FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17932
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Micron Electronics, Inc.
------------------------------------
(Exact name as specified in charter)
Minnesota 41-1404301
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
900 E. Karcher Road, Nampa, Idaho 83687
-------------------------------------------------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (208) 465-3434
-----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to the filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such 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.
Yes X No
--- ---
The number of outstanding shares of the registrant's Common Stock as
of April 28, 1995 was 91,401,711.
<PAGE>
ZEOS INTERNATIONAL, LTD.
Consolidated Balance Sheets
(Tabular dollars in thousands)
<TABLE>
<CAPTION>
April 1, December 31,
1995 1994
- ------------------------------------------------------------------
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 21,808 $ 25,314
Receivables 22,237 23,954
Inventories 25,492 24,649
Other current assets 856 949
-------- --------
Total current assets 70,393 74,866
Property and equipment, net 1,864 2,132
Other assets 754 575
-------- --------
Total assets $ 73,011 $ 77,573
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 41,646 $ 48,197
Accrued licenses and royalties 5,144 5,889
-------- --------
Total current liabilities 46,790 54,086
-------- --------
Commitments and contingencies
Shareholders' equity - 15,000,000 shares
authorized:
Preferred stock, $3.00 cumulative
convertible preferred,
$.01 par value per share, 100,000
shares issued, redemption amount
$5,461,000, liquidation preference
amount $5,211,000 4,831 4,756
Common stock, $.01 par value per share,
issued and outstanding
8,810,173 and 8,803,571 shares,
respectively 88 88
Additional paid-in capital 49,116 49,086
Accumulated deficit (27,814) (30,443)
-------- --------
Total shareholders' equity 26,221 23,487
-------- --------
Total liabilities and
shareholders' equity $ 73,011 $ 77,573
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
ZEOS INTERNATIONAL, LTD.
Consolidated Statements of Operations
(Amounts in thousands, except for per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
April 1, April 2,
For the quarter ended 1995 1994
- ------------------------------------------------------------------
<S> <C> <C>
Net sales $ 82,838 $ 49,208
Cost of goods sold 72,259 50,081
-------- --------
Gross margin 10,579 (873)
Selling, general and administrative 8,325 7,421
Research and development 365 336
Royalty income (499) (222)
-------- --------
Operating income (loss) 2,388 (8,408)
Other income (expense) 316 (156)
-------- --------
Income (loss) before income taxes 2,704 (8,564)
Income tax provision - -
-------- --------
Net income (loss) 2,704 (8,564)
Preferred stock dividend 75 -
-------- --------
Net income (loss) applicable to common
shareholders $ 2,629 $ (8,564)
======== ========
Earnings (loss) per share:
Primary $ 0.27 $ (0.98)
Fully diluted 0.25 (0.98)
Number of shares used in per share
calculations:
Primary 9,845 8,704
Fully diluted 10,845 8,704
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
ZEOS INTERNATIONAL, LTD.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
April 1, April 2,
For the quarter ended 1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 2,704 $ (8,564)
Adjustments to reconcile net income
(loss) to net cash provided
by operating activities
Depreciation 410 453
Decrease (increase) in receivables 1,717 (1,552)
Decrease (increase) in inventories (843) 7,215
Decrease in other assets 242 426
Increase (decrease) in accounts
payable and accrued expenses (6,551) 2,781
Decrease in accrued licenses and
royalties (745) (390)
Other 7 145
-------- --------
Net cash provided by (used for)
operating activities (3,059) 514
-------- --------
Cash flows from investing activities
Expenditures for property and equipment (142) (119)
Sales of property and equipment - 19
-------- --------
Net cash used for investing
activities (142) (100)
-------- --------
Cash flows from financing activities
Proceeds from issuances of common stock 30 -
Costs of merger (335) -
-------- --------
Net cash used for financing
activities (305) -
-------- --------
Net increase (decrease) in cash and
equivalents (3,506) 414
Cash and equivalents at beginning of
period 25,314 9,204
-------- --------
Cash and equivalents at end of
period $ 21,808 $ 9,618
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Notes to Consolidated Financial Statements
(Tabular dollar amounts are stated in thousands)
1. Unaudited Interim Financial Statements
On April 7, 1995, Micron Computer, Inc., an Idaho corporation
("MCI"), and Micron Custom Manufacturing Services, Inc., an Idaho
corporation ("MCMS"), both subsidiaries of Micron Technology, Inc.
("MTI") merged with and into ZEOS International, Ltd. (the
"Merger") and the resulting company's name was changed to Micron
Electronics, Inc. (the "Company"). The accompanying unaudited
consolidated financial statements reflect the financial position
and results of operations of ZEOS International, Ltd. prior to the
Merger ("ZEOS") and do not reflect the financial position and
results of operations of MCI and MCMS operations. Following the
Merger, the Company's fiscal year was changed to end on the
Thursday closest to August 31 of each year, which corresponds to
the fiscal years of MCI and MCMS prior to the Merger. Accordingly,
the Company will next report results following the fiscal quarter
ended June 1, 1995, for the preceding three-month and nine-month
periods for the operations of MCI and MCMS, and the operations of
ZEOS for the period from the Merger date through June 1, 1995.
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments,
consisting solely of normal recurring adjustments, necessary to
present fairly the consolidated financial position of ZEOS
International, Ltd. and subsidiaries and their consolidated results
of operations and cash flows. Certain reclassifications, none of
which affected results of operations, have been made to present the
financial statements on a consistent basis.
The accompanying unaudited consolidated financial statements
and notes should be read in conjunction with audited financial
statements and notes thereto included in ZEOS' Annual Report on
Form 10-K for the year ended December 31, 1994.
<TABLE>
2. Receivables April 1, December 31,
1995 1994
- -------------------------------------------------------------------
<S> <C> <C>
Trade receivables $ 23,806 $ 25,491
Allowance for doubtful accounts (1,569) (1,537)
-------- --------
$ 22,237 $ 23,954
======== ========
3. Inventories April 1, December 31,
1995 1994
- -------------------------------------------------------------------
Finished goods $ 7,862 $ 7,371
Work in progress 843 1,412
Raw materials 16,787 15,866
-------- --------
$ 25,492 $ 24,649
======== ========
4. Property and equipment, net April 1, December 31,
1995 1994
- -------------------------------------------------------------------
Machinery and equipment $ 6,926 $ 6,786
Furniture and fixtures 435 435
Leasehold improvements 3,014 3,051
-------- --------
10,376 10,272
Less accumulated depreciation (8,512) (8,140)
-------- --------
$ 1,864 $ 2,132
======== ========
4
<PAGE>
5. Accounts payable and accrued
expenses April 1, December 31,
1995 1994
- -------------------------------------------------------------------
Accounts payable $ 34,726 $ 43,213
Customer advances 2,087 1,392
Accrued warranty and sales
allowances 1,685 1,627
Salaries, wages and benefits 2,057 1,183
Deferred income 531 348
Other 560 434
-------- --------
$ 41,646 $ 48,197
======== ========
</TABLE>
6. Preferred Stock
On July 20, 1994 Sanyo Electric Co., Ltd. and Marubeni
Corporation invested an aggregate of $5,000,000 in ZEOS
International, Ltd. through the purchase of 100,000 shares of the
ZEOS' $3.00 Cumulative Convertible Preferred Stock at a price of
$50.00 per share.
The Preferred Stock paid an annual dividend of $3.00 per
share, except that payment of the dividends due in any year could
be deferred to the extent that they exceeded the net income of
ZEOS, but in no case could the accrued but unpaid dividends exceed
$600,000. Each share of Preferred Stock was initially convertible
into 10 shares of common stock of ZEOS at the option of the
holders, or at the option of ZEOS under certain, predetermined
circumstances.
The Preferred Stock was redeemed by ZEOS on April 7, 1995, for
$5,466,667, which included an accrued preferred stock dividend of
$216,667 and a redemption premium of $250,000.
7. Earnings (loss) per share
Earnings (loss) per share is computed using the weighted
average number of common and common equivalent shares
outstanding. Common equivalent shares result from the assumed
exercise of outstanding options and affect earnings per share when
they have a dilutive effect.
8. Commitments and Contingencies
In connection with its principal business activities, ZEOS has
been made aware of others in the industry who assert exclusive
rights to certain technologies, including some which have granted
related licenses to ZEOS and others which have notified ZEOS that
their technologies may also require licenses. ZEOS evaluates all
assertions on a case-by-case basis, enters into licenses that
appear necessary or desirable, and makes accruals for the
estimated impact of potential royalty payments.
9. The Merger
On October 30, 1994, ZEOS executed a merger agreement with MCI
and MCMS pursuant to which MCI and MCMS were merged with and into
ZEOS and ZEOS issued approximately 82.5 million shares of common
stock in exchange for all the outstanding shares of MCI and MCMS.
The Merger was approved by the shareholders of ZEOS, MCI and MCMS
during special meetings of the shareholders of each company on
April 6, 1995, and became effective on April 7, 1995. The Merger
resulted in a change of control of approximately 89% of ZEOS
common stock wherein MTI received an ownership interest in ZEOS of
approximately 79% and the other shareholders of MCI and MCMS
received an ownership interest in ZEOS of approximately 10%. For
accounting purposes, the Merger is treated as an acquisition of
ZEOS by MTI and the other shareholders of MCI and MCMS.
ZEOS deferred approximately $685,000 in costs associated with
the Merger through April 1, 1995.
5
<PAGE>
ZEOS retained Goldsmith, Agio, Helms Securities, Inc. ("GAHS")
to act as its exclusive financial advisor. Upon consummation of the
Merger, under the terms of an engagement agreement between ZEOS
and GAHS, ZEOS paid $480,000 and issued 40,000 shares of ZEOS'
common stock to GAHS for services rendered. No effect of amounts
due to GAHS under the engagement agreement have been included in
the accompanying financial statements.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
For the quarter ended April 1, 1995, ZEOS International, Ltd.
recorded net sales of $82.8 million, compared to net sales of
$49.2 million for the quarter ended April 2, 1994. ZEOS
International, Ltd. recorded net income of $2.7 million, or $0.25
per fully diluted share, for the first quarter of 1995, compared
to a net loss of $8.6 million, or ($0.98) per fully diluted share,
for the first quarter of 1994. On April 7, 1995, Micron Computer,
Inc. ("MCI") and Micron Custom Manufacturing Services, Inc.
("MCMS") merged with and into ZEOS International, Ltd. and the
Company's name was changed from "ZEOS International, Ltd." to
"Micron Electronics, Inc." The first quarter results reflect the
ZEOS operations prior to the Merger ("ZEOS") and do not reflect
the results of the MCI and MCMS operations and are not necessarily
indicative of the combined results of Micron Electronics, Inc.
Results of Operations
<TABLE>
<CAPTION>
First Quarter
------------------------------
1995 Change 1994
------------------------------
<S> <C> <C> <C>
Net Sales $ 82,838 68.3% $ 49,208
</TABLE>
Net sales increased approximately $33.6 million comparing the
first quarter of 1994 to the same period in 1995, primarily as a
result of an increase in the number of desktop PC systems sold,
and to a lesser extent, an increase in overall average system
selling prices. Unit sales of systems products for the first
quarter of 1995 increased approximately 66% in comparison to the
first quarter of 1994 as a result of an 82% increase in unit
sales of desktop PC systems, offset in part by an approximate 46%
decrease in unit sales of notebook PC systems. The increase in
overall average selling prices resulted principally from a shift
within the desktop PC product lines from 486 microprocessor based
systems to relatively higher priced Pentium microprocessor based
systems, and to a lesser extent, from a shift in the notebook
product line from an older, lower priced subnotebook line to the
new line of Meridian notebook PC systems.
During the first quarter of 1995, direct sales of desktop and
notebook products comprised approximately 88% and 4%,
respectively, of total net sales, compared to 70% and 10%,
respectively, for the same period in 1994. PC system sales
through retail stores combined with non-system revenue comprised
approximately 8% and 20% in the first quarters of 1995 and 1994,
respectively. Non-system revenue includes sales of parts,
accessories and component inventory.
The Company continues to evaluate a range of PC product
strategies to take advantage of both the ZEOS and Micron Computer
brand names. There is substantial overlap and competition among
product offerings of the Company's ZEOS and Micron Computer
product lines. Until the Company's various product line
strategies are fully defined, including the coordination of
marketing strategies, the coordination of and sharing of research
and development efforts and the broadening of overall product
lines, the Company may face confusion in the marketplace regarding
its personal computer products. Confusion in the marketplace
regarding the Company's PC product lines could result in a
substantial decrease in the Company's unit sales as compared to
combined unit sales of the separate companies prior to the Merger,
which would have a material adverse effect on the Company's
results of operations.
Fluctuations in the Company's net sales from quarter to quarter
can be expected and may be attributable to a number of factors,
including without limitation the timing of new product
introductions, seasonal cycles commonly seen in the computer
industry, the impact of product reviews and industry awards,
changes in product mix and product pricing, fluctuating component
costs and industry competition. As a result, the operating
results for any particular period are not necessarily indicative
of the results of any future period.
<TABLE>
<CAPTION>
First Quarter
------------------------------
1995 Change 1994
------------------------------
<S> <C> <C> <C>
Cost of goods sold $ 72,259 44.3% $ 50,081
Gross margin % 12.8% (1.8%)
</TABLE>
Cost of goods sold primarily consists of component costs, direct
labor, allocated manufacturing overhead, licenses and royalties
paid to third parties. Component costs constitute a substantial
majority of cost of goods sold.
7
<PAGE>
Gross margin percentage was significantly higher for the first
quarter of 1995 as compared to the same period of 1994. In the
first quarter of 1994, ZEOS' gross margin was adversely affected
by an adjustment of $5.7 million relating to the reduction of
certain inventories to their net realizable values. During the
first quarter of 1995, ZEOS' gross margin was favorably affected
by the purchase of approximately $7.7 million of memory components
for its PC systems from MTI and MCI at favorable prices relative
to ZEOS' other sources of supply. The related savings in cost of
goods sold in the first quarter of 1995 were approximately $1.1
million. There can be no assurance that memory components will
continue to be available from MTI or other sources at favorable
prices. The Company expects to experience significant continuing
pressure on gross margin percentage due to extensive competition
in the PC industry and consumer expectations for more powerful PC
systems at lower prices.
<TABLE>
<CAPTION>
First Quarter
------------------------------
1995 Change 1994
------------------------------
<S> <C> <C> <C>
Selling, general and
administrative $ 8,325 12.2% $ 7,421
as a % of net sales 10.1% 15.1%
</TABLE>
The increased selling, general and administrative expenses for
the first quarter of 1995 compared to the corresponding period in
1994 was primarily the result of increases in credit card
processing fees, salesperson compensation and telephone expense,
all attributable to the increase in net sales. The decrease in
selling, general and administrative expenses as a percentage of
net sales was a result of the increase in net sales.
<TABLE>
<CAPTION>
First Quarter
------------------------------
1995 Change 1994
------------------------------
<S> <C> <C> <C>
Royalty income $ 499 124.8% $ 222
as a % of net sales 0.6% 0.5%
</TABLE>
The increase in royalty income in the first quarter of 1995
compared to the same period in 1994 was due to an increase in fees
resulting from the licensing of proprietary technology. Although
the Company intends to continue the development of proprietary
technology, there can be no assurance that royalty income in
future periods will continue due to the relatively short life
cycles of products using the licensed technology and uncertainty
as to whether additional licensees will be identified and
negotiated or whether royalty income under existing license
agreements will continue at current levels.
Income taxes
ZEOS recorded no income tax benefit or provision during either
the first quarter of 1995 or the first quarter of 1994. No
provision was recorded in the first quarter of 1995 because
taxable income was offset by the anticipated utilization of net
operating loss carryforwards. No benefit was recorded during the
first quarter of 1994 due to ZEOS' uncertainty regarding
utilization of net operating loss carryforwards in future periods.
Liquidity and Capital Resources
Since its inception, ZEOS has satisfied its liquidity and
capital resource requirements through a combination of equity and
convertible debt financing, operating profits, short-term bank
borrowings, extended credit terms with suppliers and advance
deposits from customers. As of April 1, 1995, ZEOS had cash of
$21.8 million, representing a decrease of $3.5 million compared to
December 31, 1994. This decrease was due primarily to cash used
in operating activities. Cash flows from investing activities
were not material in the first quarter of 1995.
As of April 1, 1995, ZEOS had no outstanding bank borrowings or
long-term debt. ZEOS' principal sources of liquidity at April 1,
1995 consisted of cash, supplier credit lines and a revolving line
of credit agreement with a commercial finance company, which
provided for cash advances and letters of credit up to a maximum
of $12.5 million at any one time. The line of credit agreement
was terminated in April 1995 following the Merger.
ZEOS is required to make guaranteed royalty payments under
certain agreements and frequently enters into minimum purchase
commitments with certain of its suppliers. To date, the Company
has satisfied all such commitments.
8
<PAGE>
ZEOS' policies regarding extending credit to customers and
establishing payment terms for customers are designed to
facilitate customers' purchases of ZEOS' products while limiting
ZEOS' risk and conserving its capital resources. ZEOS extends 30-
day terms to qualifying businesses and accepts most major credit
cards, as well as cash on delivery. In addition, ZEOS offers a
private label credit program managed by a financial services
company which assumes the related credit risk. ZEOS also offers
qualified business customers a company-sponsored lease financing
program through a national financing organization. Under this
program, ZEOS assumes the related credit risk until the customer
acknowledges receipt and acceptance of ZEOS' product.
The Company expects that its working capital requirements will
continue to increase through 1995 and beyond. The Company
believes that currently available cash and cash equivalents, funds
generated from operations and further expansion of terms with
trade creditors will be sufficient to fund its operations through
the end of 1995. However, maintaining an adequate level of
working capital through the end of 1995 and thereafter will depend
in part on the success of the Company's products in the
marketplace, the relative profitability of those products,
continued availability of RAM components at favorable pricing and
the Company's ability to control operating expenses. While it is
anticipated that the Company will enter into a replacement
revolving credit facility to provide for the working capital
requirements of the Company, there can be no assurance that the
Company will be able to do so on acceptable terms. The Company may
seek or require additional financing to pay for costs and expenses
related to the Merger and to finance growth opportunities,
including any expansion that the Company may undertake internally,
through strategic acquisitions or partnerships or through
expansion to alternative manufacturing sites. There can be no
assurance that any such financing will be available on terms
acceptable to the Company, if at all.
Certain Factors
Periodically, the Company is made aware that technology used by
the Company may infringe on product or process technology rights
held by others. The Company accrues a liability and charges
operations for the estimated costs of settlement or adjudication
of asserted and unasserted claims for infringement. Resolution of
whether the Company's products or processes infringe on valid
rights held by others may have a material adverse effect on the
Company's future financial position or results of operations and
may require material changes in production processes and products.
The Company has various product and process technology agreements
expiring in the remainder of calendar 1995. The Company is not
able to predict whether these license agreements can be renewed on
terms acceptable to the Company.
Several states have enacted legislation which would require out-
of-state direct marketers to collect and remit sales and use taxes
or pay income taxes based on certain limited contacts with the
state. Taxation authorities in certain states have solicited
information from time to time from the Company to determine
whether the Company has sufficient contacts with such states as
would require payment of income taxes or collection of sales and
use taxes from direct marketing customers in those states. In the
event that the Company is required to pay income or other taxes or
collect and remit sales and use taxes in states where the Company
is not currently paying or collecting such taxes, the future
operating results and financial condition of the Company could be
materially and adversely affected.
9
<PAGE>
Part II. OTHER INFORMATION
Item 2. Changes in Securities
Effective upon the closing of the Merger, the Company's Articles
of Incorporation were amended in order to change the name of the
Company to "Micron Electronics, Inc." and to increase the number
of authorized shares of capital stock from a total of 15,000,000
shares to a total of 150,000,000 shares. In addition, effective
immediately prior to the closing of the Merger, all outstanding
shares of ZEOS' $3.00 Convertible Cumulative Preferred Stock,
Series A were redeemed by ZEOS.
Item 6. Exhibits and reports on Form 8-K
(a) The following are filed as a part of this report:
Exhibit
Number Description of Exhibit
------- ----------------------
2.1 Agreement of Merger dated as of October 30,
1994 as amended by the First amendment
thereto dated as of December 13, 1994 by and
among ZEOS, MCI and MCMS (Incorporated by
reference to Exhibit 2.1 to ZEOS'
Registration Statement on Form S-4) (File No.
33-90212) as declared effective on March 13,
1995 (the "S-4 Registration Statement")
2.2 Articles of Merger by and among ZEOS, MCI and
MCMS (Incorporated by reference to Exhibit it
2.2 to ZEOS' Current Report on Form 8-K dated
April 7, 1995)
3.1 Articles of Incorporation of registrant, as amended
10.32 Voting Agreement dated October 30, 1994
between ZEOS and Micron Technology, Inc.
(Incorporated by reference to Exhibit 99.2 to
the S-4 Registration Statement)
10.33 Component Recovery Revenue Sharing Agreement
dated as of July 14, 1994 between MCMS and
Micron Technology, Inc.
10.34 Amended and Restated Promissory Note dated
September 3, 1992 between MCMS and Micron
Technology, Inc.
11 Computation of per share earnings for the
quarter ended April 1, 1995
(b) The registrant did not file any reports on Form 8-K during
the quarter ended April 1, 1995.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Micron Electronics, Inc.
-------------------------------------
(Registrant)
Dated: May 12, 1995 /s/ T. Erik Oaas
--------------------------------------
T. Erik Oaas, Vice President, Finance,
and Chief Financial Officer (Principal
Financial and Accounting Officer)
11
Exhibit 2.2
ARTICLES OF MERGER
AMONG
ZEOS INTERNATIONAL, LTD.,
MICRON COMPUTER, INC., AND
MICRON CUSTOM MANUFACTURING SERVICES, INC.
THE UNDERSIGNED, each being a duly appointed and
qualified officer of ZEOS International, Ltd., a Minnesota
corporation ("ZEOS"), Micron Computer, Inc., an Idaho
corporation ("MCI"), and Micron Custom Manufacturing
Services, Inc., an Idaho corporation ("MCMS"), as the case
may be, hereby certify as follows:
1. Attached hereto as Exhibit A is the Plan of Merger
(the "Plan of Merger") for the merger of MCI and MCMS with
and into ZEOS (the "Merger"), which has been duly adopted by
the board of directors of each of such corporations.
2. Such Plan of Merger has been approved by ZEOS
pursuant to Chapter 302A of the Minnesota Business
Corporation Act.
3. The number of shares of MCI capital stock
outstanding and entitled to vote on the Plan of Merger
consists of 987,500 shares of MCI Class A Common Stock and
474,260 shares of MCI Class B Common Stock. Each such class
is entitled to vote on the Plan of Merger separately as a
single class and, in addition, the classes vote on the Plan
of Merger together as one class. The number of shares of
MCMS capital stock outstanding and entitled to vote on the
Plan of Merger consists of 1,849,281 shares of MCMS Common
Stock.
4. The number of shares of MCI Class A Common Stock
voted for and against the Plan of Merger was 987,500 and 0
shares, respectively. The number of shares of MCI Class B
Common Stock voted for and against the Plan of Merger was
443,000 and 50, respectively. The number of shares of MCMS
Common Stock voted for and against the Plan of Merger was
1,827,779 and 350, respectively.
5. The Merger shall become effective in both the
State of Minnesota and the State of Idaho at 4:00 p.m.,
central daylight time, on April 7, 1995.
6. The undersigned officer of ZEOS, in accordance
with Section 30-1-77(b) of the Idaho Business Corporation
Act, hereby certifies and agrees on behalf of ZEOS that:
(a) ZEOS may be served with process in the State of Idaho in
a proceeding for the enforcement of an obligation of MCI or
MCMS and in a proceeding for the enforcement of the rights
of a dissenting shareholder of MCI or MCMS against ZEOS; (b)
the Secretary of State of Idaho is hereby irrevocably
appointed as agent for ZEOS to accept service of process on
behalf of ZEOS in any proceeding; and (c) ZEOS will promptly
pay to dissenting shareholders of MCI and MCMS the amount,
if any, to which they are entitled under Section 30-1-80 of
the Idaho Business Corporation Act.
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly
executed this document for and on behalf of their respective
corporations this 6th day of April, 1995.
ZEOS INTERNATIONAL, LTD.
By /s/ Charles T. Henderson
-------------------------
Charles T. Henderson
Chief Financial Officer
STATE OF MINNESOTA )
) ss.
COUNTY OF HENNEPIN )
On this 6th day of April, 1995, before me
personally appeared Charles T. Henderson to me known to be
the person described in, and who executed the foregoing
instrument, and acknowledged that he executed the same as
his free act and deed.
(Seal)
/s/ Jay E. Simpson
------------------
Notary Public
<PAGE>
MICRON COMPUTER, INC.
By /s/ Chase S. Mart
-----------------
Chase S. Mart
President and
Chief Executive Officer
I, Kristine W. Nitz, hereby certify that I am the
Secretary of Micron Computer, Inc., and that I am authorized
to execute these Articles of Merger on behalf of Micron
Computer, Inc., and hereby certify that the foregoing
signature is a specimen signature of the President and Chief
Executive Officer of Micron Computer, Inc.
By /s/ Kristine W. Nitz
--------------------
Kristine W. Nitz
Secretary
STATE OF IDAHO )
) ss.
COUNTY OF ADA )
On this 6th day of April, 1995, before me
personally appeared Chase S. Mart to me known to be the
person described in, and who executed the foregoing
instrument, and acknowledged that he executed the same as
his free act and deed.
(Seal)
/s/ Andrea Lanning
------------------
Notary Public
<PAGE>
MICRON CUSTOM MANUFACTURING SERVICES, INC.
By /s/ Joseph M. Daltoso
---------------------
Joseph M. Daltoso
Chairman and President
I, Dena L. Banducci, hereby certify that I am the
Secretary of Micron Custom Manufacturing Services, Inc., and
that I am authorized to execute these Articles of Merger on
behalf of Micron Custom Manufacturing Services, Inc., and
hereby certify that the foregoing signature is a specimen
signature of the Chairman and President of Micron Custom
Manufacturing Services, Inc.
By /s/ Dena L. Banducci
--------------------
Dena L. Banducci
Secretary
STATE OF IDAHO )
) ss.
COUNTY OF ADA )
On this 6th day of April, 1995, before me
personally appeared Joseph M. Daltoso to me known to be the
person described in, and who executed the foregoing
instrument, and acknowledged that he executed the same as
his free act and deed.
(Seal)
/s/ Andrea Lanning
------------------
Notary Public
<PAGE>
Exhibit A to
Articles of Merger
PLAN OF MERGER
The respective boards of directors of ZEOS
International, Ltd. ("ZEOS"), a Minnesota corporation,
Micron Computer, Inc., an Idaho corporation ("MCI"), and
Micron Custom Manufacturing Services, Inc., an Idaho
corporation ("MCMS"), have, by resolutions duly adopted,
approved the following provisions of this Plan of Merger
(the "Plan of Merger") required by the Idaho Business
Corporation Act (the "Idaho Law") and Chapter 302A of the
Minnesota Business Corporation Act (the "Minnesota Law"):
ARTICLE I
TERMS AND CONDITIONS OF THE MERGER
SECTION 1.1 The Merger.
(a) At the Effective Time (as hereinafter defined),
MCI and MCMS shall be merged (the "Merger") with and into
the Company in accordance with the Minnesota Law and the
Idaho Law, whereupon the separate existence of MCI and MCMS
shall cease, and the Company shall be the surviving
corporation (the "Surviving Corporation").
(b) The Merger shall become effective in both the
State of Minnesota and the State of Idaho at 4:00 p.m.,
central daylight time, on April 7, 1995 (the "Effective
Time").
(c) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers
and franchises and be subject to all of the restrictions,
disabilities and duties of the Company, MCI and MCMS, all as
provided under the Minnesota Law and the Idaho Law.
SECTION 1.2 Conversion of Shares. At the Effective
Time:
(a) each issued and outstanding share of MCMS Common
Stock outstanding immediately prior to the Effective Time
(other than shares held as treasury stock of MCMS, shares
held directly or indirectly by the Company or shares as
to which the holders thereof possess and have not
effectively withdrawn or otherwise lost their appraisal
rights pursuant to Idaho Law (the "MCMS Dissenters'
Shares")) shall be converted into 20.475586 shares of
Company Common Stock;
(b) each issued and outstanding share of MCI Class A
Common Stock outstanding immediately prior to the
Effective Time (other than shares held as treasury stock
of MCI, shares held directly or indirectly by the Company
or shares as to which the holders thereof possess and
have not effectively withdrawn or otherwise lost their
appraisal rights pursuant to Idaho Law (the "MCI Class A
Dissenters' Shares")) shall be converted into 42.316865
shares of Company Common Stock;
(c) each issued and outstanding share of MCI Class B
Common Stock outstanding immediately prior to the
Effective Time (other than shares held as treasury stock
of MCI, shares held directly or indirectly by the Company
or shares as to which the holders thereof possess and
have not effectively withdrawn or otherwise lost their
appraisal rights pursuant to Idaho Law (the "MCI Class B
Dissenters' Shares" and together with the MCMS
Dissenters' Shares and the MCI Class A Dissenters'
Shares, the "Dissenters' Shares")) shall be converted
into 9.057555 shares of Company Common Stock; and
(d) each share of MCI and MCMS Common Stock held as
treasury stock of MCI or MCMS, respectively, or held
directly or indirectly by the Company, MCI or MCMS shall
be canceled, retired and cease to exist, and no exchange
or payment shall be made with respect thereof.
SECTION 1.3 Rights of Holders of MCI and MCMS
Capital Stock; Capital Stock of the Company.
(a) On and after the Effective Time and until
surrendered for exchange, each outstanding stock certificate
which immediately prior to the Effective Time represented
shares of MCI or MCMS Common Stock (other than Dissenters'
Shares) shall be deemed for all purposes, except as provided in
<PAGE>
Section 1.5(c) of this Plan of Merger, to evidence ownership
of and to represent the number of whole shares of Company
Common Stock into which such shares of MCI and MCMS Common
Stock shall have been converted, and the record holder of
such outstanding certificate shall, after the Effective
Time, be entitled to vote the shares of Company Common Stock
into which such shares of MCI and MCMS Common Stock shall
have been converted on any matters on which the holders of
record of Company Common Stock, as of any date subsequent to
the Effective Time, shall be entitled to vote. In any
matters relating to such certificates, the Company may rely
conclusively upon the record of shareholders maintained by
MCI and MCMS containing the names and addresses of the
holders of record of MCI and MCMS Common Stock at the
Effective Time.
(b) On and after the Effective Time, each share of
Company Common Stock issued and outstanding immediately
prior to the Effective Time shall remain an issued,
outstanding and existing share of Company Common Stock of
the Surviving Corporation and shall not be affected by the
Merger.
(c) On and after the Effective Time, the Company shall
reserve a sufficient number of authorized but unissued
shares of Company Common Stock for issuance in connection
with the conversion of MCI and MCMS Common Stock into
Company Common Stock as provided herein.
SECTION 1.4 No Fractional Shares. No fractional
shares of Company Common Stock, and no certificates
representing such fractional shares, shall be issued upon
the surrender for exchange of certificates representing MCI
or MCMS Common Stock. In lieu of any fractional share, the
Company shall pay to each holder of MCI and MCMS Common
Stock who otherwise would be entitled to receive a
fractional share of Company Common Stock an amount of cash
(without interest) determined by multiplying (a) the average
of the last sale price per share of Company Common Stock for
the five trading days preceding the date of the Effective
Time as reported in The Wall Street Journal, times (b) the
fractional share interest to which such holder would
otherwise be entitled.
SECTION 1.5 Procedure for Exchange of Stock.
(a) After the Effective Time, holders of certificates
theretofore evidencing outstanding shares of MCI and MCMS
Common Stock, upon surrender of such certificates to an
exchange agent appointed by the Company (the "Exchange
Agent"), shall be entitled to receive (i) certificates
representing the number of whole shares of Company Common
Stock into which shares of MCI and MCMS Common Stock
theretofore represented by the certificates so surrendered
shall have been converted as provided in Section 1.2 and
(ii) cash payments in lieu of fractional shares, if any, as
provided in Section 1.4. As soon as practicable after the
Effective Time, the Company shall cause the Exchange Agent
to mail appropriate and customary transmittal materials
(which shall specify that delivery shall be effected, and
risk of loss and title to the certificates theretofore
representing shares of MCI and MCMS Common Stock shall pass,
only upon proper delivery of such certificates to the
Exchange Agent) to each holder of MCI and MCMS Common Stock
of record as of the Effective Time advising such holder of
the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent outstanding certificates
formerly evidencing MCI and MCMS Common Stock in exchange
for new certificates for Company Common Stock. The Company
shall not be obligated to deliver the consideration to which
any former holder of shares of MCI and MCMS Common Stock is
entitled as a result of the Merger until such holder
surrenders the certificate or certificates representing such
shares for exchange as provided in such transmittal
materials and this Section 1.5(a). Upon surrender, each
certificate evidencing MCI and MCMS Common Stock shall be
cancelled.
(b) On the Effective Time, the Company shall deposit,
or shall cause to be deposited, with the Exchange Agent, for
exchange in accordance with this Section 1.5, certificates
representing the shares of Company Common Stock and the cash
in lieu of fractional shares (such certificates and cash,
hereinafter referred to as the "Exchange Fund") to be issued
or paid by the Company pursuant to this Article I in
connection with the Merger.
(c) Until outstanding certificates formerly
representing MCI and MCMS Common Stock are surrendered as
provided in Section 1.5(a), no dividend or distribution
payable to holders of record of Company Common Stock shall
be paid to any holder of such outstanding certificates, but
upon surrender of such outstanding certificates by such
holder there shall be paid to such holder the amount of any
dividends or distributions (without interest) theretofore
paid with respect to such whole shares of Company Common
Stock, but not paid to such holder, and which dividends or
distributions had a record date occurring on or subsequent
to the Effective Time.
(d) After the Effective Time, there shall be no
further registration of transfers on the records of MCI and
MCMS of outstanding certificates formerly representing
shares of MCI and MCMS Common Stock and, if a certificate
formerly representing such shares is presented to MCI and
MCMS or the Company, it shall be forwarded to the Exchange
Agent for cancellation and exchange for certificates
<PAGE>
representing shares of Company Common Stock as herein
provided.
(e) All shares of Company Common Stock and cash for
any fractional shares issued and paid upon the surrender for
exchange of MCI and MCMS Common Stock in accordance with the
above terms and conditions shall be deemed to have been
issued and paid in full satisfaction of all rights
pertaining to such shares of MCI and MCMS Common Stock.
(f) Any portion of the Exchange Fund (including the
proceeds of any investments thereof and any Company Common
Stock or any dividends or distributions thereon) that
remains unclaimed by the holders of MCI or MCMS Common Stock
for six months after the Effective Time shall be repaid to
the Company. Any holders of MCI or MCMS Common Stock who
have not theretofore complied with this Section 1.5 shall
thereafter look only to the Company for payment of their
shares of Company Common Stock, cash in lieu of fractional
shares and any unpaid dividends and distributions on the
Company Common Stock deliverable in respect of each share of
MCI or MCMS Common Stock that such holder holds as
determined pursuant to this Agreement, in each case, without
any interest thereon. If outstanding certificates for
shares of MCI or MCMS Common Stock are not surrendered or
the payment for them not claimed prior to the date on which
such payments would otherwise escheat to or become the
property of any governmental unit or agency, the unclaimed
items shall, to the extent permitted by abandoned property
and any other applicable law, become the property of the
Company (and to the extent not in its possession shall be
paid over to it), free and clear of all claims or interest
of any person previously entitled to such claims.
Notwithstanding the foregoing, none of the Company, the
Exchange Agent or any other person shall be liable to any
former holder of MCI and MCMS Common Stock for any amount
delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(g) In the event any certificate for MCI and MCMS
Common Stock shall have been lost, stolen or destroyed, the
Exchange Agent shall issue and pay in exchange for such
lost, stolen or destroyed certificate, upon the making of an
affidavit of that fact by the holder of record thereof, such
shares of Company Common Stock and cash for fractional
shares, if any, as may be required pursuant to this
Agreement; provided, however, that the Company may, in its
discretion and as a condition precedent to the issuance and
payment thereof, require the owner of such lost, stolen or
destroyed certificate to deliver a bond in such sum as it
may direct as indemnity against any claim that may be made
against the Company, MCI and MCMS, the Exchange Agent or any
other party with respect to the certificate alleged to have
been lost, stolen or destroyed.
SECTION 1.6 Dissenting Shares. Any Dissenters'
Shares shall not be converted into Company Common Stock as
provided in Section 1.2 unless and until the holder of such
Dissenters' Shares shall have effectively withdrawn or
otherwise lost the right to appraisal of and payment for
such shares under the Idaho Law, at which time such shares
shall be converted into Company Common Stock as provided in
Section 1.2. MCI and MCMS each promptly following the
approval of the Merger by its shareholders, or the Surviving
Corporation, shall deliver notice to the holders of
Dissenters' Shares as required by Section 30-1-81(d) of the
Idaho Law. Promptly following the Effective Time (or the
later receipt of demand for payment and deposit of
certificates representing Dissenters' Shares), the Surviving
Corporation shall remit payment to the holders of
Dissenters' Shares of the fair value of such shares, as
determined by the Surviving Corporation.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 Articles of Incorporation. The articles
of incorporation of the Company in effect at the Effective
Time shall be the articles of incorporation of the Surviving
Corporation (the "Articles") (until amended in accordance
with applicable law) except as follows:
(a) Article 1 of the Articles shall be restated in its
entirety to read as follows:
ARTICLE 1. NAME
The name of the Corporation is "Micron
Electronics, Inc."
(b) Article 3 of the Articles shall be restated in its
entirety to read as follows:
ARTICLE 3. AUTHORIZED SHARES
<PAGE>
The aggregate number of authorized shares of the
corporation is 150,000,000 of $.01 par value, which shall
be divisible into the classes and series, have the
designations, voting rights and other rights and
preferences and be subject to the restrictions, that the
Board of Directors of the corporation may from time to
time establish, fix and determine consistent with
Articles 4 and 5 hereof. Unless otherwise designated by
the Board of Directors, all issued shares shall be deemed
Common Stock with equal rights and preferences.
SECTION 2.2 Bylaws. The bylaws of the Company in
effect at the Effective Time shall be the bylaws of the
Surviving Corporation until amended in accordance with
applicable law.
SECTION 2.3 Directors. The directors of the
Surviving Corporation shall be Steven R. Appleton, Joseph M.
Daltoso, Gregory E. Herrick, Robert A. Lothrop, Chase S.
Mart, T. Erik Oaas, John R. Simplot and Jerry M. Hess.
Exhibit 3.1
CERTIFICATE OF RESTATED ARTICLES OF INCORPORATION
OF
ZEOS INTERNATIONAL, LTD.
The undersigned, the President of ZEOS INTERNATIONAL,
Ltd., a Minnesota corporation, hereby certifies that at a
duly called special meeting of the shareholders of the
Corporation, held on July 29, 1987, the following
resolutions relating to the adoption of Restated Articles of
Incorporation were duly adopted in accordance with Minnesota
Statutes, Chapter 302A, and the Articles of Incorporation
and Bylaws of the Corporation:
RESOLVED, that the presently existing Articles of
Incorporation, as amended, of this corporation are hereby
amended and restated in their entirety to read as set forth
in the document entitled "Restated Articles of
Incorporation of ZEOS INTERNATIONAL, Ltd." which is marked
"Exhibit A" to these resolutions and attached hereto.
FURTHER RESOLVED, that such Restated Articles of
Incorporation shall supersede the existing articles of
Incorporation and all amendments thereto.
FURTHER RESOLVED, that the president is hereby
authorized and directed to prepare and file with the
Minnesota Secretary of State a Certificate of Restated
Articles of Incorporation in accordance with law.
The undersigned further certifies that the document attached
hereto and marked "Exhibit A" and entitled "Restated
Articles of Incorporation of ZEOS INTERNATIONAL, Ltd." is a
true copy of the Restated Articles of Incorporation as so
adopted and such Restated Articles of Incorporation
supersede the existing Articles of Incorporation and all
amendments thereto.
IN WITNESS WHEREOF, the undersigned has executed this
document this 30th day of July, 1987.
ZEOS INTERNATIONAL, LTD.
By /s/ Greg E. Herrick
----------------------
Greg E. Herrick
Its President
STATE OF MINNESOTA )
)ss.
COUNTY OF )
The foregoing instrument was acknowledged before me on
July 30, 1987, by Greg E. Herrick, the President of ZEOS
INTERNATIONAL, Ltd., on behalf of the Corporation.
/s/ Teresa H. Peulen
---------------------
Notary Public
<PAGE>
RESTATED
ARTICLES OF INCORPORATION
OF
ZEOS INTERNATIONAL, LTD.
ARTICLE 1. NAME
The name of the corporation is "ZEOS INTERNATIONAL,
LTD."
ARTICLE 2. REGISTERED OFFICE
The address of the registered office of the corporation
in Minnesota is 30 Fifth Avenue, N.W., Suite 1000, New
Brighton, Minnesota 55112
ARTICLE 3. AUTHORIZED SHARES
The aggregate number of authorized shares of the
corporation is 5,000,000 of $.01 par value, which shall be
divisible into the classes and series, have the
designations, voting rights, and other rights and
preferences and be subject to the restrictions that the
Board of Directors of the corporation may from time to time
establish, fix, and determine consistent with Articles 4 and
5 hereof. Unless otherwise designated by the Board of
Directors, all issued shares shall be deemed Common Stock
with equal rights and preferences.
ARTICLE 4. NO CUMULATIVE VOTING
There shall be no cumulative voting by the shareholders
of the corporation.
ARTICLE 5. NO PREEMPTIVE RIGHTS
The shareholders of the corporation shall not have
preemptive rights to subscribe for or acquire securities or
rights to purchase securities of any kind, class, or series
of the corporation.
ARTICLE 6. BOARD OF DIRECTORS
The names and addresses of the members of the Board of
Directors are:
Name Address
Greg E. Herrick 1206 Kenwood Parkway
Minneapolis, Minnesota 55405
Robert A. Burnett 300 Walnut Street
Suite 270
Des Moines, Iowa 50309
Thomas William Evans, M.D. 1317 North Elm Street
Ottumwa, Iowa 52501
ARTICLE 7. WRITTEN ACTION BY DIRECTORS
An action required or permitted to be taken at a
meeting of the Board of Directors of the corporation may be
taken by a written action signed, or counterparts of a
written action signed in the aggregate, by all of the
directors unless the action need not be approved by the
shareholders of the corporation, in which case the action
may be taken by a written action signed, or counterparts of
a written action signed in the aggregate, the number of
directors that would be required to take the same action at
a meeting of the Board of Directors of the corporation at
which all of the directors were present.
<PAGE>
ARTICLE 8. DIRECTOR LIABILITY
A director of this corporation shall not be personally
liable to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except
for liability (I) for any breach of the director's duty or
loyalty to the corporation or its stockholders; (ii) for
acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii)
under Sections 302A.559 or 80A.23 of the Minnesota Statutes;
(iv) for any transaction from which the director derived an
improper personal benefit; or (v) for any act or omission
occurring prior to the date when this Article 8 became
effective.
I. The Minnesota Business Corporation Act is hereafter
amended to authorize the further elimination or limitation
of the liability of a director, then the liability of a
director of the corporation shall be eliminated or limited
to the fullest extent permitted by the Minnesota Business
Corporation Act, as so amended.
Any repeal or modification of the foregoing provisions
of this Article 8 by the stockholders of the corporation
shall not adversely affect any right or protection of a
director of the corporation existing at the time of such
repeal or modification.
<PAGE>
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
ZEOS INTERNATIONAL, LTD.
1. The name of the Corporation is ZEOS International,
Ltd., a Minnesota corporation.
2. The following is the full text of amendments to the
articles of incorporation of ZEOS International, Ltd.;
RESOLVED, that Article 3 of the Articles of
Incorporation shall be amended in its entirety to read as
follows:
"ARTICLE 3. AUTHORIZED SHARES
The aggregate number of authorized shares of the
corporation is 15,000,000 of $.01 par value, which shall be
divisible into the classes and series, have the
designations, voting rights, and other rights and
preferences and be subject to the restrictions that the
Board of Directors of the corporation may from time to time
establish, fix and determine consistent with Articles 4 and
5 hereof. Unless otherwise designated by the Board of
Directors, all issued shares shall be deemed Common Stock
with Equal rights and preferences."
3. The amendment was adopted by the shareholders pursuant
to section 302A.135 of the Minnesota Business Corporation
Act on May 23, 1989.
IN WITNESS WHEREOF, the undersigned, the Executive Vice
President of ZEOS International, Ltd., being duly authorized
on behalf of ZEOS International, Ltd., has executed this
document this 7th day of July, 1989.
/s/ Donald W. Cartwright
------------------------
Donald W. Cartwright
Executive Vice President
Exhibit 10.33
COMPONENT RECOVERY
REVENUE SHARING AGREEMENT
This Component Recovery Revenue Sharing Agreement is
entered into effective as of July 14, 1994 (the "Effective
Date"), by and between Micron Semiconductor, Inc., and Idaho
corporation located at 2805 E. Columbia Road, Boise, Idaho
83706 ("MSI"), and Micron Custom Manufacturing Services,
Inc., and Idaho corporation located at 8445 Westpark Street,
Boise, Idaho 83704 ("MCMS").
WHEREAS, MSI is engaged in the business of developing and
manufacturing semiconductor memory devices and MCMS in
engaged in the business of recovering semiconductor memory
devices for sale to third parties; and
WHEREAS, MSI wishes to sell and MCMS wishes to purchase
semiconductor memory devices manufactured by MSI which do
not meet MSI's full specifications and utilize them in less
critical applications;
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the parities hereto
agree as follows:
1. Definitions. As used in this Agreement, the following
terms have the following meanings:
(a) "Affiliated company" means any entity which is
fifty percent (50%) owned or controlled by MCMS or by Micron
Technology, Inc. and any entity which is fifty percent (50%)
owned or controlled by any such entity.
(b) "Components" means MSI semiconductor memory
devices, in die or packaged form, including but not limited
to DRAMs, SRAMs, and VRAMs, which have failed MSI's
electrical or burn-in tests or otherwise do not meet MSI's
databook specifications for such devices.
(c) "MSI's Average Sales Price" means:
(i) with respect to a non-DRAM component, MSI's
gross revenues from direct sales in the previous fiscal
month of any such component meeting MSI's databook
specifications, divided by the total number of such direct
sales components sold during the same period; and
(ii) with respect to a DRAM component, the sum of
(a) MSI's gross revenues from direct sales in the
previous fiscal month of any such component meeting MSI
databook specifications;
(b) MSI's book revenues from sales by
distributors in the previous fiscal month of any such
component meeting MSI databook specifications; and,
(c) MSI's gross revenues from direct sales of
modules in the previous fiscal month less applicable
assembly changes relating to such module;
divided by the total number of direct, distributor and
module components sold during the same period.
2. Sale of Components. MSI hereby grants to MCMS the
right to purchase all of MSI's Components and to resale the
Components upon the terms and conditions set forth herein.
Accordingly, MSI shall not sell Components to any third
party whether in the form of components, modules or board
level products
1
<PAGE>
without first offering such Components for sale to MCMS
in accordance with this Agreement. Nothing contained
herein shall obligate MSI to produce Components for sale
to MCMS, or obligate MCMS to purchase Components made
available for sale by MSS.
3. Component Recovery. MSI hereby grants to MCMS the
right to enter onto MSI's premises at all reasonable
business hours to recover Components from MSI. This right
shall include the right by MCMS personnel directly or
indirectly, with or without MSI's assistance, (i) to
retrieve Components form MSI's Probe area; (ii) to select
and assemble Components retrieved from MSI's Probe area for
submission to MSI's Assembly area for packaging
(encapsulation) by MSS; (iii) to retrieve from MSI's
Assembly area Components packaged by MSI for MCMS, and (iv)
to retrieve Components directly from MSI's Test area. for
the purpose of allowing MCMS personnel to select and
assemble Components for packaging by MS in MSI's Assembly
area, MSI agrees to make available to MCMS at no cost
approximately 300 square feet of Assembly cleanroom floor
space for use by MCMS personnel and equipment; provided,
however, that MSI may for reasonable business purposes deny
MCMS access to MSI's manufacturing site, recover Components
and provide such Components to MCMS off-site at MSI's cost.
All risk of loss and all costs associated with the
fabrication, probe, assembly and testing of Components by
MSI, including Components selected by MCMS for packaging by
MSI, shall be borne by MSI up to the point of delivery to
MCMS. Except as otherwise provided above, the point of
delivery shall be deemed to be the point of shipment by MSI
at MSI's manufacturing site or the point of direct retrieval
by MCMS personnel of packaged Components at MSI's
manufacturing site.
4. Revenue Sharing. In consideration of the sale to MCMS
of the components, MCMS hereby agrees to pay to MSI and
amount equal to fifty percent (50%) of the total amount of
net revenues obtained by MCMS from sales of the Components
to third parities and affiliated companies and derived from
intracompany sales to MCMS's contract assembly operations.
For the purpose of determining revenues from sales to
affiliated companies and intracompnay sales to MCMS's
contract assembly operations, prices for such components
shall be based on MSI's Average Sales Price and established
in accordance with the transfer price schedule set forth in
Schedule A attached hereto.
5. Payment of Revenue Sharing Amount. Unless otherwise
provided herein, MSI's share of revenues derived from sales
to third parities and intracompany sales of Components shall
be paid by MCMS to MSI net forty-five (45) days after the
end of each MCMS fiscal month. Any amount not received by
MSI when due shall be subject to a service charge of 1.5%
per month from the due date. MCMS shall pay all of MSI's
costs and expenses (including reasonable attorneys' fees) to
enforce MSI's rights under this Section.
6. Inspection of Records. MCMS shall keep full, clear and
accurate records with respect to third party and
intracompany sales of Components. MSI shall keep full,
clear and accurate records with respect to the Average Sales
Price used for the purpose of calculating the price of
Components. Each party's records shall be kept at the
party's principal place of business and shall be open at all
reasonable times during the term of this Agreement to the
inspection of a mutually agreeable third party. Neither
party hereto shall unreasonably withhold from the other
information necessary to confirm compliance with the terms
of this Agreement, including by not limited to information
pertaining to intellectual property rights and agreements
pertaining to the Components. In the event a party requests
and inspection as provided herein, such party shall bear all
costs and expenses associated with such inspection, unless
such inspection reveals noncompliance with the terms of this
Agreement by the other party, in which case the noncomplying
party shall bear all such costs and expenses.
7. Intellectual Property Rights. Each party hereby grants
to the other party the right to use and make available as
reasonably requested the intellectual property of the other,
including but not limited to patents, patent applications,
software programs, and copyrighted materials, as appropriate
to identify, recover and sell the Components. In addition
to bearing all costs of development and manufacture of
Components, MSI shall bear sole responsibility for, and
shall promptly pay when due, all royalty obligations arising
from patent license agreements entered into by MSI, or
Micron Technology, Inc. on behalf of MSI,
2
<PAGE>
and associated with sales of the Components to and by MCMS.
MSI hereby agrees to indemnify MCMS for any damages incurred
in the event of nonpayment by MSI of any such royalty obligations,
provided that such indemnification royalties arising form a
bona fide dispute by MSI regarding the terms or extent of
such obligations.
8. Confidentiality. Each party acknowledges that it will
have access to certain information and materials concerning
the business, plans, customers, technology, and products of
the other pertaining to the subject matter of this Agreement
that are confidential and of substantial value to the other
party. Each party agrees that it will not at any time
disclose such confidential information to any third party.
9. No Warranty. MSI MAKES NO WARRANTIES, EXPRESSED OR
IMPLIED, REGARDING THE COMPONENTS, INCLUDING, BUT NOT
LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY OR OTHERWISE.
MSI DOES NOT MAKE TO MCMS OR ANY CUSTOMER OF MCMS, AND
HEREBY EXPRESSLY DISCLAIMS ANY OTHER REPRESENTATION OR
WARRANTY OF ANY KIND WITH RESPECT TO THE COMPONENTS. ALL
COMPONENTS ARE SOLD "AS IS" AND "WITH ALL FAULTS".
10. Limitation on Liability. Except as otherwise provided
herein, in the event of termination by either party in
accordance with any of he provisions of this Agreement,
neither party shall by liable of he provisions of this
Agreement, neither party shall be liable to the other
because of such termination, for compensation, reimbursement
or damages on account of the loss of prospective profits or
anticipated sales, or on account of any expenditures or
commitments in connection with the business or goodwill of
either party.
11. Patent Indemnity. MSI represents and warrants that the
delivery and sale of components hereunder will not infringe
any patent, trademark or other intellectual property rights
of third parities. MSI shall indemnify and hold MCMS
harmless of and from any and all losses, including without
limitation loss of good will and loss of business
opportunities, costs, claims, liabilities and expenses,
including attorneys' fees, incurred by MCMS with respect to
any such infringement of any patent, trademark or other
intellectual property rights, provided that such
indemnification shall not exceed that amount equal to MSI's
share of he net revenues derived from the sale by MCMS of he
infringing products. MCMS shall have the right to offset
against payments due to MSI hereunder the amount to any
indemnification owed by MS and to MCMS under this Section.
12. Term and Termination.
12.1 Term. The term of this Agreement shall commence
on the Effective Date and shall continue thereafter for a
period of three (3) full fiscal years from the fiscal year-
end next following the Effective Date, subject to earlier
termination in accordance with the provisions of this
Section.
12.2 Termination by Mutual Agreement. This Agreement
may by terminated at any time upon the mutual written
agreement of the parties.
12.3 Survival of certain Terms. Upon any termination
of this Agreement, any provision of this Agreement which by
its terms appears to be applicable to periods or actions
occurring after termination of the Agreement, shall remain
in full force and effect.
13. Application to Subsidiaries. The obligations of either
party hereunder shall be applicable to subsidiaries of each
such party. "subsidiary" shall mean any entity owned 50% or
more by a party.
3
<PAGE>
14. General Provisions.
14.1 Governing Law. This Agreement shall be governed
by and construed under the laws of the State of Idaho. The
federal and sate courts within the State of Idaho shall have
exclusive jurisdiction to adjudicate any dispute arising out
of this Agreement.
14.2 Entire Agreement. This Agreement sets forth the
entire agreement and understanding of the parities relating
to the subject matter herein and merges all prior
discussions between them. No modification of or amendment
to this Agreement, nor any waiver of any rights under this
Agreement, shall be effective unless in writing signed by
the party to be charged.
14.3 Notices. Any notice required or permitted by
this Agreement shall be in writing and shall be sent by
prepaid registered or certified mail return receipt
requested, addressed to the other party at the address shown
at the beginning of this Agreement or at such other address
for which such party give notice hereunder. Such notice
shall be deemed to have been given three (3) days after
deposit in the mail.
14.4 Force Majeure. Nonperformance of either party
shall be excused to the extent that performance is rendered
impossible by strike, fire, flood, governmental acts or
orders or restrictions, or any other reason where failure to
perform is beyond the control and not caused by the
negligence of the nonperforming party.
14.5 Nonassignability and Binding Effect. The rights
and obligation of each party hereunder may not be assigned
or transferred directly or indirectly without the prior
written consent of the other party, which consent shall not
be unreasonably withheld. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of
the parities hereto, their successors and assigns.
14.6 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one
instrument.
MICRON SEMICONDUCTOR, INC. MICRON CUSTOM MANUFACTURING
SERVICES, INC.
By: /s/ Steven R. Appleton By: /s/ Joseph M. Daltoso
------------------------ ---------------------------
Title: President Title: Chairman and President
--------------------- ------------------------
4
<PAGE>
Schedule A
Intercompany Transfer Price
<TABLE>
<CAPTION>
MCMS MCMS
Purchase MCMS Purchase MCMS
MSI Price Purchase Price Purchase
Previous for Full Price for Printer Price
Fiscal Specification for Systems Buffer Grade for Audio
Month's ASP Parts Grade Parts Parts Grade Devices
- ------------ ------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
X .975(X) .8288(X) .70(X) .25(X)
</TABLE>
Exhibit 10.34
AMENDED AND RESTATED PROMISSORY NOTE
$9,427,293 Boise,Idaho
Date: September 3, 1992
For value received, Micron Custom Manufacturing
Services, Inc., an Idaho corporation ("Maker"), promises to
pay to the order of Micron Technology, Inc., a Delaware
corporation ("Holder"), the principal sum of Nine Million,
four Hundred Twenty Seven Thousand, Two Hundred Ninety Three
Dollars ($9,427,293.00), together with interest on the
unpaid principal balance from the date hereof, at the rate
provided below, to be paid in lawful money of the United
States of America as follows:
Interest shall accrue from the date of this Amended and
restated Promissory Note (the "Note") at a rate equal to the
lesser of (i) the prime lending rate as quoted by the Wall
Street Journal, plus one-half percent (.5%), or (ii) the 90-
day LIBOR rate quoted by the Wall Street Journal, plus one
and one-half percent (1.5%). The rate of interest under
this Note shall be adjusted on the first day of each fiscal
quarter of Maker based on the interest rate reported in the
wall Street Journal the previous business day. Interest on
the Note shall be calculated on the basis of a 360 day year
counting the actual number of days elapsed. Payments of
principal and accrued interest shall be payable beginning
the first day of Maker's first fiscal quarter of 1993, and
thereafter on the first day of each fiscal quarter, in 39
payments equal to the 1/39th of the principal amount, plus
interest on the outstanding balance thereof.
Maker shall have the right to prepay all or a portion
of the principal balance of this Note at any time. Maker
and all endorsers; sureties and guarantors hereof severally
waive demand, protest, notice of dishonor, notice of non-
payment of this Note and agree that any payments due or to
become due hreunder may be extended, modified, amended or
renewed from time to time by the Holder hereof without
notice. This Note shall be binding upon all of the above
parties and their respective heirs, representatives,
successors and assigns.
If default is made in the payment of any sum due
hereunder or if default is made in the performance of any of
the covenants or conditions of any instrument by which this
Note is secured, all unpaid principal evidence by this Note
and all the interest accrued thereon, at the option of he
Holder, shall become immediately due and payable without
demand or notice. Failure or waiver of exercise of such
option at one time shall not constitute a waiver of the
right to exercise any option arising by reasons of any later
additional default. This Note constitutes an amendment and
restatement of that certain promissory not issued by Maker
in favor of Holder and dated as of May 4, 1992. This Note
may not be modified or amended except by written agreement
of he parties hereto.
Maker promises to pay all costs and expenses of
collection and attorneys' fees and court costs incurred by
the Holder to enforce the terms of this Note and any
instrument by which this Note is secured,
including those expenses and fees which may be incurred in
connection with the appointment of receiver and any
appearances in bankruptcy or insolvency proceedings
<PAGE>
This Note shall be governed by and construed in
accordance with the laws of the State of Idaho.
MICRON CUSTOM MANUFACTURING SERVICES, INC.
an Idaho corporation
By: /s/ Joseph M. Daltoso
---------------------------------------
Its: Chairman and President
--------------------------------------
MICRON TECHNOLOGY, INC.
a Delaware corporation
By: /s/ Reid N. Langrill
---------------------------------------
Its: Vice President Finance
--------------------------------------
Exhibit 11
ZEOS INTERNATIONAL, LTD.
Computation of Per Share Earnings
(Amounts in thousands, except for per share amounts)
<TABLE>
<CAPTION>
April 1, April 2,
Quarter ended 1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
PRIMARY
Weighted average shares
outstanding 8,806 8,704
Stock options using average
market price 1,039 -
-------- --------
Total shares 9,845 8,704
======== ========
Net income (loss) $ 2,704 $ (8,564)
Less preferred stock dividend 75 -
-------- --------
Net income (loss) applicable to
common shareholders $ 2,629 $ (8,564)
======== ========
Per share amount $ 0.27 (0.98)
FULLY DILUTED
Weighted average shares
outstanding 8,806 8,704
Stock options using greater of
average or ending market price 1,039 -
Convertible preferred stock 1,000 -
-------- --------
Total shares 10,845 8,704
======== ========
Net income (loss) $ 2,704 $ (8,564)
Less preferred stock dividend
75 -
-------- --------
Net income (loss) applicable to
common shareholders $ 2,629 $ (8,564)
======== ========
Per share amount $ 0.25 $ (0.98)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from
the accompanying financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> APR-1-1995
<CASH> 21,808
<SECURITIES> 0
<RECEIVABLES> 23,806
<ALLOWANCES> 1,569
<INVENTORY> 25,492
<CURRENT-ASSETS> 70,393
<PP&E> 10,376
<DEPRECIATION> 8,512
<TOTAL-ASSETS> 73,011
<CURRENT-LIABILITIES> 46,790
<BONDS> 0
<COMMON> 88
4,831
0
<OTHER-SE> 21,302
<TOTAL-LIABILITY-AND-EQUITY> 73,011
<SALES> 82,838
<TOTAL-REVENUES> 82,838
<CGS> 72,259
<TOTAL-COSTS> 72,259
<OTHER-EXPENSES> 8,191
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (316)
<INCOME-PRETAX> 2,704
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,629
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.25
</TABLE>
