MINUTES OF THE ANNUAL MEETING OF THE SHAREHOLDERS OF RENTECH, INC.
ÿÿÿÿThe 1998 annual meeting of shareholders of Rentech, Inc. was held at Courtyard by Marriott, Cosmopolitan Room, 934 16th Street, Denver, Colorado, on Wednesday, June 24, 1998 at 9:00 a.m., local time, pursuant to written notice sent to each shareholder of the corporation.
Dennis L. Yakobson, chairman of the corporation's board of directors, called the meeting to order at 9:00 a.m. Ronald C. Butz, secretary of the corporation, acted as secretary of the meeting.
The chairman introduced himself and the other directors of the corporation. The other directors present were John J. Ball, Ronald C. Butz, John P. Diesel, Douglas L. Sheeran and Dr. Erich W. Tiepel. The chairman then introduced Dr. Charles B. Benham, vice-president, research and development; James P. Samuels, chief financial officer; Frank L. Livingston, vice president and general manager of Okon, Inc.; and Loren L. Mall of Brega & Winters P.C., corporate counsel.
A register for the names of all persons present at the meeting was kept, and the identity of persons in attendance was recorded.
The chairman appointed Tammy Davis of American Securities Transfer & Trust, Inc. to act as the credentials committee and as inspector of election for the meeting. The chairman directed that a copy of the oath of the inspector of election be filed in the corporate records as part of the records of the meeting.
The secretary, Mr. Butz, then reported on the formal steps taken in connection with the meeting. He reported that the board of directors had adopted a resolution setting the record date for determining shareholders entitled to vote at the corporation's annual meeting as of the close of business on April 20, 1998 and had fixed the meeting date for June 24, 1998 at 9:00 a.m. local time. He further stated that a certified list of shareholders of the corporation, their addresses and the number of shares held by each as of the close of business on the record date was on file and open to examination by the shareholders at the meeting. He reported that there were 35,169,026 shares of common stock of the corporation outstanding as of April 20, 1998, all of which shares are entitled to vote. The secretary presented a copy of the notice of meeting, proxy statement and form of proxy mailed to shareholders. The chairman directed that the affidavit of Tina Champanios of Genisys, agent of American Securities Transfer and Trust, Inc., dated June 10, 1998, certifying as to the due and proper mailing of the proxy material on May 27, 1998 to each shareholder entitled to vote, be filed with the records of the meeting.
Tammy Davis, as inspector of election, then reported that a preliminary count indicated the presence at the meeting of a quorum of the outstanding stock in person or represented by proxy. The chairman declared that a quorum had been established and that the meeting was duly convened and open for business.
The chairman stated that the minutes of the previous meeting of shareholders held on June 12, 1997 were on hand and available for inspection by any shareholder present. Upon motion by Mr. Samuels which was seconded by Mr. Sheeran and carried unanimously, a formal reading of the previous minutes was omitted, and the minutes were approved as written.
The chairman stated the first item of business was to elect two directors for terms expiring in 2001. The chairman called for nominations of persons to serve as directors. Mr. Diesel nominated Ronald C. Butz and Douglas L. Sheeran to serve as directors of the corporation for three-year terms expiring in 2001 at the annual meeting of shareholders in that year and when their successors have been elected and qualified. There being no further nominations, it was moved by Mr. Samuels and seconded by Dr. Tiepel that nominations be closed. The motion carried. The chairman said that voting in the election would be by proxy cards and asked that any proxy card not yet returned be submitted to the inspector of election.
The next items of business was consideration of the 1998 Stock Option Plan previously adopted by the directors. Mr. Ball moved that the 1998 Stock Option Plan described in the proxy statement authorizing the grant of options to employees, directors and consultants to purchase 500,000 shares of the corporation's common stock on the terms described in the plan be adopted. The motion was seconded by Mr. Butz. The chairman said that voting on the motion would be by proxy cards.
The chairman stated that there was no other business to come before the meeting. He asked that all proxy cards be completed and delivered to the inspector of election so that the final votes could be tabulated. Ms. Davis collected the remaining proxy cards that had not already been returned to the inspector of election. The chairman declared the polls closed on all issues.
Mr. Yakobson then reported on the status of the corporation. He said he regretted that he was not able to announce that a contract between Rentech and Texaco had been signed. He read a press release that had been distributed earlier that morning, which was as follows:
"Rentech, Inc. today announced that it is continuing in negotiations with Texaco Natural Gas, Inc., a subsidiary of Texaco, Inc., to establish a business relationship to accelerate the development and licensing of Rentech's process technology and to commercially exploit the technology on a worldwide basis in conjunction with Texaco's proprietary gasification technology for the gasification of solids and liquid feedstocks. Rentech's management is optimistic that these negotiations will be successfully concluded in the relatively near future."
Mr. Yakobson said that management is in fact optimistic that the continuing negotiations will be a success, although there are no assurances that will be the case. He said that negotiating with Texaco is very time-consuming. It is a large corporation with many layers of bureaucracy, and it does not move quickly.
In addition, Mr. Yakobson noted that there is currently much interest throughout the energy industry in gas-to-liquids technologies. The corporation has been invited to many gatherings to make presentations about the Rentech technology, and there has been much interest in Rentech because of its technology. That interest is reflected in the volume and share price that the corporation's stock has attracted in the marketplace. Mr. Yakobson reported that he would be making additional presentations during the remainder of the year in Canada, Milan, Italy, Pittsburgh, and two cities in California.
Mr. Yakobson explained that Rentech is one of two businesses in the gas-to- liquids field that can convert carbon-bearing materials throughout the wide spectrum of gas-to-liquids, solids to liquids, and heavy petroleum-to-liquids.
Rentech continues to follow its three-pronged business strategy, Mr. Yakobson reported. First, the corporation intends to continue its original business, which is gas conversion technology. Second, the corporation intends to make other acquisitions such as that represented by Okon, Inc., which was acquired in March of 1997. Since then Okon and its performance have exceeded the expectations of management. Third, the corporation would like to engage in advanced technology businesses.
Rentech has other targets which meet its criteria for acquisition, Mr. Yakobson reported. The criteria are that the business have a positive cash flow, be well-established, have additional potential for growth, have management that is effective and willing to stay in place, and be located within the geographic region so Rentech's management can be in touch with it on a convenient basis. He announced that it is the goal of management to acquire one additional business by the end of the 1998 calendar year.
In regard to advanced technology, Mr. Yakobson said Rentech's various business arrangements with ITN Energy Systems, Inc. have potential for Rentech. He noted that it is not easy to know where and how these potential opportunities with ITN will develop. So far, Rentech has concentrated its interest with ITN on the electronics substrate business and radio frequency identification tags. There are other business possibilities represented by ITN that management is investigating.
Mr. Yakobson noted that the financial position of the corporation is good even though its operations do not provide a positive cash flow. He said that, as reported previously in the corporation's Form 10-Q for March 1998, the corporation has a contractual arrangement for the sale of up to another $8 million of its common stock in private placements. Rentech has already taken down $2 million of this arrangement, through the sale of stock, and has rights to increase that amount at its option.
Mr. Yakobson reminded shareholders that the market capitalization of the corporation has increased substantially over the last year. He noted that Rentech's common stock has remained the best performing stock in Colorado, was the third-best performing stock in the country last year, and that the corporation's web site is popular. Rentech's web site is now receiving around 10,000 hits a month.
The corporation's gross revenues have also increased considerably, Mr. Yakobson reported. Total revenues were approximately $295,000 for the 9-month fiscal period in the 1996 fiscal period. Gross revenues increased to approximately $1.1 million for the 12 months of fiscal year 1997, and are expected to be higher for the fiscal year ending September 30, 1998.
In conclusion, Mr. Yakobson said that the corporation's gas-to-liquids technology offers significant potential and the solid-to-liquids technology has been perceived by industry observers as having as much or more potential. Okon, Inc. has been a great success, and the market seems to support the efforts of the corporation. He also noted that the board of directors has been reconstituted with the addition of several independent directors who have depth of experience in their various fields.
The chairman opened the floor to questions. Richard Taxman said he was thrilled and amazed that the corporation has come as far as it has in two years, when it was at a low ebb. He was pleased when the stock market price rose to $3.00 and disappointed when it fell back to around $1.50 per share. He stated that officer salaries doubled in 1997 and that the corporation has not yet quite achieved a break-even position and asked when that might occur. Mr. Yakobson responded that salaries didn't double in 1997 because officers had taken a pay cut in 1996 and regained their former salary level in 1997. He also noted that the officers and directors have sold very few shares of their Rentech stock over the 18 years of the corporation's lifetime.
Mr. Samuels responded to the question about the profitability of the corporation. He said that the strategy of the corporation which it adopted two years ago is unfolding as expected. In the near term, he expects that the corporation will be able to achieve another acquisition which would make the corporation profitable. He said that the criteria by which Rentech was evaluating potential acquisitions included requirements that advanced technology businesses must have an anticipated positive cash flow within 3 to 5 years and that other types of acquisitions must have a shorter expectation for reaching profitability. Mr. Samuels reported that three possible acquisitions meeting the corporation's standards have been identified. All of them meet Rentech's goals of profitability, stability and positive cash flow.
In response to another question, Mr. Yakobson replied that Rentech is not precluded from dealing with parties other than Texaco. He said Rentech is presently talking with others, but no deal is ready to be signed. He noted that Rentech seems to have credibility for its technology, and there are very few others with similar technology. He said that there was no deadline for reaching an agreement with Texaco, but said Rentech's management is pushing hard for the talks to come to a conclusion.
In answer to questions about the completeness of Rentech's technology, Mr. Yakobson noted that Rentech's expertise is in Fischer-Tropsch processes. He said it doesn't matter which front end is used for a gas conversion plant or for the distillation or back end systems. Both front end and back end systems are readily available. The integration of Rentech's technology into Texaco's gasification technology is what would remain to be done if Rentech were to reach agreement with Texaco. Dr. Benham explained the use of coal for creation of hydrocarbon liquids and the use of steam reforming.
The chairman then called for the report of the inspector of election. Tammy Davis, as the inspector of election, reported that there were 26,389,622 shares of common stock represented at the meeting either in person or by proxy, comprising 75% of the outstanding common stock of the corporation entitled to vote at the meeting. She reported that in the voting for the election of directors, 25,978,933 votes were cast in favor of the election of Ronald C. Butz for a three-year term, representing 73% of the outstanding shares entitled to vote with 410,689 shares or 1.6% of the shares withheld from the vote for election, and 25,978,456 were cast in favor of the election of Douglas L. Sheeran for a three-year term, representing 73% of the outstanding shares entitled to vote, with 411,166 shares or 1.6% of the shares withheld from the vote for election. More than ninety-five percent of the votes cast were in favor of the election of Mr. Butz and Mr. Sheeran. Ms. Davis also reported that 24,810,056 votes were cast in favor of adoption of the corporation's 1998 Stock Option Plan, 1,500,955 votes were cast against, and 78,611 votes abstained.
The chairman declared that Ronald C. Butz and Douglas L. Sheeran had received the highest number of votes cast in the election and had been elected directors of the corporation for three-year terms ending at the annual meeting of shareholders held in the year 2001 and when their successors are elected and qualified.
The chairman also declared that the corporation's 1998 Stock Option Plan had been approved.
There being no further business to come before the meeting, it was, upon motion duly made by Mr. Benham and seconded by Mr. Butz, adjourned at 10:50 a.m. |
