 1.5, 2, 2.5, 3, 3.5, 4, 4.5, and 5 shares
of Common Stock would be combined, converted and changed
into one share of Common Stock, with the effectiveness of one of
such amendments and the abandonment of the other amendments, or
the abandonment of all amendments, to be determined by the Board
of Directors.
Only record holders of Common Stock at the close of business on March 5, 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 or about February 5, 1999 in
connection with the March 15 Meeting may not be utilized by stockholders for
purposes of voting at the Special Meeting and such WHITE proxy card will not
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
March XX, 1999
<PAGE>
RAMTRON INTERNATIONAL CORPORATION
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
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 April 19, 1999, at
2:00 p.m., Mountain Standard Time, or at any adjournment or adjournments
thereof, for the purposes set forth herein 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 March 17, 1999 to all stockholders entitled to vote at the Special
Meeting.
For the reasons set forth herein, 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 utilized by
stockholders for purposes of voting at the Special Meeting and WHITE proxy
cards will not 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 March 5, 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. The
Company's principal place of business is 1850 Ramtron Drive, Colorado
Springs, Colorado 80921.
<PAGE>
VOTING AND SOLICITATION
On all matters, each share of 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"). As
more fully described herein under "Proposals," if Proposal 1 is approved,
Proposal 2 will not be adopted whether or not Proposal 2 receives the
requisite vote of stockholders of the Company: that is, Proposal 2 is
conditional upon Proposal 1 not being approved by stockholders. Abstentions
and broker non-votes (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) are counted as shares that are entitled to vote for
purposes of determining the presence of a quorum at the Special Meeting.
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.
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 December 31, 1998 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 the Company's Common Stock issuable upon conversion of outstanding
convertible notes and debentures and the Company's Series A Convertible
Preferred Stock, $0.01 par value (the "Series A Preferred") are not deemed
outstanding for these purposes as the number of shares of Common Stock
issuable upon conversion of each such security fluctuates based on changes in
the market price for the Common Stock.
<PAGE>
Shares of Common Stock Percent
Name of Beneficial Owner(1) Beneficially Owned of Class
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National Electrical Benefit Fund 12,944,804(2) 19.9%
1125 15th Street, N.W., Room 912
Washington, D.C. 20005
NTC Liquidating Trust 7,489,390(3) 11.8
Price Waterhouse
200 E. Randolph Dr., STE 7600
Chicago, IL 60601
Benton Liquidating Trust 1,839,621(4) 3.0
Price Waterhouse
200 E. Randolph Dr., STE 7600
Chicago, IL 60601
L. David Sikes 269,250(5) *
George J. Stathakis 250,500(6) *
Greg B. Jones 148,000(7) *
Richard L. Mohr 144,028(8) *
Donald G. Carrigan 97,216(9) *
Craig W. Rhodine 90,320(10) *
William G. Howard 40,000(11) *
William G. Tull 0 *
Eric A. Balzer 0 *
All current directors and executive
officers as a group (9 persons) 1,039,314(12) 1.7
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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.
<PAGE>
(2) Includes: (i) 8,193,399 shares of Common Stock owned by the Fund;
(ii) 4,028,485 shares of Common Stock issuable upon exercise of warrants held
by the Fund; (iii) approximately 677,920 shares issuable as of December 31,
1998 upon conversion of a convertible promissory note dated August 31, 1995
made by the Company in favor of the Fund; and (iv) 45,000 shares of Common
Stock issuable to the Fund pursuant to options, which are currently
exercisable or become exercisable within 60 days after December 31, 1998.
The trustees of the Fund share voting and dispositive powers as to such
shares.
(3) 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; and (ii) 2,961,216 shares of Common Stock issuable upon exercise
of warrants held by the NTC Liquidating Trust.
(4) 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.
(5) Includes: (i) 10,500 shares of Common Stock owned directly; and
(ii) 258,750 shares issuable to Mr. Sikes pursuant to options, which are
currently exercisable or become exercisable within 60 days after December 31,
1998.
(6) 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 after December 31,
1998.
(7) 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 after December 31,
1998.
(8) Includes: (i) 10,890 shares of Common Stock owned directly; and
(ii) 133,138 shares issuable to Mr. Mohr pursuant to options, which are
currently exercisable or become exercisable within 60 days after December 31,
1998.
(9) Includes: (i) 10,841 shares of Common Stock owned directly; and
(ii) 86,375 shares issuable to Mr. Carrigan pursuant to options, which are
currently exercisable or become exercisable within 60 days after December 31,
1998.
(10) 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 after December 31,
1998.
<PAGE>
(11) Such shares of Common Stock are issuable pursuant to options, which are
currently exercisable or become exercisable within 60 days after December 31,
1998.
(12) Includes 977,583 shares of Common Stock issuable to current officers
and directors pursuant to options, which are currently exercisable or become
exercisable within 60 days after December 31, 1998.
PROPOSALS
The Special Meeting is being held to provide stockholders of the Company with
the opportunity to vote upon the Proposals set forth below. The two
Proposals represent distinct alternatives and, as more fully described below
under "Reasons for the Restructuring; Effects of Non-Approval of the
Restructuring" and "Reasons for Proposal 2; Effects of Non-Approval of
Proposal 2", each Proposal would have substantially different effects on the
Company and its stockholders if adopted. If Proposal 1 is approved by the
requisite vote of the stockholders of the Company, Proposal 2 will not be
adopted whether or not Proposal 2 receives the requisite vote of stockholders
of the Company. In effect, Proposal 2 is conditional upon Proposal 1 not
being approved by stockholders. Therefore, stockholders who vote FOR both
Proposal 1 and Proposal 2 will increase the likelihood of the adoption of
Proposal 1 and thereby decrease the likelihood of adoption of Proposal 2.
PROPOSAL 1
APPROVAL OF A RESTRUCTURING OF THE COMPANY (THE "RESTRUCTURING") PROVIDING
FOR:
(a) (i) AMENDING AND RESTATING THE CERTIFICATE OF DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS OF THE COMPANY RELATING
TO THE COMPANY'S SERIES A CONVERTIBLE PREFERRED STOCK (THE
"SERIES A PREFERRED") IN THE FORM OF EXHIBIT A TO THIS PROXY
STATEMENT; AND
(ii) AMENDING THE COMPANY'S CERTIFICATE OF INCORPORATION, AS
AMENDED, 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;
(b) THE TERMINATION OF CERTAIN CONTRACTS (THE "DFA CONTRACTS") BETWEEN
THE COMPANY AND CERTAIN ENTITIES (EACH A "DFA ENTITY") ADVISED BY
DIMENSIONAL FUND ADVISORS, INC. ("DFA") PURSUANT TO WHICH THE
COMPANY IS CURRENTLY OBLIGATED TO PAY THE DFA ENTITIES $3,223,712
IN CASH, IN EXCHANGE FOR PROMISSORY NOTES (THE "DFA NOTES") IN THE
AGGREGATE PRINCIPAL AMOUNT OF $3,223,712 HAVING A MATURITY DATE OF
ONE YEAR FROM ISSUANCE AND BEARING INTEREST AT 8% PER ANNUM; AND
<PAGE>
(c) AMENDMENT TO THE COMPANY'S EXISTING CREDIT FACILITY (THE "NEBF
CREDIT FACILITY") WITH THE NATIONAL ELECTRICAL BENEFIT FUND (THE
"NEBF") TO (i) EXTEND THE MATURITY OF THE NEBF CREDIT FACILITY TO
MARCH 15, 2002, (ii) RELEASE CERTAIN COLLATERAL PLEDGED BY THE
COMPANY TO THE NEBF PURSUANT TO THE NEBF CREDIT FACILITY, AND
(iii) OTHERWISE PROVIDE FOR NEBF APPROVAL OF THE TERMS OF THE
RESTRUCTURING.
PROPOSAL 2
IF PROPOSAL 1 IS NOT APPROVED BY THE STOCKHOLDERS OF THE COMPANY, AMENDMENTS
TO THE COMPANY'S CERTIFICATE OF INCORPORATION, AS AMENDED, TO EFFECT, AT ANY
TIME PRIOR TO JANUARY 1, 2000, A REVERSE STOCK SPLIT OF THE COMPANY'S COMMON
STOCK, WHEREBY EACH 1.5, 2, 2.5, 3, 3.5, 4, 4.5, AND 5 SHARES OF COMMON STOCK
WOULD BE COMBINED, CONVERTED AND CHANGED INTO ONE SHARE OF COMMON STOCK, WITH
THE EFFECTIVENESS OF ONE OF SUCH AMENDMENTS AND THE ABANDONMENT OF THE OTHER
AMENDMENTS, OR THE ABANDONMENT OF ALL AMENDMENTS, TO BE DETERMINED BY THE
BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR PROPOSAL 1 AND AGAINST PROPOSAL 2. HOWEVER, IF A
STOCKHOLDER VOTES AGAINST PROPOSAL 1, THE BOARD OF DIRECTORS OF THE COMPANY
UNANIMOUSLY RECOMMENDS THAT SUCH STOCKHOLDERS VOTE FOR PROPOSAL 2.
The transactions contemplated by the Restructuring as set forth in
sub-paragraphs (a), (b) and (c) of Proposal 1 are being presented to
stockholders of the Company as a single unified proposal and approval of
Proposal 1 will constitute approval of all the transactions contemplated
thereby. Each of the transactions contemplated by the Restructuring as set
forth in sub-paragraphs (a), (b) and (c) of Proposal 1 are conditioned upon
the consummation of each of such transactions and none of such transactions
contemplated by the Restructuring as set forth in sub-paragraphs (a), (b) or
(c) of Proposal 1 will be adopted by the Company unless all of such
transactions are consummated simultaneously.
PROPOSAL 1: THE RESTRUCTURING
GENERAL
On March 1, 1999, the Board considered and unanimously adopted resolutions
declaring the advisability of the following (such proposals, as more fully
described herein, are together referred to herein as "Proposal 1" or the
"Restructuring"):
(a) (i) amending and restating the Certificate of Designation,
Preferences, Rights and Limitations of the Company relating to
the Series A Preferred (the "Certificate of Designation") in
the form of Exhibit A hereto (the "Series A Preferred
Amendment"); and
<PAGE>
(ii) amending the Company's Certificate of Incorporation, as
amended (the "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 (the "Restructuring
Reverse Stock Split");
(b) terminating the DFA Contracts in exchange for the DFA Notes in the
aggregate principal amount of $3,223,712, having a maturity date of
one year from issuance and bearing interest at 8% per annum; and
(c) amending the NEBF Credit Facility to (i) extend the maturity of the
NEBF Credit Facility to March 15, 2002, (ii) release certain
collateral pledged by the Company to the NEBF pursuant to the NEBF
Credit Facility, and (iii) otherwise provide for NEBF approval of
the terms of the Restructuring.
In addition to the approval of the holders of a majority of the outstanding
shares of Common Stock, 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 the Restructuring at a
duly convened meeting of 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, (iv) 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 the Restructuring at the Special
Meeting, there can be no assurance that the conditions to the Restructuring,
including, without limitation, approval of the holders of Series A Preferred
and the execution by the DFA Entities and the NEBF of definitive agreements,
will be met. However, as discussed more fully below, the NEBF and the
holders of XX% of the Series A Preferred have executed a non-binding letter
of intent dated February 25, 1999, pursuant to which the NEBF and such
holders of Series A Preferred have indicated their preliminary intention to
approve and consummate the Restructuring on the terms set forth therein. See
"Reasons for the Restructuring; Effects of Non-Approval of the Restructuring"
below.
If the Restructuring is duly approved and agreed, and the other conditions to
the Restructuring described above are satisfied:
<PAGE>
(a) (i) the Certificate of Designation would be amended and restated
as set forth in Exhibit A hereto (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 B (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;
(b) the DFA Contracts would be terminated and the DFA Notes would be
issued;
(c) the NEBF Credit Facility would be amended to (i) extend the
maturity of the NEBF Credit Facility to March 15, 2002,
(ii) release certain collateral pledged by the Company to the NEBF
pursuant to the NEBF Credit Facility, and (iii) otherwise provide
NEBF approval of the Restructuring.
The Series A Preferred Amendment and the 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. 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 (and as thereby amended, such shares are referred to herein as
the "New Series A Preferred"). Except as set forth below with respect to
fractional shares, on the Restructuring 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
Restructuring Reverse Stock Split ratio. Upon effectiveness, the
Restructuring Reverse Stock Split 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.
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. However, as described more fully in
"Effects of the Restructuring on Ownership and Control," conversions of
shares of New Series A Preferred into Common Stock will result in dilution to
holders of the Company's Common Stock.
<PAGE>
In addition, the termination of the DFA Contracts in exchange for the DFA
Notes and the amendment of the NEBF Credit Facility would also become
effective as of the Restructuring Effective Date.
In the event that the Restructuring is effected, the holders of the Company's
five-year warrants to acquire an aggregate of 1,742 shares of Series A
Preferred at an exercise price of $1,000 per share (the "Series A Preferred
Warrants") will be entitled to purchase, in accordance with the terms of the
Series A Preferred Warrants, such number of New Series A Preferred equal to
the number of Series A Preferred purchasable on the exercise of the Series A
Preferred Warrants immediately prior to the Restructuring Effective Date, and
the warrant exercise price per New Series A Preferred share will be the
warrant exercise price per Series A Preferred share immediately prior to the
Restructuring Effective Date, in accordance with the terms of the Series A
Preferred Warrants.
If the stockholders of the Company approve the Restructuring at the Special
Meeting, the Board intends to effect the Restructuring as promptly as
practicable after the Special Meeting. Approval of Proposal 1 will give the
Board authority to effect the Restructuring as set forth in the Letter of
Intent, 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.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR THE
RESTRUCTURING.
REASONS FOR THE RESTRUCTURING; EFFECTS OF NON-APPROVAL OF THE RESTRUCTURING
In February 1998, the Company issued in a private placement 17,425 shares of
Series A Preferred, at $1,000 per share. As partial consideration for
placing such securities, the placement agents received 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,
which have been utilized 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. Pursuant to a Registration Statement on
Form S-3, effective March 23, 1998, the Company has registered with the
Securities and Exchange Commission the shares of Common Stock 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.
<PAGE>
As indicated in the Proxy Statement sent to stockholders of the Company in
connection with the Annual Meeting of Stockholders held on May 28, 1998, at
which the stockholders approved and reserved for issuance the shares of
Common Stock issuable upon conversion of the Series A Preferred, the
aggregate number of shares of Common Stock issuable as a result of future
conversions of the Series A Preferred could not be determined, and still
cannot be determined, because such number is subject to adjustment mechanisms
dependent on future events, principally the trading price of the Common Stock
and the conversion decisions of holders of the Series A Preferred. 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).
Subsequent to the 1998 Annual Meeting of Stockholders, and particularly
during the period from August to October 1998, the Company's stock price
decreased significantly, with the result that the number of shares of Common
Stock issuable upon conversion of the outstanding shares of Series A
Preferred materially increased. Due to the Company's issuances of large
numbers of shares of Common Stock in connection with conversion notices it
received from holders of Series A Preferred, the Company found itself in the
position of not having additional authorized shares of Common Stock available
to issue to holders of Series A Preferred who elect to convert their Series A
Preferred into Common Stock. Through October 21, 1998, the Company had
issued, from its authorized but unissued and unreserved shares, the maximum
number of shares of Common Stock available for such conversions. On
October 21, 1998, the Company notified the holders of the Series A Preferred,
and issued a press release announcing, that it had suspended conversion of
its Series A Preferred. 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, and
the DFA Contracts, which provide for additional shares to be issued to the
purchasers of Common Stock based on subsequent sales of Common Stock at a
price lower than that paid by the purchasers. Approximately $9.9 million 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 stock price of the fourth quarter
1998 ($0.25 per share), the total number of shares of Common Stock required
for such conversion, with the applicable discount and, including accrued
dividends at December 31, 1998, would be 46,139,431.
In view of the rapid decline in the price of the Company's Common Stock in
the third and fourth quarters of 1998, and the suspension on October 21,
1998, of conversions of the Series A Preferred, the Company has attempted to
resolve the situation resulting from the inconvertibility of the Series A
Preferred through negotiations with the holders of the Series A Preferred,
and 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>
As a result of the circumstances described above, the Company currently has
no shares of Common Stock available to be issued for any of the foregoing or
other purposes beyond shares already reserved for stock option plans,
outstanding warrants, debt conversion, and for issuance pursuant to the DFA
Contracts. Accordingly, the Company is limited in its ability to honor
conversion requests from holders of the Series A Preferred.
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 a
letter of intent in support of the Restructuring, discussed more fully below,
and although the letter is not binding, it is a condition of the
Restructuring, as proposed in such letter, that the parties thereto terminate
with prejudice all litigation against the Company at the closing of the
Restructuring.
On January 29, 1999, Talisman Capital Opportunity Fund, LLC ("Talisman"),
another holder of Series A Preferred, 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.
While the Company believes that it has good defenses to the allegations made
by both Deere Park and Talisman, there can be no assurances that the Company
will ultimately prevail in these actions. A successful action by either
Deere Park or Talisman against the Company in this matter may have material
adverse effects on the Company.
<PAGE>
In order to remain listed on the Nasdaq National 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
National 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 thirty days as
required by the Nasdaq National 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 National Market security. Delisting of the
Company's Common Stock as a Nasdaq National 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 National 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. A hearing with Nasdaq has been requested by the
Company with respect to these issues but as of the date of this Proxy
Statement, the Company has not received a response from Nasdaq.
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."
As a result of the foregoing, 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 the reverse stock split
contemplated by Proposal 2, which, if approved, would provide the Company
with an additional number of authorized but unissued shares of Common Stock
to honor conversions of the Series A Preferred. The Company also continued
to attempt to negotiate a restructuring of the Series A Preferred with the
holders thereof.
<PAGE>
Following discussions with the holders of the Series A Preferred, DFA and the
NEBF in late February and early March 1999, the Company prepared a
non-binding letter of intent (the "Letter of Intent") setting forth the terms
of the Restructuring as discussed and negotiated with the holders of Series A
Preferred, DFA and the NEBF and the Company circulated the Letter of Intent
to such holders, DFA and the NEBF. As a result of a series of discussions
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
and 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, DFA and
the NEBF respecting the Restructuring. As of March XX, 1999, XXX holders of
Series A Preferred, representing XX% of the total number of holders of Series
A Preferred and the NEBF had executed the Letter of Intent pursuant to
which such holders of the Series A Preferred and the NEBF have
indicated their preliminary intention to approve and consummate the
Restructuring. The Letter of Intent, however, is non-binding and, therefore,
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,
it is the Company's view, based upon discussions to date and the advice of
CIBC, that notwithstanding events beyond the control of the Company, that the
Restructuring will be approved.
After consultation with its financial advisor, CIBC, the Board concluded that
the Restructuring is a superior alternative to Proposal 2. As a result, the
Board determined that, consistent with its fiduciary duties to all
stockholders of the Company, the Restructuring should be submitted for
approval of the stockholders of the Company as an alternative to Proposal 2.
Consequently, the Board determined to cancel the March 15 Meeting and call
and hold the Special Meeting at which stockholders of the Company will have
the opportunity to vote upon the Restructuring. In view, however, 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 the Restructuring will provide substantial additional benefits to the
Company and its stockholders and, therefore, is superior to Proposal 2, the
Board determined to effect the Restructuring and not Proposal 2 if the
Restructuring is approved by the requisite vote of the holders of the Common
Stock and all other conditions to the Restructuring are met. Thus, Proposal
2 is conditioned upon the Restructuring not being approved by the holders of
Common Stock at the Special Meeting.
<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) the Restructuring 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 National 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 the DFA
Contracts and the NEBF Credit Facility.
If the Restructuring is approved by the stockholders of the Company and the
other requisite approvals and consents for the Restructuring are obtained,
the Company will effect the Restructuring in accordance with the Letter of
Intent, which sets forth the material terms of the Restructuring as described
below, 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.
SERIES A PREFERRED AMENDMENT AND THE RESTRUCTURING REVERSE STOCK SPLIT
Series A Preferred Amendment. The material terms of the New Series A
Preferred as proposed by the Letter of Intent, to be set forth in the
New Certificate of Designation, are as follows:
(a) there will be a maximum of 10,576 issued shares of New Series A
Preferred;
(b) the shares will have a liquidation preference of $1,000;
<PAGE>
(c) at any time prior to April XX, 1999, the New Series A Preferred
will be exchangeable at the option of the holder for cash in amount
equal to 50% of the face value of the New Series A Preferred plus
all accrued but unpaid dividends on the Series A Preferred, up to
an aggregate amount of $6.4 million face value and accrued and
unpaid dividends (the "Cash Exchange Option"). If, in the judgment
of the Board, 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 and unpaid
dividends) of the New Series A Preferred, the terms of the New
Series A Preferred will permit the exchange for cash of up to
$8.0 million face value (plus accrued and unpaid dividends) of the
New 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 New Series A Preferred
than is permitted under the terms of the New Series A Preferred,
New Series A Preferred 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 Series A Preferred
tendered for exchange;
(d) at any time prior to April XX, 1999, the New Series A Preferred
will be convertible at the option of the holder into shares of
Common Stock at a conversion rate of $.75 face value of New Series
A Preferred per share of Common Stock plus accrued and unpaid
dividends (the "Common Stock Conversion Option"); holders of New
Series A Preferred who do not exercise the Cash Exchange Option or
the Common Stock Conversion Option will remain holders of New
Series A Preferred and on or after April XX, 1999, may convert New
Series A Preferred into shares of Common Stock at the conversion
rate of 1,000 shares of Common Stock per share of New Series A
Preferred ($1.00 per common share);
(e) the New Series A Preferred will be 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;
(f) the Company will be required to redeem all of the New Series A
Preferred 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;
<PAGE>
(g) dividends will be paid 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 Series A
Preferred. 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 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 after April 15, 2000, dividends are paid in
additional shares of New Series A Preferred the dividend rate will
increase by 2% for such dividend payment period. The Company will
have the obligation to use its best efforts to file and cause to
become effective, within 130 days after April XX, 1999, 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. In the event that a
registration statement covering shares of Common Stock issuable
upon conversion of the New Series A Preferred is not effective
within 130 days after April XX, 1999, the New Series A Preferred
will accrue dividends at a rate of 18% per annum until such time as
the registration statement is declared effective;
(h) the dividend payment dates will be April 15 and October 15,
commencing October 15, 1999, with cash dividends being payable
beginning April 15, 2000;
(i) the New Series A Preferred will be non-voting, except as otherwise
required by law and except in certain circumstances described in
the New Certificate of Designation, including (i) amending certain
rights of the holders of the New Series A Preferred and (ii) the
issuance of any class of equity securities that ranks pari passu
with or senior to the New Series A Preferred other than certain
additional shares of New Series A Preferred; and
(j) the New Series A Preferred 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
Series A Preferred will rank senior to any subsequent issue of
other preferred stock.
The foregoing summary of the proposed new terms of the New Series A Preferred
is qualified by reference to the New Certificate of Designation attached as
Exhibit A hereto.
<PAGE>
In the event that the Restructuring is effected, the holders of Series A
Preferred Warrants will be entitled to purchase, in accordance with the terms
of the Series A Preferred Warrants, such number of New Series A Preferred
equal to the number of Series A Preferred purchasable on the exercise of the
Series A Preferred Warrants immediately prior to the Restructuring Effective
Date, and the warrant exercise price per New Series A Preferred share will be
the warrant exercise price per Series A Preferred share immediately prior to
the Restructuring Effective Date, in accordance with the terms of the Series
A Preferred Warrants.
The Restructuring Reverse Stock Split. The Restructuring Certificate of
Amendment provides for an amendment to Article FOURTH of the Certificate of
Incorporation to effect the Restructuring Stock Split whereby each five
shares of Common Stock would be combined, converted and changed into one
share of Common Stock. 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 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 the Restructuring on Ownership and
Control," conversions of shares of New Series A Preferred into Common Stock
will result in dilution to holders of the Company's Common Stock.
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 B hereto.
DFA CONTRACTS. The Letter of Intent proposes that the Company and DFA
will agree that, effective on the Restructuring Effective Date, the DFA
Contracts will be terminated and in consideration thereof the Company
will execute and issue to each DFA Entity unsecured promissory notes in
the aggregate principal amount of $3.2 million, being the amount of cash
currently due under the DFA Contracts (the "DFA Notes"). The DFA Notes
will bear interest at a rate of 8% per annum.
<PAGE>
NEBF CREDIT FACILITY. The Letter of Intent proposes that the Company and
the NEBF will agree to amend the terms of the NEBF Credit Facility, and
where applicable, related security documentation, (i) to allow for the
payment of cash pursuant to the Restructuring to the holders of New
Series A Preferred, (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 receivables 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 receivables, and potentially, the
Company's inventories, may be used as collateral with other lenders for
future borrowings.
TIMETABLE. The Letter of Intent sets forth the following estimated
timetable for completion of the Restructuring in 1999:
March 1 Approval of the Restructuring by the Board
March 5 Refiling of an amended Preliminary Proxy Statement with
the Securities and Exchange Commission describing the
Restructuring
April 19 Meeting of holders of Common Stock to approve the
Restructuring
April 19 Meeting of, or action by written consent by, the Series
A Preferred holders to approve the Restructuring
April 19-28 Closing of the Restructuring
April 28-May 8 Filing of a registration statement with the Securities
and Exchange Commission for Common Stock to be issued
in connection with the Restructuring
The above timetable is indicative only and while the Company will seek
to comply with the timetable, this may not be possible in all cases due
to external circumstances such as delays in obtaining approval of the
Securities and Exchange Commission for the registration statement.
The transactions contemplated by the Restructuring as set forth in
sub-paragraphs (a), (b) and (c) of Proposal 1 are being presented to
stockholders of the Company as a single unified proposal and approval of
Proposal 1 will constitute approval of all the transactions contemplated
thereby. Each of the transactions contemplated by the Restructuring as set
forth in sub-paragraphs (a), (b) and (c) of Proposal 1 are conditioned upon
the consummation of each of such transactions and none of such transactions
contemplated by the Restructuring as set forth in sub-paragraphs (a), (b) or
(c) of Proposal 1 will be adopted by the Company unless all of such
transactions are consummated simultaneously.
<PAGE>
Set forth below are certain possible effects of the non-approval of the
Restructuring. In some cases, the effects will depend on whether Proposal 2
is approved by stockholders.
As a result of the circumstances described above, 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 the Restructuring (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 National Market, and (iii) raise capital through
issuance of Common Stock or securities convertible into Common Stock in the
future. Further, failure to approve the Restructuring (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 negotiated
resolution of adverse claims.
The Company may require additional sources of 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 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 may prove to be helpful.
EFFECTS OF THE RESTRUCTURING ON OWNERSHIP AND CONTROL
If the stockholders approve the Restructuring, the Company believes that
certain of the holders of New Series A Preferred may elect the Cash Exchange
Option, 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.
<PAGE>
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 and if such option is not
exercised, may convert New Series A Preferred into Common Stock on or after
April XX, 1999. Such conversions will result in some dilution of the holders
of the Common Stock, but not to the same significant extent the Company
believes would occur if Proposal 2 were effected. See "Effects of Proposal 2
on Ownership and Control" below. The maximum possible dilution to the Common
Stock under the Restructuring 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 16,424,301 shares of Common Stock (not taking
account of any reverse stock split). This is significantly less than the
maximum possible dilution to the Common Stock under Proposal 2. See "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 the Restructuring. See Exhibit B.
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.
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 the Restructuring
is 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.
<PAGE>
Except as set forth above, 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 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 THE RESTRUCTURING ON MARKET PRICE AND MARKETABILITY
By setting fixed conversion rates for New Series A Preferred into Common
Stock pursuant to the Restructuring 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 the Restructuring, the
Restructuring should eliminate the uncertainty and "overhang" resulting from
the potential indefinite dilution to the holders of Common Stock. See
"Effects of the Restructuring 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 the Restructuring upon such price cannot be accurately predicted.
<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 5 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 National 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 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 National 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 tend 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 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>
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 THE RESTRUCTURING ON RECORD HOLDERS
On February 3, 1999, there were 2,376 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 immediately 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 the Restructuring. See "Effects of Proposal
2 on Record Holders" below.
EFFECTS OF THE RESTRUCTURING 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 THE RESTRUCTURING ON TAKEOVERS
The issuance 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 additionally authorized but unissued shares of Common Stock to frustrate
persons seeking to effect a takeover or otherwise gain control of the Company
<PAGE>
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 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 this proposal 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
the Restructuring may reduce the number of holders of New Series A Preferred,
which may reduce the possibility of such an occurrence.
EFFECTS OF THE RESTRUCTURING ON REGISTRATION AND VOTING
The Company's Common Stock is currently registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Company is subject to the periodic reporting and other requirements of the
Exchange Act. The Restructuring will not affect the registration of the
Company's Common Stock under the Exchange Act. After the implementation of
the Restructuring, including the Restructuring Reverse Stock Split, the
Company's Common Stock will continue to be reported on the Nasdaq National
Market (assuming it meets all applicable listing requirements) under the
symbol "RMTR" (although 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).
<PAGE>
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 neither Proposal 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 either Proposal (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).
EFFECTS OF THE RESTRUCTURING 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. The Restructuring 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 April XX, 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 THE RESTRUCTURING ON RESERVED 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,
and reserved shares of Common Stock issuable pursuant to the DFA Contracts.
Under the terms of the warrants, the applicable provisions of the debt
instrument, 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.
<PAGE>
The par value of the Company's Common Stock and New Series A Preferred will
remain at $0.01 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.
PROPOSAL 2
GENERAL
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 to effect, at any time prior
to January 1, 2000, reverse stock splits of the Company's Common Stock,
whereby each 1.5, 2, 2.5, 3, 3.5, 4, 4.5, and 5 outstanding shares would
be combined, converted and changed into one share of Common Stock, with
the effectiveness of one of such amendments and the abandonment of the other
amendments, or the abandonment of all amendments, to be determined by the
Board. On March 1, 1999, the Board unanimously resolved that the
above-described proposal would be submitted to the stockholders of the
Company for approval, but the proposal would be conditional upon the
Restructuring not being approved by the stockholders of the Company. See
"Reasons for the Restructuring; Effects of Non-Approval of the Restructuring"
above and "Reasons for Proposal 2; Effects of Non-Approval of Proposal 2"
below. If the Board determines to effect one of such reverse stock splits
("Proposal 2") by filing the applicable amendment with the Secretary of State
of the State of Delaware, all other such reverse stock splits will be
abandoned. Approval of Proposal 2 will authorize the Board in its discretion
to effectuate Proposal 2 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 the Restructuring is not approved by the stockholders and Proposal 2 is
approved by the stockholders and following such approval the Board determines
Proposal 2 is in the best interests of the Company and its stockholders,
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 C; 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.
<PAGE>
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.
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,"
conversions of shares of Series A Preferred will result in substantial
dilution to holders of the Company's Common Stock.
If the Restructuring 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 the Restructuring, 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 the Restructuring 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 the Restructuring is 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 the Restructuring.
<PAGE>
REASONS FOR PROPOSAL 2; EFFECTS OF NON-APPROVAL OF PROPOSAL 2
For the reasons set forth above (see "Reasons for the Restructuring; Effects
of Non-Approval of the Restructuring"), the Company believes that the
Restructuring is a superior alternative to Proposal 2 and accordingly,
Proposal 2 will be conditional upon the Restructuring not being approved.
Therefore, if the Restructuring is 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 the Restructuring would lead to
substantially less dilution of the shares of Common Stock than if Proposal 2
were instead adopted. The Restructuring would also provide the Company with
increased financial flexibility than is currently available under the DFA
Contracts and the NEBF Credit Facility, whereas Proposal 2 does not affect
these existing arrangements.
As noted earlier (see "Reasons for the Restructuring; Effects of Non-Approval
of the Restructuring"), the Company is required under the terms of the
Certificate of Designation and the Company's Preferred Stock Investment
Agreements with the holders of the Series A Preferred 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 the Restructuring to be put
before stockholders at the Special Meeting. However, although the Company
believes that the Restructuring is 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 the
Restructuring is not approved by the stockholders. Provided that the
Restructuring is 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 National 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.
<PAGE>
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 the Restructuring), 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 National 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 the Restructuring) 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.
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
effectiveness of Proposal 2 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 the Restructuring is not
approved.
EFFECTS OF PROPOSAL 2 ON OWNERSHIP AND CONTROL
If the stockholders approve Proposal 2, 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 the Restructuring 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 the
Restructuring. 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 stock price of the fourth quarter 1998 ($0.25 per
share), the total number of shares of Common Stock required for such
conversion, with the applicable discount and, including accrued dividends at
December 31, 1998, would be 46,139,431 (not taking account of any reverse
stock split). See "Effects of the Restructuring on Ownership and Control"
above.
<PAGE>
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.
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 "Effects of the Restructuring on Market Price and
Marketability" above. However, the Restructuring 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 the Restructuring, the increase in the number of record holders
may also be correspondingly greater. See "Effects of the Restructuring on
Record Holders" above.
EFFECTS OF PROPOSAL 2 ON DIVIDENDS
See "Effects of the Restructuring on Dividends", which is equally applicable
to Proposal 2.
<PAGE>
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 the Restructuring. See
"Effects of the Restructuring on Takeovers" above.
EFFECTS OF PROPOSAL 2 ON REGISTRATION AND VOTING
The discussion in "Effects of the Restructuring 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 "Effects of the Restructuring 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.
EFFECTS OF PROPOSAL 2 ON RESERVED SHARES AND PAR VALUE
Shareholders are encouraged to read "Effects of the Restructuring on Reserved
Shares and Par Value" above. The effects described therein would, in the
opinion of the Company, be equally applicable to Proposal 2.
GENERAL
The following discussion relates to both the Restructuring and Proposal 2.
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 National 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>
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 the Restructuring or Proposal 2.
<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>
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 the
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 the
Restructuring or Proposal 2.
Proxies solicited by the Board will be voted in favor of Proposal 1 and
against Proposal 2 unless stockholders specify otherwise.
AT THE SPECIAL MEETING, THE STOCKHOLDERS WILL BE REQUESTED TO CONSIDER AND
APPROVE ONE OF THE FOLLOWING RESOLUTIONS:
PROPOSAL 1
APPROVAL OF A RESTRUCTURING OF THE COMPANY (THE "RESTRUCTURING") PROVIDING
FOR:
(a) (i) AMENDING AND RESTATING THE CERTIFICATE OF DESIGNATION,
PREFERENCES, RIGHTS AND LIMITATIONS OF THE COMPANY RELATING TO
THE COMPANY'S SERIES A CONVERTIBLE PREFERRED STOCK (THE
"SERIES A PREFERRED") IN THE FORM OF EXHIBIT A TO THIS PROXY
STATEMENT; AND
(ii) AMENDING THE COMPANY'S CERTIFICATE OF INCORPORATION, AS
AMENDED, 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;
<PAGE>
(b) THE TERMINATION OF CERTAIN CONTRACTS (THE "DFA CONTRACTS") BETWEEN
THE COMPANY AND CERTAIN ENTITIES (EACH A "DFA ENTITY") ADVISED BY
DIMENSIONAL FUND ADVISORS, INC. ("DFA") PURSUANT TO WHICH THE
COMPANY IS CURRENTLY OBLIGATED TO PAY THE DFA ENTITIES $3,223,712
IN CASH, IN EXCHANGE FOR PROMISSORY NOTES (THE "DFA NOTES") IN THE
AGGREGATE PRINCIPAL AMOUNT OF $3,223,712 HAVING A MATURITY DATE OF
ONE YEAR FROM ISSUANCE AND BEARING INTEREST AT 8% PER ANNUM; AND
(c) AMENDMENT TO THE COMPANY'S EXISTING CREDIT FACILITY (THE "NEBF
CREDIT FACILITY") WITH THE NATIONAL ELECTRICAL BENEFIT FUND (THE
"NEBF") TO (i) EXTEND THE MATURITY OF THE NEBF CREDIT FACILITY TO
MARCH 15, 2002, (ii) RELEASE CERTAIN COLLATERAL PLEDGED BY THE
COMPANY TO THE NEBF PURSUANT TO THE NEBF CREDIT FACILITY, AND
(iii) OTHERWISE PROVIDE FOR NEBF APPROVAL OF THE TERMS OF THE
RESTRUCTURING; AND
PROPOSAL 2
IF PROPOSAL 1 IS NOT APPROVED BY THE STOCKHOLDERS OF THE COMPANY, AMENDMENTS
TO THE COMPANY'S CERTIFICATE OF INCORPORATION, AS AMENDED, TO EFFECT, AT ANY
TIME PRIOR TO JANUARY 1, 2000, A REVERSE STOCK SPLIT OF THE COMPANY'S COMMON
STOCK, WHEREBY EACH 1.5, 2, 2.5, 3, 3.5, 4, 4.5, AND 5 SHARES OF COMMON STOCK
WOULD BE COMBINED, CONVERTED AND CHANGED INTO ONE SHARE OF COMMON STOCK, WITH
THE EFFECTIVENESS OF ONE OF SUCH AMENDMENTS AND THE ABANDONMENT OF THE OTHER
AMENDMENTS, OR THE ABANDONMENT OF ALL AMENDMENTS, TO BE DETERMINED BY THE
BOARD OF DIRECTORS.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR PROPOSAL 1 AND
AGAINST PROPOSAL 2. HOWEVER, IF A STOCKHOLDER VOTES AGAINST PROPOSAL 1, THE
BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT SUCH
STOCKHOLDERS VOTE FOR PROPOSAL 2.
The transactions contemplated by the Restructuring as set forth in
sub-paragraphs (a), (b) and (c) of Proposal 1 are being presented to
stockholders of the Company as a single unified proposal and approval of
Proposal 1 will constitute approval of all the transactions contemplated
thereby. Each of the transactions contemplated by the Restructuring as set
forth in sub-paragraphs (a), (b) and (c) of Proposal 1 are conditioned upon
the consummation of each of such transactions and none of such transactions
contemplated by the Restructuring as set forth in sub-paragraphs (a), (b) or
(c) of Proposal 1 will be adopted by the Company unless all of such
transactions are consummated simultaneously.
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.
<PAGE>
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 principle 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 principle offices of the Company.
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, 1997, as
filed with the Securities and Exchange Commission and as may be subsequently
amended, are hereby incorporated by reference herein.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1997 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL
BE PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO RICHARD L.
MOHR, CORPORATE SECRETARY, RAMTRON INTERNATIONAL CORPORATION, CORPORATE
COMMUNICATIONS DEPARTMENT, 1850 RAMTRON DRIVE, COLORADO SPRINGS, COLORADO
80921.
<PAGE>
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
RAMTRON INTERNATIONAL CORPORATION
April 19, 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
March 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 April 19, 1999, at 2:00 p.m., Mountain Standard 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 PROPOSAL 1 AND AGAINST PROPOSAL 2. HOWEVER, IF
PROPOSAL 1 IS 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>
RAMTRON INTERNATIONAL CORPORATION
PLEASE MARK VOTES AS IN THIS EXAMPLE USING DARK INK ONLY.
(X)
PROPOSAL 1
APPROVAL OF A RESTRUCTURING OF THE COMPANY (THE "RESTRUCTURING") PROVIDING
FOR:
(a) (i) AMENDING AND RESTATING THE CERTIFICATE OF DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS OF THE COMPANY RELATING TO THE COMPANY'S SERIES A
CONVERTIBLE PREFERRED STOCK (THE "SERIES A PREFERRED") IN THE FORM OF EXHIBIT
A TO THE ATTACHED PROXY STATEMENT; AND
(ii) AMENDING THE COMPANY'S CERTIFICATE OF INCORPORATION, AS AMENDED, TO
EFFECT A REVERSE STOCK SPLIT OF THE COMPANY'S COMMON STOCK, WHEREBY EACH FIVE
SHARES WOULD BE COMBINED, CONVERTED AND CHANGED INTO ONE SHARE OF COMMON
STOCK;
(b) THE TERMINATION OF CERTAIN CONTRACTS (THE "DFA CONTRACTS") BETWEEN THE
COMPANY AND CERTAIN ENTITIES (EACH A "DFA ENTITY") ADVISED BY DIMENSIONAL
FUND ADVISORS, INC. ("DFA") PURSUANT TO WHICH THE COMPANY IS CURRENTLY
OBLIGATED TO PAY THE DFA ENTITIES $3,223,712 IN CASH, IN EXCHANGE FOR
PROMISSORY NOTES (THE "DFA NOTE") IN THE AGGREGATE PRINCIPAL AMOUNT OF
$3,223,712 HAVING A MATURITY DATE OF ONE YEAR FROM ISSUANCE AND BEARING
INTEREST AT 8% PER ANNUM; AND
(c) AMENDMENT TO THE COMPANY'S EXISTING CREDIT FACILITY (THE "NEBF CREDIT
FACILITY") WITH THE NATIONAL ELECTRICAL BENEFIT FUND (THE "NEBF") TO
(i) EXTEND THE MATURITY OF THE NEBF CREDIT FACILITY TO MARCH 15, 2002, (ii)
RELEASE CERTAIN COLLATERAL PLEDGED BY THE COMPANY TO THE NEBF PURSUANT TO THE
NEBF CREDIT FACILITY, AND (iii) OTHERWISE PROVIDE FOR NEBF APPROVAL OF THE
TERMS OF THE RESTRUCTURING; AND
FOR AGAINST ABSTAIN
( ) ( ) ( )
PROPOSAL 2
IF PROPOSAL 1 IS NOT APPROVED BY THE STOCKHOLDERS OF THE COMPANY, AMENDMENTS
TO THE COMPANY'S CERTIFICATE OF INCORPORATION, AS AMENDED, TO EFFECT, AT ANY
TIME PRIOR TO JANUARY 1, 2000, A REVERSE STOCK SPLIT OF THE COMPANY'S COMMON
STOCK, WHEREBY EACH 1.5, 2, 2.5, 3, 3.5, 4, 4.5, AND 5 SHARES OF COMMON STOCK
WOULD BE COMBINED, CONVERTED AND CHANGED INTO ONE SHARE OF COMMON STOCK, WITH
THE EFFECTIVENESS OF ONE OF SUCH AMENDMENTS AND THE ABANDONMENT OF THE OTHER
AMENDMENTS, OR THE ABANDONMENT OF ALL AMENDMENTS, TO BE DETERMINED BY THE
BOARD OF DIRECTORS.
FOR AGAINST ABSTAIN
( ) ( ) ( )
<PAGE>
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.)
=============================================================================
BY ORDER OF THE BOARD OF DIRECTORS
------------------------
Richard L. Mohr
Secretary
Colorado Springs, Colorado
March XX, 1999
EXHIBIT A
(Restructuring)
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>
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 April 15 and
October 15, with the first payment being payable on October 15, 1999,
when and as declared by the Board of Directors. Prior to April 15,
2000, all dividends shall be paid in Series A Preferred. On and after
April 15, 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 April 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 April XX, 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>
(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 National 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 April 15, 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 April 15, 2000 at an amount equal to its Liquidation Preference
plus, without duplication, accumulated and unpaid dividends to the date of
redemption.
6. Conversion.
The holders of the Series A Preferred shall have optional conversion rights
as follows:
<PAGE>
(a) Conversion Rights.
(i) At any time prior to April XX, 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 April XX, 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
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.
<PAGE>
(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
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.
<PAGE>
(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.
(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).
<PAGE>
(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 April XX, 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
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.
<PAGE>
(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.
9. Registration Rights. The Corporation shall use its best efforts to file
and cause to become effective as of no later than XXXXXX, 1999 a
registration statement for Common Stock of the Company 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.
<PAGE>
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 Company on April XX, 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
EXHIBIT B
(Restructuring)
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
<PAGE>
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 National 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.
EXHIBIT C
(Proposal 2)
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
<PAGE>
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 National 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.
