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PQ Fa 014 r-rok <br /> • MAS Technologies, Inc. <br /> 16820 Highway 10, #120 <br /> Elk River MN 55330 <br /> December 28th, 1999 <br /> Letter to Shareholders & Debenture holders, MAS Technologies <br /> Ladies and Gentlemen: <br /> Much water has passed under the bridge at MAS Technologies since you last <br /> heard from the company in May. We are now in a position that the bank (Pine Island <br /> Security State Bank) has seized the assets of the company due to the company's default <br /> on debt payment obligations to them. <br /> Besides simply passing that sad news on to you, we also wanted, in this letter, to <br /> brief you on some of the activities that have led up to this apparent conclusion. <br /> As was indicated in the shareholder letter in May, the company was operating <br /> then, and continued to operate over the summer, in a mode of severe cash shortage <br /> such that most efforts were focused on simply keeping the doors open, satisfying what <br /> orders we had and supporting existing customers at a minimal level.With every <br /> customer payment received, there was a "balancing act"to determine who would receive <br /> what-at no time since May have we been able to achieve the status of having every <br /> • debtor, payable and employee obligation satisfied. This in turn led to further difficulty in <br /> satisfying even the most minor challenges; employee resignations, sinking morale <br /> together with reduced attendance among the remaining employees. The withdrawal of <br /> legal services by Lindquist and Vennum, long term supporters of MAS, served as an <br /> indication of how bad things were. <br /> The initiatives begun earlier in the year to raise funds or find a company <br /> interested in an acquisition of MAS continued and gained momentum but ultimately led <br /> to nothing: <br /> • The business plan of May was revised in June to create a scenario a little more <br /> conservative and hopefully, therefore, more attractive to investors...but also resulted <br /> in a considerably larger cash infusion requirement. While some existing investors <br /> agreed to put more funds into the company, and discussions were held with a <br /> customer with regards to some investment by them, the ultimate funds committed <br /> were somewhat short of our goal and, additionally, came with strings attached -- in <br /> particular with regards to the appointment of a CEO pre-approved by the major <br /> investment groups. By this time Martin Lymn, who served as Interim CEO without <br /> compensation during the spring, elected not to take a full time position with the <br /> company and resigned that position in late June, though he remained a director of <br /> the company. <br /> • Discussions were held with a variety of potential acquirers of MAS though only a <br /> single offer was forthcoming, from Mocon,for$500,000 (assuming certain inventory <br /> and receivable values) which was subsequently withdrawn. Among the discussions <br /> • held were several with TMI in New York(previously a distributor of the product) with <br />