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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
Micro-ASI, Incorporated
(Name of Small Business Issuer in its charter)
TEXAS 75-2586030
(State of Incorporation) (IRS Employer Identification No.)
12655 NORTH CENTRAL EXPWY., SUITE 1000
DALLAS, TEXAS 75243
(Address of principal executive offices)
(972) 392-9636
(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK $.001 PAR VALUE
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PART I.
ITEM 1 DESCRIPTION OF BUSINESS.
(a) BUSINESS DEVELOPMENT.
Micro-ASI, Inc. (the "Company" or "Micro-ASI") is a development stage,
high-technology electronics company founded in 1995 in Dallas, Texas. The
Company has had no revenue from operations since inception, and has no current
customers.
There has not been any bankruptcy filing, receivership or any similar proceeding
since the Company's inception.
There has been no reclassification, merger or consolidation since the Company's
inception. There has been no purchase or sale of a significant amount of assets
that were not in the ordinary course of the Company's business.
This document includes "forward-looking statements" including, in particular,
the statements about Micro-ASI's plans, strategies and prospects under the
headings "Management's Discussion and Analysis" or "Plan of Operations."
Although we believe that our plans, intentions and expectations reflected in or
suggested by such forward-looking statements are reasonable, we can give no
assurance that such plans, intentions and expectations will be achieved, and we
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caution you that our actual results may differ materially from those anticipated
or projected in our forward-looking statements. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance or achievements of Micro-ASI to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. Such factors include, among other
things, (1) general economic and business conditions; (2) ability to cost
effectively integrate multiple technologies; (3) effect of future competition;
(4) failure to raise needed capital; and.(5) the ability of Micro-ASI and its
third party providers to adequately address possible Year 2000 problems.
(b) BUSINESS OF ISSUER.
(1) PRINCIPAL PRODUCTS AND THEIR MARKETS:
The Company's opportunity is based on three tenets:
o Change in semiconductor technology from wirebond interconnect
to "flip-chip", Multichip Modules ("MCMs"), and
systems-on-a-chip (key terms and phrases are defined in the
Glossary at end of this Part I, Item (b));
o Trend toward outsourcing of design and product manufacturing
by both merchant semiconductor companies and
vertically-integrated electronic end product manufacturers;
and
o Long established relationships with senior executives in the
semiconductor industry.
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The Company's vertically integrated business structure is focused on providing
turnkey product solutions leveraging the emerging flip-chip, MCM and
systems-on-a-chip technologies. These maturing technology "cores" are needed
across the electronics industry to enable product miniaturization, reduce power
consumption and increase operating speeds. Management believes the current "wire
bonding" process used in electronics packaging since the late 1950s will be
superceded by these emerging technologies, with the Company uniquely positioned
as the turnkey enabling change agent. Electronic industry sectors targeted by
the Company are semiconductor, computer, telecom, automotive and medical.
(2) DISTRIBUTION METHODS:
The Company will distribute its products through value added resellers and
manufacturer representatives.
(3) NEW PRODUCT STATUS
The Company is developing a notebook baseline computer to serve as a platform to
showcase, in phases, the aforementioned emerging key flip-chip, MCM and
systems-on-a-chip technologies. In addition to carrying the Company's enabling
technologies to the marketplace, Management believes the sale of these computers
will generate revenues for Micro-ASI and will facilitate
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continued expansion of the Company. The initial prototype notebook computer is
expected to be completed in the fourth quarter of 1999.
Due to Micro-ASI's contacts at the chief executive officer level of many major
electronics companies, the Company is aware of a number of existing products
that need to be redesigned and that are candidates to utilize emerging
technologies. Following initial release of the notebook computer, Micro-ASI
plans to begin work on a selected subset of these redesign projects, all being
in high-volume production and representing significant business opportunities
for the Company. Micro-ASI will retain the design rights to all redesigned
products. This business strategy and policy will cause Micro-ASI's installed
intellectual property base to grow rapidly and keep the Company in the forefront
of technology and in turnkey delivery of solutions leveraging such key
technologies.
The Company's five-year business plan will take Micro-ASI into design of new
products such as emerging info-appliances and their interconnections to
networks, specialized information appliances for the medical market, embedded
computers for the automotive industry, and smaller and more capable telecom
equipment.
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ZAE Research Inc. has patented new battery technology called the ECPulse(TM)
that significantly extends runtime of a notebook computer compared to
conventional batteries. In April, 1999, ZAE Research, Inc. and Micro-ASI
executed an agreement whereby Micro-ASI will own 50% of a new ZAE subsidiary,
which will have the exclusive license to use the parent company's technology.
(4) COMPETITIVE BUSINESS CONDITIONS AND MICRO-ASI'S COMPETITIVE POSITION:
Today's electronics marketplace demands quality products which are faster, more
reliable, easier to use and less costly than current or earlier generation
products. As the need for miniaturization drives products and product part
geometry ever smaller and increasingly complex, a new method of interconnect is
necessary and overdue. Management believes that the limits of wire bonding and
traditional electronic component packaging have been reached, and shifting to
the new technologies of flip-chips, MCMs and systems-on-a-chip must occur for
the electronics industry to continue its growing and pervasive impact around the
globe.
Traditionally, flip-chips and MCMs have been used only in military or other
performance intensive applications because of higher costs associated with MCMs
compared to older, conventional interconnect technologies. These higher
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costs for MCMs have historically been incurred primarily because of known good
die issues, MCM substrate pitch and substrate coplanarity difficulties. The cost
of "bumping" wafers for flip-chip interconnect has also impeded acceptance of
this technology. Because of these industry barriers, and the significant
investments required in infrastructure change to enable these new technologies,
the vast majority of products continue to be designed and manufactured with
traditional packaging and interconnect techniques. There are presently
relatively few companies offering design services utilizing flip-chip and/or MCM
technologies. Micro-ASI believes it is unique in the electronics industry in
that the Company has resolved or is currently addressing each of the
aforementioned technology-related problems.
Micro-ASI is assembling current state of the art technologies and the needed
intellectual property to enable production of cost effective flip-chip MCMs. The
Company is positioned to offer truly turnkey solutions utilizing affordable, and
functionally richer, flip-chip, MCM and systems-on-a-chip technologies. The
Company intends to design new or re-engineer existing products to make them more
efficient, more powerful, and more cost competitive. Micro-ASI intends to
demonstrate producibility and also manufacture these devices in high volume,
through its strategic partners. Unlike the vast majority of the industry still
encumbered with more than three decades of wire bond technology, Micro-ASI plans
to utilize flip-chip as the affordable attachment method of choice to
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minimize a component's form factor, enable superior thermal management
properties, and facilitate product speed improvements not possible with wire
bonding. The Company is facilitating development of an affordable MCM substrate
that supports fine etch spacing and is coplanar without the use of interposers.
Known good die is becoming less of an issue across the industry as (1) many
major semiconductor companies now offer products with various known good die
levels and (2) other independent companies specializing exclusively in known
good die products have been formed.
Micro-ASI's management's long standing and continuing contacts with senior
executives in the semiconductor, telecom, computer, medical, and automotive
industries will, Management believes, give the Company an advantage in
identifying products for redesign and then securing new business on such leading
edge products. The fact that Micro-ASI will retain ownership of designed
products will quickly add value and intellectual property to the Company's
portfolio. The Company believes, therefore, that it is creating barriers to
entry for competitors from the outset. Because of the Company's turnkey vertical
integration approach, there are currently few companies that can or would
compete directly with Micro-ASI. However, since the demand for MCMs is expected
to be large, it is possible that new competitors, some of whom may imitate the
strategy of the Company, will emerge. There is no assurance that future
competition will not have a materially adverse affect on the operations of the
Company.
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(5) SOURCES AND AVAILABILITY OF MATERIALS AND PRINCIPAL SUPPLIERS:
Micro-ASI's initial notebook computer design, as planned, will utilize the
Plug-N-Run ("PNR") module, a new product from Cell Computing, Inc (San Jose,
California). Cell Computing is the marketing company for PFU, Ltd. (Japan), a
joint venture of Panasonic and Fujitsu. The PNR was specifically designed for
embedded applications, and cost PFU, Ltd. about $10 Million to develop.
The Company believes the PNR is the best product of its kind available in the
industry today, both from an advanced packaging standpoint and a functionality
viewpoint. In order to achieve the small form factor for the PNR, designers at
PFU, Ltd. used high performance substrates and chip scale packaging techniques.
These technologies enabled PFU, Ltd. to incorporate the CPU, chipset, level 2
cache, SDRAM, video chip, video memory, P/S2 port, parallel port, serial port,
USB ports, floppy disk controller and an IDE controller (for a hard drive and
CD-ROM) in a form factor that is only 3 inches by 5 inches by 0.7 inches.
Management believes that Micro-ASI is the first company to employ the PNR in a
notebook computer. PNR incorporates a majority of the high-speed signals
(typical of all personal computer architectures) in notebook computer design.
This module has been successfully designed, integrated and fully tested by PFU,
Ltd., thereby Micro-ASI's path to market is expedited, along with a
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reduction of schedule and development cost risk. The use of the PNR also should
enable the Company to reduce the volume of space required to accommodate the
notebook computer's electronics, compared to conventional designs. This, in
turn, makes it possible to add more functionality to the notebook computer than
can normally be accommodated in conventional machines, without impacting the
overall dimensions associated with a top-of-the-line notebook computer.
Micro-ASI's use of the PNR technology distinguishes our notebook computer from
other existing designs, and facilitates planned iterations to the computer. Due
to the modular design of the PNR, upgrades are easily accomplished by simply
unplugging a currently installed PNR and replacing it with a higher speed PNR
when available from Cell Computing. Cell Computing has a roadmap for incremental
releases of the PNR. Micro-ASI will time the release of new variations of the
notebook computer to coincide with releases of new PNR modules.
The remaining items for the initial version of the notebook computer, such as a
PCMCIA controller, the battery and power supply, are commercial-off-the-shelf
components that are readily available. Subsequent design iterations of the
notebook computer will introduce advanced technology from Micro-ASI affiliates,
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which will include, but will not be limited to, packaging using flip chip and
MCM technologies.
(6) DEPENDENCE ON ONE OR A FEW CUSTOMERS:
The Company has no revenues or current customers.
(7) PATENTS, TRADEMARKS, LICENSES, CONCESSIONS AND ROYALTIES
Micro-ASI, through its agreement with ZAE, has exclusive license to use that
company's ECPulse(TM) battery technology.
(8) NEED FOR GOVERNMENT PRODUCT APPROVAL OF PRODUCTS OR SERVICES:
Micro-ASI does not require any governmental approval of principal products or
services.
(9) EFFECT OF EXISTING OR PROBABLE REGULATIONS ON THE BUSINESS:
Micro-ASI is not aware of any existing or probable regulations that would create
any adverse conditions for the Company.
(10) LAST TWO YEARS' RESEARCH AND DEVELOPMENT SPENT:
Micro-ASI has spent $302,355 for the twelve months ending December 31, 1998, and
$186,500 for the twelve months ending December 31, 1997.
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(11) COST AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS:
Micro-ASI is not aware of any issues of compliance with environmental laws that
would create any adverse conditions for the Company.
(12) NUMBER OF TOTAL AND FULL TIME EMPLOYEES:
Micro-ASI has eight full-time employees.
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GLOSSARY OF KEY TERMS AND PHRASES:
<TABLE>
<CAPTION>
TERM: MEANING IN CONTEXT:
----- -------------------
<S> <C>
Bumping wafers Process of attaching solder balls to a silicon die
Coplanarity A measurement of substrate warpage
Core enabling technologies Fundamental, essential technologies needed to produce a product
Design tools Automated equipment and software enabling electronic design
Die The silicon that gives a component its functionality
Fine etch spacing Circuit conductors on a Printed Wiring Board that are spaced close to each
other
Flip-Chip An attachment method in which solder bumps are used to electrically connect a
die to a substrate. A flip-chip die is mounted face down on a substrate
Form factor The mechanical envelope that a product fits within
Information Appliance Some collection of electronic memory, logic, etc. enabling a user to achieve
a given result or goal
Intellectual property Company proprietary technology, such as designs, etc.
Interconnect The medium that brings I/O to a die or component
Interposer Interfaces the die to the substrate (PCB)
Known Good Die Semiconductor die that have passed a series of tests prior to being packaged
Merchant semiconductor companies Direct provider of silicon-based products
Multichip Module (MCM) A device consisting of several die mounted to a common substrate and
interconnected
Substrate Material to which a semiconductor is mounted that often routes the
semiconductor's input/output
Substrate Pitch Spacing between pins of a semiconductor die or package
System-on-a-Chip Electronics for a complete product housed on a single piece of silicon
Vertically -integrated Complete turnkey from concept through high volume manufacturing
Wafer Manufactured silicon medium for interconnecting or bumping interfaces
Wire bond interconnect An attachment method in which thin gold wires are used to electrically
connect a die to a substrate. A wire bonded die is mounted face up on a
substrate
</TABLE>
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
RESULTS OF OPERATIONS:
The Company is a development stage company and to date has had no revenue. The
primary activities to date have been limited to designing a notebook computer to
showcase emerging technologies such as MCMs and flip-chip packaging, and forming
a strategic alliance with a major electronic products distributor. Accordingly,
Management does not consider the historical results of operations to be
representative of future results of operation of the Company. During the twelve
months ended December 31, 1998 the Company sold 768,800 shares of common stock
for $766,300. During the three months ended March 31, 1999 the Company sold
853,823 shares of common stock for $853,823. The proceeds from the sales of
these securities were used to further the development of the Company's notebook
computer and finance daily operations.
The following financial information shows results of operations for the twelve
months ended December 31, 1998 and 1997 and for the three months ended March 31,
1999 and 1998.
<TABLE>
<CAPTION>
Twelve Months Ended Three Months Ended
----------------------------- -------------------------
December 31, December 31, March 31, March 31,
Summary Income Statement 1998 1997 1999 1998
- ------------------------ ------------ ----------- -------- ---------
<S> <C> <C> <C> <C>
Interest Income $ 8,649 $ 2,153 $ 3,415 $ 2,265
Research and Development (302,355) (186,500) (116,812) (80,000)
General and Administrative (516,964) (179,959) (318,437) (59,620)
Interest Expense (7,407) (62,511) (1,750) (1,900)
---------- --------- --------- ---------
Net Loss $ (818,077) $(426,817) $(433,584) $(139,255)
========== ========= ========= =========
</TABLE>
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The increase in General and Administrative expenses for the twelve months ended
December 31, 1998 compared to the twelve months ended December 31, 1997 was
primarily attributable to increases in consulting fees, legal and professional
fees, and travel expenses.
The increase in General and Administrative expenses for the three months ended
March 31, 1999 compared to the three months ended March 31, 1998 was primarily
attributable to adding five full time employees and increases in rent,
consulting fees, legal and professional fees, and travel expenses.
<TABLE>
<CAPTION>
December 31, December 31, March 31, March 31,
ASSETS 1998 1997 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash $ 177,821 $ 246,545 $ 488,863 $ 224,690
Other Assets 5,427 13,385 63,049 13,385
----------- ----------- ----------- -----------
Total Assets $ 183,248 $ 259,930 $ 551,912 $ 238,075
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS
EQUITY (DEFICIT)
Accounts Payable $ 188,492 $ 193,305 $ 135,168 $ 208,305
Note & Interest Payable 87,812 107,904 89,561 109,804
Common Stock $.001 par value 16,344 15,575 17,198 15,676
Additional Capital 1,886,868 1,121,337 2,739,837 1,221,736
Deficit Accumulated during
development stage (1,996,268) (1,178,191) (2,429,852) (1,317,446)
----------- ----------- ----------- -----------
Total Liabilities & Equity $ 183,248 $ 259,930 $ 551,912 $ 238,075
=========== =========== =========== ===========
</TABLE>
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The increase in cash at March 31, 1999 reflects the additional sales of shares
of common stock. All other line items, excluding Deficit Accumulated, in the
development stage, which reflects the operating loss, have remained relatively
unchanged.
PLAN OF OPERATIONS:
The Company is currently planning to complete the design and have prototype
notebook computers available in the fourth quarter of 1999. An agreement is
anticipated with a major distributor of electronic products to sell the
Micro-ASI custom notebook computers.
LIQUIDITY AND CAPITAL RESOURCES:
In addition to the above stock sales, during the period April 1, 1999 through
July 31, 1999 the Company sold an additional 1,340,113 shares of Common Stock
for $1,340,113 and issued 17,400 shares for services rendered. Management
believes that the proceeds from the sale of this stock will provide the Company
with needed working capital for at least ten months. As of July 31, 1999, the
Company has no debt and the only fixed obligation is the office lease rental of
$8,330 per month. However, to execute its business plan, the Company intends to
sell additional shares of common stock in the fall of 1999 to raise up to
$15,000,000. The proceeds from the sale of these securities would provide for
the following:
(1) Acquiring a facility for a research and design center
Micro-ASI will begin construction of a 60,000 square
foot Technology Integration Deployment Center
("TIDC") late in the first
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quarter of year 2000. The TIDC will be a "Star
Wars-like" collection of capabilities, tools and
technologies, staffed with engineers and
technologists, The TIDC and its staff is a pivotal
element of the Company's strategy to absorb, improve
and create its intellectual property and innovative
core technologies, and then to provide Micro-ASI
customers with full, systems-level solutions
leveraging these technologies.
(2) Employing additional senior level management
(3) Employing both senior and junior level design engineers
(4) Providing equipment and software tools for design engineers
(5) Continued development of current product
(6) Initiating large scale redesign programs for high volume
products
(7) Working capital for daily operations
Should the Company not raise additional capital, operations will be materially
adversely affected. If less than $15,000,000 is raised, the Company would have
viable alternative courses of action. First, the Technology Integration
Deployment Center could be a leased facility for an amount substantially less
than a newly constructed facility. The difference in leasing versus construction
could be as much as $6,000,000. Secondly, the Company intends to hire personnel
to work on many projects simultaneously. An alternative, which would affect the
rate of growth of the Company's revenues, would be to reduce the number of
initial projects.
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IMPACT OF THE YEAR 2000
The Year 2000 Issue is primarily the result of computer programs being written
using two digits rather than four to define the applicable year. There are not
material Year 2000 compliance requirements confronting the Company since it has
no current operating business. The Company's current financial and
administrative systems are fully compliant. Accordingly, the Company has no
ongoing remediation plans with respect to its current systems.
The Company continues to assess the impact, if any, the Year 2000 Issue will
have on its key vendors and potential strategic partners before the inception of
a relationship. Currently, the Company is not aware of the existence of any
significant Year 2000 Issue with any its key vendors and potential strategic
partners. If the Company's assessment is not correct with respect to its key
vendors and potential strategic partners, the impact of the Year 2000 Issue may
be material.
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ITEM 3 DESCRIPTION OF PROPERTY:
The Company currently leases office space in Dallas, Texas in Park Central Plaza
1 at 12655 N. Central Expressway, Suite 1000, Dallas, Texas 75243. This lease,
which will expire in April 2000, is for 6,431 square feet at the rate of
$8,329.58 per month.
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ITEM 4 SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT:
The following tables set forth, as of July 31, 1999, the name and number of
shares of the Company's Common Stock, par value $0.001 per share, held of record
or beneficially by each person who held of record or was known by the Company to
own beneficially more than 5% of the 18,555,136 issued and outstanding shares of
the Company's Common Stock and the shareholdings of the officers and directors
of the Company.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Title of Class Name & Address Amount & Relationship % of Class
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Cecil E. Smith, Jr. 5,060,000 27.27%
Park Central Plaza I Chairman of the Board of
12655 N. Central Expwy. Directors
Suite 1000
Dallas, Texas 75243
- ------------------------------------------------------------------------------------------------------------
Common Joel E. Claybrook 1,860,000 10.02%
Park Central Plaza I President and
12655 N. Central Expwy. Chief Executive Officer
Suite 1000 Chief Financial Officer
Dallas, Texas 75243 Member, Board of Directors
- ------------------------------------------------------------------------------------------------------------
Common Robert J. Hoyt 1,800,000 9.70%
174 The Masters Circle Beneficial Owner
Costa Mesa, CA 92627
- ------------------------------------------------------------------------------------------------------------
Common Dr. Meng-Sheng Lin 860,000 4.63%
Park Central Plaza I Member, Board of
12655 N. Central Expwy. Directors
Suite 1000
Dallas, Texas 75243
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
All Directors & 7,780,000 41.92%
Officers as a
Group
(3 persons)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
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ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
Shown in the table below are the Directors, Officers and Significant Employees
of the Company. The Company will be dependent on the services of its management
and key personnel, particularly Cecil Smith and Joel Claybrook. Although the
Company does not anticipate losing any of its key executives, the loss of any
key member of management could have an adverse effect on the Company's
operations.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Significant
Name Position Director Officer Employee
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cecil E. Smith, Jr. Chairman of the Board of X
Directors
- -------------------------------------------------------------------------------------------------------------------
President,
Joel E. Claybrook Chief Executive Officer, X X X
Chief Financial Officer
Member, Board of Directors
- -------------------------------------------------------------------------------------------------------------------
Director of International X X
Dr. Meng-Sheng Lin Development
Member, Board of Directors
- -------------------------------------------------------------------------------------------------------------------
Jerry Kline Director of X
Technological Development
- -------------------------------------------------------------------------------------------------------------------
Scott Smith Director of X
Manufacturing Operations
- -------------------------------------------------------------------------------------------------------------------
Randy Williams Director of Sales and Marketing X
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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CECIL E. SMITH, JR., 61, serves as Chairman of the Board of Directors of the
Company. Since 1973, Mr. Smith has served as Chief Executive Officer of S&N
Corporation ("S&N"), a provider of strategic planning and business development
services to the electronics industry. Mr. Smith served as a director for
Microelectronic Packaging Systems, Inc. from 1991 to 1996, and as Executive Vice
President and Director of Alcoa Electronic Packaging, Inc. from December 1988 to
March 1992. From January 1980 through November 1988 he served as Chairman of the
Board of Directors of Digital Telecommunications Systems, Inc, a
telecommunications company co-founded by Mr. Smith, which was merged into
International Telecharge, Inc., and is currently trading on the American Stock
Exchange. From 1976 to 1980, he served as Chairman of the Board and Chief
Executive Officer (and co-founder) of Precision Micro Electronics, Inc., a
light-electronic assembly facility in Mexico. Mr. Smith began his career in the
electronics industry as a Development Engineer and then a Product Manager with
Texas Instruments where he worked on the cutting edge of silicon wafer
technology. Mr. Smith attended the University of Texas and performed advanced
studies with the American Management Association (Executive Development) in
Hemphill, New York and Bell Laboratories (Advanced Semiconductor Technology) in
Phillipsburg, Pennsylvania.
JOEL E. CLAYBROOK, 50, serves as a member of the Board of Directors, and as
President, Chief Executive Officer and Chief Financial Officer of the Company.
Mr. Claybrook has 25 years experience in finance, marketing, and administrative
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management including over 10 years experience in sales management with the high
tech and communications industries. Prior to joining Micro-ASI, Inc. in 1998,
Mr. Claybrook served four years as General Partner of Hawk Financial Company,
Ltd., an automobile finance company. From 1992 to 1993, he served as Chief
Financial Officer for Pinpoint Communications, Inc., a Texas based high-tech
wireless data communications company. Mr. Claybrook, a Certified Public
Accountant, has served as chief financial officer of several companies and
practiced as a financial consultant to the service, distribution, and
manufacturing industries. He received a Bachelor of Business Administration
degree in 1971 from The University of North Texas.
DR. MENG-SHENG LIN, 55, serves as a member of the Board of Directors and as
Director of International Development, and Chairman of the International
Advisory Council of the Company. Dr. Lin has more than 29 years teaching and
practicing medicine. In parallel, her family's strong relationships in China and
South East Asia enabled multiple business enterprises to prosper. Her expertise
is leveraging deep contacts within industry and government to forge strategic
alliances that create key sales and marketing channels. Dr. Lin earned her
Doctor of Medicine degree from Peking China Medical College in 1970. As well,
from 1982-83, Dr. Lin was a Postdoctoral Fellow with the World Health
Organization at the M.D. Anderson Hospital & Tumor Center, University of Texas
Health Science Center.
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JERRY KLINE, 42, has been with the Company since February 1999 and is
responsible for Technological Development. Prior to joining the Company, Mr.
Kline served 15 years with Raytheon Systems as Manager of Hardware Design for
major military weapons systems. He has managed several complex state-of-the-art
weapon systems design and integration projects. His most recent assignment at
Raytheon was a $30,000,000 upgrade to a key avionics package for the F-16
aircraft. Mr. Kline's proven technical and managerial skills will be extremely
beneficial to the Company. He is a 1980 graduate of Texas A&M University with a
Bachelor of Science in Electrical Engineering degree and is a member of the
Institute of Electrical and Electronics Engineers.
SCOTT SMITH, 39, has been with the Company since February 1999 and is
responsible for Manufacturing Operations. For the prior year, Mr. Smith was
General Manager of the Dallas based manufacturing operations of Xetel
Corporation, a large subcontract manufacturer of semiconductor products. Prior
to his Xetel experience, Mr. Smith served six years as Vice President of
Marketing and Sales for Outsource Solution, Inc. He has more than 16 years of
electronic contract manufacturing experience in both the United States and
Mexico. He has been involved in a number of successful start-up operations and
held various positions with Alcoa Corporation in the Electronic Packaging Group,
specializing in semiconductor packaging and manufacturing. Mr. Smith is a 1982
graduate of Baylor University with a Bachelor of Science degree.
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RANDY WILLIAMS, 45, since June, 1998 has served as Director of Sales and
Marketing for the Company. From 1989 until joining Micro-ASI, Mr. Williams was
founder and Chief Executive Officer of both Archway and Tracer Technologies, two
computer companies specializing in hardware integration and Unix software
development in the mass storage and imaging industries. Mr. Williams was
responsible for day-to-day operations, staffing, sales and marketing, vendor
relationships, commercial and government contract negotiations, and advertising.
From 1980 through 1989, Mr. Williams was employed with United Technologies and
Plessey Microsystems as a manager in sales and marketing. Mr. Williams attended
Virginia Commonwealth University, majoring in Business Administration.
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ITEM 6 EXECUTIVE COMPENSATION:
From inception to December 31, 1998, the Company had not paid any salaries to
its officers. Beginning January 1, 1999, the Company started paying Joel
Claybrook, CEO, an annual salary of $180,000.00. Cecil E. Smith, the Company's
Chairman of the Board receives $15,000.00 per month for consulting services and
$10,000.00 per month for travel expenses.
On June 16, 1999, Dr Meng-Sheng Lin, in connection with an $860,000 purchase of
Common Stock of the Company, was appointed to serve as a member of the Board of
Directors. Additionally, on July 1, 1999, Dr. Lin joined the Company in the
capacity of Director of International Development with an annual salary of
$180,000.
There are no compensatory plans or arrangements with respect to any person named
as a director, officer, promoter, or control person which would result in
payments to any such person because of his or her resignation, retirement, or
other termination of such person's employment with the Company or due to any
change of control.
26
<PAGE> 27
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Micro-ASI's promoters were as follows:
<TABLE>
<CAPTION>
Percentage Ownership
------------------------
Name Initially Currently
---- --------- ---------
<S> <C> <C>
Cecil E. Smith (1) 45.00% 27.27%
Joel E. Claybrook (1) 12.50% 10.02%
Timothy M. Da Silva (1)(2) 12.50% 3.23%
Robert J. Hoyt (3) 15.00% 9.70%
BLB Financial, Inc. (4) 10.00% 13.39%
</TABLE>
1. Cecil E. Smith, Joel E. Claybrook and Timothy M. Da Silva were the
initial officers and directors of the Company and they each received
ownership interests in the Company as a result of being founders. The
percentage ownership interest of Mr. Smith and Mr. Claybrook has
decreased due to dilution from sales of stock.
2. The percentage ownership interest of Mr. Da Silva has decreased
because he is no longer associated with the Company.
3. Robert J. Hoyt loaned the Company $500,000.00 which was converted to a
15% ownership interest in the Company. His percentage ownership
interest has decreased due to dilution from sales of stock.
4. BLB Financial received a 10% ownership interest in the Company to
provide future services of financial consulting and managing investor
relations. The collective percentage ownership interest of BLB,
including its affiliate Highland Funding and control individuals of
these entities, has increased due to additional stock being issued in
consideration of providing Micro-ASI with convertible note financing.
27
<PAGE> 28
ITEM 8 DESCRIPTION OF SECURITIES:
As of July 31, 1999, the Company currently has authorized 20,000,000 shares of
Common Stock, par value $0.001, of which 18,555,136 are issued and outstanding,
and 1,000,000 shares of preferred stock, par value $0.01, none of which are
outstanding.
The holders of the Common Stock are entitled to one vote per share on each
matter submitted to a vote at any meeting of shareholders. Shares of Common
Stock do not carry cumulative voting rights, and, therefore, a majority of the
shares of outstanding Common Stock will be able to elect the entire board of
directors. If they do so, minority shareholders will not be able to elect any
persons to the board of directors. The Company's bylaws provide that a majority
of the issued and outstanding shares of the Company shall constitute a quorum
for shareholders' meetings except with respect to certain matters for which a
greater percentage is required by statute or the bylaws.
Shareholders of the Company have no preemptive rights to acquire additional
shares of Common Stock or other securities. In the event of liquidation of the
Company, the shares of Common Stock are entitled to share equally in corporate
assets after satisfaction of all liabilities.
Holders of Common Stock are entitled to receive such dividends as the board of
directors may from time to time declare out of funds legally available for the
28
<PAGE> 29
payment of dividends. The Company seeks growth and expansion of its business
through the reinvestment of profits, if any, and does not anticipate that it
will pay dividends in the foreseeable future.
The Board of Directors has authority to issue the authorized but unissued shares
of Common Stock without action by the shareholders. The issuance of such shares
would reduce the percentage ownership held by persons purchasing stock in this
Offering and may dilute the book value of the then-existing shareholders.
29
<PAGE> 30
PART II.
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
There is no trading market for the Company's Common Stock at present. Management
has not undertaken any discussions, preliminary or otherwise, with any
prospective market maker concerning the participation of such market maker in
the market of the Company's securities. Management does not intend to initiate
any discussion until such time as the Company has become a fully reporting
company, on a voluntary basis, with the Securities and Exchange Commission and
has filed all required financial statements and disclosure documents. There is
no assurance that a trading market will ever develop or, if such market does in
fact develop, that it will continue.
30
<PAGE> 31
ITEM 2 LEGAL PROCEEDINGS
To the knowledge of the Company, neither the Company nor any of its officers and
directors are a party to any material legal proceeding or litigation and such
persons know of no legal proceeding or litigation contemplated or threatened as
of the date of this registration.
31
<PAGE> 32
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Change in Accountants:
On March 31, 1999, the Board of Directors approved a change in independent
accounting firms to be effective for its audit of the 1998 financial statements.
The Board believed it was in the best interest of the Company to engage a larger
accounting firm. The prior firm, Jones, Jensen and Company, was dismissed in
favor of Ernst & Young, LLP.
Micro-ASI had no disagreements with Jones, Jensen and Company on any accounting
or reporting issues. Jones, Jensen and Company performed the audit for 1997 and
issued an unqualified opinion.
32
<PAGE> 33
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES
From May 1997 to December 1997, the Company issued 3,575,000 shares of common
stock to Highland Funding Group, Inc., a Nevada Corporation, pursuant to Rule
504 of Regulation D of the Securities Act of 1933 upon Highland Funding Group,
Inc.'s conversions of eight convertible secured notes with an aggregate
principal amount of $577,500. In addition to the shares issued pursuant to the
conversions, the Company sold 425,000 shares of common stock in March and April
of 1998 for a total consideration of $422,500.
The Company received two orders in regard to the issuance of stock under Rule
504. First, on August 8, 1997, the Company received a Desist & Refrain Order to
stop selling securities until qualified in California or unless the shares are
exempt from qualification. The Company subsequently established its exemption in
California. Secondly, in March of 1998 the Virginia State Corporation Commission
notified the Company that an investigation had been instituted regarding stock
sold under Rule 504 to Virginia residents. The Virginia State Corporation
Commission concluded the Company had not violated any Virginia securities laws.
However, the Virginia State Corporation Commission
33
<PAGE> 34
did order Highland Funding Group, Inc. and their affiliate, BLB Financial, Inc.,
to offer the Virginia investors the option to rescind their stock purchases and
have their money returned. Highland Funding Group, Inc. and their affiliate, BLB
Financial, Inc. complied with this order to the satisfaction of the Virginia
State Corporation Commission.
From June 10, 1998, to July 31, 1999, the Company issued 17,400 shares for
services rendered and sold 2,537,736 shares of common stock for $2,537,736 in a
private offering pursuant to Rule 506 of Regulation D of the Securities Act of
1933. The Company only allowed accredited and/or sophisticated purchasers who
were either current shareholders of the Company or who had relationships with
the Company or its shareholders to purchase shares pursuant to the Rule 506
offering.
34
<PAGE> 35
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 10 of the Company's Restated Articles of Incorporation provides for
director liability indemnification. It states that the director shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of duty of care or other duty as a director except for certain acts
or omissions. (See Article 10 of the Company's Articles of Incorporation.) It
also provides for limitation of liability to the fullest extent permitted by the
Texas Business Corporation Act for the Company's directors.
Article 8 of the Company's bylaws provides for indemnification permitted by
Section G of Article 2.02-1 of the Texas Business Corporation Act or any
successor statute for its Officers and Directors. (See Article 8 of the
Company's Bylaws)
35
<PAGE> 36
Micro-ASI, Inc.
(a development stage company)
Financial Statements
CONTENTS
<TABLE>
<S> <C>
Reports of Independent Auditors ............................................................... F-1
Balance Sheets as of December 31, 1998 and March 31, 1999 (unaudited) ......................... F-3
Statements of Operations for the years ended December 31, 1997 and 1998, the period from
February 1, 1995 (inception) through December 31, 1998, the three month
periods ended March 31, 1998 and 1999 (unaudited) and the period from
February 1, 1995 (inception) through March 31, 1999
(unaudited) .......................................................................... F-4
Statements of Stockholders' Equity (Deficit) for the period February 1, 1995 (inception)
through December 31, 1998 and the three months ended March 31, 1999 (unaudited) ...... F-5
Statements of Cash Flows for the years ended December 31, 1997 and 1998, the period from
February 1, 1995 (inception) through December 31, 1998, the three month
periods ended March 31, 1998 and 1999 (unaudited) and the period from
February 1, 1995 (inception) through March 31, 1999 (unaudited) ...................... F-6
Notes to Financial Statements ................................................................. F-7
</TABLE>
<PAGE> 37
Report of Independent Auditors
The Board of Directors
Micro-ASI, Inc.
We have audited the accompanying balance sheet of Micro-ASI, Inc. (a development
stage company) as of December 31, 1998, and the related statements of
operations, stockholders' equity (deficit) and cash flows for the year then
ended, and for the period February 1, 1995 (inception) through December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The financial statements as of December 31,
1997, and for the period February 1, 1995 (inception) through December 31, 1997,
were audited by other auditors whose report dated September 21, 1998 expressed
an unqualified opinion on those statements. The financial statements for the
period February 1, 1995, (inception) through December 31, 1997, include a
deficit accumulated during the development stage of $1,178,191. Our opinion on
the statements of operations, stockholders' equity (deficit), and cash flows for
the period February 1, 1995, (inception) through December 31, 1998, insofar as
it relates to amounts for prior periods through December 31, 1997, is based
solely on the report of other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Micro-ASI, Inc. as of December 31, 1998, and the
results of its operations and its cash flows for the year then ended and the
period from February 1, 1995 (inception) through December 31, 1998, in
conformity with generally accepted accounting principles.
Dallas, Texas
June 23, 1999 /s/ ERNST & YOUNG LLP
F-1
<PAGE> 38
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Micro-ASI, Inc.
(A Development Stage Company)
Dallas, Texas
We have audited the statements of operations, stockholders' equity (deficit),
and cash flows of Micro-ASI, Inc. (a development stage company) for the year
ended December 31, 1997 and for the period from inception on February 1, 1995
to December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Micro-ASI,
Inc. (a development stage company) for the year ended December 31, 1997 and
from inception on February 1, 1995 to December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ JONES, JENSEN & COMPANY L.L.C.
Jones, Jensen & Company
Salt Lake City, Utah
September 21, 1998
F-2
<PAGE> 39
Micro-ASI, Inc.
(a development stage company)
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 177,821 $ 488,863
----------- -----------
Total current assets 177,821 488,863
Property and equipment, net 5,427 20,258
Other assets -- 42,791
=========== ===========
Total assets $ 183,248 $ 551,912
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 188,492 $ 135,168
Accrued interest 17,812 19,561
----------- -----------
Total current liabilities 206,304 154,729
Note payable 70,000 70,000
----------- -----------
Total liabilities 276,304 224,729
Stockholders' equity (deficit):
Preferred stock, $.01 par value:
Authorized shares - 1,000,000 -- --
Common stock, $.001 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 16,343,800 at December
31, 1998 and 17,197,623 at March 31, 1999 (unaudited) 16,344 17,198
Additional capital 1,886,868 2,739,837
Deficit accumulated during the development stage (1,996,268) (2,429,852)
----------- -----------
Total stockholders' equity (deficit) (93,056) 327,183
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 183,248 $ 551,912
=========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 40
Micro-ASI, Inc.
(a development stage company)
Statements of Operations
<TABLE>
<CAPTION>
YEARS ENDED CUMULATIVE FROM
----------------------------- FEBRUARY 1, 1995
DECEMBER 31, DECEMBER 31, (INCEPTION) THROUGH
1997 1998 DECEMBER 31, 1998
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
Expenses:
Research and development 186,500 302,355 532,615
General and administrative 179,959 516,964 1,376,132
------------ ------------ ------------
Total Expenses 366,459 819,319 1,908,747
------------ ------------ ------------
Operating loss (366,459) (819,319) (1,908,747)
Other income (expense):
Interest income 2,153 8,649 10,802
Interest expense (62,511) (7,407) (98,323)
------------ ------------ ------------
(60,358) 1,242 (87,521)
------------ ------------ ------------
Net loss $ (426,817) $ (818,077) $ (1,996,268)
============ ============ ============
Basic and diluted net loss per share $ (.03) $ (0.05)
============ ============
Weighted average shares outstanding 13,259,000 15,957,781
============ ============
<CAPTION>
CUMULATIVE FROM
THREE MONTHS THREE MONTHS FEBRUARY 1, 1995
ENDED MARCH 31, ENDED MARCH 31, (INCEPTION) THROUGH
1998 1999 MARCH 31, 1999
--------------- ------------ -------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
Revenues $ -- $ -- $ --
Expenses:
Research and development 80,000 116,812 649,427
General and administrative 59,620 318,437 1,694,569
------------ ------------ ------------
Total Expenses 139,620 435,249 2,343,996
------------ ------------ ------------
Operating loss (139,620) (435,249) (2,343,996)
Other income (expense):
Interest income 2,265 3,415 14,217
Interest expense (1,900) (1,750) (100,073)
------------ ------------ ------------
365 1,665 (85,856)
------------ ------------ ------------
Net loss $ (139,255) $ (433,584) $ (2,429,852)
============ ============ ============
Basic and diluted net loss per share $ (0.01) $ (0.03)
============ ============
Weighted average shares outstanding 15,597,500 16,818,494
============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE> 41
Micro-ASI, Inc.
(a development stage company)
Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
COMMON STOCK
ISSUANCE ------------------------ ADDITIONAL
PRICE SHARES AMOUNT CAPITAL
-------- ----------- --------- -------------
<S> <C> <C> <C> <C>
1995
Issuance for notes $ 0.001 9,000,000 $ 9,000 $ (7,500)
Net loss for year ended December 31, 1995 - - -
----------- --------- -------------
Balance at December 31, 1995 9,000,000 9,000 (7,500)
1996
Issuance for forgiveness of debt 0.167 3,000,000 3,000 497,000
Contribution of interest payable to additional
capital - - 28,405
Net loss for year ended December 31, 1996 - - -
----------- --------- -------------
Balance at December 31, 1996 12,000,000 12,000 517,905
1997
Sale of common stock 0.100 2,775,000 2,775 274,725
Sale of common stock 0.333 600,000 600 199,400
Sale of common stock 0.500 200,000 200 99,800
Contributed capital - - 29,507
Net loss for year ended December 31, 1997 - - -
----------- --------- -------------
Balance at December 31, 1997 15,575,000 15,575 1,121,337
1998
Sale of common stock .993 324,500 325 321,675
Sale of common stock 1.000 444,300 444 443,856
Net loss for year ended December 31, 1998 - - -
----------- --------- -------------
Balance at December 31, 1998 16,343,800 16,344 1,886,868
1999
Sale of common stock (unaudited) 1.000 853,823 854 852,969
Net loss for quarter ended March 31, 1999
(unaudited) - - -
----------- --------- -------------
Balance at March 31, 1999 (unaudited) 17,197,623 $ 17,198 $ 2,739,837
=========== ========= =============
<CAPTION>
DEFICIT ACCUMULATED
DURING THE DEVELOPMENT TOTAL STOCKHOLDERS'
STAGE EQUITY (DEFICIT)
---------------------- -------------------
<S> <C> <C>
1995
Issuance for notes $ - $ 1,500
Net loss for year ended December 31, 1995 (610,757) (610,757)
-------------- --------------
Balance at December 31, 1995 (610,757) (609,257)
1996
Issuance for forgiveness of debt - 500,000
Contribution of interest payable to additional
capital - 28,405
Net loss for year ended December 31, 1996 (140,617) (140,617)
-------------- --------------
Balance at December 31, 1996 (751,374) (221,469)
1997
Sale of common stock - 277,500
Sale of common stock - 200,000
Sale of common stock - 100,000
Contributed capital - 29,507
Net loss for year ended December 31, 1997 (426,817) (426,817)
-------------- --------------
Balance at December 31, 1997 (1,178,191) (41,279)
1998
Sale of common stock - 322,000
Sale of common stock - 444,300
Net loss for year ended December 31, 1998 (818,077) (818,077)
-------------- --------------
Balance at December 31, 1998 (1,996,268) (93,056)
1999
Sale of common stock (unaudited) - 853,823
Net loss for quarter ended March 31, 1999
(unaudited) (433,584) (433,584)
-------------- --------------
Balance at March 31, 1999 (unaudited) $ (2,429,852) $ 327,183
============== ==============
</TABLE>
See accompanying notes.
F-5
<PAGE> 42
Micro-ASI, Inc.
(a development stage company)
Statements of Cash Flows
<TABLE>
<CAPTION>
YEARS ENDED CUMULATIVE FROM
---------------------------- FEBRUARY 1, 1995
DECEMBER 31, DECEMBER 31, (INCEPTION) THROUGH
1997 1998 DECEMBER 31, 1998
----------- ------------ ------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (426,817) $ (818,077) $(1,996,268)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation 4,908 14,471 25,626
Common stock issued to incorporators -- -- 1,500
Changes in operating assets and liabilities:
Accounts payable (46,457) (4,813) 188,492
Accrued interest 12,904 4,908 17,812
Other assets -- -- --
----------- ----------- -----------
Net cash used in operating activities (455,462) (803,511) (1,762,838)
INVESTING ACTIVITIES
Capital expenditures -- (6,513) (31,053)
----------- ----------- -----------
Net cash used in investing activities -- (6,513) (31,053)
FINANCING ACTIVITIES
Proceeds from issuance of notes -- -- 595,000
Sales of common stock 577,500 766,300 1,343,800
Contributed capital 29,507 -- 57,912
Principal payments on notes 95,000 (25,000) (25,000)
----------- ----------- -----------
Net cash provided by financing activities 702,007 741,300 1,971,712
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 246,545 (68,724) 177,821
Cash and cash equivalents at beginning of period -- 246,545 --
----------- ----------- -----------
Cash and cash equivalents at end of period $ 246,545 $ 177,821 $ 177,821
=========== =========== ===========
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 47,492 $ 7,407 $ 54,899
=========== =========== ===========
<CAPTION>
CUMULATIVE FROM
THREE MONTHS THREE MONTHS FEBRUARY 1, 1995
ENDED MARCH 31, ENDED MARCH 31, (INCEPTION) THROUGH
1998 1999 MARCH 31, 1999
--------------- --------------- ------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (139,255) $ (433,584) $(2,429,852)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation -- 2,500 28,126
Common stock issued to incorporators -- -- 1,500
Changes in operating assets and liabilities:
Accounts payable 15,000 (53,324) 135,168
Accrued interest 1,900 1,749 19,561
Other assets -- (42,791) (42,791)
----------- ----------- -----------
Net cash used in operating activities (122,355) (525,450) (2,288,288)
INVESTING ACTIVITIES
Capital expenditures -- (17,331) (48,384)
----------- ----------- -----------
Net cash used in investing activities -- (17,331) (48,384)
FINANCING ACTIVITIES
Proceeds from issuance of notes -- -- 595,000
Sales of common stock 100,500 853,823 2,197,623
Contributed capital -- -- 57,912
Principal payments on notes -- -- (25,000)
----------- ----------- -----------
Net cash provided by financing activities 100,500 853,823 2,825,535
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (21,855) 311,042 488,863
Cash and cash equivalents at beginning of period 246,545 177,821 --
----------- ----------- -----------
Cash and cash equivalents at end of period $ 224,690 $ 488,863 $ 488,863
=========== =========== ===========
SUPPLEMENTAL INFORMATION
Cash paid for interest $ -- $ 1,750 $ 56,649
=========== =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 43
Micro-ASI, Inc.
(a development stage company)
Notes to Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTS POLICIES
ORGANIZATION
Micro-ASI, Inc. (the Company) is a development stage company incorporated on
February 1, 1995, for the purpose of designing, developing, manufacturing and
marketing advanced-technology packaging systems called multi-chip modules
("MCMs"). The Company's intended initial application of this technology is in
notebook computers.
DEVELOPMENT STAGE COMPANY
The Company will continue to be a development stage company as defined in
Statement of Financial Accounting Standards No. 7, "Accounting and Reporting by
Development Stage Enterprises," until it generates significant revenue from its
MCMs. Successful development of a development stage company, particularly
advanced technology related companies, is costly and highly competitive. The
Company's growth and ultimate success depends on the timely development and
market acceptance of new products and its ability to raise needed capital. A
development stage company involves risks and uncertainties, and there are no
assurances that the Company will be successful in its efforts.
INTERIM FINANCIAL STATEMENTS
The unaudited financial statements as of March 31, 1999 and for the three months
in the periods ended March 31, 1999 and 1998 reflect all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of the
financial position and results of operations for such periods. The results for
the three months in the period ended March 31, 1999 are not necessarily
indicative of the results to be expected for the full year.
CONCENTRATION OF CREDIT RISK
At December 31, 1998, the Company's cash equivalents consisted principally of
money market accounts.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated using the
straight-line method based on the estimated useful lives of the related assets.
F-7
<PAGE> 44
Micro-ASI, Inc.
(a development stage company)
Notes to Financial Statements (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTS POLICIES (CONTINUED)
INCOME TAXES
Deferred income taxes are determined using the liability method, which gives
consideration to the future tax consequences associated with differences between
the financial accounting and tax basis of assets and liabilities. This method
also gives immediate effect to changes in income tax laws.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
NET LOSS PER SHARE
Basic and diluted net loss per share is computed using the Company's net loss
for each period presented divided by the average common shares outstanding. The
Company had no other equity instruments outstanding during any of the periods
presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting Standards Board
Statement No. 130 (Statement 130), Reporting Comprehensive Income. Statement 130
establishes new rules for the adopting and display of comprehensive income and
its components; however, the adoption of this Statement has no impact on the
Company's results of operations or stockholders' equity as the Company has no
other elements of other comprehensive income.
F-8
<PAGE> 45
Micro-ASI, Inc.
(a development stage company)
Notes to Financial Statements (continued)
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL DECEMBER 31, MARCH 31,
LIFE 1998 1999
--------- ------------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment 3 $ 6,513 $ 7,215
Furniture and fixtures 5 -- 16,629
Less accumulated depreciation (1,086) (3,586)
------------- ----------
$ 5,427 $ 20,258
============= ==========
</TABLE>
3. NOTE PAYABLE
The $70,000 note payable to an original promoter of the Company at December 31,
1998, is due on demand with interest accruing on the unpaid balance at a rate of
10%, compounding semi-annually and payable annually in arrears. In April 1999,
this note payable was exchanged for 100,000 shares of the Company's common
stock.
4. INCOME TAXES
At December 31, 1998, the Company's net deferred tax assets of approximately
$675,000 relate primarily from net operating loss carryforwards for federal
income tax purposes which begin expiring in 2011. The tax benefit of the net
operating loss carryforwards is fully offset by a valuation allowance due to
uncertainty related to future taxable income. Accordingly, no tax benefit has
been recognized in the accompanying financial statements. No other significant
reconciling items exist between the actual effective tax and the expected
effective tax rate for 1997 and 1998.
5. RELATED PARTY TRANSACTIONS
The Company has a consulting agreement with a firm owned by the Company's
Chairman for the design, development and marketing of MCMs. Fees and expenses
paid totaled $135,000, $330,000, $75,000, and $75,000 for the years ended
December 31, 1997 and 1998 and for the three months in the period ended March
31, 1999 and 1998 (unaudited), respectively.
F-9
<PAGE> 46
Micro-ASI, Inc.
(a development stage company)
Notes to Financial Statements (continued)
5. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company had a consulting agreement with a firm owned by the Company's
President and Chief Executive Officer for administrative and financial
management. Fees and expenses paid totaled $40,000, $95,000, and $15,000 for the
years ended December 31, 1997 and 1998 and for the three months in the period
ended March 31, 1998 (unaudited), respectively. This agreement ended in December
1998 when the President joined the Company full time.
The Company paid approximately $10,000, $100,000, $152,000, and $5,000 to other
related parties for development related activities and expense reimbursements in
1997 and 1998 and for the three months in the period ended March 31, 1998 and
1999 (unaudited), respectively.
6. YEAR 2000 (UNAUDITED)
The Company's assessment of its year 2000 problem indicates that its exposure is
very limited currently as the Company has no operations. Computer hardware and
software used in the business are recently acquired and are believed to be year
2000 compliant. As the Company continues to explore product development
arrangements (both internally and with third parties), management will use its
best judgment to assess the year 2000 implications, if any, these arrangements
present. The Company believes the year 2000 issue will not pose significant
operational problems and its costs, if any, will be nominal.
7. SUBSEQUENT EVENTS
OPERATING LEASES
In May 1999, the Company entered into a non-cancelable operating lease for
office space with future minimum rental payments of $66,637 for 1999 and $33,318
for 2000.
COMMON STOCK
In April 1999, the Company and one of its original promoters finalized an
agreement whereby 1,000,000 shares of stock previously issued to the promoter,
on the condition that he join the Company as a full time employee, were returned
as it was agreed that the promoter will not join the Company as a full-time
employee.
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<PAGE> 47
Micro-ASI, Inc.
(a development stage company)
Notes to Financial Statements (continued)
7. SUBSEQUENT EVENTS (CONTINUED)
In June 1999, the Company granted 150,000 shares to its outside investment
banking firm for future services covering a six month period ending December
1999. The fair value of these shares, $150,000 will be expensed over the
remaining service period. The fair value of these shares will be remeasured at
each reporting date and any increase or decrease in the fair value of the shares
will be adjusted through a cumulative effect adjustment. Additionally, the
Company granted 600,000 shares to this firm for services performed in connection
with 1999 capital raising activities.
On June 23, 1999, the Company raised approximately $860,000 through the sale of
its common stock at $1.00 per share.
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<PAGE> 48
PART III
ITEM 1 INDEX TO EXHIBITS:
The following documents are filed as exhibits to this Form 10SB:
(2) Charter and Bylaws
Exhibit 2.1 Charter
Exhibit 2.2 Bylaws
(6) Material Contracts:
Exhibit 6.1 Consulting Agreement with S&N Corporation
Exhibit 6.2 Consulting Agreement with Kingdom
Capital, Inc
Exhibit 27.1 Financial Data Schedule for the Quarter
Ended March 31, 1999
Exhibit 27.2 Financial Data Schedules for (a) the
Period February 1, 1995 (Inception) through March 31,
1999, (b) the Period February 1, 1995 (Inception)
through December 31, 1998, (c) the Year Ended
December 31, 1998, (d) the Quarter Ended March 31,
1998, and (e) the Year Ended December 31, 1997
37
<PAGE> 49
ITEM 2 DESCRIPTION OF EXHIBITS:
The Exhibits listed in Item 1 of this Part III are filed herewith.
38
<PAGE> 50
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the issuer has duly caused this document to be signed on its behalf by the
undersigned, thereunto duly authorized.
Issuer:
Micro-ASI, Incorporated
Date:
August 12, 1999 /s/ JOEL E. CLAYBROOK
-----------------------------------------
By: Joel E. Claybrook, President
39
<PAGE> 51
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
2.1 Charter
2.2 Bylaws
6.1 Consulting Agreement with S&N Corporation
6.2 Consulting Agreement with Kingdom Capital, Inc
27.1 Financial Data Schedule for the Quarter Ended March 31,
1999
27.2 Financial Data Schedules for (a) the Period February 1,
1995 (Inception) through March 31, 1999, (b) the Period
February 1, 1995 (Inception) through December 31, 1998,
(c) the Year Ended December 31, 1998, (d) the Quarter
Ended March 31, 1998, and (e) the Year Ended December 31,
1997
</TABLE>
<PAGE> 1
EXHIBIT 2.1
RESTATED ARTICLES OF INCORPORATION
OF
MICRO-ASI, INC.
Micro-Asi, Inc., in accord with Article 4.07 of the Texas Business
Corporation Act, hereby adopts Restated Articles of Incorporation which
accurately copy the Articles of Incorporation that are in effect to date and as
further amended by such Restated Articles of Incorporation as hereinafter set
forth and which contain no other change in any provision thereof.
ARTICLE I
Each such amendment made by these Restated Articles of Incorporation has
been effected in conformity with the provisions of the Texas Business
Corporation Act and such Restated Articles of Incorporation and each such
amendment and addition made by the Restated Articles were duly adopted by the
shareholders on the 24th day of January, 1997. The number of shares outstanding
was 200,000; the number of shares entitled to vote on the Restated Articles was
200,000; the number of shares voted for such Restated Articles was 160,000; and
the number of shares voted against such Restated Articles of Incorporation was
0. Accordingly, the Articles of Incorporation filed on February 1, 1995 are
hereby superseded by the following Restated Articles of Incorporation.
ARTICLE II
The following Articles of Incorporation remain unchanged. Pursuant to art.
4.07(C)(2), the name of the incorporator, formerly Article VIII, has been
deleted.
(a) Formerly Article I, the name of the corporation is MICRO-ASI, Inc.
(b) Formerly Articles II and III, the corporation's duration is perpetual
and it is organized to engage in any or all lawful business for which
corporations may be incorporated under the Texas Business Corporation Act.
(c) Formerly Article V, the corporation will not commence business until it
has received for the issuance of its shares consideration of the value of ONE
THOUSAND DOLLARS ($1,000.00), consisting of money, labor done or property
actually received,
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<PAGE> 2
(d) Formerly Article VII, the number of directors constituting the initial
board of directors is one (1) and the name and address of the person who is to
serve as director until the first annual meeting of the shareholders, or until
his successor is elected and qualified is Cecil E. Smith, Jr., of 2350 Lakeside
Boulevard, Suite 850, Richardson, Texas 75082.
ARTICLE III
(a) The former Article IV, which stated that the number of shares which the
corporation has the authority to issue is ten million shares having a par value
of one cent ($.001) each has been altered in three different respects. First,
the total number of shares of capital stock which the Corporation shall have
authority to issue is changed from ten million (10,000,000) to twenty-one
million (21,000,000) shares. Second, the Corporation shall be authorized to
issue two different Classes of stock. Twenty million (20,000,000) shares shall
be of a class designated as Common Stock. One million shares shall be of a class
designated as Preferred Stock. Third, the Par Value of the twenty million shares
of Common Stock shall be changed from $0.01 to $0.001 per share; and one million
(1,000,000) shares of Preferred Stock shall have a part value of $0.01 per
share. There are additional provisions affecting the fixing and determining of
preferences, limitations and relative rights for these shares. These matters are
fully set forth in Article IV.
ARTICLE IV
CAPITAL SHARES
Article III (a) above is hereby incorporated by reference into Article IV
and Article III (a) is further supplemented by Article IV in its entirety as
follows. Except as may otherwise be provided by the Board of Directors, no
holder of any shares of stock of this Corporation shall have any preemptive
right to purchase, subscribe for, or otherwise acquire any shares of stock of
the Corporation of any class now or hereafter authorized, or any securities
exchangeable for or convertible
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<PAGE> 3
into such shares, or any warrants or other instruments evidencing rights or
options to subscribe for, purchase or otherwise acquire such shares.
In accord with art. 2.13 of the Texas Business Corporation Act and pursuant
to Article IV of these Articles of Incorporation, authority is expressly vested
in the Board of Directors of the Corporation to establish series of unissued
shares of any class by fixing and determining the designations, preferences,
limitations, and relative rights, including voting rights, of the shares of any
series so established to the same extent that such designations, preferences,
limitations and relative rights could be stated if fully set forth in the
articles of incorporation.
In accord with art. 2.13 (C) of the Texas Business Corporation Act and
pursuant to Article IV of these Articles of Incorporation, authority is
expressly vested in the Board of Directors of the Corporation to eliminate from
the articles of incorporation any series of capital stock referenced therein,
provided that no shares of capital stock were issued or because no issued shares
of such series remain outstanding. To eliminate such series, the Board of
Directors shall adopt a resolution to this effect and all eliminated series
shall resume the status of authorized but unissued shares of the eliminated
class.
The description of the Common Stock and the Preferred Stock, and the
relative rights, preferences and limitations thereof, or the method of fixing
and establishing the same are hereinafter set forth in this Article IV:
SECTION A
PREFERRED STOCK
(a) The Board of Directors shall be authorized, without action by the
stockholders to issue such Preferred Stock, from time to time, in one or more
series, and each series shall be known and designated by such designations as
may be stated and expressed in a resolution or resolutions adopted by the Board
of Directors of the Corporation and as shall have been set forth in a
certificate made, executed, acknowledged, filed and recorded in the manner
required by the laws of the State of Texas in order to make the same effective.
Each series shall consist of such number of shares as shall be stated and
expressed in such resolution or resolutions providing for the issue of Preferred
Stock of such series together with such additional number of shares as the Board
of Directors by resolution or resolutions may from time to time determine to
issue as a part of such series. All
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<PAGE> 4
shares of any one series of such Preferred Stock shall be alike in every
particular except that shares issued at different times may accumulate dividends
from different dates. The Board of Directors shall have power and authority to
state and determine in the resolution or resolutions providing for the issue of
each series of Preferred Stock the number of shares of each such series
authorized to be issued, the voting powers (if any) and the designations,
preferences and relative, participating, optional or other rights appertaining
to each such series, and the qualifications, limitations or restrictions thereof
(including, but not by way of limitation, full power and authority to determine
as to the Preferred Stock of each such series, the rate or rates of dividends
payable thereon, the times of payment of such dividends, the prices and manner
upon which the same may be redeemed, the amount or amounts payable thereon in
the event of liquidation, dissolution or winding up of the Corporation or in the
event of any merger or consolidation of or sale of assets by the Corporation,
the rights (if any) to convert the same into, and/or to purchase, stock of any
other class or series, the terms of any sinking fund or redemption or purchase
account (if any) to be provided for shares of such series of the Preferred
Stock, restrictions on ownership and transfer to preserve tax benefits, and the
voting powers (if any) of the holders of any series of Preferred Stock generally
or with respect to any particular matter, which may be less than or equal to or
greater, than one-vote per share, and which may, without limiting the generality
of the foregoing, include the right, voting as a series by itself or together
with the holders of any other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the Corporation
generally or under such specific circumstances and on such conditions, as shall
be provided in the resolution or resolutions of the Board of Directors adopted
pursuant hereto, including, without limitation, in the event there shall have
been a default in the payment of dividends on or redemption of any one or more
series of Preferred Stock.
In accord with art. 2.13(B) of the Texas Business Corporation Act, the
Board of Directors is expressly vested with authority to decrease the number of
shares of any series of Preferred Stock (but not below the number outstanding)
by providing that any unissued shares previously assigned to such series shall
no longer constitute part thereof and may assign such unissued shares to an
existing or newly created series. Conversely, and in accord with art. 2.13(B) of
the Texas Business Corporation Act, the Board of Directors is expressly vested
with authority from time to time to increase the number of shares of any series
of Preferred Stock.
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<PAGE> 5
(b) CONVERTIBLE PREFERRED STOCK shall have the following preferences,
limitations and relative rights.
1. Certain Definitions.
"Board of Directors" shall mean the Board of Directors of the Corporation
and, to the extent permitted by law, any committee of the Board of Directors
authorized to exercise the powers of the Board of Directors.
"Preferred Stock" shall mean the one million (1,000,000) authorized shares
of the Convertible Preferred Stock, par value $0.01 per share, of the
Corporation.
"Common Stock" shall mean the twenty million (20,000,000) authorized shares
of Common Stock, $0.001 par value per share, and all shares hereafter authorized
of any additional class (or classes) of common stock of the Corporation.
"Conversion Rate" shall have the meaning set forth in paragraph 6(b).
"Distribution on Common Stock" shall have the meaning set forth in
paragraph 2 of this section.
"Dividend Payment Date" shall refer to the date fixed by the Board of
Directors for the payment of a dividend.
"Event of Noncompliance" shall mean any of the following events: (i)
Failure of the Corporation to pay the full amount of dividends accrued if
cumulative accrued dividends on the Preferred Stock, in the aggregate, are equal
to $1.00 per share in arrears (not including $.20 per annum of the dividend
which accrues but only increases the Liquidation Price); or (ii) The Corporation
shall not have made, in full, or set apart the consideration sufficient for the
payment thereof and no other purpose, any redemption payment with respect to the
Preferred Stock which it is obligated to make, whether or not such payment is
legally permissible, within 30 days of the date specified for such redemption.
"Issue Date" shall mean the date on which shares of the Preferred Stock are
issued to any holder thereof.
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<PAGE> 6
"Junior Stock" shall mean Common Stock and any other class or series of
stock of the Corporation authorized after the Issue Date not entitled to receive
any assets upon liquidation, dissolution or winding up of affairs of the
Corporation until the Preferred Stock and any Parity stock shall have received
the entire amount to which such stock is entitled upon such liquidation,
dissolution or winding up of affairs.
"Liquidation Price" measured per share of the Preferred Stock as of any
particular date shall mean the sum of (i) $10.00 plus (ii) all dividends accrued
on that share through the Dividend Payment Date immediately preceding the date
on which the Liquidation Price is being determined to the extent not paid in
full on or before such Dividend Payment Date, plus (iii) (A) for purposes of
determining amount payable pursuant to paragraphs 3 and 4 of this Section, all
unpaid dividends accrued on the sum of the amounts specified in Clauses (i) and
(ii) above, to the date as of which the Liquidation Price is being paid, and (B)
for purposes of determining the amount of dividends to be paid on a date other
than a Dividend Payment Date as contemplated by paragraph 2(c) of this Section,
all unpaid dividends accrued on the amounts specified in Clause (ii) above, to
the date as of which such dividends are being paid.
"Parity Stock" shall mean any class or series of stock of the Corporation
entitled to receive assets upon liquidation, dissolution or winding up of the
affairs of the Corporation on a parity with the Liquidation Price of the
Preferred Stock.
"Senior Stock" shall mean any class or series of stock of the Corporation
authorized after the Issue Date ranking senior to the Preferred Stock and any
Parity Stock in respect of the right to participate in any distribution upon
liquidation, dissolution or winding up of the affairs of the Corporation.
2. Dividends and Other Distributions.
(a) Subject to the prior preferences and other rights of any Senior Stock,
the holders of the Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of funds legally available therefor,
preferential dividends which shall accrue as provided herein. Dividends on each
share of Preferred Stock will accrue cumulatively on a daily basis at the rate
of eight percent (8%) per annum. of the Liquidation Price of such share from
and including the Issue Date applicable to such share to and including the date
on which the
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<PAGE> 7
redemption price of such share is paid whether or not such dividends have been
declared and whether or not there are any funds of the Corporation legally
available for the payment of dividends. Accrued dividends on each share of the
Preferred Stock shall be paid quarterly on each Dividend Payment Date,
commencing on the second Dividend Payment Date after the Issue Date applicable
to such share, or the immediately preceding business day, if any such date is a
Saturday, Sunday or legal holiday in the State of Texas, to the holders of
record of the applicable shares of Preferred Stock as of the close of business
On the record date. For purposes of determining the amount of dividends
"accrued" as of the second Dividend Payment Date and as of any date which is not
a Dividend Payment Date, such amount shall be calculated on the basis of the
foregoing rates per annum for actual days elapsed from and including the Issue
Date (in the case of the second Dividend Payment Date) or the last preceding
Dividend Payment Date (in the case of any other date) to and including the date
as of which such determination is to be made, based on a 360 day year.
(b) Dividends shall be payable in cash; provided, however, that if on any
Dividend Payment Date, the Corporation, pursuant to applicable law or the terms
of any Debt Instrument, shall be prohibited or restricted from paying in cash
the full dividends to which holders of the Preferred Stock and any Parity Stock
shall be entitled, the amount of cash available pursuant to applicable law and
which is not restricted by the terms of any Debt Instrument shall be distributed
among the holders of the Preferred Stock and such Parity Stock ratably in
proportion to the full amount to which they would otherwise be entitled. Two
percent (2%) of the dividend shall accrue but not be currently paid and shall be
added to the Liquidation Price. The per share amounts to be distributed pursuant
to this Section 2(b) shall, in each case, be adjusted by rounding down to the
nearest whole cent. Such adjusted amount is hereinafter referred to as the "Cash
Dividend Payment."
(c) To the extent not paid in full on each Dividend Payment Date in the
manner provided in this paragraph 2, all dividends which have accrued on each
share of Preferred Stock during the dividend period ending on such Dividend
Payment Date will be added to the Liquidation Price of such share and will
remain a part thereof until such dividends, together with all dividends which
have accrued to the date of such payment with respect to that portion of the
Liquidation Price which consists of such accrued unpaid dividends, are paid in
full. Such accrued unpaid dividends, together with all dividends accrued
thereon, may be declared and paid at any time, without reference to any regular
Dividend Payment Date, to
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<PAGE> 8
holders of record as of the close of business on such date, not more than fifty
(50) days nor less than ten (10) days preceding the payment date thereof, as may
be fixed by the Board of Directors (the "Special Record Date"). If declared,
such accrued unpaid dividends shall be paid in cash.
(d) Notice of such Special Record Date shall be mailed, in the manner
provided in paragraph 4(c) of this section, to the holders of record of the
Preferred Stock not less than fifteen (15) days prior thereto.
(e) So long as any shares of Preferred Stock shall be outstanding, the
Corporation shall not declare or pay on any Junior Stock any dividend
whatsoever, whether in cash, property or otherwise, nor shall the Corporation
make any distribution on any Junior Stock, or set aside any assets for any such
purposes, nor shall any Junior Stock be purchased, redeemed or otherwise
acquired by the Corporation or any of its subsidiaries, nor shall any monies be
paid, set aside for payment or made available for a sinking fund for the
purchase or redemption of any Junior Stock, unless and until (i) all dividends
to which the holders of the Preferred Stock and any Parity Stock shall have been
entitled for all current and all previous Dividend Periods shall have been paid
or declared and the consideration sufficient for the payment thereof in full set
apart so as to be available for the payment thereof and for no other purpose
(whether or not such payment is then legally permissible) and (ii) the
Corporation shall have made, in full, or set apart the consideration sufficient
for the payment thereof, and for no other purpose, all redemption payments with
respect to the Preferred Stock which it is then obligated to make (whether or
not such payment is then legally permissible); provided, however, that nothing
contained in this paragraph 2(d) shall prevent the payment of dividends solely
in Junior Stock or the repurchase, redemption or other acquisition of Junior
Stock solely through the issuance of Junior Stock (together with a cash
adjustment for fractional shares if any).
3. Distributions Upon Liquidation, Dissolution or Winding Up.
Subject to the prior payment in full of the preferential amounts to which
any Senior Stock is entitled, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the holders of
shares of the Preferred Stock shall be entitled to receive from the assets of
the Corporation available for distribution to the shareholders an amount in cash
or property at its fair market value, as determined by the Board of Directors in
good faith, or a
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<PAGE> 9
combination thereof, per share equal to the Liquidation Price, before any
payment or distribution shall be made to the holders of any Junior Stock of the
Corporation, which payment shall be made pari passu to any such payment made to
the holders, if any, of any Parity Stock. If, upon distribution of the
Corporation's assets in liquidation, dissolution or winding up, the assets of
the Corporation to be distributed among the holders of Preferred Stock and to
all holders of any Parity Stock shall be insufficient to permit payment in full
to such holders of the preferential amounts to which they are entitled, then the
entire assets of the Corporation to be distributed to holders of the Preferred
Stock and such Parity Stock shall be distributed pro rata to such holders based
upon the aggregate of the full preferential amounts to which the shares of
Preferred Stock and such Parity Stock would otherwise respectively be entitled.
Neither the consolidation or merger of the Corporation with or into any other
corporation or corporations nor the sale, transfer, or lease of all or
substantially all the assets of the Corporation shall itself be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this paragraph 3. Notice of the liquidation, dissolution or winding up of the
Corporation shall be mailed, in the manner provided in paragraph 4(c) of this
Section, to the holders of the Preferred Stock less than twenty (20) days prior
to the date on which such liquidation, dissolution and winding up is expected to
take place or become effective.
4. Redemption.
(a) Subject to the rights of any Senior Stock and the provisions of
paragraph 4(g) of this Section, the shares of Preferred Stock may be redeemed at
the option of the Company by action of the Board of Directors in whole or from
time to time in part, at any time after December 31, 1997, at the Redemption
Price per share. If less than all outstanding shares of Preferred Stock are to
be redeemed, the shares of Preferred Stock to be redeemed shall be chosen by lot
or pro rata in such manner as the Board of Directors may determine.
(b) Notice of the redemption shall be mailed, first class, postage prepaid,
not less than fifteen (15) days and no more than sixty (60) days prior to the
Redemption Date, to the holders of record of the shares of Preferred Stock to be
redeemed, at their respective addresses as the same appear on the books of the
Corporation or supplied by them in writing to the Corporation for the purpose of
such notice; but no failure to mail such notice of any defect therein, or in the
mailing thereof shall affect the validity of the proceedings for the redemption
of
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<PAGE> 10
any shares of the Preferred Stock. In addition to any information required by
law or by the applicable rules of any national stock exchange on which the
Preferred Stock may be listed or admitted to trading, such notice shall set
forth the Redemption Price, the Redemption Date, the number of shares to be
redeemed and the place at which the shares called for redemption will, upon
presentation and surrender of the stock certificates evidencing such shares, be
redeemed, and shall state the name and address of any redemption agent selected
by the Corporation in accordance with paragraph 4(d) of this Section. In case
fewer than the total number of shares of Preferred Stock represented by any
certificates are redeemed, a new certificate representing the number of
unredeemed shares will be issued to the holder thereof without cost to such
holder.
(c) If notice of any redemption by the Corporation pursuant to this
paragraph 4 shall have been mailed as provided in paragraph 4(c) of this
Section, and if on or before the Redemption Date specified in such notice the
consideration necessary for such redemption shall have been set apart so as to
be available therefor and on therefor, then on and after the close of business
on the Redemption Date, the shares of Preferred Stock called for redemption,
notwithstanding that any certificates therefor shall not have been surrendered
for cancellation, shall no longer be deemed outstanding, and all rights with
respect to such shares shall forthwith cease and terminate, except the rights of
the holders thereof to receive upon surrender of their certificates the
consideration payable upon redemption thereof. If on or prior to the Redemption
Date (but no earlier than sixty days prior to such Redemption Date), the
Corporation shall deposit, in a trust fund, with any bank or trust company
organized under the laws of the United States of America or any state thereof
having capital, undivided profits and surplus aggregating at least $50,000,000
(the "Redemption Agent"), the consideration sufficient to redeem on such
Redemption Date the shares of Preferred Stock to be redeemed, with irrevocable
instructions and authority to the Redemption Agent, on behalf and at the expense
of the Corporation, to mail the notice of redemption as soon as practicable
after receipt of such irrevocable instructions (or to complete such mailing
previously commenced, if it has not already been completed) and to pay, on and
after the Redemption Date or prior thereto, the Redemption Price of the shares
of Preferred Stock to be redeemed to their respective holders upon the surrender
of their share certificates, then, from and after the date of such deposit
(although prior to the Redemption Date) the shares of Preferred Stock to be
redeemed shall be deemed to be redeemed and dividends on those shares shall
cease to accrue after the Redemption Date. The deposit shall be deemed to
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<PAGE> 11
constitute full payment for shares of Preferred Stock to be redeemed to their
holders and from and after the date of such deposit, the shares shall be deemed
to be no longer outstanding and the holders thereof shall cease to be
shareholders with respect to such shares, except the right to receive payment of
consideration sufficient to pay the Redemption Price of the shares, calculated
through the Redemption Date, upon surrender of their certificates therefor.
(d) Any funds so deposited by the Corporation and unclaimed for one year
from the Redemption Date shall be paid to the Corporation after which repayment
the holders of shares of Preferred Stock so called for redemption shall look to
the Corporation for the payment thereof, without interest, unless an applicable
abandoned property law designates another person.
(e) All shares of Preferred Stock redeemed, retired, purchased or otherwise
acquired by the Corporation shall be retired and shall not be reissued.
(f) If at any time the Corporation shall have failed to apply, or declare
and set apart the consideration sufficient to pay all dividends accrued up to
and including the immediately preceding dividend payment date on the Preferred
Stock and any Parity Stock, and until all dividends accrued up to and including
the immediately preceding Dividend Payment Date on the Preferred Stock and any
Parity Stock shall have been paid or declared and set apart so as to be
available for the payment in full therefor, and for no other purpose, the
Corporation shall not redeem, pursuant to a sinking fund or otherwise, any
shares of Preferred Stock, Parity Stock or Junior Stock, unless all then
outstanding shares of Preferred Stock and Parity Stock are redeemed, and shall
not purchase or otherwise acquire any shares of Preferred Stock, Parity Stock or
Junior Stock.
5. Voting.
(a) Unless otherwise specified in a Board of Directors Resolution,
regarding the issuance of Preferred Stock and the voting rights attached
thereto, the holders of Preferred Stock shall have no right to vote for any
purpose, except as required by the Texas Business Corporation Act and except as
described below.
(b) Without the consent of the holders of at least 66 2/3% of the number of
shares of Preferred Stock at the time outstanding, the Corporation may not (i)
effect any change in the rights, privileges or preferences of the Preferred
Stock,
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<PAGE> 12
(ii) create or designate any additional class or series of Senior Stock, or
(iii) enter into any agreement which, in the absence of default under such
agreement, would by its terms prevent the Corporation from paying on any
Dividend Payment Date the full dividends to which holders of the Preferred Stock
are then entitled or from otherwise fully performing its obligations pursuant to
this Section. Without the consent of the holders of at least a majority of the
number of shares of Preferred Stock at the time outstanding, the Corporation may
not create any class of Parity Stock. Such consents shall be given in writing or
by vote at a meeting called for that purpose at which the holders of the
Preferred Stock shall vote as a class.
(c) The Corporation shall promptly notify the holders of the Preferred
Stock, in the manner provided in this paragraph 4(c), of the occurrence of the
Event of Noncompliance. Upon the occurrence and during the continuation of an
Event of Noncompliance, the holders of shares of the Preferred Stock voting
separately as a class shall have the exclusive right to elect two directors to
the Board of Directors. Directors so elected shall thereupon become additional
directors of the Corporation and the authorized directors of the Corporation
shall be automatically increased by such number. The Corporation will not take
any action which would impair its ability, in conformity with these Restate
Articles and the By-laws of the Corporation, to increase automatically the
number of its directors as provided herein. During such times that the holders
of Preferred Stock, voting as a class, shall be entitled to elect such
additional directors, the remaining directors shall be elected by the holders of
the other shares of capital stock of the Corporation entitled to vote for the
election of directors, without right in the holders of Preferred Stock to
participate in the election of such remaining directors.
Such right of the holders of Preferred Stock, as such holders, to elect
such directors shall continue only until all then existing Events of
Noncompliance have been cured in full, at which time the terms of office of the
directors elected as such by the holders of shares of the Preferred Stock shall
forthwith terminate and the number of directors constituting the entire Board of
Directors of the Corporation shall be reduced correspondingly (subject always to
the same provisions for the vesting of such voting rights on the occurrence of
any other or future Event of Noncompliance). The fact that an Event of
Noncompliance has been cured and that no other Events of Noncompliance have
occurred and are continuing shall be evidenced by a certificate executed by the
President of the Corporation and delivered to the Board of Directors.
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At any time after such voting rights shall so have vested in the holders of
the shares of the Preferred Stock, the Secretary of the Corporation may, and
upon the written request of the holders of record of not less than 5% of the
Preferred Stock, addressed to him at the principal office of the Corporation,
shall within ten days after delivery of such request, call a special meeting of
the holders of shares of the Preferred Stock for the purpose of electing the
directors to be elected by them, such meeting to be held within 15 days after
such call at the place and upon the notice provided by the By-laws of the
Corporation for the holding of meetings of shareholders; provided, however, that
if the Secretary of the Corporation shall fail to call any such meeting within
ten days after delivery of any such request, such meeting may be called by any
holder or holders of record of 5 % of more of the Preferred Stock.
Notwithstanding the foregoing, the Secretary of the Corporation shall not be
required, and the holders of the Preferred Stock shall not be entitled, to call
such a special meeting if the request for such call is received less than sixty
days prior to the date fixed for the next annual meeting of shareholders, and if
in such case such special meeting is not called, the holders of the Preferred
Stock shall be entitled to vote (as a class) at such annual meeting to elect
such directors. Any vacancy in the office of a director elected by the holders
of the Preferred Stock shall be filled by a vote of such holders as a separate
class or by the remaining director elected by such holders. Except as
hereinbefore provided, the directors elected by the holders of the Preferred
Stock shall serve until the next annual meeting of the shareholders and until
their successors shall have been elected and qualified and may be otherwise
removed only by the holders of at least a majority of the then outstanding
shares of Preferred Stock at the time of removal.
At any meeting having as a purpose the election of directors by holders of
the Preferred Stock, the presence, in person or by proxy, of the holders of a
majority of the shares of Preferred Stock then outstanding shall be required and
be sufficient to constitute a quorum of such class for the election of any
director by such holders. At any such meeting, or adjournment thereof, (i) the
absence of a quorum of such holders of the Preferred Stock shall not prevent the
election of the directors to be elected by the holders of shares other than the
Preferred Stock, and the absence of a quorum, either of holders of the Preferred
Stock or of shares other than the Preferred Stock, or both, a majority of the
holders, present in person or by proxy, of the class or classes of stock which
lack a quorum shall have power to adjourn the meeting for the election of
directors which they are entitled to elect, from time to time, without notice
other than announcement at the meeting, until a quorum shall be present.
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(d) With respect to actions by the holders of the Preferred Stock upon
those matters on which such holders are entitled to vote as a separate class,
such actions may be taken without a shareholders meeting by the written consent
of holders of the Preferred Stock who would be entitled to vote at a meeting
those shares having voting power to cast not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares of Preferred Stock entitled to vote were present and voted.
Notice shall be given in accordance with the applicable provisions of the Texas
Business Corporation Act for the taking of corporate action without a meeting by
less than unanimous written consent to those holders of Preferred Stock on the
record date whose shares were not represented on the written consent.
6. Conversion.
(a) Conversion Right. Unless previously redeemed as provided in paragraph 4
hereof, the Preferred Stock may be converted prior to redemption thereof at such
time, in such manner and upon such terms and conditions as hereinafter provided
in this paragraph 6 into fully paid and non-assessable full shares of Common
Stock. In the event the Corporation shall call for redemption the shares of
Preferred Stock pursuant to paragraph 7 hereof, the conversion right provided by
this paragraph 6 shall terminate at the close of business on the date fixed for
redemption. In case cash, securities or property other than Common Stock shall
be payable, deliverable or issuable upon conversion as provided herein, then all
references to Common Stock in this paragraph 6 shall be deemed to apply, so far
as appropriate and as nearly as may be, to such cash, property or other
securities.
(b) Conversion Rate. Subject to the provisions for adjustments hereinafter
set forth in this paragraph 6, the Preferred Stock may be converted into Common
Stock at the initial conversion rate of one fully paid and non-assessable shares
of Common Stock for one share of Preferred Stock. (This conversion rate as from
time to time adjusted cumulatively pursuant to the provisions of paragraph 6(d)
of this Section is hereinafter referred to as the "Conversion Rate.")
(c) Conversion Date. Unless previously redeemed as provided in paragraph 7
hereof, the Preferred Stock shall be convertible at any time and from time to
time at the option of the holder(s) thereof.
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(d) Adjustments
(i) Stock Dividends, Subdivisions, Combinations. In case the
corporation shall (A) pay a dividend or make a distribution on its
outstanding shares of Common Stock, (B) subdivided the then outstanding
shares of its Common Stock into a greater number of shares of Common Stock,
(C) Combine the ten outstanding shares of its Common Stock into a smaller
number of shares of Common Stock, or (D) issue by reclassification of its
shares of Common Stock any shares of capital stock of the Corporation
(including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing corporation), then the
Conversion Rate in effect immediately prior to the opening of business on
the record date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be adjusted so that
the holder of each share of the Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number and kind of shares of
capital stock of the Corporation which it would have owned or been entitled
to receive immediately following such action had such shares of Preferred
Stock been converted immediately prior to such time. An adjustment made
pursuant to this paragraph 6(d)(i) for a dividend or distribution shall
become effective immediately after the record date for the dividend or
distribution and an adjustment made pursuant to this paragraph 6(d)(i) for
a subdivision, combination or reclassification. Such adjustment shall be
made successively whenever any action listed above shall be taken. In any
case in which this paragraph 6(d)(i) shall require that an adjustment shall
become effective immediately after a record date for an event, the
Corporation may defer until the occurrence of such event (x) issuing to the
holder of any shares of Preferred Stock converted after such record date
and before the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the adjustment required by
such event over and above the shares of Common Stock issuable upon such
conversion before giving effect to such adjustment and (y) paying to such
holder cash in lieu of any fractional interest to which such holder is
entitled pursuant to paragraph 6(i) of this Section; provided, however,
that the Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares of Common Stock, and such cash, upon the occurrence of
the event requiring such adjustment.
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(ii) Reclassifications, Consolidations or Merger. In case of any
reclassification or change of outstanding Common Stock (other than those
referred to in paragraph 6(d)(i) of this Section and other than a change in
par value), or case of any consolidation of the Corporation with any other
corporation or any merger of the corporation into another corporation or of
another corporation into the Corporation (other than a consolidation or
merger in which the Corporation is the continuing corporation and which
does not result in any reclassification of, or change (other than a change
in par value, or as a result of a subdivision or combination to which
paragraph 6(d)(i) hereof is applicable in, the outstanding Common Stock),
or in case of any sale or transfer to another corporation or entity (other
than by mortgage or pledge) of all or substantially all of the properties
and assets of the Corporation, the Corporation (or its successor in such
consolidation or merger) or the purchase of such properties and assets
shall make appropriate provision so that the holder of each share of
Preferred Stock then outstanding shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or transfer by a holder of the number of shares of Common
Stock into which such Preferred Stock might have been converted immediately
prior to such reclassification, change, consolidation, merger, sale or
transfer, and the holders of the Preferred Stock shall have no other
conversion rights under these provisions; provided, that effective
provision shall be made, in the Articles or Certificate of Incorporation of
the resulting or surviving corporation or otherwise or in any contracts of
sale or transfer, so that the provisions set forth herein for the
protection of the conversion rights of Preferred Stock shall thereafter be
made applicable, as nearly as reasonably may be, to any such other shares
of stock and other securities and property deliverable upon conversion of
the Preferred Stock remaining outstanding or other convertible preferred
stock or other securities received by the holders of Preferred Stock or
purchaser shall expressly assume the obligation to deliver, upon the
exercise of the conversion privilege, such shares, securities or property
as the holders of the Preferred Stock remaining outstanding, or other
convertible preferred stock or other securities received by the holders in
place thereof, shall be entitled to receive pursuant to the provisions
hereof, and to make provisions for the protection of the conversion rights
as above provided.
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(iii) Notice of Adjustment. Whenever the Conversion Rate shall be
adjusted as provided in this paragraph 7(d), the Corporation shall promptly
(A) file with the transfer agent for the Preferred Stock a statement signed
by the President or the Vice President of the Corporation and by its
Treasurer, disclosing the nature of such event, the Conversion Rate in
effect immediately thereafter and the kind and amount of stock or.other
securities or property into which Preferred Stock shall be convertible
after such event, and (B) cause a notice containing a summary of the
information set forth in said statement to be mailed to the holders of
record of Preferred Stock. Where appropriate, such notice may be given in
advance and included as a part of a notice required to be mailed under the
provisions of paragraph 7(e) of this Section.
(iv) De Minimis Adjustment. The Corporation may, but shall not be
required to, make any adjustment of the Conversion Rate if such adjustment
would require an increase or decrease of less than 1 % in such Conversion
Rate; provided, however, that any adjustments which by reason of this
paragraph 6(d)(iv) are not required to be made shall be carried forward
and' taken into account in any subsequent adjustment.
(e) Advance Notice of Certain Events. In case at any time:
(i) the Corporation takes any action which would require an adjustment
in the Conversion Rate pursuant to paragraph 7(d)(i) of this Section;
(ii) the Corporation shall authorize the granting to the holders of
its Common Stock of any Distributions on Common Stock or shall have
declared any other dividend or distribution on its Common Stock and notice
thereof shall be given to holders of Common Stock;
(iii) there shall be any capital reorganization or reclassification of
the Common Stock (other than a change in par value), or any consolidation
or merger to which the Corporation is a party and for which approval of any
shareholders of the Corporation is required, or any sale or transfer of all
or substantially all of the properties and assets of the Corporation, or a
tender offer for at least a majority of the Common Stock which has been
recommended by the Board of Directors as being in the best interests of the
holders of the Common Stock; or
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<PAGE> 18
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any such event, the Corporation shall give written notice, in the
manner provided in paragraph 7(b) of this Section, to the holders of the
Preferred Stock at their respective addresses as the same appear upon the books
of the Corporation, at least twenty days (or ten days in the case of a
recommended tender offer as specified in clause (iii) above) prior to any record
date or other date set for definitive action if there shall be no record date,
of the date on which such action, dividend, distribution, reorganization,
reclassification, consolidation, merger, sale, transfer, tender offer,
dissolution, liquidation or winding up is expected to take place or become
effective, and the date as of which it is expected that holders of the Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property, if any, deliverable upon such reorganization,
reclassification, consolidation, merger, sale, transfer, tender offer,
dissolution, liquidation or winding up; provided, however, that any notice
required by clause (ii) above shall be given in the manner and at the time that
such notice is given to the holders of the Common Stock. Without limiting the
obligation of the Corporation to provide notice of corporate actions hereunder,
the failure to give the notice required by this paragraph 6(e) or any defect
therein shall not affect the legality or validity of any such corporate action
of the Corporation or the vote upon such action.
(f) Method of Conversion. Before any holder of Preferred Stock shall be
entitled to convert the same into Common Stock, it shall surrender the
certificate or certificates for such Preferred Stock at the office of the
Corporation or at the office of the Transfer Agent for the Preferred Stock, if
any, which certificate or certificates, if the Corporation shall so request,
shall be duly endorsed to the Corporation or in blank or accompanied by proper
instruments of transfer to the Corporation or in blank (such endorsements or
instruments of transfer to be in form satisfactory to the Corporation), and
shall give written notice to the Corporation at said office that it elects to
convert all or a part of the shares of Preferred Stock represented by said
certificate or certificates in accordance with the terms of this paragraph 6,
and shall state in writing therein the name or names in which it wishes the
certificate or certificates for Common Stock to be issued. Every such notice of
election to convert shall constitute a contract between the holder of such
Preferred Stock and the Corporation, whereby the holder of such Preferred Stock
shall be deemed to subscribe for the amount of Common Stock
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<PAGE> 19
which it shall be entitled to receive upon conversion of the number of shares of
Preferred Stock to be converted, and, in satisfaction of such subscription, to
deposit the shares of Preferred Stock to be converted, and thereby the
Corporation shall be deemed to agree that the surrender of the shares of
Preferred Stock to be converted shall constitute full payment of such
subscription for Common Stock to be issued upon such conversion. The Corporation
will as soon as practicable after such deposit of a certificate or certificates
for Preferred Stock, accompanied by the written notice and statements above
prescribed, issue and deliver at the office of the Corporation or of said
transfer agent to the person for whose account such Preferred Stock was so
surrendered, or to its nominee(s) or, subject to compliance with applicable law,
transferee(s), a certificate or certificates for the number of full shares of
Common Stock to which it shall be entitled, together with cash in lieu of any
fraction of a share as hereinafter provided. If surrendered certificates for
Preferred Stock are converted only in part, the Corporation will issue and
deliver to the holder, or to its nominee(s), without charge therefor, a new
certificate or certificates representing the aggregate of the unconverted share
of Preferred Stock. Such conversion shall be deemed to have been made as of the
date of such surrender of the Preferred Stock to be converted; and the person or
persons' entitled to receive the Common Stock issuable upon conversion of such
Preferred Stock shall be treated for all purposes as the record holder or
holders of such Common Stock on such date.
The issuance of certificates for shares of Common Stock upon conversion of
shares of Preferred Stock shall be made without charge for any issue, stamp or
other similar tax in respect of such issuance, provided, however, if any such
certificate is to be issued in a name other than that of the holder of the share
or shares of Preferred Stock converted, the person or persons requesting the
issuance thereof shall pay to the Corporation the amount of any tax which may be
payable in respect of any transfer involved in such issuance or shall establish
to the satisfaction of the Corporation that such tax has been paid.
The Corporation shall not be required to convert Preferred Stock, and no
surrender of Preferred Stock shall be effective for that purpose, while the
stock transfer books of the Corporation are closed for any purpose; but the
surrender of Preferred Stock for conversion during any period which such books
are so closed shall become effective for conversion immediately upon the
reopening of such books, as if the conversion had been made on the date such
Preferred Stock was surrendered.
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(g) Shares Reserved for Conversion. The Corporation shall at all times
reserve and keep available solely for the purpose of issuance upon conversion of
the outstanding shares of Preferred Stock, such number of shares of Common Stock
as shall be issuable upon the conversion of all such outstanding shares,
provided that nothing contained herein shall be construed to preclude the
Corporation from satisfying the obligations in respect of the conversion of the
outstanding shares of Preferred Stock by delivery of shares of Common Stock
which are held in the treasury of the Corporation. The Corporation shall take
all such corporate and other actions as from time to time may be necessary to
insure that all shares of Common Stock issuable upon conversion of shares of
Preferred Stock at the Conversion Rate in effect from time to time will, upon
issue, be duly and validly authorized and issued, fully paid and nonassessable
and free of any preemptive or similar rights. In order that the Corporation may
issue shares of Common Stock upon conversion of the Preferred Stock, the
Corporation will endeavor to comply with all applicable federal and state
securities laws.
(h) Status of Shares Converted. All shares of Preferred Stock received by
the Corporation upon conversion thereof into Common Stock shall be retired and
shall not be reissued.
(i) Fractions upon Conversion. The Corporation shall not be required to
issue fractional shares of Common Stock or script upon conversion of the
Preferred Stock. As to any final fractions of a share of Common Stock which a
holder of one or more shares of Preferred Stock would otherwise be entitled to
receive upon conversion of such shares in the same transaction, the Corporation
shall pay a cash adjustment in respect of such final fraction in an amount equal
to the same fraction of the market value of a full share of the Common Stock.
For purpose of this paragraph 6(i), the market value of a share of the Common
Stock shall be the last reported sale price quoted on the composite tape for the
business day immediately preceding the date of conversion, or, in case no such
reported sale takes place on such day, the average of the reported closing bid
and asked prices quoted on the composite tape, or if the shares of Common Stock
are not quoted on the composite tape, on the principal United States Securities
Exchange registered under the Securities Exchange Act of 1934, as amended, on
which the share of Common Stock are listed or admitted to trading, or if the
shares of Common Stock are not listed or admitted to trading on any exchange,
the closing sale price (or the average of the quoted closing bid and asked
prices if there are no reported sales) as reported on the National Association
of Securities Dealers Automated Quoting
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System (NASDAQ) of any comparable system, the average of the closing bid and
asked prices as furnished by any member of the National Association of
Securities Dealers, Inc. selected from time to time by the Corporation for that
purpose or, in the absence of such quotations, such other method of determining
market value as the Board of Directors shall from time to time deem to be fair.
7. Preemptive Rights. The holders of the Preferred Stock will not have any
preemptive rights to subscribe for or purchase any shares of stock or any other
securities which may be issued by the Corporation. However, the holders of
Preferred Stock shall have a fifteen day right of first refusal to acquire, in
the aggregate, up to 5% of any securities in the Corporation which are offered
pursuant to a private offering exemption under federal and applicable state law.
Each holder of Preferred Stock shall be entitled to his pro rata share of the
aggregate 5% of such securities. The right of first refusal shall be exercised
within fifteen days after a holder of Preferred Stock is deemed to have received
the offering materials prepared by the Corporation in connection with the
offering via regular U.S. mail. Deemed receipt of the materials shall be
established three days after mailing via U.S. regular mail to the address of
each holder of Preferred Stock as shown on the records of the Corporation as of
the date of mailing. Each holder of Preferred Stock desiring to exercise his
right of first refusal shall do so by fulfilling all instructions provided in
the offering materials and notification from the Corporation including returning
the fully executed and completed subscription agreement required to subscribe
for the securities offered and a check for the amount subscribed within fifteen
days after the deemed receipt. This right of first refusal shall terminate and
be of no effect 30 days prior to the effective date of any registration
statement filed with any state securities regulatory agency registering any of
the Company's securities or, if applicable, the Securities and Exchange
Commission registering any of the Company's securities.
8. Exclusion of Other Rights. Except as may otherwise be required by law
and for the equitable rights and remedies which may otherwise be available to
holders of Preferred Stock, the shares of Preferred Stock shall not have any
designations, preferences, limitations or relative rights, other than those
specifically set forth in these Restated Articles of Incorporation.
9. Headings of Subdivisions. The headings of the various subdivisions of
this Section are for the convenience of reference only and shall not affect the
interpretation of any of the provisions of this Section.
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SECTION B
THE COMMON STOCK
The Common Stock shall consist of 20,000,000 shares, $0.001 par value per
share.
1. Dividends. Subject to the rights of holders of stock of the Corporation
senior to the Common Stock with respect to the declaration and payment of
dividends, holders of Common Stock shall be entitled to receive such dividends
and other distributions in cash, stock or property of the Corporation as may be
declared thereon by the Board of Directors from time to time out of assets or
funds of the Corporation legally available therefor.
2. Voting. At every meeting of the shareholders of the Corporation, every
holder of Common Stock shall be entitled to one vote in person or by proxy for
each share of Common Stock standing in his name on the transfer books of the
Corporation.
ARTICLE V
Responsibility for the management of the business and conduct of the
affairs of the Corporation shall be vested in the Board of Directors. In
furtherance and not in limitation of the powers conferred by the laws of the
State of Texas, the Board of Directors is expressly authorized:
(a) pursuant to art. 2.23 of the Texas Business Corporation Act, to adopt
Bylaws for the corporation and to alter, amend and repeal said By-Laws, subject
only to any limitations imposed by the Texas Business Corporation Act which
reserves a power exclusively to the shareholders, whether in whole or in part;
and
(b) to include in said Bylaws, any provisions for the regulation and
management of the affairs of the corporation not inconsistent with the Texas
Business Corporation Act or these Restated Articles of Incorporation; and
(c) to adopt a corporate seal.
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ARTICLE VI
The Corporation may, upon adoption of a resolution by its Board of
Directors, purchase its own shares to the extent of unreserved and unrestricted
capital surplus available therefor. The Board of Directors of the Corporation
may, from time to time, in its discretion and without the prior approval of the
shareholders of the Corporation, distribute a portion of its assets to the
shareholders out of capital surplus of the Corporation.
ARTICLE VII
Subject to the provisions hereof, the Corporation reserves the right at any
time, and from time to time, to amend, alter, repeal, or rescind any provision
contained herein, in the manner now or hereafter prescribed by law, and other
provisions authorized by the laws of the State of Texas at the time in force may
be added or inserted, in the manner now or hereafter prescribed by law; and all
rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to these
Restated Articles of Incorporation in its present form or as hereafter amended
are granted subject to this reservation.
ARTICLE VIII
DESIGNATION OF COMMITTEES
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized by a majority of the whole Board
of Directors, to designate one or more committees, each committee to consist of
one or more of the directors of the Corporation. Any such committee, to the
extent provided in the resolution or in the By-Laws of the Corporation, shall
have and may exercise the powers of the Board of Directors in the management of
the business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
the By-Laws may provide that in the absence or disqualification of any member of
such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of such absent or disqualified member.
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ARTICLE IX
RIGHTS TO PURCHASE SECURITIES AND OTHER PROPERTY
The Board of Directors is expressly authorized to create and issue rights
entitling the holders of such rights to purchase from the Corporation shares of
capital stock or other securities or property. The Board of Directors shall
have, in its sole discretion, the authority to determine the time at which and
terms upon which such rights are to be issued and set forth in the contracts or
instruments that evidence such rights.
ARTICLE X
DIRECTOR LIABILITY INDEMNIFICATION
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of duty or care
or other duty as a director, except for liability (i) for any appropriation, in
violation of his duties, of any business opportunity of the Corporation, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for any type of liability not
contemplated by the Texas Business Corporation Act, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Texas
Business Corporation Act is hereafter amended to authorize further elimination
or limitation of the liability of the directors, then the liability of the
director shall be eliminated or limited to the fullest extent permitted by the
Law of Texas, as amended. In addition to the limitation on personal liability of
directors provided herein, the Corporation shall, to the fullest extent
permitted by the Texas Business Corporation Act, (x) indemnify its officers and
directors and (y) advance expenses incurred by such officers or directors in
relation to any action, suit or proceeding. Any repeal or modification of this
Article VI by the stockholders of the Corporation shall be prospective only, and
shall not adversely affect any limitation on the personal liability or right to
indemnification or advancement of expenses hereunder existing at the time of
such repeal or modification.
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IN WITNESS WHEREOF, MICRO-ASI, Inc., acting through its designated nominee
Cecil E. Smith, Jr., has caused these Restated Articles of Incorporation to be
executed and its corporate seal to be affixed as of this 24th day of January,
1997.
MICRO-ASI, INC.
By: /s/ CECIL E. SMITH
---------------------------
Cecil E. Smith, Jr.
President, C.E.O.
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<PAGE> 1
EXHIBIT 2.2
BYLAWS
OF
MICRO-ASI, INC.
Article I
Offices
Section 1.1 Registered Office. The registered office of the Corporation
required by the state of incorporation of the Corporation to be maintained in
the state of incorporation of the Corporation shall be the registered office
named in the charter documents of the Corporation, or such other office as may
be designated from time to time by the Board of Directors in the manner provided
by law.
Section 1.2 Other Offices. The Corporation may also have offices at
such other places both within and without the state of incorporation of the
Corporation as the Board of Directors may from time to time determine or the
business of the Corporation may require.
Article 2
Shareholders
Section 2.1 Place of Meetings. All meetings of the shareholders shall
be held at the principal office of the Corporation, or at such other place
within or without the state of incorporation of the Corporation as shall be
specified or fixed in the notices or waivers of notice thereof.
Section 2.2 Quorum: Adjournment of Meetings. Unless otherwise required
by law or provided in the charter documents of the Corporation or these Bylaws,
(i) the holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at any meeting of shareholders for the transaction of business, (ii) in
all matters other than election of directors, the affirmative vote of the
holders of a majority of such stock so present or represented at any meeting of
shareholders at which a quorum is present shall constitute the act of the
shareholders, and (iii) where a separate vote by a class or classes is required,
a majority of the outstanding shares of such class or classes, present in person
or represented by proxy shall constitute a quorum entitled to take action with
respect to that vote on that matter and the affirmative vote of the majority of
the shares of such class or classes present in person or represented by proxy at
the meeting shall be the act of such class. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum, subject to the provisions of clauses (ii) and (iii) above.
1.
<PAGE> 2
Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors.
Notwithstanding the other provisions of the charier documents of the
Corporation or these Bylaws, the chairman of the meeting or the holders of a
majority of the issued and outstanding stock, present in, person or represented
by proxy and entitled to vote thereat, at any meeting of shareholders, whether
or not a quorum is present, shall have the power to adjourn such meeting from
time to time, without any notice other than announcement at the meeting of the
time and place of the holding of the adjourned meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each shareholder of record entitled to vote at such meeting. At such
adjourned meeting at which a quorum shall be present or represented any business
may be transacted which might have been transacted at the meeting as originally
called.
Section 2.3 Annual Meeting. An annual meeting of the shareholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place (within or without the state of incorporation of the
Corporation), on such date, and at such time as the Board of Directors shall fix
and set forth in the notice of the meeting, which date shall be within thirteen
(13) months subsequent to the last annual meeting of shareholders.
Section 2.4 Special Meetings. Unless otherwise provided in the charter
documents of the Corporation, special meetings of the shareholders for any
purpose or purposes may be called at any, time by the Chairman of the Board, by
the Chief Executive Officer, by the Chief Operating Officer, by the President,
by a majority of the Board of Directors, by a majority of the executive
committee (if any) or by one or more shareholders holding, not less than five
percent (5%) of the shares entitled to vote at the meeting at such time and at
such place as may be stated in the notice of the meeting. Business transacted at
a special meeting shall be confined to the purpose(s) stated in the notice of
such meeting.
Section 2.5 Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any chance, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors of the Corporation may fix a date as
the record date for any such determination of shareholders, which record date
shall not precede the date on which the resolutions fixing the record date are
adopted and which record data shall not be more than sixty
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(60) days nor less than ten (10) days before the date of such meeting of
shareholders, nor more than sixty (60) days prior to any other action to which
such record date relates.
If the Board of Directors does not & a record date for any meeting of
the shareholders, the record date for determining shareholders entitled to
notice of or to vote at such meeting shall be at the close of business on the
day next preceding the day on which notice is given, or, if in accordance with
Article 7, Section 73 of these Bylaws notice is waived, at the dose of business
on the day next preceding the day on which the meeting is held. The record date
for determining shareholders for any other purpose (other than the consenting to
corporate action in writing without a meeting) shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of shareholders of record entitled to notice Of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
For the purpose of determining the shareholders entitled to consent to
corporate action in writing without a meeting, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If the
Board of Directors does not fix the record date, the record date for determining
shareholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is necessary, shall be
the first date on which a signed written consent setting, forth the action taken
or proposed to be taken is delivered to the Corporation at its registered office
in the state of incorporation of the Corporation or at its principal place of
business. If the Board of Directors does not fix the record date, and prior
action by the Board of Directors is necessary, the record date for determining
shareholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
Section 2.6 Notice of Meetings. Written notice of the place, date and
hour of all meetings, and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given by or at the direction of the
Chairman of the Board, the Chief Executive Officer, the Chief Operating Officer,
the President, the Secretary or the other person(s) calling the meeting to each
shareholder entitled to vote thereat not less than ten (10) nor more than sixty
(60) days before the date of the meeting. Such notice may be delivered either
personally or by mail. If mailed, notice is given when deposited in the United
States, mail, postage prepaid, directed to the shareholder at such shareholder's
address as it appears on the records of the Corporation.
Section 2.7 Shareholder List. A complete list of shareholders entitled
to vote at any meeting of shareholders, arranged in alphabetical order for each
class of
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stock and showing the address of each such shareholder and the number of shares
registered in the name of such shareholder, shall, be open to the examination of
any shareholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The shareholder list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any shareholder who is present.
Section 2.8 Proxies. Each shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent to a corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. Proxies for use at any meeting of shareholders shall be filed with the
Secretary, or such other officer as the Board of Directors may from time to time
determine by resolution, before or at the time of the meeting. All proxies shall
be received and taken charge of and all ballots shall be received and canvassed
by the secretary of the meeting, who shall decide all questions touching upon
the qualification of voters, the validity of the proxies, and the acceptance or
rejection of votes, unless an inspector or inspectors shall have been appointed
by the chairman of the meeting, in which event such inspector or inspectors
shall decide all such questions.
No proxy shall be valid after eleven (11) months from its date, unless
the proxy provides for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power.
Should a proxy designate two or more persons to act as proxies, unless
such instrument shall provide the contrary, a majority of such persons present
at any meeting at which their powers thereunder are to be exercised shall have
and may exercise all the powers of voting or giving consents thereby conferred,
or if only one be present, then such powers may be exercised by that one; or, if
an even number attend and a majority do not agree on any particular issue, each
proxy so attending shall be entitled to exercise such powers in respect of such
portion of the shares as is equal to the reciprocal of the fraction equal to the
number of proxies representing such shares divided by the total number of shares
represented by such proxies.
Section 2.9 Voting; Election; Inspectors. Unless otherwise required by
law or provided, in the charter documents of the Corporation, each shareholder
shall on each matter submitted to a vote at a meeting of shareholders have one
vote for each share of the stock entitled to vote which is registered in his
name on the record date for the meeting. For the purposes hereof, each election
to fill a directorship shall constitute a separate matter. Shares registered in
the name of another corporation, domestic or foreign, may be voted by such
officer, agent or proxy as the bylaws (or comparable body) of such corporation
may determine. Shares registered in the name of a deceased person
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may be voted by the executor or administrator of such person's estate, either in
person or by proxy.
All voting, except as required by the charter documents of the
Corporation or where otherwise required by law, may be by a voice vote;
provided, however, upon request of the chairman of the meeting or upon demand
therefore by shareholders holding a majority of the issued and outstanding stock
present in person or by proxy at any meeting a stock vote shall be taken. Every
stock vote shall be taken by written ballots, each of which shall state the name
of the shareholder or proxy voting and such other information as may be required
under the procedure established for the meeting. All elections of directors
shall be by written ballots, unless otherwise provided in the charter documents
of the Corporation.
At any meeting at which a vote is taken by written ballots, the
chairman of the meeting may appoint one or more inspectors, each of whom shall
subscribe an oath or affirmation to execute faithfully the duties of inspector
at such meeting with strict impartiality and according to the best of such
inspector's ability. Such inspector shall receive the written ballots, count the
votes, and make and sign a certificate of the result thereof. The chairman of
the meeting way appoint any person to serve as inspector, except no candidate
for the office of director shall be appointed as an inspector.
Unless otherwise provided in the charter documents of the Corporation,
cumulative voting for the election of directors shall be prohibited.
Section 2.10 Conduct of Meetings. The meetings of the shareholders
shall be presided over by the Chairman of the Board, or, if the Chairman of the
Board is not present by the Chief Executive Officer, or if the Chief Executive
Officer is not present by the Chief Operating, Officer, or if the Chief
Operating Officer is not present by the President, or if neither the Chairman of
the Board, the Chief Executive Officer, the Chief Operating Officer nor the
President is present, by a chairman elected at the meeting. The Secretary of the
Corporation, if present, shall act as secretary of such meetings, or, if the
Secretary is not present, an Assistant Secretary shall so act; if neither the
Secretary or an Assistant Secretary is present then a secretary shall be
appointed by the chairman of the meeting.
The Chairman of any meeting of shareholders shall determine the order
of business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to the chairman in order.
Section 2.11 Treasury Stock. The Corporation shall not vote, directly
or indirectly, shares of its own stock owned by it and such shares shall not be
counted for quorum purposes. Nothing in this Section 2.11 shall be construed as
limiting the right of the Corporation to vote stock, including but not limited
to its own stock, held by it in a fiduciary capacity.
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Section 2.12 Action Without Meeting. Unless otherwise provided in the
charter documents of the Corporation, any action permitted or required by taw,
the charter documents of the Corporation or these Bylaws to be taken at a
meeting of shareholders, may be taken without a meeting, without prior notice
and without a vote, if a consent or consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted and shall be delivered to the Corporation by delivery to its
registered office in the state of incorporation, its principal place of
business, or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of shareholders are recorded. Delivery made to
the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
Every written consent shall bear the date of signature of each
shareholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered in the manner required by this Section to
the Corporation, written consents signed by a sufficient number of holders to
take action are delivered to the Corporation by delivery to its registered
office in the state of incorporation, its principal place of business, or an
officer or agent of the Corporation having custody of the book in. which
proceedings of meetings of shareholders are recorded. Delivery made to the
Corporations registered office shall be by hand or by certified or registered
mail, return receipt requested.
Prompt notice of the taking of corporation action without a meeting by
less than a unanimous written consent shall be given by the Secretary to those
shareholders who have not consented in writing.
Article 3
Board of Directors
Section 3.1 Power, Number; Term of Office. Me business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors, and, subject to the restrictions imposed by law or the charter
documents of the Corporation, the Board of Directors may exercise all the powers
of the Corporation.
The number of directors which shall constitute the whole Board of
Directors shall be determined from time to time by the Board of Directors
(provided that no decrease in the number of directors which would have the
effect of shortening, the term of an incumbent director may be made by the Board
of Directors). The number of directors on the date of adoption of these Bylaws
shall be five (5). Each director shall hold office for the term for which such
director is elected, and until such
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director's successor shall have been elected and qualified or until such
director's earlier death, resignation or removal.
Unless otherwise provided in the charter documents of the Corporation,
directors need not be shareholders nor residents of the state of incorporation
of the Corporation.
Section 3.2 Quorum; Voting. Unless otherwise provided in the charter
documents of the Corporation, a majority of the number of directors fixed in
accordance with Section 3.1 shall constitute a quorum for the transaction of
business of the Board of Directors and the vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors.
Section 3.3 Place of Meetings; Order of Business. The directors may
bold their meetings and may have an office and keep the books of the
Corporation, except as otherwise provided by law, in such place or places,
within or without the state of incorporation of the Corporation, as the Board of
Directors may from time to time determine. At all meetings of the Board of
Directors business shall be transacted in such order as shall from time to time
be determined by the Chairman of the Board, or in the Chairman of the Board's
absence by the Chief Executive Officer, or in the Chief Executive Officer's
absence, the Chief Operating Officer, or in the Chief Operating Officer's
absence by the President or by the Board of Directors.
Section 3.4 First Meeting. Each newly elected Board of Directors may
hold its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as the
annual meeting of the shareholders. Notice of such meeting shall not be
required. At the first meeting of the Board of Directors in each year at which
quorum shall be present, hold after tile annual meeting of shareholders, the
Board of Directors shall elect the officers of the Corporation.
Section 3.5 Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as shall be designated from
time to time by the Chairman of the Board, or in the Chairman of the Board's
absence, by the Chief Executive Officer, or in the Chief Executive Officer's
absence by the Chief Operating Officer, or in the Chief Operating Officer's
absence by the President, or in the President's absence, by another officer of
the Corporation. Notice of such regular meetings shall not be required.
Section 3.6 Special Meetings. Special meetings of the Board of Director
may be called by the Chairman of the Board, or in the Chairman of the Board's
absence by the Chief Executive Officer, or in the Chief Executive officer's
absence by the Chief Operating Officer, or in the Chief Operating Officer's
absence by the President or, on the written request of any director, by the
Secretary, in each case on at least twenty-four
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(24) hours' personal, written, telegraphic, cable or wireless notice to each
director. Such notice, or any waiver thereof pursuant to Article 7, Section 7.3
hereof, need not state the purpose or purposes of such meeting, except as may
otherwise be required by law or provided for in the charter documents of the
Corporation or these Bylaws. Meetings may be held at any time without notice if
all the directors are present or if those not present waive notice of the
meeting in writing.
Section 3.7 Removal. Any director or the entire Board of Directors may
be removed, with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors.
Section 3.8 Vacancies; Increases in the Number of Directors. Unless
otherwise provided in the charter documents of the Corporation or prohibited by
the laws of the state of incorporation of the Corporation, vacancies existing on
the Board of Directors for any reason may be filled by the affirmative vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director; and any director, so chosen shall hold office until the
next annual election and until such director's successors shall have been
elected and qualified, or until such director's earlier death, resignation or
removal
Section 3.9 Compensation. Directors and members of standing Committees
may receive such compensation as the Board of Directors from time to time shall
determine to be appropriate, and shall be reimbursed for all reasonable expenses
incurred in attending and returning from meetings of the Board of Directors.
Section 3.10 Action Without a Meeting; Telephone Conference Meeting.
Unless otherwise restricted by the charter documents of the Corporation, any
action required or permitted to be taken at any meeting of the Board of
Directors or any committee designated by the Board of Directors may be taken
without a meeting if all members of the Board of Directors or committee, as the
case may be, consent thereto in writing, and the, writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee. Such
consent shall have the same force and effect as a unanimous vote at a meeting,
and may be stated as such in any document or instrument filed with the Secretary
of State of the state of incorporation of the Corporation.
Unless otherwise restricted by the charter documents of the
Corporation, subject to the requirement for notice of meetings, members of the
Board of Directors or members of any committee designated by the Board of
Directors, may participate in a meeting of such Board of Directors or committee,
as the case, may be, by means of a conference telephone connection or similar
communications equipment by means of which all persons participating in the
meeting can bear each other, and participation in such a meeting shall
constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting, to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
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Section 3.11 Approval or Ratification of Acts or Contracts by
Shareholders. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the shareholders,
or at any special meeting of the shareholders called for the purpose of
considering any such act or contract, and any act or contract that shall be
approved or be ratified by the vote of the shareholders holding a majority of
the issued and outstanding shares of stock of the Corporation entitled to vote
and present in person or by proxy at such meeting (provided that a quorum is
present) shall be as valid and as binding upon the Corporation and upon all the
shareholders as if it has been approved or ratified by every shareholder of the
Corporation. In addition, any such act or contract may be approved or ratified
by the written consent of shareholders holding a majority of the issued and
outstanding shares of capital stock of the Corporation entitled to vote, and
such consent shall be as valid and binding, upon the Corporation and upon all
the shareholders as if it had been approved or ratified by every shareholder of
the Corporation.
Section 3.12 Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors in which action on any
corporate, matter is taken shall be presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting, or
unless he shall file his written dissent to such action with the person acting
as secretary of the meeting before the adjournment thereof, or shall forward
such dissent by registered or certified mail to the Secretary of the Corporation
promptly after the adjournment of the meeting. Such right to dissent shall not
apply to a director who voted in favor of such action.
Article 4
Committees
Section 4.1 Designation; Powers. The Board of Directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, including, if they shall so determine, an executive committee, with
each such committee to consist of one or more of the directors of the
Corporation. Any such designated committee shall have and may exercise such of
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation as may be provided in such resolution,
except that no such committee shall have the power or authority, of the Board of
Directors in reference to amending the charter documents of the Corporation,
adopting an agreement of merger or consolidation, recommending to the
shareholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the shareholders a
dissolution of the Corporation or a revocation of a dissolution of the
Corporation, or amending, altering or repealing these Bylaws or adopting new
bylaws for the Corporation. Any such committee may authorize the seal of the
Corporation to be affixed to all papers which may require it. In addition to the
above, such committee or committees shall have such other powers and limitations
of authority as may be determined from time to time by the Board of Directors.
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Section 4.2 Procedure: Meetings; Quorum. Any committee designated
pursuant to this Article 4 shall keep regular minutes of its actions and
proceedings in a book provided for that purpose and report the same to the Board
of Directors at its meeting next succeeding such action, shall fix its own rules
or procedures, and shall meet at such times and at such place or places as may
be provided by such rules, or by such committee or the Board of Directors.
Should a committee fail to fix its own rules, the provisions of those Bylaws,
pertaining to the calling of meetings and conduct of business by the Board of
Directors, shall apply as nearly as may be possible. At every meeting of any
such committee, the presence of a majority of all the members thereof shall
constitute a quorum except as provided in Section 4.3 of this Article 4, and the
affirmative vote of a majority of the members present shall be necessary for the
adoption by it of my resolution.
Section 4.3 Substitution and Removal of Members, Vacancies. The Board
of Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
such committee. In the absence or disqualification of a member of a committee,
the member or members present at any meeting and not disqualified from voting,
whether or not constituting a quorum may unanimously appoint another member of
the Board of Directors to art at the meeting in the place of the absent or
disqualified member. The Board of Directors shall have the power at any time to
remove any member(s) of a committee and to appoint other directors in lieu of
the person(s) so removed and shall also have the power to fill vacancies in a
committee.
Article 5
Officers
Section 5.1 Number, Titles and Term of Office. The officers of the
Corporation shall be a Chairman of the Board, Chief Executive Officer, Chief
Operating Officer, President, one or more Vice Presidents (any one or more of
whom may be designated Executive Vice President or Senior Vice President), a
Chief Financial Officer, a Secretary, and such other officers as the Board of
Directors may from time to time elect or appoint (including, but not limited to,
one or more Assistant Secretaries and one or more Assistant Financial Officers).
Each officer shall bold office until such officer's successor shall be duly
elected and shall qualify or until such officer's death or until such officer
shall resign or shall have been removed. Any number of offices may be held by
the same person, unless the charter documents of the Corporation provide
otherwise. Except for the Chairman of the Board, no officer need be a director.
Section 5.2 Powers and Duties of the Chairman of the Board. Subject to
the control of the Board of Directors and the Executive Committee (if any), the
Chairman of the Board shall have general executive charge management and control
of the properties, business and operations of the Corporation with all such
powers as may be reasonably incident to such responsibilities; the Chairman of
the Board may agree
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upon and execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Corporation and may sign all certificates for
shares of capital stock of the Corporation; and shall have such other powers and
duties as designated in accordance with these Bylaws and as from time to time
may be assigned to the Chairman of the Board by the Board of Directors. The
Chairman of the Board shall preside at all meetings of the shareholders and of
the Board of Directors.
Section 5.3 Powers and Duties of the Chief Executive Officer. Subject
to the control of the Board of Directors and the Executive Committee (if any),
the Chief Executive Officer shall have direct charge and supervision of the
management and control of the properties, business and operations of the
Corporation with all such powers as may be reasonably incident to such
responsibilities; the Chief Executive Officer shall, in the absence of the
Chairman of the Board, perform the duties of the Chairman of the Board; the
Chief Executive Officer shall have the authority to agree upon and execute all
leases, contracts, evidences of indebtedness and other obligations in the name
of the Corporation and may sign all certificates for shares of capital stock of
the Corporation; and, unless the Board of Directors otherwise determines, the
Chief Executive Officer shall, in the absence of the Chairman of the Board or if
there be no Chairman of the Board, preside at all meetings of the shareholders
and of the Board of Directors; and the Chief Executive Officer shall have such
other powers and duties as designated in accordance with these Bylaws and as
from time to time may be assigned to the Chief Executive Officer by the Board of
Directors or the Chairman of the Board.
Section 5.4 Powers and Duties of the Chief Operating Officer. Unless
the Board of Directors otherwise determines, the Chief Operating Officer may
agree upon and execute all leases, contracts, evidences of indebtedness and
other Obligations in the name of the Corporation and may sign all certificates
for shares of capital stock of the Corporation; and, unless the Board of
Directors otherwise determines, the Chief Operating Officer shall, in the
absence of the Chairman of the Board and the Chief Executive Officer, or if
there be no Chairman of the Board or Chief Executive Officer, preside at all
meetings of the shareholders and of the Board of Directors; and the Chief
Operating Officer shall have such other powers wad duties as designated in
accordance with these Bylaws and as from time to time may be assigned to the
Chief Operating Officer by the Board of Directors or the Chairman of the Board
or the Chief Executive Officer.
Section 5.5 Powers and Duties of the President. Unless the Board of
Directors otherwise determines, the President shall have the authority to agree
upon and execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Corporation; and, unless the Board of Directors
otherwise determines, the President shall, in the absence of the Chairman of the
Board, the Chief Executive Officer and the Chief operating Officer, or if there
be no Chairman of the Board or Chief Executive Officer or Chief Operating
Officer, preside at all meetings of the shareholders and of the Board of
Directors; and the President shall have such other
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powers and duties as designated in accordance with these Bylaws and as from tine
to time may be assigned to the President by the Board of Directors or the
Chairman of the Board or the Chief Executive Officer or the Chief Operating
Officer.
Section 5.6 Vice Presidents. Each Vice President shall at all times
possess power to sign all certificates, contracts and other instruments of the
Corporation, except as otherwise limited in writing by the Chairman of the
Board, the Chief Executive Officer, the Chief Operating Officer or the President
of the Corporation. Each Vice President shall have such other powers and duties
as from time to time may be assigned to such Vice President by the Board of
Directors, the Chairman of the Board, the Chief Executive Officer, the Chief
Operating Officer or the President.
Section 5.7 Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors, committees of the Board of Directors and the
shareholders, in books provided for that purpose; shall attend to the giving and
serving of all notices; may in the name of the Corporation affix the seal of the
Corporation to all contracts and attest the affixation of the seal of the
Corporation thereto; may sign with the other appointed officers all certificates
for shares of capital stock of the Corporation; shall have charge of the
certificate books, transfer books and stock ledgers, and such other books and
papers as the Board of Directors may direct, all of which shall at all
reasonable times; be open to inspection of any director upon application at the
office of the Corporation during business hours; shall have such other powers
and duties as designated in these Bylaws and as from time to time may be
assigned to the Secretary by the Board of Directors, the Chairman of the Board,
the Chief Executive Officer, the Chief Operating Officer or the President; and
shall in general perform all acts incident to the office of Secretary, subject
to the control of the Board of Directors, the Chairman of the Board, the Chief
Executive Officer, the Chief Operating Officer or the President.
Section 5.8 Assistant Secretaries. Each Assistant Secretary shall have,
the usual powers and duties pertaining to such offices, together with such other
powers and duties as designated in these Bylaws and as from time to time may be
assigned to an Assistant Secretary by the Board of Directors, the Chairman of
the Board, the Chief Executive Officer, the Chief Operating Officer, the
President or the Secretary. The Assistant Secretaries shall exercise the powers
of the Secretary that officer's absence or inability or refusal to act.
Section 5.9 Chief Financial Officer. The Chief Financial Officer shall
have responsibility for the custody and control of all the funds and securities
of the Corporation, and shall have such other powers and duties as designated in
these Bylaws and as from time to time may be assigned to the Chief Financial
Officer by the Board of Directors, the Chairman of the Board, the Chief
Executive Officer, the Chief Operating Officer or the President. The Chief
Financial officer shall perform all acts incident to the position of Chief
Financial Officer, subject to the control of the Board of Directors, the
Chairman of the Board, the Chief Executive Officer, the Chief Operating Officer
or
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the President; and the Chief Financial Officer shall, if required by the Board
of Directors, give such bond for the faithful discharge of the Chief Financial
Officer's duties in such form as the Board of Directors may require.
Section 5.10 Assistant Financial Officers. Each Assistant Financial
Officer shall have the usual powers and duties pertaining to such office,
together with such other powers and duties as designated in these Bylaws and as
from time to time may be assigned to each Assistant Financial Officer by the
Board of Directors, the Chairman of the Board, the Chief Executive Officer, the
Chief Operating Officer, the President or the Chief Financial Officer. The
Assistant Financial Officers shall exercise the powers of the Chief Financial
Officer during that officer's absence or inability or refusal to act.
Section 5.11 Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the Chairman of the Board,
the Chief Executive Officer, Chief Operating Officer or the President, together
with the Secretary or any Assistant Secretary shall have power to vote and
otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of security holders of, or with, respect to any action of security
holders, of any other corporation in which this Corporation may hold securities
and otherwise to exercise any and all rights and powers which this Corporation
may possess by reason of its ownership of securities in such other corporation.
Section 5.12 Delegation. For any reason that the Board of Directors may
deem sufficient, the Board of Directors may, except where otherwise provided by
statute, delegate the powers or duties of any officer to any other person, and
may authorize any officer to delegate specified duties of such office to any
other person. Any such delegation or authorization by the Board shall be
effected from time to time by resolution of the Board of Directors.
Article 6
Capital Stock
Section 6.1 Certificates of Stock. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
that required by law and the charter documents of the Corporation, as shall be
approved by the Board of Directors. Every holder of stock represented by
certificates shall be entitled to have a certificate signed by or in the name of
the Corporation by the Chairman of the Board, the Chief Executive Officer, the
Chief Operating Officer or the President or a Vice President and the Secretary
or an Assistant Secretary or the Chief Financial Officer or an Assistant
Financial Officer of the Corporation representing the number of share's (and, if
the stock of the Corporation shall be divided into classes or series, certifying
the Class and series of such shares) owned by such shareholder which are
registered in certified form provided; however, that any of or all the
signatures on the certificate may be facsimile. The stock record books and the
blank stock certificate books shall be kept
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by the Secretary or at the office of such transfer agent or transfer agents as
the Board of Directors may from time to time determine. In case any officer,
transfer agent or registrar who shall have signed or whose facsimile signature
or signature shall have been placed upon any such certificate or certificates
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued by the Corporation, such certificate may nevertheless be
issued by the Corporation with the same effect as if such person were such
officer, transfer agent or registrar at the date of issue. The stock
certificates shall be consecutively numbered and shall be entered in the books
of the Corporation as they are issued and shall exhibit the holder's name and
number of shares.
Section 6.2 Transfer of Shares. The shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal representatives
upon surrender and cancellation of certificates for a like number of shares.
Upon surrender to the Corporation or a transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books. The person in
whose name shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
Section 6.3 Ownership of Shares. The Corporation shall be entitled to
treat the hold of record of any share or shares of capital stock of the
Corporation as the holder in fact thereof and, accordingly, shall not be bound
to recognize any equitable or the claim to or interest in such share or shares
on the part of any other person, whether or riot it shall have express or other
notice thereof, except as otherwise provided by the laws of the state of
incorporation of the Corporation.
Section 6.4 Regulations Regarding Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer and registration or the
replacement of certificates for shares of capital stock of the Corporation.
Section 6.5 Lost, Stolen or Destroyed Certificates. The Board of
Directors may determine the conditions upon which the Corporation may issue a
new certificate of stock in place of a certificate theretofore issued by it
which is alleged to have been lost, stolen or destroyed arid may require the
owner of such certificate or such owner's legal representative to give bond,
with surety sufficient to indemnify the Corporation and each transfer agent and
registrar against any and all losses or claims which may arise by reason of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate in the place of the one so lost, stolen or destroyed.
14.
<PAGE> 15
Article 7
Miscellaneous
Section 7.1 Fiscal Year. The Board of Directors shall, by resolution,
fix the fiscal year of the Corporation.
Section 7.2 Corporate Seal. The corporate seal shall be circular in
form and shall have inscribed thereon the name of the Corporation and the state
of its incorporation, which seal shall be in the charge of the Secretary and
shall be affixed to certificates of stock, debentures, bonds, and other
documents, in accordance with the direction of the Board of Directors or a
committee thereof, and as may be required by law; however, the Secretary may, if
the Secretary deems it expedient, have a facsimile of the corporate seal
inscribed on way such certificates of stock, debentures, bonds, contract or
other documents. Duplicates of the seal may be kept for use by any Assistant
Secretary.
Section 7.3 Notice And Waiver of Notice. Whenever any notice is
required to be en by law, the charter documents of the Corporation or under the
provisions of these Bylaws, said notice shall be deemed to be sufficient if
given (i) by telegraphic, cable or wireless transmission (including by telecopy
or facsimile transgressions) or (ii) by deposit of the same in a post office box
or by delivery to an overnight courier service company in a sealed prepaid
wrapper addressed to the person entitled thereto at such person's post office
address, as it appears on the records of the Corporation, and such notice shall
be deemed to have been given on the day of such transmission or mailing or
delivery to courier, as the case may be.
Whenever notice is required to be given by law, the charter documents
of the Corporation or under any of the provisions of these Bylaws, a written
waiver thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person, including without limitation a director, at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the shareholders, directors, or members of a
committee of directors need be specified in any written waiver of notice unless
so required by the charter documents of the Corporation or these Bylaws.
Section 7.4 Facsimile Signatures. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by Board of Directors.
15.
<PAGE> 16
Section 7.5 Reliance upon Books, Reports and Records. A member of the
Board of Directors, or a member of any committee designated by the Board of
Directors, shall, in the performance of such person's duties, be protected to
the fullest extent permitted by law in relying upon the records of the
Corporation and upon information, opinion, reports or statements presented to
the Corporation.
Section 7.6 Participation in Related Business. Unless otherwise
provided by contract, officers and director of this Corporation may hold
positions as officers and directors of other corporations, in related
businesses, and their efforts to advance the interest of those corporations
shall not create a breach of fiduciary duty to this Corporation in the absence
of bad faith.
Section 7.7 Application of Bylaws. In the event that any provisions of
these Bylaws is or may be in conflict with any law of the United States, of the
state of incorporation of the Corporation or of any other governmental body or
power having jurisdiction over this Corporation, or over the subject matter to
which such provision of these Bylaws applies, or may apply, such provision of
these Bylaws shall be inoperative to the extent only that the operation thereof
unavoidably conflicts with such law, and shall in all other respects be in full
force and effect.
Article 8
Indemnification of Officers and Directors
Section 8.1 Indemnification. As permitted by Section G of Article
2.02-1 of the Texas Business Corporation Act or any successor statute (the
"Indemnification Article"), the Corporation hereby:
(a) makes mandatory the Indemnification permitted under Section B of
the Indemnification Article as contemplated by Section G thereof;
(b) makes mandatory its payment or reimbursement of the reasonable
expenses incurred by a former or present director who was, is, or is threatened
to be made a named defendant or respondent in a proceeding upon such director's
compliance with the requirements of the Section K of the Indemnification
Article; and
(c) extends the mandatory indemnification referred to in Section 8.1
(a) above and the mandatory payment or reimbursement of expenses referred to in
Section 8.1(b) above (i) to all former or present officers of the Corporation
and (ii) to all persons who are or were serving at the request of the
Corporation as a director, officer, partner or trustee of another foreign or
domestic corporation, partnership, joint venture, trust or employee benefit
plan, to the same extent that the Corporation is obligated to indemnify and pay
or reimburse expenses to directors.
16.
<PAGE> 17
Section 8.2 Nonexclusivity. The indemnification provided by this
Article shall not be deemed exclusive of any other rights to which the person
indemnified may be entitled under any bylaw, agreement, authorization of
shareholders or disinterested directors or, otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of such person's heirs
and legal representatives.
Section 8.3 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the Corporation or who is or was serving at the request of
the Corporation as a director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another business, foreign, domestic or
non-profit corporation, partnership, joint venture, sole proprietorship, trust
or other enterprise or employee benefit plan, against any liability asserted
against such person and involved by such person in such a capacity or arising
out of such persons status as such a person, whether or not the Corporation
would have the power to indemnify such person against that liability under the
provisions of this Article or the Texas Business Corporation Act.
Section 8.4 Witnesses. Notwithstanding any other provision of this
Article, the Corporation shall pay or reimburse expenses incurred by any
director, officer, employee or agent in connection with such person's appearance
as a witness or other participation in a proceeding at a time when such person
is not a named defendant or respondent in such proceeding.
Article 9
Amendments
Section 9.1 Amendments. The Board of Directors shall have the power to
adopt, amend and repeal from time to time Bylaws of the Corporation, subject to
the right of the shareholders entitled to vote with respect thereto to amend or
repeal such Bylaws as adopted or amended by the Board of Directors.
17.
<PAGE> 1
EXHIBIT 6.1
MICRO-ASI, Inc.
CONSULTING AGREEMENT
This agreement "Agreement", effective as of June 1, 1997, is made by
and between S&N Corporation "Consultant" and Micro-ASI, Inc. as "Company" for
consulting services to be rendered by Consultant to Company.
WHEREAS, the Company is a development stage company desiring the
expertise of Consultant with respect to the designing, manufacturing, and
marketing a notebook computer utilizing multi-chip module (MCM) technology, and
WHEREAS, Company acknowledges consultant shall provide services on a
nonexclusive basis, and
WHEREAS, Company is in the process of raising capital and uncertain as
to the amount that will be raised, and
WHEREAS, Company, at this time, is not financially capable of employing
consultant on a full time basis, and
WHEREAS, Consultant acknowledges that, until such time that the Company
has successfully developed a marketable product and is receiving significant
revenues the from the sale of said product, the Company does not intend to offer
Consultant full time employment,
NOW THEREFORE, Consultant and Company agree as follows:
1. Consultant shall provide consulting services to Company for
the purpose of designing, developing and marketing a multi-chip module
to be utilized on the motherboard for notebook computers.
2. Consultant, although not an employee of the Company, will
agree to take the title of Chairman of the Board and represent the
Company as Chief Executive Officer.
3. Consultant shall be paid, in advance on the first day of
each month, a consulting fee of $15,000 per month and a travel
allowance of $ 10,000 per month.
4. Consultant represents and warrants that he is under no
obligation or restriction, nor shall he assume any such obligation or
restriction, which would in any way interfere or be inconsistent with,
or present a conflict of interest concerning the services to be
rendered by Consultant under this Agreement.
<PAGE> 2
5. All work generated hereunder or goods produced pursuant to
this Agreement shall become the property of Micro-ASI.
The parties to this Agreement mutually agree that this Agreement
contains the entire understanding between the parties and this Agreement shall
not be modified other than by an instrument, in writing, executed by both
parties.
This Agreement may be terminated by either party with a minimum of 30
days written notice.
This agreement shall be construed and interpreted in accordance with
the laws of the State of Texas.
Consultant /s/ C.E. SMITH CEO & CHMN
---------------------------------
S&N Corporation
Signed by /s/ CECIL E. SMITH
---------------------------------
Cecil E. Smith, Jr.
Micro-ASI, Inc. /s/ JOEL E. CLAYBROOK, PRESIDENT
----------------------------------------
Joel E. Claybrook, as President
<PAGE> 1
EXHIBIT 6.2
CONSULTING AGREEMENT
THIS AGREEMENT is entered into and is effective as of the 30th day of
November, 1998 BY AND BETWEEN MicroASI, Inc., a Texas corporation with principal
offices at 9330 LBJ Freeway, Suite 900, Dallas, TX 75243 (the "Company") AND
Kingdom Capital, Inc., a Nevada Corporation, with principal offices at 990
Highland Drive, Suite 110V, Solana Beach, California 92075 (the "Consultant").
WHEREAS:
A. The Company seeks consulting services from Consultant.
B. Consultant is willing, subject to the terms and conditions of
this Agreement, to provide certain consulting services in exchange for
fees as more specifically set forth herein.
C. The Company hereby acknowledges and represents that it has
knowledge of Consultant and its staff and that Consultant has the
background, knowledge, and expertise that the Company is seeking, and
on this basis, the Company hereby enters into this Agreement.
D. The Company further acknowledges that Consultant will not be
performing either legal or accounting services for the Company. The
Company further acknowledges and warrants that it has consulted with
and will continue to rely on its own legal, tax, and accounting
advisors.
NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:
1.00 CONSULTING SERVICES. Consultant shall, for a period of two (2) years after
the signing of this Agreement, be available to consult with the Company in the
following areas:
1.01 Developing an investor relations program for the Company;
1.02 Identify potential equity investors;
1.03 Research on proposed new business opportunities;
1.04 Assistance in revising the Company's business plan including
financial projections, operating strategy, and business development
strategy;
1.05 Executive management and board of directors search, selection, and
recruitment;
1.06 Identification and selection, when necessary of additional
professional services;
1.07 Assistance, when necessary, in negotiations leading to strategic
business relationships;
1.08 Public and media relations including distribution of reports on
the company to various print media and brokerage firms as prepared or
approved by the company;
1.09 Assistance in securing purchase order financing.
1 of 4
<PAGE> 2
2.00 COMPANY'S OBLIGATION TO PAY CONSULTING FEES. In consideration for
the services to be rendered by Consultant, the Company shall pay Consultant the
following fees:
2.01 RETAINER FEE. The Company shall pay to Consultant a retainer fee of
Sixty Five Thousand Dollars ($65,000.00). The retainer shall be paid in
the following manner:
$10,000.00 installment to be paid in December 1998
$20,000.00 installment to be paid in January 1999
$20,000.00 installment to be paid in February 1999
$15,000.00 installment to be paid in March 1999
2.02 MONTHLY FEE. The Company shall pay to Consultant a monthly
consulting fee of $25,000.00 beginning in December 1998.
2.03 INVOICES. The Company shall pay all invoices upon their receipt.
3.00 MISCELLANEOUS
3.01 FURTHER ASSURANCE. Each of the parties shall hereafter execute all
documents and do all acts reasonably necessary to effect the provisions
of this Agreement.
3.02 SUCCESSORS. The provisions of this Agreement shall be deemed to
obligate, extend to and inure to the benefit of the successors, assigns,
transferees, grantees, and indemnitees of each of the parties to this
Agreement.
3.03 INDEPENDENT COUNSEL. Each of the parties to this Agreement
acknowledges and agrees that it has been represented by independent
counsel of its own choice throughout all negotiations which preceded the
execution of this Agreement and the transactions referred to in this
Agreement, and each has executed this Agreement with the consent and
upon the advice of said independent counsel. Each party represents that
he or it fully understands the provisions of this Agreement, has
consulted with counsel concerning its terms and executes this Agreement
of its own free choice without reference to any representations,
promises or expectations not set forth herein.
3.04 INTEGRATION. This Agreement, after full execution, acknowledgment
and delivery, memorializes and constitutes the entire agreement and
understanding between the parties and supersedes and replaces all prior
negotiations and agreements of the parties, whether written or
unwritten. Each of the parties to this Agreement acknowledges that no
other party, nor any agent or attorney of any other party has made any
promises, representations, or warranty whatsoever, express or implied,
which is not expressly contained in this Agreement; and each party
further acknowledges that he or it has not executed this Agreement in
reliance upon any belief as to any fact not expressly recited
hereinabove.
2 of 4
<PAGE> 3
3.05 ATTORNEYS FEES. In the event of a dispute between the parties
concerning the enforcement or interpretation of this Agreement, the
prevailing party in such dispute, whether by legal proceedings or
otherwise, shall be reimbursed immediately for the reasonably incurred
attorneys' fees and other costs and expenses by the other parties to the
dispute.
3.06 CONTEXT. Wherever the context so requires: the singular number
shall include the plural; the plural shall include the singular.
3.07 CAPTIONS. The captions by which the sections and subsections of
this Agreement are identified are for convenience only, and shall have
no effect whatsoever upon its interpretation.
3.08 SEVERANCE. If any provision of this Agreement is held to be illegal
or invalid by a court of competent jurisdiction, such provision shall be
deemed to be severed and deleted; and neither such provision, nor its
severance and deletion, shall affect the validity of the remaining
provisions.
3.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts.
3.10 EXPENSES ASSOCIATED WITH THIS AGREEMENT. Each of the parties hereto
agrees to bear its own costs, attorney's fees and related expenses
associated with this Agreement.
3.11 ARBITRATION. Any dispute or claim arising to or in any way related
to this Agreement shall be settled by arbitration in Dallas, TX. All
arbitration shall be conducted in accordance with the rules and
regulations of the American Arbitration Association ("AAA"). AAA shall
designate an arbitrator from an approved list of arbitrators following
both parties' review and deletion of those arbitrators on the approved
list having a conflict of interest with either party. Each party shall
pay its own expenses associated with such arbitration (except as set
forth in Section 9.05 Above). A demand for arbitration shall be made
within a reasonable time after the claim, dispute or other matter has
arisen and in no event shall such demand be made after the date when
institution of legal or equitable proceedings based on such claim,
dispute or other matter in question would be barred by the applicable
statutes of limitations. The decision of the arbitrators shall be
rendered within Sixty (60) days of submission of any claim or dispute,
shall be in writing and mailed to all the parties included in the
arbitration. The decision of the arbitrator shall be binding upon the
parties and judgement in accordance with that decision may be entered in
any court having jurisdiction thereof.
3.12 ASSIGNMENT. The Company shall have no right to assign this
Agreement or any obligations created hereby unless Consultant expressly
approves the assignment in writing.
3 of 4
<PAGE> 4
3.13 AUTHORITY TO BIND. A responsible officer of the Company has read
and understands the contents of this Agreement and is empowered and duly
authorized on behalf of the Company to execute it.
3.14 CHOICE OF LAW. The formation, construction and performance of this
agreement shall be construed in accordance with the laws of Texas.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
FOR THE COMPANY:
By: /s/ Joel Claybrook
----------------------------------
Joel Claybrook, President
FOR CONSULTANT:
By: /s/ Brent Fouch
----------------------------------
Brent Fouch, President
4 of 4
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