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Strategies & Market Trends : Floorless Preferred Stock/Debenture
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To: Mama Bear who wrote (125)10/10/1998 12:35:00 PM
From: N. Dixon  Read Replies (1) of 1438
 
Barbara and Roger,

Let me clarify a couple of things. I was told over the weekend that someone on SI was making fraudulent statements about the terms and consequences of the REFR financing with Ailouros comparing it to the types of financing that are known as "floorless convertibles" or " death spirals. I knew this not to be the case because I am friends with several attorneys who work in securities law who also happen to own REFR who told me what an INCREDIBLE deal this was for the company. I sent to them the concerns that were being discussed by the two of you and one responded with the post that I put on your board regarding the FACT that if they CHOOSE to REFR can be buying shares right now in the open market and at a later date which THEY determine put these shares to Ailorous at a whatever floor price REFR determines and Ailouros may NOT pay LESS than that floor price. True they don't have to buy the shares either. They are required to make the decision within the three-month period. REFR on the other hand NEVER has to put ONE single share to Ailouros. REFR's only requirement is that they sell 65,500 to Ailouros at $8.25.

Barbara,

You said:
<<Ailorous can't be required to buy unless it is at 92% of the market price. >> but you left out the FACT that Ailouros CANNOT UNDER ANY CIRCUMSTANCE buy for less than the FLOOR price. They have the CHOICE to pay the floor price if they choose even if it's higher than the 92% of the average 7-day price. So REFR can ALWAYS choose NOT to offer stock below $15. They do not need cash. They have 3 licensees bringing product to market.

You have not given one reason why REFR would even bother to access this financing with the stock at the current market price. There is no advantage for either REFR or Ailouros to do so. Ailouros can't force REFR to sell them stock now (other than the 65,500 which is at a premium). Any attorney who will look at this deal will tell you that there is nothing in the SEC filing that in any way indicates that REFR is in need of cash (this would HAVE to be disclosed to shareholders). I truly believe that the two of you have misinterpreted what is actually a very positive event for shareholders.

One of the frustrations when the company went public in 1986 was having to practically give away the licenses because it was new technology with whom little in the industry had experience. Today in 1998 we have a 23million life insurance policy that allows us to have more leverage when negotiating with companies. I have told you both that I do not expect you to take my word on this. I do believe these announcements are forthcoming and you will see by these that what I have stated it accurate.

Thanks for allowing me to clarify my position and I wish you luck in your other investments.

ND
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