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FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number: 000-27027
MICRO-ASI, INC.
(Exact name of registrant as specified in its charter)
STATE OF TEXAS 75-2586030
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION) IDENTIFICATION NO.)
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12655 NORTH CENTRAL EXPRESSWAY, SUITE 1000
DALLAS, TEXAS 75243
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(972)392-9636
(TELEPHONE NUMBER, INCLUDING AREA CODE)
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for much shorter period that the
registrant was required to file such reports, and (2) has been subject to
such filing requirements for the past 90 days. [X]Yes [ ]No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
As of March 24, 2000, the aggregate market value of voting and non-voting
common equity held by non-affiliates of the Company was $13,758,261.
The number of shares outstanding as of March 24, 2000 was 19,560,111 shares
of Common Stock.
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DOCUMENTS INCORPORATED BY REFERENCE
Listed hereunder are the following documents that are incorporated by
reference and are a part of the Form 10-KSB.
(1) Portions of the Proxy Statement in connection with the Company's Annual
Meeting held on December 15, 1999, (2)portions of the Company's Form
10-SB/A filed on February 4, 2000 and (3) portions of the Form 8-K in
connection with the purchase of Best Technologies, Inc. on January 18,
2000.
A list of all Exhibits to this Annual Report Form 10-KSB is located on
page 35.
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.
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 involving the
Company since its inception. There has been no sale or acquisition of a
significant amount of assets that were not in the ordinary course of the
Company's business, except that the Company acquired Best Technologies, Inc.
("BTI") on January 18, 2000, with an effective date of January 1, 2000, as
disclosed in the Company's Form 8-K filed on January 27, 2000.
This document includes "forward-looking statements" including, in particular,
the statements about Micro-ASI's plans, strategies and prospects, future
financial condition and results of operations under the headings "Management's
Discussion and Analysis" or "Plan of Operations." We have based these statements
on our expectations about future events. The words "may," "intend," "will,"
"expect," "anticipate," "objective," "projection," "forecast," "position" or
negatives of those terms or other variations of them or by comparable
terminology are intended to identify forward-looking statements. Although
management believes that the plans, intentions and expectations reflected in or
suggested by such forward-looking statements are reasonable, no assurance can be
given that such plans, intentions and expectations will be achieved, and we
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.
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(b) BUSINESS OF ISSUER.
(1) PRINCIPAL PRODUCTS AND THEIR MARKETS:
The Company's intends to design and manufacture products such as semiconductor
Multi-Chip Modules (MCM), Printed Circuit Boards (PCB), and electronic end
products based on flip-chip technology. The Company intends to provide these
products to strategic customer partners in a "one-stop-shop" for design,
prototype and manufacturing.
These types of products represent a large market opportunity, because the
electronics market is moving toward faster, smaller, higher performance devices
with lower costs and reduced power consumption. The worldwide electronics
end-equipment market is $1.2 trillion today and projected by the American
Electronics Association to grow to over $2 trillion by 2004. A growing
percentage of this market is being served through outsourcing. Outsourcing is
the process whereby a company contracts with another company for goods and/or
services instead of manufacturing the products itself. Cahners Research
estimates that the contract manufacturing market is growing from more than $100
billion in 1999 to $170 billion by 2001.
Today, approximately 98% of semiconductor packaging is internally interconnected
by wire bond, which has been used since the late 1950s and is reaching its
physical limitations in terms of size reduction and cost. Flip-chip technology
differs from wire bond in that it allows a die to be connected directly to the
substrate using "bumping" technology, which is a process of using solder balls
to attach the die instead of using wire bond. Flip-chip technology offers the
following advantages over wire bond:
1. reduction in size
2. lower heat generation
3. improved performance.
Until recently, costs of flip-chip production have been too high to permit
widespread commercial use. Recent advancements in "bumping" the technology, the
process of attaching solder balls to a die, and advances in "high density
substrate", which is a medium to connect the die to its external packaging, are
dramatically reducing the costs of flip-chip production and making it much more
attractive as an alternative to wire bond technology for large pin count
devices.
Micro-ASI's management believes that the current wire bonding process used to
interconnect silicon die to external packaging will be unable to support future
requirements of electronics products. The constant demand for affordable,
smaller products, with more functionality and greater performance that operate
at reduced power consumption levels will likely be supported by the flip-chip,
MCM's and system-on-a-chip technologies. These emerging technologies offer
significant form factor reduction for products due to a much-reduced footprint
of the electronics. With a wire bond approach, additional space is needed to
interconnect the silicon die to a substrate.
The close proximity of the die in a circuit afforded by flip-chip interconnect,
along with the elimination of the wire bonds for connections, creates a faster
and more efficient design. A recent study by William Brown found that a wire
bonded MCM was 15% to 20% slower than a functionally identical flip-chip MCM.
Problems with the wire bond approach exist because
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the wires themselves introduce inductance, cross talk and impedance mismatches
into a system. These "parasitics" limit the bandwidth of a device or system and
preclude it from operating at peak performance. In the past, wire bonds
minimally affected the operating speed of silicon-based products. But today,
these wire bonds have become a barrier to continued product advancement in many
cases because silicon design technologies and manufacturing techniques have made
advances in producing designs that operate much faster than similar devices in
the past. As each incremental improvement in the silicon die was developed over
the past several decades, the instilled performance of the silicon die improved,
while the performance of the wire bonds remained unchanged. Therefore, wire
bonds have now become a major obstacle in the continuous quest for product
performance improvement.
Another benefit of these emerging technologies over conventional wire bond
interconnect methods is that the heat generated by flip-chip silicon die can be
more readily dissipated into the substrate than with wire bond interconnect.
Flip-chip mounts the silicon die "face down" to the substrate. An underfill
material is applied between the die and the substrate. This underfill provides
structural support for the solder "bumps" that provide the electrical connection
between the die and the substrate. The underfill also has excellent thermal
conductivity properties. Thus the heat generated by the die is channeled to the
substrate via the underfill. With wire bond interconnect, however, the silicon
die is mounted "face up" on the substrate, exposing the input and output (I/O)
pads of the die. This allows a wire-bonding machine to attach wires to each.
However, the heat radiates off of the die rather than carried away to a
substrate by an underfill. This is an inefficient thermal management system, as
the thermal transfer rate through the cavity of the package is much slower in
the wire bond interconnect configuration than the heat transfer rate of the
underfill/substrate configuration. The cooler temperature of the die in the
flip-chip configuration means that the die will be able to operate at faster
speeds and will experience a reduced level of thermal stress, compared to the
wire bond interconnect.
Micro-ASI's objective is to be a "turn key" design and manufacturing company.
This means that the Company will have the following capabilities:
1. Product concept definition and trade studies
2. Engineering design, such as systems, electrical and mechanical
3. Engineering analysis, such as thermal, vibration, stress, timing and power
4. consumption Prototype manufacturing
5. Product conformance testing and evaluation
6. Manufacturing capability
Micro-ASI plans to integrate all of the product development and manufacturing
steps into the Company. Integration will allow the Company to offer a
"one-stop-shop" solution. As of the date of this document, management is unaware
of any company offering all of these capabilities.
(2) NEW PRODUCT STATUS
Mr. Cecil E. Smith, Jr., Chairman of the Board of Micro-ASI, brings his industry
contacts to the Company. Due to these contacts, Micro-ASI has been made aware of
a number of existing products that need to be redesigned and are candidates to
utilize these emerging technologies. Micro-ASI has begun work on selected
redesign projects representing significant business
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opportunities for the Company. These projects in process include the redesign of
a series of chips for a large merchant semiconductor company, the redesign of a
flash memory module for a large memory manufacturer, and integrating four
significant function chips into one MCM for a large notebook computer company.
Micro-ASI intends to retain the design rights to all redesigned products. This
business strategy and policy should cause Micro-ASI's installed intellectual
property base to grow rapidly and keep the Company in the forefront of
technology and turnkey delivery of solutions leveraging such key technologies.
The Company's five-year business plan includes the 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 telecommunications equipment.
In January 2000, the Company and ZAE Research, Inc. ("ZAE") reached an agreement
to terminate a relationship described through a Memorandum of Understanding
("MOU") previously agreed to in March 1999. Under the MOU, the Company could
have acquired 50% of a subsidiary of ZAE in addition to funding development of
certain technology and obtaining other royalty arrangements. The Company never
acquired any ownership in ZAE and ceased funding in December 1999.
On January 18, 2000, and effective January 1, 2000, Micro-ASI entered into a
definitive stock purchase agreement (the "Agreement") whereby the Company
acquired all of the outstanding common stock of Best Technologies, Inc. ("BTI").
BTI, a Texas corporation, is a contract electronics manufacturer headquartered
in Wylie, Texas. This acquisition adds the manufacturing capabilities that will
enable the Company to become a turnkey or one-stop-shop for its customers.
(3) SOURCES AND AVAILABILITY OF MATERIALS AND PRINCIPAL SUPPLIERS:
Primary sources for component materials to manufacturer redesigned products will
come through vendor relationships with electronic component distributors and
original equipment manufactures (OEMs). Substrate requirements will be met
through close relationships with material manufacturers and fabricators in the
electronics industry. Micro-ASI will work closely in the development of
substrates with vendors where new materials are required for the assembly
processes.
The Company plans to work directly with equipment manufacturers to sell
flip-chip and MCM packaging solutions at the component or board level. For
example, the Company will consult directly with a hardware manufacturer to
miniaturize an existing product design by employing flip-chip packaging of key
integrated circuits. In this type of consultation the Company will directly sell
consulting services, design services, prototype manufacturing and board
production without the use of distribution partners or other reseller
intermediaries.
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(4) PATENTS, TRADEMARKS, LICENSES, CONCESSIONS AND ROYALTIES
Micro-ASI has filed a patent with the US Patent Office for wafer integration and
testing.
(5) SEASONALITY OF INDUSTRY
The industry that Micro-ASI serves is not seasonal.
(6) INDUSTRY PRACTICES
It is the normal practice in the electronic contract manufacturing industry to
allocate significant working capital to the cost of carrying component
inventory. Contract manufacturing scheduling can typically have short lead
times. This will cause the manufacturer to inventory lead-time critical
components at reasonable enough quantities to enable the manufacturer to react
to volatile schedule requirements. The manufacturer will often pay its vendors
prior to receiving payment from its customers. This can, at times cause working
capital shortages during periods of rapid expansion.
(7) DEPENDENCE ON ONE OR A FEW CUSTOMERS:
The Company has had no revenues since its inception and has not established a
customer base.
(8) ORDER BACKLOG
The Company has no backlog of confirmed orders.
(9) GOVERNMENT CONTRACTS
Micro-ASI has no contracts with any government entity.
(10) 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.
Traditionally, flip-chips and MCMs have been used only in military or other
performance intensive applications because of higher costs associated with them
compared to older, conventional interconnect technologies. These higher costs
for flip-chips and MCMs have historically been incurred primarily because of the
cost to apply solder balls on the die, the cost of a sufficiently coplanar
substrate, and low yields due to Known Good Die ("KGD") issues. The expression
"Known Good Die" pertains to the availability of semiconductor chips that are
guaranteed to meet the same manufacturers specifications and their packaged
counterparts.
Until recently, the cost of bumping a standard eight-inch wafer was typically in
excess of $1,300. Through technological advances the cost of bumping has dropped
to around $60-$80 per wafer. This accomplishment has removed a large hurdle in
making flip-chip production cost competitive with traditional interconnect
approaches.
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Substrate technology has also been a traditional barrier to the cost effective
deployment of flip-chips and MCMs. The use of flip-chip technology enables a
"fine pitch" etch and I/O routing that is not possible with wire bond
technology. This greater density capacity requires a substrate that can be
manufactured to more stringent tolerances and can insulate electrical signals at
very narrow line widths. Until recently, the cost of these high performance
substrates was not competitive with conventional substrate materials. Micro-ASI
is working to identify the most cost effective high performance substrate
material. These substrates have not yet been fully developed for the high volume
production environment. Micro-ASI is working with Hadco, (a leading electronic
substrate manufacturer) to complete the development and scalability of these
substrate materials. Micro-ASI, through its customers, will furnish the products
with the volumes necessary to allow Hadco to allocate significant resources to
this effort. Micro-ASI intends to use Hadco's substrates in the production of
these products.
Without KGD, the performance of systems and/or modules cannot be characterized
at the component level. Furthermore, the underfill used in flip-chip
applications often makes the rework of a module or system difficult when
defective die are identified at system level test. Until recently, there were
relatively few semiconductor products even offered in a KGD format. Intel now
has the SmartDie(TM) program; Texas Instruments has a KGD product line, as do
other leading semiconductor companies, such as Motorola, National Semiconductor
and Micron. There are also companies, such as ChipSupply, that specialize
exclusively in KDG. The movement toward KGD has added incremental momentum to
the overall KDG sector of the industry.
Because of these industry barriers and the significant investment 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. Currently there are relatively few companies offering
design services utilizing flip-chip and/or MCM technologies.
The Company is positioned to be a "core enabling technology" enterprise. This
means that Micro-ASI will pull the various pieces of the advanced interconnect
components together and act as an industry change agent in the transition from
wire bond interconnect to flip-chip interconnect. There are companies in
existence that have a piece of the overall flip-chip and MCM process, but few
companies, if any, have focused on the entire process.
Management believes that its long-standing and continuing contacts with senior
executives in the semiconductor, telecommunications, computer, medical, and
automotive industries should 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 intends to retain ownership of designed
products should 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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(11) LAST TWO YEARS' RESEARCH AND DEVELOPMENT SPENT:
Micro-ASI has spent $302,355 and $808,396 for the twelve months ended December
31, 1998, and December 31, 1999, respectively for research and development.
(12) COST AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS:
Micro-ASI is not aware of any issues regarding compliance with environmental
laws that would create any adverse conditions for the Company.
(13) NUMBER OF TOTAL AND FULL TIME EMPLOYEES:
Micro-ASI has sixteen full-time employees as of March 1, 2000, which does not
include BTI employees.
ITEM 2 PROPERTIES
Micro-ASI's corporate offices and research facilities are currently located in
two adjoining leased facilities in Dallas, Texas. The leases on these facilities
will expire in March and April 2000. The two leases combined total approximately
7,335 square feet, one for approximately 6,450 square feet and the second for
approximately 885 square feet. The Company does not plan to renew the 885 square
foot lease. The Company has negotiated a new lease for 7,221 square feet for the
executive offices. The new lease is for a period of two years and will expire in
March 2002.
The Company is currently negotiating a new lease to house the Technology
Integration Deployment Center ("TIDC") and process engineering. This lease will
be for approximately 10,000 square feet.
ITEM 3 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.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Micro-ASI held an Annual Meeting of the Shareholders on December 15, 1999.
Cecil E. Smith, Jr., Joel E. Claybrook, Dr. Meng-Sheng Lin, Dr. Myles Welborn
and James Hamner were all elected as directors at the meeting. The directors
were elected in three classes. James Hamner and Dr. Myles Welborn were elected
to Class I, which serve for a term of one year. Dr. Meng-Sheng Lin was elected
as a Class II director, which serves a term of two years. Cecil E. Smith, Jr.
and Joel E. Claybrook were elected as Class III directors, which serve a term of
three years.
The shareholders also voted to approve the 1999 Stock Option Plan, which is more
fully described in the Proxy Statement and is hereby incorporated by reference.
The number of shares voting for the Board of Directors was 12,939,809. There
were no votes against, no abstentions and no broker non-votes.
The number of shares voting for the 1999 Stock Option Plan was 12,896,309 and
there were 28,500 votes against the plan. There were no abstention or broker
non-votes.
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PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 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 fully become a reporting
company, on a voluntary basis, with the Securities and Exchange Commission and
has filed all the 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.
As of March 24, 2000, there were approximately 600 holders of the Company's
Common Stock.
The Company has not, nor does it intend to declare any dividends on its Common
Stock in the future. The Company has no current restrictions on paying
dividends.
ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Plan of Operations:
The Company is a development stage company and to date has had no revenues. The
primary activities to date have been limited to forming the management team,
research and development and identifying products to redesign utilizing
flip-chip technology. Accordingly, management does not consider the historical
results of operations to be representative of future results of operation of the
Company. The following financial information shows results of operations for the
twelve months ended December 31, 1999 and 1998 and for the three months ended
December 31, 1999 and 1998, respectively. This Form 10-KSB should be read in
conjunction with the Form 10-QSB and Form 10-QSB/A which were filed on December
16 and 17, 1999, respectively, the Form 8-K which was filed on January 27, 2000,
Form 10-SB/A which was filed on February 4, 2000 and the Proxy Statement for a
Special Meeting of the Shareholders filed on February 15, 2000.
The Company has identified redesign projects from three major electronic
manufacturers that will serve as the core of the Company's research and
development strategy. The Company anticipates that it will spend approximately
$2.1 million in research and development projects during 2000. Micro-ASI is now
in the process of project definition, which includes precise technical details,
number of units, pricing and the time to do the redesign. These three projects
will result in significant business opportunities for the Company after they
become contracts. The Company has also purchased BTI, a contract electronics
manufacturer, which will allow the Company to become a one-stop-shop for its
customers.
Management intends to complete a $15 million private placement financing during
the second quarter of 2000. Upon completion of this financing, Micro-ASI will
begin its expansion plans in accordance with its business plan. The Company will
invest in new equipment so that BTI can install a new flip-chip line and two
additional surface mount lines to
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increase the production capacity of the facility at an anticipated cost of
approximately $3.5 million. Micro-ASI will also begin work on a Technology
Integration Deployment Center ("TIDC"). The Company will locate a suitable
facility and begin the staffing of employees and purchase of the necessary
equipment to complete the research and development portion of the business plan.
This design facility is an integral part of the Company's strategy to provide a
turnkey solution for its customers.
Micro-ASI anticipates that after the additional funding is completed, it will
increase its number of employees from eleven to approximately 200 employees over
a period of approximately 12 months. This includes the employees of BTI.
The Company anticipates that it will purchase approximately $1.5 million in
capital equipment during 2000. This includes production equipment and equipment
for the TIDC. The Company also anticipates that it will lease an additional
$16.8 million in both research and development equipment and production
equipment to further increase the capacity of BTI over a period of the next 24
months.
The Company also anticipates that it will spend an additional $1.0 million to
increase the size of the building of BTI. This increase in size will increase
the manufacturing capacity of BTI.
Micro-ASI believes the completion of a $15 million private placement effort
mentioned above will provide sufficient capital reserves to allow the Company to
achieve its goals as set forth above. Should the Company not raise this
acknowledges additional capital, operations will be materially affected and the
goals set forth above will be scaled back to levels consistent with the
Company's available funds.
RESULTS OF OPERATIONS:
The following financial information shows results of operations for the twelve
months ended December 31, 1999 and 1998, respectively, and for the three-month
periods ended December 31, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
Year Ended
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December 31, 1999 December 31, 1998
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<S> <C> <C>
Interest Income $ 27,451 $ 8,649
Research and Development (808,396) (302,355)
General and Administrative (2,922,080) (516,964)
Interest Expense (2,674) (7,407)
----------- ---------
Net Loss $(3,705,699) $(818,077)
=========== =========
</TABLE>
The increase in research and development expenses for the twelve months ended
December 31, 1999 compared to December 31, 1998 was due primarily to the initial
development projects relating to battery technology and to the development work
on the three projects secured by the Company.
As of January 18, 2000, ZAE and Micro-ASI mutually agreed to terminate their
relationship as described in the Memorandum of Understanding ("MOU") previously
agreed to in March 1999. ZAE has agreed to repay all amounts previously funded
by the Company, however due to the financial condition of ZAE; management has
elected to fully reserve this receivable.
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The increase in General and Administrative expenses for the twelve months ended
December 31, 1999 compared to the twelve months ended December 31, 1998 was
primarily attributable to increases in consulting fees, legal and professional
fees, rent and travel expenses. Consulting fees were approximately $675,127 and
$394,875 for the 12 months ended December 31, 1999 and 1998, respectively. The
consulting fees were for financial, administrative, sales and marketing and
increased due to the increased activities of the Company and the initial
redesign activities of the Company. Legal and professional fees were
approximately $281,328 and $77,613 for the 12 months ended December 31, 1999 and
1998, respectively. The increases in these fees were primarily attributable to
filing various required forms with the SEC, as Micro-ASI became a reporting
company in November 1999. The Company paid approximately $720,407 in salaries
for the year ended December 31, 1999. The Company paid no salaries in 1998. Rent
expense was approximately $79,674 and $23,491 for the 12 months ended December
31, 1999 and 1998, respectively. Travel expenses were $350,239 and $171,926 for
the 12 months ended December 31, 1999 and 1998, respectively. The increase in
travel expenses was attributable to the Company's private placement of stock,
developing business relationships and securing redesign projects.
In 1999, the Company determined it would be appropriate to award Kingdom Capital
in the form of 600,000 shares of the Company's Common Stock valued at $600,000.
This amount was charged to expense in June 1999. In addition, the Company
granted Kingdom Capital an additional 150,000 shares valued at $150,000 for
future services through December 31, 1999. The Company chose to grant stock in
lieu of cash due to its limited liquidity situation at the time of the decision.
As of December 31, 1999, the Company had charged all of the $150,000 to expense.
SUMMARY BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS December 31, 1999
-----------------
<S> <C>
Cash and equivalents $ 551,292
Other Assets 116,756
-----------
Total Assets $ 668,048
===========
LIABILITIES AND EQUITY
Accounts Payable $ 501,543
Note, Interest and Other Payables 81,949
Additional Capital 5,786,523
Deficit Accumulated during
development stage) (5,701,967)
-----------
Total Liabilities & Equity $ 668,048
===========
</TABLE>
The increase in cash and additional capital at December 31, 1999 reflects the
proceeds from additional sales of shares of Common Stock. During the 12 months
ended December 31, 1999, the Company sold 3,006,536 shares of its Common Stock
for $3,006,536. The note and interest payable settled during 1999 for 100,000
shares of the Company's Common Stock valued at $100,000. The excess over the
carrying value of the note and interest payable was expensed. The increase in
"Other Assets" represents purchases of property
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and equipment. All other line items, excluding "Deficit Accumulated", which
reflects the operating losses, have remained relatively unchanged.
LIQUIDITY AND CAPITAL RESOURCES:
During the twelve months ended December 31, 1998 the Company sold 768,800 shares
of common stock for $766,300. During the 12 months ended December 31, 1999 the
Company sold 3,006,536 shares of common stock for $3,006,536. The proceeds from
the sales of these securities were used to hire the executive management team,
secure the redesign projects and finance daily operations. From January 1, 2000
through March 24, 2000, the Company sold 155,000 shares of its common stock for
$155,000. In addition, the Company issued 178,000 shares of common stock
valued at $178,000 in payment for services performed and expensed in 1999.
In February 2000, the Company obtained a $1.3 million line of credit arrangement
that expires in March 2001 from a financial institution.
Other than Notes Payable to BTI resulting from its acquisition on January 18,
2000, the only fixed obligation is the executive office lease rental of $8,330
per month. However, to execute the business plan, the Company intends to sell
shares of preferred stock in the second quarter of 2000 to raise up to
$15,000,000. The proceeds from the sale of these securities would provide for
the following:
o Leasing a facility for a Technology Integration Deployment Center
("TIDC") This facility is intended to be a collection of capabilities,
tools and technologies, staffed with engineers and technologists, The
TIDC and its staff are 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.
o Fund the initial note due to BTI in the amount of $600,000.
o Purchasing manufacturing equipment to increase the capacity of BTI.
The additional equipment will include flip-chip, surface mount and
related production equipment. The Company will purchase furniture,
computers, test equipment and production equipment related for the
research and development center.
o Employing additional senior level management.
New senior level managers will include a Chief Financial Officer,
Chief Information Officer, VP of Business Development, VP of Human
Resources and VP of Legal Affairs.
o Employing senior and junior level design engineers for research and
development and for the TIDC.
o Provide computer equipment and software tools for above mentioned
design engineers.
o Continuing development of current redesign projects.
o Initiating new large-scale redesign programs.
o Addition of administrative, accounting, financial and human resources
personnel to strengthen the infrastructure of the Company.
12
<PAGE> 13
o Providing working capital for daily operations
If the Company is unable to raise the 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 expansion of BTI
could be delayed. Secondly, the Company could reduce the number of initial
projects, which would reduce the number of personnel required.
Effective January 18, 2000, Micro-ASI completed the acquisition of the
outstanding common stock (the "BTI Common Stock") of Best Technologies, Inc., a
Texas corporation, from the sole shareholder of BTI (the "Seller"), pursuant to
a stock purchase agreement (including all Exhibits and Schedules thereto and
documents executed in connection therewith, the "Agreement"). BTI is an
electronics contract manufacturer headquartered in Wylie, Texas. In connection
with the Agreement, one share of preferred stock of BTI (the "BTI Preferred
Stock") was created and issued to the Seller. The Company, as the holder of the
BTI Common Stock, has the right to appoint one director to the three member
Board of Directors of BTI. Seller, as holder of the BTI Preferred Stock has the
right to appoint two directors to the three-member Board of Directors of BTI and
certain other voting rights. Pursuant to the Agreement, the Company will receive
the outstanding BTI Preferred Stock upon the satisfaction of certain
obligations, including, but not limited to, the completion of an initial public
offering of the Company's Common Stock.
The total aggregate purchase price for the BTI Common Stock is approximately
$5.3 million. The purchase price includes (i) a promissory note from the Company
to the Seller in the amount of $2,500,000, due the earlier of (a) December 31,
2001 or (b) ten days after the completion of an initial public offering by the
Company (the "Purchase Note"); (ii) a convertible note from the Company to the
Seller in the amount of $1,416,667 due December 31, 2001, which is immediately
convertible into 1,416,677 shares of Common Stock of the Company (the
"Convertible Note"); (iii) a promissory note from BTI to the Seller and
guaranteed by the Company in the amount of $600,000, due the earlier of (a)
March 31, 2000 or (b) ten days after the completion of one or more private
placements having an aggregate gross offering amount in excess of $6,000,000
(the "Cash Note"); and additionally, the Company has committed to purchase
$750,000 of capital expenditures to be used in BTI's flip-chip assembly due
ninety days after the completion of one or more private placements having an
aggregate gross offering amount in excess of $6,000,000 (the "Capital
Contribution"). Furthermore, the payment of the Cash Note, the Purchase Note and
the Convertible Note are secured by a stock pledge agreement pursuant to which
the Company has pledged all of the BTI Common Stock. The purchase price is not
subject to any post-closing adjustments. The acquisition of BTI provides the
Company with manufacturing capabilities to produce the redesigned products and
offer turnkey solutions to its customers. Because the seller of BTI still
retains voting control, the Company will not consolidate the operations of BTI
until the obligations noted above are satisfied.
Should the Company not be able to raise $15 million dollars through an equity
offering, the Company may be limited to funding of the initial note in the
amount of $600,000, which would limit the Company's ability to increase the
manufacturing capacity of BTI.
The Company held a Special Meeting of the Shareholders on March 1, 2000 to
approve an increase in the authorized preferred shares from 1,000,000 to
15,000,000 and to approve an increase in the authorized common shares from
20,000,000 to 75,000,000 shares and authorize the board to issue blank check
Preferred Stock. The shareholders approved this increase and change to the
Articles of Incorporation.
13
<PAGE> 14
Item 7 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, 1999 and the related statements of operations,
stockholders' equity (deficit) and cash flows for the two years in the period
then ended, and for the period February 1, 1995 (inception) through December 31,
1999. 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 of Micro-ASI, Inc. 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, 1999, 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 auditing standards generally accepted
in the United States. 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, 1999 and the
results of its operations and its cash flows for the two years in the period
then ended and the period from February 1, 1995 (inception) through December 31,
1999, in conformity with accounting principles generally accepted in the United
States.
/s/ ERNST & YOUNG LLP
Dallas, Texas
March 20, 2000
14
<PAGE> 15
Micro - ASI, Inc.
(a development stage company)
Balance Sheet
DECEMBER 31,
1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 551,292
------------
Total current assets 551,292
Property and equipment, net 89,635
Other assets 27,121
------------
Total assets $ 668,048
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 583,493
------------
Total current liabilities 583,493
Stockholders' equity (deficit):
Preferred stock, $.001 par value:
Authorized shares - 15,000,000
Common stock, $.001 par value:
Authorized shares - 75,000,000
Issued and outstanding shares -19,227,111 19,227
Additional capital 5,767,295
Deficit accumulated during the development stage (5,701,967)
------------
Total stockholders' equity 84,555
------------
Total liabilities and stockholders' equity $ 668,048
============
</TABLE>
See accompanying notes.
15
<PAGE> 16
Micro-ASI, Inc.
(a development stage company)
Statements of Operations
<TABLE>
<CAPTION>
CUMULATIVE FROM
YEAR ENDED YEAR ENDED FEBRUARY 1, 1995
DECEMBER 31, DECEMBER 31, (INCEPTION) THROUGH
1998 1999 DECEMBER 31, 1999
------------ ------------ -------------------
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
Expenses:
Research and development 302,355 808,396 1,341,001
General and administrative 516,964 2,922,080 4,298,212
------------ ------------ ------------
819,319 3,730,476 5,639,213
Operating loss (819,319) (3,730,476) (5,639,213)
Other income (expense):
Interest income 8,649 27,451 38,253
Interest expense (7,407) (2,674) (100,997)
------------ ------------ ------------
1,242 24,777 (62,744)
Net loss $ (818,077) $ (3,705,699) $ (5,701,957)
============ ============ ============
Basic and diluted net loss per share $ (0.05) $ (0.21)
============ ============
Weighted average shares outstanding 15,957,781 17,989,506
============ ============
</TABLE>
See accompanying notes.
16
<PAGE> 17
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 $ 0.00 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 0.16 3,000,000 3,000 497,000
Contribution of interest payable to additional -- -- 28,405
capital
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 0.10 2,775,000 2,775 274,725
Sale of common stock 0.33 600,000 600 199,400
Sale of common stock 0.50 200,000 200 99,800
Contributed to 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 .99 324,500 325 321,675
Sale of common stock 1.00 444,300 444 443,856
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 1.00 3,006,536 3,006 3,003,529
Issuance for services 1.00 876,775 877 875,898
Return of stock .00 (1,000,000) (1,000) 1,000
Net loss for the period ended
December 31, 1999 -- -- --
------------ ------------ ------------
Balance at December 31, 1999 19,227,111 $ 19,227 $ 5,767,295
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
DEFICIT ACCUMULATED
DURING THE DEVELOPMENT TOTAL STOCKHOLDERS
STAGE EQUITY (DEFICIT)
<S> <C> <C>
Issuance of 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 -- 28,405
capital
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 -- 3,006,535
Issuance for services -- 876,775
Return of stock -- --
Net loss for the period ended December 31, 1999 (3,705,699) (3,705,699)
----------- -----------
Balance at December 31, 1999 $(5,701,967) $ 84,555
=========== ===========
</TABLE>
See accompanying notes
17
<PAGE> 18
Micro-ASI, Inc.
(a development stage company)
Statements of Cash Flows
<TABLE>
<CAPTION>
YEARS ENDED
CUMULATIVE FROM
FEBRUARY 1, 1995
(INCEPTION) THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1999 DECEMBER 31,1999
----------------- ----------------- -------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (818,077) $ (3,705,699) $ (5,701,967)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 14,471 23,461 49,087
Common stock issued to incorporators -- -- 1,500
Common stock issued for services -- 806,776 806,776
Changes in operating assets and
liabilities:
Accounts payable 95 377,187 565,679
Other assets -- (27,120) (9,308)
------------- ------------- -------------
Net cash used in operating activities (803,511) (2,525,395) (4,288,233)
INVESTING ACTIVITIES
Capital expenditures, net (6,513) (107,669) (138,722)
------------- ------------- -------------
Net cash used in investing
activities (6,513) (107,669) (138,722)
FINANCING ACTIVITIES
Proceeds from issuance of notes -- -- 595,000
Proceeds from issuance of common stock 766,300 3,006,535 4,350,335
Contributed capital -- -- 57,912
Principal payments on notes (25,000) -- (25,000)
------------- ------------- -------------
Net cash provided by financing activities 741,300 3,006,535 4,978,247
------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents (68,724) 373,471 551,292
Cash and cash equivalents at beginning of
period 246,545 177,821 --
------------- ------------- -------------
Cash and cash equivalents at end of period $ 177,821 $ 551,292 $ 551,292
============= ============= =============
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 7,407 $ 2,674 $ 57,573
============= ============= =============
</TABLE>
See accompanying notes.
18
<PAGE> 19
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").
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. A development stage company involves risks
and uncertainties, and there are no assurances that the Company will be
successful in its efforts.
The Company is in the processing of raising up to $15 million through the sale
of preferred stock and anticipates closing this transaction during the second
quarter of 2000. Management believes this funding will provide sufficient
funding for the Company to begin executing its business plan. There are no
assurances the Company will be successful in raising the capital. If sufficient
capital is not raised, the Company has alternative actions including curtailing
its expansion and reducing the current number of employees.
CONCENTRATION OF RISK
At December 31, 1999, the Company's cash equivalents consisted principally of
money market accounts.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of six
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.
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. Valuation allowances
are provided for deferred tax assets when there realization is not reasonably
assured.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
19
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTS POLICIES (continued)
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.
Options to purchase 3,450,000 shares of common stock are excluded from the
calculation of diluted net loss per share as the impact of these shares is
anti-dilutive.
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 material elements of other comprehensive income.
2. PROPERTY AND EQUIPMENT
At December 31, 1999, Property and equipment consist of the following:
<TABLE>
<CAPTION>
Estimated
Useful
Life
----------
<S> <C> <C>
Computer Equipment 3 $ 23,197
Furniture and Fixtures 5 43,387
Leasehold Improvements 1 24,816
Property and equipment 5 22,661
------------
Less Accumulated Depreciation (24,426)
------------
$ 89,635
============
</TABLE>
3. NOTE PAYABLE
The $70,000 note payable to an original promoter of the Company at December 31,
1998, was 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. The excess for market value of the common stock over the carrying value
of the notes payable was charged to expense.
20
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS (continued)
4. Income Taxes
At December 31, 1998, the Company's net deferred tax assets of approximately
$1.9 million 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. During 1999, the
valuation allowance increased by $1.2 million. No other significant reconciling
items exist between the actual effective tax and the expected effective tax rate
for 1999.
5. Related Party Transactions
The Company had 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 $330,000 and $255,000 in 1998 and 1999, respectively. This
agreement ended September 30, 1999 when the Chairman joined the Company as a
full time employee.
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 $95,000 in 1998. This agreement ended
in December 1998 when the President joined the Company as a full time employee.
The Company paid approximately $64,500 and $604,013 to other related parties for
the development related activities and expense reimbursements for 1998 and 1999,
respectively.
The Company paid approximately $55,000 to a consulting company owned by Patrick
Antaki, an original promoter of the Company for development services for 1998.
This agreement ended on December 31,1998.
The Company paid consulting fees of $70,000 for the year ended December 31, 1999
for assistance with the development of its business strategy to a company owned
by two current employees of the Company. These fees were paid prior to these
individuals joining the Company.
The Company paid $10,000 and $349,350 in 1998 and 1999, respectively, and
granted 750,000 shares of common stock valued at $750,000 (see Note 7) to
Kingdom Capital for financial and investor relations services for 1998 and 1999,
respectively. Kingdom Capital is a stockholder in the Company.
The Company paid J&N $124,000 for financial consulting services in 1999. J&N is
a stockholder of the Company.
The Company paid approximately $54,500 and $130,663 to other related parties for
development related activities and expense reimbursements in 1998 and 1999,
respectively.
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (continued)
6. COMMITMENTS
OPERATING LEASES
The Company leases office facilities and certain equipment under operating
leases. Leases that expire are generally expected to be renewed or replaced by
other leases. Rental expense under these leases for the year ended December 31,
1999 was $74,000. As of December 31, 1999, future minimum rental payments
required under operating leases that had initial or remaining noncancelable
lease terms in excess of one year are as follows:
<TABLE>
<S> <C>
2000 $ 49,306
2001 16,472
2002 15,584
2003 5,863
--------
$ 87,225
========
</TABLE>
INVESTMENT IN ZAE
On March 25, 1999, the Company entered into a memorandum of understanding with
ZAE Research, Inc. ("ZAE"), whereby, the Company would invest up to $1,000,000
in ZAE. In return, the Company was to receive a 50% ownership interest in one of
ZAE's subsidiaries and a 10.5% royalty paid on all consolidated gross revenue of
ZAE and its subsidiaries, excluding the subsidiary with the aforementioned 50%
interest. As of December 31, 1999, the Company had invested approximately
$213,000 in ZAE and has not recorded any revenues from royalties. The Company's
funding has been used for product development by ZAE and accordingly has been
expensed by the Company. On January 18, 2000, the Company and ZAE mutually
agreed to terminate the relationship. As part of that termination, ZAE has
agreed to repay all amounts previously funded by the Company; however due to the
financial condition of ZAE, management has elected to fully reserve this
receivable and will only be recorded as payments are received. AS of March 28,
2000, no payments had been received.
7. EQUITY
COMMON STOCK
The original issuance of common stock was for 150,000 shares valued at $.01 per
share for a note payable in an equal amount. The Company had a stock split of 60
for 1 on February 27, 1997, which was retroactively applied. The stock split
resulted in the restatement of the 150,000 shares of common stock to 9,000,000
shares of common stock with a par value of $9,000. The par value of $9,000 was
greater than the original consideration received of $1,500 resulting in the
$7,500 deficit in additional capital.
In 1996, $500,000 in debt outstanding was converted to 3,000,000 shares of
common stock. No gain or loss was recorded on this transaction, as management
believes the 3,000,000 shares approximated the full value of the debt
outstanding on the conversion date.
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.
22
<PAGE> 23
NOTES TO FINANCIAL STATEMENTS (continued)
7. Equity Common Stock (continued)
In 1999, the Company determined it would be appropriate to award Kingdom
Capital, its investor and public relations firm a bonus in the form of the
Company's Common Stock in the amount of 600,000 shares valued at $600,000 which
was charged to expense in June 1999. In addition, the Company granted this firm
an additional 150,000 shares valued at $150,000 for future services through
December 31, 1999. which has been fully expensed as of December 31, 1999. The
Company granted stock in lieu of cash due to its limited liquidity situation at
the time of the decision.
From January 1, 2000 through March 24, 2000, the Company sold 155,000 shares of
its common stock for $1 per share in a series of transactions.
Stock Option Plan
The Company has elected to follow APB 25 and related interpretations in
accounting for its stock based compensation. Under APB 25, because the exercise
price of the Company's stock options has been equal to or greater than the
market price of the underlying stock on the date of grant, no compensation
expense has been recognized.
During 1999, the Company introduced a stock option plan: the 1999 Employee Stock
option Plan (Employee Plan). The Employee Plan has authorized the grant of
incentive and non-qualified stock options to employees for up to 4,000,000
shares of the Company's common stock. All options granted have five to ten year
terms and become exercisable over a four to five year period. The option price
is equal to 100% to 110% of the fair value of the common stock on the date of
grant depending on the percentage of common stock owned by the optionee on the
grant date.
Supplemental information regarding net loss and net loss per share is required
by SFAS 123 and has been determined as if the Company had accounted for its
stock options under the fair value method of that Statement. The fair value for
these options was estimated at the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions for 1999:
risk-free interest rate of 6.29%; dividend yield of 0%; volatility factors of
the expected market price of the Company's common stock of .828; and a
weighted-average expected life of the option of 3.6 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The expense amounts
for 1999 are not necessarily indicative of the effects on reported net income
(loss) for future years. The Company's pro forma information as of December 31,
1999 is as follows:
<TABLE>
<S> <C>
Pro forma net loss $ (3,829,121)
Pro forma basic and diluted net loss per share $ (0.21)
</TABLE>
23
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS (continued)
7. Equity Stock Option Plan (continued)
Based on the Black-Scholes method, the fair value of the options granted as of
December 31, 1999 is as follows:
<TABLE>
<S> <C>
Number of options issued at fair market value of stock 2,450,000
Weighted-average fair value of options $0.62
Weighted-average exercise price of options $1.00
Number of options issued in excess of fair market value of stock 1,000,000
Weighted-average in fair value of options $0.58
Weighted-average exercise price of options $1.10
</TABLE>
A summary of the Company's stock option activity, and related information for
the year ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
------------ ----------------
<S> <C> <C>
Outstanding, beginning of year - $ -
Granted 3,450,000 1.03
Exercised -- --
------------
Outstanding, end of year 3,450,000 $ 1.03
============
Exercisable at end of year 837,500 $ 1.03
============
</TABLE>
Exercise prices for options outstanding as of December 31, 1999 ranged from
$1.00 to $1.10. The weighted-average remaining contractual life of those options
is 8.2 years.
On February 23, 2000, the Board of Directors approved the grant of an option to
purchase 200,000 shares at $1 per share of the Company's common stock to the
Company's external general counsel to serve for on the Company's newly formed
CEO Committee. The fair value of these options of approximately $172,000 will be
charged to expense in 2000. These options vest immediately and are fully
exercisable and non-forfeitable.
8. Line of Credit
In February 2000, the Company obtained a line of credit from a financial
institution in the amount of $1.3 million. This line of credit was personally
guaranteed by the Company's Chairman and Chief Executive Officer. In connection
with their personal guarantees, the two individuals were granted warrants to
purchase 1.95 million shares of the Company's common stock at $1 per share. The
warrants are fully vested and immediately exercisable and have a 10 year life.
The estimated fair value of these warrants, $1.677 million, will be charged to
expense immediately as a fee for the guarantee.
9. Acquisition
Effective January 18, 2000, Micro-ASI completed the acquisition of the
outstanding common stock (BTI Common Stock) of Best Technologies, Inc., a Texas
corporation (BTI), from the sole shareholder of BTI (Seller), pursuant to a
stock purchase agreement (including all Exhibits and Schedules thereto and
documents executed in connection therewith, the "Agreement"). BTI is an
electronics contract manufacturer headquartered in Wylie, Texas. In connection
with the Agreement, one share of preferred stock of BTI (BTI Preferred Stock)
was created and issued to the Seller. The Company, as the holder of the BTI
Common Stock, has the right to appoint one director to the three member Board of
Directors of BTI. Seller, as holder of the BTI Preferred Stock has the right to
appoint two directors to the three-member Board of Directors of BTI and certain
other voting rights. Pursuant to the Agreement, the Company will receive the
outstanding BTI Preferred Stock upon the satisfaction of certain obligations,
including, but not limited to, the completion of an initial public offering of
the Company's Common Stock.
24
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (continued)
9. Acquisition (continued)
The total aggregate purchase price for the BTI Common Stock is approximately
$5.3 million. The purchase price includes (i) a promissory note from the Company
to the Seller in the amount of $2,500,000, due the earlier of (a) December 31,
2001 or (b) ten days after the completion of an initial public offering by the
Company (Purchase Note); (ii) a convertible note from the Company to the Seller
in the amount of $1,416,667 due December 31, 2001, which is immediately
convertible into 1,416,677 shares of Common Stock of the Company (Convertible
Note); (iii) a promissory note from BTI to the Seller and guaranteed by the
Company in the amount of $600,000, due the earlier of (a) March 31, 2000 or (b)
ten days after the completion of one or more private placements having an
aggregate gross offering amount in excess of $6,000,000 (Cash Note); and
additionally, the Company has committed to purchase $750,000 of capital
expenditures to be used in BTI's flip-chip assembly due ninety days after the
completion of one or more private placements having an aggregate gross offering
amount in excess of $6,000,000 (Capital Contribution). Furthermore, the payment
of the Cash Note, the Purchase Note and the Convertible Note are secured by a
stock pledge agreement pursuant to which the Company has pledged all of the BTI
Common Stock. The purchase price is not subject to any post-closing adjustments.
The acquisition of BTI provides the Company with manufacturing capabilities to
produce the redesigned products and offer turnkey solutions to its customers.
Because the seller of BTI still retains voting control, the Company will not
consolidate the operations of BTI until the obligations noted above are
satisfied.
25
<PAGE> 26
ITEM 8 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 had performed the audit the
previous two years (1997 and 1996) and had issued an unqualified opinion with
the going concern disclaimer indicating that Micro-ASI was a development stage
company. A letter from Jones, Jensen and Company agreeing with the above
statements is incorporated by reference as an exhibit in its Form 10-SB/A.
ITEM 9 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 E. Smith, Jr. and Joel E. 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.
26
<PAGE> 27
<TABLE>
<CAPTION>
Name Director/
/ Director DirectorClass/ Significant
Age Position Since Term Officer Employee
- ------------------------------ ------------------------------ -------------- -------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Cecil E. Smith, Jr. 61 Chairman of the Board of X III X
Directors 2/95 3 Years
- ------------------------------ ------------------------------ -------------- -------------- ------------- ------------------
President, X III
Joel E. Claybrook Chief Executive Officer, 4/98 3 Years X X
50 Chief Financial Officer,
Member, Board of Directors
- ------------------------------ ------------------------------ -------------- -------------- ------------- ------------------
Director of International X II X
Dr. Meng-Sheng Lin 55 Development 6/99 2 Years
Member, Board of Directors
- ------------------------------ ------------------------------ -------------- -------------- ------------- ------------------
Dr. Myles Welborn Member, Board of Directors X I
71 9/99 1 Year
- ------------------------------ ------------------------------ -------------- -------------- ------------- ------------------
James Hamner Member, Board of Directors X I
61 9/99 1 Year
- ------------------------------ ------------------------------ -------------- -------------- ------------- ------------------
Executive Vice President and
Dr. James Dukowitz 54 Chairman of the Executive X X
Committee of the Office of
the Chief Executive
- ------------------------------ ------------------------------ -------------- -------------- ------------- ------------------
Vice President of
Jerry Kline Technological Development X
42
- ------------------------------ ------------------------------ -------------- -------------- ------------- ------------------
Vice President of
Scott Smith Manufacturing Operations X
39
- ------------------------------ ------------------------------ -------------- -------------- ------------- ------------------
Tom Miller Vice President - Computer SBU X
48
- ------------------------------ ------------------------------ -------------- -------------- ------------- ------------------
Ari Reubin Vice President - X
36 Telecom/Internet SBU
- ------------------------------ ------------------------------ -------------- -------------- ------------- ------------------
</TABLE>
On December 15, 1999, the Company held their Annual Meeting of Shareholders. At
that meeting, the shareholders approved the new slate of directors as described
in the Company's Proxy Statement filed on December 3, 1999. The Shareholders
also approved a change in the terms of office for members of the Board of
Directors, which is described in the detailed Proxy Statement, which is
incorporated by reference.
27
<PAGE> 28
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. 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
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. Dr. Lin has taught and practiced medicine
for 29 years. 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.
DR. MYLES WELBORN, 71, has 40 years experience in dentistry, and has served as
teacher and principal in the Texas school system. Upon earning a Bachelors
Degree from Hardin-Simmons University in 1949, Dr. Welborn served in the Army
for three years, attaining the rank of Corporeal Chief of Congressional Section
of the General's Office. After the military, he spent several years in education
as a teacher and principal in elementary schools. Dr. Welborn attended the
Baylor College of Dentistry, earning a DDS with honors. Since 1960 he has been
practicing dentistry.
JIM HAMNER, 61, has forty years of business experience, specializing in
information technology. He began his professional career in 1960 at the U.S.
Naval Ordnance Laboratory in Corona, California, working in early computing
evaluations of missile development and testing. Since 1998, Mr. Hamner has been
employed as a Senior Manager at Andersen Consulting in Dallas. For 32 years
prior to 1998, he was employed by Texas Instruments in Dallas, Texas in multiple
technical, management, and administrative roles. He holds a Bachelors Degree in
Mathematics from Baylor University.
DR. JAMES A. DUKOWITZ, 54, is the Executive Vice President and Chairman of the
Executive Committee of the Office of the Chief Executive. Dr. Dukowitz holds a
Ph.D. from Massachusetts Institute of Technology, where he also served as
Special Assistant to MIT President Dr. Jerome Wiesner to establish the
Congressional Office of Technology Assessment. Prior to 1999, Dr. Dukowitz
28
<PAGE> 29
spent over 20 years with Texas Instruments, Dallas, Texas, serving as President
of TI Asia and TI China for six years; Vice President of European and Latin
American Marketing; and Vice President, Corporate Staff with responsibilities
for Corporate Strategic Planning, Corporate Marketing, and Corporate Relations.
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. His most recent assignment at Raytheon was a
$30,000,000 upgrade to a key avionics package for the F-16 aircraft. 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. Scott is the
son of Cecil E. Smith, Jr.
TOM MILLER, 48, serves as Vice President and General Manager of the Computer
Strategic Business Unit for the Company. For the past two years, Mr. Miller was
Vice President and General Manager of the Commercial Division of Acer America
Corporation, responsible for the sales of Acer's brand of computers to the
business market. Prior to Acer, Mr. Miller spent 23 years with Texas Instruments
where he started in Sales Management for the Data Systems Division, moving to
Marketing for the Data Systems Group, Manager of the Travel Industry Business
Unit for the Peripheral Products Division, Vice President of Sales and Marketing
for Personal Products Group, and Vice President of the Mobile Computing Group.
He holds a Masters of Business Administration degree from The University of
Texas at Austin and a Bachelor of Science degree in Industrial
Management/Computer Science from Purdue University.
ARI REUBIN, 36, serves as Vice President and General Manager of the
Telecom/Internet Strategic Business Unit for the Company. For over ten years he
was with Texas Instruments where he served as Director and CEO of the worldwide
Digital Image Sensor Products group, Director of Strategic Alliances for the
Notebook Computer group, Manager of Technology Transfer for TI at ESMATECH,
Manager of worldwide marketing for Quality Assurance Products, and key
engineering positions in semiconductor packaging. He holds a BS in Materials
Engineering from Michigan State University, an MS in Materials Engineering from
University of Illinois at Urbana-Champaign. He has also completed studies at
Wharton Business School of Business Strategy, Mergers and Acquisitions, Finance
and Law.
29
<PAGE> 30
ITEM 10 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 E.
Claybrook, President and CEO, an annual salary of $180,000. Cecil E. Smith, the
Company's Chairman of the Board received $15,000.00 per month for consulting
services and $10,000.00 per month for travel expenses, which was paid to his
company S&N Consulting. This contract ended September 30, 1999 and he joined the
Company as a salaried employee on October 1, 1999 at a salary of $180,000 per
year.
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.
On September 1, 1999, Dr. James A. Dukowitz joined the Company at a salary of
$180,000 per year. Dr. Dukowitz has deferred 75% of his salary until the first
quarter of 2000, at which time the deferred salary will be paid. Dr. Dukowitz
will receive full salary beginning January 1, 2000.
There are no compensatory plans or arrangements with respect to any person named
as a director, officer, promoter, or control person which would result in
payments to any such person because of his or her resignation, retirement, or
other termination of such person's employment with the Company or due to any
change of control. On February 23, 2000, the Board of Directors approved and
entered into Employment Agreements with Cecil E. Smith, Jr. and Joel E.
Claybrook which are attached as Exhibits.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Long Term
Compensation Compensation
------------ ------------ All Other
Name and Fiscal Salary Options/SAR's Compensation
Principal Position Year ($) (1) (#)(6)(7) ($)(2) (3)
- ------------------ ------ ------- ----------- ------------
<S> <C> <C> <C> <C>
Cecil E. Smith, Jr. 1999 45,000 750,000 255,000
Chairman of the 1998 330,000
Board (2) 1997 135,000
Joel E. Claybrook 1999 180,000 750,000
President & CEO 1998 95,000
(3) 1997 40,000
Dr. James A. Dukowitz 1999 15,000 400,000
Executive Vice President
& Chairman of the
Executive Committee of
the Office of the Chief
Executive (4)
Dr. Meng-Sheng Lin 1999 90,000 500,000
Director of Int'l
Development (5)
</TABLE>
- ----------------------------
(1) Salaries shown above are for the 12 months ended December 31, 1999.
(2) Cecil E. Smith, Jr. received consulting fees and expenses in lieu of salary
until October 1, 1999. This consulting agreement ended September 30, 1999
when Mr. Smith became an employee of the Company.
30
<PAGE> 31
(3) Joel E. Claybrook received consulting fees and expenses in lieu of salary
until December 31, 1998. This consulting agreement ended December 31, 1998
when Mr. Claybrook became an employee of the Company.
(4) Dr. Dukowitz joined the Company September 1, 1999. He is deferring $45,000
of his salary until January 2000.
(5) Dr. Lin joined the Company July 1, 1999.
(6) The above officers and directors were granted options pursuant to the 1999
Stock Option Plan. The total options granted have been included in the above
table.
(7) A Special Meeting of the Shareholders was held on March 1, 2000 at which
time the Shareholders approved an increase in the authorized shares of
Common Stock and Preferred Stock.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information regarding options granted
under the 1999 Stock Option Plan for each of the executive officers and
employees named below:
<TABLE>
<CAPTION>
Name Number of % of Exercise Expiration Number of % of Exercise Expiration
Securities Total Price Date Securities Total Price Date
Underlying Incentive Per Underlying Non-Qualified per
Incentive Options Share ($) Non-Qualified Options Share ($)
Options (#) Granted Options Granted
(1) (2) in 1999 (#)(3) in 1999
- ------------------------ ------------ ----------- ---------- ------------ ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cecil E. Smith, Jr. 500,000 18.3% 1.10 9/6/2004 250,000 50.00% 1.00 9/6/2009
- ------------------------ ------------ ----------- ---------- ------------ ------------- ----------- ---------- -------------
Joel E. Claybrook 500,000 18.2% 1.10 9/6/2004 250,000 50.00% 1.00 9/6/2009
- ------------------------ ------------ ----------- ---------- ------------ ------------- ----------- ---------- -------------
Dr. Meng-Sheng Lin 500,000 18.2% 1.00 9/6/2009
- ------------------------ ------------ ----------- ---------- ------------ ------------- ----------- ---------- -------------
Dr. James Dukowitz 400,000 14.4% 1.00 9/6/2009
- ------------------------ ------------ ----------- ---------- ------------ ------------- ----------- ---------- -------------
Scott Smith 250,000 9.1% 1.00 9/6/2009
- ------------------------ ------------ ----------- ---------- ------------ ------------- ----------- ---------- -------------
Jerry Kline 200,000 7.3% 1.00 9/6/2009
- ------------------------ ------------ ----------- ---------- ------------ ------------- ----------- ---------- -------------
Tom Miller 200,000 7.3% 1.00 9/6/2009
- ------------------------ ------------ ----------- ---------- ------------ ------------- ----------- ---------- -------------
Ari Reubin 200,000 7.3% 1.00 9/6/2009
- ------------------------ ------------ ----------- ---------- ------------ ------------- ----------- ---------- -------------
- ------------------------ ------------ ----------- ---------- ------------ ------------- ----------- ---------- -------------
Totals 2,750,000 100.00% 500,000 100.00%
- ------------------------ ------------ ----------- ---------- ------------ ------------- ----------- ---------- -------------
</TABLE>
(1) No shares have been exercised under this Plan.
(2) The Incentive options are first exercisable 25% in 1999, 25% in 2000, 25% in
2001 and 25% in 2002. The exercise price is $1.00 per share except for
Messer's. Cecil E. Smith, Jr. and Joel E. Claybrook who have an
exercise price of $1.10 per share.
(3) The Nonqualified options are first exercisable 20% per year for five years
beginning in 1999 at $1.00 per share.
EMPLOYMENT CONTRACTS
On February 23, 2000, the Company entered into Employment Agreements with Cecil
E. Smith, Jr., Chairman of the Board, and Joel E. Claybrook, President and CEO.
The term of the Employment Agreements are for a period of four years,
respectively, ending December 31, 2003. The base salaries were set at the
current rates of $180,000 per year with any increases to be determined by the
Board of Directors. Both are entitled to participate in all employee benefit
plans. Both employees will be entitled to six weeks vacation per year. The
Company will use its best efforts to nominate each individual for a position on
the Board of Directors during the period of the Agreement and at any general
election of directors. The Agreements provide provisions for termination by the
Company with and without cause. Causes for termination are conviction of fraud,
embezzlement, theft or other criminal conduct and willful misconduct or gross
negligence. The Agreements also provide provisions for termination by the
employees. Causes for termination by the employee are reduction in salary,
significant reduction in aggregate value of
31
<PAGE> 32
benefits, material and willful breach of the Agreement by the Company, removal
from position, significant adverse change in nature or scope of authority,
change of control of the Company and assignment of any duties inconsistent with
status of job description.
The Agreements provide that if the employees are terminated without cause or
terminated for good reason by the employee, the Company will continue the
installments of the base salary for a term of two years or the Agreement
expiration date whichever is greater, the issuance of Common Stock fully paid
and non-assessable and certain other payments.
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
The following tables set forth, as of March 24, 2000, 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 19,560,111 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 and Address Amount (1), (2) % of Class
- ----------------- ----------------------------- ----------------------------- ---------------
<S> <C> <C> <C>
Common Cecil E. Smith, Jr. (4) 4,757,650 22.4%
Park Central Plaza I Chairman of the Board of
12655 N. Central Expressway. Directors
Suite 1000
Dallas, Texas 75243
Common Joel E. Claybrook (5) 2,148,700 10.6%
Park Central Plaza I President and
12655 N. Central Expressway. Chief Executive Officer
Suite 1000 Member, Board of
Dallas, Texas 75243 Directors
Common Dr. Meng-Sheng Lin (6) 1,175,000 6.0%
Park Central Plaza I Director
12655 N. Central Expressway Member, Board of Directors
Suite 1000
Dallas, Texas 75243
Common Dr. Myles Welborn 45,500 .2%
Director
Member, Board of Directors
James Hamner 0
Director
Member, Board of Directors
Common Dr. James Dukowitz (7) 100,000 .5%
Executive Vice President and
Chairman of the Executive
Committee of the Office of the
Chief Executive
Common Robert J. Hoyt 1,800,000 9.3%
174 The Masters Circle Beneficial Owner
Costa Mesa, CA 92627
All Directors & 8,226,850 37.1%
Officers as a
Group
(6 persons)
</TABLE>
32
<PAGE> 33
(1) The rules of the SEC provide that, for the purpose hereof, a person is
considered the "beneficial owner" of shares with respect to which the
person, directly or indirectly, has or shares the voting or investment
power, irrespective of his economic, interest in the shares. Unless
otherwise noted, each person identified possesses sole voting and
investment power over the shares listed, subject to community property
laws.
(2) Based on a total of 19,560,111 shares of Common Stock issued and
outstanding as of the March 24, 2000. Shares of Common Stock subject
to options that are exercisable within 60 days of March 24, 2000, are
deemed beneficially owned by the person holding such options for the
purposes of calculating the percentage of ownership of such person but
are not treated as outstanding for the purpose of computing the
percentage of any other person.
(3) The 1999 Stock Option Plan, which is fully described in the Company's
Proxy Statement filed on December 3, 1999 and is incorporated herein
by reference. An additional 837,500 shares could have been purchased
by December 31, 1999, but no options were exercised.
(4) Mr. Smith's shares include 175,000 shares that could be purchased
under the proposed Stock Option Plan and 1,500,000 warrants granted in
February 2000.
(5) Mr. Claybrook's shares include 175,000 shares that could be purchased
under the proposed Stock Option Plan and 450,000 warrants granted in
February 2000.
(6) Dr. Meng-Sheng Lin's shares 125,000 shares that could be purchased
under the proposed Stock Option Plan.
(7) Dr. Dukowitz's shares include shares that could be purchased under the
proposed Stock Option Plan. If his options were exercised, he would
own 100,000 shares representing .5% of the outstanding shares after
the shares were exercised. Dr. Dukowitz does not currently own any
shares of stock.
ITEM 12 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% 17.5%
Joel E. Claybrook (1) 12.50 10.0%
Timothy M. Da Silva (1) (2) 12.50% 3.1%
Robert J. Hoyt (3) 15.00% 9.4%
BLB Financial, Inc. (4) 10.00% 0.0%
</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. Mr. Da Silva
returned 1,000,000 shares to the Company and was issued 100,000
shares.
(3) Robert J. Hoyt loaned the Company $500,000 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
and financial consulting. BLB Financial was dissolved and the shares
of Micro-ASI were dispersed to the various owners of BLB. No one owner
holds more than five percent.
Cecil E. Smith, Jr., Chairman of the Board was retained by the Company under a
consulting agreement that ended September 30, 1999, at which time he joined
33
<PAGE> 34
the Company as a full time employee. Prior to becoming an employee, Mr. Smith
was paid consulting fees plus travel expenses of approximately $330,000, and
$255,000 for the years ended December 31, 1998 and 1999, respectively. This
contract ended September 30, 1999, and Mr. Smith became a salaried employee on
October 1, 1999.
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 $95,000 for the year ended December
31, 1998.
On May 7, 1999, the Company entered into a consulting contract with
Darwin's-Beagle.Com, Inc. Ari Reubin and Dr. James Dukowitz are partners of
this consulting firm. The Company paid Darwin's Beagle.Com, Inc. consulting
fees per their contract in the amount of $70,000 in cash for services rendered
from May 1999 through August 1999. The agreement also called for the issuance
of 28,000 shares of the Company's Common Stock, which were issued in March
2000.
The Company paid $55,000 to Willow Technologies, a company controlled by Pat
Antaki, who owns 1.2% of the Company's Common Stock, for the year ended December
31, 1998.
The Company paid approximately $10,213 in consulting fees and expenses to James
Hamner for the year ended December 31, 1999. These fees were for consulting
services in conjunction with the three redesign projects.
The terms of the related party transactions were favorable to the Company and
are equal to services that could be obtained by unaffiliated parties.
34
<PAGE> 35
PART III
ITEM 13(a) INDEX TO EXHIBITS:
The following documents are filed as exhibits to this Form 10SB/A:
(2) Articles of Incorporation and Bylaws
Exhibit 2.1 Second Amended and Restated Articles of Incorporation
(10) Material Contracts:
Exhibit 10.1 - Employment Agreement - Cecil E. Smith, Jr.
Exhibit 10.2 - Employment Agreement - Joel E. Claybrook
(27) Financial Data Schedules
Exhibit 27.1 Financial Data Schedule
Exhibit 27.2 Financial Data Schedule
13(b) Form 8-K Reports filed in last quarter of year
None
35
<PAGE> 36
ITEM 2 DESCRIPTION OF EXHIBITS:
The Exhibits listed in Item 1 of this Part III are filed herewith.
36
<PAGE> 37
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:
March 30, 2000 /s/ Joel E. Claybrook
---------------------
By: Joel E. Claybrook, President
37
<PAGE> 38
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1 Second Amended and Restated Articles of Incorporation
10.1 - Employment Agreement - Cecil E. Smith, Jr.
10.2 - Employment Agreement - Joel E. Claybrook
27.1 Financial Data Schedule
27.2 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 2.1
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MICRO-ASI, INC.
Pursuant to the provisions of Articles 4.04 and 4.07 of the Texas
Business Corporation Act, Micro-ASI, Inc. (the "Corporation"), hereby adopts
these Second Amended and Restated Articles of Incorporation of the Corporation
("Restated Articles of Incorporation") which accurately copy the Articles of
Incorporation of the Corporation and all amendments thereto 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 A. The Articles of Incorporation of the Corporation are amended by the
Restated Articles of Incorporation as follows:
1. Article III of the Articles of Incorporation is hereby amended to
read in its entirety as follows:
"ARTICLE III
The corporation is authorized to issue ninety million (90,000,000)
shares of capital stock. Seventy-five million (75,000,000) of the
authorized shares shall be common stock, $0.001 par value per share
("Common Stock"), and fifteen million (15,000,000) of the authorized
shares shall be preferred stock, $0.001 par value per share ("Preferred
Stock")."
2. Article IV of the Articles of Incorporation is hereby amended to
read in its entirety as follows:
"ARTICLE IV
Section A. 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 shares exchangeable for or convertible
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 Article 2.13 of the Texas Business Corporation Act and
pursuant to Article IV of these Restated 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 Restated Articles of Incorporation.
<PAGE> 2
In accord with Article 2.13(c) of the Texas Business Corporation Act
and pursuant to Article IV of these Restated Articles of Incorporation,
authority is expressly vested in the board of directors to eliminate
from the Restated 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 shares shall resume the
status of authorized but unissued shares of any eliminated class.
Section B. The Common Stock shall consist of 75,000,000 shares, $0.001
par value per share. 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. 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.
Section C. The Preferred Stock shall consist of 15,000,000 shares,
$0.001 par value per share.
1. The Preferred Stock may, from time to time, be
divided into and issued in one or more series, with each
series to be so designated as to distinguish the shares
thereof from the shares of all other series. The shares of
each series may have such powers, designations, preferences,
relative rights, qualifications, limitations or restrictions
as are stated herein and in one or more resolutions providing
for the issue of such series adopted by the board of directors
of the corporation as provided in this Section C.
2. To the extent that these Restated Articles of
Incorporation do not fix and determine the variations in the
relative rights and preferences of the Preferred Stock, both
in relation to the Common Stock and as between series of
Preferred Stock, the board of directors is expressly vested
with the authority to divide the Preferred Stock into one or
more series and, within the limitations set forth in these
Restated Articles of Incorporation, to fix and determine the
relative rights and preferences of the shares of any series so
established and, with respect to each such series, to fix by
one or more resolutions providing for the issue of such
series, the following:
(a) The distinctive designation of, and the
number of shares of Preferred Stock which shall
constitute, the series, which number may be increased
or decreased (but not below the number of shares
thereof then outstanding) from time to time by action
of the board of directors.
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<PAGE> 3
(b) The dividend rate, if any, on the shares
of such series and the date or dates from which
dividends shall commence to accrue or accumulate, the
terms and conditions upon which dividends, if any, on
the shares of such series shall be paid, and whether
or in what circumstances such dividends shall be
cumulative.
(c) The price at and the terms and
conditions on which the shares of such series may be
redeemed, including (without limitation) the time
during which shares of the series may be redeemed and
the premium, if any, over and above the par value
thereof that the holders of shares of such series
shall be entitled to receive upon the redemption
thereof, which premium may vary at different dates
and may also be different with respect to shares
redeemed through the operation of any retirement or
sinking fund.
(d) The liquidation preference, if any, over
and above the par value thereof that the holders of
shares of such series shall be entitled to receive
upon the voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the
corporation.
(e) Whether or not the shares of such series
shall be subject to the operation of a retirement or
sinking fund, and, if so, the extent and manner in
which any such retirement or sinking fund shall be
applied to the purchase or redemption of the shares
of such series for retirement or for other corporate
purposes, and the terms and provisions of such
retirement or sinking fund.
(f) The terms and conditions, if any, on
which the shares of such series shall be convertible
into, or exchangeable for, shares of any other class
or classes of capital stock of the corporation or any
series of any other class or classes, or of any other
series of the same class, including (without
limitation) the price or prices or the rate or rates
of conversion or exchange and the method, if any, of
adjusting the same; provided, that shares of such
series may not be convertible into shares of a series
or class that has prior or superior rights and
preferences as to dividends or distribution of assets
of the corporation upon voluntary or involuntary
liquidation, dissolution or winding-up of the affairs
of the corporation.
(g) The voting rights, if any, on the shares
of such series (in addition to voting rights
provided by law).
(h) Any or all other preferences and
relative, participating, optional or other special
rights, or qualifications, limitations or
restrictions thereof, as shall not be inconsistent
with the law or with this Article IV.
3. All shares of any one series of Preferred Stock
shall be identical with each other in all respects, except
that shares of any one series issued at different times
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<PAGE> 4
may differ as to the dates from which dividends thereon, if
any, shall commence to accrue or accumulate; and all series
shall rank equally and be identical in all respects, except as
permitted by this Section C.
4. Except as provided in the resolution or
resolutions adopted by the board of directors providing for
the issue of the series of Preferred Stock, no vote or consent
of the holders of outstanding shares of that series shall be
required for the issue by the board of directors of any other
series of Preferred Stock, whether or not the rights and
preferences of any such other series shall be fixed by the
board of directors as senior to, or on a parity with, the
rights and preferences of that outstanding series."
3. The Articles of Incorporation as set forth in the Restated
Articles of Incorporation filed on February 14, 1997 are amended by deleting
Article I in its entirety and renumbering, together with internal references,
Article II as Article I, Article III (as amended above) as Article II, Article
IV (as amended above) as Article III, Article V as Article IV, Article VI as
Article V, Article VII as Article VI, Article VIII as Article VII, Article IX as
Article VIII and Article X as Article IX.
ARTICLE B. 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 made by these Restated Articles of Incorporation was duly adopted by
the shareholders of the Corporation on March 1, 2000.
ARTICLE C. The number of shares of capital stock of the Corporation outstanding
and entitled to vote at the time of the adoption of these Restated Articles of
Incorporation was 19,227,111 shares of common stock, $0.001 par value per share
(the "Common Stock").
ARTICLE D. The holders of 14,324,809 shares of Common Stock outstanding and
entitled to vote, which number exceeds two-thirds of the number of outstanding
shares of Common Stock, approved the adoption of these amendments. 78,400 shares
of Common Stock were voted against adoption of these amendments.
ARTICLE E. The Articles of Incorporation and all amendments and supplements
thereto that are in effect to date are hereby superseded by the following
Restated Articles of Incorporation which accurately copy the entire text thereof
and as amended as above set forth:
ARTICLE I
Section A. The name of the corporation is Micro-ASI, Inc.
Section B. The corporation's duration is perpetual, and it is organized to
engage in any and all lawful business for which corporations may be incorporated
under the Texas Business Corporation Act.
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<PAGE> 5
Section C. The corporation will not commence business until it has received for
the issuance of its shares consideration of the value of $1,000, consisting of
money, labor done or property actually received.
Section D. The number of directors constituting the initial board of directors
is one, 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 II
The corporation is authorized to issue ninety million (90,000,000) shares of
capital stock. Seventy-five million (75,000,000) of the authorized shares shall
be common stock, $0.001 par value per share ("Common Stock"), and fifteen
million (15,000,000) of the authorized shares shall be preferred stock, $0.001
par value per share ("Preferred Stock").
ARTICLE III
Section A. 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 shares
exchangeable for or convertible 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 Article 2.13 of the Texas Business Corporation Act and pursuant
to Article III of these Restated 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 Restated Articles of Incorporation.
In accord with Article 2.13(c) of the Texas Business Corporation Act and
pursuant to Article III of these Restated Articles of Incorporation, authority
is expressly vested in the board of directors to eliminate from the Restated
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 shares
shall resume the status of authorized but unissued shares of any eliminated
class.
Section B. The Common Stock shall consist of 75,000,000 shares, $0.001 par value
per share. 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. 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.
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<PAGE> 6
Section C. The Preferred Stock shall consist of 15,000,000 shares, $0.001 par
value per share.
1. The Preferred Stock may, from time to time, be divided into
and issued in one or more series, with each series to be so designated
as to distinguish the shares thereof from the shares of all other
series. The shares of each series may have such powers, designations,
preferences, relative rights, qualifications, limitations or
restrictions as are stated herein and in one or more resolutions
providing for the issue of such series adopted by the board of
directors of the corporation as provided in this Section C.
2. To the extent that these Restated Articles of Incorporation
do not fix and determine the variations in the relative rights and
preferences of the Preferred Stock, both in relation to the Common
Stock and as between series of Preferred Stock, the board of directors
is expressly vested with the authority to divide the Preferred Stock
into one or more series and, within the limitations set forth in these
Restated Articles of Incorporation, to fix and determine the relative
rights and preferences of the shares of any series so established and,
with respect to each such series, to fix by one or more resolutions
providing for the issue of such series, the following:
(a) The distinctive designation of, and the number of
shares of Preferred Stock which shall constitute, the series,
which number may be increased or decreased (but not below the
number of shares thereof then outstanding) from time to time
by action of the board of directors.
(b) The dividend rate, if any, on the shares of such
series and the date or dates from which dividends shall
commence to accrue or accumulate, the terms and conditions
upon which dividends, if any, on the shares of such series
shall be paid, and whether or in what circumstances such
dividends shall be cumulative.
(c) The price at and the terms and conditions on
which the shares of such series may be redeemed, including
(without limitation) the time during which shares of the
series may be redeemed and the premium, if any, over and above
the par value thereof that the holders of shares of such
series shall be entitled to receive upon the redemption
thereof, which premium may vary at different dates and may
also be different with respect to shares redeemed through the
operation of any retirement or sinking fund.
(d) The liquidation preference, if any, over and
above the par value thereof that the holders of shares of such
series shall be entitled to receive upon the voluntary or
involuntary liquidation, dissolution or winding-up of the
affairs of the corporation.
(e) Whether or not the shares of such series shall be
subject to the operation of a retirement or sinking fund, and,
if so, the extent and manner in which any such retirement or
sinking fund shall be applied to the purchase or redemption of
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<PAGE> 7
the shares of such series for retirement or for other
corporate purposes, and the terms and provisions of such
retirement or sinking fund.
(f) The terms and conditions, if any, on which the
shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of
capital stock of the corporation or any series of any other
class or classes, or of any other series of the same class,
including (without limitation) the price or prices or the rate
or rates of conversion or exchange and the method, if any, of
adjusting the same; provided, that shares of such series may
not be convertible into shares of a series or class that has
prior or superior rights and preferences as to dividends or
distribution of assets of the corporation upon voluntary or
involuntary liquidation, dissolution or winding-up of the
affairs of the corporation.
(g) The voting rights, if any, on the shares of such
series (in addition to voting rights provided by law).
(h) Any or all other preferences and relative,
participating, optional or other special rights, or
qualifications, limitations or restrictions thereof, as shall
not be inconsistent with the law or with this Article III.
3. All shares of any one series of Preferred Stock shall be
identical with each other in all respects, except that shares of any
one series issued at different times may differ as to the dates from
which dividends thereon, if any, shall commence to accrue or
accumulate; and all series shall rank equally and be identical in all
respects, except as permitted by this Section C.
4. Except as provided in the resolution or resolutions adopted
by the board of directors providing for the issue of the series of
Preferred Stock, no vote or consent of the holders of outstanding
shares of that series shall be required for the issue by the board of
directors of any other series of Preferred Stock, whether or not the
rights and preferences of any such other series shall be fixed by the
board of directors as senior to, or on a parity with, the rights and
preferences of that outstanding series.
ARTICLE IV
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 Article 2.23 of the Texas Business Corporation Act, to
adopt bylaws for the corporation and to alter, amend and repeal said bylaws,
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;
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<PAGE> 8
(B) To include in said bylaws any provision 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.
ARTICLE V
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 VI
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
shareholders, 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 VII
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 bylaws 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 bylaws 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.
ARTICLE VIII
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.
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<PAGE> 9
ARTICLE IX
A director of the corporation shall not be personally liable to the corporation
or its shareholders for monetary damages for breach of duty or care or other
duty as a director, except for liability for (i) any appropriation, in violation
of his duties, of any business opportunity of the corporation; (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) any type of liability not contemplated by the Texas
Business Corporation Act; or (iv) 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, indemnify its officers and directors and advance
expenses incurred by such officers or directors in relation to any action, suit
or proceeding. Any repeal or modification of this Article IX by the shareholders
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.
ARTICLE X
The street address of the registered office of the corporation is 1601 Elm
Street, Suite 3000, Dallas, Texas 75201, and the name of the registered agent of
the corporation at such address is David G. McLane.
IN WITNESS HEREOF, the undersigned has executed these Restated Articles
of Incorporation on March 9, 2000.
MICRO-ASI, INC.
By: /s/ JOEL E. CLAYBROOK
--------------------------------
Joel E. Claybrook, President
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<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), effective as of January 1,
2000, between Micro-ASI, Inc., a corporation (the "Company"), and Cecil E.
Smith, Jr., an individual residing in Dallas, Texas (the "Employee").
WHEREAS, the Board of Directors of the Company desires to assure that
key executives devote their time and attention to the Company without regard to
concerns about an involuntary loss of employment without cause, and to assure
the continuity and cooperation of management in the event of a change in
ownership and the continued attention of Employee to his duties without any
distraction arising out of the circumstances surrounding a change or potential
change in ownership; and,
WHEREAS, the Company and Employee desire to enter into this Agreement
to protect Employee against an involuntary termination of employment without
cause, to recognize the additional efforts of Employee that may be necessary to
assist in and prepare for any potential change in ownership, and to encourage
Employee to diligently perform his duties and responsibilities to ensure a
smooth transition for any change in ownership;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company and the Employee hereby agree as follows:
1. Employment. The Company agrees to employ the Employee and the
Employee agrees to be employed by the Company, for the period set forth in
Paragraph 2, in the position and with the duties and responsibilities set forth
in Paragraph 3, and upon the other terms and conditions herein provided.
2. Term. The employment of the Employee by the Company as provided in
Paragraph 1 shall be for a period of four (4) years commencing on the effective
date of this Agreement through and ending on December 31, 2003, unless sooner
terminated as herein provided (the "Employment Term"). Each twelve-month period
running from January 1 to December 31 during the Employment Term shall be
referred to herein as an "Annual Period".
3. Position and Duties.
(a) During the Employment Term, the Employee shall serve as Chairman of
the Board of Directors of the Company. In addition, the Employee shall have such
other duties, functions, responsibilities, and authority as are from time to
time delegated to the Employee by the Board of Directors of the Company,
provided that such duties, functions, responsibilities, and authority are
reasonable and customary for a person serving in the aforesaid position or
office of an enterprise comparable to the Company.
(b) During the Employment Term, the Employee shall devote his full
time, skill, and attention and his best efforts to the business and affairs of
the Company to the extent necessary to discharge fully, faithfully and
efficiently the duties and responsibilities delegated and assigned to the
Employee herein or pursuant hereto, except for usual, ordinary, and customary
periods of vacation and absence due to illness or other disability. In this
Agreement, "full time" does not necessarily require that the Employee spend a
specific number of hours per working day or a specific number of days per week
at the Company's executive offices or otherwise in performing his duties and
responsibilities hereunder, but the Employee need only perform his duties and
responsibilities as such times as are necessary. In addition, nothing in this
Agreement prohibits the Employee's (i) serving as a director of other entities
that are not competitive with
<PAGE> 2
the Company, (ii) involvement in community or charitable activities, or, (iii)
personal or family investment-related activities.
(c) In connection with the Employee's employment by the Company under
this Agreement, the Employee shall be based at the principal executive offices
of the Company in Dallas, Texas, except for such reasonable travel as the
performance of the Employee's duties in the business of the Company may require.
(d) All services that the Employee may render to the Company or any of
its subsidiaries or affiliates in any capacity during the Employment Term shall
be deemed to be services required by this Agreement and consideration for the
compensation provided for herein.
4. Compensation and Related Matters.
(a) Base Salary. During each Annual Period of the Employment Term, the
Company shall pay to the Employee for his services hereunder a base salary
("Base Salary") of $180,000. The Employee's Base Salary shall be payable in
installments in accordance with the general payroll practices of the Company, or
as otherwise mutually agreed upon. The Employee's Base Salary shall be subject
to such other increases as may be determined from time to time by the Board of
Directors of the Company in its sole discretion, but in no event shall the
Company pay the Employee a Base Salary at a rate less than that set forth in the
first sentence of this Section 4(a).
(b) Employee Benefits. During the Employment Term, the Employee shall
be entitled to participate in all employee benefit plans, programs and
arrangements that are generally made available by the Company to its senior
executives, including, without limitation, the Company's life, long-term
disability and health/PPO plans and the Company's stock option and other equity
incentive plans. The Employee agrees to cooperate and participate in any medical
or physical examinations as may be required by any insurance company in
connection with the applications for such life and/or disability insurance
policies.
(c) Expenses. During the Employment Term, the Employee shall be
entitled to receive prompt reimbursement upon a timely basis (according to the
then-current practices of the Company) for all reasonable expenses incurred by
the Employee in performing his duties and responsibilities hereunder upon the
presentation by the Employee of an accounting of such expenditures, including
receipts where required by Company policy or federal income tax regulations.
(d) Vacations. During the Employment Term, the Employee shall be
entitled to six (6) weeks of paid vacation each year. The Employee shall also be
entitled to all paid holidays given by the Company to its senior executives. The
Employee agrees to utilize his vacation at such time or times as are (i)
consistent with the proper performance of his duties and responsibilities
hereunder and (ii) mutually convenient for the Company and the Employee.
(e) Board Seat. So long as the Employee remains an employee of the
Company, the Company agrees to use its best efforts to cause the Employee to be
nominated for election to the Company's Board of Directors at each annual or
special meeting of the stockholders of the Company at which the general election
of directors of the Company is to take place and to use its best efforts to
cause the Employee to be so elected to such Board of Directors.
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<PAGE> 3
(f) Indemnification. The Employee, in any capacity on behalf of the
Company or any of its subsidiaries or affiliates, shall be entitled to
exculpation, indemnification, and advancement of expenses to the fullest extent
not prohibited by law. The Employee shall also be entitled to coverage under
each directors' and officers' liability insurance policy, if any, maintained by
or on behalf of the Company's directors and officers.
5. Termination of Employment.
(a) Death. The Employee's employment hereunder shall terminate
automatically upon his death.
(b) Disability. If the Disability (as defined below) of the Employee
occurs during the Employment Term, the Company may notify the Employee of the
Company's intention to terminate the Employee's employment hereunder for
Disability. In such event, the Employee's employment hereunder shall terminate
effective on the 15th day following the date such notice of termination is
received by the Employee (the "Disability Effective Date"). For purposes of this
Agreement a disability occurs if the Employee is determined to be "totally
disabled" by a vote of at least 80% of the Board of Directors of the Company
(excluding Employee) based upon the advice of a board-certified physician
reasonably satisfactory to Employee, which may include a determination that the
Employee is unable, because of physical or mental illness or incapacity or
otherwise, to fulfill his duties under this Agreement for 180 consecutive days
or appears unable to perform such duties for an indefinite period of time in
excess of 180 days.
(c) Termination by Company.
(i) For Cause Termination. The Company may terminate the Employee's
employment hereunder for Cause (as defined below) in accordance with
the following procedure (a "For Cause Termination"):
(A) Cause Defined. "Cause" shall only mean: (1) the employee is
convicted of fraud, embezzlement, theft or other criminal conduct
against the Company and such conviction is final and
non-appealable, or (2) willful misconduct or gross negligence in
the performance of, or willful neglect of, the Employee's duties,
which has caused demonstrable and serious injury to the Company.
(B) Required Notice. A termination for Cause shall not take
effect unless the following has occurred:
(1) the Board of Directors has given Employee written
notice of its intention to terminate Employee for Cause,
specifying with particularity the grounds on which the proposed
termination for Cause is contemplated, which shall be acts or
failures to act on the part of Employee which occurred no more
than six months prior to the Board having knowledge of such
acts or failures to act;
(2) the Employee shall have 30 days after such written
notice to cure such conduct;
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<PAGE> 4
(3) if Employee fails to cure such conduct, Employee shall
have the right to request, by notice to the Secretary of the
Company given within ten days after Employee receives notice
from the Board that he has not cured the conduct within the
period described in subsection (b) above, the hearing before
the full Board of Directors, with his counsel; and
(4) if, within five days after Employee's hearing by the
Board, he receives a certified copy of a resolution duly
adopted by 80% of the full Board (exclusive of Employee)
confirming that in its judgment the grounds for termination for
(Cause) described in the initial notice given under subsection
(a) above are justified, the Employee's employment shall be
terminated.
(ii) Without Cause. The Company may terminate the Employee's
employment hereunder without cause for any or no reason. For purposes
of this Agreement, a "Without Cause Termination" shall mean a
termination by the Company of the Employee's employment hereunder other
than pursuant to (x) a For Cause Termination, or (y) Disability.
(d) Termination by Employee For Good Reason. The Employee may terminate
his employment hereunder if, without Employee's prior written consent
specifically referring to this Agreement:
(i) Any reduction in the amount of Employee's annual salary,
guaranteed incentive compensation or aggregate incentive compensation
opportunities (which reduction may also occur pursuant to any
assignment of performance goals and corresponding awards which are
inconsistent with prior performance goals and awards).
(ii) Any significant reduction in the aggregate value of Employee's
benefits as such benefits may be increased from time to time (unless
such reduction is pursuant to a general change in benefits applicable
to all similarly situated employees of the Company and its Affiliates)
or
(iii) Any material and wilful breach of the Company of any provision
of this Agreement or any written employment agreement with Employee;
(iv) (A) assignment to Employee of any duties inconsistent with his
status as Chairman of the Board of Directors of the Company, (B) the
removal of Employee from his position as Chairman of the Board of
Directors of the Company, (C) the failure to retain Employee as
Chairman of the Board of Directors of any successor of the Company
(whether by merger, consolidation, or sale or disposition of all or
substantially all of the assets of the Company) or any entity which
directly or indirectly owns twenty five percent (25%) or more of any
class of securities of the Company or any successor to the Company
(whether by merger, consolidation, or sale or disposition of all or
substantially all of the assets of the Company) or (D) any significant
change in the nature or status of Employees duties or responsibilities;
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<PAGE> 5
(v) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to
the Employee's position with the Company.
(vi) Transfer of Employee's principal place of employment
to a location more than 25 miles away from the Company's current
headquarters.
(vii) Any Change of Control of the Company. In this Agreement a
"Change of Control" is any of the following:
A. A merger, consolidation, share exchange, or other
reorganization in which the Company is not a continuing or surviving
corporation or as a result of which shares of the Company's capital
stock are converted into or exchanged for cash, securities of
another entity, or other property, unless (in any case) the holders
of the Company's outstanding shares of Common Stock immediately
before that transaction own more than 50% of the combined voting
power of the outstanding securities of the continuing or surviving
entity immediately after that transaction.
B. A sale or other transfer for value, in one transaction or a
series of related transactions, of all or substantially all of the
Company's assets.
C. A majority of the Board of Directors of the Company
consists of persons other than (5) of the members of the Board of
Directors on the effective date of this Agreement and the Employee.
D. The Company's stockholders approve a plan or proposal to
liquidate or dissolve the Company.
E. A person or group, hereafter acquires the beneficial
ownership of more than 25% of the outstanding voting securities of
the Company (all within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the regulations
promulgated thereunder), unless that acquisition is approved by the
Employee.
(e) Notice of Termination. Any termination of the Employee's employment
hereunder by the Company or by the Employee (other than a termination pursuant
to Paragraph 5(a) and other than expiration of the Employment Term) shall be
communicated by a Notice of Termination (as defined below) to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) in the case of a termination for Disability or a For
Cause Termination or a Good Reason Termination, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated, and (iii) specifies the
Employment Termination Date (as defined in Paragraph 5(f) below). The failure by
the Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Disability or Cause shall not waive any right
of the Company hereunder or preclude the Company from asserting such fact or
circumstance in enforcing the Company's rights hereunder.
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<PAGE> 6
(f) Employment Termination Date. For purposes of this Agreement,
"Employment Termination Date" shall mean the effective date of termination of
the Employee's employment hereunder, which date shall be (i) if the Employee's
employment is terminated by his death, the date of his death, (ii) if the
Employee's employment is terminated because of his Disability, the Disability
Effective Date, (iii) if the Employee's employment is terminated by the Company
pursuant to a For Cause Termination or a Without Cause Termination, the date
specified in the Notice of Termination, which date shall in no event be earlier
than the date such notice is given, (iv) if the Employee's employment is
terminated by the Employee pursuant to a Good Reason Termination, the date on
which the Notice of Termination is given, and (v) December 31, 2003, if the
Employee's employment is terminated due to expiration of the Employment Term.
(g) Resignation. In the event of termination of the Employee's
employment hereunder (for any reason other than the death of the Employee), the
Employee agrees that if at such time he is a member of the Board of Directors or
officer of the Company or a director or officer of any of its subsidiaries, he
will promptly deliver to the Company his written resignation from all such
positions, such resignation to be effective as of the Employment Termination
Date.
6. Company Obligations Upon Termination of Employment.
(a) Death. If the Employee's employment hereunder is terminated by
reason of the Employee's death, his estate or designated beneficiaries shall be
entitled to the following:
(i) Base salary in effect on and payable through, the Employee's
date of death in accordance with the Company's standard payroll
policies;
(ii) The Employee's annual bonus for the year in which the
Employee's death occurs based on the maximum target award opportunity
for such year, payable on the date it otherwise would have been
payable;
(iii) The balance of any incentive awards earned but not yet paid,
payable on their standard payment dates;
(iv) The right to exercise any stock option held by Employee on
the date of death for the remainder of its term, whether or not
exercisable by Employee on the date of death;
(v) any amounts payable on death pursuant to any plans or
policies of the Company;
(vi) any other amounts due but not yet paid from the Company to
Employee; and
(vii) the option of Employee's legal representatives to sell to the
Company all capital stock of Employee held by Employee at his death at
a price equal to the greater of the price per share paid by the
Employee (as adjusted to reflect any capital adjustments made by the
Company since that purchase) or the Fair Market Value of each of the
shares. For this purpose, the "Fair Market Value" shall be that value
of the shares as of the Employment Termination Date which is determined
(i) by mutual agreement between the Company and Employee's legal
representatives or (ii) the per-share price paid in a bona fide sale of
shares of the same class of the
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<PAGE> 7
Company's stock within the six (6) months prior to the Employment
Termination Date in an arms-length transaction, as adjusted to reflect
any capital adjustments by the Company since that sale or (iii) if no
such mutual written agreement is entered into, or no such sale has
occurred, by the following appraisal process. Each of the Company and
the Employee's legal representatives shall select an independent
investment banking, accounting, or appraisal firm ("Appraiser"), and
each of the two Appraisers shall determine the Fair Market Value of the
shares of stock as of the Employment Termination Date, without giving
effect to any difference in the percentage ownership of the Company
that the shares of stock represented (i.e. whether the shares are a
majority or a minority of the outstanding stock). The arithmetical
average of the two values so determined shall be the Fair Market Value
of the shares of stock. Each Appraiser shall afford each of the parties
an opportunity to present evidence as to such parties opinion as to the
value of the shares of stock. The determination of the Fair Market
Value by this procedure shall be binding on the Company and the
Employee.
(b) Disability. If the Employee's employment hereunder is terminated by
reason of the Employee's Disability, Employee or his legal representative shall
be entitled to the following:
(i) Base salary in effect on and payable through, the Employee's
date of death in accordance with the Company's standard payroll
policies;
(ii) The Employee's annual bonus for the year in which the
termination for disability occurs based on the maximum target award
opportunity for such years, payable on the date it otherwise would have
been payable;
(iii) The balance of any incentive awards earning but not yet paid,
payable on their standard payment dates;
(iv) The right to exercise any stock option held by Employee on
the Employment Termination Date for the remainder of its term, whether
or not exercisable by Employee on the Employment Termination Date;
(v) Any amounts payable on disability pursuant to any plans or
policies of the Company;
(vi) Any other amounts due but not yet paid from the Company to
Employee; and
(vii) The option of the Employee or his legal representatives to
sell to the Company all the capital stock of the Company held by
Employee on the Employment Termination Date at a price equal to the
greater of the price per share paid by the Employee (as adjusted to
reflect any capital adjustments made by the Company since that
purchase) or the Fair Market Value of each of the shares. For this
purpose, the "Fair Market Value" shall be that value of the shares as
of the Employment Termination Date which is determined (i) by mutual
agreement between the Company and Employee or (ii) if no such mutual
written agreement is entered into, or no such sale has occurred, by the
following appraisal process. Each of the Company and the Employee shall
select an independent investment banking, accounting, or appraisal firm
("Appraiser"), and each of the two Appraisers shall determine the Fair
Market Value of the shares of stock as of the
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<PAGE> 8
Employment Termination Date, without giving effect to any difference in
the percentage ownership of the Company that the shares of stock
represent (i.e. whether the shares are a majority or a minority of the
outstanding stock). The arithmetical average of the two values so
determined shall be the Fair Market Value of the shares of stock. Each
Appraiser shall afford each of the parties an opportunity to present
evidence as to such parties opinion as to the value of the shares of
stock. The determination of the Fair Market Value by this procedure
shall be binding on the Company and the Employee.
(c) For Cause Termination. If the Employee's employment hereunder is
terminated pursuant to a For Cause Termination, Employee shall receive:
(i) Base Salary in effect on and payable through, Employment
Termination Date in accordance with the Company's standard payroll
policies;
(ii) The portion of the Employee's annual bonus for the year in
which the Employment Termination Date occurs based on the award he
would have earned for such year if employment had not terminated,
prorated for the number of days in the calendar year prior to the
Employment Termination Date, payable on the date it otherwise would
have been payable;
(iii) Any other amounts due but not yet paid from the Company to
Employee;
(iv) Any other amounts payable by the Company under applicable
plans or programs; and
(d) Without Cause Termination or Good Reason Termination. If the
Employee's employment hereunder is terminated by the Company by reason of a
Without Cause Termination, or by the Employee for Good Reason, Employee shall be
entitled to the following:
(i) Continuation of installments of the Base Salary amount for
the balance of the Employment Term or for two years after the
Employment Termination Date, whichever is greater;
(ii) The immediate issuance to the Employee of 400,000 newly
issued and fully paid and non-assessable shares of the Company's common
stock, $.001 par value per share (the "Shares"), which shall be issued
in the name of the Employee on the Employment Termination Date.
(iii) Annual bonus for the balance of the Employment Term payable
on the date such payments would have been payable;
(iv) The balance of any incentive awards earned but not yet paid,
payable on their standard payment dates;
(v) The right to exercise any stock option for the remainder of
its term, whether or not exercisable by Employee on the Employment
Termination Date;
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<PAGE> 9
(vi) Any other amounts due but not yet paid from the Company to
Employee; and
(vii) The option of Employee to sell to the Company all the capital
stock of the Company held by the Employee on the Employment Termination
Date at a price equal to the greater of the price per share paid by the
Employee (as adjusted to reflect any capital adjustments made by the
Company since that purchase) or the Fair Market Value of each of the
shares. For this purpose, the "Fair Market Value" shall be that value
of the shares as of the Employment Termination Date which is determined
(i) by mutual agreement between the Company and Employee or (ii) the
per-share price paid in a bona fide sale of shares of the same class of
the Company's stock within the six (6) months prior to the Employment
Termination Date in an arms-length transaction, as adjusted to reflect
any capital adjustments by the Company since that sale or (iii) if no
such mutual written agreement is entered into, or no such sale has
occurred, by the following appraisal process. Each of the Company and
the Employee shall select an independent investment banking,
accounting, or appraisal firm ("Appraiser"), and each of the two
Appraisers shall determine the Fair Market Value of the shares of stock
as of the Employment Termination Date, without giving effect to any
difference in the percentage ownership of the Company that the shares
of stock represent (i.e. whether the shares are a majority or a
minority of the outstanding stock). The arithmetical average of the two
values so determined shall be the Fair Market Value of the shares of
stock. Each Appraiser shall afford each of the parties an opportunity
to present evidence as to such parties opinion as to the value of the
shares of stock. The determination of the Fair Market Value by this
procedure shall be binding on the Company and the Employee.
The Employee shall not be obligated to seek or secure new employment or
to become self-employed after termination of his employment with the Company,
but shall be obligated to report promptly to the Company any actual employment
obtained during the period for which Employee benefits continue. There shall be
no offset against any amounts due to Employee under this Agreement on account of
any remuneration or benefits attributable to any subsequent employment
(including, without limitation, any self-employment) that he may obtain.
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<PAGE> 10
8. Confidentiality. The Employee recognizes and acknowledges that the
Company's trade secrets and other confidential or proprietary information, as
they may exist from time to time, are valuable, special, and unique assets of
the Company's business, access to and knowledge of which are essential to the
performance of the Employee's duties hereunder. The Employee confirms that all
such trade secrets and other information constitute the exclusive property of
the Company. During the Employment Term and thereafter without limitation of
time, the Employee shall hold in strict confidence and shall not, directly or
indirectly, disclose or reveal to any person, or use for his own personal
benefit or for the benefit of anyone else, any trade secrets, and other
confidential or proprietary information of any kind, nature, or description
(whether or not acquired, learned, obtained, or developed by the Employee alone
or in conjunction with others during the Employment Term) that has been obtained
by or disclosed to, him as a result of his employment by the Company, except (i)
with the prior written consent of the Company duly authorized by its Board of
Directors, (ii) in the course of the proper performance of the Employee's duties
hereunder, (iii) for information (x) that becomes generally available to the
public other than as a result of unauthorized disclosure by the Employee or his
affiliates or (y) that becomes available to the Employee subsequent to the
termination of his employment hereunder and on a nonconfidential basis from a
source other than the Company or its subsidiaries who is not bound by a duty of
confidentiality, or other contractual, legal, or fiduciary obligation, to the
Company or such customers, clients, or others having a business relationship, or
(iv) as required by applicable law or legal process. The provisions of this
Paragraph 8 shall continue in effect notwithstanding termination of the
Employee's employment hereunder for any reason.
9. Business Records. Given the competitive environment in which the
Company does business and the fiduciary relationship that the Employee will have
with the Company hereunder, the Employee agrees to promptly deliver to the
Company, upon termination of his employment hereunder, or at any other time when
the Company so requests, all memoranda, notes, records, drawings, manuals, and
other documents (and all copies thereof and therefrom) in any way relating to
the business or affairs of the Company or any of its subsidiaries or any of
their clients, whether made or compiled by the Employee or furnished to him by
the Company or any of its employees, customers, clients, consultants, or agents,
which the Employee may then possess or have under his control. The Employee
confirms that all such memoranda, notes, records, drawings, manuals, and other
documents (and all copies thereof and therefrom) constitute the exclusive
property of the Company. The obligation of confidentiality set forth in
Paragraph 8 shall continue notwithstanding the Employee's delivery of any such
documents to the Company. The provisions of this Paragraph 9 shall continue in
effect notwithstanding termination of the Employee's employment hereunder for
any reason.
10. Assistance in Litigation. During the Employment Term and for a
period of three years thereafter, the Employee shall, upon reasonable notice,
furnish such information and proper assistance to the Company as may reasonably
be required by the Company in connection with any litigation in which the
Company or any of its subsidiaries or affiliates is, or may become, a party. The
Company shall reimburse the Employee for all reasonable out-of-pocket expenses
incurred by the Employee, including attorneys' fees incurred by Employee, in
rendering such assistance. The provisions of this Paragraph 10 shall continue in
effect notwithstanding termination of the Employee's employment hereunder for
any reason.
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<PAGE> 11
11. Noncompetition and Related Matters.
(a) The Employee acknowledges that during the term of his employment
with the Company, the Company will provide him, and he will receive from the
Company, special training and knowledge. The Employee acknowledges that included
in the special knowledge received is the confidential information identified in
paragraph 8. The Employee acknowledges that this confidential information is
valuable to the Company and, therefore, its protection and maintenance
constitutes a legitimate interest to be protected by the Company by enforcement
of this covenant not to compete. Therefore, the Employee agrees that, in
consideration of the foregoing, during the Employment Term and for the greater
of the period of time during which the Company shall pay to the Employee any
amount due under the terms of this Agreement or twelve (12) months following the
Employment Termination Date, unless otherwise extended pursuant to the terms of
this paragraph 11, the Employee will not, directly or indirectly, either as an
employee, employer, consultant, agent, principal, partner, shareholder,
corporate officer, director, or in any other individual or representative
capacity, engage or participate in any Competitive Business (as hereinafter
defined) within any state in which the Company or any subsidiary thereof is
conducting or has conducted its Competitive Business during the Employment Term;
provided that nothing in this paragraph 11 shall be construed to prevent the
Employee from owning beneficially, as an investment, up to an aggregate of 5% of
a class of equity securities that is publicly traded and registered under
Section 12 of the Securities Exchange Act of 1934. For purposes of this
paragraph 11, "Competitive Business" shall mean any business entity whose
primary or principal business consists of designing and manufacturing electronic
products using flip chip assembly processing. The Employee represents to the
Company that the enforcement of the restriction contained in this paragraph 11
would not be unduly burdensome to the Employee and that in order to induce the
Company to employ the Employee, the Employee further represents and acknowledges
that the Employee is willing and able to compete in other geographical areas not
prohibited by this paragraph 11 (a).
(b) The Employee agrees that a breach or violation of this covenant not
to compete by the Employee shall entitle the Company, as a matter of right, to
an injunction issued by any court of competent jurisdiction, restraining any
further or continued breach or violation of this covenant. Such right to an
injunction shall be cumulative and in addition to, and not in lieu of, any other
remedies to which the Company may show itself justly entitled. Further, during
any period in which the Employee is in breach of this covenant not to compete,
the time period of this covenant shall be extended for an amount of time that
the Employee is in breach hereof.
(c) In addition to the restrictions set forth in paragraph 11 (a), the
Employee shall not, during the Employment Term and for a greater period of time
during which the Company shall pay to the Employee any amounts due under the
terms of this Agreement or twelve (12) months after the Employment Termination
Date, either directly or indirectly, (i) make known to any person or entity the
names and addresses of any of the customers of the Company or contacts of the
Company or any other information pertaining to such customers or contacts, (ii)
call on, solicit, or take away, or attempt to call on, solicit, or take away,
any of the customers of the Company who were customers during the Employee's
association with the Company, whether for the Employee or for any other person
or entity, or (iii) recruit or attempt to recruit, directly or by assisting
others, any other employee of the Company or any of its affiliates.
(d) The parties to this Agreement agree that the limitations contained
in this paragraph 11 with respect to time, geographical area, and scope of
activity are reasonable. However, if any court shall determine that the time,
geographical area, or scope of activity of any restriction contained in this
paragraph 11 is unenforceable, it is the intention of the parties that such
restrictive covenant set forth herein shall not
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<PAGE> 12
thereby be terminated but shall be deemed amended to the extent required to
render it valid and enforceable.
12. Withholding Taxes. The Company shall withhold from any payments to
be made to the Employee hereunder such amounts (including social security
contributions and federal income taxes) as shall be required by federal, state,
and local withholding tax laws.
13. No Effect on Other Contractual Rights. The provisions of this
Agreement, and any payment provided for hereunder, shall not reduce any amounts
otherwise payable to the Employee, or in any way diminish the Employee's rights
as an employee of the Company, whether existing now or hereafter, under any
employee benefit plan, program, or arrangement or other contract or agreement of
the Company providing benefits to the Employee.
14. Arbitration. The Company and the Employee agree to submit to final
and binding arbitration any and all disputes, claims (whether in tort, in
contract, statutory, or otherwise) and/or disagreements concerning the
interpretation or application of this Agreement; provided, however,
notwithstanding the foregoing, in no event shall any dispute, claim, or
disagreement arising under Paragraphs 8 and 9 be submitted to arbitration
pursuant to this Paragraph 14 or otherwise. Any dispute, claim, and/or
disagreement subject to arbitration pursuant to the terms of this Paragraph 14
shall be resolved by arbitration in accordance with the National Rules for the
Resolution of Employment Dispute of the American Arbitration Association or any
successor organization (the "Association") then in effect. Arbitration under
this provision must be initiated within 30 days of the action, inaction, or
occurrence about which the party initiating the arbitration is complaining.
Within ten days of the initiation of an arbitration hereunder, each party will
designate an arbitrator from a panel list provided by the Association. The
appointed arbitrators will appoint a neutral arbitrator from the panel list. The
Employee and the Company agree that the decision of the arbitrators selected
hereunder will be final and binding on both parties. This arbitration provision
is expressly made pursuant to and shall be governed by the Federal Arbitration
Act, 9 U.S.C. Sections 1-14. The parties hereto agree that pursuant to Section 9
of such Act a judgment of the United States District Court for the Northern
District of Dallas, Texas shall be entered upon the award made pursuant to the
arbitration.
15. Injunctive Relief. In recognition of the fact that a breach by the
Employee of any of the provisions of Paragraphs 8 and 9 will cause irreparable
damage to the Company for which monetary damages alone will not constitute an
adequate remedy, the Company shall be entitled as a matter of right (without
being required to prove damages or furnish any bond or other security) to obtain
a restraining order, an injunction, an order of specific performance, or other
equitable or extraordinary relief from any court of competent jurisdiction
restraining any further violation of such provisions by the Employee or
requiring him to perform his obligations hereunder. Such right to equitable or
extraordinary relief shall not be exclusive but shall be in addition to all
other rights and remedies to which the Company may be entitled at law or in
equity, including without limitation the right to recover monetary damages for
the breach by the Employee of any of the provisions of this Agreement.
16. Excise Tax.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution to or
for the benefit of the Employee (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise,
but
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<PAGE> 13
determined without regard to any additional payments required under
this Section 16) (a "Termination Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any interest or penalties are
incurred by the Employee with respect to such excise tax (such excise
tax, together with any such interest and penalties, hereinafter
collectively referred to as the "Excise Tax"), then the Employee shall
be entitled to receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the Employee of all taxes
(including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) For purposes of determining the amount of the Gross-Up Payment,
Employee shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and locality of
Employee's residence on the Termination Date, net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. If the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of Employee's termination of employment, Employee
shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of
the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Gross-Up Payment being repaid by
Employee to the extent that such repayment results in a reduction in
Excise Tax and/or a federal, state or local income tax deduction) plus
interest on the amount of such repayment at the rate provided in
section 1274(b)(2)(B) of the Code. If the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of the
termination of Employee's employment (including by reason of any
payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by Employee with respect to such excess)
at the time that the amount of such excess is finally determined.
Employee and the Company shall each reasonably cooperate with the other
in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with
respect to the Termination Payments.
(c) All determinations required to be made under this Section 16,
including (without limitation) whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to
be used in arriving at such determination, shall be made by a certified
public accounting firm selected by the Company and reasonably
acceptable to Employee (the "Accounting Firm"), which shall be retained
to provide detailed supporting calculations both to the Company and
Employee within 15 business days of the receipt of notice from Employee
that there has been a Termination Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm
shall be paid solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 16, shall be paid by the Company to
Employee within five (5) days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be
binding upon the Company and Employee. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been
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<PAGE> 14
made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. If Employee
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Employee.
17. Survival. Neither the expiration or the termination of the term of
the Employee's employment hereunder shall impair the rights or obligations of
either party hereto which shall have accrued hereunder prior to such expiration
or termination. The provisions of Paragraphs 8, 9, 10, 15, 25, and 26 and the
rights and obligations of the parties thereunder, shall survive the expiration
or termination of the term of the Employee's employment hereunder.
18. Notices. All notices, requests, demands, and other communications
required or permitted to be given or made hereunder by either party hereto shall
be in writing and shall be deemed to have been duly given or made (i) when
delivered personally, or (ii) when deposited in the United States mail, first
class registered or certified mail, postage prepaid, return receipt requested,
to the party for which intended at the following addresses (or at such other
addresses as shall be specified by the parties by like notice, except that
notices of change of address shall be effective only upon receipt):
If to the Company, at:
Micro ASI, Incorporated
12655 North Central Expressway
Suite 1000
Dallas, TX 75243
19. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto concerning the subject matter hereof and supersedes
all prior agreements and understandings, both written and oral, between the
parties with respect to such subject matter.
20. Binding Effect; Assignment; No Third Party Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors, and assigns; provided,
however, that the Employee shall not assign or otherwise transfer this Agreement
or any of his rights or obligations hereunder without the prior written consent
of the Company (except that any rights that the Employee may have hereunder at
the time of his death may be transferred by will or pursuant to the laws of
descent and distribution). Nothing in this Agreement, express or implied, is
intended to or shall confer upon any person other than the parties hereto, and
their respective heirs, legal representatives, successors, and permitted
assigns, any rights, benefits, or remedies of any nature whatsoever under or by
reason of this Agreement.
21. Nonalienation of Benefits. The Employee shall not have any right to
pledge, hypothecate, anticipate, or in any way create a lien upon any payments
or other benefits provided under this Agreement; and no benefits payable
hereunder shall be assignable in anticipation of payment either by voluntary or
involuntary acts, or by operation of law, except by will or pursuant to the laws
of descent and distribution.
22. Amendment. This Agreement may not be modified or amended in any
respect except by an instrument in writing signed by both of the parties hereto.
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<PAGE> 15
23. Waiver. Any term or condition of this Agreement may be waived at
any time by the party hereto which is entitled to have the benefit thereof, but
such waiver shall only be effective if evidenced by a writing signed by such
party, and a waiver on one occasion shall not be deemed to be a waiver of the
same or any other type of breach on a future occasion. No failure or delay by a
party hereto in exercising any right or power hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right or power.
24. Authority. No person, other than pursuant to a resolution duly
adopted by the members of the Board of Directors of the Company, shall have
authority on behalf of the Company to agree to modify, amend, or waive any
provision of this Agreement or take any action in reference hereto.
25. Severability. If any provision of this Agreement is held to be
unenforceable, (a) this Agreement shall be considered divisible, (b) such
provision shall be deemed inoperative to the extent it is deemed unenforceable,
and (c) in all other respects this Agreement shall remain in full force and
effect; provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by applicable law.
26. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
27. Counterparts. This Agreement may be executed by the parties hereto
in any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer, and the Employee has
executed this Agreement, effective as of the date first set forth above.
MICRO-ASI, INC.
By: /s/ Joel E. Claybrook /s/ Cecil E. Smith, Jr.
------------------------ -------------------------
JOEL E. CLAYBROOK, CECIL E. SMITH, JR.
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), effective as of January 1,
2000, between Micro-ASI, Inc., a corporation (the "Company"), and Joel E.
Claybrook, an individual residing in Dallas, Texas (the "Employee").
WHEREAS, the Board of Directors of the Company desires to assure that
key executives devote their time and attention to the Company without regard to
concerns about an involuntary loss of employment without cause, and to assure
the continuity and cooperation of management in the event of a change in
ownership and the continued attention of Employee to his duties without any
distraction arising out of the circumstances surrounding a change or potential
change in ownership; and,
WHEREAS, the Company and Employee desire to enter into this Agreement
to protect Employee against an involuntary termination of employment without
cause, to recognize the additional efforts of Employee that may be necessary to
assist in and prepare for any potential change in ownership, and to encourage
Employee to diligently perform his duties and responsibilities to ensure a
smooth transition for any change in ownership;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company and the Employee hereby agree as follows:
1. Employment. The Company agrees to employ the Employee and the
Employee agrees to be employed by the Company, for the period set forth in
Paragraph 2, in the position and with the duties and responsibilities set forth
in Paragraph 3, and upon the other terms and conditions herein provided.
2. Term. The employment of the Employee by the Company as provided in
Paragraph 1 shall be for a period of four (4) years commencing on the effective
date of this Agreement through and ending on December 31, 2003, unless sooner
terminated as herein provided (the "Employment Term"). Each twelve-month period
running from January 1 to December 31 during the Employment Term shall be
referred to herein as an "Annual Period".
3. Position and Duties.
(a) During the Employment Term, the Employee shall serve as Chief
Executive Officer of the Company. In addition, the Employee shall have such
other duties, functions, responsibilities, and authority as are from time to
time delegated to the Employee by the Board of Directors of the Company,
provided that such duties, functions, responsibilities, and authority are
reasonable and customary for a person serving in the aforesaid position or
office of an enterprise comparable to the Company.
(b) During the Employment Term, the Employee shall devote his full
time, skill, and attention and his best efforts to the business and affairs of
the Company to the extent necessary to discharge fully, faithfully and
efficiently the duties and responsibilities delegated and assigned to the
Employee herein or pursuant hereto, except for usual, ordinary, and customary
periods of vacation and absence due to illness or other disability. In this
Agreement, "full time" does not necessarily require that the Employee spend a
specific number of hours per working day or a specific number of days per week
at the Company's executive offices or otherwise in performing his duties and
responsibilities hereunder, but the Employee need only perform his duties and
responsibilities as such times as are necessary. In addition, nothing in this
Agreement prohibits the Employee's (i) serving as a director of other entities
that are not competitive with
<PAGE> 2
the Company, (ii) involvement in community or charitable activities, or, (iii)
personal or family investment-related activities.
(c) In connection with the Employee's employment by the Company under
this Agreement, the Employee shall be based at the principal executive offices
of the Company in Dallas, Texas, except for such reasonable travel as the
performance of the Employee's duties in the business of the Company may require.
(d) All services that the Employee may render to the Company or any of
its subsidiaries or affiliates in any capacity during the Employment Term shall
be deemed to be services required by this Agreement and consideration for the
compensation provided for herein.
4. Compensation and Related Matters.
(a) Base Salary. During each Annual Period of the Employment Term, the
Company shall pay to the Employee for his services hereunder a base salary
("Base Salary") of $180,000. The Employee's Base Salary shall be payable in
installments in accordance with the general payroll practices of the Company, or
as otherwise mutually agreed upon. The Employee's Base Salary shall be subject
to such other increases as may be determined from time to time by the Board of
Directors of the Company in its sole discretion, but in no event shall the
Company pay the Employee a Base Salary at a rate less than that set forth in the
first sentence of this Section 4(a).
(b) Employee Benefits. During the Employment Term, the Employee shall
be entitled to participate in all employee benefit plans, programs and
arrangements that are generally made available by the Company to its senior
executives, including, without limitation, the Company's life, long-term
disability and health/PPO plans and the Company's stock option and other equity
incentive plans. The Employee agrees to cooperate and participate in any medical
or physical examinations as may be required by any insurance company in
connection with the applications for such life and/or disability insurance
policies.
(c) Expenses. During the Employment Term, the Employee shall be
entitled to receive prompt reimbursement upon a timely basis (according to the
then-current practices of the Company) for all reasonable expenses incurred by
the Employee in performing his duties and responsibilities hereunder upon the
presentation by the Employee of an accounting of such expenditures, including
receipts where required by Company policy or federal income tax regulations.
(d) Vacations. During the Employment Term, the Employee shall be
entitled to six (6) weeks of paid vacation each year. The Employee shall also be
entitled to all paid holidays given by the Company to its senior executives. The
Employee agrees to utilize his vacation at such time or times as are (i)
consistent with the proper performance of his duties and responsibilities
hereunder and (ii) mutually convenient for the Company and the Employee.
(e) Board Seat. So long as the Employee remains an employee of the
Company, the Company agrees to use its best efforts to cause the Employee to be
nominated for election to the Company's Board of Directors at each annual or
special meeting of the stockholders of the Company at which the general election
of directors of the Company is to take place and to use its best efforts to
cause the Employee to be so elected to such Board of Directors.
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<PAGE> 3
(f) Indemnification. The Employee, in any capacity on behalf of the
Company or any of its subsidiaries or affiliates, shall be entitled to
exculpation, indemnification, and advancement of expenses to the fullest extent
not prohibited by law. The Employee shall also be entitled to coverage under
each directors' and officers' liability insurance policy, if any, maintained by
or on behalf of the Company's directors and officers.
5. Termination of Employment.
(a) Death. The Employee's employment hereunder shall terminate
automatically upon his death.
(b) Disability. If the Disability (as defined below) of the Employee
occurs during the Employment Term, the Company may notify the Employee of the
Company's intention to terminate the Employee's employment hereunder for
Disability. In such event, the Employee's employment hereunder shall terminate
effective on the 15th day following the date such notice of termination is
received by the Employee (the "Disability Effective Date"). For purposes of this
Agreement a disability occurs if the Employee is determined to be "totally
disabled" by a vote of at least 80% of the Board of Directors of the Company
(excluding Employee) based upon the advice of a board-certified physician
reasonably satisfactory to Employee, which may include a determination that the
Employee is unable, because of physical or mental illness or incapacity or
otherwise, to fulfill his duties under this Agreement for 180 consecutive days
or appears unable to perform such duties for an indefinite period of time in
excess of 180 days.
(c) Termination by Company.
(i) For Cause Termination. The Company may terminate the Employee's
employment hereunder for Cause (as defined below) in accordance with
the following procedure (a "For Cause Termination"):
(A) Cause Defined. "Cause" shall only mean: (1) the employee is
convicted of fraud, embezzlement, theft or other criminal conduct
against the Company and such conviction is final and
non-appealable, or (2) willful misconduct or gross negligence in
the performance of, or willful neglect of, the Employee's duties,
which has caused demonstrable and serious injury to the Company.
(B) Required Notice. A termination for Cause shall not take
effect unless the following has occurred:
(1) the Board of Directors has given Employee written
notice of its intention to terminate Employee for Cause,
specifying with particularity the grounds on which the proposed
termination for Cause is contemplated, which shall be acts or
failures to act on the part of Employee which occurred no more
than six months prior to the Board having knowledge of such
acts or failures to act;
(2) the Employee shall have 30 days after such written
notice to cure such conduct;
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<PAGE> 4
(3) if Employee fails to cure such conduct, Employee shall
have the right to request, by notice to the Secretary of the
Company given within ten days after Employee receives notice
from the Board that he has not cured the conduct within the
period described in subsection (b) above, the hearing before
the full Board of Directors, with his counsel; and
(4) if, within five days after Employee's hearing by the
Board, he receives a certified copy of a resolution duly
adopted by 80% of the full Board (exclusive of Employee)
confirming that in its judgment the grounds for termination for
(Cause) described in the initial notice given under subsection
(a) above are justified, the Employee's employment shall be
terminated.
(ii) Without Cause. The Company may terminate the Employee's
employment hereunder without cause for any or no reason. For purposes
of this Agreement, a "Without Cause Termination" shall mean a
termination by the Company of the Employee's employment hereunder other
than pursuant to (x) a For Cause Termination, or (y) Disability.
(d) Termination by Employee For Good Reason. The Employee may terminate
his employment hereunder if, without Employee's prior written consent
specifically referring to this Agreement:
(i) Any reduction in the amount of Employee's annual salary,
guaranteed incentive compensation or aggregate incentive compensation
opportunities (which reduction may also occur pursuant to any
assignment of performance goals and corresponding awards which are
inconsistent with prior performance goals and awards).
(ii) Any significant reduction in the aggregate value of Employee's
benefits as such benefits may be increased from time to time (unless
such reduction is pursuant to a general change in benefits applicable
to all similarly situated employees of the Company and its Affiliates)
or
(iii) Any material and wilful breach of the Company of any
provision of this Agreement or any written employment agreement with
Employee;
(iv) (A) assignment to Employee of any duties inconsistent with his
status as President and Chief Executive Officer of the Company, (B) the
removal of Employee from his position as President and Chief Executive
Officer of the Company, (C) the failure to retain Employee as President
and Chief Executive Officer of any successor of the Company (whether by
merger, consolidation, or sale or disposition of all or substantially
all of the assets of the Company) or any entity which directly or
indirectly owns twenty five percent (25%) or more of any class of
securities of the Company or any successor to the Company (whether by
merger, consolidation, or sale or disposition of all or substantially
all of the assets of the Company) or (D) any significant change in the
nature or status of Employees duties or responsibilities;
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<PAGE> 5
(v) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to
the Employee's position with the Company.
(vi) Transfer of Employee's principal place of employment to a
location more than 25 miles away from the Company's current
headquarters.
(vii) Any Change of Control of the Company. In this Agreement a
"Change of Control" is any of the following:
A. A merger, consolidation, share exchange, or other
reorganization in which the Company is not a continuing or
surviving corporation or as a result of which shares of the
Company's capital stock are converted into or exchanged for cash,
securities of another entity, or other property, unless (in any
case) the holders of the Company's outstanding shares of Common
Stock immediately before that transaction own more than 50% of the
combined voting power of the outstanding securities of the
continuing or surviving entity immediately after that transaction.
B. A sale or other transfer for value, in one transaction or
a series of related transactions, of all or substantially all of
the Company's assets.
C. A majority of the Board of Directors of the Company
consists of persons other than (5) of the members of the Board of
Directors on the effective date of this Agreement and the Employee.
D. The Company's stockholders approve a plan or proposal to
liquidate or dissolve the Company.
E. A person or group, hereafter acquires the beneficial
ownership of more than 25% of the outstanding voting securities of
the Company (all within the meaning of Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the regulations
promulgated thereunder), unless that acquisition is approved by the
Employee.
(e) Notice of Termination. Any termination of the Employee's employment
hereunder by the Company or by the Employee (other than a termination pursuant
to Paragraph 5(a) and other than expiration of the Employment Term) shall be
communicated by a Notice of Termination (as defined below) to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) in the case of a termination for Disability or a For
Cause Termination or a Good Reason Termination, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated, and (iii) specifies the
Employment Termination Date (as defined in Paragraph 5(f) below). The failure by
the Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Disability or Cause shall not waive any right
of the Company hereunder or preclude the Company from asserting such fact or
circumstance in enforcing the Company's rights hereunder.
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<PAGE> 6
(f) Employment Termination Date. For purposes of this Agreement,
"Employment Termination Date" shall mean the effective date of termination of
the Employee's employment hereunder, which date shall be (i) if the Employee's
employment is terminated by his death, the date of his death, (ii) if the
Employee's employment is terminated because of his Disability, the Disability
Effective Date, (iii) if the Employee's employment is terminated by the Company
pursuant to a For Cause Termination or a Without Cause Termination, the date
specified in the Notice of Termination, which date shall in no event be earlier
than the date such notice is given, (iv) if the Employee's employment is
terminated by the Employee pursuant to a Good Reason Termination, the date on
which the Notice of Termination is given, and (v) December 31, 2003, if the
Employee's employment is terminated due to expiration of the Employment Term.
(g) Resignation. In the event of termination of the Employee's
employment hereunder (for any reason other than the death of the Employee), the
Employee agrees that if at such time he is a member of the Board of Directors or
officer of the Company or a director or officer of any of its subsidiaries, he
will promptly deliver to the Company his written resignation from all such
positions, such resignation to be effective as of the Employment Termination
Date.
6. Company Obligations Upon Termination of Employment.
(a) Death. If the Employee's employment hereunder is terminated by
reason of the Employee's death, his estate or designated beneficiaries shall be
entitled to the following:
(i) Base salary in effect on and payable through, the Employee's
date of death in accordance with the Company's standard payroll
policies;
(ii) The Employee's annual bonus for the year in which the
Employee's death occurs based on the maximum target award opportunity
for such year, payable on the date it otherwise would have been
payable;
(iii) The balance of any incentive awards earned but not yet paid,
payable on their standard payment dates;
(iv) The right to exercise any stock option held by
Employee on the date of death for the remainder of its term, whether or
not exercisable by Employee on the date of death;
(v) any amounts payable on death pursuant to any plans or
policies of the Company;
(vi) any other amounts due but not yet paid from the Company to
Employee; and
(vii) the option of Employee's legal representatives to
sell to the Company all capital stock of Employee held by Employee at
his death at a price equal to the greater of the price per share paid
by the Employee (as adjusted to reflect any capital adjustments made by
the Company since that purchase) or the Fair Market Value of each of
the shares. For this purpose, the "Fair Market Value" shall be that
value of the shares as of the Employment Termination Date which is
determined (i) by mutual agreement between the Company and Employee's
legal representatives or (ii) the per-share price paid in a bona fide
sale of shares of the same class of the
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<PAGE> 7
Company's stock within the six (6) months prior to the Employment
Termination Date in an arms-length transaction, as adjusted to reflect
any capital adjustments by the Company since that sale or (iii) if no
such mutual written agreement is entered into, or no such sale has
occurred, by the following appraisal process. Each of the Company and
the Employee's legal representatives shall select an independent
investment banking, accounting, or appraisal firm ("Appraiser"), and
each of the two Appraisers shall determine the Fair Market Value of the
shares of stock as of the Employment Termination Date, without giving
effect to any difference in the percentage ownership of the Company
that the shares of stock represented (i.e. whether the shares are a
majority or a minority of the outstanding stock). The arithmetical
average of the two values so determined shall be the Fair Market Value
of the shares of stock. Each Appraiser shall afford each of the parties
an opportunity to present evidence as to such parties opinion as to the
value of the shares of stock. The determination of the Fair Market
Value by this procedure shall be binding on the Company and the
Employee.
(b) Disability. If the Employee's employment hereunder is terminated by
reason of the Employee's Disability, Employee or his legal representative shall
be entitled to the following:
(i) Base salary in effect on and payable through, the Employee's
date of death in accordance with the Company's standard payroll
policies;
(ii) The Employee's annual bonus for the year in which the
termination for disability occurs based on the maximum target award
opportunity for such years, payable on the date it otherwise would have
been payable;
(iii) The balance of any incentive awards earning but not yet paid,
payable on their standard payment dates;
(iv) The right to exercise any stock option held by Employee on
the Employment Termination Date for the remainder of its term, whether
or not exercisable by Employee on the Employment Termination Date;
(v) Any amounts payable on disability pursuant to any plans or
policies of the Company;
(vi) Any other amounts due but not yet paid from the Company to
Employee; and
(vii) The option of the Employee or his legal representatives to
sell to the Company all the capital stock of the Company held by
Employee on the Employment Termination Date at a price equal to the
greater of the price per share paid by the Employee (as adjusted to
reflect any capital adjustments made by the Company since that
purchase) or the Fair Market Value of each of the shares. For this
purpose, the "Fair Market Value" shall be that value of the shares as
of the Employment Termination Date which is determined (i) by mutual
agreement between the Company and Employee or (ii) if no such mutual
written agreement is entered into, or no such sale has occurred, by the
following appraisal process. Each of the Company and the Employee shall
select an independent investment banking, accounting, or appraisal firm
("Appraiser"), and each of the two Appraisers shall determine the Fair
Market Value of the shares of stock as of the
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<PAGE> 8
Employment Termination Date, without giving effect to any difference in
the percentage ownership of the Company that the shares of stock
represent (i.e. whether the shares are a majority or a minority of the
outstanding stock). The arithmetical average of the two values so
determined shall be the Fair Market Value of the shares of stock. Each
Appraiser shall afford each of the parties an opportunity to present
evidence as to such parties opinion as to the value of the shares of
stock. The determination of the Fair Market Value by this procedure
shall be binding on the Company and the Employee.
(c) For Cause Termination. If the Employee's employment hereunder is
terminated pursuant to a For Cause Termination, Employee shall receive:
(i) Base Salary in effect on and payable through, Employment
Termination Date in accordance with the Company's standard payroll
policies;
(ii) The portion of the Employee's annual bonus for the year in
which the Employment Termination Date occurs based on the award he
would have earned for such year if employment had not terminated,
prorated for the number of days in the calendar year prior to the
Employment Termination Date, payable on the date it otherwise would
have been payable;
(iii) Any other amounts due but not yet paid from the Company to
Employee;
(iv) Any other amounts payable by the Company under applicable
plans or programs; and
(d) Without Cause Termination or Good Reason Termination. If the
Employee's employment hereunder is terminated by the Company by reason of a
Without Cause Termination, or by the Employee for Good Reason, Employee shall be
entitled to the following:
(i) Continuation of installments of the Base Salary amount for
the balance of the Employment Term or for two years after the
Employment Termination Date, whichever is greater;
(ii) The immediate issuance to the Employee of 400,000 newly
issued and fully paid and non-assessable shares of the Company's common
stock, $.001 par value per share (the "Shares"), which shall be issued
in the name of the Employee on the Employment Termination Date.
(iii) Annual bonus for the balance of the Employment Term payable
on the date such payments would have been payable;
(iv) The balance of any incentive awards earned but not yet paid,
payable on their standard payment dates;
(v) The right to exercise any stock option for the remainder of
its term, whether or not exercisable by Employee on the Employment
Termination Date;
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<PAGE> 9
(d) Without Cause Termination or Good Reason Termination. If the
Employee's employment hereunder is terminated by the Company by reason of a
Without Cause Termination, or by the Employee for Good Reason, Employee shall be
entitled to the following:
(i) Continuation of installments of the Base Salary amount for
the balance of the Employment Term or for two years after the
Employment Termination Date, whichever is greater;
(ii) The immediate issuance to the Employee of 400,000 newly
issued and fully paid and non-assessable shares of the Company's common
stock, $.001 par value per share (the "Shares"), which shall be issued
in the name of the Employee on the Employment Termination Date.
(iii) Annual bonus for the balance of the Employment Term payable
on the date such payments would have been payable;
(iv) The balance of any incentive awards earned but not yet paid,
payable on their standard payment dates;
(v) The right to exercise any stock option for the remainder of
its term, whether or not exercisable by Employee on the Employment
Termination Date;
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<PAGE> 10
(vi) Any other amounts due but not yet paid from the Company to
Employee; and
(vii) The option of Employee to sell to the Company all
the capital stock of the Company held by the Employee on the Employment
Termination Date at a price equal to the greater of the price per share
paid by the Employee (as adjusted to reflect any capital adjustments
made by the Company since that purchase) or the Fair Market Value of
each of the shares. For this purpose, the "Fair Market Value" shall be
that value of the shares as of the Employment Termination Date which is
determined (i) by mutual agreement between the Company and Employee or
(ii) the per-share price paid in a bona fide sale of shares of the same
class of the Company's stock within the six (6) months prior to the
Employment Termination Date in an arms-length transaction, as adjusted
to reflect any capital adjustments by the Company since that sale or
(iii) if no such mutual written agreement is entered into, or no such
sale has occurred, by the following appraisal process. Each of the
Company and the Employee shall select an independent investment
banking, accounting, or appraisal firm ("Appraiser"), and each of the
two Appraisers shall determine the Fair Market Value of the shares of
stock as of the Employment Termination Date, without giving effect to
any difference in the percentage ownership of the Company that the
shares of stock represent (i.e. whether the shares are a majority or a
minority of the outstanding stock). The arithmetical average of the two
values so determined shall be the Fair Market Value of the shares of
stock. Each Appraiser shall afford each of the parties an opportunity
to present evidence as to such parties opinion as to the value of the
shares of stock. The determination of the Fair Market Value by this
procedure shall be binding on the Company and the Employee.
The Employee shall not be obligated to seek or secure new employment or
to become self-employed after termination of his employment with the Company,
but shall be obligated to report promptly to the Company any actual employment
obtained during the period for which Employee benefits continue. There shall be
no offset against any amounts due to Employee under this Agreement on account of
any remuneration or benefits attributable to any subsequent employment
(including, without limitation, any self-employment) that he may obtain.
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<PAGE> 11
8. Confidentiality. The Employee recognizes and acknowledges that the
Company's trade secrets and other confidential or proprietary information, as
they may exist from time to time, are valuable, special, and unique assets of
the Company's business, access to and knowledge of which are essential to the
performance of the Employee's duties hereunder. The Employee confirms that all
such trade secrets and other information constitute the exclusive property of
the Company. During the Employment Term and thereafter without limitation of
time, the Employee shall hold in strict confidence and shall not, directly or
indirectly, disclose or reveal to any person, or use for his own personal
benefit or for the benefit of anyone else, any trade secrets, and other
confidential or proprietary information of any kind, nature, or description
(whether or not acquired, learned, obtained, or developed by the Employee alone
or in conjunction with others during the Employment Term) that has been obtained
by or disclosed to, him as a result of his employment by the Company, except (i)
with the prior written consent of the Company duly authorized by its Board of
Directors, (ii) in the course of the proper performance of the Employee's duties
hereunder, (iii) for information (x) that becomes generally available to the
public other than as a result of unauthorized disclosure by the Employee or his
affiliates or (y) that becomes available to the Employee subsequent to the
termination of his employment hereunder and on a nonconfidential basis from a
source other than the Company or its subsidiaries who is not bound by a duty of
confidentiality, or other contractual, legal, or fiduciary obligation, to the
Company or such customers, clients, or others having a business relationship, or
(iv) as required by applicable law or legal process. The provisions of this
Paragraph 8 shall continue in effect notwithstanding termination of the
Employee's employment hereunder for any reason.
9. Business Records. Given the competitive environment in which the
Company does business and the fiduciary relationship that the Employee will have
with the Company hereunder, the Employee agrees to promptly deliver to the
Company, upon termination of his employment hereunder, or at any other time when
the Company so requests, all memoranda, notes, records, drawings, manuals, and
other documents (and all copies thereof and therefrom) in any way relating to
the business or affairs of the Company or any of its subsidiaries or any of
their clients, whether made or compiled by the Employee or furnished to him by
the Company or any of its employees, customers, clients, consultants, or agents,
which the Employee may then possess or have under his control. The Employee
confirms that all such memoranda, notes, records, drawings, manuals, and other
documents (and all copies thereof and therefrom) constitute the exclusive
property of the Company. The obligation of confidentiality set forth in
Paragraph 8 shall continue notwithstanding the Employee's delivery of any such
documents to the Company. The provisions of this Paragraph 9 shall continue in
effect notwithstanding termination of the Employee's employment hereunder for
any reason.
10. Assistance in Litigation. During the Employment Term and for a
period of three years thereafter, the Employee shall, upon reasonable notice,
furnish such information and proper assistance to the Company as may reasonably
be required by the Company in connection with any litigation in which the
Company or any of its subsidiaries or affiliates is, or may become, a party. The
Company shall reimburse the Employee for all reasonable out-of-pocket expenses
incurred by the Employee, including attorneys' fees incurred by Employee, in
rendering such assistance. The provisions of this Paragraph 10 shall continue in
effect notwithstanding termination of the Employee's employment hereunder for
any reason.
11. Noncompetition and Related Matters.
(a) The Employee acknowledges that during the term of his employment
with the Company, the Company will provide him, and he will receive from the
Company, special training and
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<PAGE> 12
knowledge. The Employee acknowledges that included in the special knowledge
received is the confidential information identified in paragraph 8. The Employee
acknowledges that this confidential information is valuable to the Company and,
therefore, its protection and maintenance constitutes a legitimate interest to
be protected by the Company by enforcement of this covenant not to compete.
Therefore, the Employee agrees that, in consideration of the foregoing, during
the Employment Term and for the greater of the period of time during which the
Company shall pay to the Employee any amount due under the terms of this
Agreement or twelve (12) months following the Employment Termination Date,
unless otherwise extended pursuant to the terms of this paragraph 11, the
Employee will not, directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, shareholder, corporate officer, director,
or in any other individual or representative capacity, engage or participate in
any Competitive Business (as hereinafter defined) within any state in which the
Company or any subsidiary thereof is conducting or has conducted its Competitive
Business during the Employment Term; provided that nothing in this paragraph 11
shall be construed to prevent the Employee from owning beneficially, as an
investment, up to an aggregate of 5% of a class of equity securities that is
publicly traded and registered under Section 12 of the Securities Exchange Act
of 1934. For purposes of this paragraph 11, "Competitive Business" shall mean
any business entity whose primary or principal business consists of designing
and manufacturing electronic products using flip chip assembly processing. The
Employee represents to the Company that the enforcement of the restriction
contained in this paragraph 11 would not be unduly burdensome to the Employee
and that in order to induce the Company to employ the Employee, the Employee
further represents and acknowledges that the Employee is willing and able to
compete in other geographical areas not prohibited by this paragraph 11 (a).
(b) The Employee agrees that a breach or violation of this covenant not
to compete by the Employee shall entitle the Company, as a matter of right, to
an injunction issued by any court of competent jurisdiction, restraining any
further or continued breach or violation of this covenant. Such right to an
injunction shall be cumulative and in addition to, and not in lieu of, any other
remedies to which the Company may show itself justly entitled. Further, during
any period in which the Employee is in breach of this covenant not to compete,
the time period of this covenant shall be extended for an amount of time that
the Employee is in breach hereof.
(c) In addition to the restrictions set forth in paragraph 11 (a), the
Employee shall not, during the Employment Term and for a greater period of time
during which the Company shall pay to the Employee any amounts due under the
terms of this Agreement or twelve (12) months after the Employment Termination
Date, either directly or indirectly, (i) make known to any person or entity the
names and addresses of any of the customers of the Company or contacts of the
Company or any other information pertaining to such customers or contacts, (ii)
call on, solicit, or take away, or attempt to call on, solicit, or take away,
any of the customers of the Company who were customers during the Employee's
association with the Company, whether for the Employee or for any other person
or entity, or (iii) recruit or attempt to recruit, directly or by assisting
others, any other employee of the Company or any of its affiliates.
(d) The parties to this Agreement agree that the limitations contained
in this paragraph 11 with respect to time, geographical area, and scope of
activity are reasonable. However, if any court shall determine that the time,
geographical area, or scope of activity of any restriction contained in this
paragraph 11 is unenforceable, it is the intention of the parties that such
restrictive covenant set forth herein shall not thereby be terminated but shall
be deemed amended to the extent required to render it valid and enforceable.
- 11 -
<PAGE> 13
12. Withholding Taxes. The Company shall withhold from any payments to
be made to the Employee hereunder such amounts (including social security
contributions and federal income taxes) as shall be required by federal, state,
and local withholding tax laws.
13. No Effect on Other Contractual Rights. The provisions of this
Agreement, and any payment provided for hereunder, shall not reduce any amounts
otherwise payable to the Employee, or in any way diminish the Employee's rights
as an employee of the Company, whether existing now or hereafter, under any
employee benefit plan, program, or arrangement or other contract or agreement of
the Company providing benefits to the Employee.
14. Arbitration. The Company and the Employee agree to submit to final
and binding arbitration any and all disputes, claims (whether in tort, in
contract, statutory, or otherwise) and/or disagreements concerning the
interpretation or application of this Agreement; provided, however,
notwithstanding the foregoing, in no event shall any dispute, claim, or
disagreement arising under Paragraphs 8 and 9 be submitted to arbitration
pursuant to this Paragraph 14 or otherwise. Any dispute, claim, and/or
disagreement subject to arbitration pursuant to the terms of this Paragraph 14
shall be resolved by arbitration in accordance with the National Rules for the
Resolution of Employment Dispute of the American Arbitration Association or any
successor organization (the "Association") then in effect. Arbitration under
this provision must be initiated within 30 days of the action, inaction, or
occurrence about which the party initiating the arbitration is complaining.
Within ten days of the initiation of an arbitration hereunder, each party will
designate an arbitrator from a panel list provided by the Association. The
appointed arbitrators will appoint a neutral arbitrator from the panel list. The
Employee and the Company agree that the decision of the arbitrators selected
hereunder will be final and binding on both parties. This arbitration provision
is expressly made pursuant to and shall be governed by the Federal Arbitration
Act, 9 U.S.C. Sections 1-14. The parties hereto agree that pursuant to Section 9
of such Act a judgment of the United States District Court for the Northern
District of Dallas, Texas shall be entered upon the award made pursuant to the
arbitration.
15. Injunctive Relief. In recognition of the fact that a breach by the
Employee of any of the provisions of Paragraphs 8 and 9 will cause irreparable
damage to the Company for which monetary damages alone will not constitute an
adequate remedy, the Company shall be entitled as a matter of right (without
being required to prove damages or furnish any bond or other security) to obtain
a restraining order, an injunction, an order of specific performance, or other
equitable or extraordinary relief from any court of competent jurisdiction
restraining any further violation of such provisions by the Employee or
requiring him to perform his obligations hereunder. Such right to equitable or
extraordinary relief shall not be exclusive but shall be in addition to all
other rights and remedies to which the Company may be entitled at law or in
equity, including without limitation the right to recover monetary damages for
the breach by the Employee of any of the provisions of this Agreement.
16. Excise Tax.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution to or
for the benefit of the Employee (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required under
this Section 16) (a "Termination Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), or any interest or penalties are
incurred by the
- 12 -
<PAGE> 14
Employee with respect to such excise tax (such excise tax, together
with any such interest and penalties, hereinafter collectively referred
to as the "Excise Tax"), then the Employee shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Employee of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) For purposes of determining the amount of the Gross-Up Payment,
Employee shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and locality of
Employee's residence on the Termination Date, net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. If the Excise Tax is
subsequently determined to be less than the amount taken into account
hereunder at the time of Employee's termination of employment, Employee
shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of
the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Gross-Up Payment being repaid by
Employee to the extent that such repayment results in a reduction in
Excise Tax and/or a federal, state or local income tax deduction) plus
interest on the amount of such repayment at the rate provided in
section 1274(b)(2)(B) of the Code. If the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of the
termination of Employee's employment (including by reason of any
payment the existence or amount of which cannot be determined at the
time of the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by Employee with respect to such excess)
at the time that the amount of such excess is finally determined.
Employee and the Company shall each reasonably cooperate with the other
in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with
respect to the Termination Payments.
(c) All determinations required to be made under this Section 16,
including (without limitation) whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the assumptions to
be used in arriving at such determination, shall be made by a certified
public accounting firm selected by the Company and reasonably
acceptable to Employee (the "Accounting Firm"), which shall be retained
to provide detailed supporting calculations both to the Company and
Employee within 15 business days of the receipt of notice from Employee
that there has been a Termination Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm
shall be paid solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 16, shall be paid by the Company to
Employee within five (5) days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be
binding upon the Company and Employee. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. If Employee thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has
- 13 -
<PAGE> 15
occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Employee.
17. Survival. Neither the expiration or the termination of the term of
the Employee's employment hereunder shall impair the rights or obligations of
either party hereto which shall have accrued hereunder prior to such expiration
or termination. The provisions of Paragraphs 8, 9, 10, 15, 25, and 26 and the
rights and obligations of the parties thereunder, shall survive the expiration
or termination of the term of the Employee's employment hereunder.
18. Notices. All notices, requests, demands, and other communications
required or permitted to be given or made hereunder by either party hereto shall
be in writing and shall be deemed to have been duly given or made (i) when
delivered personally, or (ii) when deposited in the United States mail, first
class registered or certified mail, postage prepaid, return receipt requested,
to the party for which intended at the following addresses (or at such other
addresses as shall be specified by the parties by like notice, except that
notices of change of address shall be effective only upon receipt):
If to the Company, at:
Micro ASI, Incorporated
12655 North Central Expressway
Suite 1000
Dallas, TX 75243
19. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto concerning the subject matter hereof and supersedes
all prior agreements and understandings, both written and oral, between the
parties with respect to such subject matter.
20. Binding Effect; Assignment; No Third Party Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors, and assigns; provided,
however, that the Employee shall not assign or otherwise transfer this Agreement
or any of his rights or obligations hereunder without the prior written consent
of the Company (except that any rights that the Employee may have hereunder at
the time of his death may be transferred by will or pursuant to the laws of
descent and distribution). Nothing in this Agreement, express or implied, is
intended to or shall confer upon any person other than the parties hereto, and
their respective heirs, legal representatives, successors, and permitted
assigns, any rights, benefits, or remedies of any nature whatsoever under or by
reason of this Agreement.
21. Nonalienation of Benefits. The Employee shall not have any right to
pledge, hypothecae, anticipate, or in any way create a lien upon any payments or
other benefits provided under this Agreement; and no benefits payable hereunder
shall be assignable in anticipation of payment either by voluntary or
involuntary acts, or by operation of law, except by will or pursuant to the laws
of descent and distribution.
22. Amendment. This Agreement may not be modified or amended in any
respect except by an instrument in writing signed by both of the parties hereto.
23. Waiver. Any term or condition of this Agreement may be waived at
any time by the party hereto which is entitled to have the benefit thereof, but
such waiver shall only be effective if evidenced by a writing signed by such
party, and a waiver on one occasion shall not be deemed to be a waiver of the
- 14 -
<PAGE> 16
same or any other type of breach on a future occasion. No failure or delay by a
party hereto in exercising any right or power hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right or power.
24. Authority. No person, other than pursuant to a resolution duly
adopted by the members of the Board of Directors of the Company, shall have
authority on behalf of the Company to agree to modify, amend, or waive any
provision of this Agreement or take any action in reference hereto.
25. Severability. If any provision of this Agreement is held to be
unenforceable, (a) this Agreement shall be considered divisible, (b) such
provision shall be deemed inoperative to the extent it is deemed unenforceable,
and (c) in all other respects this Agreement shall remain in full force and
effect; provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by applicable law.
26. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
27. Counterparts. This Agreement may be executed by the parties hereto
in any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer, and the Employee has
executed this Agreement, effective as of the date first set forth above.
MICRO-ASI, INC.
By: /s/ Cecil E. Smith, Jr. /s/ Joel E. Claybrook
------------------------- -----------------------
CECIL E. SMITH, JR. JOEL E. CLAYBROOK
Chairman of the Board of Directors
- 15 -
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