<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934 for the fiscal year ended June 30, 1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
COMMISSION FILE NUMBER 1-10981
SBS TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
New Mexico 85-0359415
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
2400 Louisiana Blvd. NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
(505) 875-0600
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock, no par value NASD National Market System
<PAGE>
Indicate by 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 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
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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-K or any amendment to this
form 10-K. ( )
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of the Common Stock on September
1, 1996 as reported on NASDAQ was approximately $29,612,369. Shares of Common
Stock held by each officer and director and by each person who owns 5% or more
of the outstanding Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
As of September 1, 1996, Registrant had 3,386,133 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the following documents are incorporated by reference into Part III of
this Form 10-K Report: (1) Definitive Proxy Statement for Registrant's 1996
Annual Meeting of Stockholders to be held November 12, 1996.
<PAGE>
PART I
ITEM 1. BUSINESS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED FINANCIAL DATA" AND THE COMPANY'S FINANCIAL STATEMENTS AND NOTES
THERETO. INFORMATION DISCUSSED HEREIN MAY INCLUDE FORWARD-LOOKING STATEMENTS
REGARDING FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF THE COMPANY, AND
ARE SUBJECT TO A NUMBER OF RISKS AND OTHER FACTORS WHICH COULD CAUSE THE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD LOOKING
STATEMENTS. AMONG SUCH FACTORS ARE: GENERAL BUSINESS AND ECONOMIC CONDITIONS;
CUSTOMER ACCEPTANCE AND DEMAND FOR THE COMPANY'S PRODUCTS; THE COMPANY'S OVERALL
ABILITY TO DESIGN, TEST AND INTRODUCE NEW PRODUCTS ON A TIMELY BASIS; THE NATURE
OF THE MARKETS ADDRESSED BY THE COMPANY'S PRODUCTS; AND OTHER RISK FACTORS
LISTED FROM TIME TO TIME IN DOCUMENTS FILED BY THE COMPANY WITH THE SEC.
INTRODUCTION
Fiscal 1996 was a year of excellent progress for the Company. During fiscal
1996:
- Sales increased by 93.2% from $16.2 million in fiscal 1995 to $31.3
million.
- Income from continuing operations increased 94.1% from $1.8
million in fiscal 1995 to $3.6 million.
- Income per common and common equivalent share from
continuing operations increased 49.2% from $0.65 to $0.97.
- The Company reduced its indebtedness, primarily incurred in
connection with the April 1995 acquisition of GreenSpring
Computers, Inc., by approximately $3.4 million.
- The Company's debt to equity ratio improved from 2.9 to 1 at
the start of the year to 1 to 1 by year end.
- Return on equity from continuing operations improved from 34% in
fiscal 1995 to 47%.
During fiscal 1996, the Company made significant investments targeted toward
developing more solutions for its customers, and providing them the support they
want and have come to expect. This investment included increasing research and
development spending by 69% so that the Company could continue to offer current
technology in its product offerings to its growing base of customers, and to
expand the Company's product offerings to provide more solutions for customer
needs. During 1996, the Company also introduced more than 20 new products, such
as our Com360 IndustryPacks-Registered Trademark- for the telecommunications
industry, our ABI V6 avionics interface board to help the developers of avionics
for military aircraft and the Space Station and our 4400VF 10 telemetry card to
receive high data rate satellite transmissions.
We also increased selling, general and administrative expense by 62% in order to
put in place an organization capable of handling the current level of business
activity without decline in the Company's commitment to serving its customers
needs. Much of this increase resulted from the addition of 18 new employees.
The Company designs, manufactures and sells board level products for the
standard bus (VME, ISA, PCI, Multibus, etc.) embedded industrial computer
industry. The Company's product lines include a series of general purpose
input/output boards known as IndustryPacks-Registered Trademark- designed in
accordance with an ANSI standard and several high end, special purpose
input/output devices that serve the avionics and telemetry markets.
<PAGE>
SBS' PRODUCTS
The Company's current product line is a result of the application of its
combined strategy of internal growth and acquisition. It entered the standard-
bus embedded computer market with the internal development of an application-
specific product line, its avionics interface products. These products are used
in military and space applications, are in relatively small, protected market
niches and require very high levels of hardware and software performance. The
Company's expansion continued with its acquisition of a line of telemetry
interface products, which are also application-specific and are in a high
technology, high performance market niche. The acquisition of GreenSpring
Computers, Inc. in April 1995 moved the Company into the main stream of the
embedded computer market with general purpose input/output and processor
products that can be used over a very wide range of applications. The wide
applicability of these product lines provides substantial opportunity for
growth. The growing technology base associated with each of these product lines
also supports synergy between product lines in developing new products and
upgrading existing products. The Company's product lines are divided into two
groups, including general purpose I/O products and special purpose interface
equipment, including telemetry and avionics interface products.
GENERALIZED I/O PRODUCTS: In April 1995, the Company purchased GreenSpring
Computers, Inc., the leading developer and producer of input/output modules
known as IndustryPacks-Registered Trademark- ("IP"s), a registered trademark of
GreenSpring. IPs are small mezzanine boards that plug into an embedded computer
card and provide specific types of input/output for embedded computer systems.
GreenSpring originally developed the IP in conjunction with Motorola as a
modular input/output solution for Motorola's VME-162 processor board, which has
become the most popular processor board in the VME market. Up to four IPs can
be installed on a VME-162 product to provide whatever type of I/O a system
designer requires. In conjunction with a VME-162 or some other processor board,
IP products provide an industrial computer with an interface to sense, interpret
and/or control an external process. The Company has continued to expand its
market opportunity for IP products by introducing a line of carrier cards for
VME systems that can accommodate up to four IPs. This allows system designers
to use IPs even if they do not use Motorola VME-162 products. GreenSpring's
product line of over ninety input/output products services a very wide range of
applications in the embedded computer market. In fiscal years 1996, 1995 and
1994, sales of this product comprised approximately 35%, 9% and 0%,
respectively, of the Company's total sales. As of September 1, 1996 and 1995,
backlog orders were $2.5 million and $2.8 million, respectively. All backlog
orders are expected to be filled in the current fiscal year.
SPECIAL PURPOSE INPUT/OUTPUT INTERFACE EQUIPMENT
TELEMETRY PRODUCTS: In August 1992, the Company purchased Berg Systems
International, Inc. ("BSI"), a leading supplier of telemetry interface equipment
for the embedded computer market. BSI was the developer of the concept of using
a special purpose, embedded computer interface boards for telemetry ground
station applications. Telemetry is the process used in sending and receiving
digital data via radio waves. Historically it has been used to transmit data
from some object under test, such as an aircraft, to a receiving station while
the test is underway. This allows engineers to monitor test performance in real
time while the test is being performed. Use of this technology has expanded to
include continuous monitoring of remote sites and transmission of digital data
from satellites to the earth. The Company's telemetry interface products, when
installed in industrial computers, allow computers to receive, interpret and
process telemetry data. Since its acquisition, BSI has seen a steady increase
in demand for its telemetry interface equipment and has expanded its product
offerings to include specialized equipment designed to receive and process
satellite data. The Company's telemetry products serve a high technology, niche
market and include a significant software component. In fiscal years 1996, 1995
and 1994, sales of this product comprised approximately 21%, 34% and 44%,
respectively, of the Company's total sales. As of September 1, 1996 and 1995,
backlog orders were $.7 million and $.9 million, respectively. All backlog
orders are expected to be filled within the current fiscal year.
<PAGE>
AVIONICS INTERFACE PRODUCTS: Avionics interface products were the
Company's first entry into the standard-bus, embedded computer market.
Introduced in 1988, these products interfaced a standard embedded computer
system to an avionics data bus used in a broad range of military and space
applications. Initial applications for the Company's products were avionics
system development, avionics system testing and simulation. Over the past
several years, the Company has introduced a number of related products that have
expanded its potential market in this area. These include ruggedized interface
products that are used in operational systems, and monitor and test systems that
can be used as diagnostic tools for operational systems. The result has been
steady, continuous revenue and income growth in this product line, with sales to
some of the country's largest and most technologically advanced organizations.
Like its telemetry products, the Company's avionics products occupy a high
technology, niche market and include a significant software component. In
fiscal years 1996, 1995 and 1994, sales of this product comprised approximately
40%, 50% and 45%, respectively, of the Company's total sales. As of September
1, 1996 and 1995, backlog orders were $1.9 million and $1.3 million,
respectively. All backlog orders are expected to be filled within the current
fiscal year.
The Company also produces a judgmental use of force product which utilizes an
embedded computer in a device to train police officers and military personnel in
proper responses to crisis situations. In fiscal years 1996, 1995 and 1994,
sales of this product comprised approximately 4%, 4% and 9%, respectively, of
the Company's total sales. As of September 1, 1996, backlog orders were $.1
million and are expected to be filled within the current fiscal year. Backlog
orders were not significant at September 1, 1995.
CUSTOMERS AND APPLICATIONS
The Company's broad range of products support a very wide range of applications.
These include:
Commercial/Industrial Applications: Standard-bus embedded computers are
used in a wide range of commercial applications. Examples include
maintenance monitoring equipment on large, heavy earth moving equipment,
entertainment systems and copiers. The Company's input/output products may
be used in all of these devices.
Communications: Modern communications technology relies heavily on
industrial computers. Communications switches combine interface switching
hardware with industrial computer processors to provide overall system
operation and control. The Company supplies processor cards that can be
used to control overall switch operation and communications interface IPs.
Industrial Automation: Embedded industrial computers are used to automate
plants and factories. Individual computers connect to and control
machines. Individual computers controlling machines are also networked to
allow other computers to exercise supervisory control over the entire
factory operation. Company-supplied products include input/output
equipment to provide sensing and control of plant operation and processor
cards to generate control strategies.
Medical Devices: Numerous high-end medical instruments use standard-bus,
embedded processors for data collection, data processing, data display and
system operation. Typical applications are embedded computer systems in
PET, CAT and MRI scanners. The Company's input/output products may be used
in all of these devices.
Military and Aerospace Applications: As the performance and reliability of
commercial, industrial computer systems have increased, these systems have
increasingly been used as economical alternatives to custom designed, MIL-
SPEC equipment by domestic and international military and space agencies.
Additionally, open architecture approaches to applications such as
telemetry and satellite ground stations have provided an economical
alternative to dedicated, special purpose design approaches. All of the
Company's products, including its telemetry and avionics interface
equipment, may be used in this application area.
<PAGE>
Test and Measurement Applications: Many process control and quality
systems are based on embedded computer systems whereby the input element of
the computer measures some set of parameters and the processing portion of
the computer makes some assessment based on the measured data. These types
of systems have very broad applicability, including aircraft test sets,
measurement systems associated with semiconductor production and factory
quality measurement systems. The Company's input/output products may be
used in all of these devices.
Transportation: Embedded computer systems are used in a variety of
transportation applications. For example, they control the operation of
people movers at airports and are used to control locomotives. On a
smaller scale, they provide the sensing and control for today's automated
toll booths based on "pass cards". The Company's input/output products may
be used in all of these devices.
SALES AND MARKETING
The Company markets its products both domestically and internationally through a
combination of 14 sales employees, who are typically degreed engineers, and
approximately 36 independent manufacturer's representatives. Employee sales
personnel are educated on the Company's complete product line portfolio and are
able to take advantage of cross-selling opportunities between product lines.
Primary sales methods vary among the Company's product lines. The Company's
avionics interface and telemetry products generally have the most complex
applications and, as a result, leads are generally identified by independent
manufacturer's representatives and sales are closed by the sales employees. In
the case of its computer I/O products, a higher percentage of sales are either
closed by independent manufacturer's representatives or are the result of
catalogue sales.
COMPANY RESEARCH AND DEVELOPMENT
The Company maintains a research and development program to develop new products
in related markets and to integrate advanced technology into existing products.
As of September 1, 1996, the Company had approximately 28 employees engaged in
research and development activities. Of these, 20 have technical degrees and 8
have advanced degrees. The Company's products combine special-purpose hardware
and software to provide a customer with the required functionality.
Approximately 60% of the Company's research and development efforts in fiscal
year 1996 were software related. The Company's expenditure on research and
development was $2.8 million, $1.7 million and $1.2 million in fiscal years
1996, 1995 and 1994 respectively, corresponding to 9.1%, 10.4% and 11.6% of
sales.
SUPPLIERS
The Company uses contract manufacturing to produce all of its board-level
products. Parts are obtained from large electronics parts suppliers and
provided as kits to contract manufacturing companies that fabricate the
Company's products. The Company believes contract manufacturing is the most
economical approach to producing its products at its current level of
production. Dependence on a particular contract manufacturer is reduced by
using a different contract manufacturer for each of the Company's product lines.
However, the Company may choose in the future to consolidate all of its
manufacturing at a single manufacturer to gain economies of scale and to shift
its inventory control to the manufacturer, in which case the Company would be
dependent on that manufacturer for the continued timely and efficient production
of all of its inventory.
<PAGE>
Many of the Company's products consist in part of state-of-the-art digital
electronic components. The Company is dependent upon third parties for the
continuing supply of many of these components, some of which are obtained from a
sole supplier such as Xylinx, Inc. or a limited number of suppliers and
alternative sources for which would be difficult to locate. Moreover, suppliers
may discontinue or upgrade some of the products incorporated into the Company's
products, which could require the Company to redesign a product to incorporate
newer or alternative technology. Although the Company believes that it has
arranged for an adequate supply of components to meet its short-term
requirements, the Company does not have contracts for the components which would
assure availability and price. Lack of timely availability of components could
cause delays in shipment of product and affect the Company's revenues during
certain periods as well as lead to customer dissatisfaction. Limited
availability of components could also require the Company to pay premiums for
parts to make shipment deadlines and thus affect the Company's profit margin, or
cause the Company to increase its inventory of scarce parts and thus affect the
Company's cash flow. There is no assurance that the Company will continue to be
able to obtain all of the components it requires or that the price of certain
components in short supply will not materially and adversely affect its
business, financial condition or results of operations.
COMPETITION
The Company faces competition in each of its product line markets. Because of
the diverse nature of the Company's products and the fragmented nature of the
embedded computer market, there is little overlap of competitors for each
product line. The Company competes through a combination of technical
excellence, superior support and a competitive performance to price ratio.
In the generalized computer I/O product area serviced by GreenSpring and its
IndustryPack-Registered Trademark- product line, the Company has two classes of
competition. The first are companies that compete directly by selling
IndustryPack-Registered Trademark- products. The second are companies that
compete with I/O products using a different implementation to provide
functionally equivalent products.
In the telemetry products market, the Company is recognized as the innovator
that replaced the traditional, high cost, proprietary, closed architecture
approach to telemetry equipment with an open architecture approach that allowed
standard industrial computers with the proper interface boards to be used as
self-contained telemetry ground stations. In this business area, the Company
competes with other suppliers of open architecture telemetry solutions. It also
indirectly competes with suppliers of traditional, closed architecture telemetry
systems.
In the avionics interface market, the Company competes with a number of other
companies that produce similar avionics interface products.
EMPLOYEES
As of September 1, 1996, the Company had approximately 114 employees at its
three locations: Albuquerque, New Mexico; Menlo Park, California; and Carlsbad,
California. On August 19, 1996 the Company added 30 employees at its Raleigh,
North Carolina facility. See "Subsequent Event" under Item 7.
ITEM 2. PROPERTIES
The Company leases office and manufacturing space in Albuquerque, New Mexico,
Carlsbad, California and Menlo Park, California. The Company's standard
practice is to obtain all its facilities through operating leases. Management
maintains a comprehensive insurance plan covering all its facilities and
contents.
<PAGE>
The Albuquerque, New Mexico leased facility consists of 15,741 square feet
located in a multi-floor office building which includes adequate assembly and
test space for the Company's avionics interface and judgmental use-of-force
product lines, as well as serving as the Company's corporate headquarters.
Expansion space is available, if required. Currently the assembly and test
operations utilize approximately 85% of their productive floor space. The lease
term for the Albuquerque, New Mexico location is five years commencing July 1,
1995, with one additional five year option.
The Carlsbad, California leased facility is a one story, 13,000 square foot
building, located in a business park, consisting of 3,000 square feet of office
space and 10,000 square feet of assembly and test areas for the Company's
telemetry products. Management believes that this facility is capable of
handling projected increases in production for the foreseeable future because
the current capacity utilization of the manufacturing area is approximately 35%.
The lease term for the Carlsbad, California location is two years commencing May
1994, plus two additional one year options. The first one year option was
exercised in May 1996.
In March 1996, the Company entered into a four year lease commencing June 1,
1996 and ending May 31, 2000 for a facility located in Menlo Park, California
for the Company's I/O business. The facility is a one story, multi-tenanted
building in a business park, of which the Company leases approximately 16,394
square feet, consisting of 6,000 square feet of office space and 10,394 square
feet of assembly and test areas. The Company relocated to this facility in
July 1996 from a leased facility in the immediate area at the expiration of the
lease as the Company had outgrown the facility. Management believes that the
new facility will be sufficient to serve the I/O business' needs through the
term of the lease.
Before the sale of its simulation business to Camber Corporation in April 1995,
the Company had additional leased facilities in Albuquerque, New Mexico, Dallas
and Houston, Texas. In conjunction with this sale, the Company entered into
sublease and lease assumption agreements with Camber Corporation, transferring
the obligations under these leases.
ITEM 3. LEGAL PROCEEDINGS
The Company has been named as a defendant in Virtual Systems Group, Inc. (VSG)
v. SBS Technologies, Inc., filed on June 19, 1996 in the Second Judicial
District Court, County of Bernalillo, State of New Mexico. The plaintiff, a
company engaged by SBS to market its judgmental use of force trainers, claims
that the Company failed to fulfill all its obligations under an Agreement
between the Company and VSG whereby VSG would market the Company's judgmental
use of force trainers. The Company is vigorously defending the lawsuit and has
filed a counter suit alleging misrepresentation and failure to perform on the
part of VSG, and on the advise of counsel, does not believe that the outcome of
the litigation will have a material effect on the Company's financial condition
or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The following table sets forth the range of closing price of the Company's
common stock as reported on the NASDAQ National Market System for the last two
fiscal years:
High Low
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1st Quarter 1995 6.75 4.00
2nd Quarter 1995 7.13 4.38
3rd Quarter 1995 5.00 3.75
4th Quarter 1995 5.25 4.00
1st Quarter 1996 9.00 5.00
2nd Quarter 1996 8.94 7.13
3rd Quarter 1996 10.13 7.63
4th Quarter 1996 17.13 8.88
The Company's common stock is traded over the counter on the NASDAQ National
Market System using the symbol SBSE.
Based on the Company's survey of brokerage houses, management believes that as
of September 1, 1996, the number of common stockholders of record was
approximately 2,000, at which date the closing market value of the Company's
common stock was $14.25 per share.
The Company has not paid any cash dividends on its common stock. Management's
current policy is to retain earnings for use in the Company's operations and for
expansion of the Company's business. The Company's bank line of credit also
requires bank approval before the payment of any cash dividends.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the years ended June 30, 1992 through
June 30, 1996 have been derived from the Company's audited consolidated
financial statements. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the audited consolidated financial statements and related notes
thereto included elsewhere herein.
<TABLE>
<CAPTION>
Years ended June 30
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1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
Sales - continuing operations $ 31,331,793 16,217,648 10,196,568 5,907,658 2,542,131
Income - continuing operations 3,580,907 1,844,876 870,750 168,099 73,222
Income per common and common
equivalent share - continuing operations $0.97 0.65 0.30 0.05 0.03
Total assets $ 20,443,672 19,904,922 13,476,737 11,732,328 5,515,402
Long-term debt, excluding
current installments 5,188,320 5,341,649 273,573 329,979 3,243
Total liabilities 10,392,752 14,855,674 7,611,400 6,885,973 1,618,074
Total stockholders' equity $ 10,050,920 5,049,248 5,865,337 4,846,355 3,897,328
</TABLE>
Note: The Company has not declared any dividends during the periods
presented.
On April 28, 1995 the Company acquired GreenSpring Computers, Inc.,
and on April 26, 1995 the Company sold its flight simulation business
to Camber Corporation, which is reported as discontinued operations on
the consolidated financial statements. The Selected Financial Data
are for continuing operations only. The financial statements herein
reflect the separation of continuing operations from discontinued
operations.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED FINANCIAL DATA" AND THE COMPANY'S FINANCIAL STATEMENTS AND NOTES
THERETO. INFORMATION DISCUSSED HEREIN MAY INCLUDE FORWARD-LOOKING STATEMENTS
REGARDING FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF THE COMPANY, AND
ARE SUBJECT TO A NUMBER OF RISKS AND OTHER FACTORS WHICH COULD CAUSE THE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD LOOKING
STATEMENTS. AMONG SUCH FACTORS ARE: GENERAL BUSINESS AND ECONOMIC CONDITIONS;
CUSTOMER ACCEPTANCE AND DEMAND FOR THE COMPANY'S PRODUCTS; THE COMPANY'S OVERALL
ABILITY TO DESIGN, TEST AND INTRODUCE NEW PRODUCTS ON A TIMELY BASIS; THE NATURE
OF THE MARKETS ADDRESSED BY THE COMPANY'S PRODUCTS; AND OTHER RISK FACTORS
LISTED FROM TIME TO TIME IN DOCUMENTS FILED BY THE COMPANY WITH THE SEC.
OVERVIEW
The Company designs, manufactures and sells board level products for the
standard bus (VME, ISA, PCI, Multibus, etc.) embedded industrial computer
industry. The Company's product lines include a series of general purpose
input/output boards known as IndustryPacks-Registered Trademark-, designed in
accordance with an ANSI standard, and several high-end, special purpose
input/output devices that serve the avionics and telemetry markets. The
Company's first project after its incorporation in 1986 was to support the U.S.
Navy in the development of a V-22 flight simulator. In 1988, the Company
entered the embedded computing market with the development of its avionics
interface board, which is used in ground-based avionics systems development and
test. In 1992, the Company acquired a second embedded computer product line
with the acquisition of Berg Systems International, Inc., a developer of
telemetry interface circuit boards. In April 1995, following a significant
decline in the defense flight simulation industry, the Company divested its
flight simulation business and recorded a related charge of $2.25 million. It
also ceased providing engineering services, a line of business in which it had
been engaged since 1987 but which had had minimal impact on its overall revenue
and profitability. The Company has since focused its efforts and investments in
the embedded computing marketplace, expanding its product offerings and
marketing with the acquisition of two embedded computing companies as discussed
in "Completed Acquisition" and "Subsequent Event" below. The Company markets a
Judgmental Use of Force Training System, utilizing an embedded computer, which
is used to train police and military personnel in appropriate situational use of
force.
COMPLETED ACQUISITION
On April 28, 1995, the Company acquired GreenSpring Computers, Inc., a
corporation based in California, for $7.5 million. GreenSpring is engaged in
the design, development, marketing and manufacturing of general purpose computer
input/output products utilized in multiple segments of the embedded computer
systems market. The acquisition was accounted for as a purchase and the Company
recorded $5.8 million in goodwill with $653,245 amortized through June 30, 1996
and the remainder to be amortized through June 30, 2005.
Net income and earnings per common and common equivalent share for the year
ended June 30, 1994 would have been approximately $1.7 million and $0.56,
respectively, had the acquisition taken place on July 1, 1993. Had the
acquisition taken place on July 1, 1994, the reported net loss and net loss per
common and common equivalent share would have been decreased by approximately
$804,000 and $0.28, respectively.
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain financial
data as a percentage of sales:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
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1996 1995 1994
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<S> <C> <C> <C>
Sales 100.0% 100.0% 100.0%
Cost of sales 46.3 41.7 47.9
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Gross profit 53.7 58.3 52.1
Selling, general and administrative expense 20.1 24.0 21.8
Research and development expense 9.1 10.4 11.6
Amortization of intangible assets 2.8 3.0 3.8
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Operating income from continuing operations 21.7 20.9 14.9
Interest income (expense) (2.7) (1.2) (.1)
Income from continuing operations
before income taxes 19.0 19.7 14.8
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Income taxes 7.6 8.4 6.3
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Net income from continuing operations 11.4% 11.3% 8.5%
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</TABLE>
FISCAL YEAR ENDED JUNE 30, 1996 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1995
SALES. Sales increased 93.2% or $15.1 million from $16.2 million in fiscal
1995, to $31.3 million in fiscal 1996. This growth reflected the inclusion of
$11.1 million in sales from GreenSpring as its results were included for full
year in fiscal 1996 as compared to fiscal 1995, which included only $1.5 million
in sales during the two months for which GreenSpring's results were consolidated
into the Company's results. In addition, sales of the Company's other existing
products increased by 37.5% in fiscal 1996. The increases in sales for 1996
resulted from increased sales of existing products, introduction of new products
and sales of new and existing products to new customers in all the Company's
product lines. Sales of the Company's products are recorded at the time of
shipment.
GROSS PROFIT. Gross profit increased 77.8% or $7.4 million from $9.5
million in fiscal 1995, to $16.8 million in fiscal 1996 as a result of increased
sales volume. In fiscal 1996, gross profit decreased to 53.7% of sales from
58.3% in fiscal 1995 primarily as a result of sales mix. Fiscal 1996 sales were
comprised of a higher proportion of sales of GreenSpring products which yield
lower margins than the Company's other products. Reductions in component
material costs in each of the Company's product lines partially offset this
shift in sales mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased 61.7% or $2.4 from $3.9 million in fiscal 1995,
to $6.3 million in fiscal 1996. The increase resulted primarily from the
addition of the GreenSpring operations and staffing and promotional expense
increases in the Company's avionics and telemetry product lines. The Company's
sales increased such that as a percentage of sales, selling, general and
administrative expense decreased from 24.0% in fiscal 1995 to 20.1% in fiscal
1996, as a result of operating leverage.
<PAGE>
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense
increased by 68.8% or $1.2 million from $1.7 million in fiscal 1995 to $2.9
million in fiscal 1996, reflecting the costs of the GreenSpring operation and
additional staffing required for new product development in the avionics product
line. However, research and development expense decreased as a percentage of
sales from 10.4% in fiscal 1995 to 9.1% in fiscal 1996 primarily due to a more
rapid increase in sales over research and development expenses.
AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets
increased 79.3% or $391,029 from $493,409 in fiscal 1995 to $884,438 in fiscal
1996 due to the increase in intangible assets recorded with the acquisition of
GreenSpring.
INTEREST INCOME (EXPENSE). Interest income (expense) increased by 342% or
$642,013 from $187,805 in fiscal 1995 to $829,818 in fiscal 1996, primarily as a
result of debt incurred late in fiscal 1995 to finance the acquisition of
GreenSpring.
INCOME TAXES. Income taxes increased 75.9% or $1.0 million from $1.4
million in 1995 to $2.4 million in fiscal 1996, representing effective tax rates
of 42% and 40% respectively. The reduction in effective tax rates resulted
primarily from the use of a foreign sales corporation.
FISCAL YEAR ENDED JUNE 30, 1995 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1994
SALES. Sales increased 59.1% or $6.0 million from $10.2 million in fiscal
1994 to $16.2 million in fiscal 1995. This increase resulted from a number of
factors including, introduction of the PASS 1000 bus analyzer product,
participation in certain government programs and $1.5 million in sales of
GreenSpring products included for the two months following its acquisition in
April 1995. Sales of the Company's products are recorded at the time of
shipment.
GROSS PROFIT. Gross profit increased 78.0% or $4.2 million to $9.5 million
in fiscal 1995 from $5.3 million in fiscal 1994. In fiscal 1995, gross profit
as a percentage of sales increased from 52.1% in fiscal 1994 to 58.3% in fiscal
1995, as a result of reductions in per unit material and labor costs, and
increased volume which allowed for more efficient use of manufacturing overhead.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased 75.1% or $1.7 million from $2.2 million in
fiscal 1994 to $3.9 million in fiscal 1995. The increase resulted from the
addition of GreenSpring costs and staffing and promotional expense increases in
the avionics and telemetry product lines. As a percentage of sales, selling,
general and administrative expense increased from 21.8% in fiscal 1994 to 24.0%
in fiscal 1995, reflecting expenses incurred in anticipation of increased sales.
RESEARCH AND DEVELOPMENT. Research and development expense increased by
42.1% or $499,773 from $1.2 million in fiscal 1994 to $1.7 million in fiscal
1995, reflecting the costs of additional staffing required for new product
development in the avionics product line such as the ABI V6, ABI V and PASS 1000
interface boards. However, research and development decreased as a percentage
of sales from 11.6% to 10.4% primarily due to a more rapid increase in sales
over research and development expenses.
AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets
increased 28.8% or $110,324 from $383,085 in fiscal 1994 to $493,409 in fiscal
1995, due to the increase in intangible assets recorded with the acquisition of
GreenSpring.
INTEREST INCOME (EXPENSE). Interest income (expense) increased by $173,171
from $14,634 in fiscal 1994 to $187,805 in fiscal 1995, primarily as a result of
debt incurred late in fiscal 1995 to finance the acquisition of GreenSpring.
<PAGE>
INCOME TAXES. Income taxes increased 112.7% or $719,000 from $638,000 in
1994 to $1.4 million in fiscal 1995, representing statutory tax rate of 42%.
LIQUIDITY AND CAPITAL RESOURCES
The Company uses a combination of the sale of equity offerings, invested
capital, internally generated funds and bank borrowings to finance its
operations, capital equipment and working capital requirements.
Cash totaled $1.1 million at June 30, 1996, an increase of $246,226 from June
30, 1995. Net cash provided by operating activities for the year ended June 30,
1996 was $3.4 million, primarily due to the collection of contract receivables
of $2.9 million, the majority of which were from the Company's discontinued
flight and radar simulation business which were retained by the Company when it
exited this business in April 1995. Increases in sales volume and demand for
semiconductor parts during the year caused the Company to increase accounts
receivable and inventory. In addition, liabilities increased in line with the
current level of business activity. Net cash used by investing activities for
the year ended June 30, 1996 of $1.1 million was primarily for the purchase of
software and equipment totaling $764,191 and $236,626 for the purchase of the
IndustryPack-Registered Trademark--compatible product line from Wavetron
Microsystems, Inc. in January 1996. During the year ended June 30, 1996, the
Company utilized $3.4 million to pay down short and long term bank
debt.
In fiscal years ended June 30, 1995 and June 30, 1994, the Company generated
$1.1 million and $711,569 respectively of positive cash flow from its operating
activities. In fiscal 1995, the positive cash flow combined with bank
borrowings provided the Company sufficient funds to acquire GreenSpring
Computers, Inc. in April 1995, as well as to purchase required equipment. In
fiscal 1994, the positive cash flow was primarily used to purchase required
equipment and pay down short and long term bank debt.
On April 26, 1996, the Company amended its bank financing agreement with
NationsBank of Texas, N.A., originally entered into in April 1995, to provide
the Company with a $6.8 million term loan and a $2.5 million revolving line of
credit which management believes is sufficient. The term loan is a three and
one-half year note with a five year amortization maturing on October 30, 1999.
This loan refinanced a majority of the Company's outstanding debt, including the
$1.0 million note payable to the former shareholders and option holders of
GreenSpring Computers, Inc. entered into in April 1995 at the time the Company
acquired GreenSpring. The revolving line of credit matures on October 30, 1997.
The interest rate on the term loan is NationsBank's prime rate plus .25% or
LIBOR plus 2.50% in 30, 60, or 90 day options. The interest rate of the
revolving line of credit is NationsBank's prime rate or LIBOR plus 2.25% in 30,
60, or 90 day options. The amended financing agreement provides for a security
interest by NationsBank in the Company's receivables, inventories, and equipment
and imposes certain performance ratios on the Company. These ratios include a
current maturities ratio which requires that the Company's net earnings plus
depreciation and amortization expense for the preceding four quarters from time
of measurement compared to the Company's current portion of its long term debt
will not be less than a ratio of 2.00 to 1.00, a senior funded debt to EBITDA
ratio which requires that the Company's total debt evidenced by promissory
notes, loan agreements, bonds or similar instruments, but excluding subordinated
debt, will not be greater than a ratio of 1.50 to 1.00 when compared to the
Company's profit before tax plus interest, depreciation, and amortization
expense for the preceding four quarters from time measurement, and a fixed
charge coverage ratio requiring that the Company's income before tax plus
interest expense and operating lease expense for the preceding four quarters
from time of measurement will not be less than a ratio of 2.00 to 1.00 when
compared to the Company's interest expense plus operating lease expense for the
same preceding four quarters. The Company is also prohibited from disposing of
or acquiring certain assets and businesses without the consent of the lender.
At June 30, 1996 the Company was in compliance with all of the covenants of the
amended financing agreement.
<PAGE>
The outstanding balance on the Company's term loan with NationsBank at June 30,
1996 was $6.5 million, of which $5.0 million was at LIBOR plus 2.5% (8% at June
30, 1996) and $1.5 million was at NationsBank's prime rate plus .25% (8.5% at
June 30, 1996). The term loan is payable in monthly installments of $112,500.
As of June 30, 1996 there were no borrowings drawn on the Company's revolving
line of credit. During fiscal 1996, total borrowings were reduced by $3.4
million.
Management believes that its financial resources, including its internally
generated funds and available bank borrowings, will be sufficient to finance the
Company's current operations and capital equipment requirements for the next
twelve months. The Company subcontracts much of its manufacturing, and
therefore its capital expenditures generally consist of computing equipment,
leasehold improvements and office furniture.
SUBSEQUENT EVENT
On August 19, 1996, the Company acquired Logical Design Group, Inc. ("LDG"), a
Raleigh , North Carolina based designer and manufacturer of Intel-based VME
central processing unit boards. The acquisition qualifies as a pooling of
interests for accounting purposes and will constitute a tax-free reorganization
for federal income tax purposes. Under the terms of the agreement, LDG
shareholders exchanged all outstanding shares of LDG stock for 200,000 shares of
the Company's stock.
The financial position and results of operations of the Company and LDG will be
combined in fiscal 1997 on a prospective basis. LDG's historical results do not
have a material affect on combined results of operations.
NEW ACCOUNTING STANDARDS
In October 1995, the FASB issued Financial Accounting Standard No. 123 ("FAS
123"), "Accounting for Stock-Based Compensation". Under the provisions of FAS
123, companies may elect to account for stock-based compensation plans using a
fair-value-based method or may continue measuring compensation expense for those
plans using the intrinsic-value-based method. Companies electing to continue
using the intrinsic-value-based method must provide pro forma disclosures of net
income and earnings per share as if the fair-value-based method had been
applied. Management intends to continue to account for stock-based compensation
using the intrinsic value based method and, as such, FAS 123 will not have an
impact on the Company's results of operations or financial position. FAS 123
becomes effective in fiscal year 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<PAGE>
KPMG Peat Marwick LLP
6565 Americas Parkway, NE-#700
Post Office Box 3939
Albuquerque, NM 87190
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
SBS Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of SBS
Technologies, Inc. and subsidiaries as of June 30, 1996 and 1995, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the years in the three-year period ended June 30,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SBS Technologies,
Inc. and subsidiaries as of June 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1996 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Albuquerque, New Mexico
July 30, 1996
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30
-------
ASSETS 1996 1995
------ ---- -----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,130,030 883,804
Receivables, net (notes 4, 5 and 6) 6,421,224 7,151,563
Inventories (notes 5 and 6) 5,160,962 3,903,957
Deferred income taxes (note 7) 317,100 360,000
Prepaid expenses 303,846 359,083
Other current assets 104,249 175,649
----------- -----------
Total current assets 13,437,411 12,834,056
----------- -----------
Property and equipment, at cost (notes 5 and 6) 2,389,289 1,728,764
Less accumulated depreciation 1,041,719 784,673
----------- -----------
Net property and equipment 1,347,570 944,091
----------- -----------
Intangible assets, net 5,571,135 6,076,894
Deferred income taxes (note 7) 55,900 -
Other assets 31,656 49,881
----------- -----------
Total assets $ 20,443,672 19,904,922
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------
Current liabilities:
Current portion of long-term debt (note 6) $ 1,458,976 1,751,392
Notes payable to bank (note 5) - 2,959,920
Accounts payable 1,243,748 1,878,797
Accrued representative commissions 353,278 325,468
Accrued salaries 1,077,121 514,518
Accrued compensated absences 340,342 282,072
Accrued software license fees 33,000 313,000
Income taxes (note 7) 223,381 350,913
Other current liabilities 425,033 353,877
Reserve for discontinued operations (note 3) 49,553 784,068
----------- -----------
Total current liabilities 5,204,432 9,514,025
Long-term liabilities:
Long-term debt, excluding current installments (note 6) 5,188,320 5,341,649
----------- -----------
Total long-term liabilities 5,188,320 5,341,649
----------- -----------
Total liabilities 10,392,752 14,855,674
----------- -----------
Stockholders' equity:
Common stock, no par value; 30,000,000 shares authorized,
3,178,133 and 2,893,654 issued and outstanding
at June 30, 1996 and 1995, respectively 4,690,786 3,375,021
Common stock warrants (note 2) 180,000 75,000
Retained earnings 5,180,134 1,599,227
----------- -----------
Total stockholders' equity 10,050,920 5,049,248
----------- -----------
Total liabilities and stockholders' equity $ 20,443,672 19,904,922
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30
------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Sales $31,331,793 16,217,648 10,196,568
Cost of sales 14,510,106 6,756,560 4,881,851
------------- ----------- -----------
Gross profit 16,821,687 9,461,088 5,314,717
Selling, general and administrative expense 6,292,954 3,891,408 2,221,431
Research and development expense 2,846,300 1,686,590 1,186,817
Amortization of intangible assets 884,438 493,409 383,085
------------- ----------- -----------
Operating income from
continuing operations 6,797,995 3,389,681 1,523,384
------------- ----------- -----------
Interest income 9,210 3,315 1,761
Interest expense (839,028) (191,120) (16,395)
------------- ----------- -----------
(829,818) (187,805) (14,634)
------------- ----------- -----------
Income from continuing operations before
income taxes 5,968,177 3,201,876 1,508,750
Income taxes (note 7) 2,387,270 1,357,000 638,000
------------- ----------- -----------
Income from continuing operations 3,580,907 1,844,876 870,750
------------- ----------- -----------
Discontinued operations (net of tax benefits (expense)
of $1,160,000 and ($627,000) for 1995 and
1994, respectively) - (1,781,235) 855,555
Loss on disposal of discontinued operations (net of
tax benefits of $896,000) - (1,354,000) -
------------- ----------- -----------
Income (loss) from discontinued operations - (3,135,235) 855,555
------------- ----------- -----------
Net income (loss) $ 3,580,907 (1,290,359) 1,726,305
------------- ----------- -----------
------------- ----------- -----------
Income (loss) per common and
common equivalent share:
Continuing operations $ 0.97 0.65 0.30
Discontinued operations - (1.10) 0.29
----- ----- -----
Net income (loss) per common and
common equivalent share $ 0.97 (0.45) 0.59
---- ------ -----
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Total
stock Common stock-
-------------- stock Retained holders'
Shares Amount warrants earnings equity
------ ------- -------- --------- ------
<S> <C> <C> <C> <C> <C>
Balances at June 30, 1993 2,964,957 $ 3,683,074 $ - $ 1,163,281 $ 4,846,355
Common stock repurchased (154,531) (707,323) - - (707,323)
Net income - - - 1,726,305 1,726,305
------------ ----------- --------- ---------- -----------
Balances at June 30, 1994 2,810,426 2,975,751 - 2,889,586 5,865,337
Exercise of stock options 8,228 18,020 - - 18,020
Common stock issued under
employee stock bonus plan 75,000 381,250 - - 381,250
Warrants issued for business
acquisition (note 2) - - 75,000 - 75,000
Net loss - - - (1,290,359) (1,290,359)
------------ ----------- --------- ---------- -----------
Balance at June 30, 1995 2,893,654 3,375,021 75,000 1,599,227 5,049,248
Exercise of stock options 257,618 1,295,765 - - 1,295,765
Warrants issued for business
acquisition (note 2) - - 125,000 - 125,000
Exercise of warrants 26,861 20,000 (20,000) - -
Net income - - - 3,580,907 3,580,907
------------ ----------- --------- ---------- -----------
Balance at June 30, 1996 3,178,133 $ 4,690,786 $180,000 $5,180,134 $10,050,920
------------ ----------- --------- ---------- -----------
------------ ----------- --------- ---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30
-------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 3,580,907 (1,290,359) 1,726,305
---------- ---------- ----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 316,494 384,057 340,344
Amortization of intangible assets 884,438 536,328 459,467
Bad debt expense 56,933 - -
Loss on disposition of assets 44,218 - -
Loss from sale of discontinued operations - 2,250,000 -
Stock issued under employee stock bonus plan - 399,270 -
Changes in assets and liabilities:
Receivables 673,406 3,314,458 (1,459,380)
Inventories (1,192,938) (1,101,607) (539,916)
Deferred income taxes (13,000) (360,000) -
Prepaids and other assets 144,862 (476,828) (54,780)
Accounts payable (635,049) 1,172,798 (809,055)
Accrued representative commissions 27,810 218,669 54,770
Accrued salaries 562,603 277,433 372,972
Accrued compensated absences 58,270 (155,833) 85,055
Accrued software license fees (280,000) 21,000 41,000
Income taxes (127,532) (1,500,209) 615,000
Other current liabilities (663,359) (2,580,768) (120,213)
---------- ---------- ----------
Net adjustments (142,844) 2,398,768 (1,014,736)
---------- ---------- ----------
Net cash provided by operating activities 3,438,063 1,108,409 711,569
---------- ---------- ----------
</TABLE>
(continued)
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30
-------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flow from investing activities:
Business acquisition (note 2) (317,746) (5,196,815) (95,000)
Refund of down payment on contracts - - 500,000
Acquisition of property and equipment (764,191) (426,769) (854,671)
Cash received from sale of discontinued
operations (note 3) - 400,300 -
----------- ----------- ----------
Net cash used by investing activities (1,081,937) (5,223,284) (449,671)
----------- ----------- ----------
Cash flows from financing activities:
Proceeds from notes payable to bank 4,095,000 6,950,437 13,501,622
Payments on notes payable to bank (4,717,383) (7,690,517) (12,913,622)
Payments on liability to stockholder (100,000) (116,666) (204,166)
Proceeds from long-term borrowings - 7,000,000 -
Payments on long-term borrowings (3,232,390) (1,227,901) (55,442)
Net proceeds from refinancing long-term borrowings 549,108 - -
Proceeds from exercise of stock options 1,295,765 - -
Repurchase of common stock - - (707,323)
----------- ----------- ----------
Net cash provided (used) by financing activities (2,109,900) 4,915,353 (378,931)
----------- ----------- ----------
Net increase (decrease) in cash and cash equivalents 246,226 800,478 (117,033)
Cash and cash equivalents at beginning of period 883,804 83,326 200,359
----------- ----------- ----------
Cash and cash equivalents at end of period $ 1,130,030 883,804 83,326
----------- ----------- ----------
----------- ----------- ----------
Supplemental disclosure of cash flow information:
Interest paid $ (875,736) (497,002) (163,953)
Income taxes paid $ (2,431,749) (700,000) (700,000)
Noncash financing and investing activities:
Acquisition of GreenSpring Computers, Inc.
(note 2):
Common stock warrants issued $ 125,000 75,000 -
Long-term debt issued - 1,000,000 -
----------- ----------- ----------
----------- ----------- ----------
$ 125,000 1,075,000 -
----------- ----------- ----------
----------- ----------- ----------
Assets acquired through capital leases $ - - 145,238
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) GENERAL
The consolidated financial statements include the accounts of SBS
Technologies, Inc. and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
SBS Technologies, Inc. and subsidiaries (the Company) is an embedded
computer products supplier with operations in New Mexico and
California. The Company specializes in the design and manufacture of
computer interface products and industrial circuit boards.
(b) SALES RECOGNITION
Sales are recognized when goods are delivered to the customer.
(c) CASH AND CASH EQUIVALENTS
Temporary investments with original maturities of ninety days or less
are classified as cash and cash equivalents.
(d) INVENTORIES
Inventories are valued at average cost which does not exceed market.
June 30
-------------------
1996 1995
---- ----
Raw materials $ 2,254,788 1,724,307
Work in process 1,546,800 757,682
Finished goods 1,359,374 1,421,968
---------- ----------
$ 5,160,962 3,903,957
---------- ----------
---------- ----------
(e) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
June 30
-------------------
1996 1995
---- ----
Computers $ 1,194,888 836,593
Software 411,839 226,659
Furniture and equipment 782,562 665,512
---------- ----------
$ 2,389,289 1,728,764
---------- ----------
---------- ----------
Depreciation of property and equipment is provided over the estimated
useful lives (three to seven years) of the respective assets using
straight-line and accelerated methods.
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(f) INTANGIBLE ASSETS
Intangible assets are stated at cost and consisted of the following:
June 30
-------------------
1996 1995
---- ----
Noncompete covenants $ 1,540,000 1,540,000
Goodwill 6,551,671 6,172,992
---------- ----------
8,091,671 7,712,992
Less accumulated amortization (2,520,536) (1,636,098)
---------- ----------
$ 5,571,135 6,076,894
---------- ----------
---------- ----------
Noncompete covenants are amortized over the life of the covenants
using the straight-line method. Goodwill is amortized over the
estimated useful lives (three to ten years) of the respective assets
using the straight-line method. The Company assesses the
recoverability of goodwill by determining whether the amortization of
the goodwill balance over its remaining life can be recovered through
projected undiscounted future results. Impairment would be recognized
in operating results if a permanent diminution in value were to occur.
(g) INCOME TAXES
The Company accounts for income taxes under the asset and liability
method. Deferred income taxes are recognized for the tax consequences
of differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities by applying enacted
statutory tax rates applicable to future years. The affect on
deferred taxes of a change in tax rates is recognized in income in the
period that includes the change.
(h) EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share are based on the
weighted average shares of common stock and, if dilutive, common
equivalent shares (options and warrants) outstanding during the
period.
The numbers of shares used in the earnings per share computations are
as follows:
<TABLE>
<CAPTION>
Year ended June 30
------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Weighted average shares of common
stock outstanding during the year 3,017,575 2,810,426 2,874,058
Common equivalent shares - assumed
exercise of options and warrants 1,377,923 48,514 74,110
Shares assumed to be repurchased with
proceeds from exercise subject to 20% of
average shares outstanding maximum (603,515) - -
---------- ---------- ----------
Total common and common
equivalent shares 3,791,983 2,858,940 2,948,168
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(i) FINANCIAL INSTRUMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107, DISCLOSURES ABOUT
FAIR VALUES OF FINANCIAL INSTRUMENTS, requires the fair value of
financial instruments be disclosed. The Company's financial
instruments are accounts receivable, accounts payable, and long-term
variable rate debt. The carrying amounts of accounts receivable,
accounts payable, and long-term variable rate debt, because of their
nature, approximate fair value.
(j) RECLASSIFICATIONS
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform with the 1996 presentation.
(k) 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.
(l) NEW ACCOUNTING STANDARDS
In October 1995, the FASB issued Financial Accounting Standard No. 123
("FAS 123"), "Accounting for Stock-Based Compensation". Under the
provisions of FAS 123, companies may elect to account for stock-based
compensation plans using a fair-value-based method or may continue
measuring compensation expense for those plans using the intrinsic-
value-based method. Companies electing to continue using the
intrinsic-value-based method must provide pro forma disclosures of net
income and earnings per share as if the fair-value-based method had
been applied. Management intends to continue to account for stock-
based compensation using the intrinsic-value-based method and, as
such, FAS 123 will not have an impact on the company's results of
operations or financial position. FAS 123 becomes effective in fiscal
year 1997.
(2) BUSINESS ACQUISITIONS
On January 10, 1996, the Company's wholly owned subsidiary, GreenSpring
Computers, Inc., completed an asset purchase of the IndustryPack-Registered
Trademark--compatible product line from Wavetron Microsystems, Inc. The
purchase price, including capitalizable expenses, was $236,626. In
conjunction with the acquisition, goodwill of $172,559 was recorded and is
being amortized over five years. The reported net income and net income
per common and common equivalent shares for the reported periods would not
have been materially different from that reported had the acquisition taken
place at the beginning of the respective fiscal year.
On April 28, 1995, the Company acquired GreenSpring Computers, Inc.
(GreenSpring), a corporation based in California, for $7,450,000.
GreenSpring is engaged in the design, development, marketing and
manufacturing of industrial circuit boards and computers. The acquisition
was accounted for using the purchase method of accounting, and goodwill is
being amortized over 10 years.
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Assets acquired and liabilities assumed in the acquisition are as follows:
Cash and equivalents $ 1,053,185
Accounts receivable 1,725,641
Inventory 1,216,904
Other assets 39,908
Property and equipment 129,695
Goodwill and other intangible assets 5,752,440
Accounts payable (2,467,773)
---------
$ 7,450,000
---------
---------
The purchase price was paid as follows:
Notes payable issued $ 1,000,000
Warrants issued 200,000
Cash 6,250,000
---------
$ 7,450,000
---------
---------
Warrants to purchase 400,000 shares of common stock were issued to the
former shareholders and option holders of GreenSpring, of which 150,000
were exercisable immediately upon closing and the remaining 250,000
warrants vested during fiscal year 1996. At June 30, 1996, 40,000 warrants
were exercised under the net issuance method with the balance exercisable
ratably over the next two years.
Net income and net income per common and common equivalent share for the
year ended June 30, 1994, would have been approximately $1,655,000 and
$0.56, respectively, had the acquisition taken place on July 1, 1993. Had
the acquisition taken place on July 1, 1994, the reported net loss and net
loss per common and common equivalent share for the year ended June 30,
1995 would have been decreased by approximately $804,000 and $0.28,
respectively.
(3) SIGNIFICANT CUSTOMERS
Sales to significant customers as a percentage of total sales are as
follows:
Year ended June 30
------------------
Customers 1996 1995 1994
--------- ---- ---- ----
A - - 14
B - - 20
--- --- --
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sales to significant customers in 1994 were related to the simulation
division which was sold during 1995. All of the Company's operations are
conducted in the United States. International sales are denominated in
U.S. dollars. During the years ended June 30, 1996, 1995 and 1994, export
sales from continuing operations, all of which were to unaffiliated
customers, were approximately $5.1 million, $1.6 million and $1.2 million
respectively. Export sales from discontinued operations in 1995 and 1994
were $2.4 million and $6.8 million, respectively. Export sales from
continuing operations were made primarily in the following foreign markets:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Sales % Sales % Sales %
Foreign Market (000's) (000's) (000's)
-------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
United Kingdom $ 1,000 19.6
Germany 800 15.7
Korea 500 9.8
France 400 7.8 600 37.5
Japan 400 7.8
Canada 600 11.8 600 37.5 800 66.7
Belgium 300 5.9
All Others 1,100 21.6 400 25.0 400 33.3
------- ----- ------ ----- ------ -----
Total $ 5,100 100.0 1,600 100.0 1,200 100.0
Sales from
continuing operations $31,300 16.3 16,200 9.9 10,200 11.8
------- ----- ------ ----- ------ -----
------- ----- ------ ----- ------ -----
</TABLE>
(4) RECEIVABLES
Receivables, net consisted of the following:
<TABLE>
<CAPTION>
June 30
--------------------
1996 1995
---- ----
<S> <C> <C>
Accounts receivable $ 5,527,620 3,276,762
Contract receivables:
Amounts billed 721,803 2,216,673
Recoverable costs and accrued profit
on progress completed - not billed 242,038 1,665,799
---------- ----------
963,841 3,882,472
---------- ----------
6,491,461 7,159,234
---------- ----------
Less: allowance for doubtful accounts (70,237) (7,671)
---------- ----------
$ 6,421,224 7,151,563
---------- ----------
---------- ----------
</TABLE>
Recoverable costs and accrued profit not billed are comprised
principally of amounts of revenue recognized on contracts for which
billings had not been presented to the contract owners since the
amounts were not billable at the balance sheet date, because contract
specified milestones had not yet been reached or because progress
billings are restricted by the contract to a percentage of costs
incurred.
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(5) FINANCING
The Company has an available bank line of credit of $2,500,000, which
matures October 1997. Interest is payable monthly at LIBOR plus 2.25
percent or the bank's prime lending rate. The bank's prime lending
rate at June 30, 1996 was 8.25 percent. During the year ended June
30, 1996 the Company refinanced through long-term borrowings
$2,337,537 previously outstanding on the line of credit. The Company
had no amounts drawn on this line of credit at June 30, 1996. The
line of credit provides for security interests in the Company's
receivables, inventories and equipment. Management anticipates that
the line of credit will be renewed at maturity in the normal course of
business.
(6) LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
June 30
--------------------------
1996 1995
---- ----
<S> <C> <C>
Note payable to bank, $5,000,000 at LIBOR plus
2.5% (8% at June 30, 1996), $1,525,000 at prime
plus .25% (8.5% at June 30, 1996), secured by
receivables, inventories and equipment,
due in monthly installments of $112,500 $ 6,525,000 -
Note payable to bank at prime plus 1.5% (10.5%
at June 30, 1995), secured by receivables,
inventories and equipment, due in monthly
installments of $116,667 - 5,819,469
16% notes payable to former shareholders and
option holders of GreenSpring, Computers, Inc.
common stock, secured by receivables but
subordinate to the above described note,
due in quarterly installments commencing
when the principal balance of the aforementioned
note is less than $3,000,000 - 1,000,000
Note payable, non-interest-bearing,
payable in monthly installments through
August 1997 113,316 213,316
8.24% note due in monthly installments of $2,215
including interest through August 1996 4,385 31,470
8.14% note due in monthly installments of
$2,321 including interest through
August 1996 4,595 28,786
--------- ---------
6,647,296 7,093,041
Less current installments (1,458,976) (1,751,392)
--------- ---------
$ 5,188,320 5,341,649
--------- ---------
--------- ---------
</TABLE>
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal maturities of long-term debt as of June 30, 1996 are as follows:
1997 $ 1,458,976
1998 1,363,320
1999 3,825,000
-----------
$ 6,647,296
-----------
-----------
(7) INCOME TAXES
Income tax expense (benefit) is comprised of the following:
<TABLE>
<CAPTION>
Year ended June 30
--------------------------------
1996 1995 1994
---------- --------- -----------
<S> <C> <C> <C>
Current:
U.S. Federal $ 1,916,770 1,211,000 716,000
State 483,500 352,000 208,000
Deferred:
U.S. Federal (11,000) (145,000) (209,000)
State (2,000) (61,000) (77,000)
---------- --------- -----------
Income tax before discontinued operations 2,387,270 1,357,000 638,000
Income tax expense (benefit) from
Discontinued operations - (1,160,000) 627,000
Loss on disposal - (896,000) -
---------- --------- -----------
Total income tax expense $ 2,387,270 (699,000) 1,265,000
---------- --------- -----------
---------- --------- -----------
</TABLE>
Income tax expense was provided for at an effective rate of 40.0, 42.4
and 42.2 percent in 1996, 1995 and 1994, respectively. The actual tax
expense differs from the "expected" tax expense (computed by applying
the U.S. Federal corporate tax rate of 34 percent to income before
income taxes) as follows:
<TABLE>
<CAPTION>
Year ended June 30
-----------------------------------
1996 1995 1994
---------- --------- -----------
<S> <C> <C> <C>
Computed "expected" tax expense $ 2,029,180 1,089,000 513,000
State income tax, net of federal income
tax benefit 319,112 212,000 65,000
Goodwill amortization 21,508 66,000 60,000
Other 17,470 (10,000) -
---------- --------- -----------
$ 2,387,270 1,357,000 638,000
---------- --------- -----------
---------- --------- -----------
</TABLE>
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The significant components of deferred income tax assets
(liabilities) are as follows:
Year ended June 30
1996 1995
----- ----
Vacation and severance accruals $ 136,136 176,274
Reserve for discontinued operations - 169,435
Inventory capitalization 198,792 -
Other 35,072 14,291
----------- ----------
$ 370,000 360,000
----------- ----------
----------- ----------
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based on the
Company's historical taxable transactions, the timing of the reversal
of existing temporary differences, and the evaluation of tax planning
strategies, management believes it is more likely than not that the
Company's future taxable income will be sufficient to realize the
benefit of the deferred tax assets existing at June 30, 1996.
Accordingly, management has no allowance for deferred tax assets at
June 30, 1996 or 1995.
(8) LEASES
The Company leases its main facilities in Albuquerque, New Mexico,
Carlsbad, California and Menlo Park, California under noncancelable
operating leases which expire at various dates through 2000. The
Company also leases various items of equipment under noncancelable
operating leases which expire at various dates through the year 2001.
<TABLE>
<CAPTION>
Buildings Equipment
Year ending minimum minimum
June 30 lease payments lease payments Total
------- -------------- -------------- ------
<S> <C> <C> <C>
1997 $ 542,831 45,710 588,541
1998 450,633 43,179 493,812
1999 443,932 43,179 487,111
2000 436,599 43,179 479,778
2001 - 13,929 13,929
--------- -------- -----------
$ 1,873,995 189,176 2,063,171
--------- -------- -----------
--------- -------- -----------
</TABLE>
Total rental expense for operating leases for the years ended June 30,
1996, 1995, 1994 was $521,885, $511,150 and $569,188, respectively.
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(9) STOCK OPTION PLANS
(a) 1991 KEY EMPLOYEE STOCK OPTION PLAN
The Company has a 1991 Key Employee Stock Option Plan (Key
Employee Plan) whereby 42,908 shares of its common stock are
reserved for discretionary issuance by the Board to certain key
employees to encourage them to continue to promote the growth of
the Company.
The Key Employee Plan is not intended to be tax-qualified under
the Internal Revenue Code. Options granted under the Key
Employee Plan must (i) be accompanied by an agreement signed by
each grantee setting forth the terms of the option; (ii) may not
equal more than $100,000 aggregate purchase price; (iii) may be
transferable by grantees only in accordance with applicable
securities laws; and (iv) have a price per share that will be
equal to fair market value at the time of the decision to grant
the option as determined by the Board of Directors.
(b) 1992, 1993, 1995 AND 1996 INCENTIVE STOCK OPTION PLANS
The Company has 1992, 1993, 1995, and 1996 Incentive Stock Option
Plans (Plans) whereby a total of 1,100,000 shares of its common
stock are reserved for discretionary grant of options by the
Board to officers and employees who are not directors. The Plans
all terminate ten years after inception, from 2001 to 2005.
The options are intended to qualify as "incentive stock options"
within the meaning of Section 422A of the Internal Revenue Code
(the Code). The option plan generally permits options to be
granted (i) only to employees or officers and not to directors as
such; (ii) for a period of up to ten years; and (iii) at prices
not less than fair market value at the date of grant. Under the
Code, holders of more than 10 percent of the Company's stock
cannot be granted options with a duration of more than five years
or exercisable at a price less than 110 percent of the fair
market value on the date of grant. Options granted under the
plan may be exercised as provided by the administering committee
or Board of Directors of the Company. All options granted prior
to the Company's initial public offering are exercisable at $4.00
per share, the presumed market value at that time. All other
options are exercisable at the quoted market value of the
Company's stock in effect on the respective dates of the grants.
(c) 1993 DIRECTOR AND OFFICER STOCK OPTION PLAN
The 1993 Director and Officer Stock Option Plan permits options
to be granted to all Directors of the Company who are not
employees and all Executive Officers of the Company. Directors
who are not employees of the Company receive automatic grants on
the anniversary date of their service as a director of the
Company. Executive Officers receive grants subject to the
discretion of the Board.
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(d) 1996 EMPLOYEE STOCK PURCHASE PLAN
The 1996 Employee Stock Purchase Plan was adopted by the Board of
Directors on January 21, 1996 but is subject to shareholder
approval at the November 1996 annual meeting. Those eligible to
participate in the plan are full-time employees of the Company
who are not participants in any Incentive Stock Option Plans
provided by the Company. The plan provides for the grant of
options to eligible employees on January 21, 1996, 1997 and 1998.
Individual grants are issued for a percentage of the employee's
annual base salary, (as determined each year by the Board of
Directors, up to 10%), divided by the fair market value of one
share of the Company's stock on the date of grant. Options are
eligible to be exercised beginning 18 months after the date of
grant for a period of nine months at which time they will expire.
Information regarding the Company's stock option plans is
summarized below:
<TABLE>
<CAPTION>
1991 ALL 1993 1996
NSOP ISOP's D & O ESPP
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPTIONS OUTSTANDING - 06/30/93 26,512 318,533 20,000 -
Granted - 520,000 10,000 -
Exercised - - - -
Canceled - 75,725 - -
--------------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING - 06/30/94 26,512 762,808 30,000 -
Granted - 140,000 10,000 -
Exercised 8,228 - - -
Canceled - 236,667 - -
--------------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING - 06/30/95 18,284 666,141 40,000 -
Granted - 360,000 118,500 42,894
Exercised 18,284 234,334 5,000 -
Canceled - 60,000 - 4,889
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING - 06/30/96 - 731,807 153,500 38,005
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
OPTIONS AVAILABLE TO GRANT - 06/30/96 - 133,859 157,833 261,995
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
AVERAGE OPTION PRICE PER SHARE:
at June 30, 1994 2.190 4.600 5.375 -
at June 30, 1995 2.190 5.102 5.438 -
at June 30, 1996 - 7.047 5.773 7.750
OPTIONS EXERCISABLE:
at June 30, 1994 26,512 297,546 - -
at June 30, 1995 18,284 347,807 - -
at June 30, 1996 - 471,807 115,000 -
AVERAGE PRICE OF OPTIONS EXERCISED:
at June 30, 1995 2.190 - - -
at June 30, 1996 2.190 4.620 5.500 -
</TABLE>
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(10) RETIREMENT PLAN
The Company maintains a retirement plan under Section 401(k) of the
Internal Revenue Code for all employees of the Company. The plan
provides for employees to selectively defer a percentage of their
wages, which the Company matches at a predetermined rate not to exceed
4 percent of the employee's wages. The plan also provides for
additional contributions at the discretion of the Board of Directors.
Total Company contributions to the plan during the years ended
June 30, 1996, 1995 and 1994 were $185,387, $251,493 and $273,373,
respectively.
(11) INITIAL PUBLIC OFFERING
In connection with the 1992 initial public offering, warrants to
purchase 100,000 common shares at $4.80 per share were issued to the
underwriter. The warrants are exercisable from January 9, 1993
through January 8, 1997.
(12) DISCONTINUED OPERATIONS
On April 26, 1995, the company sold its flight simulation business for
$400,300. Included in the sale were net assets of approximately
$1,225,000. The purchaser has agreed to complete simulation contracts
in progress at the time of the sale on a time and material and fixed
price basis. The Company is responsible for completion of these
contracts, until novation of the contracts by the customer, to the
purchaser of the simulation operations. As of June 30, 1996, the
majority of these contracts have been substantially completed.
The disposition of the flight simulation business has been accounted
for as a discontinued operation and prior years consolidated
statements of operations have been restated accordingly. Revenue of
the discontinued operations were approximately $8,700,000 and
$18,560,00 in 1995 and 1994, respectively.
(13) CONTINGENCIES
The New Mexico Department of Taxation and Revenue is currently
auditing the Company's compliance with applicable New Mexico gross
receipts tax laws and regulations. Certain compliance issues have
been identified during the audit which may result in an assessment of
additional tax, penalties and interest. The Company intends to
contest any proposed adjustments vigorously and expects that the
ultimate resolution of this matter will not have a material adverse
effect on the Company's consolidated financial position or results of
operations.
Direct and allocable indirect costs charged to government contracts
are subject to audit by the Company's customers or their principal
agent, the Defense Contract Audit Agency (DCAA). As of June 30, 1996,
as a result of past audits, no significant adjustments were required.
Disallowed costs, if any, resulting from future audits will be
recognized in the period of the disallowance. Management estimates
that any such disallowed cost would not be material to the
consolidated financial statements.
The Company has been named as a defendant in a lawsuit filed on June
19, 1996. The Company is vigorously defending the lawsuit and has
filed a counter suit. Management does not believe that the outcome of
the litigation will have a material affect on the Company's financial
condition or results of operations.
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(14) SUBSEQUENT EVENT
On August 19, 1996, the Company acquired Logical Design Group, Inc.
("LDG"), a Raleigh , North Carolina based designer and manufacturer of
Intel-based VME central processing unit boards. The acquisition
qualifies as a pooling of interests for accounting purposes and will
constitute a tax-free reorganization for federal income tax purposes.
Under the terms of the agreement, LDG shareholders exchanged all
outstanding shares of LDG stock for 200,000 shares of the Company's
stock.
The financial position and results of operations of the Company and
LDG will be combined in fiscal 1997 on a prospective basis. LDG's
historical results do not have a material affect on combined results
of operations.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Certain information required by Part III is incorporated by reference to the
Company's definitive proxy statement pursuant to Regulation 14A (the "Proxy
Statement") for its annual meeting to be held November 12, 1996.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT
The information required by this item is incorporated by reference to the
Company's Proxy Statement under the section entitled "Directors and Executive
Officers".
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
Company's Proxy Statement under the section entitled "Compensation of Executive
Officers".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the
corresponding section of the Company's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
Company's Proxy Statement under the section entitled "Directors and Executive
Officers".
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits. The Exhibits listed on the accompanying Index to Exhibits at the
end of this Report are filed as part of, or incorporated by reference into,
this Report.
(b) Financial Statement Schedules. The schedules are omitted inasmuch as the
required information is not present or not present in amounts sufficient to
require submission of the respective schedules, or the information is
included in the financial statements, including the notes thereto.
(c) Reports on Form 8-K during the fourth quarter.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SBS TECHNOLOGIES, INC.
By: /s/ Andrew C. Cruce
Andrew C. Cruce
Chairman of the Board and
Chief Executive Officer
Date: Sept. 23, 1996
<PAGE>
SBS Technologies, Inc.
Annual Report on Form 10-K
Fiscal Year Ended June 30, 1996
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description Page
- ------ -------------- ----
<C> <S> <C>
3.i(4) Articles of Incorporation, as amended on June 28, 1995 - -
3.ii(4) By-laws, as amended on May 8, 1995 - -
4.a(5) Article VI of the Articles of Incorporation, as amended, as included in the
Articles of Incorporation of SBS Technologies, Inc. - -
4.b(5) Articles I, II of the Bylaws of SBS Engineering, Inc., as amended - -
4.c(5) Form of certificate evidencing Common Stock - -
10.a Employment agreement between Registrant and
Dr. Andrew C. Cruce, dated October 1, 1993,
as amended Filed herewith electronically
10.b Employment agreement between Registrant and
Scott A. Alexander, dated October 1, 1993,
as amended Filed herewith electronically
10.d Employment agreement between Registrant and
Christopher J. Amenson, dated August 24, 1992,
as amended Filed herewith electronically
10.e(1) 1991 Key Employee Stock Option Plan - -
10.f(1) 1992 Incentive Stock Option Plan - -
10.g(1) Stock Bonus Plan - -
10.h(2) 1993 Incentive Stock Option Plan - -
10.i(2) 1993 Director and Officer Stock Option Plan - -
10.q(3) Asset Purchase Agreement dated April 26, 1995 between registrant
and Camber Corporation. - -
10.r(3) Purchase Agreement dated April 28, 1995 between Registrant and GreenSpring
Computers, Inc. et al - -
10.s(3) Credit Agreement dated April 28, 1995 with NationsBank of Texas, N.A. - -
10.t(3) Lease dated May 25, 1995 between Registrant and PARS Asset
Management Company - -
10.v 1996 Employee Stock Purchase Plan, adopted January 21, 1996,
subject to shareholder approval. Filed herewith electronically
10.w Amended and Restated Term Loan and Revolver
Credit Facility from NationsBank of Texas, N.A.
dated April 26, 1996. Filed herewith electronically
10.x Lease dated March 5, 1996, between Registrant and
Bohannon Trust Partnership II. Filed herewith electronically
10.y Pooling Agreement dated August 19, 1996 between
Registrant and Logical Design Group, Inc. et al Filed herewith electronically
10.z Management Incentive Plan Filed herewith electronically
11 Statement Re Computation of Per-Share Income Filed herewith electronically
22 Subsidiaries of the registrant Filed herewith electronically
25 Power of attorney Filed herewith electronically
27 Financial Data Schedules Filed herewith electronically
</TABLE>
<PAGE>
<TABLE>
<C> <S>
(1) Incorporated by reference to the exhibit filed with the Registrant's Registration
Statement on Form S-18 (No 33-43256-D), originally filed October 8, 1991, which
Registration Statement became effective January 9, 1992.
(2) Incorporated by reference to Exhibits "A" & "B" of the Registrant's Proxy Statement for
its annual meeting held November 10, 1992.
(3) Incorporated by reference to Exhibits 10.q, 10.r, 10.s and 10.t of the Registrant's Annual
Report on Form 10-K for the fiscal year ended June 30, 1995.
(4) Incorporated by reference to Exhibits 3.1 and 3.2 of the Registrant's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1995.
(5) Incorporated by reference to Exhibits 4.1, 4.2 and 4.3 of Registrant's Registration
Statement on Form S-3 originally filed on January 5, 1996 and Amendment No. 1 filed
on March 14, 1996.
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENT
SBS ENGINEERING, INC. ("Company") and ANDREW C. CRUCE ("Employee") agree:
1. EMPLOYMENT. Company employs Employee for the period beginning on the date
of this Employment Agreement and ending five years from its date or upon
discharge or resignation of Employee, if earlier (the "Employment Period").
During the Employment Period, Employee will serve in the capacities
determined by Company. Employee will devote sufficient time and energies
to the business of Company to accomplish the duties assigned, will perform
to the best of Employee's ability all duties assigned to Employee by
Company and will devote Employee's best efforts to advance the interests of
Company. Employee will have the power and authority determined by Company.
2. COMPENSATION. For all services performed by Employee for Company during
the Employment Period, Company will pay Employee the base annual salary of
$90,000. Employee will be entitled to participate in employee benefit
plans established by Company. Vacation in amounts designated by Company
will be taken at the times designated by Company. During that vacation,
Employee will receive Employee's usual compensation.
3. REIMBURSEMENT OF EXPENSES. Company recognizes that Employee, in performing
Employee's duties hereunder, may be required to spend sums of money in
connection with those duties for the benefit of Company. Employee may
present to Company an itemized voucher listing expenses paid by Employee in
the performance of Employee's duties on behalf of Company, and on
presentation of such itemized voucher Company will reimburse Employee for
all reasonable expenses itemized thereon, including, but not limited to,
travel, meals, lodging, entertainment, and promotion. Employee may receive
advances from Company for anticipated expenses. Employee agrees that the
amount by which an advance exceeds actual expenses ("Amount") will be
promptly refunded to Company upon determination by Company that it is due,
that the Amount may be deducted from any payments of any nature (including
without limitation salary) owed by Company to Employee, and that the Amount
will constitute a debt from Employee to Company, enforceable by Company in
all respects as if Employee had executed a promissory note or other
instrument acknowledging the debt, bearing interest at a rate of 10% per
year from the date repayment is due and payable in full on demand without
set-off or deduction.
4. SICK LEAVE AND DISABILITY. Employee will be entitled to sick leave for the
number of days determined by Company ("Sick Leave"). Employee will be
considered disabled during any period in excess of Sick Leave during which
Employee is unable to work because of illness or incapacity ("Disability
Period"). Employee will be entitled to receive Employee's full salary
during Sick Leave and will be deemed to be on leave, without pay, during
the Disability Period. If the Sick Leave plus Disability Period exceeds
the initial eligibility or waiting period between the time of disability
and the date disability benefits commence as provided in any disability
insurance policy provided by Company for the benefit of Employee, or, if
there is no such policy, 90 days, Employee will be considered to have
resigned as of the end of the waiting period or 90 days, as the case may
be, and will receive no further compensation. In no event will Employee be
entitled to payment or other compensation for unused Sick Leave or
Disability Period, unless required by law or otherwise provided in a policy
or employment manual adopted by the Board of Directors of Company.
5. RESTRICTIONS. Employee may not during the Employment Period, and for a
period of two years following the termination of the Employment Period,
anywhere in the United States, directly or indirectly, own, manage,
operate, invest in, control, be employed by, participate in, be a financial
EMPLOYMENT AGREEMENT - PAGE 1
<PAGE>
sponsor of, or be connected in any manner with, the ownership, management,
operation or control of any avionics simulation business operating in a
manner similar to that of Company, which competes with a business conducted
by Company at any time during the Employment Period or a business which
Employee knows, during the Employment Period, that Company intends to
conduct. This restriction applies, however, only if the Employee is an
officer, director, partner, management employee or other controlling person
of the business.
6. RESIGNATION AND DISCHARGE. Employee may resign by giving two weeks'
written notice to Company before resigning. Employee's death will
constitute a resignation. Company may discharge Employee for cause or
without cause upon two weeks' notice. If Employee is terminated without
cause, Employee will receive six months severance benefit, determined on
Employee's base salary at the time of discharge. If the Employment Period
is terminated by resignation or discharge without cause, Employee will be
paid Employee's salary on a pro rata basis through the effective date of
resignation or discharge ("Effective Date"), and if requested by Company,
Employee will continue to render Employee's services through the Effective
Date. If Employee refuses, upon Company's request, or fails, to render
services competently and in good faith to the Company's benefit through the
Effective Date, Company may deem the Effective Date to be the date of
refusal or failure, as the case may be. If during the Employment Period,
Employee violates any provision or restriction or fails to perform any
obligation contained in this Employment Agreement or in any Company policy
or Company employment manual or practice, or, unless otherwise provided by
Company policy or Company employment manual, (a) is reasonably believed by
Company (i) to have failed to comply with any employment or
nondiscrimination or similar law, regulation or policy, (ii) to abuse, as
determined by the Company, alcohol or to use drugs, (other than as
prescribed by Employee's physician), or (b) refuses to submit to testing
for alcohol or drugs, or (c) is reasonably believed by Company to have
committed or is charged with any felony or a misdemeanor (except minor
traffic violations and similar offenses), Company may immediately discharge
Employee without liability for salary after the date of the discharge and
without any other liability to Employee. In no event will Employee be
entitled, upon resignation or discharge with or without cause, to payment
for sick leave or similar benefits of any kind unless required by law or
otherwise provided in a policy or employment manual adopted by the Board of
Directors of Company.
7. CONFIDENTIAL INFORMATION. Employee acknowledges and recognizes that
Employee is, or will be, employed by Company in a confidential relationship
and may receive and have access to the confidential business information,
customer names, contracts and other customer data, business methods,
techniques and trade secrets of Company ("Confidential Information").
Employee may develop ideas, conceptions, inventions, processes, methods,
products and improvements; and Employee may receive disclosures of ideas,
conceptions, inventions, processes, methods, products and improvements made
by other employee of Company ("Company Inventions"). Employee may
participate with Company in improving and developing Confidential
Information and Company Inventions. Confidential information and Company
Inventions developed on behalf of Company are neither commonly known or
readily accessible to others and are used by Company in its business to
obtain a competitive advantage over Company's competitors who do not know
or use the Confidential Information or Company Inventions. Protection of
the Confidential Information and Company Inventions against unauthorized
disclosure and use is of critical importance to Company in maintaining its
competitive position. Employee agrees that Employee will assign to Company
Inventions developed on Company time and that Company is the owner of those
Company Inventions. Employee agrees that Employee will not, at any time,
during or after the Employment Period make any independent use of, or
disclose to any other person or organization, except as authorized by
Company in writing, any Confidential Information or Company Inventions.
Upon termination of the Employment Period for any reason, Employee shall
promptly deliver to Company
EMPLOYMENT AGREEMENT - PAGE 2
<PAGE>
all drawings, manuals, letters, notes, notebooks, reports, customer lists,
customer data, mailing lists, and all other materials and records of any
kind, and all copies thereof, that may be in the possession of, or under
the control of, Employee pertaining to Company's business including any
that contain any Confidential Information or Company Inventions.
8. PERSONNEL POLICIES. Company's personnel policies apply to all of Company's
employees, including Employee, and describe additional terms and conditions
of employment of Employee. Those terms and conditions, as they may be
revised from time to time by Company, are incorporated by reference into
this Employment Agreement. Company reserves the right to revise the
personnel policies from time to time, as Company deems necessary. If any
personnel policy provision conflicts with a provisions of this Employment
Agreement, the terms of this Employment Agreement shall govern.
9. ALCOHOL AND DRUG TESTING. Employee agrees to comply with and submit to any
Company program or policy for testing for alcohol abuse or use of drugs.
10. BINDING EFFECT. This Employment Agreement constitutes the entire
understanding of the parties, may be modified only in writing, is governed
by laws of New Mexico, and will bind and inure to the benefit of Employee
and Employee's personal representative and Company and Company's successors
and assigns.
DATED: 10/1/93
------------------------
COMPANY:
--------
SBS ENGINEERING, INC.
By: /s/ Christopher J. Amenson
----------------------------------
Christopher J. Amenson, President
EMPLOYEE:
---------
/s/ Andrew C. Cruce
------------------------------------
Andrew C. Cruce
EMPLOYMENT AGREEMENT - PAGE 3
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
OF
Andrew C. Cruce
Amendment to Employment Agreement between SBS Technologies, Inc. and Andrew C.
Cruce as per direction of the Board of Directors at a meeting held July 14,
1995. Paragraph 2. "Compensation" is amended, as of July 1, 1995, as follows:
2. COMPENSATION. For all services performed by Employee for Company during
the Employment Period, Company will pay Employee the base annual salary of
$176,000. Employee will be entitled to participate in employee benefit
plans established by Company. Vacation in amounts designated by Company
will be taken at the times designated by Company. During that vacation,
Employee will receive Employee's usual compensation.
July 14, 1995
<PAGE>
EMPLOYMENT AGREEMENT
SBS ENGINEERING, INC. ("Company") and SCOTT A. ALEXANDER ("Employee") agree:
1. EMPLOYMENT. Company employs Employee for the period beginning on the date
of this Employment Agreement and ending five years from its date or upon
discharge or resignation of Employee, if earlier (the "Employment Period").
During the Employment Period, Employee will serve in the capacities
determined by Company. Employee will devote sufficient time and energies
to the business of Company to accomplish the duties assigned, will perform
to the best of Employee's ability all duties assigned to Employee by
Company and will devote Employee's best efforts to advance the interests of
Company. Employee will have the power and authority determined by Company.
2. COMPENSATION. For all services performed by Employee for Company during
the Employment Period, Company will pay Employee the base annual salary of
$85,000. Employee will be entitled to participate in employee benefit
plans established by Company. Vacation in amounts designated by Company
will be taken at the times designated by Company. During that vacation,
Employee will receive Employee's usual compensation.
3. REIMBURSEMENT OF EXPENSES. Company recognizes that Employee, in performing
Employee's duties hereunder, may be required to spend sums of money in
connection with those duties for the benefit of Company. Employee may
present to Company an itemized voucher listing expenses paid by Employee in
the performance of Employee's duties on behalf of Company, and on
presentation of such itemized voucher Company will reimburse Employee for
all reasonable expenses itemized thereon, including, but not limited to,
travel, meals, lodging, entertainment, and promotion. Employee may receive
advances from Company for anticipated expenses. Employee agrees that the
amount by which an advance exceeds actual expenses ("Amount") will be
promptly refunded to Company upon determination by Company that it is due,
that the Amount may be deducted from any payments of any nature (including
without limitation salary) owed by Company to Employee, and that the Amount
will constitute a debt from Employee to Company, enforceable by Company in
all respects as if Employee had executed a promissory note or other
instrument acknowledging the debt, bearing interest at a rate of 10% per
year from the date repayment is due and payable in full on demand without
set-off or deduction.
4. SICK LEAVE AND DISABILITY. Employee will be entitled to sick leave for the
number of days determined by Company ("Sick Leave"). Employee will be
considered disabled during any period in excess of Sick Leave during which
Employee is unable to work because of illness or incapacity ("Disability
Period"). Employee will be entitled to receive Employee's full salary
during Sick Leave and will be deemed to be on leave, without pay, during
the Disability Period. If the Sick Leave plus Disability Period exceeds
the initial eligibility or waiting period between the time of disability
and the date disability benefits commence as provided in any disability
insurance policy provided by Company for the benefit of Employee, or, if
there is no such policy, 90 days, Employee will be considered to have
resigned as of the end of the waiting period or 90 days, as the case may
be, and will receive no further compensation. In no event will Employee be
entitled to payment or other compensation for unused Sick Leave or
Disability Period, unless required by law or otherwise provided in a policy
or employment manual adopted by the Board of Directors of Company.
5. RESTRICTIONS. Employee may not during the Employment Period, and for a
period of two years following the termination of the Employment Period,
anywhere in the United States, directly or indirectly, own, manage,
operate, invest in, control, be employed by, participate in, be a financial
EMPLOYMENT AGREEMENT - PAGE 1
<PAGE>
sponsor of, or be connected in any manner with, the ownership, management,
operation or control of any avionics simulation business operating in a
manner similar to that of Company, which competes with a business conducted
by Company at any time during the Employment Period or a business which
Employee knows, during the Employment Period, that Company intends to
conduct. This restriction applies, however, only if the Employee is an
officer, director, partner, management employee or other controlling person
of the business.
6. RESIGNATION AND DISCHARGE. Employee may resign by giving two weeks'
written notice to Company before resigning. Employee's death will
constitute a resignation. Company may discharge Employee for cause or
without cause upon two weeks' notice. If Employee is terminated without
cause, Employee will receive six months severance benefit, determined on
Employee's base salary at the time of discharge. If the Employment Period
is terminated by resignation or discharge without cause, Employee will be
paid Employee's salary on a pro rata basis through the effective date of
resignation or discharge ("Effective Date"), and if requested by Company,
Employee will continue to render Employee's services through the Effective
Date. If Employee refuses, upon Company's request, or fails, to render
services competently and in good faith to the Company's benefit through the
Effective Date, Company may deem the Effective Date to be the date of
refusal or failure, as the case may be. If during the Employment Period,
Employee violates any provision or restriction or fails to perform any
obligation contained in this Employment Agreement or in any Company policy
or Company employment manual or practice, or, unless otherwise provided by
Company policy or Company employment manual, (a) is reasonably believed by
Company (i) to have failed to comply with any employment or
nondiscrimination or similar law, regulation or policy, (ii) to abuse, as
determined by the Company, alcohol or to use drugs, (other than as
prescribed by Employee's physician), or (b) refuses to submit to testing
for alcohol or drugs, or (c) is reasonably believed by Company to have
committed or is charged with any felony or a misdemeanor (except minor
traffic violations and similar offenses), Company may immediately discharge
Employee without liability for salary after the date of the discharge and
without any other liability to Employee. In no event will Employee be
entitled, upon resignation or discharge with or without cause, to payment
for sick leave or similar benefits of any kind unless required by law or
otherwise provided in a policy or employment manual adopted by the Board of
Directors of Company.
7. CONFIDENTIAL INFORMATION. Employee acknowledges and recognizes that
Employee is, or will be, employed by Company in a confidential relationship
and may receive and have access to the confidential business information,
customer names, contracts and other customer data, business methods,
techniques and trade secrets of Company ("Confidential Information").
Employee may develop ideas, conceptions, inventions, processes, methods,
products and improvements; and Employee may receive disclosures of ideas,
conceptions, inventions, processes, methods, products and improvements made
by other employee of Company ("Company Inventions"). Employee may
participate with Company in improving and developing Confidential
Information and Company Inventions. Confidential information and Company
Inventions developed on behalf of Company are neither commonly known or
readily accessible to others and are used by Company in its business to
obtain a competitive advantage over Company's competitors who do not know
or use the Confidential Information or Company Inventions. Protection of
the Confidential Information and Company Inventions against unauthorized
disclosure and use is of critical importance to Company in maintaining its
competitive position. Employee agrees that Employee will assign to Company
Inventions developed on Company time and that Company is the owner of those
Company Inventions. Employee agrees that Employee will not, at any time,
during or after the Employment Period make any independent use of, or
disclose to any other person or organization, except as authorized by
Company in writing, any Confidential Information or Company Inventions.
Upon termination of the Employment Period for any reason, Employee shall
promptly deliver to Company
EMPLOYMENT AGREEMENT - PAGE 2
<PAGE>
all drawings, manuals, letters, notes, notebooks, reports, customer lists,
customer data, mailing lists, and all other materials and records of any
kind, and all copies thereof, that may be in the possession of, or under
the control of, Employee pertaining to Company's business including any
that contain any Confidential Information or Company Inventions.
8. PERSONNEL POLICIES. Company's personnel policies apply to all of Company's
employees, including Employee, and describe additional terms and conditions
of employment of Employee. Those terms and conditions, as they may be
revised from time to time by Company, are incorporated by reference into
this Employment Agreement. Company reserves the right to revise the
personnel policies from time to time, as Company deems necessary. If any
personnel policy provision conflicts with a provisions of this Employment
Agreement, the terms of this Employment Agreement shall govern.
9. ALCOHOL AND DRUG TESTING. Employee agrees to comply with and submit to any
Company program or policy for testing for alcohol abuse or use of drugs.
10. BINDING EFFECT. This Employment Agreement constitutes the entire
understanding of the parties, may be modified only in writing, is governed
by laws of New Mexico, and will bind and inure to the benefit of Employee
and Employee's personal representative and Company and Company's successors
and assigns.
DATED: 10/1/93
------------------------
COMPANY:
--------
SBS ENGINEERING, INC.
By: /s/ Christopher J. Amenson
----------------------------------------
Christopher J. Amenson, President
EMPLOYEE:
---------
/s/ Scott A. Alexander
-------------------------------------------
Scott A. Alexander
EMPLOYMENT AGREEMENT - PAGE 3
<PAGE>
AMENDMENT TO EMPLOYMENT AGREEMENT
OF
Scott A. Alexander
Amendment to Employment Agreement between SBS Technologies, Inc. and Scott A.
Alexander as per direction of the Board of Directors at a meeting held July 14,
1995. Paragraph 2. "Compensation" is amended, as of July 6, 1996, as follows:
2. COMPENSATION. For all services performed by Employee for Company during
the Employment Period, Company will pay Employee the base annual salary of
$148,000.00. Employee will be entitled to participate in employee benefit
plans established by Company. Vacation in amounts designated by Company
will be taken at the times designated by Company. During that vacation,
Employee will receive Employee's usual compensation.
July 14, 1995
<PAGE>
EMPLOYMENT AGREEMENT
SBS ENGINEERING, INC. ("Company") and Chris Amenson ("Employee") agree:
1. EMPLOYMENT. Company employs Employee for the period beginning on the date
of this Employment Agreement, and ending five years from its date or upon
discharge or resignation of Employee, if earlier (the "Employment Period").
During the Employment Period, Employee will serve in the capacities
determined by Company. Employee will devote sufficient time and energies
to the business of Company to accomplish the duties assigned, will perform
to the best of Employee's ability all duties assigned to Employee by
Company and will devote Employee's best efforts to advance the interests of
Company. Employee will have the power and authority determined by Company.
2. COMPENSATION. For all services performed by Employee for Company during
the Employment Period, Company will pay Employee the salary set forth in
Schedule "A". Employee will be entitled to participate in employee benefit
plans established by Company. Vacation in amounts designated by Company
will be taken at the times designated by Company. During that vacation,
Employee will receive Employee's usual compensation.
3. REIMBURSEMENT OF EXPENSES. Company recognizes that Employee, in performing
Employee's duties hereunder, may be required to spend sums of money in
connection with those duties for the benefit of Company. Employee may
present to Company an itemized voucher listing expenses paid by Employee in
the
EMPLOYMENT AGREEMENT - PAGE 1
<PAGE>
performance of Employee's duties on behalf of Company, and on
presentation of such itemized voucher Company will reimburse Employee for
all reasonable expenses itemized thereon, including, but not limited to,
travel, meals, lodging, entertainment, and promotion. Employee may receive
advances from Company for anticipated expenses. Employee agrees that the
amount by which an advance exceeds actual expenses ("Amount") will be
promptly refunded to Company upon determination by Company that is due,
that the Amount may be deducted from any payments of any nature (including
without limitation salary) owed by Company to Employee, and that the Amount
will constitute a debt from Employee to Company, enforceable by Company in
all respects as if Employee had executed a promissory note or other
instrument acknowledging the debt, bearing interest at a rate of 10% per
year from the date repayment is due and payable in full on demand without
set-off or deduction.
4. SICK LEAVE AND DISABILITY. Employee will be entitled to sick leave for the
number of days determined by Company ("Sick Leave"). Employee will be
considered disabled during any period in excess of Sick Leave during which
Employee is unable to work because of illness or incapacity ("Disability
Period"). Employee will be entitled to receive Employee's full salary
during Sick Leave and will be deemed to be on leave, without pay, during
the Disability Period. If the Sick Leave plus Disability Period exceeds
the initial eligibility or waiting period between the time of disability
and the date disability benefits commence as provided
EMPLOYMENT AGREEMENT - PAGE 2
<PAGE>
in any disability insurance policy provided by Company for the benefit of
Employee, or, if there is no such policy, 90 days, Employee will be
considered to have resigned as of the end of the waiting period or 90 days,
as the case may be, and will receive no further compensation. In no event
will Employee be entitled to payment or other compensation for unused Sick
Leave or Disability Period, unless required by law or otherwise provided in
a policy or employment manual adopted by the Board of Directors of Company.
5. RESTRICTIONS. Employee may not during the Employment Period, and for a
period of two years following the termination of the Employment Period,
anywhere in the United States, directly or indirectly, own, manage,
operate, invest in, control, be employed by, participate in, be a financial
sponsor of, or be connected in any manner with, the ownership, management,
operation or control of any avionics simulation business operating in a
manner similar to that of Company, which competes with a business conducted
by Company at any time during the Employment Period or a business which
Employee knows, during the Employment Period, that Company intends to
conduct. This restriction applies, however, only if the Employee is an
officer, director, partner, management employee or other controlling person
of the business.
6. RESIGNATION AND DISCHARGE. Employee may resign by giving two weeks'
written notice to Company before resigning. Employee's death will
constitute a resignation. Company may discharge Employee for cause or
without cause upon two weeks' notice. If Employee is terminated without
cause, Employee will receive six
EMPLOYMENT AGREEMENT - PAGE 3
<PAGE>
months severance benefit, determined on Employee's base salary at the time
of discharge, payable in six equal monthly installments beginning the first
day of the month following Employee's termination. Employee will also
receive the benefits set forth on Schedule A during the time these
installment payments are made. If the Employment Period is terminated by
resignation or discharge without cause, Employee will be paid Employee's
salary on a pro rata basis through the effective date of resignation or
discharge ("Effective Date"), and if requested by Company, Employee will
continue to render Employee's services through the Effective Date. If
Employee refuses, upon Company's request, or fails, to render services
competently and in good faith to the Company's benefit through the
Effective Date, Company may deem the Effective Date to be the date of
refusal or failure, as the case may be. If during the Employment Period,
Employee violates any provision or restriction or fails to perform any
obligation contained in this Employment Agreement or in any Company policy
or Company employment manual or practice, or, unless otherwise provided by
Company policy or Company employment manual, (a) is reasonably believed by
Company (i) to have failed to comply with any employment or
nondiscrimination or similar law, regulation or policy, (ii) to abuse, as
determined by the Company, alcohol or to use drugs, (other than as
prescribed by Employee's physician), or (b) refuses to submit to testing
for alcohol or drugs, or (c) is reasonably believed by Company to have
committed or is charged with any felony or a misdemeanor (except minor
traffic violations
EMPLOYMENT AGREEMENT - PAGE 4
<PAGE>
and similar offenses), Company may immediately discharge Employee without
liability for salary after the date of the discharge and without any other
liability to Employee. Except as provided in this Employment Agreement, in
no event will Employee be entitled, upon resignation or discharge with or
without cause, to payment for sick leave or similar benefits of any kind
unless required by law or otherwise provided in a policy or employment
manual adopted by the Board of Directors of Company.
7. CONFIDENTIAL INFORMATION. Employee acknowledges and recognizes that
Employee is, or will be, employed by Company in a confidential relationship
and may receive and have access to the confidential business information,
customer names, contracts and other customer data, business methods,
techniques and trade secrets of Company ("Confidential Information").
Employee may develop ideas, conceptions, inventions, processes, methods,
products and improvements; and Employee may receive disclosures of ideas,
conceptions, inventions, processes, methods, products and improvements made
by other employees of Company ("Company Inventions"). Employee may
participate with Company in improving and developing Confidential
Information and Company Inventions. Confidential Information and Company
Inventions developed on behalf of Company are neither commonly known or
readily accessible to others and are used by Company in its business to
obtain a competitive advantage over Company's competitors who do not know
or use the Confidential Information or Company Inventions. Protection of
the Confidential Information and Company Inventions against
EMPLOYMENT AGREEMENT - PAGE 5
<PAGE>
unauthorized disclosure and use is of critical importance to Company in
maintaining its competitive position. Employee agrees that Employee will
assign to Company Inventions developed on Company time and that Company is
the owner of those Company Inventions. Employee agrees that Employee will
not, at any time, during or after the Employment Period make any
independent use of, ordisclose to any other person or organization, except
as authorized by Company in writing, any Confidential Information or
Company Inventions. Upon termination of the Employment Period for any
reason, Employee shall promptly deliver to Company all drawings, manuals,
letters, notes, notebooks, reports, customer lists, customer data, mailing
lists, and all other materials and records of any kind, and all copies
thereof, that may be in the possession of, or under the control of,
Employee pertaining to Company's business including any that contain any
Confidential Information or Company Inventions.
8. PERSONNEL POLICIES. Company's personnel policies apply to all of Company's
employees, including Employee, and describe additional terms and conditions
of employment of Employee. Those terms and conditions, as they may be
revised from time to time by Company, are incorporated by reference into
this Employment Agreement. Company reserves the right to revise the
personnel policies from time to time, as Company deems necessary. If any
personnel policy provision conflicts with a provision of this Employment
Agreement, the terms of this Employment Agreement shall govern.
EMPLOYMENT AGREEMENT - PAGE 6
<PAGE>
9. ALCOHOL AND DRUG TESTING. Employee agrees to comply with and submit to any
Company program or policy for testing for alcohol abuse or use of drugs.
10. BINDING EFFECT. This Employment Agreement constitutes the entire
understanding of the parties, may be modified only in writing, is governed
by laws of New Mexico, and will bind and inure to the benefit of Employee
and Employee's personal representative and Company and Company's successors
and assigns.
DATED: April 24, 1992
------------------------
COMPANY:
--------
SBS ENGINEERING, INC.
By: /s/ Andrew C. Cruce
----------------------------------------
Its President
-------------------------------
EMPLOYEE:
---------
/s/ Christopher J. Amenson
-------------------------------------------
EMPLOYMENT AGREEMENT - PAGE 7
<PAGE>
SCHEDULE "A"
TO EMPLOYMENT AGREEMENT BETWEEN
SBS ENGINEERING, INC. AND
CHRIS AMENSON
"EMPLOYEE"
Base Salary: $85,000.00
Position: Advisor until April 28, 1992.
Beginning April 28, 1992 and ending as determined by the
Board of Directors: President
Standard Employee Benefits:
Medical insurance
Dental insurance
Life insurance
Long and short-term disability insurance
Ten vacation days
Ten holidays per year
401K Plan
All as provided by the Company to employees generally, and subject to
modification from time to time by the Company.
Additional Benefits:
Incentive stock options for 33,3333 shares of Common Stock,
as provided in the attached agreement.
Moving expenses from Massachusetts to Albuquerque
EMPLOYMENT AGREEMENT - PAGE 8
<PAGE>
AMENDMENT TO SCHEDULE "A"
OF
EMPLOYMENT AGREEMENT
OF
Chris Amenson
Amendment to Schedule "A" of the Employment Agreement between SBS Technologies,
Inc. and Chris Amenson as per direction of the Board of Directors at a meeting
held July 14, 1995. Base Salary: is amended, as of July 1, 1995, as follows:
Base Salary: $156,000.00
July 14, 1995
<PAGE>
THIS PLAN HAS NOT BEEN APPROVED BY SHAREHOLDERS. THAT APPROVAL IS REQUIRED.
THE PLAN IS ALSO SUBJECT TO MODIFICATIONS AND CHANGES MADE BY THE BOARD OF
DIRECTORS IN ITS DISCRETION.
SBS TECHNOLOGIES, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
300,000 SHARES
I. PURPOSE
The purpose of the 1996 Employee Stock Purchase Plan ("Plan") of SBS
Technologies, Inc. ("SBS") and its subsidiaries (together, with SBS, the
"Company") is to attract, compensate and retain well-qualified employees by
providing to them an equity interest in the Company's success.
II. PLAN SHARES
SBS may issue and sell not more than 300,000 shares ("Plan Shares") of its
no par value common stock ("Common Stock") pursuant to the Plan. The Plan
Shares include authorized but unissued shares of Common Stock and shares of
Common Stock that have been subject to unexercised options under the Plan,
whether those options have terminated or expired by their terms, by
cancellation, or otherwise. The number of Plan Shares will be adjusted if the
number of outstanding shares of Common Stock of SBS is increased or reduced by
split-up, reclassification, stock dividend and the like.
III. ADMINISTRATION
The Plan shall be administered by a committee ("Committee") of the Board of
Directors of SBS consisting of two or more directors who are "disinterested
persons" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934 ("Exchange Act") or such other persons as may be permitted by that Rule, as
amended or superseded from time to time. The Committee shall have the power and
authority necessary or appropriate to carry out the provisions of the Plan,
including the interpretation and construction of the Plan and the option grants
made under the Plan, the adoption, amendment or rescission of such rules and
regulations as the Committee deems advisable, the amendment with respect to the
terms of future option grants under the Plan, the termination of further option
grants under the Plan, and to make all other determinations the Committee deems
necessary or advisable in administering the Plan. The determinations of the
Committee on these matters shall be conclusive and binding upon all persons in
interest.
<PAGE>
IV. ELIGIBILITY
Options under the Plan may be granted only to Eligible Employees. Eligible
Employees are full-time employees of the Company but shall not include an
employee: (i) who, if an option is granted to the employee under the Plan,
will, immediately after the option is granted own or be entitled to purchase
under such an option 5% or more of the total combined voting power or value of
all classes of stock of the Company, within the meaning of Section 423(b)(3) of
the Internal Revenue Code of 1986, as amended ("Code"), (ii) who, if an option
is granted, would have rights to purchase shares under all employee stock
purchase plans offered by the Company accruing at a rate exceeding $25,000 of
the fair market value of the Common Stock (determined at the time the option is
granted) for each calendar year in which the option is outstanding at any time,
(iii) whose customary employment is 20 hours or less per week, (iv) whose
customary employment is for not more than 5 months in any fiscal year, (v) who
is a highly compensated employee within the meaning of Code Section 414(g) as
amended or superseded from time to time and an executive officer of the Company
subject to Section 16 of the Securities Exchange Act.
V. OPTION GRANTS
Until such time as the Committee may in its sole discretion amend the terms
of the option grants or terminate further option grants under the Plan, all
eligible employees of the Company shall, on the twenty-first day of January,
1996, 1997 and 1998 ("Date of Grant"), be granted an option to purchase Plan
Shares on the following terms and conditions:
A. OPTION TERM.
The term of each option will be from the Date of Grant until 1700
hours, mountain time, on the date which is twenty-seven months from the Date of
Grant, when the option will expire ("Date of Expiration").
B. OPTION PRICE.
The purchase price per Plan Share ("Option Price") will be the fair
market value on the Date of Grant ("Date of Grant Price"). Fair market value
means (a) the closing price of the Common Stock on the NASDAQ National Market
System or, if the Common Stock is admitted to trading on an exchange, on that
exchange, or (b) if no such closing price is available, the value as determined
in good faith by the Board of Directors of SBS.
C. NUMBER OF OPTION SHARES.
The number of Plan Shares subject to each option shall, within the
limitations of eligibility, be the whole number equal to (i) up to 10% of each
eligible employee's annual base compensation (without regard to benefits,
bonuses or the like), the percentage to be determined by the Committee, divided
by (ii) the Date of Grant Price.
D. EXERCISE.
Each option may be exercised in whole or in part beginning eighteen
months from the Date of Grant, when the option will vest, until the Date of
Expiration by payment to the Company by cashier's check or money order of the
full amount of the exercise price of the Plan Shares being purchased.
<PAGE>
E. DELIVERY OF SHARES.
A stock certificate representing the Plan Shares purchased pursuant to
an exercised option, or if the Company has uncertificated shares, a written
notice complying with the New Mexico Business Corporation Act, will be delivered
by the Company to the purchaser as promptly as practicable after exercise of the
option.
F. TERMINATION OF EMPLOYMENT.
If an employee's employment with the Company is terminated for cause,
any option held by the employee, whether or not vested, will immediately
terminate. For purposes of this Plan, cause is defined to mean if the employee
refuses, upon the Company's request, or, fails, to render services competently
and in good faith to the Company's benefit while employed by the Company, or if
the employee violates any provision or restriction or fails to perform any
obligation contained in any employment agreement with the Company, or in any
Company policy or Company employment manual or practice, or unless otherwise
provided by Company policy or Company employment manual, (a) is reasonably
believed by Company (i) to have failed to comply with any employment or
nondiscrimination or similar law, regulation or policy, (ii) to abuse, as
determined by the Company, alcohol or to use drugs, (other than as prescribed by
employee's physician), or (b) refuses to submit to testing for alcohol or drugs,
or (c) is reasonably believed by Company to have committed or is charged with
any felony or a misdemeanor (except minor traffic violations and similar
offenses). If an employee is terminated for any reason other than for cause,
the employee's option will be exercisable in accordance with the terms of the
Plan, except that the option must be exercised within three months of the
employee's termination of employment and will expire at the end of that three-
month period to the extent not previously exercised.
VI. RIGHTS AS SHAREHOLDER
Until an option granted under the Plan has been exercised and the Plan
Shares acquired pursuant to that exercise have been issued (or a written notice
for uncertificated Plan Shares has been sent), the employee holding the option
will have no rights as a shareholder with respect to the Plan Shares subject to
the option.
VII. PLAN NOT TO AFFECT EMPLOYMENT
Nothing in this Plan or options issued under it confers upon any employee
the right to continue in the employ of the Company.
VIII. NONTRANSFERABILITY OF THE OPTION
No option granted under the Plan may be transferred or assigned otherwise
than by will or the laws of descent and distribution, nor may any option be
exercised by anyone other than the optionee during the optionee's lifetime.
<PAGE>
IX. SEVERABILITY
If any part of this Plan is determined to be invalid or void in any
respect, that determination will not affect, impair, invalidate or nullify the
remaining provisions of this Plan, which will continue in full force and effect.
X. COMPLIANCE WITH SECURITIES LAWS
If the Plan Shares have not been registered under the Securities Act of
1933 and any applicable state securities laws, the Company's obligation to issue
Plan Shares pursuant to the exercise of an option shall be conditioned upon
receipt of a representation letter in form satisfactory to the Company which
includes, among other things, a representation that the employee is acquiring
the Plan Shares for the employee's own account and not with a view to the
distribution; the certificate representing those Plan Shares will bear a legend
in a form deemed necessary or advisable by the SBS's legal counsel. In no event
shall the Company be obligated to issue any Plan Shares pursuant to the exercise
of an option if, in the opinion of SBS' legal counsel, that issuance would
result in a violation of any federal or state securities laws.
XI. EFFECTIVENESS AND SHAREHOLDER APPROVAL
The Plan is effective on January 21, 1996, subject to approval of the
shareholders of SBS. If approval by SBS shareholders is not obtained within
twelve months from the Plan's effective date, the Plan and any options issued
under it will be deemed void ab initio.
XII. STOCK ADJUSTMENTS
A. STOCK DIVIDENDS, SPLITS AND THE LIKE.
In the event of a stock dividend, stock split, recapitalization,
merger in which SBS is the surviving corporation or other capital adjustment
affecting the outstanding shares of Common Stock, an appropriate adjustment will
be made, as determined by the SBS Board of Directors, to the number of Plan
Shares and the exercise price per Plan Share with respect to any option granted
under the Plan.
B. LIQUIDATION AND REORGANIZATION.
If SBS is liquidated or is a party to a reorganization, consolidation
or merger in which SBS is not the surviving corporation, any option granted
under the Plan will vest.
XIII. AMENDMENT AND TERMINATION
The Committee or the SBS Board of Directors may at any time alter, amend,
suspend or terminate the Plan in whole or in part in any respect except that
upon termination of the Plan for reasons other than its failure to qualify as an
employee stock purchase plan under Section 423 of the Code, vested options may
still be exercised in accordance with their terms and, as to them, the Plan will
be considered to be in effect and not terminated until exercise or expiration of
the vested options. If the Plan is terminated because it fails to comply with
Section 423 of the Code, the Plan and all options issued under it, whether or
not vested, will terminate.
<PAGE>
XIV. APPLICABLE LAW
This Plan will be construed in accordance with the laws of the State of New
Mexico, to the extent not pre-empted by applicable Federal law.
<PAGE>
CLOSING DOCUMENTS INDEX
AMENDED AND RESTATED TERM LOAN
AND REVOLVER CREDIT FACILITY
FROM
NATIONSBANK OF TEXAS, N.A.
TO
SBS TECHNOLOGIES, INC.
CLOSING DATE: APRIL 26, 1996
- --------------------------------------------------------------------------------
NationsBank of Texas, N.A. - Lender
SBS Technologies, Inc. - Borrower
Berg Systems International, Inc. - Berg
GreenSpring Computers, Inc. - GreenSpring
- --------------------------------------------------------------------------------
1. AMENDED AND RESTATED CREDIT AGREEMENT, dated April 26, 1996, executed by
and among Borrower and Lender, and acknowledged by Berg and GreenSpring.
2. AMENDED AND RESTATED PROMISSORY NOTE, dated April 26, 1996, in the original
principal amount of $6,750,000.00, executed by Borrower and payable to the
order of Lender.
3. AMENDED AND RESTATED REVOLVING PROMISSORY NOTE, dated April 26, 1996, in
the original principal amount of $2,500,000.00, executed by Borrower and
payable to the order of Lender.
4. AMENDED AND RESTATED GUARANTY AGREEMENT, dated April 26, 1996, executed by
Berg as Guarantor in favor of Lender.
5. AMENDED AND RESTATED GUARANTY AGREEMENT, dated April 26, 1996, executed by
GreenSpring as Guarantor in favor of Lender.
6. MODIFICATION OF SECURITY AGREEMENTS, dated April 16, 1996, executed by and
among Borrower, Berg, GreenSpring and Lender.
Page 1
<PAGE>
7. UCC-3 TERMINATION, filed on May 23, 1996, in the Office of the Secretary of
State of the State of New Mexico, by Borrower as Debtor and L&V Lehmann
Trust as Secured Party, filed under Clerk's File No. 950519098.
8. UCC-2 TERMINATION, filed on May 23, 1996, in the Office of the Secretary of
State of the State of California, by Borrower as Debtor and L&V Lehmann
Trust as Secured Party, filed under Clerk's File No. 96145C0137.
9. UCC-2 TERMINATION, filed on May 23, 1996, in the Office of the Secretary of
State of the State of California, by GreenSpring as Debtor and L&V Lehmann
Trust as Secured Party, filed under Clerk's File No. 96145C0138.
10. SUBORDINATED DEBT PAYOFF LETTER, dated April 25, 1996, from Subordinate
Lenders to Lender.
11. OPINION OF KEMP, SMITH, DUNCAN & HAMMOND, P.C., dated April 26, 1996,
executed by Bruce E. Castle.
12. CERTIFICATE IN SUPPORT OF OPINION, dated April 26, 1996, executed by
Christopher J. Amenson and James E. Dixon.
13. CLOSING CERTIFICATE, dated April 26, 1996, executed by Borrower, Berg and
GreenSpring in favor of Lender.
14. CORPORATE DOCUMENTS for Borrower:
(a) Certificate of Secretary of Borrower regarding:
(i) Articles of Incorporation;
(ii) Bylaws; and
(iii) Resolutions Adopted by Unanimous Consent of the Board of
Directors.
(b) Good Standing Certificate, dated April 26, 1996, issued by the
Secretary of State of the State of California;
(c) Good Standing Certificate, dated April 26, 1996, issued by the
Secretary of State of the State of New Mexico;
(d) Good Standing Certificate, dated April 26, 1996, issued by the
Comptroller of Public Accounts, State of Texas; and
(e) Certificate of Authority to do Business in Texas, dated April 26,
1996, issued by the Secretary of State of the State of Texas;
Page 2
<PAGE>
15. CORPORATE DOCUMENTS for Berg:
(a) Certificate of Secretary of Berg regarding:
(i) Articles of Incorporation;
(ii) Bylaws; and
(iii) Resolutions Adopted by Unanimous Consent of the Board of
Directors.
(b) Certificate of Filing and Suspension, dated April 26, 1996, executed
by the Secretary of State of the State of California.
(c) Franchise Tax Letter, dated April 29, 1996, executed by the Franchise
Tax Board, State of California; and
16. CORPORATE DOCUMENTS for GreenSpring:
(a) Certificate of Secretary of GreenSpring regarding:
(i) Articles of Incorporation;
(ii) Bylaws; and
(iii) Resolutions Adopted by Unanimous Consent of the Board of
Directors.
(b) Good Standing Certificate, dated April 26, 1996, executed by the
Secretary of State of the State of California; and
(c) Franchise Tax Letter, dated April 29, 1996, executed by the Franchise
Tax Board of the State of California.
Page 3
<PAGE>
- --------------------------------------------------------------------------------
AMENDED AND RESTATED CREDIT AGREEMENT
BETWEEN
SBS TECHNOLOGIES, INC.,
AS BORROWER
AND
NATIONSBANK OF TEXAS, N.A.,
AS LENDER
DATED AS OF APRIL 26, 1996
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PRELIMINARY STATEMENT . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS . . . . . . . . . . . . . . . . 1
.
SECTION 1.2 ACCOUNTING TERMS . . . . . . . . . . . . . . . 17
ARTICLE II
COMMITMENT AND ADVANCES
SECTION 2.1 COMMITMENT . . . . . . . . . . . . . . . . . . 17
SECTION 2.2. METHOD OF BORROWING . . . . . . . . . . . . . 18
SECTION 2.3. FEES . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III
TERMS OF CREDIT FACILITY
SECTION 3.1. NOTE . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.2. MATURITY . . . . . . . . . . . . . . . . . . . 20
SECTION 3.3. INTEREST RATE . . . . . . . . . . . . . . . . 20
SECTION 3.4. INTEREST PAYMENTS . . . . . . . . . . . . . . 21
SECTION 3.5. LIBOR RATE PORTIONS . . . . . . . . . . . . . 21
SECTION 3.6. PRINCIPAL PAYMENTS OF REVOLVER LOAN; REDUCTION
OF COMMITMENT AMOUNT . . . . . . . . . . . . . 23
SECTION 3.7. TERMINATION OF REVOLVING COMMITMENT . . . . . 24
SECTION 3.8. MANDATORY TERM LOAN PRINCIPAL PAYMENTS . . . . 24
SECTION 3.9. SCHEDULES ON NOTES . . . . . . . . . . . . . . 24
SECTION 3.10. GENERAL PROVISIONS AS TO PAYMENTS . . . . . . 25
SECTION 3.11. APPLICATION OF PAYMENTS . . . . . . . . . . . 25
SECTION 3.12. POST-DEFAULT INTEREST; PAST DUE PRINCIPAL AND
INTEREST . . . . . . . . . . . . . . . . . . . 25
SECTION 3.13. COMPUTATION OF INTEREST AND FEES . . . . . . . 26
SECTION 3.14 SECURITY . . . . . . . . . . . . . . . . . . . 26
SECTION 3.15. DEPOSIT OF CASH COLLATERAL . . . . . . . . . . 26
i
<PAGE>
ARTICLE IV
CONDITIONS TO FUNDING
SECTION 4.1. CONDITIONS TO INITIAL ADVANCE OR LETTER
OF CREDIT . . . . . . . . . . . . . . . . . . 26
SECTION 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES . . . . 28
SECTION 4.3 LEGAL DETAILS . . . . . . . . . . . . . . . . 29
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.1 BOOKS, RECORDS AND PROPERTIES . . . . . . . . 29
SECTION 5.2 FINANCIAL STATEMENTS AND REPORTS . . . . . . 30
SECTION 5.3 MAINTENANCE OF EXISTENCE AND PRESERVATION OF
PROPERTY . . . . . . . . . . . . . . . . . . 31
SECTION 5.4 INSURANCE . . . . . . . . . . . . . . . . . . 31
SECTION 5.5 COMPLIANCE WITH APPLICABLE LAWS . . . . . . . 31
SECTION 5.6 OTHER INFORMATION AND DOCUMENTS . . . . . . . 31
SECTION 5.7 DEFAULT . . . . . . . . . . . . . . . . . . . 31
SECTION 5.8 TAXES . . . . . . . . . . . . . . . . . . . . 31
SECTION 5.9 FURTHER ASSURANCES . . . . . . . . . . . . . 31
SECTION 5.10 FILINGS . . . . . . . . . . . . . . . . . . . 32
SECTION 5.11 MAINTENANCE . . . . . . . . . . . . . . . . . 32
SECTION 5.12 ERISA COMPLIANCE . . . . . . . . . . . . . . 32
SECTION 5.13 INDEMNITY . . . . . . . . . . . . . . . . . . 32
SECTION 5.14 CONTINGENT LIABILITIES . . . . . . . . . . . 33
SECTION 5.15 POST-CLOSING LIEN RELEASE REQUIREMENTS . . . 33
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.1 LIMITATION ON DEBT . . . . . . . . . . . . . 34
SECTION 6.2 LIENS . . . . . . . . . . . . . . . . . . . . 34
SECTION 6.3 TRANSFER OF ASSETS . . . . . . . . . . . . . 34
SECTION 6.4 NEW INDUSTRY . . . . . . . . . . . . . . . . 34
SECTION 6.5 RESTRICTED INVESTMENTS . . . . . . . . . . . 34
SECTION 6.6 TRANSACTIONS WITH AFFILIATES . . . . . . . . 34
SECTION 6.7 SENIOR FUNDED DEBT TO EBITDA RATIO . . . . . 35
SECTION 6.8 CURRENT MATURITIES COVERAGE RATIO . . . . . . 35
SECTION 6.9 FIXED CHARGE COVERAGE RATIO . . . . . . . . . 35
SECTION 6.10 NAME, FISCAL YEAR AND ACCOUNTING METHOD . . . 35
ii
<PAGE>
SECTION 6.11 LIQUIDATION, MERGERS, CONSOLIDATIONS AND
DISPOSITIONS OF SUBSTANTIAL ASSETS . . . . . 35
SECTION 6.12 NO AMENDMENTS . . . . . . . . . . . . . . . . 35
SECTION 6.13 RESTRICTIONS ON DISTRIBUTIONS BY AND PURCHASES
OF INTERESTS IN BORROWER OR ANY SUBSIDIARY . 35
SECTION 6.14 OWNERSHIP OF SUBSIDIARIES . . . . . . . . . . 35
SECTION 6.15 MANAGEMENT OF BORROWER AND THE SUBSIDIARIES . 36
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.1 ORGANIZATION; QUALIFICATION; AUTHORITY. . . . 36
SECTION 7.2 FINANCIAL STATEMENTS . . . . . . . . . . . . 36
SECTION 7.3 CONFLICTING AGREEMENTS AND OTHER MATTERS . . 36
SECTION 7.4 GOVERNMENTAL CONSENT . . . . . . . . . . . . 37
SECTION 7.5 ENFORCEABILITY . . . . . . . . . . . . . . . 37
SECTION 7.6 LITIGATION . . . . . . . . . . . . . . . . . 37
SECTION 7.7 OUTSTANDING DEBT . . . . . . . . . . . . . . 37
SECTION 7.8 TITLE TO PROPERTIES . . . . . . . . . . . . . 37
SECTION 7.9 TAXES . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.10 REGULATION U, ETC. . . . . . . . . . . . . . 38
SECTION 7.11 ERISA . . . . . . . . . . . . . . . . . . . . 38
SECTION 7.12 DISCLOSURE . . . . . . . . . . . . . . . . . 38
SECTION 7.13 ENVIRONMENTAL MATTERS . . . . . . . . . . . . 38
SECTION 7.14 SUFFICIENCY OF CAPITAL . . . . . . . . . . . 39
SECTION 7.15 NO FINANCING OF CORPORATE TAKEOVERS . . . . . 39
SECTION 7.16 PRINCIPAL OFFICE, ETC. . . . . . . . . . . . 39
SECTION 7.17 COMPLIANCE WITH LAWS . . . . . . . . . . . . 40
SECTION 7.18 GOVERNMENT REGULATION . . . . . . . . . . . . 40
SECTION 7.19 INSIDER . . . . . . . . . . . . . . . . . . . 40
SECTION 7.20 FAIR LABOR STANDARDS ACT . . . . . . . . . . 40
SECTION 7.21 CASUALTIES . . . . . . . . . . . . . . . . . 40
SECTION 7.22 INVESTMENT COMPANY ACT . . . . . . . . . . . 40
SECTION 7.23 NO DEFAULT . . . . . . . . . . . . . . . . . 40
SECTION 7.24 REPRESENTATIONS AND WARRANTIES . . . . . . . 40
SECTION 7.25 FISCAL YEAR AND ACCOUNTING METHODS . . . . . 41
SECTION 7.26 SUBSIDIARIES . . . . . . . . . . . . . . . . 41
SECTION 7.27 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . 41
iii
<PAGE>
ARTICLE VIII
DEFAULT
SECTION 8.1 EVENTS OF DEFAULT . . . . . . . . . . . . . . 41
SECTION 8.2 REMEDIES UPON DEFAULT . . . . . . . . . . . . 43
SECTION 8.3 PERFORMANCE BY LENDER . . . . . . . . . . . . 43
SECTION 8.4 LENDER NOT IN CONTROL . . . . . . . . . . . . 44
SECTION 8.5 WAIVERS . . . . . . . . . . . . . . . . . . . 44
SECTION 8.6 CUMULATIVE RIGHTS . . . . . . . . . . . . . . 44
SECTION 8.7 EXPENDITURES BY LENDER . . . . . . . . . . . 44
SECTION 8.8 APPLICATION OF PROCEEDS . . . . . . . . . . 44
SECTION 8.9 SETOFF . . . . . . . . . . . . . . . . . . . 45
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 ACCOUNTING TERMS . . . . . . . . . . . . . . 45
SECTION 9.2 MONEY . . . . . . . . . . . . . . . . . . . . 46
SECTION 9.3 NUMBER AND GENDER OF WORDS . . . . . . . . . 46
SECTION 9.4 HEADINGS . . . . . . . . . . . . . . . . . . 46
SECTION 9.5 ARTICLES, SECTIONS, AND EXHIBITS . . . . . . 46
SECTION 9.6 NOTICES AND DELIVERIES . . . . . . . . . . . 46
SECTION 9.7 SURVIVAL OF AGREEMENTS . . . . . . . . . . . 47
SECTION 9.8 PARTIES IN INTEREST . . . . . . . . . . . . . 48
SECTION 9.9 EXPENSES . . . . . . . . . . . . . . . . . . 48
SECTION 9.10 GOVERNING LAW . . . . . . . . . . . . . . . . 48
SECTION 9.11 MANDATORY ARBITRATION . . . . . . . . . . . . 48
SECTION 9.12 LIMITATION ON INTEREST . . . . . . . . . . . 49
SECTION 9.13 VALIDITY OF LIENS . . . . . . . . . . . . . . 50
SECTION 9.14 REAFFIRMATION OF DEBT . . . . . . . . . . . . 50
SECTION 9.15 LIEN PRIORITY . . . . . . . . . . . . . . . . 51
SECTION 9.16 TIME OF ESSENCE . . . . . . . . . . . . . . . 51
SECTION 9.17 RENEWAL, EXTENSION OR REARRANGEMENT . . . . . 51
SECTION 9.18 INCONSISTENT PROVISIONS . . . . . . . . . . . 51
SECTION 9.19 CONSTRUCTION . . . . . . . . . . . . . . . . 51
SECTION 9.20 SEVERABILITY . . . . . . . . . . . . . . . . 51
SECTION 9.21 AMENDMENT . . . . . . . . . . . . . . . . . . 51
SECTION 9.22 EXCEPTIONS TO COVENANTS . . . . . . . . . . . 52
SECTION 9.23 COUNTERPARTS . . . . . . . . . . . . . . . . 52
SECTION 9.24 WAIVER OF JURY TRIAL . . . . . . . . . . . . 52
SECTION 9.25 ENTIRE AGREEMENT . . . . . . . . . . . . . . 52
iv
<PAGE>
INDEX TO EXHIBITS
Exhibit "A" Form of Revolving Promissory Note
Exhibit "B" Form of Promissory Note
Exhibit "C" Form of Quarterly Borrowing Base Report
Exhibit "C-1" Form of Quarterly Compliance Certificate
Exhibit "D" Description of Certain Collateral
Exhibit "D-1" Description of Certain Tangible Personal Property
Exhibit "E" Description of Permitted Liens
Exhibit "F" Form of Notice of Borrowing
Exhibit "G" Description of Existing Debt
Exhibit "H" List of Subsidiaries
Exhibit "I" Description of Litigation with Respect to Borrower or any
Subsidiary
v
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (this "AGREEMENT") is made and
entered into effective as of April 26, 1996, between SBS TECHNOLOGIES, INC.
(formerly known as SBS Engineering, Inc.), a New Mexico corporation
("BORROWER"), and NATIONSBANK OF TEXAS, N.A., a national banking association
("LENDER").
PRELIMINARY STATEMENT
Borrower and Lender executed that certain Credit Agreement (as previously
amended, the "ORIGINAL CREDIT AGREEMENT"), dated as of the Original Closing Date
on April 28, 1995, related to a $7,000,000 term loan and a $4,000,000 revolving
line of credit as therein described, which Credit Agreement has been previously
amended pursuant to (i) that certain First Amendment to Credit Agreement dated
as of May 25, 1995, executed by and between Borrower and Lender, and (ii) that
certain Second Amendment to Credit Agreement and Related Loan Documents dated as
of November 1, 1995, executed by and between Borrower and Lender. Borrower and
Lender desire to further amend the Credit Agreement, the Notes and all of the
other Loan Documents, and to amend and restate such documents in their entirety.
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00), the covenants and agreements set forth herein, and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and confessed, Borrower and Lender hereby covenant and agree that
the Original Credit Agreement is amended in its entirety and restated as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS.
The terms defined in this Article I (except as otherwise expressly provided
in this Agreement) for all purposes shall have the following meanings, and the
singular shall include the plural, and vice versa, unless otherwise specifically
required by the context:
"ACCOUNT" has the meaning assigned to such term in the UCC.
"ACQUISITION AGREEMENT" means the Stock Purchase Agreement, dated as of the
Original Closing Date, executed by Borrower, as buyer, and Subordinate
Noteholders, as seller, Leonard A. Lehmann and Vivian V. Lehmann, and certain
other parties, pursuant to which Borrower acquired all of the outstanding stock
of GreenSpring.
Page 1
<PAGE>
"ADJUSTED LIBOR RATE" means on any date of determination for the relevant
Interest Period with respect to a LIBOR Rate Portion, a rate of interest per
annum equal to the sum of (a) the quotient obtained by dividing (i) the rate of
interest determined by Lender at which deposits in dollars for the relevant
Interest Period are offered based on information presented on the Telerate
Screen as of 11:00 A.M. (London time) on the day which is two (2) Business Days
prior to the first day of such Interest Period (PROVIDED, that if at least two
such offered rates appear on the Telerate Screen in respect of such Interest
Period, the arithmetic mean of all such rates (as determined by Lender) will be
the rate used, and, PROVIDED FURTHER, that if Telerate ceases to provide LIBOR
quotations, such rate shall be the average rate of interest determined by Lender
at which deposits in Dollars are offered for the relevant Interest Period by
Lender (or its successor) to banks with combined capital and surplus in excess
of $500,000,000 in the London interbank market as of 11:00 A.M. (London time) on
the applicable Effective Date), by (ii) the remainder of 1.00 minus the LIBOR
Reserve Requirement, if any, on the applicable Effective Date, provided, that
such LIBOR Reserve Requirement shall not change during the applicable Interest
Period, plus (b) the FDIC Percentage in effect on the applicable Effective Date,
provided, that such FDIC Percentage shall not change during the applicable
Interest Period, together with any additional impositions, assessments, fees or
surcharges that may be imposed on Lender (expressed as a percentage), to the
extent such impositions, assessments, fees or surcharges are not reflected in
the FDIC Percentage or the LIBOR Reserve Requirement and are generally imposed
on banks with capitalization and supervisory risk factors comparable to Lender.
"ADVANCE" means an Advance as defined in SECTION 2.1(b) to be made from
time to time by Lender to Borrower under the Revolving Commitment.
"AFFILIATE" of any Person means any other Person that is, directly or
indirectly, through one or more Persons controlling, controlled by, or under
common control with, such Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person.
"APPLICABLE LAW" means the Laws of the United States of America applicable
to contracts made or performed in the State of Texas, including, without
limitation, 12 USC Sections 85 and 86, as amended to the date hereof and as the
same may be amended at any time and from time to time hereafter, and any other
statute of the United States of America now or at any time hereafter prescribing
maximum rates of interest on loans and extensions of credit, and the Laws of the
State of Texas, including, without limitation, Articles 5069-1.04 and 5069-
1.07(a), Title 79, Revised Civil Statutes of Texas, 1925, as amended at any time
and from time to time hereafter and any other statute of the State of Texas now
or at any time hereafter prescribing maximum rates of interest on loans and
extensions of credit.
"APPLICATION RATE" has the meaning set forth in SECTION 3.3.
Page 2
<PAGE>
"BASE RATE" means, on any date of determination, the rate of interest per
annum most recently announced by Lender as its prime rate in effect at its
principal office in Dallas, Texas, automatically fluctuating upward and downward
until and at the time specified in each such announcement without special notice
to Borrower or any other Person, which prime rate may not necessarily represent
the lowest or best rate actually charged to a customer.
"BERG" means Berg Systems International, Inc., a California corporation,
and its successors.
"BORROWER" means SBS Technologies, Inc. (formerly known as SBS Engineering,
Inc.), a New Mexico corporation, and its successors.
"BORROWING BASE" means, at the time in question, an amount equal to the sum
of (i) 80% of all Eligible Accounts, plus (ii) 50% of all Eligible Inventory;
provided, however, that (a) in no event shall the Borrowing Base exceed the
Revolving Commitment, and (b) the Eligible Inventory component of the Borrowing
Base shall never exceed thirty percent (30%) of the aggregate Borrowing Base.
"BORROWING BASE REPORT" means a report, signed by a duly authorized officer
of Borrower, in the form of EXHIBIT "C", appropriately completed.
"BUSINESS DAY" means (a) for all purposes other than as covered by
clause (b) of this definition, any day of the week, other than Saturday, Sunday
or other day that Lender is required or authorized by law or executive order to
close, and (b) with respect to all requests, notices and determinations in
connection with LIBOR Rate Portions, a day which is a Business Day described in
clause (a) of this definition and which is a day for trading by and between
banks for Dollar deposits in the London interbank market.
"CAPITAL LEASE" means, as of any date, any lease of property, real or
personal, which would be capitalized on a balance sheet of the lessee prepared
as of such date in accordance with GAAP.
"CLOSING DATE" means April 26, 1996.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means that property of Borrower, Berg, GreenSpring and any
other Subsidiary, or any other Person, in which Lender shall have Liens to
secure payment of the Obligation or any part thereof, including, without
limitation, the property, assets, rights and interests described in EXHIBIT "D".
"COLLATERAL DOCUMENTS" means all security agreements, mortgages, deeds of
trust, assignments, pledges, financing statements, stock or bond powers, and
other agreements, instruments and documents, including any amendments thereto
and extensions thereof, which
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provide for the grant, creation, perfection and/or maintenance of Liens in
Collateral, which secure partially or fully, directly or indirectly, the
Obligation, whether executed and/or delivered or filed prior to,
contemporaneously with, or at any time after the date of this Agreement.
Without limiting the generality of the foregoing, the term "Collateral
Documents" shall include such security agreements and financing statements as
Lender shall deem necessary or appropriate to create a security interest in
favor of Lender covering all assets of Borrower, GreenSpring and Berg,
including the Collateral described in EXHIBIT "D".
"COMMITMENT FEE" has the meaning set forth in SECTION 2.1(f).
"COMPLIANCE CERTIFICATE" means a certificate, signed by a duly authorized
officer of Borrower, in the form of EXHIBIT "C-1", appropriately completed.
"CREDIT FACILITY" means the credit facility arranged for Borrower hereunder
consisting of the Term Loan and the Revolving Loan.
"CURRENT MATURITIES" means, on any date of calculation, the current
liabilities of Borrower and its Subsidiaries, on a consolidated basis,
attributable to long term indebtedness, determined in accordance with GAAP.
"CURRENT MATURITIES COVERAGE RATIO" means the ratio of (i) Net Earnings
Available for Current Maturities for the immediately preceding four (4) fiscal
quarters of Borrower to (ii) Current Maturities as of the last day of such
period.
"DEBT" means, with respect to any Person, all debt, obligations and
liabilities of such Person, including without limitation, (i) all "liabilities"
which would be reflected on a balance sheet of such Person, prepared in
accordance with GAAP, (ii) all obligations of such Person in respect of any
Guaranty, (iii) all obligations of such Person in respect of any Capital Lease,
(iv) all obligations, debt and liabilities secured by any Lien on any property
or assets of such Person and (v) all obligations of such Person in respect of
letters of credit, acceptances or similar obligations issued or created for the
account of such Person.
"DEBTOR RELIEF LAWS" means any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, fraudulent conveyance, insolvency,
reorganization or similar debtor relief Laws relating to the enforcement of
creditors' rights generally from time to time in effect.
"DEFAULT" means any of the events specified in SECTION 8.1, whether or not
there has been satisfied any requirement in connection with such event for the
giving of notice, or the lapse of time, or the happening of any further
condition, event or act.
"DEFAULT RATE" means the per annum rate of interest equal to the lesser of
(a) four percent (4.0%) plus the Base Rate, or (b) the Maximum Lawful Rate.
"DIRECT COSTS" has the meaning set forth in SECTION 3.5(g).
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"DISTRIBUTION" by any Person, means (a) with respect to any stock issued by
such Person or any partnership or joint venture interest of such Person, the
retirement, redemption, repurchase, or other acquisition for value of such
stock, partnership or joint venture interest, (b) the declaration or payment of
any dividend or other distribution, whether monetary or in kind, on or with
respect to any stock, partnership or joint venture interest of such Person, and
(c) any other payment or distribution of assets in respect of an equity
investment.
"DOLLAR" and the sign "$" mean lawful money of the United States of
America.
"EBITDA" means for Borrower and its Subsidiaries, on a consolidated basis,
the sum of the Profit Before Tax plus (i) Interest Expense (to the extent that
such amounts have been deducted in determining Profit Before Tax for such
period), and (ii) all amounts attributable to depreciation and/or amortization
of intangible and other assets of Borrower and its Subsidiaries (to the extent
that such amounts have been deducted in determining Profit Before Tax), in each
case determined for the immediately preceding four (4) consecutive fiscal
quarters of Borrower.
"EFFECTIVE DATE" has the meaning set forth in SECTION 3.5(c).
"ELIGIBLE ACCOUNTS" means, at the time of any determination thereof, each
Account as to which the following requirements have been fulfilled to the
satisfaction of Lender:
(i) Borrower or any Subsidiary has lawful and absolute title to such
Account;
(ii) Such Account is a valid, legally enforceable obligation of the
Person who is obligated under such Account (the "ACCOUNT DEBTOR") for goods
or services previously delivered or rendered to such Person by Borrower or
any Subsidiary;
(iii) There has been excluded from such Account any portion that is
subject to any dispute, offset, counterclaim or other claim or defense on
the part of the account debtor or to any claim on the part of the account
debtor denying liability under such Account;
(iv) Borrower or any Subsidiary has the full and unqualified right to
assign and grant a security interest in such Account to Lender as security
for the Obligation;
(v) Such Account is payable in Dollars and is evidenced by an invoice
rendered to the account debtor and such Account is not evidenced by any
chattel paper, promissory note or other instrument;
(vi) Such Account is subject to a fully perfected first priority
security interest in favor of Lender pursuant to the Loan Documents, prior
to the rights of, and enforceable as such against, any other Person
(including holders of a purchase money security interest);
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(vii) Such Account is not subject to any Lien in favor of any Person
other than the Lien of Lender pursuant to the Loan Documents;
(viii) If requested by Lender, Borrower or any applicable Subsidiary has
provided the account debtor with respect to such Account with written
instructions, and such account debtor has acknowledged receipt of such
written instructions from Borrower or such applicable Subsidiary, in each
case in form and substance acceptable to Lender, instructing such account
debtor to make all payments with respect to such Account directly to a
specific account acceptable to Lender;
(ix) Such Account arose from a transaction in the ordinary course of
business of Borrower or any Subsidiary;
(x) Such Account has not been due and payable for more than ninety
(90) days from the invoice date;
(xi) No account debtor in respect of such Account is (A) invoiced at a
location outside the United States of America, (B) Borrower or any
Subsidiary, (C) any Tribunal, domestic or foreign, (D) the subject of a
proceeding under any Debtor Relief Laws, or (E) the United States of
America or any state; and
(xii) Lender has not reasonably determined that there is a legitimate
concern with respect to the timing or collection of such Account or has not
rejected such Account as unsuitable.
"ELIGIBLE INVENTORY" means, at the time of any determination thereof, each
item of inventory as to which the following requirements have been fulfilled to
the satisfaction of Lender:
(i) Borrower or any Subsidiary has lawful and absolute title to such
item of Inventory;
(ii) Borrower or any Subsidiary has the full and unqualified right to
assign and grant a security interest in such item of Inventory to Lender as
security for the Obligation;
(iii) Such item of Inventory is subject to a fully perfected first
priority security interest in favor of Lender pursuant to the Loan
Documents, prior to the rights of, and enforceable as against, any other
Person (including holders of a purchase money security interest); and
(iv) Such item of Inventory is not subject to any Lien in favor of any
Person other the Lien of Lender pursuant to the Loan Documents.
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The following items shall be excluded from Eligible Inventory:
(A) Work in process inventory or any overhead that might be allocable
to work in process inventory;
(B) Any inventory in the possession of an Affiliate (other than a
Subsidiary), bailee, warehouseman, consignee or similar third party;
(C) Any inventory that is damaged, defective, unmerchantable,
outdated or obsolete;
(D) Any inventory subject to a title vesting clause under a contract
with the United States of America or any department or agency thereof;
(E) Any inventory produced in violation of the Fair Labor Standards
Act and subject to the so-called "hot-goods" provisions contained in Title
25 U.S.C. 215(a)(i);
(F) Any merchandise sold which has been returned by the customer for
whatever reason and is not immediately saleable for a price approximately
equal to or greater than the original sales price of such merchandise;
(G) Any inventory not located in a jurisdiction in which Lender has
filed an appropriate financing statement;
(H) Any inventory that is in transit for any reason; and
(I) Any inventory reasonably rejected by Lender as unsuitable.
"ENVIRONMENTAL LAWS" means all federal, state and local laws, rules,
regulations, ordinances, and consent decrees relating to health, safety,
hazardous substances, and environmental matters applicable to the business or
facilities of Borrower or any Subsidiary (whether or not owned by Borrower or
any Subsidiary). Such laws and regulations include, but are not limited to, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, Toxic Substances Control Act, the
Clean Water Act, the Clean Air Act, the Comprehensive Environmental Response,
Compensation and Liability Information System, all state and federal superlien
and environmental cleanup programs and the U. S. Department of Transportation
regulations.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all regulations issued pursuant
thereto.
"EVENT OF DEFAULT" means the occurrence of any of the events specified in
SECTION 8.1, provided there has been satisfied any requirement in connection
with such event for the giving of notice, or the lapse of time, or the happening
of any further condition, event or act.
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"EXISTING LETTER OF CREDIT" means that certain commercial Letter of Credit
dated December 1, 1995, issued by Lender to Marconi Radar and Control Systems,
for the account of Borrower, in the stated amount of $86,530.00.
"FDIC PERCENTAGE" shall mean, on any day, the net assessment rate
(expressed as a percentage rounded to the next highest 1/100 of 1%) which is in
effect on such day (under the regulations of the Federal Deposit Insurance
Corporation or any successor) for determining the assessments paid by Lender to
the Federal Deposit Insurance Corporation (or any successor) for insuring
Eurocurrency deposits made in dollars at Lender's principal office in Dallas,
Texas. Each good faith determination of said percentage made by Lender shall,
in the absence of manifest error, be binding; however, in the event any error in
such determination is discovered, appropriate adjustment shall be made to such
percentage.
"FINANCIAL STATEMENTS" means, with respect to any Person, such financial
information with respect to such Person as Lender shall from time to time deem
necessary or appropriate; however, such term shall include, but shall not be
limited to, balance sheets, profit and loss statements, reconciliation of
capital and surplus and statements of cash flow with respect to such Person.
"FIXED CHARGE COVERAGE RATIO" means, for any date of determination, the
ratio of (a) the sum of (i) Income Before Tax plus (ii) Interest Expense plus
(iii) Operating Lease Expense, all for the immediately preceding four (4) fiscal
quarters of Borrower, to (b) the sum of (i) Interest Expense plus (ii) Operating
Lease Expense, both for the immediately preceding four (4) fiscal quarters of
Borrower.
"GAAP" means generally accepted accounting principles, practices and
procedures applied on a consistent basis, set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements or pronouncements of the Financial
Accounting Standards Board, which are applicable in the circumstances as of the
date in question; and the requirement that such principles be applied on a
consistent basis shall mean that the accounting principles observed in a current
period are comparable in all material respects to those applied in a preceding
period.
"GREENSPRING" means GreenSpring Computers, Inc., a California corporation
and its successors.
"GUARANTY" of any Person means any contract, agreement or understanding of
such Person pursuant to which such Person guarantees, or in effect guarantees,
any Debt of any other Person in any manner, whether directly or indirectly,
including, without limitation, contracts, agreements or understandings: (i) to
purchase such Debt or any property constituting security therefor, (ii) to
advance or supply funds (A) for the purchase or payment of such Debt, or (B) to
maintain net worth or working capital or other balance sheet conditions, or
otherwise to advance or made available funds for the purchase or payment of such
Debt, (iii) to purchase property, securities or service primarily for the
purpose of assuring the holder of such Debt of the ability of the primary
obligor to make payment of the Debt, or (iv) otherwise to assure the holder of
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the Debt of the primary obligor against loss in respect thereof; EXCEPT THAT
"Guaranty" shall not include the endorsement by Borrower or any Subsidiary in
the ordinary course of business of negotiable instruments or documents for
deposit or collection.
"GUARANTY AGREEMENT" means a guaranty agreement in form and content
satisfactory to Lender executed by a Subsidiary for the benefit of Lender,
guaranteeing full payment and performance of the Term Loan and the Revolving
Loan.
"HEREOF", "HERETO", "HEREUNDER" and similar terms refer to this Agreement
and not to any particular section or provision of this Agreement.
"INCOME BEFORE TAX" means the net income (or loss) of Borrower and its
Subsidiaries during the applicable period, before federal income taxes,
determined on a consolidated basis and in accordance with GAAP.
"INDEMNITEE" has the meaning set forth in SECTION 5.13.
"INTEREST ADJUSTMENT DATE" shall mean the earlier of either the last day of
an Interest Period or the Termination Date.
"INTEREST EXPENSE" means, for any period, the interest expense which is
required to be shown as such on the financial statements of Borrower and its
Subsidiaries, on a consolidated basis, prepared in accordance with GAAP.
"INTEREST HEDGE AGREEMENTS" means any interest rate swap agreements,
interest cap agreements, interest floor agreements, interest rate collar
agreements, or any similar agreement or arrangements designed to hedge the risk
of variable interest rate volatility, or foreign currency hedge, exchange or
similar agreements, entered into between Lender and Borrower including without
limitation that certain ISDA Master Agreement, dated May 15, 1995, by and
between Lender and Borrower, as such agreements or arrangements may be modified,
supplemented, amended, and in effect from time to time.
"INTEREST PAYMENT DATE" means for both the Term Note and the Revolving
Note, the first day of each month commencing on May 1, 1996 and continuing on
the first day of each month thereafter.
"INTEREST PERIOD" means, subject to the limitations set forth in
SECTION 3.5, with respect to a LIBOR Rate Portion under either the Term Loan or
the Revolving Loan, a period commencing on the Effective Date of such LIBOR Rate
Portion and ending on the numerically corresponding day in the calendar month
that is one, two or three months thereafter, as Borrower may request in the
Minimum Notice Requirement; provided that any Interest Period ending on a date
later than the Term Loan Termination Date or the Revolving Loan Termination
Date, as the case may be, shall be deemed to end on the applicable Termination
Date.
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"INVENTORY" has the meaning assigned to such term in the UCC.
"INVESTMENT" in any Person means any investment, whether by means of
purchase of any share or interest, loan, advance (other than advances to
employees for travel expenses, drawing accounts and similar expenditures in the
ordinary course of business), extension of credit, capital contribution or
otherwise, in or to such Person, the Guaranty of Debt of such Person or the
subordination of any claim against such Person to other Debt of such Person.
"LAWS" means all statutes, laws, ordinances, regulations, orders, writs,
injunctions, or decrees of the United States, any state or commonwealth, any
municipality, any foreign country, any territory or possession, or any Tribunal.
"LENDER" means NationsBank of Texas, N.A., a national banking association,
and its successors and assigns.
"LETTER OF CREDIT EXPOSURE" means the aggregate amount of the unfunded
portion of each Letter of Credit outstanding at any time.
"LETTER OF CREDIT FEE" has the meaning set forth in SECTION 2.3(b).
"LETTERS OF CREDIT" means the Existing Letter of Credit and all standby
letters of credit and commercial letters of credit issued by Lender on or after
the Closing Date for the account of Borrower pursuant to this Agreement.
"LIBOR RATE" means (i) with respect to a LIBOR Rate Portion under the Term
Loan a per annum rate equal to the sum of the Adjusted LIBOR Rate plus two and
one-half percent (2.50%), and (ii) with respect to a LIBOR Rate Portion under
the Revolving Loan, the sum of the Adjusted LIBOR Rate plus two and one-quarter
percent (2.25%).
"LIBOR RATE PORTION" means an Advance or a portion of the Term Loan or the
Revolving Loan that bears interest computed with reference to the LIBOR Rate in
accordance with SECTION 3.5.
"LIBOR RESERVE REQUIREMENT" means, on any day, that percentage (expressed
as a decimal fraction) which is in effect on such date, as provided by the
Federal Reserve System for determining the maximum reserve requirements
generally applicable to financial institutions regulated by the Federal Reserve
Board comparable in size and type to Lender (including, without limitation,
basic supplemental, marginal and emergency reserves) under Regulation D with
respect to "Eurocurrency liabilities" as currently defined in Regulation D, or
under any similar or successor regulation with respect to Eurocurrency
liabilities or Eurocurrency funding (or, if reserves for Eurocurrency
liabilities are not separately stated in such regulations, the other applicable
category of liabilities which includes deposits by reference to which the
interest rate on a LIBOR Rate Portion is determined). Each good faith
determination by Lender of the LIBOR Reserve Requirement, shall, in the absence
of manifest error, be binding; however, in
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the event any error in such determination is discovered, appropriate
adjustments hall be made in the LIBOR Reserve Requirement.
"LIEN" means any mortgage, deed of trust, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give or not
to give any of the foregoing), any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement (other than a financing statement with respect to
an Operating Lease), in each case whether arising by agreement or under any
statute or law, or otherwise.
"LITIGATION" means any proceeding, claim, lawsuit and/or investigation
conducted or, to the knowledge of the applicable Person, threatened by or before
any Tribunal, including, but not limited to, proceedings, claims, lawsuits,
and/or investigations under or pursuant to any environmental, occupational,
safety and health, antitrust, unfair competition, securities, Tax, or other
Law, or under or pursuant to any contract, agreement or other instrument.
"LOAN DOCUMENTS" means this Agreement, the Notes, all of the Collateral
Documents, the Letters of Credit, the LOC Applications, any and all Interest
Hedge Agreements, and all other agreements securing or assuring performance of
the Obligations and all other agreements, certificates and documents delivered
by Borrower and/or any Subsidiary hereunder or any other Person pursuant hereto,
whether now existing or hereafter arising, as same may have heretofore been, or
may contemporaneously herewith or hereafter be, amended, restated, supplemented
or otherwise modified from time to time.
"LOC APPLICATION" has the meaning set forth in SECTION 2.2(d).
"MARGIN REGULATIONS" mean Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any act or
circumstance which in Lender's reasonable judgment is (i) material and adverse
to the financial condition, business operations or prospects of the Person in
question, (ii) in any material manner whatsoever to adversely affect the
validity or enforceability of any of the Loan Documents or (iii) in any material
manner to impair the value of any Collateral.
"MAXIMUM LAWFUL RATE" means the maximum rate (or, if the context so permits
or requires, an amount calculated at such rate) of interest which, at the time
in question would not cause the interest charged on any Obligation at such time
to exceed the maximum amount which Lender would be allowed to contract for,
charge, take, reserve, or receive under applicable federal or state law after
taking into account, to the extent required by applicable law, any and all
relevant payments, fees or charges under the Loan Documents. If and to the
extent the laws of the State of Texas are applicable for purposes of determining
the "Maximum Lawful Rate", such term shall mean the "indicated rate ceiling"
from time to time in effect under Article 5069-1.04, Title 79, Revised Civil
Statutes of Texas, 1925, as amended, or, if permitted
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by applicable law and effective upon the giving of the notices required by
such Article 5069-1.04 (or effective upon any other date otherwise specified
by applicable law), the "quarterly ceiling" or "annualized ceiling" from time
to time in effect under such Article 5069-1.04, whichever Lender shall elect
to substitute for the "indicated rate ceiling," and VICE VERSA, each such
substitution to have the effect provided in such Article 5069-1.04, and
Lender shall be entitled to make such election from time to time and one or
more times and, without notice to Borrower, to leave any such substitute rate
in effect for subsequent periods in accordance with subsection (h)(1) of such
Article 5069-1.04. If under federal or state law there is no legal
limitation on the amount or rate of interest that may be charged on amounts
outstanding under the Credit Facility, there shall be no Maximum Lawful Rate,
notwithstanding any reference thereto herein or in any of the Loan Documents.
"MINIMUM NOTICE REQUIREMENT" has the meaning set forth in SECTION 3.5(a).
"NET EARNINGS AVAILABLE FOR CURRENT MATURITIES" means with respect to
Borrower and its Subsidiaries, on a consolidated basis, (i) the sum of (A) net
income determined in accordance with GAAP for the applicable period, plus
(B) depreciation and amortization expense for such period, minus (ii) the
amounts of any dividends or other Distributions made, paid or declared during
such period (if and to the extent any are consented to by Lender).
"NOTES" means the Term Note and the Revolving Note.
"NOTICE OF BORROWING" has the meaning set forth in SECTION 2.2(a).
"OBLIGATION" means:
(i) all present and future indebtedness, obligations and liabilities
of Borrower or any Subsidiary or any other Person to Lender evidenced by
or arising pursuant to this Agreement, the Notes or any of the other Loan
Documents (including without limitation related to any Letter of Credit),
regardless of whether such indebtedness, obligations and liabilities are
direct, indirect, fixed, contingent, joint, several, or joint and several;
(ii) all present and future indebtedness, obligations and liabilities
of Borrower or any Subsidiary to Lender arising pursuant to or represented
by the Notes, and all interest accruing thereon, and attorneys' fees
incurred in the enforcement or collection thereof;
(iii) all costs incurred by Lender to obtain, preserve, perfect and
enforce the Liens and/or security interests securing payment of all or any
portion of the foregoing indebtedness, liabilities and obligations, or to
maintain, preserve and collect the property in which Lender has been
granted a Lien to secure payment of the indebtedness, liabilities and
obligations of Borrower or any Subsidiary, or any part thereof, including
but not limited to, taxes, assessments, insurance premiums, repairs,
reasonable attorneys'
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fees and legal expenses, rent, storage charges, advertising costs,
brokerage fees and expenses of sale; and
(iv) all renewals, extensions and modifications of the indebtedness,
obligations and liabilities referred to in the foregoing clauses, or any
part thereof.
"OPERATING LEASE EXPENSE" means for any period the lease expense under all
Operating Leases for Borrower and its Subsidiaries on a consolidated basis.
"OPERATING LEASES" means operating leases, as defined in the Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 13,
dated November 1976.
"ORIGINAL CLOSING DATE" means April 28, 1995.
"ORIGINAL LOAN DOCUMENTS" has the meaning set forth in SECTION 9.14.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor to
all or any of the Pension Benefit Guaranty Corporation's functions under ERISA.
"PERMITTED INVESTMENTS" means (i) direct obligations of, or obligations
guaranteed by, the United States of America, or any agency thereof, having a
maturity of not more than six (6) months from the date of issuance, (ii) time
deposits with, including certificates of deposit or banker's acceptances issued
by, Lender, in each case having a maturity of not more than six (6) months from
the date of acquisition, and (iii) repurchase obligations with a term of not
more than seven (7) days for underlying securities of the types described in
clause (i) of this definition with Lender.
"PERMITTED LIENS" means: (i) Liens granted to Lender to secure the
Obligation, (ii) pledges or deposits made to secure payment of worker's
compensation insurance (or to participate in any fund in connection with
worker's compensation insurance), unemployment insurance, pensions or social
security programs or to secure performance of bids, tenders, contracts or
leases, or to secure statutory obligations, surety or appeal bonds, or
indemnity, performance or similar bonds in the ordinary course of business,
(iii) Liens imposed by mandatory provisions of law such as for materialmen's,
mechanics', warehousemen's and other like Liens arising in the ordinary course
of business, securing Indebtedness whose payment is not yet due or which are
being contested in good faith and as to which adequate cash reserves established
in accordance with GAAP have been provided, (iv) Liens for taxes, assessments
and governmental charges or levies imposed upon a Person or upon such Person's
income or profits or property, if the same are not yet due and payable or if the
same are being contested in good faith and as to which adequate cash reserves
have been provided, (v) Capital Leases in connection with Debt permitted by
SECTION 6.1 insofar as such Liens cover only the property acquired by a Person
under such Capital Lease, (vi) Liens described in EXHIBIT "E" and Liens securing
the refinancing (but not any increase in the amount) of the indebtedness
presently secured thereby, and (vii) purchase money liens securing Debt
permitted by SECTION 6.1(vi).
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"PERSON" means and includes an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, a government or any
department, Tribunal, agency or political subdivision thereof and any and all
other legally recognized entities.
"PLAN" means an employee benefit plan or other plan maintained by Borrower
for employees of Borrower covered by Title IV of ERISA, or subject to the
minimum funding standards under Section 412 of the Code.
"PRINCIPAL OFFICE" means the principal office of Lender located at 901 Main
Street, Dallas, Texas 75202.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time and shall include any successor
or other regulation or official interpretation of the Board of Governors
relating to the extension of credit by banks for the purpose of purchasing or
carrying margin stocks that is applicable to member banks of the Federal Reserve
System.
"REGULATORY CHANGE" means the adoption after the Closing Date of any
applicable law, rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by any
Tribunal charged with the administration thereof, other than any changes related
to income, excise or franchise taxes applicable to any Lender.
"REPORTABLE EVENT" has the meaning specified in Title IV of ERISA.
"REVOLVING COMMITMENT" means the maximum amount available to be advanced
under the Revolver Loan, being $2,500,000.00 as of the Closing Date, subject to
reduction as provided in SECTION 3.6(d).
"REVOLVING LOAN" means the revolving credit facility being made available
to Borrower hereunder pursuant to which Lender will make the Revolving
Commitment available to Borrower and advance funds thereunder.
"REVOLVING LOAN TERMINATION DATE" means the earliest to occur of
(i) October 30, 1997, (ii) the date on which payment of the Revolving Note is
accelerated or becomes immediately due and payable pursuant to SECTION 8.2
hereof or the terms of the Revolving Note, or (iii) the date that the Revolving
Commitment is terminated or reduced to zero pursuant to the provisions of this
Agreement.
"REVOLVING NOTE" means the Amended and Restated Revolving Promissory Note
dated the date hereof, in the principal full amount of $2,500,000.00, executed
by Borrower and payable to the order of Lender, in the form of "EXHIBIT A"
attached hereto, related to the Revolving Commitment, and any and all renewals,
extensions, modifications, amendments and restatements thereof, which note is in
modification, renewal, extension and restatement of that
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certain Revolving Promissory Note dated as of the Original Closing Date, in the
original principal amount of $4,000,000.00, executed by Borrower and payable to
the order of Lender.
"RIGHTS" means rights, remedies, powers and privileges.
"SENIOR FUNDED DEBT" means all Debt of Borrower and its Subsidiaries which
is evidenced by promissory notes, loan agreements, bonds or similar instruments,
but excluding Subordinated Debt, as such amount is required to be shown on the
financial statements of Borrower prepared on a consolidated basis and in
accordance with GAAP on the date of determination.
"SENIOR FUNDED DEBT TO EBITDA RATIO" means the ratio of (i) Senior Funded
Debt to (ii) EBITDA.
"SIMULATION" means SBS Simulation Systems, Inc., formerly a Subsidiary of
Borrower.
"SIMULATION RECEIVABLES" means those account receivables of Simulation and
Borrower relating to Borrower's flight simulation business which were in
existence on the date of the Simulation Sale and retained by Borrower.
"SIMULATION SALE" means the sale of the physical assets of the flight
simulation business of Borrower and the shares of Simulation (other than the
Simulation Receivables) to Camber Corporation pursuant to the Simulation Sale
Agreement.
"SIMULATION SALE AGREEMENT" means the Asset Purchase Agreement dated
April 26, 1995, executed by Borrower and Camber Corporation for the sale of the
assets of the flight simulation business of Borrower and the shares of
Simulation (other than the Simulation Receivables).
"SOLVENT" has the meaning assigned to such term in SECTION 7.14.
"SPECIAL COUNSEL" means the law firm of Jackson & Walker, L.L.P., Dallas,
Texas, Special Counsel to Lender, and each other attorney or law firm
representing Lender.
"SUBORDINATE NOTES" means those four (4) certain subordinated Promissory
Notes dated as of the Original Closing Date, in the respective original
principal amounts of $836,603.00, $150,000.00, $12,700.00 and $697.00, executed
by Borrower and payable to the order of each of the respective Subordinate
Noteholders named therein as part of the purchase price paid by Borrower under
the Acquisition Agreement.
"SUBORDINATE NOTEHOLDERS" means The L & V Lehmann Trust, dated January
1991, Kim Rubin, Fred Trevor and Kevin Yurek, and any successor holder or
holders of any of the Subordinate Notes.
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"SUBORDINATED DEBT" means such Debt of any Person as has been subordinated,
with respect to payment, collection, collateral, liquidation and otherwise, to
the Obligation pursuant to a written subordination agreement or other agreement,
in form and substance acceptable to Lender, executed by such Person, Lender, the
owner and holder of such Debt and such other Persons as Lender deems necessary
or appropriate, including without limitation the Subordinate Notes.
"SUBORDINATION AGREEMENT" means the Subordination Agreement dated as of the
Original Closing Date, executed by the Subordinated Noteholders, Borrower and
Lender, pursuant to which Subordinate Noteholders expressly subordinated payment
of the Subordinate Notes and all liens and security interests securing the
Subordinate Notes to payment of the Obligation and the liens and security
interests in favor of Lender securing the Obligation.
"SUBSIDIARY" means Berg and GreenSpring and any other corporation of which
a total of more than 50% of the outstanding voting securities is at the time
owned or controlled, directly or indirectly, by Borrower or one or more
Subsidiaries.
"TAXES" means all taxes, assessments, fees or other charges from time to
time or at any time imposed by any Laws or by any Tribunal.
"TELERATE SCREEN" means the display designated as Screen 3750 on the
Telerate System or such other screen on the Telerate System as shall display the
London interbank offered rates for deposits in U.S. Dollars quoted by selected
banks.
"TERM LOAN" means the term loan originally made to Borrower under the
Original Credit Agreement, and being modified, renewed, extended and increased
hereunder, in the new principal amount of $6,750,000.00 as of the Closing Date.
"TERM LOAN MATURITY DATE" means October 30, 1999, or such earlier date as
the Term Note is accelerated or becomes immediately due and payable pursuant to
SECTION 8.2 hereof or the terms of the Term Note.
"TERM NOTE" means the Promissory Note dated the date hereof executed by
Borrower and payable to the order of Lender, in the form of EXHIBIT "B" attached
hereto, related to the Term Loan, and any and all renewals, extensions,
modifications, amendments and restatements thereof, which note is in
modification, renewal, extension and restatement of that certain Promissory Note
dated as of the Original Closing Date, in the original principal amount of
$7,000,000.00, executed by Borrower and payable to the order of Lender.
"TRIBUNAL" means any state, commonwealth, federal, foreign, territorial or
other court or governmental department, commission, board, bureau, agency or
instrumentality.
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"UCC" means the Uniform Commercial Code in effect under the laws of the
State of Texas, as amended, or, if stated with reference to another
jurisdiction, the Uniform Commercial Code as adopted in the relevant
jurisdiction.
"UNUSED FEE" has the meaning set forth in SECTION 2.3(c).
"VARIABLE RATE" means (i) with respect to the Revolving Loan, a fluctuating
per annum rate of interest equal to the Base Rate, and (ii) with respect to the
Term Loan, a fluctuating per annum rate of interest equal to the Base Rate plus
one-quarter of one percent (.25%).
"VARIABLE RATE PORTION" means an Advance or a portion of the Term Loan or
the Revolving Loan that bears interest computed with reference to the Variable
Rate.
SECTION 1.2 ACCOUNTING TERMS. All accounting and financial terms used
in this Agreement, and the compliance with each provision contained herein which
relates to accounting or financial matters, shall be determined in accordance
with GAAP unless a deviation therefrom is expressly stated therein. If the
compliance with any provision hereof is affected by any change in GAAP, such
provision shall be modified to take into account the change in question.
ARTICLE II
COMMITMENT AND ADVANCES
SECTION 2.1 COMMITMENT.
(a) RENEWAL OF TERM LOAN. Lender agrees, upon the terms and subject to
the conditions of this Agreement, to modify, renew and extend, and increase the
outstanding balance of, the Term Loan as existing under the Original Credit
Agreement, as of the Closing Date. Lender shall advance to Borrower a sum equal
to the difference between $6,750,000.00 and the outstanding principal balance of
the Term Loan under the Original Credit Agreement on the Closing Date, subject
to the conditions to funding set forth in SECTION 4.1 and the other terms and
conditions of this Agreement. Of such amount to be funded under the Term Loan
(i) an amount equal to the outstanding principal balance of each Subordinate
Note, together with all accrued unpaid interest thereon, shall be paid directly
to the respective Subordinate Noteholder, in full and final payment of each of
the Subordinate Notes; (ii) an amount equal to the portion of the outstanding
principal balance of the Revolving Note under the Original Credit Agreement in
excess of the reduced Revolver Commitment hereunder shall be paid on the Closing
Date directly to Lender as a principal payment on the Revolving Loan; and
(iii) any remaining funds available under the Term Note shall be funded to
Borrower to be used for general corporate purposes.
(b) RENEWAL OF REVOLVING LOAN. Lender agrees to renew and extend the
Revolving Commitment as made under the Original Credit Agreement, and to modify
the terms upon which advances ("ADVANCES") under the Revolving Loan will be made
to Borrower from time to time
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from the Closing Date to, but not including, the Revolving Loan Termination
Date. Immediately after giving effect to each Advance pursuant to this
SECTION 2.1(b), the amount of the Revolving Note which is outstanding at any
time shall at no time exceed (A) the Borrowing Base at such time or (B) the
Revolving Commitment, less any Letter of Credit Exposure. Each Advance under
this SECTION 2.1(b) shall be made under, and shall be evidenced by, the
Revolving Note. Advances of the Revolving Commitment issued hereunder shall
be used to provide working capital funds to Borrower and its Subsidiaries and
other general corporate purposes, and to fund drawings on any of the Letters
of Credit.
(c) LETTERS OF CREDIT. Subject to the terms of this Agreement, Letters of
Credit shall be issued by Lender for the account of Borrower or any Subsidiary
(provided, that, with respect to Letters of Credit issued for any Subsidiary,
the applicable LOC Application must be co-signed by Borrower) for any of the
purposes for which Borrower can obtain an Advance as referenced in SECTION
2.1(b); provided, that, (i) each such Letter of Credit shall be issued on a
Business Day, (ii) after the issuance of any such Letter of Credit, (A) the
Letter of Credit Exposure plus the outstanding principal balance of the Revolver
Note must be less than or equal to the Revolver Commitment (as the same may be
adjusted as herein provided), and (B) the Letter of Credit Exposure shall not at
any time exceed Five Hundred Thousand and No/100 Dollars ($500,000.00) in the
aggregate for all outstanding Letters of Credit, and (iii) each such Letter of
Credit must have an expiration date no later than the ninetieth (90th) day after
the Revolver Loan Termination Date.
SECTION 2.2. METHOD OF BORROWING. (a) ALL ADVANCES. Borrower shall
notify Lender at Lender's Principal Office, not later than the time required for
the applicable type of Advance pursuant to SECTIONS 2.2(b) and (c), of the
amount of such Advance and the date such Advance is to be effected (which shall
be a Business Day), which notice shall specify what portion of such Advance is
to be a LIBOR Rate Portion and/or a Variable Rate Portion. Such notification of
a proposed Advance (a "NOTICE OF BORROWING") may be by telephone or in writing
from an authorized officer or designated employee of Borrower, provided that
upon the request of Lender, Borrower shall submit a written Notice of Borrowing
confirming the terms of any telephonic Notice of Borrowing, and at any time
Lender may notify Borrower that each Notice of Borrowing thereafter shall be in
writing. Each Notice of Borrowing shall be in the form of Exhibit "F" attached
hereto, and shall be irrevocable and binding on Borrower. Provided that all
conditions precedent to the making of such Advance have been satisfied, Lender
shall, on the date requested for such Advance, deposit the funds so requested in
the deposit account of Borrower with Lender. Borrower understands and agrees
that Lender may make Advances under the Revolving Commitment at any time, at
Lender's discretion and without notice to, or any notice from, Borrower, to fund
and pay (i) any draw made on any Letter of Credit, provided, that subsequent to
such Advance Lender agrees to make a reasonable effort to notify Borrower of
such Advance, by telephone or otherwise, but failure to so notify will not
impair or jeopardize any of Lender's rights or interests hereunder, and (ii) any
amounts that are advanced to Borrower's deposit account(s) with Lender to cover
overdrafts pursuant to Borrower's "autoborrow" agreement with Lender or
otherwise.
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(b) VARIABLE RATE ADVANCES. In the case of any Advance which is to
be a Variable Rate Portion, Borrower, acting through an authorized officer,
shall give Lender prior to 10:00 a.m., Dallas, Texas time, on the date of any
such proposed Advance, an irrevocable Notice of Borrowing stating Borrower's
intention to borrow or reborrow such Variable Rate Advance hereunder. Such
Notice of Borrowing shall specify the requested funding date, which shall be a
Business Day and the amount of the proposed Variable Rate Portion to be advanced
by Lender, and shall be accompanied by the documents required to be delivered
pursuant to ARTICLE IV.
(c) LIBOR RATE ADVANCES. In the case of any Advance which is to be
a LIBOR Rate Portion, Borrower, acting through an authorized officer, shall give
to Lender at least three Business Days' prior to the date of any such proposed
Advance an irrevocable Notice of Borrowing stating Borrower's intention to
borrow or reborrow such Advance hereunder. Notice shall be given to Lender
prior to 10:00 a.m., Dallas, Texas time, in order for such Business Day to count
toward the minimum number of Business Days required. LIBOR Rate Portions shall
in all cases be subject to availability of LIBOR funds to Lender and to
SECTION 3.5 hereof. For LIBOR Rate Portions, the Notice of Borrowing shall
(i) specify the requested funding date, which shall be a Business Day, the
aggregate amount of the proposed aggregate LIBOR Rate Portions to be made by
Lender, the Interest Period selected (provided that no such Interest Period
shall extend past the applicable Termination Date) and (ii) be accompanied by
the documents required to be delivered pursuant to ARTICLE IV. The amount of
LIBOR Rate Portion to be made on any funding date shall not be less than Fifty
Thousand and No/100 Dollars ($50,000.00) or greater whole multiples of Fifty
Thousand and No/100 Dollars ($50,000.00).
(d) METHOD OF ISSUING LETTERS OF CREDIT. Not less than three (3)
Business Days prior to the requested date of issuance of any Letter of Credit,
Borrower shall deliver to Lender a Notice of Borrowing and shall execute and
deliver to Lender the customary letter of credit application and agreement used
by Lender from time to time (the "LOC APPLICATION"). Nothing in this Agreement
shall prohibit Lender from modifying the form of LOC Application in effect from
time to time in connection with the issuance of any Letter of Credit, provided
that, such modification does not substantially modify this Agreement to the
detriment of Borrower. In the event of a direct conflict between the provisions
of the LOC Application and this Agreement, the provisions of this Agreement
shall govern. Each Letter of Credit will be an irrevocable standby letter of
credit (which can be drawn on by sight draft) or a commercial letter of credit
used in the operation of Borrower's business and sales of inventory, and each
shall be issued for the account of Borrower or for the account of Berg or
GreenSpring (in which event the applicable LOC Application must be co-signed by
Borrower). Upon satisfaction of the applicable conditions precedent set forth
in ARTICLE IV, and subject to the other terms and conditions of this Agreement,
Lender shall issue Letters of Credit within three (3) Business Days from receipt
by Lender of the fully executed LOC Application (so long as the requested terms
of such Letter of Credit are acceptable to Lender in its reasonable discretion).
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SECTION 2.3. FEES.
(a) COMMITMENT FEE. In consideration of the commitment of Lender to
advance the additional funds under the Term Loan and to make Advances under
the Revolving Loan upon the terms and conditions set forth in this Agreement,
and the reserving of sufficient funds by Lender from which to make
disbursement of the Advances, Borrower shall pay to Lender on the Closing
Date a one-time fee in the sum of $15,000.00.
(b) LETTER OF CREDIT FEE. Borrower shall pay to Lender an issuance fee
which shall be due and payable on the date of issuance of each Letter of
Credit in an amount equal to (i) 2.0% of the amount of the Letter of Credit
to be issued in the case of a standby letter of credit, or (ii) 1.25% of the
amount of the Letter of Credit to be issued in the case of a commercial
Letter of Credit.
(c) UNUSED FEES. In consideration for Lender making available the
Revolver Commitment, Borrower agrees to pay, commencing on the first day of
the first calendar quarter after the Closing Date and continuing on the first
day of each calendar quarter thereafter during the term of the Credit
Facility, a non-refundable fee equal to (a) 0.25% TIMES (b) the average daily
unused portion of the Revolver Commitment during the calendar quarter
immediately preceding the date on which such fee is to be paid. The Unused
Fee is to be computed based on the number of actual days elapsed, assuming
each calendar year consisted of 360 days, subject, however, to proportionate
adjustments if the Closing Date occurs or the term of the Revolver Commitment
ends other than at the beginning or end of a calendar quarter, or if there is
an increase or decrease in the Revolver Commitment during such calendar
quarter. Borrower acknowledges that, although Borrower shall be entitled to
reduce the Revolver Commitment from time to time, the Unused Fee shall be
computed based on the Revolver Commitment in effect on the Closing Date for
the initial term of the Revolver Commitment.
ARTICLE III
TERMS OF CREDIT FACILITY
SECTION 3.1. NOTES. The Credit Facility shall be evidenced by the Term
Note and the Revolver Note.
SECTION 3.2. MATURITY. All outstanding principal of the Term Note,
together with all accrued but unpaid interest and other amounts owed with
respect thereto, shall be due and payable in full on the Term Loan
Termination Date. All outstanding principal of the Revolving Note, together
with all accrued but unpaid interest and other amounts owed with respect
thereto, shall be due and payable in full on the Revolving Loan Termination
Date.
SECTION 3.3. INTEREST RATE. Interest on the outstanding principal
balance of the Term Note and the Revolving Note shall accrue at a rate per
annum equal to the lesser of (i) at
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Borrower's option exercised in accordance with the terms of this Agreement,
the Variable Rate or the LIBOR Rate with respect to the respective Variable
Rate Portions and LIBOR Rate Portions outstanding under each of the Notes
from time to time, subject, however, to the provisions of SECTION 9.12 (the
"APPLICABLE RATE"), or (ii) the Maximum Lawful Rate; provided, however, if at
any time the Applicable Rate exceeds the Maximum Lawful Rate, resulting in
the charging of interest hereunder to be limited to the Maximum Lawful Rate,
then any subsequent reduction in the Applicable Rate shall not reduce the
rate of interest below the Maximum Lawful Rate until the total amount of
interest accrued on the indebtedness evidenced hereby equals the amount of
interest which would have accrued on such indebtedness if the Applicable Rate
had at all times been in effect. Without notice to Borrower or anyone else,
the Variable Rate and the Maximum Lawful Rate shall each automatically
fluctuate upward and downward as and in the amount by which the Base Rate and
Maximum Lawful Rate, respectively, fluctuate, subject always to limitations
contained in this Agreement.
SECTION 3.4. INTEREST PAYMENTS.
(a) REVOLVING LOAN. Interest on the Revolving Note, computed as
provided in SECTION 3.13, shall be due and payable as it accrues on each
Interest Payment Date, and on demand after the Revolving Loan Termination Date
so long as any principal of any Revolving Note remains unpaid.
(b) TERM LOAN. Interest on the Term Note, computed as provided in
SECTION 3.13, shall be due and payable as it accrues on each Interest Payment
Date, and on demand after the Term Loan Termination Date so long as any
principal of any Term Note remains unpaid.
SECTION 3.5. LIBOR RATE PORTIONS.
(a) Upon at least three (3) Business Days' prior written notice to
Lender ("MINIMUM NOTICE REQUIREMENT"), Borrower may, on any Interest Adjustment
Date, convert amounts of any LIBOR Rate Portion into a Variable Rate Portion,
with interest accruing thereon with reference to the Variable Rate, as provided
in SECTION 3.3 above.
(b) Upon satisfaction by Borrower of the Minimum Notice
Requirement, and subject to the conditions provided in this Agreement and the
Notes, Borrower may, on any date prior to the Revolving Loan Termination Date
or the Term Loan Termination Date, as the case may be, convert amounts of not
less than Fifty Thousand and No/100 Dollars ($50,000.00) on the same date (or
any whole multiple of Fifty Thousand and No/100 Dollars ($50,000.00) in
excess thereof) of any Variable Rate Portion into one or more LIBOR Rate
Portions with interest accruing thereon with reference to the LIBOR Rate as
provided in SECTION 3.3 above, for the Interest Period selected in such
notice.
(c) To the extent Borrower has not made an effective election under
and in accordance with SUBPARAGRAPHS (a) OR (b) above (including without
limitation at the expiration
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of an Interest Period), the Applicable Rate shall be the Variable Rate for
all amounts outstanding under either of the Notes. If Borrower has failed to
make such election at the end of an Interest Period for any LIBOR Rate
Portion under either of the Notes, such LIBOR Rate Portion then maturing
shall become a Variable Rate Portion.
(d) Each notice of a LIBOR Rate election by Borrower must satisfy
the Minimum Notice Requirement and shall include the following: (i)
Borrower's election of the LIBOR Rate; (ii) Borrower's choice of an Interest
Period during which the LIBOR Rate will apply; (iii) Borrower's election of
the effective date (the "EFFECTIVE DATE") on which the LIBOR Rate Portion
shall begin; and (iv) the amount of outstanding loan principal to which the
LIBOR Rate shall apply. Borrower shall give written notice of each such
election to Lender.
(e) Borrower's election to convert to the LIBOR Rate is subject to
the following conditions: (1) with respect to any LIBOR Rate Portion, the
FDIC Percentage and the LIBOR Reserve Requirement cannot be changed for any
particular LIBOR Rate Portion subsequent to the Effective Date of such LIBOR
Rate Portion and the period during which the LIBOR Rate will apply shall be
limited to the Interest Period, elected by Borrower in its notice to Lender
which Interest Period shall commence on the Effective Date; (2) Borrower's
written notice of an election shall be received by Lender in time to satisfy
the Minimum Notice Requirement; (3) the last day of the Interest Period will
not be subsequent in time to the Revolving Loan Termination Date or the Term
Loan Termination Date; (4) in the case of a continuation of a LIBOR Rate
Portion, the Interest Period applicable after such continuation shall
commence on the last day of the preceding Interest Period; (5) there shall
never be more than six (6) LIBOR Rate Portions in effect at any one time
under the Term Note or the Revolver Note; (6) no LIBOR Rate election shall be
made after the occurrence and during the continuance of a Default (for which
Borrower has received written notice if and to the extent such notice is
required to be delivered by Lender pursuant to the Loan Documents as a
condition to the occurrence of an Event of Default) or Event of Default; and
(7) no LIBOR Rate election shall be made if Lender determines by reason of
circumstances affecting the interbank Eurodollar market that either adequate
or reasonable means do not exist for ascertaining the LIBOR Rate for any
Interest Period, or it becomes impracticable for Lender to obtain funds by
purchasing U.S. dollars in the interbank Eurodollar market, or if Lender
determines that the LIBOR Rate will not adequately or fairly reflect the
costs to Lender of maintaining the applicable LIBOR Rate Portions at such
rate, or if as a result of any Regulatory Change, it shall become unlawful or
impossible for Lender to maintain any such LIBOR Rate election.
(f) In the event that prior to the commencement of any Interest
Period relating to any LIBOR Rate Portion, Lender determines that the LIBOR
Rate shall not apply for such Interest Period for any of the reasons set
forth in SECTION 3.5(e)(7) then, in such event, (i) any notice from Borrower
requesting a LIBOR Rate Portion shall be automatically withdrawn and shall be
deemed a request for a Variable Rate Portion and (ii) on the last day of each
then current Interest Period under the Notes, the principal balance of each
respective LIBOR Rate Portion shall convert to an amount accruing interest at
the Variable Rate, and no further LIBOR Rate Portions will be permitted until
Lender determines in the exercise of its reasonable business
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judgment that the circumstances giving rise to such suspension no longer
exist, whereupon Lender shall so notify Borrower, and Borrower may reinstate
its notice requesting a LIBOR Rate Portion. If Lender shall determine that
it may not lawfully continue to maintain and fund any of its outstanding
LIBOR Rate Portions to maturity and shall so specify in a notice to Borrower,
Borrower shall immediately prepay in full the then outstanding principal
amount of the LIBOR Rate Portions, together with accrued interest thereon;
provided, that in such case Borrower shall not be liable for any prepayment
fee if such prepayment is required. Concurrent with such prepayment of such
LIBOR Rate Portions, Lender shall make a Variable Rate Portion available to
Borrower in an equal amount.
(g) If Borrower shall prepay any portion of a LIBOR Rate Portion
prior to the expiration of its applicable Interest Period, Borrower shall pay
to Lender at the time of such prepayment a prepayment fee in an amount equal
to any losses, costs or expense incurred or anticipated to be incurred by
Lender by virtue of such prepayment of such LIBOR Rate Portion ("Direct
Costs"), which such loss, costs or expense shall include that which Lender
may sustain or incur in liquidating or employing deposits from Lender or
other third parties acquired to effect, fund or maintain any such LIBOR Rate
Portion or any part thereof. Such loss or expense shall include, without
limitation, (i) the interest which, but for such prepayment, Lender would
have earned in respect of such LIBOR Rate Portion so paid, for the remainder
of the Interest Period applicable to such LIBOR Rate Portion, reduced, if
Lender is able to redeposit such principal amount so paid for the balance of
such Interest Period, by the interest earned by Lender as a result of so
redepositing such principal amount, plus (ii) any expenses or penalty
incurred by Lender on redepositing such principal amount, plus (iii) any
"breakage" fees that Lender is required to pay by reason of the early
breakage of any customary LIBOR contract entered into by Lender in connection
with such LIBOR Rate Portion. Borrower's election to make a voluntary
prepayment on either of the Notes under this SECTION 3.5(g) shall be
irrevocable once notice thereof has been given to Lender. Any prepayment fee
required to be paid by Borrower pursuant to this SECTION 3.5(g) or any other
provision of this Agreement or of the Loan Agreement or other Loan Documents
in connection with the prepayment of any portion of a LIBOR Rate Portion
shall be due and payable whether such prepayment is being made voluntarily or
involuntarily, including, without limitation, as a result of an acceleration
of sums due under a LIBOR Rate Portion or any part thereof due to an Event of
Default; provided, however, that if the prepayment fee required to be paid by
Borrower pursuant to this SECTION 3.5(g) payable upon acceleration of
maturity of the Notes, or either of them, constitutes interest under
applicable law, the amount of such prepayment fee, together with all other
amounts that constitute interest under applicable law, will not exceed the
maximum amount of interest that may be lawfully charged or received with
respect to the respective Note for the actual period that the respective Note
is outstanding.
SECTION 3.6. PRINCIPAL PAYMENTS OF REVOLVER LOAN; REDUCTION OF COMMITMENT
AMOUNT.
(a) Borrower may, voluntarily prepay any outstanding principal of
the Revolving Note from time to time and at any time, in whole or in part,
without premium or penalty; provided that Borrower shall pay any related
Direct Costs within ten days after Lender's
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demand therefor. Each such optional prepayment shall be applied in
accordance with SECTION 3.11 to pay the amounts owed under the Revolving Loan.
(b) If the outstanding principal balance of the Revolving Loan
plus the Letter of Credit Exposure ever exceeds the Revolving Commitment,
Borrower shall make a mandatory prepayment of principal on the Revolving Note
in at least the amount of such excess, together with any Direct Costs arising
as a result thereof. Additionally, if at any time the outstanding balance of
the Revolving Note plus any Letter of Credit Exposure shall exceed the
then-effective Borrowing Base, Borrower shall immediately make a mandatory
principal payment on the Revolving Note in at least the amount of such
excess, together with any Direct Costs arising as a result thereof.
(c) Lender will not be obligated to lend to Borrower, and Borrower
shall not be entitled to borrow under the Revolving Commitment any amount which
would cause the outstanding balance of the Revolving Note plus any Letter of
Credit Exposure to exceed (a) the Borrowing Base, or (b) the Revolving
Commitment.
(d) Borrower may reduce the Revolving Commitment at any time and
from time to time provided that (i) notice of such reduction must be received
by Lender by 11:00 a.m. Dallas, Texas, time on the fifth Business Day
preceding the effective date of such reduction, (ii) each such reduction in
the Revolving Commitment must be in a minimum amount of One Hundred Thousand
and No/100 Dollars ($100,000.00) or any whole multiple of One Hundred
Thousand and No/100 Dollars ($100,000.00) in excess thereof, (iii) if the
aggregate outstanding principal balance of the Revolving Loan exceeds the
Revolving Commitment as so reduced, Borrower shall make a mandatory
prepayment on the principal amount of the Revolving Loan in at least the
amount of such excess, together with any Direct Costs arising as a result
thereof, (iv) Borrower shall not be entitled to reduce the Revolving
Commitment to an amount which is less than the Letter of Credit Exposure at
such time, (v) Borrower shall not be entitled to an increase in the Revolving
Commitment once it has been so reduced, and (vi) in no event shall Borrower
be entitled to so reduce the Revolving Commitment below $100,000.00, unless
Borrower has elected to terminate the Revolving Commitment in full. Subject
to the foregoing requirements, Borrower shall be entitled to terminate the
Revolving Commitment in full.
SECTION 3.7. TERMINATION OF REVOLVING COMMITMENT. On the Revolving Loan
Termination Date, the Revolving Commitment shall automatically be reduced to
zero and terminated.
SECTION 3.8. MANDATORY TERM LOAN PRINCIPAL PAYMENTS. Commencing on
May 1, 1996, and continuing on the first (1st) day of each calendar month
until full and final payment of the Term Loan, Borrower shall make a
principal payment on the Term Note, which shall be in addition to the monthly
interest payment required pursuant to SECTION 3.4, in an amount equal to
$112,500.00. Borrower shall have the right to prepay the Term Loan, or any
portion thereof; PROVIDED, HOWEVER, that (a) together with any such
prepayment Borrower pays to Lender the amount of any prepayment fees and
Direct Costs of any LIBOR Rate Portions being prepaid as
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required under SECTION 3.5(a), and (b) any prepayments on the Term Loan shall
be applied in inverse order of maturity.
SECTION 3.9. SCHEDULES ON NOTES. Lender is hereby authorized to record
the date and amount of the initial principal balance of the Notes and the date
and amount of each advance and repayment of principal on such Notes, and to
attach any such recording as a schedule to the Notes whereupon such schedule
shall constitute a part of such Notes for all purposes. Any such recording
shall constitute PRIMA FACIE evidence of the accuracy of the information so
recorded; provided that the absence or inaccuracy of any such schedule or
notation thereon shall not limit or otherwise affect the liability of Borrower
for the repayment of all amounts outstanding under the Notes together with
interest thereon.
SECTION 3.10. GENERAL PROVISIONS AS TO PAYMENTS. Borrower shall make
each payment of principal and interest on the Notes and all fees and other
sums payable hereunder or under any other Loan Document not later than 1:00
p.m. (Dallas, Texas time) on the date when due, in Federal or other
immediately available unrestricted funds in lawful money of the United States
of America, to Lender at Lender's Principal Office. Any payment under the
Note or under any other Loan Document other than in the required amount and
in good, unrestricted U.S. funds immediately available to Lender shall not,
regardless of any receipt or credit issued therefor, constitute payment until
the required amount is actually received by Lender in such funds and shall be
made and accepted subject to the condition that any check or draft may be
handled for collection in accordance with the practice of the collecting bank
or banks. For purposes of calculating accrued interest on the Notes, any
payment received by Lender as aforesaid by 1:00 p.m. (Dallas, Texas time) on
any Business Day shall be deemed made on such day; otherwise, such payment
shall be deemed made on the next Business Day after receipt by Lender.
Whenever any payment of principal or interest on the Notes, or any fees under
the Loan Documents, shall be due on a day which is not a Business Day, the
date for payment thereof shall be extended to the next succeeding Business
Day. If the date for any payment of principal is extended by operation of
law or otherwise, interest thereon shall be payable for such extended time.
SECTION 3.11. APPLICATION OF PAYMENTS. Except as (a) to principal
payments on the Term Loan made pursuant to SECTION 3.8, and (b) otherwise
specifically provided in this Agreement or in any other Loan Document, all
prepayments on the Notes shall be applied against accrued but unpaid interest
and then against the principal portion of the applicable Note in the inverse
order of maturity; provided, however, that, unless otherwise designated by
Borrower or required by law, prepayments and involuntary payments received by
Lender and applied to principal shall be applied first to the Variable Rate
Portions (or that portion of LIBOR Rate Portions not subject to a prepayment
penalty) and then to reduce LIBOR Rate Portions.
SECTION 3.12. POST-DEFAULT INTEREST; PAST DUE PRINCIPAL AND INTEREST.
After maturity of the Notes or the occurrence of an Event of Default, the
outstanding principal balance of the Notes shall, at the option of Lender,
bear interest at the Default Rate. Any past due principal of and, to the
extent permitted by law, past due interest on the Notes shall bear interest,
payable
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as it accrues on demand, for each day until paid at the Default Rate. Such
interest shall continue to accrue at the Default Rate notwithstanding the
entry of a judgment with respect to any part of the Obligation or the
foreclosure of any of the Collateral.
SECTION 3.13. COMPUTATION OF INTEREST AND FEES. All interest payable on
the Notes hereunder or the amount of any fees hereunder shall be computed based
on the number of days elapsed for the period for which interest is calculated
and as if each year was comprised of 360 days, except that any calculation of
the Maximum Lawful Rate shall be based on the actual number of days in the
applicable calendar year.
SECTION 3.14 SECURITY. The Credit Facility and the Obligation shall all
be secured by the Collateral Documents, and any and all other Collateral
described herein or in any of the Loan Documents, and any and all other
collateral pledged or assigned to Lender pursuant to this Agreement, and all
proceeds thereof, until the Notes and all of the Obligation is paid and
performed in full.
SECTION 3.15. DEPOSIT OF CASH COLLATERAL. Upon the occurrence of any
Event of Default, Borrower shall, on the next succeeding Business Day,
deposit in a segregated, interest bearing account with Lender such funds as
Lender may request, up to a maximum amount equal to the aggregate existing
Letter of Credit Exposure. Any funds so deposited shall be held by Lender as
security for the Credit Facility (including the Letters of Credit) and
Borrower will, in connection therewith, execute and deliver such assignments
and security agreements in form and substance satisfactory to Lender which
Lender may, in its discretion, require. As drafts or demands for payment are
presented under any Letter of Credit, Borrower hereby irrevocably directs
Lender to apply such funds to satisfy such drafts or demands. When all
Letters of Credit have expired and the Notes have been repaid in full (and
Lender has no obligation to make further Advances or issue Letters of Credit
hereunder) or such Event of Default has been cured to the satisfaction of
Lender, Lender shall release to Borrower any remaining funds deposited
pursuant to this SECTION 3.15. Whenever Borrower is required to make
deposits under this SECTION 3.15 and fails to do so on the day such deposit
is due, Lender may make such deposit using any funds of Borrower on deposit
then available to Lender.
ARTICLE IV
CONDITIONS TO FUNDING
SECTION 4.1. CONDITIONS TO INITIAL ADVANCE OR LETTER OF CREDIT. The
obligation of Lender to fund the full amount of the Term Loan or the initial
Advance on or after the Closing Date, or of Lender to issue any Letter of
Credit, whichever is first, is subject to the fulfillment of the following
conditions and requirements to the satisfaction of Lender:
(a) NO DEFAULT. There shall exist no Event of Default or Default.
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(b) REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties contained in ARTICLE VII and in the other Loan Documents shall be
true and correct in all material respects.
(c) CREDIT AGREEMENT. Borrower, each Subsidiary and Lender shall have
each duly executed and delivered multiple execution counterparts of this
Agreement.
(d) NOTES. Borrower shall have duly executed and delivered the Notes to
Lender, dated as of the Closing Date.
(e) GUARANTY AGREEMENTS. Each of the Subsidiaries shall have duly
executed and delivered to Lender a Guaranty Agreement.
(f) NOTICE OF BORROWING. Borrower shall have given to Lender a Notice of
Borrowing.
(g) BORROWER COLLATERAL DOCUMENTS. Borrower shall have duly executed and
delivered to Lender such security agreements, financing statements and other
Collateral Documents, covering all Collateral owned by Borrower, including all
property described in EXHIBIT "D", together with all original stock
certificates, stock powers, and other instruments required under the terms of
the Collateral Documents, as shall have been requested by Lender.
(h) SUBSIDIARY COLLATERAL DOCUMENTS. Each of the Subsidiaries shall have
duly executed and delivered to Lender such security agreements, financing
statements and other Collateral Documents, covering the Collateral owned by
them, including all property described in EXHIBIT "D", together with all
original stock certificates, stock powers, and other instruments required under
the terms of the Collateral Documents, as shall have been requested by Lender.
(i) CORPORATE CERTIFICATES. Borrower and each Subsidiary shall have
delivered to Lender an officer's certificate, dated as of the Closing Date,
certifying (i) to the matters covered by the conditions specified in
SECTION 4.1(A) AND (B), (ii) that it has performed and complied with all
agreements and conditions required to be performed or complied with by it prior
to or on the Closing Date, (iii) to the name and signature of each of the
officers of Borrower and each Subsidiary authorized to sign this Agreement, the
Notes and the other Loan Documents to be executed by such party and to borrow
under this Agreement, and (iv) to such other matters in connection with this
Agreement that Lender shall deem to be advisable. Lender may conclusively rely
on such certificate until it receives notice in writing to the contrary.
(j) PROCEEDINGS. All corporate proceedings of Borrower and each
Subsidiary taken in connection with the transactions contemplated by this
Agreement and all documents incidental thereto shall be reasonably satisfactory
in form and substance to Lender and Special Counsel; and Lender shall have
received, as of the Closing Date, copies of all documents or other evidence
which Lender or Special Counsel may reasonably request in connection with said
transactions, including without limitation, (i) complete copies of the
Certificates of
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Incorporation, and all amendments thereto, of Borrower and each Subsidiary,
certified to be true and correct by an authorized officer of Borrower and
each Subsidiary, respectively, (ii) copies of the Bylaws of Borrower and each
Subsidiary certified to be true and correct by an authorized officer of
Borrower and each Subsidiary, respectively, (iii) copies of certified
corporate resolutions of Borrower and each Subsidiary approving the renewal,
extension and modification of the Term Loan and the Revolving Loan pursuant
hereto, and the due execution of all the Loan Documents by authorized
officers of Borrower and each Subsidiary, and (iv) certificates of good
standing and existence with respect to Borrower and each Subsidiary.
(k) UCC SEARCHES. Lender shall have received certified copies of
Requests for Information or Copies (Form UCC-11), or equivalent reports,
listing all financing statements in effect which name Borrower, Berg and
GreenSpring as debtor and which are filed in the UCC records of the Office of
the Secretary of State of Texas, the Office of the Secretary of State of New
Mexico, and the Office of the Secretary of State of California.
(l) OPINION OF COUNSEL. Lender shall have received an opinion of
Borrower's legal counsel, Kemp, Smith, Duncan & Hammond, P.C., in form and
substance acceptable to Lender and Special Counsel.
(m) SUBORDINATION AGREEMENT. Lender shall have received the fully
executed Subordination Agreement and copies of the Subordinate Notes and any
and all other documents related thereto; and Lender shall have received
evidence satisfactory to Lender that the Subordinate Notes shall have been
paid in full from the proceeds of the Term Loan and that all liens and
security interests securing the Subordinated Notes (and all UCC-1 financing
statements related thereto) shall have been released and terminated.
(o) FEES/EXPENSES. Lender shall have received evidence of the payment by
Borrower of all fees and expenses owing by Borrower pursuant to the provisions
of this Agreement and the other Loan Documents, including, without limitation,
the Commitment Fee and the actual and reasonably anticipated fees and expenses
of Special Counsel and Lender in connection with the drafting, negotiation and
closing of this Agreement and the other Loan Documents and the recordation and
filing of certain Collateral Documents after the Closing Date.
(p) ORIGINAL CREDIT AGREEMENT REQUIREMENTS. Lender shall have received
all financial reports, certificates and other items required to have been
delivered under the Original Credit Agreement for all periods up to the Closing
Date.
(q) FURTHER DOCUMENTS. As of the Closing Date, Lender shall have
received, in form and substance satisfactory to Lender and Special Counsel,
such other documents and instruments as Lender may reasonably require to
evidence the status, organization or authority of Borrower and each Subsidiary,
as applicable, and to evidence payment of the Obligation.
SECTION 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES. Lender shall not be
obligated to make any Advance under the Revolving Commitment or issue a Letter
of Credit if there is in
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existence at such time an Event of Default or a Default has occurred and is
continuing; or if any representations or warranties contained in ARTICLE VII
shall be false or untrue in any material respect on the date of such advance,
as if made on such date except for representations and warranties that are by
their express terms limited to a specific date; or if any Litigation that
could have a Material Adverse Effect, arbitration or governmental
investigation or proceeding before any Tribunal, which, if adversely
determined, would reasonably be expected to have a Material Adverse Effect
upon Borrower or any Subsidiary, shall be pending, or, to the knowledge of
Borrower or any Subsidiary, threatened against Borrower or any Subsidiary or
affecting the business or operations of Borrower or such Subsidiary; or if
there shall have occurred any Material Adverse Change in the business,
condition or operation (financial or otherwise) of Borrower or any Subsidiary
since the Closing Date. Each request by Borrower for an Advance under the
Revolving Commitment shall constitute a representation by Borrower that
Borrower and each Subsidiary are in compliance with the provisions of this
SECTION 4.2.
SECTION 4.3 LEGAL DETAILS. All documents executed or submitted
pursuant hereto by Borrower and each Subsidiary shall be satisfactory in form
and substance to Lender and Special Counsel. Lender and Special Counsel
shall receive all information, and such counterpart originals or certified or
other copies of any such materials, as Lender or Special Counsel may
reasonably request. All legal matters incident to the transactions
contemplated by this Agreement (including, without limitation, matters
arising from time to time as a result of changes occurring with respect to
any Laws) shall be reasonably satisfactory to Special Counsel.
ARTICLE V
AFFIRMATIVE COVENANTS
From the date hereof, and so long as this Agreement is in effect and until
payment in full of the Obligation and the performance of all other obligations
of Borrower and each Subsidiary under this Agreement and the other Loan
Documents, Borrower and each Subsidiary agrees and covenants that it shall,
unless otherwise waived in writing by Lender, observe, perform, comply and
fulfill each and every covenant, term and provision set forth below:
SECTION 5.1 BOOKS, RECORDS AND PROPERTIES. Borrower and each
Subsidiary shall maintain its respective books and records in accordance with
GAAP. During normal business hours and after reasonable notice by Lender
(provided that if a Default or Event of Default shall occur and be in
existence, reasonable notice shall not be required) Borrower and each
Subsidiary shall permit any of Lender's agents or representatives to have
access to and examine the books and records of Borrower and each Subsidiary,
including statements and schedules with respect to the Collateral, and to
copy and make abstracts therefrom, and to inspect any of the business
properties of Borrower and each Subsidiary at any time(s) hereafter during
normal business hours.
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SECTION 5.2 FINANCIAL STATEMENTS AND REPORTS. Borrower and each
Subsidiary shall furnish or cause to be furnished to Lender the following
Financial Statements and reports:
(a) QUARTERLY REPORTS OF BORROWER. On or before the forty-five (45) days
after the end of each fiscal quarter of Borrower, (i) a Borrowing Base Report
dated as of the last day of the immediately preceding quarter and (ii) to the
extent that such information is not specifically included in the Borrowing Base
Report, a report showing, as of such date, the Accounts of Borrower and each
Subsidiary and the Eligible Accounts in such detail as shall be acceptable to
Lender and the aging of all of such Accounts in categories of current, thirty
(30) days past due, sixty-one (61) or more days past due and ninety (90) or more
days past due. Each such report shall be in detail reasonably acceptable to
Lender and shall be certified as being complete and correct in all material
respect by the chief financial officer of the party to whom the applicable
Accounts are payable or another authorized officer or representative of such
party reasonably acceptable to Lender.
(b) QUARTERLY STATEMENTS OF BORROWER AND EACH SUBSIDIARY. As soon as
practicable after the end of each fiscal quarter of Borrower, and in any event
within forty-five (45) days after the end of each fiscal quarter, copies of
Financial Statements of Borrower and each Subsidiary on a consolidated basis.
Each such Financial Statement shall be in detail reasonably acceptable to Lender
and shall be certified as being complete and correct in all material respects,
subject to changes resulting from year-end adjustment, by the chief financial
officer of Borrower or by another authorized officer or agent of Borrower
reasonably acceptable to Lender.
(c) ANNUAL STATEMENTS OF BORROWER. As soon as practicable after the end
of each fiscal year of Borrower and in any event within one hundred twenty (120)
days thereafter, copies of annual Financial Statements of Borrower, prepared on
a consolidated basis, setting forth in each case in comparative form the figures
for the previous fiscal year, all in reasonable detail and accompanied by an
unqualified opinion of independent certified public accountants acceptable to
Lender, which opinion shall state that the Financial Statements have been
prepared in accordance with GAAP, that their examination has been made in
accordance with generally accepted auditing standards and that said financial
statements present fairly the financial position of Borrower and its results of
operations.
(d) QUARTERLY CERTIFICATE. Within forty-five (45) days after the end of
each fiscal quarter of Borrower, a Compliance Certificate dated as of the last
day of such fiscal quarter of Borrower.
(e) CONTINGENT LIABILITIES REPORT. Promptly upon becoming aware, written
notice of (i) any actual or potential contingent liabilities, including
Litigation, against Borrower or any Subsidiary involving liability in an
uninsured amount in excess of $125,000 and (ii) any other act, event or
circumstance, the result of which could have a Material Adverse Effect upon
Borrower or any Subsidiary.
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(f) SEC FILINGS. Promptly after the filing thereof, a true, correct and
complete copy of each Form 10-K and Form 10-Q and each other report filed by or
on behalf of Borrower with the Securities and Exchange Commission.
SECTION 5.3 MAINTENANCE OF EXISTENCE AND PRESERVATION OF PROPERTY.
Borrower and each Subsidiary shall cause to be done all things necessary to
preserve and keep in full force and effect its existence as a corporation.
Borrower and each Subsidiary shall keep its respective business property,
including leasehold interests, necessary to continue its respective business in
good operating condition.
SECTION 5.4 INSURANCE. Borrower and each Subsidiary shall maintain in
force with financially sound and reputable insurers, insurance policies required
pursuant to the Loan Documents in accordance with the provisions thereof and
such other policies with respect to their respective business properties and
businesses against such casualties and contingencies (including fire, worker's
compensation, business interruption and public liability) and in such amounts as
is customary in the lines of business of comparable size and financial strength
and as is acceptable to Lender, with loss payee endorsements in favor of Lender
and noncancelable without thirty (30) days prior notice to Lender. Borrower and
each Subsidiary shall supply evidence of such insurance to Lender upon request
by Lender.
SECTION 5.5 COMPLIANCE WITH APPLICABLE LAWS. Borrower and each
Subsidiary shall comply in all material respects with the requirements of all
applicable Laws and orders (including but not limited to the ERISA and
Environmental Laws), Tribunals or other governmental authorizations necessary to
the ownership of their respective properties or to the conduct of their
respective businesses.
SECTION 5.6 OTHER INFORMATION AND DOCUMENTS. Borrower and each
Subsidiary shall promptly deliver to Lender such information, certificates and
documents in addition to those herein mentioned as Lender may from time to time
reasonably request.
SECTION 5.7 DEFAULT. Borrower and each Subsidiary shall report to
Lender immediately any Default or Event of Default and any notice of any claimed
default under any other debt agreement, specifying the default and steps taken
or to be taken to cure any such default.
SECTION 5.8 TAXES. Borrower and each Subsidiary shall pay any stamp,
loan, transaction or similar taxes that may be imposed on this Agreement, the
Advances, the Notes, or any of the transactions hereunder, and shall pay all
income, ad valorem, and other taxes (other than taxes of Lender that are
measured by or calculated based upon income of Lender) before they become
delinquent except taxes being contested by appropriate means and in good faith
and levy and execution therein have been stayed and continued to be stayed. Any
such taxes must be paid before their nonpayment causes a Lien to be filed on any
of the Collateral.
SECTION 5.9 FURTHER ASSURANCES. Borrower and each Subsidiary shall
immediately, on request of Lender, correct any defect or error which may be
discovered in the contents of any
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of the Loan Documents or in the execution or acknowledgment thereof, and will
execute, acknowledge and deliver such further instruments and do such further
acts as, in each case, may be necessary and as may be reasonably requested by
Lender to carry out more effectively the purposes of this Agreement and the
Loan Documents and to subject to the Liens any of the properties, rights or
interests of Borrower or each Subsidiary covered or intended to be covered
thereby, and to perfect and maintain all Liens at any time securing all or
any part of the debt hereunder.
SECTION 5.10 FILINGS. Borrower and each Subsidiary shall pay all
expenses incurred in connection with the filing of any of the Collateral
Documents or other Loan Documents and every other instrument in addition or
supplemental to any thereof that shall be required by Law, or that Lender or
Special Counsel reasonably may deem necessary, appropriate or otherwise
advantageous to Lender, in order to evidence, perfect and/or maintain the
validity and effectiveness of Liens at any time securing all or any part of the
Obligation.
SECTION 5.11 MAINTENANCE. Borrower and each Subsidiary shall maintain
all of its respective property that is used or useful in its respective business
in good condition and repair and make all necessary replacements thereof, and
preserve and maintain all material leases, licenses, privileges, franchises,
certificates and the like necessary for the operation of its respective
business.
SECTION 5.12 ERISA COMPLIANCE. Borrower and each Subsidiary shall (i) at
all times, make timely payment of all contributions required under all Plans and
required to meet the minimum funding standards set forth in ERISA with respect
to its Plans, (ii) within thirty (30) days after the filing thereof, furnish to
Lender copies of each annual report/return, as well as all schedules and
attachments required to be filed with the Department of Labor and/or the
Internal Revenue Service pursuant to ERISA, and the regulations promulgated
thereunder, in connection with each of its Plans for each Plan year,
(iii) notify Lender immediately of any fact, including, but not limited to, any
Reportable Event arising in connection with any of its Plans, which might
constitute grounds for termination thereof by the PBGC or for the appointment by
the appropriate United States District Court of a trustee to administer such
Plan, together with a statement, if requested by Lender as to the reason
therefor and the action, if any, proposed to be taken with respect thereto, and
(iv) furnish to Lender, upon its request, such additional information concerning
any of its Plans as may be reasonably requested.
SECTION 5.13 INDEMNITY. BORROWER AND EACH SUBSIDIARY SHALL INDEMNIFY,
SAVE, AND HOLD HARMLESS LENDER AND ITS SHAREHOLDERS, DIRECTORS, OFFICERS,
AGENTS, ATTORNEYS, AND EMPLOYEES (COLLECTIVELY, THE "INDEMNITEES") FROM AND
AGAINST: (A) ANY AND ALL CLAIMS, DEMANDS, ACTIONS, OR CAUSES OF ACTION THAT ARE
ASSERTED AGAINST ANY INDEMNITEE IF THE CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
DIRECTLY OR INDIRECTLY RELATES TO THE OBLIGATION, THE USE OF PROCEEDS OF ANY
ADVANCE UNDER THE TERM LOAN OR THE REVOLVING COMMITMENT, OR THE RELATIONSHIP OF
BORROWER AND LENDER, OR OF ANY GUARANTOR AND
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LENDER, UNDER THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED PURSUANT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, (B) ANY PROCEEDING OR ANY
ADMINISTRATIVE, INVESTIGATIVE OR ARBITRATION PROCEEDING BY OR BEFORE ANY
TRIBUNAL OR ARBITRATION BODY DIRECTLY OR INDIRECTLY RELATED TO (I) A CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION DESCRIBED IN CLAUSE (A) ABOVE OR (II) ANY
CLAIM, DEMAND, PROCEEDING, ACTION OR CAUSE OF ACTION INVOLVING BORROWER, ANY
SUBSIDIARY OR ANY AFFILIATE (INCLUDING ANY SHAREHOLDER) OF BORROWER OR ANY
SUBSIDIARY IN WHICH ANY INDEMNITEE INCURS COSTS AND EXPENSES AS A RESULT OF
ANY REQUIREMENT THAT SUCH INDEMNITEE TESTIFY OR PRODUCE RECORDS THEREIN, AND
(C) ANY AND ALL LIABILITIES, LOSSES, COSTS, OR EXPENSES (INCLUDING ATTORNEYS'
FEES AND DISBURSEMENTS) THAT ANY INDEMNITEE SUFFERS OR INCURS AS A RESULT OF
ANY OF THE FOREGOING (OTHER THAN AS A RESULT OF ANY LITIGATION COMMENCED BY
AN INDEMNITEE IN WHICH SUCH INDEMNITEE IS NOT THE PREVAILING PARTY),
EXPRESSLY INCLUDING ANY SUCH CLAIMS, LOSSES OR LIABILITIES ARISING OUT OF
MERE NEGLIGENCE OF LENDER; PROVIDED, HOWEVER, THAT NEITHER BORROWER NOR ANY
SUBSIDIARY SHALL HAVE ANY OBLIGATION UNDER THIS SECTION 5.13 TO A PARTICULAR
INDEMNITEE OR WITH RESPECT TO ANY OF THE FOREGOING ARISING OUT OF THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE. IF ANY CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION IS ASSERTED AGAINST ANY INDEMNITEE, SUCH INDEMNITEE
SHALL PROMPTLY NOTIFY BORROWER AND EACH SUBSIDIARY, BUT THE FAILURE TO SO
PROMPTLY NOTIFY BORROWER OR ANY SUBSIDIARY SHALL NOT AFFECT THE OBLIGATIONS
OF BORROWER OR ANY SUBSIDIARY UNDER THIS SECTION 5.13. ANY OBLIGATION OR
LIABILITY OF BORROWER OR ANY SUBSIDIARY TO ANY INDEMNITEE UNDER THIS SECTION
5.13 SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT AND THE
REPAYMENT OF THE OBLIGATION.
SECTION 5.14 CONTINGENT LIABILITIES. Borrower and each Subsidiary shall
immediately inform Lender of the actual or potential incurrence of any
contingent liability, including the amount and to whom the obligation is or may
be payable.
SECTION 5.15 POST-CLOSING LIEN RELEASE REQUIREMENTS. Within ten (10)
days after the Closing Date (or such longer period as Lender may reasonably
agree to in the event that any such items cannot practicably be obtained within
such ten (10) day period, and in any event within thirty (30) days after the
Closing Date), Borrower shall deliver or cause to be delivered to Lender
evidence in form and content satisfactory to Lender of (a) the payment in full
of the Subordinate Notes and (b) releases of all liens and security interests
and financing statements related thereto.
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ARTICLE VI
NEGATIVE COVENANTS
From the date hereof and so long as this Agreement is in effect and until
payment in full of the Obligation, the expiration or termination of all Letters
of Credit, and the performance of all other obligations of Borrower and each
Subsidiary under this Agreement and the other Loan Documents, Borrower and each
Subsidiary agrees and covenants that it shall observe, perform, comply and
fulfill each and every covenant, term and provision set forth below, unless
Lender shall otherwise give its prior written consent:
SECTION 6.1 LIMITATION ON DEBT. Neither Borrower nor any Subsidiary
shall incur, create, contract, waive, assume, have outstanding, guarantee or
otherwise be or become, directly or indirectly, liable in respect of any Debt,
except (i) Debt to Lender arising under this Agreement, (ii) current liabilities
for taxes and assessments, wages, employee benefits, general and administrative
expenses not otherwise prohibited herein, incurred in the ordinary course of
business, (iii) Debt in respect of current accounts payable (other than for
borrowed funds or purchase money obligations) accrued and incurred in the
ordinary course of business, provided that all such liabilities, accounts and
claims shall be promptly paid and discharged when due or in conformity with
customary trade terms, (iv) Debt arising under any depository agreement between
Borrower or any Subsidiary and Lender, (v) Debt of Borrower or any Subsidiary
existing on the date hereof and described in EXHIBIT "G", or (vi) purchase money
debt incurred in the ordinary course of business and of which Borrower has
promptly notified Lender, provided that the amount of such purchase money debt
shall not exceed $300,000 with respect to the acquisition of any particular item
of personal property and shall not exceed $500,000 in the aggregate at any time.
SECTION 6.2 LIENS. Neither Borrower nor any Subsidiary shall grant,
permit or suffer to exist any Lien on any of its property or assets, except for
Permitted Liens.
SECTION 6.3 TRANSFER OF ASSETS. Neither Borrower nor any Subsidiary
shall sell, lease, transfer, or otherwise dispose of any of its respective
business assets, except in the ordinary course of business and for full and fair
consideration.
SECTION 6.4 NEW INDUSTRY. Neither Borrower nor any Subsidiary shall
enter any industry or type of business other than the types of business
presently conducted by Borrower and each Subsidiary, respectively, and other
businesses directly related thereto.
SECTION 6.5 RESTRICTED INVESTMENTS. Neither Borrower nor any Subsidiary
shall make or have outstanding any Investments, except for Permitted
Investments.
SECTION 6.6 TRANSACTIONS WITH AFFILIATES. Neither Borrower nor any
Subsidiary shall enter into any transaction with any Affiliate except in the
ordinary course of the business of Borrower or any Subsidiary, and on fair and
reasonable terms no less favorable to Borrower or
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any Subsidiary than it would obtain in a comparable arm's length transaction
with a Person not an Affiliate.
SECTION 6.7 SENIOR FUNDED DEBT TO EBITDA RATIO. Borrower shall not
permit the Senior Funded Debt To EBITDA Ratio to be more than 1.50 to 1.00 at
the end of any fiscal quarter. In computing such ratio, there shall not be
included any charge to earnings resulting from the Simulation Sale or any
increase in earnings which may result from reversing any charge to earnings
previously taken in connection with the Simulation Sale.
SECTION 6.8 CURRENT MATURITIES COVERAGE RATIO. Borrower shall not
permit the Current Maturities Coverage Ratio to be less than 2.0 to 1.00 at the
end of any fiscal quarter. In computing such ratio, there shall not be included
any charge to earnings resulting from the Simulation Sale or any increase in
earnings which may result from reversing any charge to earnings previously taken
in connection with the Simulation Sale.
SECTION 6.9 FIXED CHARGE COVERAGE RATIO. Borrower shall not permit the
Fixed Charge Coverage Ratio to be less than 2.00 to 1.00 at the end of any
fiscal quarter.
SECTION 6.10 NAME, FISCAL YEAR AND ACCOUNTING METHOD. Neither Borrower
nor any Subsidiary shall change its name, fiscal year or method of accounting
except as required by GAAP.
SECTION 6.11 LIQUIDATION, MERGERS, CONSOLIDATIONS AND DISPOSITIONS OF
SUBSTANTIAL ASSETS. Neither Borrower nor any Subsidiary shall dissolve or
liquidate, or become a party to any merger or consolidation, or acquire by
purchase, lease or otherwise all or substantially all or substantially all of
the assets or capital stock of any Person, or sell, transfer, lease or otherwise
dispose of all or any substantial part of its property, assets or business.
SECTION 6.12 NO AMENDMENTS. Neither Borrower nor any Subsidiary shall
amend its articles of incorporation or bylaws without the prior written consent
of Lender, which consent shall not be unreasonably withheld.
SECTION 6.13 RESTRICTIONS ON DISTRIBUTIONS BY AND PURCHASES OF INTERESTS
IN BORROWER OR ANY SUBSIDIARY. Neither Borrower nor any Subsidiary shall,
directly or indirectly, declare or make or incur any liability to make any
Distributions, nor shall Borrower or any Subsidiary, directly or indirectly,
purchase or redeem or incur any liability to purchase or redeem any interest in
Borrower or any Subsidiary other than Distributions from any Subsidiary to
Borrower. Without limiting the foregoing, Borrower shall not distribute any
assets or make any other Distributions to Berg, or permit Berg to acquire any
assets.
SECTION 6.14 OWNERSHIP OF SUBSIDIARIES. Borrower shall not agree to,
consent to, vote for or approve any action or transaction that has, or may
reasonably be expected to have, the effect, either directly or indirectly, of
changing the ownership of any Subsidiary from the ownership that exists on the
date hereof.
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SECTION 6.15 MANAGEMENT OF BORROWER AND THE SUBSIDIARIES. Neither
Borrower nor any Subsidiary shall substantially change its respective present
executive or management personnel.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Borrower and each Subsidiary represents and warrants to Lender as follows:
SECTION 7.1 ORGANIZATION; QUALIFICATION; AUTHORITY. Borrower and each
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation. Borrower and each
Subsidiary is duly qualified to transact business as a foreign corporation and,
is in good standing in all states in which it is doing business or is otherwise
required to so qualify, unless the failure to qualify would not have a Material
Adverse Effect. The respective Board of Directors of Borrower and each
Subsidiary has duly authorized the execution, delivery and performance of the
Loan Documents to be executed by Borrower and each Subsidiary. No consent of
the shareholders of Borrower or any Subsidiary is required as a prerequisite to
the validity and enforceability of any Loan Documents or any other document
contemplated hereby. Borrower and each Subsidiary has full legal right and
corporate power (if such party is a corporation), and authority to execute,
deliver, and perform its obligations under the Loan Documents to be executed and
delivered by it. EXHIBIT "H" attached hereto lists all of the Subsidiaries and
the ownership thereof.
SECTION 7.2 FINANCIAL STATEMENTS. The Financial Statements (including
any related schedules and/or notes) heretofore delivered to Lender (whether
delivered to Lender in connection with this Agreement, or otherwise) and/or
required to be delivered to Lender pursuant hereto are true and correct in all
material respects (subject, as to interim statements, to charges resulting from
audits and year-end adjustments), have been prepared in accordance with GAAP
(except, as to interim statements, for notes) consistently followed throughout
the periods specified, and fairly present the financial condition and results of
operations of Borrower or the applicable Subsidiary as at the dates thereof and
for the periods indicated. There has been no Material Adverse Change in the
business, condition or operations (financial or otherwise) of Borrower or any
Subsidiary since December 31, 1995.
SECTION 7.3 CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither Borrower
nor any Subsidiary is a party to any contract or agreement or subject to any
restriction which materially and adversely affects the business, property or
assets or financial condition of Borrower or any Subsidiary. Neither the
execution nor delivery of this Agreement, the Notes, or the other Loan
Documents, nor fulfillment of nor compliance with the terms and provisions of
this Agreement, the Notes or the other Loan Documents will conflict with, or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the creation of any
Lien (except for Liens in favor of Lender created by the Loan Documents) upon
any of the properties or assets of Borrower or any Subsidiary pursuant to the
articles of
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incorporation of Borrower or such Subsidiary, any award of any arbitrator or
any agreement, instrument, order, judgment, decree, statute, law, rule or
regulation to which Borrower or any Subsidiary is subject, or to which its
respective property is subject. Neither Borrower nor any Subsidiary is a
party to, or otherwise subject to any provision contained in, any instrument
evidencing indebtedness of Borrower or any Subsidiary, any agreement relating
thereto or any other contract or agreement which limits the amount of, or
otherwise imposes restrictions on the incurring of, Debt of Borrower or any
Subsidiary of the type to be evidenced by the Notes or by the Guaranties to
be executed by the Subsidiaries pursuant hereto.
SECTION 7.4 GOVERNMENTAL CONSENT. Neither the nature of Borrower or any
Subsidiary, nor their respective businesses or properties, nor any relationship
between Borrower or any Subsidiary and any other Person, nor any circumstance in
connection with the execution, delivery and performance of this Agreement, the
Loan Documents or the Note is such as to require any authorization, consent,
approval, exemption or other action by or notice to or filing with any court or
Tribunal (other than routine filings and recordings to perfect Liens in favor of
Lender) in connection with the execution and delivery of this Agreement, the
Notes, the other Loan Documents, or the fulfillment of or compliance with the
terms and provisions hereof, of the Notes or of the other Loan Documents.
SECTION 7.5 ENFORCEABILITY. This Agreement, the Notes, the Guaranty
Agreements and the other Loan Documents are legal, valid and binding obligations
of Borrower and each Subsidiary, as applicable, enforceable against Borrower and
each Subsidiary, as applicable, in accordance with their terms.
SECTION 7.6 LITIGATION. Except as described in EXHIBIT "I" (and, with
respect to subsequent affirmations of this representation and warranty, except
as theretofore disclosed to Lender in writing), there is no Litigation pending
or, to the knowledge of Borrower or any Subsidiary, threatened against Borrower
or any Subsidiary, or any properties or rights of Borrower or any Subsidiary, by
or before any court, arbitrator or Tribunal. There is no Litigation pending or,
to the knowledge of Borrower or any Subsidiary, threatened against Borrower or
any Subsidiary which purports to affect the validity or enforceability of this
Agreement, the Notes or any of the other Loan Documents.
SECTION 7.7 OUTSTANDING DEBT. Neither Borrower nor any Subsidiary has
any outstanding Debt except as described on EXHIBIT "G" (and, with respect to
subsequent affirmations of this representation and warranty, except as otherwise
permitted hereunder). There exists no default under the provisions of any
instrument evidencing such Debt or of any material agreement relating thereto.
SECTION 7.8 TITLE TO PROPERTIES. Neither Borrower nor any Subsidiary
owns fee title to any real property. Borrower and each Subsidiary has good
title to all of its other respective properties and assets, subject to no Lien
of any kind except Permitted Liens. All leases necessary in any material
respect for the conduct of the respective businesses of Borrower and each
Subsidiary are valid and subsisting and are in full force and effect.
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SECTION 7.9 TAXES. Borrower and each Subsidiary has paid all taxes and
assessments owed by it to the extent that such taxes and assessments have become
due, except such taxes as are being contested in good faith by appropriate
proceedings for which adequate reserves have been established in accordance with
GAAP.
SECTION 7.10 REGULATION U, ETC. Borrower neither owns nor has any
present intention of acquiring any "margin stock" as defined in Regulation U (12
CFR Part 221) of the Board of Governors of the Federal Reserve System (herein
called "margin stock"). None of the proceeds of any advance of the Term Loan
nor any Advance under the Revolving Commitment will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any margin stock or for the purpose of maintaining,
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any stock that is currently a margin stock or for any other purpose
which might constitute this transaction a "purpose credit" within the meaning of
such Regulation U. Neither Borrower nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or the Notes to violate
Regulation U, Regulation G, Regulation T, Regulation X or any other regulation
of the Board of Governors of the Federal Reserve System or to violate the
Securities Exchange Act of 1934, as amended, in each case as in effect now or as
the same may hereafter be in effect.
SECTION 7.11 ERISA. No accumulated funding deficiency (as defined in
section 302 of ERISA and section 412 of the Code), whether or not waived, exists
with respect to any Plan. No liability to the PBGC has been or is expected by
Borrower or any Subsidiary to be incurred with respect to any Plan by Borrower
or any Subsidiary which is or would be materially adverse to Borrower or any
Subsidiary. Neither Borrower nor any Subsidiary has incurred or presently
expects to incur any withdrawal liability under Title IV of ERISA with respect
to any Multiemployer Plan which is or would be materially adverse to Borrower or
any Subsidiary.
SECTION 7.12 DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished, or to be furnished from time to time, to
Lender by or on behalf of Borrower or any Subsidiary in connection herewith
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading in any material respect. There is no fact known to Borrower or any
Subsidiary that is peculiar to Borrower or any Subsidiary which materially and
adversely affects or in the future may (so far as Borrower or any Subsidiary can
now foresee) materially and adversely affect the business, property or assets,
or financial condition of Borrower or any Subsidiary and which has not been set
forth in this Agreement or in the other documents, certificates and statements
furnished to Lender by or on behalf of Borrower or a Subsidiary prior to the
date hereof in connection with the transactions contemplated hereby.
SECTION 7.13 ENVIRONMENTAL MATTERS. Borrower and each Subsidiary, the
plants and sites it owns, and to the best of its knowledge, the plants and sites
which it leases, have complied with all applicable federal, state, local and
regional statutes, ordinances, orders, judgments, rulings and regulations
relating to any matters of pollution or of environmental regulation or control
except, in any such case, where such failure to comply would not result in a
Material
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Adverse Effect to Borrower or any Subsidiary. Without limiting the
generality of the preceding sentence, neither Borrower nor any Subsidiary has
received notice of or has actual knowledge of any actual, claimed or asserted
failure so to comply which alone or together with any other such failure is
material and would result in a Material Adverse Effect upon Borrower or any
Subsidiary. During periods of use, ownership, occupancy or operation by
Borrower or any Subsidiary, neither Borrower, nor any Subsidiary nor their
respective plants or sites have managed, generated, released or disposed of
any hazardous wastes, hazardous substances, hazardous materials, toxic
substances or toxic pollutants, as those terms are used or defined in the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response Compensation and Liability Act, the Hazardous Materials
Transportation Act, the Toxic Substance Control Act, the Clean Air Act and
the Clean Water Act, in material violation of or in a manner which would
result in liability under such statutes or any regulations promulgated
pursuant thereto or any other applicable law, except where such noncompliance
or liability would not result in a Material Adverse Effect upon Borrower or
any Subsidiary.
SECTION 7.14 SUFFICIENCY OF CAPITAL. Borrower and each Subsidiary is,
and after consummation of this Agreement and after giving effect to the
Obligation incurred and Liens created in connection herewith will be, Solvent.
As used in this SECTION 7.14, "Solvent" means, with respect to a particular
date, that on such date (a) the fair value of the property of the applicable
party is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such party, (b) the present fair salable
value of the assets of such party is not less than the amount that will be
required to pay the probable liability of such party on its debts as they become
absolute and matured, (c) such party is able to realize upon its assets and pay
its debts and other liabilities, contingent obligations and other commitments as
they mature in the normal course of business, (d) such party does not intend to,
or believes that it will, incur debts or liabilities beyond such party's ability
to pay as such debts and liabilities mature, and (e) such party is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such party's property would constitute unreasonably small
capital after giving due consideration to the prevailing practice in the
industry in which such party is engaged. In computing the amount of contingent
liabilities at any time, it is intended that such liabilities will be computed
at the amount which, in light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or material liability.
SECTION 7.15 NO FINANCING OF CORPORATE TAKEOVERS. None of the advances
under the Term Loan or Advances under the Revolving Commitment will be used to
acquire any security in any transaction which is subject to Sections 13 or 14 of
the Securities Exchange Act of 1934, including particularly (but without
limitation) Sections 13(d) and 14(d) thereof.
SECTION 7.16 PRINCIPAL OFFICE, ETC. The principal office, chief
executive office and principal place of business of Borrower and each Subsidiary
is located at 2400 Louisiana Blvd. NE, AFC Building 5, Suite 600, Albuquerque,
NM 87110. Borrower and each Subsidiary maintains its principal records and
books at such address.
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SECTION 7.17 COMPLIANCE WITH LAWS. Borrower and each Subsidiary is in
compliance in all material respects with all material Laws which are applicable
to it or its properties.
SECTION 7.18 GOVERNMENT REGULATION. Neither Borrower nor any Subsidiary
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Investment Company Act of 1940 (as any of the
preceding acts have been amended), or any other Law (other than Regulation X)
which regulates the incurring by a Person of Debt.
SECTION 7.19 INSIDER. Neither Borrower nor any Subsidiary is, and no
Person having "control" (as that term is defined in 12 U.S.C. Section 375(b)(5)
or in regulations promulgated pursuant thereto) of Borrower or any Subsidiary
is, an "executive officer," "director," or "principal shareholder" (as those
terms are defined in 12 U.S.C. Section 375(b) or in regulations promulgated
pursuant thereto) of Lender, of a bank holding company of which Lender is a
subsidiary, or of any subsidiary of a bank holding company of which Lender is a
subsidiary, or of any bank at which Lender maintains a "correspondent account"
(as such term is defined in such statute or regulations), or of any bank which
maintains a correspondent account with Lender.
SECTION 7.20 FAIR LABOR STANDARDS ACT. Borrower and each Subsidiary has
complied with, and will continue to comply with, the provisions of the Fair
Labor Standards Act of 1938, 29 U.S.C.Section 200, ET SEQ., as amended from time
to time (the "FLSA"), including specifically, but without limitation, 29 U.S.C.
Section 215(a). This representation and warranty, and each reconfirmation
hereof, shall constitute written assurance from Borrower and each Subsidiary,
given as of the date hereof and as of the date of each reconfirmation, that
Borrower and each Subsidiary has complied in all material respects with the
requirements of the FLSA, in general, and Section 215(a)(1) thereof in
particular.
SECTION 7.21 CASUALTIES. Neither the business nor the properties of
Borrower or any Subsidiary is currently affected by any environmental hazard,
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storms, hail, earthquake, embargo, act of God or other casualty (whether or not
covered by insurance), which could have a Material Adverse Effect upon Borrower
or any Subsidiary.
SECTION 7.22 INVESTMENT COMPANY ACT. Neither Borrower nor any Subsidiary
(i) is an "investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, or (ii) is controlled by such a
company. Borrower will not conduct its business in such a way that it will
become subject to regulation under the Investment Advisers Act of 1940, as
amended.
SECTION 7.23 NO DEFAULT. No event has occurred and is continuing which
constitutes a Default or an Event of Default.
SECTION 7.24 REPRESENTATIONS AND WARRANTIES. The delivery of any
document to Lender under the terms of this Agreement shall constitute, without
the necessity of specifically
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containing a written statement, a representation and warranty by Borrower
that no Default or Event of Default exists and that all representations and
warranties contained in this ARTICLE VII or in any other Loan Document are
true and correct on and as of such date.
SECTION 7.25 FISCAL YEAR AND ACCOUNTING METHODS. Neither Borrower, any
Subsidiary will change its Fiscal Year or its method of accounting (other than
changes as are concurred with by such Person's independent public accountants as
being required by GAAP); provided, that, Lenders will not unreasonably withhold
their consent to any such change in method of accounting if such change is in
compliance with GAAP.
SECTION 7.26 SUBSIDIARIES. Berg and GreenSpring are the only
Subsidiaries of Borrower as of the Closing Date. Borrower owns 100% of all
issued and outstanding stock of Berg and GreenSpring, and any stock options or
warrants with respect to the stock of Berg or GreenSpring.
SECTION 7.27 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties by Borrower and/or any Subsidiary herein shall
survive delivery of the Notes, and any investigation at any time made by or on
behalf of Lender shall not diminish Lender's right to rely thereon.
ARTICLE VIII
DEFAULT
SECTION 8.1 EVENTS OF DEFAULT. The term "Event of Default" as used
herein, means the occurrence and continuance of any one or more of the following
events (including the passage of time, if any, specified therefor):
(a) Borrower or any Subsidiary shall fail to pay, when due, whether by its
terms, acceleration, maturity or otherwise, any amount, whether principal,
interest or other amounts, payable hereunder, under the Notes or under any of
the other Loan Documents; provided, however, that, except in the case of
maturity of the Notes, such nonpayment shall not be deemed an Event of Default
until the expiration of five (5) days after written notice thereof to Borrower;
provided, further, that if Lender has delivered written notice of nonpayment of
any such part of the Obligation two (2) times during the preceding twelve (12)
month period, then Borrower shall not be entitled to any notice from Lender, and
any nonpayment of the Obligation, or any part thereof, when due shall
automatically be an Event of Default; or
(b) Any representation or warranty made by Borrower or any Subsidiary
under or in connection with any Loan Document shall prove to have been incorrect
in any material respect when made; or
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(c) Borrower or any Subsidiary shall fail to perform or observe any term,
covenant or agreement contained herein or contained in any other Loan Document
and, except (i) in the case of any breach or noncompliance with the provisions
of SECTIONS 5.2, 5.3, 5.7, 5.15, and ARTICLE VI or (ii) if any event is covered
in another subsection of this SECTION 8.1 (for which either such circumstance
there shall not be given the notice and cure period herein granted), such
failure continues for thirty (30) days after written notice thereof from Lender
to Borrower; or
(d) Borrower or any Subsidiary shall fail to pay any Debt which is, either
separately or in the aggregate, in the amount of $200,000 or more, or any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other default under any agreement or
instrument relating to any such Debt, or any other event, shall occur and shall
continue after the applicable grace period, if any, specified in such agreement
or instrument, if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
or
(e) Borrower or any Subsidiary shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against Borrower or any Subsidiary
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding-up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any Debtor Relief Laws, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for any substantial part of its property; or Borrower
or any Subsidiary shall take any action to authorize any of the actions set
forth above in this SECTION 8.1(E); provided, however, that the filing of any
such proceeding against Borrower or any Subsidiary shall not constitute an Event
of Default if same is dismissed within sixty (60) days of the date of filing of
same; or
(f) Any judgment or order for the payment of money in excess of $200,000
shall be rendered against Borrower or any Subsidiary and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of thirty (30) consecutive days during
which a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; or
(g) Lender for any reason shall cease to have a valid and perfected first
priority security interest in any portion of the Collateral purported to be
covered by any of the Collateral Documents; or
(h) Any material provision of the Loan Documents shall at any time for any
reason cease to be valid and binding on Borrower or any Subsidiary or shall be
declared to be null and void, or the validity or enforceability thereof shall be
contested by Borrower or any Subsidiary, or a proceeding shall be commenced by
any Tribunal having jurisdiction over Borrower or any
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Subsidiary or any Collateral, seeking to establish the invalidity or
unenforceability thereof and such proceeding shall remain undismissed or
unstayed for a period of thirty (30) days, or Borrower or any Subsidiary
shall deny that it has any or further liability or obligation thereunder; or
(i) The occurrence of a default or event of default (howsoever designated)
contained in any other Loan Document and such default or event of default shall
continue beyond any applicable grace period; or
(j) The occurrence of any event deemed material and adverse with respect
to Borrower or any Subsidiary, or their respective businesses or financial
condition, as reasonably determined by Lender.
SECTION 8.2 REMEDIES UPON DEFAULT. If an Event of Default specified in
SECTION 8.1(e) shall occur and be continuing, the aggregate unpaid principal
balance of and accrued interest on the Obligation shall thereupon immediately
become due and payable and the Revolving Commitment shall immediately terminate
concurrently therewith, without any action by Lender and without diligence,
presentment, demand, protest, notice of protest, notice of acceleration or
notice of intent to accelerate, or notice of any other kind, all of which are
hereby expressly waived. Should any other Event of Default occur and be
continuing, Lender may do any one or more of the following:
(a) ACCELERATION. Declare the entire unpaid balance of the Obligation, or
any part thereof, immediately due and payable, whereupon it shall be due and
payable without any action by Lender and without diligence, presentment, demand,
protest, notice of protest, notice of acceleration or notice of intent to
accelerate or notice of any other kind, all of which are hereby expressly
waived.
(b) TERMINATION. Terminate the Revolving Commitment.
(c) JUDGMENT. Reduce any claim to judgment.
(d) RIGHTS. Exercise any and all Rights afforded by the Laws of the State
of Texas or any other jurisdiction, including, but not limited to, the UCC, or
by any of the Loan Documents, or by Law, in equity, or otherwise.
(e) OFFSET. Exercise the Rights of offset and/or banker's Lien against
the interest of Borrower and/or any Subsidiary in and to every account and other
property of Borrower or any Subsidiary which is in the possession of Lender, to
the extent of the full amount of the Obligation.
SECTION 8.3 PERFORMANCE BY LENDER. Should any covenant, duty or
agreement of Borrower or any Subsidiary fail to be performed in all material
respects in a timely manner in accordance with the terms of this Agreement or
the other Loan Documents, Lender may, at its
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option, perform, or attempt to perform, such covenant, duty or agreement on
behalf of Borrower or any Subsidiary. In such event, Borrower and each
Subsidiary shall, jointly and severally, at the request of Lender, promptly
pay any amount expended by Lender in such performance or attempted
performance to Lender at Lender's Principal Office, together with interest
thereon at the Default Rate from the date of such expenditure by Lender until
paid. Notwithstanding the foregoing, it is expressly understood that Lender
shall not have any liability or responsibility for the performance of any
duties of Borrower or any Subsidiary hereunder.
SECTION 8.4 LENDER NOT IN CONTROL. None of the covenants or other
provisions contained in this Agreement shall, or shall be deemed to, give Lender
the Rights or power to exercise control over the affairs or management of
Borrower or any Subsidiary, the power of Lender being limited to the Right to
exercise the remedies provided in this ARTICLE VIII; PROVIDED that, if Lender
becomes the owner of any interest in Borrower or any Subsidiary, whether through
foreclosure or otherwise, Lender shall be entitled to exercise such legal Rights
as it may have by being an owner of such interest in Borrower or any Subsidiary.
SECTION 8.5 WAIVERS. The acceptance by Lender at any time and from time
to time of part payment on the Obligation shall not be deemed to be a waiver of
any Event of Default or Default then existing. No waiver by Lender of any
particular Event of Default or Default shall be deemed to be a waiver of any
Event of Default or Default other than said particular Event of Default or
Default. No delay or omission by Lender in exercising any Right under any Loan
Documents shall impair such Right or be construed as a waiver thereof or an
acquiescence therein, nor shall any single or partial exercise of any such Right
preclude other or further exercise thereof, or the exercise of any other Right
under the Loan Documents or otherwise.
SECTION 8.6 CUMULATIVE RIGHTS. All Rights available to Lender under the
Loan Documents shall be cumulative of and in addition to all other Rights
granted to Lender at Law in equity or otherwise, whether or not the Obligation
be due and payable and whether or not Lender shall have instituted any suit for
collection or other action in connection with any Loan Document.
SECTION 8.7 EXPENDITURES BY LENDER. Any sums, including reasonable
attorneys' fees, spent by Lender pursuant to the exercise of any Right provided
in this ARTICLE VIII shall become part of the Obligation and shall bear interest
at the Default Rate from the date spent until the date repaid by Borrower.
SECTION 8.8 APPLICATION OF PROCEEDS. All payments on the Credit
Facility received by Lender during the existence of an Event of Default, and the
proceeds of any sale or disposition of, and all proceeds generated by the
holding, leasing, operation or other use of, the Collateral, or any part
thereof, during the existence of an Event of Default and upon the exercise of
the rights and remedies of Lender hereunder or under any of the Loan Documents,
shall be applied by Lender, the applicable trustee or the receiver, if one is
appointed, to the extent that funds are so available therefrom, in the following
order of priority, or as otherwise may be determined by Lender:
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(a) First, to the payment of the costs and expenses of taking
possession of the Collateral and holding, using, leasing, repairing, improving
or selling the same, including without limitation (i) trustee's and receiver's
fees, court costs, attorneys' and accountants' fees, (ii) costs of advertisement
and (iii) the payment of any and all Impositions and amounts secured by any
Liens equal or superior to Lender's Liens.
(b) Second, to the payment of the Obligation, other than the unpaid
principal balance of the Notes and accrued unpaid interest thereon, then due and
payable to Lender under the Loan Documents, and any advances made by Lender to
effect performance of any unperformed obligations of Borrower under any of the
Loan Documents, together with any accrued interest thereon if and as provided in
the Loan Documents.
(c) Third, to the payment of any and all accrued and unpaid interest
due on the Notes.
(d) Fourth, to the payment of the unpaid principal balance of the
Notes, in the inverse order of maturity unless Lender determines otherwise
(provided that in the case the entire principal amount of the Term Loan and the
Revolving Loan is then due and payable, such amount may be applied to interest
and/or principal in such order or manner as Lender shall determine).
(e) Fifth, to the extent known by Lender and required or permitted by
law, to the payment of any indebtedness or obligation secured by Liens against
the Collateral, as applicable, which are subordinate to Lender's Liens.
(f) Sixth, to Borrower or such other Person entitled to the same.
SECTION 8.9 SETOFF. Regardless of the adequacy of any Collateral,
during the continuance of any Event of Default, any deposits (general or
special, time or demand, provisional or final, regardless of currency, maturity,
or the branch of where such deposits are held) or other sums credited by or due
from Lender to Borrower, and any securities or other property of Borrower in the
possession of Lender may be applied to or set off against the payment of the
Obligation due to Lender in such order and manner as Lender may determine in its
sole discretion, regardless of whether Lender shall have made any demand under
this Agreement or the Notes and although the Obligation may be unmatured.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 ACCOUNTING TERMS. All accounting and financial terms used
herein, and the compliance with each covenant contained herein which relates to
financial matters, shall be
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determined in accordance with GAAP, except to the extent that a deviation
therefrom is expressly stated herein.
SECTION 9.2 MONEY. Unless stipulated otherwise, all references herein
to "Dollars", "money", payments", or other similar financial or monetary terms,
are references to currency of the United States of America.
SECTION 9.3 NUMBER AND GENDER OF WORDS. Wherever herein the singular
number is used, the same shall include the plural where appropriate, and words
of any gender shall include each other gender where appropriate.
SECTION 9.4 HEADINGS. The headings, captions and arrangements used in
this Agreement and the other Loan Documents are, unless specified otherwise, for
convenience only and shall not be deemed to limit, amplify or modify the terms
of any Loan Document, nor affect the meaning thereof.
SECTION 9.5 ARTICLES, SECTIONS, AND EXHIBITS. All references to
"Article", "Sections", "subparagraphs" or "subsections" contained herein are,
unless specifically indicated otherwise, references to articles, sections,
subparagraphs and subsections of this Agreement. All references to "Exhibits"
and "Schedules" contained herein are references to exhibits and schedules
attached hereto, all of which are made a part hereof for all purposes, the same
as if set forth herein verbatim. If any exhibit or schedule attached hereto
which is to be executed and delivered contains blanks or is otherwise required
to be updated from time to time, it shall be completed correctly and in
accordance with the terms and provisions contained and as contemplated herein
prior to, at the time of or after the execution and delivery thereof.
SECTION 9.6 NOTICES AND DELIVERIES.
(a) MANNER OF DELIVERY. All notices, communications and materials
(including all information) to be given or delivered pursuant to this Agreement
shall, except in those cases where giving notice by telephone is expressly
permitted, be given or delivered in writing. All written notices,
communications and materials shall be sent by registered or certified mail,
postage prepaid, return receipt requested, by telecopier, or delivered by hand
or overnight courier. In the event of a discrepancy between any telephonic
notice and any written confirmation thereof, such written confirmation shall be
deemed the effective notice except to the extent Lender, Borrower or any
Subsidiary has acted in reliance on such telephonic notice.
(b) ADDRESSES. All notices, communications and materials to be given or
delivered pursuant to this Agreement shall be given or delivered at the
following respective addresses and telecopier and telephone numbers and to the
attention of the following individuals or departments:
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(i) if to Borrower or any Subsidiary, care of Borrower at:
SBS Engineering, Inc.
2400 Louisiana Blvd., NE
AFC Building 5, Suite 600
Albuquerque, NM 87110
Telephone No: (505) 875-0600
Telecopier No: (505) 875-0404
Attention: Mr. Christopher J. Amenson, President
(ii) if to Lender, to it at:
NationsBank of Texas, N.A.
NationsBank Plaza
901 Main Street
7th Floor
Dallas, Texas 75202
Telephone No: (214) 508-0316
Telecopier No: (214) 508-3138
Attention: Commercial Banking Group
or at such other address, telecopier or telephone number or to the attention of
such other individual or department as the party to which such information may
hereafter specify for the purpose in a notice to the other specifically
captioned "Notice of Change of Address".
(c) EFFECTIVENESS. Each notice, communication and any material to be
given or delivered to Lender, Borrower or any Subsidiary pursuant to this
Agreement shall be effective or deemed delivered or furnished (i) if sent by
mail, on the second (2nd) Business Day after such notice, communication or
material is deposited in the mail, addressed as above provided, (ii) if sent by
telecopier, when such notice, communication or material is transmitted to the
appropriate number determined as above provided in this SECTION 9.6 and the
appropriate receipt is received or acknowledged, (iii) if sent by hand delivery
or overnight courier, when left at the address of the addressee addressed as
above provided and the appropriate receipt is received or acknowledged, and
(iv) if given by telephone, when communicated to the individual or any member of
the department specified as the individual or department to whose attention
notices, communications and materials are to be given or delivered except that
notices of a change of address, telecopier or telephone number or individual or
department to whose attention notices, communications and materials are to be
given or delivered shall not be effective until received.
SECTION 9.7 SURVIVAL OF AGREEMENTS. All covenants, agreements,
representations and warranties made herein shall survive the execution and the
delivery of this Agreement, the Notes and the other Loan Documents. All
statements contained in any certificate or other instrument delivered by or on
behalf of Borrower or any Subsidiary hereunder shall be deemed to constitute
representations and warranties made by Borrower or the applicable Subsidiary.
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SECTION 9.8 PARTIES IN INTEREST. All covenants and agreements contained
in the Loan Documents shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto, except that neither Borrower nor
any Subsidiary may assign its rights hereunder without the prior written consent
of Lender.
SECTION 9.9 EXPENSES. Borrower and each Subsidiary jointly and
severally agrees (a) to pay all out-of-pocket expenses of Lender in connection
with the negotiation and preparation of this Agreement, including exhibits and
amendments hereto, consents and waivers to any of the other Loan Documents as
may from time to time hereafter be requested or required, and the reasonable
fees and expenses of Special Counsel from time to time in connection with the
negotiation, preparation and execution of the Loan Documents, and (b) to pay or
reimburse Lender for all reasonable costs and expenses, including, without
limitation, reasonable fees and expenses of counsel to Lender incurred in
connection with the enforcement or preservation of any rights under or the
collection of any amounts due pursuant to any of the Loan Documents; provided,
that subsequent to an Event of Default, Borrower and each Subsidiary jointly and
severally agree to pay or reimburse Lender for all costs and expenses. The
obligations of Borrower and the Subsidiaries under this SECTION 9.9 shall
survive any termination of this Agreement.
SECTION 9.10 GOVERNING LAW. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS
SHALL BE DEEMED CONTRACTS MADE UNDER THE LAWS OF TEXAS AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF TEXAS, EXCEPT TO THE
EXTENT FEDERAL LAWS GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION OF ALL OR ANY PART OF THE LOAN DOCUMENTS OR THE LAWS OF ANY OTHER
STATE GOVERN THE PERFECTION OR LENDER'S LIENS IN THE COLLATERAL, AND EXCEPT TO
THE EXTENT FEDERAL LAW GOVERNS PURSUANT TO SECTION 9.12 HEREOF. WITHOUT
EXCLUDING ANY OTHER JURISDICTION, BORROWER AND EACH SUBSIDIARY AGREES THAT THE
COURTS OF TEXAS WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH.
BORROWER, EACH SUBSIDIARY AND LENDER HEREBY AGREE THAT EXCEPT FOR SECTION
15.10(b) THEREOF, THE PROVISIONS OF ART. 5069-15.01 ET SEQ. OF THE REVISED CIVIL
STATUTES OF TEXAS, 1925, AS AMENDED, SHALL NOT APPLY TO THIS AGREEMENT AND THE
NOTES.
SECTION 9.11 MANDATORY ARBITRATION. (A) ANY CONTROVERSY OR CLAIM BETWEEN
OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING
ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY
BINDING ARBITRATION IN ACCORDANCE THE FEDERAL ARBITRATION ACT (OR IF NOT
APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR
THE ARBITRATION OF COMMERCIAL DISPUTES OF
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JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. ("JAMS"), AND THE "SPECIAL
RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES
SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY
COURT HAVING JURISDICTION. ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
(b) SPECIAL RULES. The arbitration shall be conducted in Dallas, Texas
and administered by JAMS who will appoint an arbitrator; if JAMS is unable or
legally precluded from administering the arbitration, then the American
Arbitration Association will serve. All arbitration hearings will be commenced
within ninety (90) days of the demand for arbitration; further, the arbitrator
shall only, upon a showing of cause, be permitted to extend the commencement of
such hearing for up to an additional sixty (60) days.
(c) RESERVATIONS OF RIGHTS. Nothing in this Agreement or any other Loan
Document shall be deemed to (i) limit the applicability of any otherwise
applicable statutes of limitation or repose and any waivers contained in this
Agreement; or (ii) be a waiver by Lender of the protection afforded to it by 12
U.S.C. Section 91 or any substantially equivalent state law; or (iii) limit the
right of Lender hereto (A) to exercise self help remedies such as (but not
limited to) setoff, or (B) to foreclose against any real or personal property
collateral, or (C) to obtain from a court provisional or ancillary remedies such
as (but not limited to) injunctive relief or the appointment of a receiver.
Lender may exercise such self help rights, foreclose upon such property, or
obtain such provisional or ancillary remedies before, during or after the
pendency of any arbitration proceeding brought pursuant to this Agreement. At
Lender's option, foreclosure under a deed of trust or mortgage may be
accomplished by any of the following: the exercise of a power of sale under the
deed of trust or mortgage, or by judicial sale under the deed of trust or
mortgage, or by judicial foreclosure. Neither this exercise of self help
remedies nor the institution or maintenance of an action for foreclosure or
provisional or ancillary remedies shall constitute a waiver of the right of any
party, including the claimant in any such action, to arbitrate the merits of the
controversy or claim occasioning resort to such remedies.
SECTION 9.12 LIMITATION ON INTEREST. It is expressly stipulated and
agreed to be the intent of Borrower and Lender at all times to comply with the
applicable law governing the maximum rate or amount of interest payable on or in
connection with the Notes, the Advances and the Letters of Credit. If the
applicable law is ever judicially interpreted so as to render usurious any
amount called for under the Notes or under any of the other Loan Documents, or
contracted for, charged, taken, reserved or received with respect to any of the
Advances or the Letters of Credit, or if acceleration of the maturity of the
Notes, any prepayment by Borrower, or any other circumstance whatsoever, results
in Lender having been paid any interest in excess of that permitted by
applicable law, then it is the express intent of Borrower and Lender that all
excess amounts theretofore collected by Lender be credited on the principal
balance of the Notes (or, if the Notes have been or would thereby be paid in
full, refunded to Borrower), and the
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provisions of the Notes and the other applicable Loan Documents immediately
be deemed reformed and the amounts thereafter collectible hereunder and
thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
The right to accelerate the maturity of the Notes does not include the right
to accelerate any interest which has not otherwise accrued on the date of
such acceleration, and Lender does not intend to collect any unearned
interest in the event of acceleration. All sums paid or agreed to be paid to
Lender for the use, forbearance or detention of the indebtedness evidenced
hereby or by the Notes shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the Maximum Lawful Rate or
maximum amount of interest permitted under applicable law. The term
"APPLICABLE LAW" as used herein shall mean the laws of the State of Texas, or
any other applicable United States federal law to the extent that it permits
Lender to contract for, charge, take, reserve or receive a greater amount of
interest than under Texas law. The provisions of this SECTION 9.12 shall
control all agreements between Borrower and Lender.
SECTION 9.13 VALIDITY OF LIENS. Borrower hereby (a) affirms the liens
and security interests created pursuant to the Original Credit Agreement and the
Collateral Documents and other Loan Documents executed in connection therewith,
as modified and restated hereby, (b) agrees that all such liens and security
interests shall remain in place until such time as the Notes and the Obligation
have been paid in full, (c) agrees that this Agreement and the other Loan
Documents shall in no manner affect or impair such liens and security interests,
and that the liens shall not in any manner be waived, the purpose of this
Agreement and such other Loan Documents being to modify, renew and restate
certain terms of the Original Loan Agreement, and (d) acknowledges that all such
liens and security interests are valid and subsisting and in full force and
effect and secures the Obligation.
SECTION 9.14 REAFFIRMATION OF DEBT. This Agreement and the Loan
Documents executed in connection herewith constitute only an amendment and
restatement of the Original Credit Agreement and the Collateral Documents and
other Loan Documents executed in connection therewith (collectively, the
"ORIGINAL LOAN DOCUMENTS") and not a novation thereof or of any indebtedness
secured thereby. The parties have expressly intended and continue to intend
that none of the execution, delivery, and performance of any other documents
executed since the date of the Original Credit Agreement, including but not
limited to this herewith, shall have constituted a novation or discharge of any
indebtedness previously existing, as evidenced by the Original Loan Documents.
Without limiting the generality of the foregoing and without intending to affect
the priority of the Original Loan Documents, each of Borrower and Subsidiaries
hereby expressly reaffirms the grants and assignments, under the Original Loan
Documents, of all liens upon and security interests in the collateral described
therein as security for the Obligation and further irrevocably grants and
regrants, bargains and rebargains, sells and resells, conveys and reconveys,
mortgages and remortgages, assigns and reassigns, sets over and resets over, and
grants and regrants security interest in, unto Lender forever, all collateral
described in each of the Original Loan Documents as security for the Obligation,
in accordance
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with the terms and conditions of such Original Loan Documents, as amended by
this Agreement and the Loan Documents executed in connection herewith.
Except as expressly modified and restated by the terms of this Agreement and
the Loan Documents executed in connection herewith, the Original Loan
Documents shall remain in full force and effect.
SECTION 9.15 LIEN PRIORITY. Nothing contained herein or in any of the
other Loan Documents shall affect or impair the priority of the liens and
security interests arising under the Original Credit Agreement and documents
executed in connection therewith.
SECTION 9.16 TIME OF ESSENCE. Time shall be of the essence in this
Agreement with respect to all of Borrower's obligations hereunder.
SECTION 9.17 RENEWAL, EXTENSION OR REARRANGEMENT. All provisions of this
Agreement and of the other Loan Documents shall apply with equal force and
effect to each and all promissory notes hereafter executed which in whole or in
part represent a renewal, extension for any period, increase or rearrangement of
any part of the Obligation originally represented by the Notes.
SECTION 9.18 INCONSISTENT PROVISIONS. In the event of any conflict or
inconsistency between the terms of this Agreement and the terms of the other
Loan Documents, the terms of this Agreement shall control.
SECTION 9.19 CONSTRUCTION. The parties hereto acknowledge and agree that
neither this Agreement nor any other Loan Document shall be construed more
favorably in favor of one than the other based upon which party drafted the
same, it being acknowledged that all parties hereto contributed substantially to
the negotiations and preparation of this Agreement and the other Loan Documents.
SECTION 9.20 SEVERABILITY. If any provision of this Agreement or any
other Loan Document is held to be illegal, invalid or unenforceable under
present or future Laws during the term thereof, such provision shall be fully
severable, the appropriate agreement or instrument shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part thereof, and the remaining provision thereof shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance therefrom. Furthermore, IN LIEU of
such illegal, invalid or unenforceable provision there shall be added
automatically as a part of such agreement or instrument a provision as similar
in terms to the illegal, invalid or unenforceable provision as may be possible
and legal, valid and enforceable.
SECTION 9.21 AMENDMENT. The provisions of this Agreement and each other
Loan Document may not be amended, modified or waived except by the written
agreement of Borrower and Lender. This Agreement embodies the entire agreement
among the parties, supersedes all prior agreements and understandings, if any,
relating to the subject matter hereof, and may be amended only as provided
above.
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SECTION 9.22 EXCEPTIONS TO COVENANTS. Neither Borrower nor any
Subsidiary shall be deemed to be permitted to take any action or fail to take
any action which is permitted as an exception to any of the covenants contained
herein or which is within the permissible limits of any of the covenants
contained herein if such action or omission would result in the breach of any
other covenant contained herein.
SECTION 9.23 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, but in making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
SECTION 9.24 WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, BORROWER AND EACH SUBSIDIARY HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO A
TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT, EQUITY OR
OTHERWISE) ARISING UNDER OR RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS
OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A
JUDGE SITTING WITHOUT A JURY.
SECTION 9.25 ENTIRE AGREEMENT. THIS AGREEMENT SUPERSEDES ALL OTHER PRIOR
UNDERSTANDINGS AND AGREEMENTS, WHETHER WRITTEN OR NOT, BETWEEN THE PARTIES
HERETO RELATING SPECIFICALLY TO THE TRANSACTIONS PROVIDED FOR HEREIN, INCLUDING,
WITHOUT LIMITATION, THE ORIGINAL CREDIT AGREEMENT. BORROWER CONFIRMS THAT THERE
ARE NO EXISTING DEFENSES, CLAIMS, COUNTERCLAIMS OR RIGHTS OF OFFSET AGAINST
LENDER KNOWN TO BORROWER IN CONNECTION WITH THE NEGOTIATION, PREPARATION,
EXECUTION, PERFORMANCE OR ANY OTHER MATTERS RELATED TO THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS EXECUTED AS OF THE DATE HEREOF AND ANY OF THE
TRANSACTIONS CONTEMPLATED THEREBY, AND BORROWER HEREBY EXPRESSLY RELEASES AND
DISCHARGES LENDER, AND ITS OFFICERS AND REPRESENTATIVES, FROM ANY AND ALL SUCH
KNOWN CLAIMS. BORROWER FURTHER CONFIRMS THAT LENDER HAS NOT MADE ANY AGREEMENTS
WITH, OR COMMITMENTS OR REPRESENTATIONS TO, BORROWER (EITHER IN WRITING OR
ORALLY) OTHER THAN AS EXPRESSLY STATED HEREIN OR IN THE OTHER LOAN DOCUMENTS
EXECUTED AS OF THE DATE HEREOF.THIS AGREEMENT AND THE LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE
ARE NO ORAL AGREEMENTS BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BORROWER:
SBS TECHNOLOGIES, INC.
By: /s/ CHRISTOPHER J. AMENSON
------------------------------------
Christopher J. Amenson,
President
LENDER:
NATIONSBANK OF TEXAS, N.A.
By: /s/ BRIAN GORDON
------------------------------------
Name: Brian Gordon
Title: Vice President
ACKNOWLEDGEMENT AND CONSENT OF SUBSIDIARIES
The undersigned Subsidiaries hereby acknowledge the terms and agreements
contained herein, and agree and consent to be bound by the terms of this
Agreement and the other Loan Documents. The undersigned Subsidiaries
acknowledge and agree that they have and will receive substantial direct benefit
from the credit facilities created by this Agreement.
BERG SYSTEMS INTERNATIONAL, INC.
By: /s/ CHRISTOPHER J. AMENSON
------------------------------------
Name: Christopher J. Amenson
Title: Director, Chairman and Chief
Executive Officer
GREENSPRING COMPUTERS, INC.
By: /s/ CHRISTOPHER J. AMENSON
------------------------------------
Name: Christopher J. Amenson
Title: Chairman & Chief Executive
Officer
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EXHIBIT "A"
AMENDED AND RESTATED REVOLVING PROMISSORY NOTE
$2,500,000.00 Dallas, Texas April 26, 1996
SBS TECHNOLOGIES, INC. (formerly known as SBS Engineering, Inc.), a New
Mexico corporation, having its principal office located at 2400 Louisiana Blvd.,
NE, AFC Building 5, Suite 600, Albuquerque, NM, 87110 ("BORROWER"), for value
received, hereby promises to pay to the order of NATIONSBANK OF TEXAS, N.A., a
national banking association ("LENDER"), at its Dallas Banking Center at 901
Main Street, Dallas, Texas 75202, or at such other address given to Borrower by
Lender, in immediately available funds and in lawful money of the United States
of America, the principal sum of Two Million Five Hundred Thousand and NO/100
Dollars ($2,500,000.00), or so much thereof as may be advanced and outstanding,
on October 30, 1997, or sooner as provided in the Credit Agreement (as defined
herein), together with interest on the unpaid principal balance of this Note
from time to time outstanding at the applicable interest rate. Unless
prohibited by Applicable Law and subject to the terms hereof limiting interest
to the Maximum Lawful Rate, interest on this Note shall be calculated on the
basis of actual days elapsed, but as if each year consisted of 360 days.
This Note is made pursuant to that certain Amended and Restated Credit
Agreement of even date herewith between Borrower and Lender (as the same may be
amended, supplemented, renewed, extended or restated from time to time, the
"CREDIT AGREEMENT"), and is the "Revolving Note" defined and described therein,
the terms and provisions of the Credit Agreement related to this Note being
incorporated herein by reference for all purposes. Each capitalized term used
but not expressly defined herein shall have the meaning given to such term in
the Credit Agreement. Reference is hereby expressly made to the Credit
Agreement for a statement of the rights and obligations of Lender and the duties
and obligations of Borrower in relation thereto; but neither this reference to
the Credit Agreement nor any provision thereof shall affect or impair the
absolute and unconditional obligation of Borrower to pay unpaid principal of and
interest on this Note when due.
This Note is secured by the Credit Agreement, the Collateral Documents and
all the other Loan Documents, and all liens and security interests created or
evidenced thereby, and payment of this Note is guaranteed by the Guaranty. Any
holder hereof shall be entitled to all benefits of and remedies and security set
forth in the Credit Agreement, the Collateral Documents and all the other Loan
Documents.
Lender may disburse the principal of this Note to Borrower in one or more
advances from time to time, subject to and upon the terms and conditions set
forth in the Credit Agreement with respect to the Revolving Commitment, so long
as the outstanding principal
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balance hereof never exceeds the then applicable amount of the Revolving
Commitment or the Borrowing Base, less any Letter of Credit Exposure.
Subject to and upon the terms and conditions of the Credit Agreement,
Borrower shall be entitled to prepay the principal of this Note from time to
time, in whole or in part, without premium or penalty, except for any
prepayment fee due upon prepayment of a LIBOR Rate Portion prior to the
expiration of the applicable Interest Period as provided in Section 3.5(g) of
the Credit Agreement, and thereafter, prior to the maturity date hereof (and
provided that no Default has occurred and is in existence), to request
additional advances hereunder, subject to and in accordance with the terms
and conditions of the Credit Agreement.
1. INTEREST AND PAYMENT.
(a) MATURITY. The entire principal balance of this Note, and all
accrued but unpaid interest hereon, shall be due and payable in full on the
Revolving Loan Termination Date.
(b) ACCRUAL OF INTEREST. Subject to Paragraph 1(f) below, interest
on this Note shall accrue at a rate per annum equal to the lesser of (i) at
Borrower's option exercised in accordance with the terms of the Credit
Agreement, the Variable Rate or the LIBOR Rate with respect to the Variable Rate
Portions and the LIBOR Rate Portions outstanding hereunder from time to time,
subject, however, to the provisions of the Credit Agreement, or (ii) the Maximum
Lawful Rate; provided, however, that as to any portion of the outstanding
principal balance hereof that is not subject to an effective election of or
conversion to the LIBOR Rate in accordance with the terms of the Credit
Agreement, interest on such portion of this Note shall accrue interest at the
lesser of (i) the Variable Rate or (ii) the Maximum Lawful Rate. Interest on
this Note shall be calculated at a daily rate equal to 1/360 of the annual
percentage rate which this Note bears, subject to the provisions hereof limiting
interest to the Maximum Lawful Rate. Without notice to Borrower or any other
Person, the Variable Rate and the Maximum Lawful Rate shall each automatically
fluctuate upward and downward as and in the amount by which the Base Rate and
the Maximum Lawful Rate, respectively, fluctuate, subject always to limitations
contained in this Note and the Credit Agreement.
(c) AGREEMENTS CONCERNING PRICING ELECTION. Reference should be made
to the provisions of SECTION 3.5 of the Credit Agreement concerning the terms,
manner and agreements related to the interest rate elections available to
Borrower under this Note.
(d) PRINCIPAL AND INTEREST PAYMENTS. Principal and interest hereon
shall be due and payable as is provided in ARTICLE III of the Credit Agreement,
which provides, in part, for monthly payments of accrued, unpaid interest on the
first (1st) day of each month.
(e) COSTS DUE TO REGULATORY CHANGES. Borrower shall indemnify Lender
against and reimburse Lender for increased costs to Lender, as a result of any
Regulatory Change, in the maintaining of any LIBOR Rate Portion. All payments
made pursuant to this
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paragraph shall be made free and clear, without reduction for, or account of,
any present or future taxes or other levies of any nature, excluding net income
and franchise taxes.
(f) DEFAULT RATE. After maturity of this Note or the occurrence of
an Event of Default, the outstanding principal balance of this Note shall, at
the option of Lender, bear interest at the Default Rate. Any past due principal
and, to the extent permitted by law, past due interest on the Loan shall bear
interest, payable as it accrues on demand, for each day until paid at the
Default Rate. Such interest shall continue to accrue at the Default Rate
notwithstanding the entry of a judgment with respect to any of the Obligation or
the foreclosure of any of Lender's Liens.
(g) MAXIMUM LAWFUL RATE ADJUSTMENTS. If at any time a change in the
Variable Rate or the LIBOR Rate shall cause the rate of interest on this Note to
be limited to the Maximum Lawful Rate, any subsequent reductions in the Variable
Rate or the LIBOR Rate, as applicable, shall not reduce the rate of interest on
this Note below the Maximum Lawful Rate until the total amount of interest
accrued equals the amount of interest which would have accrued if the Variable
Rate or the LIBOR Rate, as applicable, had at all times been in effect. In the
event that at maturity (stated or by acceleration), or at the final payment of
the Loan, the total amount of interest paid or accrued on the Loan is less than
the amount of interest which would have accrued if the Variable Rate or the
LIBOR Rate, as applicable, had at all times been in effect with respect thereto,
then at such time, to the extent permitted by law, Borrower shall pay to Lender
an amount equal to the difference between (a) the lesser of the amount of
interest which would have accrued if the Variable Rate or the LIBOR Rate, as
applicable, had at all times been in effect and the amount of interest which
would have accrued if the Maximum Lawful Rate had at all times been in effect,
and (b) the amount of interest actually paid on the Loan.
2. DEFAULT. The occurrence of a Default or an Event of Default, under
and as defined in the Credit Agreement, shall constitute, respectively, a
Default or an Event of Default under this Note.
3. REMEDIES.
(a) ALL REMEDIES AVAILABLE. Upon the occurrence of an Event of
Default, the holder hereof shall have the right to declare the entire unpaid
principal balance of, and all accrued unpaid interest on, this Note at once due
and payable (and upon such declaration, the same shall be at once due and
payable), to foreclose any and all liens and security interests securing payment
hereof, to offset against this Note any sum or sums owed by it to Borrower, and
to exercise any of its other rights, powers and remedies under this Note, under
the Credit Agreement or any other Loan Document, or at law or in equity.
(b) NO WAIVER. Neither the failure by the holder hereof to exercise,
nor delay by the holder hereof in exercising, the right to accelerate the
maturity of this Note or any other right, power or remedy upon any Default or
Event of Default shall be construed as a waiver of
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such Default or Event of Default or as a waiver of the right to exercise any
such right, power or remedy at any time. No single or partial exercise by
the holder hereof of any right, power or remedy shall exhaust the same or
shall preclude any other or further exercise thereof, and every such right,
power or remedy may be exercised at any time and from time to time. All
rights and remedies provided for in this Note and in any other Loan Document
are cumulative of each other and of any and all other rights and remedies
existing at law or in equity, and the holder hereof shall, in addition to the
rights and remedies provided herein or in any other Loan Document, be
entitled to avail itself of all such other rights and remedies as may now or
hereafter exist at law or in equity for the collection of the indebtedness
owing hereunder, and the resort to any right or remedy provided for hereunder
or under any such other Loan Document or provided for by law or in equity
shall not prevent the concurrent or subsequent employment of any other
appropriate rights or remedies. Without limiting the generality of the
foregoing provisions, the acceptance by the holder hereof from time to time
of any payment under this Note which is past due or which is less than the
payment in full of all amounts due and payable at the time of such payment,
shall not (i) constitute a waiver of or impair or extinguish the rights of
the holder hereof to accelerate the maturity of this Note or to exercise any
other right, power or remedy at the time or at any subsequent time, or
nullify any prior exercise of any such right, power or remedy, or (ii)
constitute a waiver of the requirement of punctual payment and performance,
or a novation in any respect.
4. USURY SAVINGS PROVISIONS.
(a) GENERAL LIMITATION. Notwithstanding anything herein or in any
other Loan Documents, expressed or implied, to the contrary, in no event shall
any interest rate charged hereunder or under any of the other Loan Documents, or
any interest contracted for, collected or received by Lender or any holder
hereof, exceed the Maximum Lawful Rate.
(b) INTENT OF PARTIES. It is expressly stipulated and agreed to be
the intent of Borrower and Lender at all times to comply with the applicable law
governing the maximum rate or amount of interest payable on or in connection
with this Note. If the applicable law is ever judicially interpreted so as to
render usurious any amount called for under this Note or under any of the other
Loan Documents, or contracted for, charged, taken, reserved or received with
respect to this Note, or if acceleration of the maturity of this Note, any
prepayment by Borrower, or any other circumstance whatsoever, results in Lender
having been paid any interest in excess of that permitted by applicable law,
then it is the express intent of Borrower and Lender that all excess amounts
theretofore collected by Lender be credited on the principal balance of this
Note (or, if this Note has been or would thereby be paid in full, refunded to
Borrower), and the provisions of this Note and the other applicable Loan
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
The right to accelerate the maturity of this Note does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the
event of
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acceleration. All sums paid or agreed to be paid to Lender for the use,
forbearance or detention of the indebtedness evidenced hereby or by any other
Loan Document shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the rate or amount of interest on account of
such indebtedness does not exceed the Maximum Lawful Rate. The term
"APPLICABLE LAW" as used herein shall mean the laws of the State of Texas, or
any applicable United States federal law to the extent that it permits Lender
to contract for, charge, take, reserve or receive a greater amount of
interest than under Texas law. The provisions of this paragraph shall
control all agreements between Borrower and Lender.
5. GENERAL PROVISIONS.
(a) BUSINESS DAY. Whenever any payment shall be due under this Note
on a day which is not a Business Day, the date on which such payment is due
shall be extended to the next succeeding Business Day, and such extension of
time shall be included in the computation of the amount of interest then
payable.
(b) MANNER OF PAYMENT. The manner in which payments are to be made
on this Note shall be governed by the provisions hereof and the Credit
Agreement, including, without limitation, SECTION 3.10 of the Credit Agreement.
(c) PREPAYMENTS. Prepayments may be made on this Note subject to and
in accordance with SECTIONS 3.5(g) and 3.6 of the Credit Agreement.
(d) APPLICATION OF PAYMENTS. All payments made on this Note shall be
applied in accordance with SECTIONS 3.11 and 8.8 of the Credit Agreement, as
applicable. Nothing herein shall limit or impair any rights of any holder
hereof to apply as provided in the Loan Documents any past due payments, any
proceeds from the disposition of any collateral by foreclosure or other
collections after default. Except to the extent specific provisions are set
forth in this Note or another Loan Document with respect to application of
payments, all payments received by the holder hereof shall be applied, to the
extent thereof, to the indebtedness owing by Borrower to the holder hereof in
such order and manner as the holder hereof shall deem appropriate, any
instructions from Borrower or anyone else to the contrary notwithstanding.
(e) COSTS OF COLLECTION. If any holder of this Note retains an
attorney in connection with any default or at maturity or to collect, enforce or
defend this Note or any other Loan Document in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if Borrower sues any holder
of this Note in connection with this Note or any other Loan Document and does
not prevail, then Borrower agrees to pay to each such holder, in addition to
principal and interest, all costs and expenses incurred by such holder in trying
to collect this Note or in any such suit or proceeding, including reasonable
attorneys' fees.
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(f) WAIVERS AND ACKNOWLEDGMENTS. Borrower and all sureties,
endorsers, guarantors and any other party now or hereafter liable for the
payment of this Note in whole or in part, hereby severally (i) waive demand,
presentment for payment, notice of dishonor and of nonpayment, protest, notice
of protest, notice of intent to accelerate, notice of acceleration and all other
notice (except only for any notice that is specifically required by the terms of
the Credit Agreement or any other Loan Document), filing of suit and diligence
in collecting this Note or enforcing any of the security herefor; (ii) agree to
any substitution, subordination, exchange or release of any such security or the
release of any party primarily or secondarily liable hereon; (iii) agree that
the holder hereof shall not be required first to institute suit or exhaust its
remedies against Borrower or others liable or to become liable hereon or to
enforce its rights against them or any security herefor; (iv) consent to any
extension or postponement of time of payment of this Note for any period or
periods of time and to any partial payments, before or after maturity, and to
any other indulgences with respect hereto, without notice thereof to any of
them; and (v) submit (and waive all rights to object) to personal jurisdiction
in the State of Texas, and venue in Dallas County, Texas, for the enforcement of
any and all obligations under the Loan Documents.
(g) AMENDMENTS IN WRITING. This Note may not be changed, amended or
modified except in a writing expressly intended for such purpose and executed by
the party against whom enforcement of the change, amendment or modification is
sought.
(h) PURPOSE OF PROCEEDS. The proceeds of this Note will be used
solely for business purposes and not for personal, family, household or
agricultural purposes.
(i) NOTICES. Any notice required or which any party desires to give
under this Note shall be given and effective as provided in SECTION 9.6 of the
Credit Agreement.
(j) ASSIGNMENTS/PARTICIPATIONS. Holder acknowledges and agrees that
the holder of this Note may, at any time and from time to time, assign all or a
portion of its interest in the Revolving Loan or the Credit Facility or transfer
to any Person a participation interest in the Revolving Loan or the Credit
Facility.
(k) SUCCESSORS AND ASSIGNS. All of the covenants, stipulations,
promises and agreements contained in this Note by or on behalf of Borrower shall
bind its successors and assigns and shall be for the benefit of Lender and any
holder hereof, and their successors and assigns, whether so expressed or not.
(l) TIME OF THE ESSENCE. Time shall be of the essence in this Note
with respect to all of Borrower's obligations hereunder.
(m) JURY TRIAL WAIVER. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
BORROWER HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT, EQUITY OR OTHERWISE) ARISING UNDER
OR RELATING TO THIS
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NOTE, THE OTHER LOAN DOCUMENTS OR ANY RELATED MATTERS, AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
(n) GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY TEXAS LAW, EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW
APPLIES PURSUANT TO SECTION 9.10 OF THE CREDIT AGREEMENT OR OTHERWISE. THE
BOOKS AND RECORDS OF LENDER SHALL CONSTITUTE PRIMA FACIE EVIDENCE OF ALL SUMS
DUE LENDER HEREUNDER.
(o) INTEGRATION. THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN LENDER AND BORROWER AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF LENDER AND
BORROWER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Note is given in modification, renewal, extension, amendment and
restatement, but not in novation or extinguishment, of the outstanding principal
balance under that certain Revolving Promissory Note in the original principal
amount of $4,000,000.00 dated April 28, 1995, executed by Borrower and payable
to the order of Lender.
IN WITNESS WHEREOF, Borrower has duly executed this Note as of the date
first above written.
BORROWER:
SBS TECHNOLOGIES, INC.,
a New Mexico Corporation
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
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<PAGE>
EXHIBIT "B"
AMENDED AND RESTATED PROMISSORY NOTE
$6,750,000.00 Dallas, Texas April 26, 1996
SBS TECHNOLOGIES, INC. (formerly known as SBS Engineering, Inc.), a New
Mexico corporation, having its principal office located at 2400 Louisiana Blvd.,
NE, AFC Building 5, Suite 600, Albuquerque, NM, 87110 ("BORROWER"), for value
received, hereby promises to pay to the order of NATIONSBANK OF TEXAS, N.A., a
national banking association ("LENDER"), at its Dallas Banking Center at 901
Main Street, Dallas, Texas 75202, or at such other address given to Borrower by
Lender, in immediately available funds and in lawful money of the United States
of America, the principal sum of Six Million Seven Hundred Fifty Thousand and
NO/100 Dollars ($6,750,000.00), or so much thereof as may be advanced and
outstanding, on October 30, 1999, or sooner as provided in the Credit Agreement
(as defined herein), together with interest on the unpaid principal balance of
this Note from time to time outstanding at the applicable interest rate. Unless
prohibited by Applicable Law and subject to the terms hereof limiting interest
to the Maximum Lawful Rate, interest on this Note shall be calculated on the
basis of actual days elapsed, but as if each year consisted of 360 days.
This Note is made pursuant to that certain Amended and Restated Credit
Agreement of even date herewith between Borrower and Lender (as the same may be
amended, supplemented, renewed, extended or restated from time to time, the
"CREDIT AGREEMENT"), and is the "Term Note" defined and described therein, the
terms and provisions of the Credit Agreement related to this Note being
incorporated herein by reference for all purposes. Each capitalized term used
but not expressly defined herein shall have the meaning given to such term in
the Credit Agreement. Reference is hereby expressly made to the Credit
Agreement for a statement of the rights and obligations of Lender and the duties
and obligations of Borrower in relation thereto; but neither this reference to
the Credit Agreement nor any provision thereof shall affect or impair the
absolute and unconditional obligation of Borrower to pay unpaid principal of and
interest on this Note when due.
This Note is secured by the Credit Agreement, the Collateral Documents and
all the other Loan Documents, and all liens and security interests created or
evidenced thereby, and payment of this Note is guaranteed by the Guaranty. Any
holder hereof shall be entitled to all benefits of and remedies and security set
forth in the Credit Agreement, the Collateral Documents and all the other Loan
Documents.
Subject to and upon the terms and conditions of the Credit Agreement,
Borrower shall be entitled to prepay the principal of this Note from time to
time, in whole or in part, without premium or penalty, except for any prepayment
fee due upon prepayment of a LIBOR Rate
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Portion prior to the expiration of the applicable Interest Period as provided
in Section 3.5(g) of the Credit Agreement.
1. INTEREST AND PAYMENT.
(a) MATURITY. The entire principal balance of this Note, and all
accrued but unpaid interest hereon, shall be due and payable in full on the Term
Loan Termination Date.
(b) ACCRUAL OF INTEREST. Subject to Paragraph 1(f) below, interest
on this Note shall accrue at a rate per annum equal to the lesser of (i) at
Borrower's option exercised in accordance with the terms of the Credit
Agreement, the Variable Rate or the LIBOR Rate with respect to the Variable Rate
Portions and the LIBOR Rate Portions outstanding hereunder from time to time,
subject, however, to the provisions of the Credit Agreement, or (ii) the Maximum
Lawful Rate; provided, however, that as to any portion of the outstanding
principal balance hereof that is not subject to an effective election of or
conversion to the LIBOR Rate in accordance with the terms of the Credit
Agreement, interest on such portion of this Note shall accrue interest at the
lesser of (i) the Variable Rate or (ii) the Maximum Lawful Rate. Interest on
this Note shall be calculated at a daily rate equal to 1/360 of the annual
percentage rate which this Note bears, subject to the provisions hereof limiting
interest to the Maximum Lawful Rate. Without notice to Borrower or any other
Person, the Variable Rate and the Maximum Lawful Rate shall each automatically
fluctuate upward and downward as and in the amount by which the Base Rate and
the Maximum Lawful Rate, respectively, fluctuate, subject always to limitations
contained in this Note and the Credit Agreement.
(c) AGREEMENTS CONCERNING PRICING ELECTION. Reference should be made
to the provisions of SECTION 3.5 of the Credit Agreement concerning the terms,
manner and agreements related to the interest rate elections available to
Borrower under this Note.
(d) PRINCIPAL AND INTEREST PAYMENTS. Principal and interest hereon
shall be due and payable as is provided in ARTICLE III of the Credit Agreement,
which provides, in part, for (i) monthly payments of accrued, unpaid interest on
the first (1st) day of each month, and (ii) monthly payments of principal in the
amount of $112,500.00 on the first (1st) day of each month.
(e) COSTS DUE TO REGULATORY CHANGES. Borrower shall indemnify Lender
against and reimburse Lender for increased costs to Lender, as a result of any
Regulatory Change, in the maintaining of any LIBOR Rate Portion. All payments
made pursuant to this paragraph shall be made free and clear, without reduction
for, or account of, any present or future taxes or other levies of any nature,
excluding net income and franchise taxes.
(f) DEFAULT RATE. After maturity of this Note or the occurrence of
an Event of Default, the outstanding principal balance of this Note shall, at
the option of Lender, bear interest at the Default Rate. Any past due principal
and, to the extent permitted by law, past due interest on the Loan shall bear
interest, payable as it accrues on demand, for each day until
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paid at the Default Rate. Such interest shall continue to accrue at the
Default Rate notwithstanding the entry of a judgment with respect to any of
the Obligation or the foreclosure of any of Lender's Liens.
(g) MAXIMUM LAWFUL RATE ADJUSTMENTS. If at any time a change in the
Variable Rate or the LIBOR Rate shall cause the rate of interest on this Note to
be limited to the Maximum Lawful Rate, any subsequent reductions in the Variable
Rate or the LIBOR Rate, as applicable, shall not reduce the rate of interest on
this Note below the Maximum Lawful Rate until the total amount of interest
accrued equals the amount of interest which would have accrued if the Variable
Rate or the LIBOR Rate, as applicable, had at all times been in effect. In the
event that at maturity (stated or by acceleration), or at the final payment of
the Loan, the total amount of interest paid or accrued on the Loan is less than
the amount of interest which would have accrued if the Variable Rate or the
LIBOR Rate, as applicable, had at all times been in effect with respect thereto,
then at such time, to the extent permitted by law, Borrower shall pay to Lender
an amount equal to the difference between (a) the lesser of the amount of
interest which would have accrued if the Variable Rate or the LIBOR Rate, as
applicable, had at all times been in effect and the amount of interest which
would have accrued if the Maximum Lawful Rate had at all times been in effect,
and (b) the amount of interest actually paid on the Loan.
2. DEFAULT. The occurrence of a Default or an Event of Default, under
and as defined in the Credit Agreement, shall constitute, respectively, a
Default or an Event of Default under this Note.
3. REMEDIES.
(a) ALL REMEDIES AVAILABLE. Upon the occurrence of an Event of
Default, the holder hereof shall have the right to declare the entire unpaid
principal balance of, and all accrued unpaid interest on, this Note at once due
and payable (and upon such declaration, the same shall be at once due and
payable), to foreclose any and all liens and security interests securing payment
hereof, to offset against this Note any sum or sums owed by it to Borrower, and
to exercise any of its other rights, powers and remedies under this Note, under
the Credit Agreement or any other Loan Document, or at law or in equity.
(b) NO WAIVER. Neither the failure by the holder hereof to exercise,
nor delay by the holder hereof in exercising, the right to accelerate the
maturity of this Note or any other right, power or remedy upon any Default or
Event of Default shall be construed as a waiver of such Default or Event of
Default or as a waiver of the right to exercise any such right, power or remedy
at any time. No single or partial exercise by the holder hereof of any right,
power or remedy shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right, power or remedy may be exercised at any
time and from time to time. All rights and remedies provided for in this Note
and in any other Loan Document are cumulative of each other and of any and all
other rights and remedies existing at law or in equity, and the holder hereof
shall, in addition to the rights and remedies provided herein or in any other
Loan
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Document, be entitled to avail itself of all such other rights and remedies
as may now or hereafter exist at law or in equity for the collection of the
indebtedness owing hereunder, and the resort to any right or remedy provided
for hereunder or under any such other Loan Document or provided for by law or
in equity shall not prevent the concurrent or subsequent employment of any
other appropriate rights or remedies. Without limiting the generality of the
foregoing provisions, the acceptance by the holder hereof from time to time
of any payment under this Note which is past due or which is less than the
payment in full of all amounts due and payable at the time of such payment,
shall not (i) constitute a waiver of or impair or extinguish the rights of
the holder hereof to accelerate the maturity of this Note or to exercise any
other right, power or remedy at the time or at any subsequent time, or
nullify any prior exercise of any such right, power or remedy, or (ii)
constitute a waiver of the requirement of punctual payment and performance,
or a novation in any respect.
4. USURY SAVINGS PROVISIONS.
(a) GENERAL LIMITATION. Notwithstanding anything herein or in any
other Loan Documents, expressed or implied, to the contrary, in no event shall
any interest rate charged hereunder or under any of the other Loan Documents, or
any interest contracted for, collected or received by Lender or any holder
hereof, exceed the Maximum Lawful Rate.
(b) INTENT OF PARTIES. It is expressly stipulated and agreed to be
the intent of Borrower and Lender at all times to comply with the applicable law
governing the maximum rate or amount of interest payable on or in connection
with this Note. If the applicable law is ever judicially interpreted so as to
render usurious any amount called for under this Note or under any of the other
Loan Documents, or contracted for, charged, taken, reserved or received with
respect to this Note, or if acceleration of the maturity of this Note, any
prepayment by Borrower, or any other circumstance whatsoever, results in Lender
having been paid any interest in excess of that permitted by applicable law,
then it is the express intent of Borrower and Lender that all excess amounts
theretofore collected by Lender be credited on the principal balance of this
Note (or, if this Note has been or would thereby be paid in full, refunded to
Borrower), and the provisions of this Note and the other applicable Loan
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
The right to accelerate the maturity of this Note does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the
event of acceleration. All sums paid or agreed to be paid to Lender for the
use, forbearance or detention of the indebtedness evidenced hereby or by any
other Loan Document shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the Maximum Lawful Rate. The term
"APPLICABLE LAW" as used herein shall mean the laws of the State of Texas, or
any applicable United States federal law to the extent that it permits Lender to
contract for, charge, take, reserve or receive a greater
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<PAGE>
amount of interest than under Texas law. The provisions of this paragraph
shall control all agreements between Borrower and Lender.
5. GENERAL PROVISIONS.
(a) BUSINESS DAY. Whenever any payment shall be due under this Note
on a day which is not a Business Day, the date on which such payment is due
shall be extended to the next succeeding Business Day, and such extension of
time shall be included in the computation of the amount of interest then
payable.
(b) MANNER OF PAYMENT. The manner in which payments are to be made
on this Note shall be governed by the provisions hereof and the Credit
Agreement, including, without limitation, SECTION 3.10 of the Credit Agreement.
(c) PREPAYMENTS. Prepayments may be made on this Note subject to and
in accordance with SECTIONS 3.5(g) and 3.6 of the Credit Agreement.
(d) APPLICATION OF PAYMENTS. All payments made on this Note shall be
applied in accordance with SECTIONS 3.11 and 8.8 of the Credit Agreement, as
applicable. Nothing herein shall limit or impair any rights of any holder
hereof to apply as provided in the Loan Documents any past due payments, any
proceeds from the disposition of any collateral by foreclosure or other
collections after default. Except to the extent specific provisions are set
forth in this Note or another Loan Document with respect to application of
payments, all payments received by the holder hereof shall be applied, to the
extent thereof, to the indebtedness owing by Borrower to the holder hereof in
such order and manner as the holder hereof shall deem appropriate, any
instructions from Borrower or anyone else to the contrary notwithstanding.
(e) COSTS OF COLLECTION. If any holder of this Note retains an
attorney in connection with any default or at maturity or to collect, enforce or
defend this Note or any other Loan Document in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if Borrower sues any holder
of this Note in connection with this Note or any other Loan Document and does
not prevail, then Borrower agrees to pay to each such holder, in addition to
principal and interest, all costs and expenses incurred by such holder in trying
to collect this Note or in any such suit or proceeding, including reasonable
attorneys' fees.
(f) WAIVERS AND ACKNOWLEDGMENTS. Borrower and all sureties,
endorsers, guarantors and any other party now or hereafter liable for the
payment of this Note in whole or in part, hereby severally (i) waive demand,
presentment for payment, notice of dishonor and of nonpayment, protest, notice
of protest, notice of intent to accelerate, notice of acceleration and all other
notice (except only for any notice that is specifically required by the terms of
the Credit Agreement or any other Loan Document), filing of suit and diligence
in collecting this Note or enforcing any of the security herefor; (ii) agree to
any substitution, subordination, exchange or release of any such security or the
release of any party primarily or secondarily liable hereon;
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(iii) agree that the holder hereof shall not be required first to institute
suit or exhaust its remedies against Borrower or others liable or to become
liable hereon or to enforce its rights against them or any security herefor;
(iv) consent to any extension or postponement of time of payment of this Note
for any period or periods of time and to any partial payments, before or
after maturity, and to any other indulgences with respect hereto, without
notice thereof to any of them; and (v) submit (and waive all rights to
object) to personal jurisdiction in the State of Texas, and venue in Dallas
County, Texas, for the enforcement of any and all obligations under the Loan
Documents.
(g) AMENDMENTS IN WRITING. This Note may not be changed, amended or
modified except in a writing expressly intended for such purpose and executed by
the party against whom enforcement of the change, amendment or modification is
sought.
(h) PURPOSE OF PROCEEDS. The proceeds of this Note will be used
solely for business purposes and not for personal, family, household or
agricultural purposes.
(i) NOTICES. Any notice required or which any party desires to give
under this Note shall be given and effective as provided in SECTION 9.6 of the
Credit Agreement.
(j) ASSIGNMENTS/PARTICIPATIONS. Holder acknowledges and agrees that
the holder of this Note may, at any time and from time to time, assign all or a
portion of its interest in the Revolving Loan or the Credit Facility or transfer
to any Person a participation interest in the Revolving Loan or the Credit
Facility.
(k) SUCCESSORS AND ASSIGNS. All of the covenants, stipulations,
promises and agreements contained in this Note by or on behalf of Borrower shall
bind its successors and assigns and shall be for the benefit of Lender and any
holder hereof, and their successors and assigns, whether so expressed or not.
(l) TIME OF THE ESSENCE. Time shall be of the essence in this Note
with respect to all of Borrower's obligations hereunder.
(m) JURY TRIAL WAIVER. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
BORROWER HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT, EQUITY OR OTHERWISE) ARISING UNDER
OR RELATING TO THIS NOTE, THE OTHER LOAN DOCUMENTS OR ANY RELATED MATTERS, AND
AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A
JURY.
(n) GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY TEXAS LAW, EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW
APPLIES PURSUANT TO SECTION 9.10 OF THE CREDIT AGREEMENT OR OTHERWISE. THE
BOOKS AND RECORDS OF
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<PAGE>
LENDER SHALL CONSTITUTE PRIMA FACIE EVIDENCE OF ALL SUMS DUE LENDER HEREUNDER.
(o) INTEGRATION. THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN LENDER AND BORROWER AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF LENDER AND
BORROWER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Note is given in modification, renewal, extension, amendment and
restatement, but not in novation or extinguishment, of the outstanding principal
balance under that certain Promissory Note in the original principal amount of
$7,000,000.00 dated April 28, 1995, executed by Borrower and payable to the
order of Lender.
IN WITNESS WHEREOF, Borrower has duly executed this Note as of the date
first above written.
BORROWER:
SBS TECHNOLOGIES, INC.,
a New Mexico Corporation
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
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<PAGE>
EXHIBIT "C"
QUARTERLY BORROWING BASE REPORT
The undersigned hereby certifies that he/she is the duly authorized officer
permitted under the Credit Agreement of SBS TECHNOLOGIES, INC., a New Mexico
corporation ("Borrower"), and the he/she is authorized to execute this report
on behalf of Borrower in connection with that certain Amended and Restated
Credit Agreement dated as of April 26, 1996 ("Credit Agreement"), between
Borrower and NationsBank of Texas, N.A. All terms used but not defined herein
shall have the meanings set forth in the Credit Agreement. This report is
submitted on a quarterly basis on or before the date which is 45 days after the
end of the fiscal quarter of Borrower for the immediately preceding quarter
ended, _____________, 19___. The undersigned hereby further certifies to
the following as of the date set forth below:
<TABLE>
<CAPTION>
<S> <C>
A) Total consolidated accounts receivable $------------------------
(-)
B) Receivables with invoices 91 day or more past due $------------------------
(-)
C) All other ineligible accounts receivable $------------------------
(=)
D) Sum of eligible accounts receivable (A minus B & C) $------------------------
X 80% =
E) Accounts receivable portion of Borrowing Base $------------------------
- -------------------------------------------------------------------------------------------
A) Total consolidated inventory $------------------------
(-)
B) Ineligible inventory $-------------------------
(=)
C) Eligible inventory (A minus B) $-------------------------
X 50% =
D) Inventory portion of Borrowing Base $-------------------------
(-)
E) Portion of Item D which exceeds 30% of Borrowing Base $-------------------------
(=)
F) Remainder of Item (D) minus (E) $-------------------------
- --------------------------------------------------------------------------------------------
A) Total Borrowing Base
(Sum of Eligible A/R + Eligible Inventory) $------------------------
(-)
B) Outstanding or $2,500,000 Revolving Note at the
end of above referenced subject period $------------------------
(-)
C) Letter of Credit Exposure at the end of the
above referenced subject period $------------------------
(+)
(D) Sum of (B) plus (C) $------------------------
(=)
(E) Net Excess or Deficit (A minus D) $------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
I HEREBY CERTIFY, in my capacity as an authorized officer of Borrower, that
the information set forth herein is true and correct in all material respects
to the best of my knowledge.
IN WITNESS WHEREOF, I have executed this Borrowing Base as of
the _______ day of ______________, 199___.
---------------------------------------
Title: ---------------------------------------
Page 1
<PAGE>
EXHIBIT "C-1"
QUARTERLY CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that he/she is the duly authorized officer
permitted under the Credit Agreement of SBS TECHNOLOGIES, INC., a New Mexico
corporation ("Borrower"), and that he/she is authorized to execute this report
on behalf of Borrower in connection with that certain Amended and Restated
Credit Agreement dated as of April 26, 1996 ("Credit Agreement"), between
Borrower and NationsBank of Texas, N.A. All terms used herein shall have the
meanings set forth in the Credit Agreement. This report is submitted on a
quarterly basis as of the 30th day of the month for the immediately preceding
quarter ended _________, 199___. The undersigned hereby further certifies
to the following as of the date set forth below:
As of __________, 199___, (being the last day of Borrower's most recently
ended fiscal quarter), Borrower and the Subsidiaries, on a consolidated bases,
are in compliance with the financial covenants contained in SECTIONS 6.7, 6.8
AND 6.9 of the Credit Agreement and the following information is true, accurate
and complete as of such date.
Compliance
Yes/No
(1) Current Maturities Coverage Ratio to 1.00
---------- -----------
Definition: Ratio of (i) Borrower's consolidated Net Earnings Available for
Current Maturities for the immediately preceding four fiscal quarters to (ii)
Borrower's consolidated Current Maturities as of the last day of such period.
Borrower shall not permit the Current Maturities Coverage Ratio to be less than
2.00 to 1.00. In computing such ratio, there shall not be included any charge
to earnings resulting from the simulation sale or any increase in earnings which
may result from reversing any charge to earnings previously taken in connection
with the Simulation Sale.
(2) Senior Funded Debt to EBITDA Ratio to 1.00
--------- ----------
Definition: Ratio of (i) Borrower's consolidated Senior Funded Debt to (ii)
Borrower's consolidated EBITDA.
Borrower shall not permit the Senior Funded Debt to EBITDA ration to be more
than 1.50 to 1.00 at the end of any fiscal quarter. In computing such ratio,
there shall not be included any charge to earnings resulting from the simulation
sale or any increase in earnings which may result from reversing any charge to
earnings previously taken in connection with the simulation sale.
(3) Fixed Charge Coverage Ratio to 1.00
---------- ----------
Definition: Ratio of (i) the sum of Borrower's consolidated Income Before Tax
plus Interest Expense plus Operating Lease Expense to (ii) the sum of Borrower's
consolidated Interest Expense plus Operating Lease Expense, all for the
immediately preceding four fiscal quarters.
Borrower shall not permit the Fixed Charge Coverage Ratio to be less than 2.00
to 1.00 at the end of any fiscal quarter.
I HEREBY CERTIFY, in my capacity as an authorized officer of Borrower, that the
information set forth herein is true and correct in all material respects to the
best of my knowledge and prepared in accordance with GAAP.
IN WITNESS WHEREOF, I have executed this Compliance Certificate as of the ____
day of ___________, 19___.
----------------------------------------
Title: ----------------------------------------
Page 1
<PAGE>
EXHIBIT "D"
DESCRIPTION OF CERTAIN COLLATERAL
1. Property, assets, rights and interests of Borrower.
A. All of Borrower"s present and future cash and cash equivalents,
claims, demands, causes of action, contract rights, documents,
Inventory, goods, chattel paper, general intangibles, instruments,
Accounts, patents, tradenames, copyrights, and all other personal
property of any type, however arising and by whomever owing, whether
now existing or hereafter arising, and whether existing or arising
under agreements heretofore or hereafter executed and delivered or
transactions heretofore or hereafter affected;
B. All of Borrower's machinery, equipment and/or other tangible personal
property, including those items of personal property described in
EXHIBIT "D-1" attached hereto.
C. All substitutions and replacements for, accessions, attachments and
other additions to, and proceeds and products of, the above property,
assets, rights and interests (including all income and benefits
resulting from any of the above, such as interest, premium and
principal payments and returned or repossessed property);
D. All policies of insurance covering the foregoing property, assets,
rights and interests and proceeds thereof;
E. All funds on deposit with NationsBank of Texas, N.A., all bank
accounts, all certificates of deposit, instruments and money;
F. All of Borrower's patents, trademarks and copyrights, and all
applications therefor and licenses with respect thereto;
G. All stock and other securities owned by Borrower, including all stock
of the Subsidiaries;
H. All property similar to the foregoing property hereafter acquired by
Borrower; and
I. All proceeds of the items described above.
Page 1
<PAGE>
2. Property, assets, rights and interests of the Subsidiaries.
A. All of the Subsidiaries' present and future cash and cash equivalents,
claims, demands, causes of action, contract rights, documents,
Inventory, goods, chattel paper, general intangibles, instruments,
Accounts, patents, tradenames, copyrights, and all other personal
property of any type, however arising and by whomever owing, whether
now existing or hereafter arising, and whether existing or arising
under agreements heretofore or hereafter executed and delivered or
transactions heretofore or hereafter affected;
B. All of the Subsidiaries' machinery, equipment and/or other tangible
personal property, including those items of personal property
described in EXHIBIT "D-1" attached hereto;
C. All substitutions and replacements for, accessions, attachments and
other additions to, and proceeds and products of, the above property,
assets, rights and interests (including all income and benefits
resulting from any of the above, such as interest, premium and
principal payments and returned or repossessed property);
D. All policies of insurance covering the foregoing property, assets,
rights and interests and proceeds thereof;
E. All funds on deposit with NationsBank of Texas, N.A., all bank
accounts, all certificates of deposit, instruments and money;
F. All of the Subsidiaries' patents, trademarks and copyrights, and all
applications therefor and licenses with respect thereto;
G. All stock and other securities owned by the Subsidiaries;
H. All property similar to the foregoing property hereafter acquired by
the Subsidiaries; and
I. All proceeds of the items described above.
Page 2
<PAGE>
EXHIBIT D-1
DESCRIPTION OF CERTAIN TANGIBLE PERSONAL
PROPERTY OF BORROWER AND ITS SUBSIDIARIES
<TABLE>
<CAPTION>
PROPERTY DESCRIPTION ACQUIRED COST NET VALUE
HEADQUARTERS-ALBUQUERQUE
<S> <C> <C> <C>
XEROX 1090 2/24/93 15,000.00 9,125.00
SHARP FAX FO-6000 8/01/93 2,804.05 1,988.20
POLYCOM SOUNDSTATION 8/26/94 1,010.00 954.91
SOUNDSTATION S/N10034150 10/17/94 1,010.00 965.11
4-DR LATERAL FILE-BLACK 12/28/87 326.18 0.00
PC TABLE (ANDY) 12/31/87 411.60 0.00
CHAIR (ANDY) 12/31/87 476.70 0.00
60 ROUND WALNUT TABLE 1/14/91 99.00 41.25
STENO CHAIR-BROWN 1/14/91 99.50 41.47
STACK CHAIRS - PINTO - 6 1/14/91 161.70 67.37
30x60 WORK TABLE-MED OAK 1/14/91 169.50 70.64
FORMOST COMPUTER DESK-2 1/14/91 179.00 74.58
GUEST CHAIRS-NAT OAK-2 1/14/91 249.90 104.12
10' MED OAK CONF TABLE 1/14/91 351.75 146.56
42 MED OAK ROUND TABLE-2 1/14/91 368.00 153.33
4 DRAWER LEGAL FILE-4 1/14/91 484.00 193.32
72 MED OAK BOOKCASE-4 1/14/91 556.00 231.67
H2066 MED OAK BOOKCASE CREDENZA 1/14/91 633.00 263.75
H2066KS MED OAK KNEESPACE CREDENZA1/14/91 633.00 263.75
1510 HIBACK EXEC CHAIR-2 1/14/91 638.00 265.84
LEFT DROP DESK MED OAK 1/14/91 700.00 291.67
72 BOOKCASE-8 1/14/91 736.00 306.68
HIBACK MGR CHAIRS-4 1/14/91 779.80 324.92
GUEST CHAIRS-NAT OAK-8 1/14/91 999.50 416.50
110 MED OAK NAT CHAIR-8 1/14/91 1,063.36 443.07
MGR DESK-30x60 MED OAK-4 1/14/91 1,196.00 496.32
BURGANDY CONF CHAIRS-10 1/14/91 1,200.00 500.00
H3672 MED OAK EXEC DESK-2 1/14/91 1,252.00 521.65
DESK 4/11/91 441.45 199.71
DESK 4/11/91 476.28 216.35
2 CHAIRS 4/11/91 478.50 216.45
4 CHAIRS 4/11/91 653.88 295.81
2 CREDENZAS 4/11/91 960.44 434.47
FLOOR BY UNISTRUT 7/15/91 25,119.37 17,374.22
FLOOR BY UNISTRUT 10/31/91 3,151.35 2,179.67
MODULAR FURNITURE 4/05/93 872.95 659.90
MODULAR FURN (5540 MIDWAY PK) 1/15/93 14,066.71 10,131.38
SHREDDER (RON SMITH) 12/01/93 995.00 823.24
MODULAR FURN (HQT) 12/02/93 7,556.07 5,251.75
MODULAR FURN (5540 MIDWAY PK) 1/12/94 339.66 293.16
3 CHAIRS 2/15/94 1,396.73 1,205.52
MODULAR OFFICE SYSTEM 8/23/94 6,191.09 5,949.88
EXEC CHAIRS 12 CONF RM 9/15/94 2,196.67 2,118.21
LASERJET II 9/18/87 3,051.00 0.00
LASERJET II 3/27/89 1,809.25 0.00
DELL 386-25 ROLFE 10/01/90 3,836.15 379.78
OKIDATA PRINTER 7/15/91 995.59 484.01
NETWORK CARDS 2/13/92 1,002.00 487.11
GATEWAY 2000 486/33-ANDY C. 3/15/92 3,140.00 1,526.50
</TABLE>
<PAGE>
EXHIBIT D-1
DESCRIPTION OF CERTAIN TANGIBLE PERSONAL
PROPERTY OF BORROWER AND ITS SUBSIDIARIES
<TABLE>
<CAPTION>
PROPERTY DESCRIPTION ACQUIRED COST NET VALUE
<S> <C> <C> <C>
386-LAPTOP - CHRIS 5/15/92 2,545.55 1,237.51
VIEWSONIC 7 MONITOR 6/15/92 1,850.63 899.67
GATEWAY 386-25SX (2) 9/11/92 3,180.00 1,616.50
NOTEBOOK COMPUTER 12/22/92 2,530.43 1,412.82
386DX/40 MOTHERBOARD/130MB HD 2/09/93 693.07 421.62
245 MB HARD DRIVE (JANELLE) 8/01/93 348.12 246.59
250MB HARD DISK 1/01/94 303.80 247.18
HQT FILE SERVER 1/01/94 2,370.21 1,915.92
340MB WESTERN DIGITAL IDE BARE KIT 2/10/94 279.00 225.52
486DX/33 VL MOT 2/07/94 570.33 461.02
130MB HARD DISK 2/16/94 515.31 417.35
AMBRA NC 425SL, 8MEG 3/03/94 449.00 362.94
250MB HARD DISK 3/07/94 300.00 242.50
COLORADO TAPE BACKUP 3/01/94 572.00 462.37
TOSHIBA 1950C-SURESH 3/18/94 2,855.88 2,308.50
VIEWSONIC 17 SVGA 4/01/94 1,011.20 867.95
486DX MOTHER BOARD/HARD DRIVE/MEMORY 8/01/94 913.18 863.35
486X33 COMPUTER 1084 8/29/94 1,193.54 1,128.44
LASERJET 4SI MX POSTSCRIPT II, 103B 9/27/94 4,263.56 4,050.38
DELL COMPUTERS LATITUDE 486 NOTEBOOK STN(DS) 11/02/94 3,423.45 3,295.07
DELL COMPUTERS LATITUDE 486 NOTEBOOK STN(DS) 11/03/94 3,633.45 3,497.19
DELL COMPUTERS ADV PORT REPLICATOR LXP NOTEBK 11/22/94 221.55 213.24
DELL COMPUTERS LATITUDE XP 486 NOTEBOOK STN 11/19/94 3,948.45 3,800.38
computer Disc Warehouse oki 395 24 pin blk/wh 12/06/94 1,039.00 1,039.00
computer zone pentium 90 moter board cd rom 1/20/95 3,494.97 3,494.97
MISC-B. DALTON 3/24/88 368.36 0.00
DELTEK ACCOUNTING 6/30/89 9,500.00 0.00
DELTEK INVENTORY 10/11/89 3,800.00 0.00
DELTEK MULTI-USER UPDATE 1/01/91 6,750.00 1,912.50
DELTEK MULTIUSER 8/15/91 3,375.00 1,068.75
DELTEK NASA 533 MODULE 8/02/90 3,000.00 300.00
DELTEK 4-USER UPGRADE 8/01/93 4,160.00 2,912.00
ALLEGRO 12/17/92 3,995.00 2,330.42
NETWORK HOOKUPS TO HQT 12/01/93 866.77 664.53
NETWORK HOOKUPS TO HQT 11/30/93 776.50 595.32
UPGRADE TO NOVELL 3.12-25 12/07/93 1,436.70 1,101.46
INSTALL NOV 3.12/405MB DRIVE 1/01/94 126.98 99.46
INSTALL/SETUP-SBS_ADM 1/01/94 444.41 348.12
DELTEK 5 USER UPGRADE 2/01/94 4,160.00 3,328.00
ALLEGRO SUPPORT (1YR) 3/01/94 999.00 277.50
DELTEK UPGRADE USERS TO 6 12/19/94 4,160.00 4,041.14
IMPROVEMENTS-5540 MIDWAY PK 3/31/93 26,084.00 24,531.38
CARPETING (HQT) 12/01/93 5,608.07 5,446.30
CARPETING-5540 MIDWAY PK 1/01/94 21,169.91 20,618.61
WINDOW TINT-5540 MIDWAY PARK PLACE 2/04/94 2,158.52 2,106.80
FLOODLIGHTS FOR BLDG #2 4/01/94 3,270.82 3,206.08
INSTALL SWAMP COOLER 6/01/94 2,749.02 2,706.07
FORD VAN 07/28/94 9,225.00 8,730.80
272,992.53 190,532.03
</TABLE>
<PAGE>
EXHIBIT D-1
DESCRIPTION OF CERTAIN TANGIBLE PERSONAL
PROPERTY OF BORROWER AND ITS SUBSIDIARIES
<TABLE>
<CAPTION>
PROPERTY DESCRIPTION ACQUIRED COST NET VALUE
BERG SYSTEMS-CARLSBAD
<S> <C> <C> <C>
XEROX 5335RFIN COPIER 4/09/93 13,136.89 8,548.45
TOSHIBA FAX 30100 5/01/89 860.58 0.00
TRAVEL CASES 5/19/89 649.11 0.00
XEROX COPIER 1012 1/09/90 1,823.24 0.00
BIND MACHINE IM2000 2/13/90 299.88 0.00
PANASONIC SHREDDER MPS500 3/21/90 405.35 0.00
TRADE SHOW DISPLAY 10/04/91 5,000.00 0.00
PANASONIC PHONE SYSTEM 12/31/91 4,445.00 785.22
PHONE SYSTEM-BERG 4/01/94 2,050.00 1.759.58
PANASONIC PHONE SYSTEM 6/01/94 2,942.50 2.525.65
SKYLINE DISPLAY 10/01/94 6,319.17 6.038.32
SKYLINE DISPLAY 10/31/94 958.21 915.62
ANTI-STATIC MATS 8/26/89 332.17 30.18
OFFICE FURNITURE 12/30/89 800.00 71.96
METAL CABINETS 1/18/90 252.95 0.00
IBM COMPUTER-BS50039255 12/04/85 4,267.00 0.00
STAR PRINTER MX-10 12/04/85 351.00 0.00
NEC MONITOR 2A JC-1401P3A 12/04/85 595.00 0.00
PANASONIC PRINTER KXP1592 6 1/10/87 493.00 0.00
HP LASER PRINTER 33440A 10/28/88 1,821.00 0.00
DISK DRIVE 40MB 3/20/89 298.96 0.00
COMPUTER VME682 127 4/02/89 2,730.54 0.00
COMPUTER 550-1088A 21-525 12/04/89 2,300.53 0.00
COMPUTER JC1404/NCC386 3/10/90 3,522.37 0.00
COMPUTER MR535/MZ4575 4/06/90 1,555.13 0.00
COMPUTER MR535/MZ4575 4/06/90 1,555.13 0.00
SONY MONITOR KV13TR20 5/28/90 308.88 0.00
HP PRINTER HP33440A 7/19/90 1,350.81 0.00
NEC MONITOR JC1404HMA-1 8/24/90 599.00 0.00
NEC MONITOR JC2002VMA-1 3/01/91 2,199.00 168.74
COMPUTER 5420VGA 9/10/91 3,164.21 333.54
COMPUTER SYSTEM 10/15/90 2,214.71 187.04
COMPUTER SYSTEM 12/07/90 1,718.34 145.05
CITIZEN HSP-500 PRINTER 4/22/91 299.60 42.15
COMPUTER SYSTEM 3/06/91 2,033.00 145.31
V CMPTR SYSTEM, AMBR MNTR 4/30/91 2,113.25 156.69
MICROPOLIS DRIVE 5/09/91 959.00 134.97
ZENITH ZCM-1492 MONITOR 10 5/14/91 674.32 94.89
HP III-P PRINTER 6/04/91 1,224.08 172.27
AT COMPUTER 12/88 12/03/88 2,229.00 0.00
COMPUTER 8/09/91 1,537.15 271.62
COMPUTER DEX-4861 MON MLHA 9/20/91 899.00 158.70
OPTIMAL COMPUTER 11919 9/24/91 1,840.25 325.07
HP III-P PRINTER 10/03/91 1,131.21 199.88
MITSUBA NINJA-386N4 L/TOP 10/02/91 2,121.71 374.87
HP PAINT JET PRINTER 10/14/91 724.19 127.85
COMPUTER/MONITOR/KEYBOARD 2/12/92 1,145.29 284.50
COMPUTER & VIEWSONIC MON 3/24/92 2,532.13 629.04
MICROPOLIS 300 MD H/DRIVE 4/03/92 1,007.15 250.23
</TABLE>
<PAGE>
EXHIBIT D-1
DESCRIPTION OF CERTAIN TANGIBLE PERSONAL
PROPERTY OF BORROWER AND ITS SUBSIDIARIES
<TABLE>
<CAPTION>
Property Description Acquired Cost Net Value
<S> <C> <C> <C>
MACINTOSH COMPUTER 4/28/92 2,883.39 716.20
COMPUTER SYSTEM 5/20/92 1,985.83 493.31
MICROPOLIS 300MG ESDI 7/31/92 1,012.85 302.84
MISROPOLIS SCSI DR 7/31/92 1,011.17 302.52
SMT 386/33 CO PROCESSOR 7/31/92 1,934.11 578.30
IMPERIAL 486-50 COMPUTER 10/07/92 3,060.00 1,055.70
CPU 80486/33MHZ-128K 5/06/93 1,615.50 1,063.53
486DX266LB 6/21/93 3,190.00 1,560.83
GATEWAY 486/66V COMPUTER 3/05/93 2,620.00 1,593.83
CRYSTALSCAN 1572 FS MONITOR 3/05/93 470.00 285.92
28 - 1MB SIMMS 6/30/93 795.20 523.51
TELOGY EQUIPMENT 7/01/93 12,930.00 9,158.75
BP122/84 UNIVERSAL PROGRAMMER 8/01/93 4,788.50 3,391.85
SOCKET MODULE, UNIV PLCC 8/01/93 1,000.00 708.33
HP-8505A/5 N/W ANALYZER 8/01/93 5,594.05 3,962.45
486DX-66V COMPUTER 11/01/93 2,075.00 1,573.54
SFGE 17IN MULTI 28MM 12/01/93 1,117.65 847.55
4DX2-66V COMPT SYST 1/01/94 2,145.00 1,733.87
PCAIFIC DATA PACIFICPAGE 2/01/94 311.11 251.48
OPTIMAL 486DX2-66 L.B. SYSTEM 2/18/94 4,805.65 3,884.57
INTEL 486DX2-66 CPU 2/18/94 2,081.73 1,682.73
DEMO COMPUTER/MEMORY 3/15/94 3,801.42 3,072.81
SPECTRUM ANALYZER 4/01/94 27,395.43 23,514.40
REFLECTION TEST KIT 4/22/94 2,889.00 2,479.72
CD-ROM DRIVE 5/01/94 586.08 503.05
OPTIMAL PENTIUM SYSTEM 8/31/94 8,825.36 8,343.97
ETHERNET CABLE 8/31/94 97.37 92.06
3COM FMS 24 PORT HUB 8/31/94 1,086.05 1,026.81
GENOA VLB P24T 3LB SLOTS 4MB INTEL 486DX2-66M 9/08/94 818.08 777.17
4MB 72 PIN SIMMS 10/03/94 342.40 327.18
HP IICX COLOR FLAT 10/04/94 967.26 924.27
OPTIMAL 16MB 72-PINS-SIMM'S PS2 1/03/95 1,144.91 1,125.83
VENTURA PUBLISHER 1.1 3/01/91 517.00 249.88
SOFTWARE 9/02/89 1,412.00 0.00
SOFTWARE SMP 2/17/90 316.44 0.00
LABVIEW FOR WINDOWS 7/01/93 2,589.72 1,769.65
XILINS DESIGNER SOFTWARE 11/01/93 2,303.22 1,727.41
WEBB LABS AFDPLUS 12/13/94 995.00 966.57
PROM BURNER SPRINT PLUS 1/18/89 1,908.70 0.00
DFI SCANNER HS-3000 2/05/89 269.70 0.00
VME CHASSIS MIV80620 3/10/89 1,336.70 0.00
AT TEST BED 80 DATA 3/23/89 1,760.15 0.00
HAMEG SCOPE 1005 4/12/89 1,232.64 0.00
SWEEP FUND GEN DFG-600 4/11/90 482.60 0.00
B&K SWEEP GEN 3026 5/05/90 506.95 0.00
TEMP CHAMBER NK6304 6/27/90 2,070.75 0.00
HP 34090A TRUE RMS VLTMTR 12/21/90 819.38 0.00
PHILIPS PM3580 LOGC ANLZR 3/01/91 4,263.28 318.63
TEKTRONIC 454 SCOPE 3/15/91 400.00 56.32
MISC EQUIPMENT 6/15/88 3,975.00 0.00
</TABLE>
<PAGE>
EXHIBIT D-1
Description of Certain Tangible Personal
Property of Borrower and its Subsidiaries
<TABLE>
<CAPTION>
Property Description Acquired Cost Net Value
<S> <C> <C> <C>
HONDA BACKUP GENERATOR 10/01/91 1,635.00 288.84
HP 3585A SPECTUM ANALYZER 4/09/92 15,034.99 1,250.01
HAMEG 1005 SCOPE 4/30/92 1,515.35 376.42
NUMBER NINE CARD 5/20/92 657.00 163.25
SRL FUNCTION GENERATOR 5/27/92 3,279.95 814.74
HEIM DATAREC-D3 7/31/92 10,636.13 3,180.20
4400-P 7/31/92 876.16 251.97
4400-TM 7/31/92 846.70 253.15
4411-C 7/31/92 672.45 201.06
ULTRASTOR ESDI CARD 7/31/92 463.33 138.54
VME TEST STATION 8/12/92 1,077.43 322.15
VME EXTENDER CARD 8/12/92 493.53 147.56
XYCOM XVME-688/1 8/12/92 1,448.85 433.20
TEKTRONIK 2465A SCOPE 2/28/93 3,771.25 1,474.56
HP 141T & 8554B &8552B SYST 5/27/93 3,591.00 2,714.62
HP TEST EQUIPMENT 6/01/93 21,614.65 16,339.54
PCM LINK ANALYZER 7/01/93 30,690.00 24,296.25
TWEEZERS/LCR METER 2/01/94 1,299.88 1,121.91
GOODWILL-TELEMETRY 8/24/92 387,128.51 75,274.98
NON-COMPETE-TELEMETRY 8/25/92 1,225,000 632,915.66
1,938,162.09 870,196.45
</TABLE>
<PAGE>
EXHIBIT D-1
Description of Certain Tangible Personal
Property of Borrower and its Subsidiaries
<TABLE>
<CAPTION>
Property Description Acquired Cost Net Value
<S> <C> <C> <C>
Firearms Training-Albuquerque
TANDON 386 LAPTOP 6/15/91 3,449.25 432.53
2-TOSHIBA LAPTOPS 11/01/93 4,591.99 3,482.26
MICRODEX COMPUTERS 11/01/93 2,259.00 1,713.07
AMBRA COMPT CORP 12/01/93 4,354.00 3,301.78
MICRODEX 2/01/94 2,338.79 1,890.52
PORTABLE COMPUTER 486-33DX 3/01/94 7,338.90 5,932.27
486-DX266 MB/CPU & MEMORY 4/13/94 1,135.00 974.20
COMPUTER ZONE 486DX MTHR BOARD 11/17/94 649.00 624.66
ICAT SOFTWARE 7/01/93 76,507.21 52,279.93
HANNAH-HILL 12/01/93 2,110.00 1,617.66
ATLANTA SIGNAL 12/01/93 1,228.25 1,016.23
MEASURING EQUIP/LASERS 1/01/94 1,023.50 883.38
106,984.89 74,148.49
Computer Based Training-Albuquerque
NVT ACQUISITION OFC EQUIP 3/11/94 1,550.00 1,252.92
HIGH END CAMCORDER 8/01/94 3,809.01 3,601.25
NVT ACQUISITION COMPUTER EQUIP 3/11/94 22,437.00 18,136.57
POWERBOOK 180C 3/09/94 2,749.24 2,222.30
APPLE POWERCD WITH CD-ROM CATALOG 4/01/94 1,064.90 914.04
2.2 GIG EXABYTE 8MM BACKUP KIT 4/01/94 1,755.90 1,507.14
486DX266PCI COMPUTER/MONITOR 5/01/94 4,020.00 3,450.50
RECORDING & ENCODER UNIT 6/01/94 8,034.10 6,895.94
POWERMAC 8100AV 1GIGCD 9/08/94 1,898.00 11,303.10
UPS RFD DMGD MONITOR (REPUR W/POWER MAC 9/94) 9/30/94 (1,016.00) (1,016.00)
COMPUTER DESING & GRAPHICS 7100/66 POWERMAC 1/01/95 4,116.00 4,047.40
NVT ACQUISITION SOFTWARE 3/11/94 16,860.00 13,769.00
STRATA SUTDIO PRO/DIRECTOR 3.1 7/01/94 1,958.00 1,544.65
GOODWILL-NVT 3/11/94 4,153.00 2,249.54
NON-COMPETE-NVT 3/11/94 50,000.00 27,083.34
133,389.15 96,961.69
</TABLE>
<PAGE>
EXHIBIT D-1
Description of Certain Tangible Personal
Property of Borrower and its Subsidiaries
<TABLE>
<CAPTION>
Property Description Acquired Cost Net Value
<S> <C> <C> <C>
Mil-Std 1553 Products-Albuquerque
MISC EQUIPMENT (SCOTT) 12/31/87 4,385.00 0.00
BOARD-TESTING OVEN 6/30/89 2,507.44 205.15
DIGITAL SYNCHRO METER 9/06/91 1,097.51 759.11
OFFICE EQUIPMENT-NEBRASKA 9/17/92 5,200.00 2,643.33
SECURITY SAFE 4/05/93 800.00 526.67
1553 TRADE SHOW DISPLAY 7/22/93 1,978.70 1,401.58
8102 ANA VOICE TERM 6/13/94 137.56 118.07
1 CHAIR 2/15/94 465.58 401.84
1-DELL 286 PC 9/24/87 3,027.94 0.00
DELL 286 PC 6/13/88 2,305.84 0.00
LOGIC ANALYZER 6/14/88 3,900.00 0.00
1-DELL 286 PC 10/09/88 2,852.05 0.00
PASSPORT PC BUS 11/11/88 1,093.55 0.00
TK50 TAPE DRIVE 12/30/88 1,768.20 0.00
TOSHIBA 3200 1/19/89 3,702.09 0.00
TOSHIBA 3200 4/19/89 3,512.89 0.00
PROM PROGRAMMER 6/30/89 2,997.67 0.00
COMPAQ PORTABLE III 5/15/90 3,682.59 0.00
DEC PDP-11 COMPUTER 6/30/90 3,000.00 0.00
EQUIS 386-33 - SCOTT 9/24/90 7,005.94 601.11
VME COMPUTER 9/30/90 7,620.00 653.80
PLD/EPROM PROGRAMMER 12/01/90 1,321.25 130.80
EQUIS 386 - R. RUPERT 12/01/90 3,907.46 386.84
386/25 COMPUADD PC 3/01/91 3,650.49 409.58
386/33 COMPUADD PC 3/01/91 4,494.00 504.23
LOGIC ANALYZER 10/15/91 7,781.16 3,782.77
2-333D COMPUTERS 10/15/91 4,951.14 2,406.97
NEC-486SX LAPTOP 2/15/92 8,313.01 4,041.33
HARD DISK UPGRADE-SCOTT 4/15/92 1,071.00 520.66
TAPE DRIVE 5/11/92 807.70 392.65
DISK DRIVE 6/11/92 415.00 201.74
486 COMPUTER-BUS ANALYZER 6/15/92 7,817.89 3,800.63
COMPAQ PORTABLE III 9/18/87 4,343.00 0.00
VME CHASSIS 4/28/88 6,400.00 0.00
EXP 450DX2 DUAL 4M 200M 8/03/92 3,480.20 1,769.10
433FP 4M DUAL FLPY W/KB 9/04/92 3,149.98 1,601.23
PREMIO 386DX/40 UPGRADABLE MB 12/04/92 1,592.37 889.08
486GSLDX2-66 1/20/93 2,902.00 1,765.38
SIP-93-SBS-C02 3/05/93 11,850.00 7,208.75
OFFICE PC-DEREK 1/20/93 1,049.00 638.14
VME BUS ANALYZER 6/14/93 5,150.00 3,390.42
DOCKING STATION CARRYING CASE 7/01/92 94.12 47.85
130 MB HARD DRIVE-MAXTOR 1/13/93 380.92 231.73
4MB UPGRADE 70NS SINGLE SIDE 1/22/93 320.55 195.00
OSCILLOSCIPE 200MHZ 7/09/93 3,525.66 2,497.34
CD ROM DRIVE 7/01/93 967.49 685.30
UNIVERSAL PROGRAMMER 10/01/93 3,039.00 2,304.57
342MB HARDDRIVE 11/16/93 305.80 231.89
486DX/33 VL MOT-GUNN 1/01/94 666.52 538.77
</TABLE>
<PAGE>
EXHIBIT D-1
Description of Certain Tangible Personal
Property of Borrower and its Subsidiaries
<TABLE>
<CAPTION>
Property Description Acquired Cost Net Value
<S> <C> <C> <C>
GATEWAY COMPUTER-SCHULER 1/01/94 1,895.00 1,531.79
486DX/33 VL MOT 2/01/94 2,383.97 1,927.04
33 MHZ 8MB,VSB,SBC 3/01/94 7,193.30 5,814.58
486-66DX2 VESA WIN STATION/VESA BEST BUY 4/01/94 4,045.00 3,471.95
486-66DX2 EISA DREAM MACHINE 4/01/94 2,395.00 2,055.70
UMAX SCAN OFFICE COLOR 800 DPI 4/01/94 1,015.00 693.58
PAGEMARQ 15 4/20/94 1,543.75 1,410.89
4 CH, 500 MHZ BW, 50K MEM/CH 4/05/94 19,159.03 16,444.83
4MB SIMM MEMORY 5/23/94 825.32 708.40
EMBEDDED PC 486, VXI-C BUS 6/01/94 8,380.89 7,193.60
486VLB D-SCAN 4M/T NB MAIN UNIT 6/01/94 3,340.00 2,866.83
4GIG TAPE BACKUP (CONNER) 6/08/94 1,216.81 1,044.43
COLOR DIGITAL OSCILL 6/01/94 3,685.00 3,162.95
12MB ADD-ON MEMORY/DOCKING STATION 6/22/94 1,230.00 1,055.75
ACMA 486DX266 6/18/94 2,495.00 2,141.54
OFFICE COMPUTER/FLEISSNER 6/01/94 1,000.00 858.33
UPGRADE BOARD TO REV V 8/01/94 1,738.00 1,643.20
486DX MOTHERBOARD 8/02/94 495.00 468.00
TELEPAD SL CASE BATT 9/30/94 3,204.77 3,044.53
2-4X36-70 HY12 7/01/94 1,205.70 1,135.37
486DX2-66 8/31/94 2,088.00 1,974.11
IBM PC/AT A32/D16 VME A CABLE DSUB37 TO 2-IDC 9/30/94 3,892.75 3,698.11
BIT3 IMBPC/AT A32/D16 VME A CABLE 11/01/94 1,956.50 1,883.13
COMPUTER ZONE 486DX 2-66 COMPUTER 4MB 11/08/94 2,028.42 1,952.35
INTEL 486 11/15/94 2,599.00 2,501.54
ACMA 486-66 DX2 11/21/94 2,701.00 2,599.71
COMPUTER ZONE 486DX 2-66 12/07/94 1,710.98 1,662.09
ACMA SIMM 72 PIN 4MBX32-70NS(=16MB) 12/21/94 540.00 524.57
ZEOS INTL. PENTIUM 90MB 2MB STEALTH GRAPHICS 11/17/94 4,623.00 4,449.64
GBC TECH 16-BIT ETHER 10BASET LINKBUILDER 12/16/94 1,469.00 1,427.03
GBC TECH LINKBUILDER 24PORT 12/20/94 871.00 846.11
EXCEL COMMUNICATIONS 12/22/94 2,965.97 2,881.23
ENTRE COMPUTERS BACK-UPS 900 NOVELL PWR & TRG 12/28/94 2,830.50 2,749.63
COMPUTER ZONE PENTIUM 90 DESKTOP 16MB SIMM 1/12/95 4,564.73 4,488.65
GBC TECH 3COM 16-BIT ETHER 10BASET 1/10/95 417.02 410.07
Dawn vme products vmecc4-60160-21,vmebp20j1j2 1/25/95 2,249.00 2,249.00
Hewlatt-Packard 34-channel portable logic ana 11/11/94 6,321.00 6,321.00
COMPUWARE CBL IBM 15 FT 12/28/94 15.87 15.87
XYLINX DEVELOPMENT 8/04/88 4,958.90 0.00
ALS-PLDS-ENCORE 12/14/89 7,927.13 0.00
XYLINX SOFTWARE 4/15/91 1,406.64 328.21
3861 DOX EXTENDER RTK 10/06/92 1,995.00 1,064.00
4-TELEMAGIC v12.2 7/29/92 1,477.14 738.57
SYNERGY FULL SUPPORT PKG 7/01/93 1,500.00 1,025.00
XYLINX SOFTWARE 2/04/94 3,366.50 2,693.20
STX SOFTWARE 10/20/94 2,015.00 1,925.44
BUSINESS FX CORP GOLDMINE WINDOWS 11/01/94 295.00 283.94
BUSINESS FX GOLDMINE WINDOWS 11/01/94 3,024.00 2,910.60
INVTRY AM29005W,PLS-ADV,PLSM-SIM 12/31/94 6,140.00 5,964.57
BUSINESS FX CORP CONSULT BILL F CONVER QUIKSY 1/02/95 356.25 356.25
</TABLE>
<PAGE>
EXHIBIT D-1
Description of Certain Tangible Personal
Property of Borrower and its Subsidiaries
<TABLE>
<CAPTION>
Property Description Acquired Cost Net Value
<S> <C> <C> <C>
COMPUTERLAND 10-ACCESS F/WINDOWS 10-WORD 1/13/95 2,967.57 2,967.57
MIXED TECHNOLOGY REWORK SYST W/STAND 7/01/94 4,378.32 4,195.89
NOZZLE, KIT 8/04/94 499.00 479.56
TRIOCULAR STEREOSCOP CLV 8/31/94 1,926.35 1,851.30
313,410.34 175,974.64
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CA DEPRECIATION STATEMENT 2
- --------------------------------------------------------------------------------------------------------
ASSET NO./ DATE IN COST OR PRIOR DEPRE-
DESCRIPTION SERVICE BASIS DEPR METHOD LIFE CIATION BONUS
- ------------- ------- -------- ------------- ------ ---- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1. VME 1100 COMPUTERS 01/01/87 3,957. 3,957. 200DB 5.00 0. 0.
4. DOLCH LOGIC ANALYZER 05/15/87 7,000. 7,000. 200DB 5.00 0. 0.
5. ZENITH DISPLAY
02/15/88 599. 599. 200DB 5.00 0. 0.
6. APPLE MACINTOSH SE 03/15/88 2,028. 2,028. 200DB 5.00 0. 0.
7. APPLE MACINTOSH II 03/15/88 1,975. 1,975. 200DB 5.00 0. 0.
8. DATA FRAME XP60 05/01/88 543. 543. 200DB 5.00 0. 0.
9. HEALTHKIT ELEC METER 05/27/88 798. 798. 200DB 5.00 0. 0.
10. APPLE COMPUTER 08/31/88 1,090. 1,090. 200DB 5.00 0. 0.
11. APPLE CD COMPUTER 10/14/88 603. 603. 200DB 5.00 0. 0.
12. DELL SYS310 COMPUTER 10/05/88 6,559. 6,559. 200DB 5.00 0. 0.
13. APPLE SCANNER 11/01/88 903. 903. 200DB 5.00 0. 0.
14. MACINTOSH SE30 CPU 03/08/89 2,643. 2,643. 200DB 5.00 0. 0.
15. MACINTOSH IISI 11/30/90 1,885. 1,498. 200DB 5.00 206. 0.
16. MACINTOSH IISI 11/30/90 1,885. 1,498. 200DB 5.00 206. 0.
17. APPLE MONITOR 12/05/90 194. 155. 200DB 5.00 21. 0.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
18. APPLE MONITOR
12/05/90 194. 155. 200DB 5.00 21. 0.
19. HP SCOPE
12/19/90 5,095. 4,050. 200DB 5.00 557. 0.
20. FURNITURE
03/15/88 540. 485. 200DB 7.00 47. 0.
21. TELEPHONE EQUIPMENT
03/27/89 1,237. 1,237. 200DB 7.00 0. 0.
22. TEST FIXTURE/SBC3
05/25/88 1,776. 1,776. 200DB 7.00 0. 0.
23. TEST FIXTURE/SBC2
08/25/88 2,188. 2,188. 200DB 7.00 0. 0.
24. TEST PROGRAM FOR SBC2
09/01/88 3,270. 3,040. 200DB 7.00 124. 0.
25. EPROM MULTIPROGRAMMER
10/06/88 1,325. 1,325. 200DB 7.00 0. 0.
26. SPECTRUM C1 TEST FIXTURE
10/01/88 4,427. 3,736. 200DB 7.00 395. 0.
27. FLUKE METER
11/10/88 795. 795. 200DB 7.00 0. 0.
28. MILLING FIXTURE FOR IP'S
02/23/89 800. 800. 200DB 7.00 0. 0.
29. GAUGE FIXTURE
05/09/89 575. 570. 200DB 7.00 1. 0.
30. OS-9 TESTER
12/13/90 1,400. 909. 200DB 7.00 141. 0.
31. VME 48120 BOARD
07/01/86 600. 600. 200DB 5.00 0. 0.
34. TAPE DRIVE
07/01/86 390. 390. 200DB 5.00 0. 0.
37. VME 1100 COMPUTER
07/01/86 1,800. 1,800. 200DB 5.00 0. 0.
40. TELEPHONE SYSTEM
09/01/86 949. 949. 200DB 5.00 0. 0.
43. Z-80 EMULATOR
09/01/86 640. 640. 200DB 5.00 0. 0.
46. FACSIMILE MACHINE
11/01/86 2,195. 2,195. PRE 5.00 0. 0.
49. MOTOROLA 68020 COMPUTER
12/01/86 2,495. 2,495. PRE 5.00 0. 0.
52. MACINTOSH II (3)
04/15/89 9,441. 9,441. 200DB 5.00 0. 0.
53. ETHERNET BOARD BVM
01/12/90 561. 546. 200DB 5.00 15. 0.
54. KONICA COPIER
03/09/90 4,000. 3,885. 200DB 5.00 115. 0.
55. COMPUTER TEST EQUIPMENT
01/31/91 3,563. 2,729. 200DB 5.00 392. 0.
56. 486 COMPUTER
02/22/91 2,965. 2,272. 200DB 5.00 326. 0.
57. APPLE MCINTOSH
05/27/91 3,859. 2,818. 200DB 5.00 439. 0.
58. PC COMPUTER
06/14/91 563. 411. 200DB 5.00 64. 0.
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
59. OFFICE FURNITURE
06/14/91 2,052. 1,117. 200DB 7.00 267. 0.
60. GRAMMAR ENGINE EMULATOR
09/25/91 1,657. 1,149. 200DB 5.00 203. 0.
61. HP SCOPE
10/25/91 6,982. 6,982. 200DB 5.00 0. 0.
62. MOTO 147 COMPUTER BOARD
10/07/91 2,781. 1,830. 200DB 5.00 380. 0.
63. QUADRA 700 COMPUTER
11/14/91 3,590. 3,394. 200DB 5.00 78. 0.
64. APPLE POWER BOOK COMPUTER
01/08/92 2,058. 1,297. 200DB 5.00 304. 0.
65. DIG AUDIO TAPE BACK UP SYSTEM
06/02/92 1,220. 671. 200DB 5.00 220. 0.
66. 386 COMPUTER
08/31/92 820. 402. 200DB 5.00 167. 0.
67. NEC MULTISYNCH MONTER
08/31/92 583. 583. 200DB 5.00 0. 0.
69. LOGIC ANALYZER (TEKTRONIX)
10/01/92 6,997. 5,289. 200DB 5.00 683. 0.
70. MOTOROLA MVME 147 TEST BOARD
10/21/92 716. 308. 200DB 5.00 163. 0.
71. MRP SYSTEM SOFTWARE
10/29/92 700. 301. 200DB 5.00 160. 0.
72. PREMA METER
11/16/92 5,310. 5,310. 200DB 7.00 0. 0.
73. SOLDERING STATION
10/22/92 1,058. 329. 200DB 7.00 208. 0.
74. APPLE QUADRA 650
05/22/93 2,011. 402. 200DB 5.00 644. 0.
75. TWO - 6U VME ENCLOSURES
06/30/93 2,934. 587. 200DB 5.00 939. 0.
76. TEKTRONIX ANALYZER
07/29/93 17,910. 11,582. 200DB 5.00 2,531. 0.
77. MOTOROLA MVME!62 BOARD
11/01/93 2,795. 559. 200DB 5.00 894. 0.
78. APPLE DUO
11/30/93 1,900. 380. 200DB 5.00 608. 0.
79. APPLE QUARDRA 650
12/01/93 2,597. 519. 200DB 5.00 831. 0.
80. LOBBY DESK/CREDENZA
05/07/93 677. 97. 200DB 7.00 166. 0.
81. SYSTEMS GENERAL PROGRAM
06/14/93 2,508. 358. 200DB 7.00 614. 0.
82. MICROWARE ENETPACK
06/30/93 2,995. 599. 200DB 5.00 958. 0.
83. XILINX SIMULATOR
06/30/93 2,000. 400. 200DB 5.00 640. 0.
84. GESPAC G-VIEW PORT PACK
08/20/93 4,370. 874. 200DB 5.00 1,398. 0.
85. 486 COMPUTER
12/01/93 2,957. 591. 200DB 5.00 946. 0.
86. COPIER
02/28/94 6,000. 0. 200DB 5.00 2,100. 0.
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
87. PC COMPUTER
02/28/94 872. 0. 200DB 5.00 305. 0.
88. MONITOR
02/22/94 1,085. 0. 200DB 5.00 380. 0.
89. PC COMPUTER
02/21/94 2,424. 0. 200DB 5.00 848. 0.
90 MACINTOSH
05/09/94 1,589. 0. 200DB 5.00 397. 0.
91. GATEWAY 2000
08/02/94 4,299. 0. 200DB 5.00 645. 0.
92. GATEWAY 2000
09/12/94 4,293. 0. 200DB 5.00 644. 0.
93. SUPERMAC BOARD
09/28/94 1,028. 0. 200DB 5.00 154. 0.
94. DISK DRIVE
09/26/94 1,276. 0. 200DB 5.00 191. 0.
95. FAX
11/09/94 731. 0. 200DB 5.00 37. 0.
96. MAC 610
11/30/94 1,428. 0. 200DB 5.00 71. 0.
97. MAC 610
11/30/94 1,758. 0. 200DB 5.00 88. 0.
98. 15 INCH MONITOR
11/30/94 513. 0. 200DB 5.00 26. 0.
99. LOGIC ANALYZER (TEKTRONIX)
12/28/94 9,524. 0. 200DB 5.00 345. 2,617.
100. MVME 162
07/23/94 1,976. 0. 200DB 7.00 0. 1,976.
101. HEWLETT PACKARD SCOPE
07/13/94 5,407. 0. 200DB 7.00 0. 5,407.
102. MICROWARE ENETPACK
03/14/94 1,290. 0. 200DB 3.00 752. 0.
103. VIEWLOGIC
11/17/94 7,095. 0. 200DB 3.00 591. 0.
104. POLYWARE LCD G VIEW PORT PACK
12/21/94 4,000. 0. 200DB 3.00 333. 0.
109. SUN WORK STATION & BACK UP DAT
11/09/94 9,154. 0. 200DB 5.00 458. 0.
------- ------------ ------- -----
TOTAL DEPRECIATION 238,225. 129,996. 25,437 10,000.
------- ------------ ------- -----
------- ------------ ------- -----
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CA OTHER TRADE OR BUSINESS INCOME STATEMENT 2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION AMOUNT
- ----------- ------------
RELIEF OF LIABILITY 13,026
------------
TOTAL OTHER TRADE OR BUSINESS INCOME 13,026
------------
------------
21
<PAGE>
EXHIBIT "E"
DESCRIPTION OF PERMITTED LIENS
<TABLE>
<CAPTION>
SECURED PARTY STATE FILE NO. DATE
------------- ----- -------- ----
<S> <C> <C> <C>
1. Xerox Corporation NM 91-0206017 2/6/91
Dallas, TX TX 91-156258 8/9/91
For lease of xerox machine
2. AT&T
Phoenix, AZ NM 91-0625011 6/25/91
For lease of telephone system
3. Inter-Tel Leasing, Inc.
Houston, TX TX 94-123361 6/22/94
For lease of telephone system
4. CIT Group
Tempe, AZ NM 93-1004069 10/4/93
For debt described in Items 4 and 5 of
Exhibit "F"
5. CIT Group
Tempe, AZ NM 93-1004070 10/4/93
For debt described in Items 4 and 5 of
Exhibit "F"
6. AT&T Credit Corporation
For lease of telecommunications NM 95-0821079 8/21/95
equipment (Notice filing)
</TABLE>
Page 1
<PAGE>
EXHIBIT "F"
FORM OF NOTICE OF BORROWING
This Notice of Borrowing is being delivered by SBS Technologies, Inc.
("BORROWER") pursuant to that certain Amended and Restated Credit Agreement
(the"CREDIT AGREEMENT"), dated as of April _______, 1996, executed by and
between Borrower and NationsBank of Texas, N.A. ("LENDER"). Unless indicated
otherwise, each capitalized term used herein shall have the meaning given to
such term in the Credit Agreement.
1. Borrower hereby requests an Advance in an amount equal to
$___________. Borrower represents and warrants to Lender that the Advance
herein requested does not exceed the amount which Borrower is entitled to
receive pursuant to Section 2.1 (or any other provisions) of the Credit
Agreement and will be used for purposes permitted under the Credit Agreement
(and, if requested by Lender, disclosed to Lender).
2. Borrower requests that of the Advance requested hereby:
$_____________ bear interest based on the Variable Rate; and/or
$_____________ bear interest based on the LIBOR Rate. With respect to
this LIBOR Rate Portion, the Interest Period shall be ______ 30 ______
60 or ______ 90 [check one] days, with the Effective Date being
______________ , 19____.
3. Borrower hereby requests a ________ Standby ________ Commercial [check
one] Letter of Credit in the amount of $______________ to be issued on
_____________, 19____, and to expire on ______________, 19_____. Borrower
requests that the original of such Letter of Credit be delivered to
___________________________________________. Borrower represents and warrants
to Lender that the Letter of Credit herein requested does not exceed the amount
which Borrower is entitled to receive pursuant to Section 2.1(c) (or any other
provisions) of the Credit Agreement.
4. Borrower hereby certifies, represents and warrants to Lender that:
(a) This Notice of Borrowing has been duly authorized by all
necessary action on the part of the Borrower.
(b) The representations and warranties contained in the Credit
Agreement and the other Loan Documents remain true and correct on and as of
the date hereof with the same force and effect as though made on the date
hereof.
Page 1
<PAGE>
(c) To the best of the undersigned's knowledge, no Default or Event
of Default has occurred and is continuing, and the making of the Advance
requested hereby shall not constitute a Default or Event of Default.
(d) Borrower has performed and complied in all material respects with
all agreements and conditions in the Credit Agreement and the other Loan
Documents required to be performed or complied with by Borrower on or prior
to the date hereof, and each of the conditions precedent contained in the
Credit Agreement applicable to the Advance or the Letter of Credit
requested hereby has been satisfied in all material respects.
(e) The proceeds of the Advance or Letter of Credit herein requested
will not be used in violation of any provision of the Credit Agreement
(including, without limitation, Sections 2.1(b) thereof) or any other Loan
Document.
5. Borrower hereby confirms all representations and warranties contained
in the Credit Agreement, except that any representation or warranty that speaks
as of a particular date is only confirmed to have been true and correct in all
material respects as of such date.
6. Borrower acknowledges and agrees that the making of the Advance or the
issuance of the Letter of Credit requested hereby shall not (a) constitute a
waiver of any condition precedent to the obligation of Lender to make further
Advances or arrange for the issuance of additional Letters of Credit or (b)
preclude Lender from thereafter declaring the failure of Borrower to satisfy all
such conditions precedent to be a Default.
EXECUTED as of ________________, 19____.
BORROWER:
SBS TECHNOLOGIES, INC.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
Page 2
<PAGE>
EXHIBIT "G"
DESCRIPTION OF EXISTING DEBT
1. Unsecured obligation to Peter and Marcia Berg under Non-Compete Covenant
executed August 20, 1992, with unpaid balance of $129,982 as of April 26,
1996.
2. Promissory note (purchase money note for software) payable to The CIT Group
dated September 27, 1993, with unpaid principal balance of $11,372 as of
April 26, 1996.
3. Capital equipment lease payable to The CIT Group dated September 27, 1993,
with unpaid principal balance of $10,851 as of April 26, 1996.
Page 1
<PAGE>
EXHIBIT "H"
LIST OF SUBSIDIARIES
SUBSIDIARY % OF STOCK OWNED BY BORROWER
---------- ----------------------------
Berg Systems International, Inc. 100%
GreenSpring Computers, Inc. 100%
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EXHIBIT "I"
DESCRIPTION OF LITIGATION
WITH RESPECT TO BORROWER OR ANY SUBSIDIARY
None
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AMENDED AND RESTATED PROMISSORY NOTE
$6,750,000.00 Dallas, Texas April 26, 1996
SBS TECHNOLOGIES, INC. (formerly known as SBS Engineering, Inc.), a New
Mexico corporation, having its principal office located at 2400 Louisiana Blvd.,
NE, AFC Building 5, Suite 600, Albuquerque, NM, 87110 ("BORROWER"), for value
received, hereby promises to pay to the order of NATIONSBANK OF TEXAS, N.A., a
national banking association ("LENDER"), at its Dallas Banking Center at 901
Main Street, Dallas, Texas 75202, or at such other address given to Borrower by
Lender, in immediately available funds and in lawful money of the United States
of America, the principal sum of Six Million Seven Hundred Fifty Thousand and
NO/100 Dollars ($6,750,000.00), or so much thereof as may be advanced and
outstanding, on October 30, 1999, or sooner as provided in the Credit Agreement
(as defined herein), together with interest on the unpaid principal balance of
this Note from time to time outstanding at the applicable interest rate. Unless
prohibited by Applicable Law and subject to the terms hereof limiting interest
to the Maximum Lawful Rate, interest on this Note shall be calculated on the
basis of actual days elapsed, but as if each year consisted of 360 days.
This Note is made pursuant to that certain Amended and Restated Credit
Agreement of even date herewith between Borrower and Lender (as the same may be
amended, supplemented, renewed, extended or restated from time to time, the
"CREDIT AGREEMENT"), and is the "Term Note" defined and described therein, the
terms and provisions of the Credit Agreement related to this Note being
incorporated herein by reference for all purposes. Each capitalized term used
but not expressly defined herein shall have the meaning given to such term in
the Credit Agreement. Reference is hereby expressly made to the Credit
Agreement for a statement of the rights and obligations of Lender and the duties
and obligations of Borrower in relation thereto; but neither this reference to
the Credit Agreement nor any provision thereof shall affect or impair the
absolute and unconditional obligation of Borrower to pay unpaid principal of and
interest on this Note when due.
This Note is secured by the Credit Agreement, the Collateral Documents and
all the other Loan Documents, and all liens and security interests created or
evidenced thereby, and payment of this Note is guaranteed by the Guaranty. Any
holder hereof shall be entitled to all benefits of and remedies and security set
forth in the Credit Agreement, the Collateral Documents and all the other Loan
Documents.
Subject to and upon the terms and conditions of the Credit Agreement,
Borrower shall be entitled to prepay the principal of this Note from time to
time, in whole or in part, without premium or penalty, except for any prepayment
fee due upon prepayment of a LIBOR Rate Portion prior to the expiration of the
applicable Interest Period as provided in Section 3.5(g) of the Credit
Agreement.
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1. INTEREST AND PAYMENT.
(a) MATURITY. The entire principal balance of this Note, and all
accrued but unpaid interest hereon, shall be due and payable in full on the Term
Loan Termination Date.
(b) ACCRUAL OF INTEREST. Subject to Paragraph 1(f) below, interest
on this Note shall accrue at a rate per annum equal to the lesser of (i) at
Borrower's option exercised in accordance with the terms of the Credit
Agreement, the Variable Rate or the LIBOR Rate with respect to the Variable Rate
Portions and the LIBOR Rate Portions outstanding hereunder from time to time,
subject, however, to the provisions of the Credit Agreement, or (ii) the Maximum
Lawful Rate; provided, however, that as to any portion of the outstanding
principal balance hereof that is not subject to an effective election of or
conversion to the LIBOR Rate in accordance with the terms of the Credit
Agreement, interest on such portion of this Note shall accrue interest at the
lesser of (i) the Variable Rate or (ii) the Maximum Lawful Rate. Interest on
this Note shall be calculated at a daily rate equal to 1/360 of the annual
percentage rate which this Note bears, subject to the provisions hereof limiting
interest to the Maximum Lawful Rate. Without notice to Borrower or any other
Person, the Variable Rate and the Maximum Lawful Rate shall each automatically
fluctuate upward and downward as and in the amount by which the Base Rate and
the Maximum Lawful Rate, respectively, fluctuate, subject always to limitations
contained in this Note and the Credit Agreement.
(c) AGREEMENTS CONCERNING PRICING ELECTION. Reference should be made
to the provisions of SECTION 3.5 of the Credit Agreement concerning the terms,
manner and agreements related to the interest rate elections available to
Borrower under this Note.
(d) PRINCIPAL AND INTEREST PAYMENTS. Principal and interest hereon
shall be due and payable as is provided in ARTICLE III of the Credit Agreement,
which provides, in part, for (i) monthly payments of accrued, unpaid interest on
the first (1st) day of each month, and (ii) monthly payments of principal in the
amount of $112,500.00 on the first (1st) day of each month.
(e) COSTS DUE TO REGULATORY CHANGES. Borrower shall indemnify Lender
against and reimburse Lender for increased costs to Lender, as a result of any
Regulatory Change, in the maintaining of any LIBOR Rate Portion. All payments
made pursuant to this paragraph shall be made free and clear, without reduction
for, or account of, any present or future taxes or other levies of any nature,
excluding net income and franchise taxes.
(f) DEFAULT RATE. After maturity of this Note or the occurrence of
an Event of Default, the outstanding principal balance of this Note shall, at
the option of Lender, bear interest at the Default Rate. Any past due principal
and, to the extent permitted by law, past due interest on the Loan shall bear
interest, payable as it accrues on demand, for each day until paid at the
Default Rate. Such interest shall continue to accrue at the Default Rate
notwithstanding the entry of a judgment with respect to any of the Obligation or
the foreclosure of any of Lender's Liens.
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(g) MAXIMUM LAWFUL RATE ADJUSTMENTS. If at any time a change in the
Variable Rate or the LIBOR Rate shall cause the rate of interest on this Note to
be limited to the Maximum Lawful Rate, any subsequent reductions in the Variable
Rate or the LIBOR Rate, as applicable, shall not reduce the rate of interest on
this Note below the Maximum Lawful Rate until the total amount of interest
accrued equals the amount of interest which would have accrued if the Variable
Rate or the LIBOR Rate, as applicable, had at all times been in effect. In the
event that at maturity (stated or by acceleration), or at the final payment of
the Loan, the total amount of interest paid or accrued on the Loan is less than
the amount of interest which would have accrued if the Variable Rate or the
LIBOR Rate, as applicable, had at all times been in effect with respect thereto,
then at such time, to the extent permitted by law, Borrower shall pay to Lender
an amount equal to the difference between (a) the lesser of the amount of
interest which would have accrued if the Variable Rate or the LIBOR Rate, as
applicable, had at all times been in effect and the amount of interest which
would have accrued if the Maximum Lawful Rate had at all times been in effect,
and (b) the amount of interest actually paid on the Loan.
2. DEFAULT. The occurrence of a Default or an Event of Default, under
and as defined in the Credit Agreement, shall constitute, respectively, a
Default or an Event of Default under this Note.
3. REMEDIES.
(a) ALL REMEDIES AVAILABLE. Upon the occurrence of an Event of
Default, the holder hereof shall have the right to declare the entire unpaid
principal balance of, and all accrued unpaid interest on, this Note at once due
and payable (and upon such declaration, the same shall be at once due and
payable), to foreclose any and all liens and security interests securing payment
hereof, to offset against this Note any sum or sums owed by it to Borrower, and
to exercise any of its other rights, powers and remedies under this Note, under
the Credit Agreement or any other Loan Document, or at law or in equity.
(b) NO WAIVER. Neither the failure by the holder hereof to exercise,
nor delay by the holder hereof in exercising, the right to accelerate the
maturity of this Note or any other right, power or remedy upon any Default or
Event of Default shall be construed as a waiver of such Default or Event of
Default or as a waiver of the right to exercise any such right, power or remedy
at any time. No single or partial exercise by the holder hereof of any right,
power or remedy shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right, power or remedy may be exercised at any
time and from time to time. All rights and remedies provided for in this Note
and in any other Loan Document are cumulative of each other and of any and all
other rights and remedies existing at law or in equity, and the holder hereof
shall, in addition to the rights and remedies provided herein or in any other
Loan Document, be entitled to avail itself of all such other rights and remedies
as may now or hereafter exist at law or in equity for the collection of the
indebtedness owing hereunder, and the resort to any right or remedy provided for
hereunder or under any such other Loan Document or provided for by law or in
equity shall not prevent the concurrent or subsequent
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employment of any other appropriate rights or remedies. Without limiting the
generality of the foregoing provisions, the acceptance by the holder hereof from
time to time of any payment under this Note which is past due or which is less
than the payment in full of all amounts due and payable at the time of such
payment, shall not (i) constitute a waiver of or impair or extinguish the rights
of the holder hereof to accelerate the maturity of this Note or to exercise any
other right, power or remedy at the time or at any subsequent time, or nullify
any prior exercise of any such right, power or remedy, or (ii) constitute a
waiver of the requirement of punctual payment and performance, or a novation in
any respect.
4. USURY SAVINGS PROVISIONS.
(a) GENERAL LIMITATION. Notwithstanding anything herein or in any
other Loan Documents, expressed or implied, to the contrary, in no event shall
any interest rate charged hereunder or under any of the other Loan Documents, or
any interest contracted for, collected or received by Lender or any holder
hereof, exceed the Maximum Lawful Rate.
(b) INTENT OF PARTIES. It is expressly stipulated and agreed to be
the intent of Borrower and Lender at all times to comply with the applicable law
governing the maximum rate or amount of interest payable on or in connection
with this Note. If the applicable law is ever judicially interpreted so as to
render usurious any amount called for under this Note or under any of the other
Loan Documents, or contracted for, charged, taken, reserved or received with
respect to this Note, or if acceleration of the maturity of this Note, any
prepayment by Borrower, or any other circumstance whatsoever, results in Lender
having been paid any interest in excess of that permitted by applicable law,
then it is the express intent of Borrower and Lender that all excess amounts
theretofore collected by Lender be credited on the principal balance of this
Note (or, if this Note has been or would thereby be paid in full, refunded to
Borrower), and the provisions of this Note and the other applicable Loan
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
The right to accelerate the maturity of this Note does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the
event of acceleration. All sums paid or agreed to be paid to Lender for the
use, forbearance or detention of the indebtedness evidenced hereby or by any
other Loan Document shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the Maximum Lawful Rate. The term
"APPLICABLE LAW" as used herein shall mean the laws of the State of Texas, or
any applicable United States federal law to the extent that it permits Lender to
contract for, charge, take, reserve or receive a greater amount of interest than
under Texas law. The provisions of this paragraph shall control all agreements
between Borrower and Lender.
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5. GENERAL PROVISIONS.
(a) BUSINESS DAY. Whenever any payment shall be due under this Note
on a day which is not a Business Day, the date on which such payment is due
shall be extended to the next succeeding Business Day, and such extension of
time shall be included in the computation of the amount of interest then
payable.
(b) MANNER OF PAYMENT. The manner in which payments are to be made
on this Note shall be governed by the provisions hereof and the Credit
Agreement, including, without limitation, SECTION 3.10 of the Credit Agreement.
(c) PREPAYMENTS. Prepayments may be made on this Note subject to and
in accordance with SECTIONS 3.5(g) and 3.6 of the Credit Agreement.
(d) APPLICATION OF PAYMENTS. All payments made on this Note shall be
applied in accordance with SECTIONS 3.11 and 8.8 of the Credit Agreement, as
applicable. Nothing herein shall limit or impair any rights of any holder
hereof to apply as provided in the Loan Documents any past due payments, any
proceeds from the disposition of any collateral by foreclosure or other
collections after default. Except to the extent specific provisions are set
forth in this Note or another Loan Document with respect to application of
payments, all payments received by the holder hereof shall be applied, to the
extent thereof, to the indebtedness owing by Borrower to the holder hereof in
such order and manner as the holder hereof shall deem appropriate, any
instructions from Borrower or anyone else to the contrary notwithstanding.
(e) COSTS OF COLLECTION. If any holder of this Note retains an
attorney in connection with any default or at maturity or to collect, enforce or
defend this Note or any other Loan Document in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if Borrower sues any holder
of this Note in connection with this Note or any other Loan Document and does
not prevail, then Borrower agrees to pay to each such holder, in addition to
principal and interest, all costs and expenses incurred by such holder in trying
to collect this Note or in any such suit or proceeding, including reasonable
attorneys' fees.
(f) WAIVERS AND ACKNOWLEDGMENTS. Borrower and all sureties,
endorsers, guarantors and any other party now or hereafter liable for the
payment of this Note in whole or in part, hereby severally (i) waive demand,
presentment for payment, notice of dishonor and of nonpayment, protest, notice
of protest, notice of intent to accelerate, notice of acceleration and all other
notice (except only for any notice that is specifically required by the terms of
the Credit Agreement or any other Loan Document), filing of suit and diligence
in collecting this Note or enforcing any of the security herefor; (ii) agree to
any substitution, subordination, exchange or release of any such security or the
release of any party primarily or secondarily liable hereon; (iii) agree that
the holder hereof shall not be required first to institute suit or exhaust its
remedies against Borrower or others liable or to become liable hereon or to
enforce its rights against them
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or any security herefor; (iv) consent to any extension or postponement of time
of payment of this Note for any period or periods of time and to any partial
payments, before or after maturity, and to any other indulgences with respect
hereto, without notice thereof to any of them; and (v) submit (and waive all
rights to object) to personal jurisdiction in the State of Texas, and venue in
Dallas County, Texas, for the enforcement of any and all obligations under the
Loan Documents.
(g) AMENDMENTS IN WRITING. This Note may not be changed, amended or
modified except in a writing expressly intended for such purpose and executed by
the party against whom enforcement of the change, amendment or modification is
sought.
(h) PURPOSE OF PROCEEDS. The proceeds of this Note will be used
solely for business purposes and not for personal, family, household or
agricultural purposes.
(i) NOTICES. Any notice required or which any party desires to give
under this Note shall be given and effective as provided in SECTION 9.6 of the
Credit Agreement.
(j) ASSIGNMENTS/PARTICIPATIONS. Holder acknowledges and agrees that
the holder of this Note may, at any time and from time to time, assign all or a
portion of its interest in the Revolving Loan or the Credit Facility or transfer
to any Person a participation interest in the Revolving Loan or the Credit
Facility.
(k) SUCCESSORS AND ASSIGNS. All of the covenants, stipulations,
promises and agreements contained in this Note by or on behalf of Borrower shall
bind its successors and assigns and shall be for the benefit of Lender and any
holder hereof, and their successors and assigns, whether so expressed or not.
(l) TIME OF THE ESSENCE. Time shall be of the essence in this Note
with respect to all of Borrower's obligations hereunder.
(m) JURY TRIAL WAIVER. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
BORROWER HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT, EQUITY OR OTHERWISE) ARISING UNDER
OR RELATING TO THIS NOTE, THE OTHER LOAN DOCUMENTS OR ANY RELATED MATTERS, AND
AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A
JURY.
(n) GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY TEXAS LAW, EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW
APPLIES PURSUANT TO SECTION 9.10 OF THE CREDIT AGREEMENT OR OTHERWISE. THE
BOOKS AND RECORDS OF LENDER SHALL CONSTITUTE PRIMA FACIE EVIDENCE OF ALL SUMS
DUE LENDER HEREUNDER.
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(o) INTEGRATION. THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN LENDER AND BORROWER AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF LENDER AND
BORROWER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Note is given in modification, renewal, extension, amendment and
restatement, but not in novation or extinguishment, of the outstanding principal
balance under that certain Promissory Note in the original principal amount of
$7,000,000.00 dated April 28, 1995, executed by Borrower and payable to the
order of Lender.
IN WITNESS WHEREOF, Borrower has duly executed this Note as of the date
first above written.
BORROWER:
SBS TECHNOLOGIES, INC.,
a New Mexico Corporation
By: /s/ CHRISTOPHER J. AMENSON
---------------------------------
Name: Christopher J. Amenson
---------------------------------
Title: President
---------------------------------
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AMENDED AND RESTATED REVOLVING PROMISSORY NOTE
$2,500,000.00 Dallas, Texas April 26, 1996
SBS TECHNOLOGIES, INC. (formerly known as SBS Engineering, Inc.), a New
Mexico corporation, having its principal office located at 2400 Louisiana Blvd.,
NE, AFC Building 5, Suite 600, Albuquerque, NM, 87110 ("BORROWER"), for value
received, hereby promises to pay to the order of NATIONSBANK OF TEXAS, N.A., a
national banking association ("LENDER"), at its Dallas Banking Center at 901
Main Street, Dallas, Texas 75202, or at such other address given to Borrower by
Lender, in immediately available funds and in lawful money of the United States
of America, the principal sum of Two Million Five Hundred Thousand and NO/100
Dollars ($2,500,000.00), or so much thereof as may be advanced and outstanding,
on October 30, 1997, or sooner as provided in the Credit Agreement (as defined
herein), together with interest on the unpaid principal balance of this Note
from time to time outstanding at the applicable interest rate. Unless
prohibited by Applicable Law and subject to the terms hereof limiting interest
to the Maximum Lawful Rate, interest on this Note shall be calculated on the
basis of actual days elapsed, but as if each year consisted of 360 days.
This Note is made pursuant to that certain Amended and Restated Credit
Agreement of even date herewith between Borrower and Lender (as the same may be
amended, supplemented, renewed, extended or restated from time to time, the
"CREDIT AGREEMENT"), and is the "Revolving Note" defined and described therein,
the terms and provisions of the Credit Agreement related to this Note being
incorporated herein by reference for all purposes. Each capitalized term used
but not expressly defined herein shall have the meaning given to such term in
the Credit Agreement. Reference is hereby expressly made to the Credit
Agreement for a statement of the rights and obligations of Lender and the duties
and obligations of Borrower in relation thereto; but neither this reference to
the Credit Agreement nor any provision thereof shall affect or impair the
absolute and unconditional obligation of Borrower to pay unpaid principal of and
interest on this Note when due.
This Note is secured by the Credit Agreement, the Collateral Documents and
all the other Loan Documents, and all liens and security interests created or
evidenced thereby, and payment of this Note is guaranteed by the Guaranty. Any
holder hereof shall be entitled to all benefits of and remedies and security set
forth in the Credit Agreement, the Collateral Documents and all the other Loan
Documents.
Lender may disburse the principal of this Note to Borrower in one or more
advances from time to time, subject to and upon the terms and conditions set
forth in the Credit Agreement with respect to the Revolving Commitment, so long
as the outstanding principal balance hereof never exceeds the then applicable
amount of the Revolving Commitment or the Borrowing Base, less any Letter of
Credit Exposure. Subject to and upon the terms and conditions of the Credit
Agreement, Borrower shall be entitled to prepay the principal of this Note from
time to time, in whole or in part, without premium or penalty, except for any
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prepayment fee due upon prepayment of a LIBOR Rate Portion prior to the
expiration of the applicable Interest Period as provided in Section 3.5(g) of
the Credit Agreement, and thereafter, prior to the maturity date hereof (and
provided that no Default has occurred and is in existence), to request
additional advances hereunder, subject to and in accordance with the terms and
conditions of the Credit Agreement.
1. INTEREST AND PAYMENT.
(a) MATURITY. The entire principal balance of this Note, and all
accrued but unpaid interest hereon, shall be due and payable in full on the
Revolving Loan Termination Date.
(b) ACCRUAL OF INTEREST. Subject to Paragraph 1(f) below, interest
on this Note shall accrue at a rate per annum equal to the lesser of (i) at
Borrower's option exercised in accordance with the terms of the Credit
Agreement, the Variable Rate or the LIBOR Rate with respect to the Variable Rate
Portions and the LIBOR Rate Portions outstanding hereunder from time to time,
subject, however, to the provisions of the Credit Agreement, or (ii) the Maximum
Lawful Rate; provided, however, that as to any portion of the outstanding
principal balance hereof that is not subject to an effective election of or
conversion to the LIBOR Rate in accordance with the terms of the Credit
Agreement, interest on such portion of this Note shall accrue interest at the
lesser of (i) the Variable Rate or (ii) the Maximum Lawful Rate. Interest on
this Note shall be calculated at a daily rate equal to 1/360 of the annual
percentage rate which this Note bears, subject to the provisions hereof limiting
interest to the Maximum Lawful Rate. Without notice to Borrower or any other
Person, the Variable Rate and the Maximum Lawful Rate shall each automatically
fluctuate upward and downward as and in the amount by which the Base Rate and
the Maximum Lawful Rate, respectively, fluctuate, subject always to limitations
contained in this Note and the Credit Agreement.
(c) AGREEMENTS CONCERNING PRICING ELECTION. Reference should be made
to the provisions of SECTION 3.5 of the Credit Agreement concerning the terms,
manner and agreements related to the interest rate elections available to
Borrower under this Note.
(d) PRINCIPAL AND INTEREST PAYMENTS. Principal and interest hereon
shall be due and payable as is provided in ARTICLE III of the Credit Agreement,
which provides, in part, for monthly payments of accrued, unpaid interest on the
first (1st) day of each month.
(e) COSTS DUE TO REGULATORY CHANGES. Borrower shall indemnify Lender
against and reimburse Lender for increased costs to Lender, as a result of any
Regulatory Change, in the maintaining of any LIBOR Rate Portion. All payments
made pursuant to this paragraph shall be made free and clear, without reduction
for, or account of, any present or future taxes or other levies of any nature,
excluding net income and franchise taxes.
(f) DEFAULT RATE. After maturity of this Note or the occurrence of
an Event of Default, the outstanding principal balance of this Note shall, at
the option of Lender, bear
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interest at the Default Rate. Any past due principal and, to the extent
permitted by law, past due interest on the Loan shall bear interest, payable as
it accrues on demand, for each day until paid at the Default Rate. Such
interest shall continue to accrue at the Default Rate notwithstanding the entry
of a judgment with respect to any of the Obligation or the foreclosure of any of
Lender's Liens.
(g) MAXIMUM LAWFUL RATE ADJUSTMENTS. If at any time a change in the
Variable Rate or the LIBOR Rate shall cause the rate of interest on this Note to
be limited to the Maximum Lawful Rate, any subsequent reductions in the Variable
Rate or the LIBOR Rate, as applicable, shall not reduce the rate of interest on
this Note below the Maximum Lawful Rate until the total amount of interest
accrued equals the amount of interest which would have accrued if the Variable
Rate or the LIBOR Rate, as applicable, had at all times been in effect. In the
event that at maturity (stated or by acceleration), or at the final payment of
the Loan, the total amount of interest paid or accrued on the Loan is less than
the amount of interest which would have accrued if the Variable Rate or the
LIBOR Rate, as applicable, had at all times been in effect with respect thereto,
then at such time, to the extent permitted by law, Borrower shall pay to Lender
an amount equal to the difference between (a) the lesser of the amount of
interest which would have accrued if the Variable Rate or the LIBOR Rate, as
applicable, had at all times been in effect and the amount of interest which
would have accrued if the Maximum Lawful Rate had at all times been in effect,
and (b) the amount of interest actually paid on the Loan.
2. DEFAULT. The occurrence of a Default or an Event of Default, under
and as defined in the Credit Agreement, shall constitute, respectively, a
Default or an Event of Default under this Note.
3. REMEDIES.
(a) ALL REMEDIES AVAILABLE. Upon the occurrence of an Event of
Default, the holder hereof shall have the right to declare the entire unpaid
principal balance of, and all accrued unpaid interest on, this Note at once due
and payable (and upon such declaration, the same shall be at once due and
payable), to foreclose any and all liens and security interests securing payment
hereof, to offset against this Note any sum or sums owed by it to Borrower, and
to exercise any of its other rights, powers and remedies under this Note, under
the Credit Agreement or any other Loan Document, or at law or in equity.
(b) NO WAIVER. Neither the failure by the holder hereof to exercise,
nor delay by the holder hereof in exercising, the right to accelerate the
maturity of this Note or any other right, power or remedy upon any Default or
Event of Default shall be construed as a waiver of such Default or Event of
Default or as a waiver of the right to exercise any such right, power or remedy
at any time. No single or partial exercise by the holder hereof of any right,
power or remedy shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right, power or remedy may be exercised at any
time and from time to time. All rights and remedies provided for in this Note
and in any other Loan Document are cumulative
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of each other and of any and all other rights and remedies existing at law or in
equity, and the holder hereof shall, in addition to the rights and remedies
provided herein or in any other Loan Document, be entitled to avail itself of
all such other rights and remedies as may now or hereafter exist at law or in
equity for the collection of the indebtedness owing hereunder, and the resort to
any right or remedy provided for hereunder or under any such other Loan Document
or provided for by law or in equity shall not prevent the concurrent or
subsequent employment of any other appropriate rights or remedies. Without
limiting the generality of the foregoing provisions, the acceptance by the
holder hereof from time to time of any payment under this Note which is past due
or which is less than the payment in full of all amounts due and payable at the
time of such payment, shall not (i) constitute a waiver of or impair or
extinguish the rights of the holder hereof to accelerate the maturity of this
Note or to exercise any other right, power or remedy at the time or at any
subsequent time, or nullify any prior exercise of any such right, power or
remedy, or (ii) constitute a waiver of the requirement of punctual payment and
performance, or a novation in any respect.
4. USURY SAVINGS PROVISIONS.
(a) GENERAL LIMITATION. Notwithstanding anything herein or in any
other Loan Documents, expressed or implied, to the contrary, in no event shall
any interest rate charged hereunder or under any of the other Loan Documents, or
any interest contracted for, collected or received by Lender or any holder
hereof, exceed the Maximum Lawful Rate.
(b) INTENT OF PARTIES. It is expressly stipulated and agreed to be
the intent of Borrower and Lender at all times to comply with the applicable law
governing the maximum rate or amount of interest payable on or in connection
with this Note. If the applicable law is ever judicially interpreted so as to
render usurious any amount called for under this Note or under any of the other
Loan Documents, or contracted for, charged, taken, reserved or received with
respect to this Note, or if acceleration of the maturity of this Note, any
prepayment by Borrower, or any other circumstance whatsoever, results in Lender
having been paid any interest in excess of that permitted by applicable law,
then it is the express intent of Borrower and Lender that all excess amounts
theretofore collected by Lender be credited on the principal balance of this
Note (or, if this Note has been or would thereby be paid in full, refunded to
Borrower), and the provisions of this Note and the other applicable Loan
Documents immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
The right to accelerate the maturity of this Note does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the
event of acceleration. All sums paid or agreed to be paid to Lender for the
use, forbearance or detention of the indebtedness evidenced hereby or by any
other Loan Document shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the rate or amount of interest on
account of such indebtedness does not exceed the Maximum Lawful Rate. The term
"APPLICABLE LAW"
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as used herein shall mean the laws of the State of Texas, or any applicable
United States federal law to the extent that it permits Lender to contract for,
charge, take, reserve or receive a greater amount of interest than under Texas
law. The provisions of this paragraph shall control all agreements between
Borrower and Lender.
5. GENERAL PROVISIONS.
(a) BUSINESS DAY. Whenever any payment shall be due under this Note
on a day which is not a Business Day, the date on which such payment is due
shall be extended to the next succeeding Business Day, and such extension of
time shall be included in the computation of the amount of interest then
payable.
(b) MANNER OF PAYMENT. The manner in which payments are to be made
on this Note shall be governed by the provisions hereof and the Credit
Agreement, including, without limitation, SECTION 3.10 of the Credit Agreement.
(c) PREPAYMENTS. Prepayments may be made on this Note subject to and
in accordance with SECTIONS 3.5(g) and 3.6 of the Credit Agreement.
(d) APPLICATION OF PAYMENTS. All payments made on this Note shall be
applied in accordance with SECTIONS 3.11 and 8.8 of the Credit Agreement, as
applicable. Nothing herein shall limit or impair any rights of any holder
hereof to apply as provided in the Loan Documents any past due payments, any
proceeds from the disposition of any collateral by foreclosure or other
collections after default. Except to the extent specific provisions are set
forth in this Note or another Loan Document with respect to application of
payments, all payments received by the holder hereof shall be applied, to the
extent thereof, to the indebtedness owing by Borrower to the holder hereof in
such order and manner as the holder hereof shall deem appropriate, any
instructions from Borrower or anyone else to the contrary notwithstanding.
(e) COSTS OF COLLECTION. If any holder of this Note retains an
attorney in connection with any default or at maturity or to collect, enforce or
defend this Note or any other Loan Document in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if Borrower sues any holder
of this Note in connection with this Note or any other Loan Document and does
not prevail, then Borrower agrees to pay to each such holder, in addition to
principal and interest, all costs and expenses incurred by such holder in trying
to collect this Note or in any such suit or proceeding, including reasonable
attorneys' fees.
(f) WAIVERS AND ACKNOWLEDGMENTS. Borrower and all sureties,
endorsers, guarantors and any other party now or hereafter liable for the
payment of this Note in whole or in part, hereby severally (i) waive demand,
presentment for payment, notice of dishonor and of nonpayment, protest, notice
of protest, notice of intent to accelerate, notice of acceleration and all other
notice (except only for any notice that is specifically required by the terms of
the Credit Agreement or any other Loan Document), filing of suit and diligence
in collecting this Note or
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enforcing any of the security herefor; (ii) agree to any substitution,
subordination, exchange or release of any such security or the release of any
party primarily or secondarily liable hereon; (iii) agree that the holder hereof
shall not be required first to institute suit or exhaust its remedies against
Borrower or others liable or to become liable hereon or to enforce its rights
against them or any security herefor; (iv) consent to any extension or
postponement of time of payment of this Note for any period or periods of time
and to any partial payments, before or after maturity, and to any other
indulgences with respect hereto, without notice thereof to any of them; and (v)
submit (and waive all rights to object) to personal jurisdiction in the State of
Texas, and venue in Dallas County, Texas, for the enforcement of any and all
obligations under the Loan Documents.
(g) AMENDMENTS IN WRITING. This Note may not be changed, amended or
modified except in a writing expressly intended for such purpose and executed by
the party against whom enforcement of the change, amendment or modification is
sought.
(h) PURPOSE OF PROCEEDS. The proceeds of this Note will be used
solely for business purposes and not for personal, family, household or
agricultural purposes.
(i) NOTICES. Any notice required or which any party desires to give
under this Note shall be given and effective as provided in SECTION 9.6 of the
Credit Agreement.
(j) ASSIGNMENTS/PARTICIPATIONS. Holder acknowledges and agrees that
the holder of this Note may, at any time and from time to time, assign all or a
portion of its interest in the Revolving Loan or the Credit Facility or transfer
to any Person a participation interest in the Revolving Loan or the Credit
Facility.
(k) SUCCESSORS AND ASSIGNS. All of the covenants, stipulations,
promises and agreements contained in this Note by or on behalf of Borrower shall
bind its successors and assigns and shall be for the benefit of Lender and any
holder hereof, and their successors and assigns, whether so expressed or not.
(l) TIME OF THE ESSENCE. Time shall be of the essence in this Note
with respect to all of Borrower's obligations hereunder.
(m) JURY TRIAL WAIVER. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
BORROWER HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT, EQUITY OR OTHERWISE) ARISING UNDER
OR RELATING TO THIS NOTE, THE OTHER LOAN DOCUMENTS OR ANY RELATED MATTERS, AND
AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A
JURY.
(n) GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY TEXAS LAW, EXCEPT TO THE EXTENT
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THAT UNITED STATES FEDERAL LAW APPLIES PURSUANT TO SECTION 9.10 OF THE CREDIT
AGREEMENT OR OTHERWISE. THE BOOKS AND RECORDS OF LENDER SHALL CONSTITUTE PRIMA
FACIE EVIDENCE OF ALL SUMS DUE LENDER HEREUNDER.
(o) INTEGRATION. THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN LENDER AND BORROWER AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF LENDER AND
BORROWER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
This Note is given in modification, renewal, extension, amendment and
restatement, but not in novation or extinguishment, of the outstanding principal
balance under that certain Revolving Promissory Note in the original principal
amount of $4,000,000.00 dated April 28, 1995, executed by Borrower and payable
to the order of Lender.
IN WITNESS WHEREOF, Borrower has duly executed this Note as of the date
first above written.
BORROWER:
SBS TECHNOLOGIES, INC.,
a New Mexico Corporation
By: /s/ CHRISTOPHER J. AMENSON
---------------------------------
Name: Christopher J. Amenson
---------------------------------
Title: President
---------------------------------
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AMENDED AND RESTATED GUARANTY AGREEMENT
This Amended and Restated Guaranty Agreement (this "GUARANTY") is made
as of the 26th day of April, 1996, by Berg Systems International, Inc., a
California corporation ("GUARANTOR"), in favor of NationsBank of Texas, N.A., a
national banking association (LENDER), and its successors and assigns.
PRELIMINARY STATEMENTS.
(1) SBS Technologies, Inc. (formerly known as SBS Engineering, Inc.),
a New Mexico corporation ("BORROWER"), and Lender have entered into that certain
Amended and Restated Credit Agreement dated of even date herewith (herein
called, as it may hereafter be modified, supplemented, extended, renewed or
restated, and as in effect from time to time, the "CREDIT AGREEMENT"), which
Credit Agreement (i) sets forth the terms and conditions of a term loan and a
revolving credit facility to Borrower secured by all personal property of
Borrower and its Subsidiaries, as more particularly described in the Credit
Agreement and identified therein as the Collateral, and (ii) was executed in
modification, renewal and restatement of that certain Credit Agreement (the
"ORIGINAL CREDIT AGREEMENT) dated as of April 28, 1995, executed by and between
Borrower and Lender.
(2) A condition precedent to the modification and restatement of the
Original Credit Agreement and the extension of credit to Borrower pursuant to
the Credit Agreement is Guarantor's execution and delivery to Lender of this
Guaranty.
(3) The loans made under the Credit Agreement are or will be,
evidenced by (i) that certain Amended and Restated Promissory Note of even date
with the Credit Agreement, executed by Borrower and payable to the order of
Lender in the principal face amount of Six Million Seven Hundred Fifty Thousand
and No/100 Dollars ($6,750,000.00) (such note, as it may hereafter be renewed,
extended, supplemented, increased or modified and in effect from time to time,
and all other notes given in substitution therefor, or in modification, renewal,
or extension thereof, in whole or in part, is herein called the "TERM NOTE"),
and (ii) that certain Amended and Restated Revolving Promissory Note of even
date with the Credit Agreement, executed by Borrower and payable to the order of
Lender in the principal face amount of Two Million Five Hundred Thousand and
No/100 Dollars ($2,500,000.00) (such note, as it may hereafter be renewed,
extended, supplemented, increased or modified and in effect from time to time,
and all other notes given in substitution therefor, or in modification, renewal,
or extension thereof, in whole or in part, is herein called the "REVOLVING
NOTE") (the Term Note and the Revolving Note being sometimes referred to herein
collectively as the "NOTES").
(4) Any capitalized term used and not defined in this Guaranty shall
have the meaning given to such term in the Credit Agreement. This Guaranty is
one of the Loan Documents described in the Credit Agreement.
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, and as a material inducement to Lender to extend credit
to Borrower, Guarantor hereby guarantees to Lender the prompt and full payment
and performance of the indebtedness and obligations described below in this
Guaranty (collectively called the "GUARANTEED OBLIGATIONS"), this Guaranty being
upon the following terms and conditions:
1. GUARANTY OF PAYMENT. Guarantor hereby unconditionally and irrevocably
guarantees to Lender the punctual payment when due, whether by lapse of time, by
acceleration of maturity, or otherwise, and at all times thereafter, of all
principal, interest (including interest accruing after the commencement of any
bankruptcy or insolvency proceeding by or against Borrower, whether or not
allowed in such proceeding), fees, costs, expenses, indemnification
indebtedness, and other sums of money now or hereafter due and owing pursuant to
(i) the terms of the Notes, the Credit Agreement, the Collateral Documents and
the other Loan Documents, including any indemnifications contained in such Loan
Documents, now or hereafter existing, and (ii) all renewals, extensions,
refinancings, modifications, supplements or amendments of such indebtedness or
any part thereof (the indebtedness described in clauses (i) and
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(ii) above in this Section 1 is herein collectively called the "INDEBTEDNESS").
This Guaranty covers the Indebtedness, whether presently outstanding or arising
subsequent to the date hereof, including all amounts advanced by Lender in
stages or installments. The guaranty of Guarantor as set forth in this Section
1 is a continuing guaranty of payment and not a guaranty of collection.
2. GUARANTY OF PERFORMANCE. Guarantor additionally hereby unconditionally and
irrevocably guarantees to Lender the timely performance of all other obligations
of Borrower under all of the Loan Documents. If any of such obligations of
Borrower are not complied with, in any respect whatsoever, and without the
necessity of any notice from Lender to Guarantor, Guarantor agrees to timely
perform such obligations.
3. PRIMARY LIABILITY OF GUARANTOR.
(a) This Guaranty is an absolute, irrevocable and unconditional
guaranty of payment and performance. Guarantor shall be liable for the payment
and performance of the Guaranteed Obligations, as set forth in this Guaranty, as
a primary obligor. This Guaranty shall be effective as a waiver of, and
Guarantor hereby expressly waives, any and all rights to which Guarantor may
otherwise have been entitled under any suretyship laws in effect from time to
time, including, without limitation, any rights pursuant to Rule 31 of the Texas
Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice and
Remedies Code, and Chapter 34 of the Texas Business and Commerce Code.
(b) In the event of default by Borrower in payment or performance of
the Guaranteed Obligations, or any part thereof, when such indebtedness or
performance becomes due, either by its terms or as the result of the exercise of
any power to accelerate, Guarantor shall, on demand and without presentment,
protest, notice of protest, further notice of nonpayment or of dishonor or of
default or nonperformance, or notice of acceleration or of intent to accelerate,
or any other notice whatsoever, without any notice having been given to
Guarantor previous to such demand of the acceptance by Lender of this Guaranty,
and without any notice having been given to Guarantor previous to such demand of
the creating or incurring of such indebtedness or of such obligation to perform,
all such notices being hereby waived by Guarantor, pay the amount due thereon to
Lender or perform or observe the agreement, covenant, term or condition, as the
case may be, and it shall not be necessary for Lender, in order to enforce such
payment or performance by Guarantor, first to institute suit or pursue or
exhaust any rights or remedies against Borrower or others liable on such
indebtedness or for such performance, or to enforce any rights against any
security that shall ever have been given to secure such indebtedness or
performance, or to join Borrower or any others liable for the payment or
performance of the Guaranteed Obligations or any part thereof in any action to
enforce this Guaranty, or to resort to any other means of obtaining payment or
performance of the Guaranteed Obligations.
(c) Suit may be brought or demand may be made against all parties who
have signed this Guaranty or any other guaranty covering all or any part of the
Guaranteed Obligations, or against any one or more of them, separately or
together, without impairing the rights of Lender against any party hereto. Any
time that Lender is entitled to exercise its rights or remedies hereunder, it
may in its discretion elect to demand payment and/or performance. If Lender
elects to demand performance, it shall at all times thereafter have the right to
demand payment until all of the Guaranteed Obligations have been paid and
performed in full. If Lender elects to demand payment, it shall at all times
thereafter have the right to demand performance until all of the Guaranteed
Obligations have been paid and performed in full.
4. CERTAIN AGREEMENTS AND WAIVERS BY GUARANTOR.
(a) Guarantor hereby agrees that neither Lender's rights or remedies
nor Guarantor's obligations under the terms of this Guaranty shall be released,
diminished, impaired, reduced or affected by any one or more of the following
events, actions, facts, or circumstances, and the liability of Guarantor under
this Guaranty shall be absolute and unconditional irrespective of:
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(i) any limitation of liability or recourse in any other Loan
Document or arising under any Law;
(ii) the taking or accepting of any other security or guaranty
for, or right of recourse with respect to, any or all of the Guaranteed
Obligations;
(iii) any release, surrender, abandonment, exchange, alteration,
sale or other disposition, subordination, deterioration, waste, failure to
protect or preserve, impairment, or loss of, or any failure to create or
perfect any lien or security interest with respect to, or any other
dealings with, any collateral or security at any time existing or
purported, believed or expected to exist in connection with any or all of
the Guaranteed Obligations;
(iv) whether express or by operation of Law, any partial release
of the liability of Guarantor hereunder, or if one or more other guaranties
are now or hereafter obtained by Lender covering all or any part of the
Guaranteed Obligations, any complete or partial release of any one or more
of such guarantors under any such other guaranty, or any complete or
partial release of Borrower or any other party liable, directly or
indirectly, for the payment or performance of any or all of the Guaranteed
Obligations;
(v) the death, insolvency, bankruptcy, disability, dissolution,
liquidation, termination, receivership, reorganization, merger,
consolidation, change of form, structure or ownership, sale of all assets,
or lack of corporate, partnership or other power of Borrower or any other
party at any time liable for the payment or performance of any or all of
the Guaranteed Obligations;
(vi) either with or without notice to or consent of Guarantor:
any renewal, extension, modification or rearrangement of the terms of any
or all of the Guaranteed Obligations and/or any of the Loan Documents,
including, without limitation, material alterations of the terms of payment
(including changes in maturity date(s) and interest rate(s)) or performance
or any other terms thereof, or any waiver, termination, or release of, or
consent to departure from, any of the Loan Documents or any other guaranty
of any or all of the Guaranteed Obligations, or any adjustment, indulgence,
forbearance, or compromise that may be granted from time to time by Lender
to Borrower, Guarantor, and/or any other party at any time liable for the
payment or performance of any or all of the Guaranteed Obligations;
(vii) any neglect, lack of diligence, delay, omission, failure, or
refusal of Lender to take or prosecute (or in taking or prosecuting) any
action for the collection or enforcement of any of the Guaranteed
Obligations, or to foreclose or take or prosecute any action to foreclose
(or in foreclosing or taking or prosecuting any action to foreclose) upon
any security therefor, or to exercise (or in exercising) any other right or
power with respect to any security therefor, or to take or prosecute (or in
taking or prosecuting) any action in connection with any Loan Document, or
any failure to sell or otherwise dispose of in a commercially reasonable
manner any collateral securing any or all of the Guaranteed Obligations
(excepting only, with respect to any such sale or other disposition of
collateral, any such requirement imposed at the time in question by then
applicable law and not waivable by Guarantor, and Guarantor agreeing, with
respect to any such sale or other disposition to which Section 9.504(c) of
the Texas Business and Commerce Code or other similar provision of
applicable law, is determined to be applicable, that ten days' notice shall
constitute reasonable notification; and provided that, except for any such
non-waivable requirement applicable to any sale or other disposition of any
such collateral, no provision of this Guaranty shall be construed to limit
or otherwise adversely affect Lender's absolute and discretionary rights,
as set forth in this Guaranty, to release and/or otherwise deal or fail to
deal with any such collateral without affecting or impairing Guarantor's
liability hereunder);
(viii) any failure of Lender to notify Guarantor of any creation,
renewal, extension, rearrangement, modification, supplement, or assignment
of the Guaranteed Obligations or any part thereof, or of any Loan Document,
or of any release of or change in any security or of any other action taken
or
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refrained from being taken by Lender against Borrower or any security or
other recourse or of any new agreement between Lender and Borrower, it
being understood that Lender shall not be required to give Guarantor any
notice of any kind under any circumstances with respect to or in connection
with the Guaranteed Obligations, any and all rights to notice Guarantor may
have otherwise had being hereby waived by Guarantor (excepting only any
notice, if any, required at the time in question by then applicable law and
not waivable by Guarantor);
(ix) if for any reason Lender is required to refund any payment
by Borrower to any other party liable for the payment or performance of any
or all of the Guaranteed Obligations or pay the amount thereof to someone
else;
(x) the existence of any claim, set-off, or other right that
Guarantor may at any time have against Borrower, Lender, or any other
Person, whether or not arising in connection with this Guaranty, the Note,
the Credit Agreement, or any other Loan Document (provided, that nothing
contained herein shall prevent the assertion of any such claim by separate
suit or compulsory counterclaim); or
(xi) the unenforceability of all or any part of the Guaranteed
Obligations against Borrower, whether because the Guaranteed Obligations
exceed the amount permitted by law or violate any usury law, or because the
act of creating the Guaranteed Obligations, or any part thereof, is ULTRA
VIRES, or because the officers or Persons creating same acted in excess of
their authority, or because of a lack of validity or enforceability of or
defect or deficiency in any of the Loan Documents, or because Borrower has
any valid defense, claim or offset with respect thereto, or because
Borrower's obligation ceases to exist by operation of law, or because of
any other reason or circumstance, it being agreed that Guarantor shall
remain liable hereon regardless of whether Borrower or any other Person be
found not liable on the Guaranteed Obligations, or any part thereof, for
any reason (and regardless of any joinder of Borrower or any other party in
any action to obtain payment or performance of any or all of the Guaranteed
Obligations).
(b) In the event any payment by Borrower or any other party to
Lender is held to constitute a preference, fraudulent transfer or other voidable
payment under any bankruptcy, insolvency or similar law, or if for any other
reason Lender is required to refund such payment or pay the amount thereof to
any other party, such payment by Borrower or any other party to Lender shall not
constitute a release of Guarantor from any liability hereunder, and this
Guaranty shall continue to be effective or shall be reinstated (notwithstanding
any prior release or discharge by Lender of this Guaranty or of Guarantor), as
the case may be, with respect to, and this Guaranty shall apply to, any and all
amounts so refunded by Lender or paid by Lender to another party (which amounts
shall constitute part of the Guaranteed Obligations), and any interest paid by
Lender and any attorneys' fees, costs and expenses paid or incurred by Lender in
connection with any such event. It is the intent of Guarantor and Lender that
the obligations and liabilities of Guarantor hereunder are absolute and
unconditional under any and all circumstances and that until the Guaranteed
Obligations are fully and finally paid and performed, and not subject to refund
or disgorgement, the obligations and liabilities of Guarantor hereunder shall
not be discharged or released, in whole or in part, by any act or occurrence
that might, but for the provisions of this Guaranty, be deemed a legal or
equitable discharge or release of a guarantor. Lender shall be entitled to
continue to hold this Guaranty in its possession for a period of one year from
the date the Guaranteed Obligations are paid and performed in full and for so
long thereafter as may be necessary to enforce any obligation of Guarantor
hereunder and/or to exercise any right or remedy of Lender hereunder.
(c) If acceleration of the time for payment of any amount
payable by Borrower under the Note, the Credit Agreement, or any other Loan
Document is stayed or delayed by any Law or applicable tribunal, all such
amounts shall nonetheless be payable by Guarantor on demand by Lender.
5. SUBORDINATION. If, for any reason whatsoever, Borrower is now or hereafter
becomes indebted to Guarantor:
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(a) Such indebtedness and all interest thereon and all liens,
security interests and rights now or hereafter existing with respect to property
of Borrower securing same shall, at all times, be subordinate in all respects to
the Guaranteed Obligations and to all liens, security interests and rights now
or hereafter existing to secure the Guaranteed Obligations;
(b) Guarantor shall not be entitled to enforce or receive
payment, directly or indirectly, of any such indebtedness of Borrower to
Guarantor until the Guaranteed Obligations have been fully and finally paid and
performed; and
(c) Guarantor shall promptly upon request of Lender from time to
time execute such documents and perform such acts as Lender may require to
evidence and perfect its interest and to permit or facilitate exercise of its
rights under this Section 5, including, but not limited to, execution and
delivery of financing statements, proofs of claim, further assignments and
security agreements, and delivery to Lender of any promissory notes or other
instruments evidencing indebtedness of Borrower to Guarantor.
Guarantor hereby assigns and grants to Lender a security interest in all
such indebtedness and security therefor, if any, of Borrower to Guarantor now
existing or hereafter arising, including any dividends and payments pursuant to
debtor relief or insolvency proceedings referred to below. In the event of
receivership, bankruptcy, reorganization, arrangement or other debtor relief or
insolvency proceedings involving Borrower as debtor, Lender shall have the right
to prove its claim in any such proceeding so as to establish its rights
hereunder and shall have the right to receive directly from the receiver,
trustee or other custodian (whether or not a default shall have occurred or be
continuing under any of the Loan Documents), dividends and payments that are
payable upon any obligation of Borrower to Guarantor now existing or hereafter
arising, and to have all benefits of any security therefor, until the Guaranteed
Obligations have been fully and finally paid and performed. If, notwithstanding
the foregoing provisions, Guarantor should receive any payment, claim or
distribution that is prohibited as provided above in this Section 5, Guarantor
shall pay the same to Lender immediately, Guarantor hereby agreeing that it
shall receive the payment, claim or distribution in trust for Lender and shall
have absolutely no dominion over the same except to pay it immediately to
Lender. All promissory notes, accounts receivable ledgers or other evidences,
now or hereafter held by Guarantor, of obligations of Borrower to Guarantor
shall contain a specific written notice thereon that the indebtedness evidenced
thereby is subordinated under and is subject to the terms of this Guaranty.
6. OTHER LIABILITY OF GUARANTOR OR BORROWER. If Guarantor becomes liable, by
endorsement or otherwise, for any indebtedness owing by Borrower to Lender other
than under this Guaranty, such liability shall not be in any manner impaired or
affected hereby, and the rights of Lender hereunder shall be cumulative of any
and all other rights that Lender may have against Guarantor. If Borrower is or
becomes indebted to Lender for any indebtedness other than or in excess of the
Indebtedness for which Guarantor is liable under this Guaranty, any payment
received or recovery realized upon any indebtedness of Borrower to Lender may,
except to the extent paid by Guarantor on the Indebtedness for which Guarantor
is liable under this Guaranty or specifically required by Law or agreement of
Lender to be applied to the Indebtedness for which Guarantor is liable under
this Guaranty, in Lender's sole discretion, be applied upon indebtedness of
Borrower to Lender other than the Indebtedness for which Guarantor is liable
under this Guaranty.
7. LENDER'S ASSIGNS. This Guaranty is for the benefit of Lender and Lender's
successors and assigns, and in the event of an assignment of the Indebtedness or
other Guaranteed Obligations, or any part thereof or any interest therein, the
rights and benefits hereunder, to the extent applicable to the Guaranteed
Obligations so assigned, may be transferred with such Guaranteed Obligations.
Guarantor waives notice of any transfer or assignment of the Guaranteed
Obligations, or any part thereof, and agrees that failure to give notice will
not affect the liabilities of Guarantor hereunder.
8. BINDING EFFECT. This Guaranty is binding not only on Guarantor, but also
on Guarantor's successors and assigns.
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9. GOVERNING LAW; FORUM. THIS GUARANTY, AND ITS VALIDITY, ENFORCEMENT, AND
INTERPRETATION, SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE UNITED STATES
FEDERAL LAW, AND IS INTENDED TO BE PERFORMED IN ACCORDANCE WITH, AND ONLY TO THE
EXTENT PERMITTED BY, SUCH LAWS. All obligations of Guarantor hereunder are
payable and performable at the place or places where the Guaranteed Obligations
are payable and performable. Guarantor hereby irrevocably submits generally and
unconditionally for Guarantor and in respect of Guarantor's property to the
non-exclusive jurisdiction of any Texas state court, or any United States
federal court, sitting in the City of Dallas, Texas, and to the non-exclusive
jurisdiction of any state or United States federal court sitting in the state in
which any of the Collateral is located, over any suit, action or proceeding
arising out of or relating to this Guaranty or the Guaranteed Obligations.
10. INVALIDITY OF CERTAIN PROVISIONS. If any provision of this Guaranty or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be judicially declared to be invalid or unenforceable, neither the
remaining provisions of this Guaranty nor the application of such provision to
any other Person or circumstance shall be affected thereby, and the remaining
provisions of this Guaranty, or the applicability of such provision to other
Persons or circumstances, as applicable, shall remain in effect and be
enforceable to the maximum extent permitted by applicable Law.
11. ATTORNEYS' FEES AND COSTS OF COLLECTION. Guarantor shall pay on demand all
reasonable attorneys' fees and all other costs and expenses incurred by Lender
in the enforcement of or preservation of Lender's rights under this Guaranty.
Guarantor agrees to pay interest on any expenses or other sums due to Lender
under this Section 11 that are not paid when due, at a rate per annum equal to
the lesser of (i) the Highest Lawful Rate, or (ii) the Prime Rate plus 4%.
Guarantor's obligations and liabilities under this Section 11 shall survive any
payment or discharge in full of the Guaranteed Obligations.
12. PAYMENTS. All sums payable under this Guaranty shall be paid in lawful
money of the United States of America that at the time of payment is legal
tender for the payment of public and private debts.
13. CONTROLLING AGREEMENT. It is not the intention of Lender or Guarantor to
charge or to obligate Guarantor to pay interest in excess of that lawfully
permitted to be paid by Guarantor under applicable Law. To the extent that any
law limiting the amount of interest that may be contracted for, charged or
received is applicable to the obligations of Guarantor under this Guaranty, no
provision of this Guaranty shall require the payment or permit the collection of
any sum in excess of the maximum lawful amount applicable to Guarantor's
obligations under this Guaranty. Should it be determined that any portion of
the Guaranteed Obligations or any other amount payable by Guarantor under this
Guaranty constitutes interest in excess of the maximum amount of interest that
Guarantor, in Guarantor's capacity as guarantor, may lawfully be required to pay
under applicable Law, the obligation of Guarantor to pay such interest shall
automatically be limited to the payment thereof in the maximum amount so
permitted under applicable Law. All interest paid or agreed to be paid to
Lender, to the extent permitted by applicable law, shall be amortized, prorated,
allocated, and spread throughout the full period until payment in full of the
principal of the Indebtedness (including the period of any renewal or extension
thereof) so that the interest thereon for such full period shall not exceed the
maximum amount permitted by applicable law. The intention of Guarantor and
Lender hereunder is to comply with all laws applicable to this Guaranty and
Guarantor's obligations hereunder. The provisions of this Section 13 shall
override and control all other provisions of this Guaranty and of any other
agreement between Guarantor and Lender.
14. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF GUARANTOR. In addition to
the representations, warranties and acknowledgments of Guarantor contained in
the Credit Agreement, Guarantor hereby represents, warrants, and covenants that
(a) the board of directors of Guarantor have determined that the execution and
delivery of this Guaranty by Guarantor is in the best interests of Guarantor and
Guarantor will derive substantial benefit, directly or indirectly, from the
extensions of credit by Lender to Borrower under the Credit Agreement and the
Notes and from the making of this Guaranty by Guarantor, in an amount not less
than the amount guaranteed hereunder taking into account any right of
contribution of Guarantor against Borrower and each of the other guarantors of
the
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Indebtedness and other Guaranteed Obligations; (b) this Guaranty is duly
authorized and valid, and is binding upon and enforceable against Guarantor; (c)
Guarantor is not, and the execution, delivery and performance by Guarantor of
this Guaranty will not cause Guarantor to be, in violation of or in default with
respect to any Law or in default (or at risk of acceleration of indebtedness)
under any material agreement or restriction by which Guarantor is bound or
affected; (d) Guarantor is a wholly-owned subsidiary of Borrower and is duly
organized, validly existing, and in good standing under the Laws of the state of
its organization, and has full power and authority to enter into and perform
this Guaranty; (e) there is no Litigation pending or, to the knowledge of
Guarantor, threatened before or by any Tribunal against or affecting Guarantor;
(f) all of the most recent financial statements and information heretofore
furnished to Lender by or on behalf of Guarantor do, and all financial
statements hereafter furnished to Lender by Guarantor will, fully and accurately
present the condition (financial or otherwise) of Guarantor as of their dates
and the results of Guarantor's operations for the periods therein specified,
and, since the date of the most recent financial statements of Guarantor
heretofore furnished to Lender, no material adverse change has occurred in the
financial condition of Guarantor, nor, except as heretofore disclosed in writing
to Lender, has Guarantor incurred any material liability, direct or indirect,
fixed or contingent; (g) after giving effect to this Guaranty, Guarantor is
solvent, is not engaged or about to engage in business or a transaction for
which the property of Guarantor is an unreasonably small capital, and does not
intend to incur or believe that it will incur debts that will be beyond its
ability to pay as such debts mature; (h) Lender has no duty at any time to
investigate or inform Guarantor of the financial or business condition or
affairs of Borrower or any change therein, and Guarantor will keep itself fully
appraised of Borrower's financial and business condition; (i) Guarantor
acknowledges and agrees that Guarantor may be required to pay and perform the
Guaranteed Obligations in full without assistance or support from Borrower or
any other party; (j) Guarantor has the full rights of contribution afforded
under law as against Borrower and each of the other guarantors of the Guaranteed
Obligations, and Guarantor has not waived or agreed to limit or alter any such
rights and shall not do so in the future; and (k) Guarantor has read and fully
understands the provisions contained in the Notes, the Credit Agreement and the
other Loan Documents. Guarantor's representations, warranties and covenants are
a material inducement to Lender to enter into the other Loan Documents and shall
survive the execution hereof and any bankruptcy, foreclosure, transfer of
security or other event affecting Borrower, Guarantor, any other party, or any
security for all or any part of the Guaranteed Obligations.
15. NOTICES. Unless specifically provided otherwise, any notices, requests,
demands or other communications required or given for purposes of this Guaranty
or any other Loan Document shall be given in writing and shall be deemed
sufficiently given if delivered in accordance with Section 7.6 of the Credit
Agreement. This Section 15 shall not be construed in any way to affect or
impair any waiver of notice or demand provided in this Guaranty or in any other
Loan Document or to require giving notice or demand to or upon any Person in any
situation or for any reason.
16. CUMULATIVE RIGHTS; NO WAIVER, ETC. The exercise by Lender of any right or
remedy hereunder or under any other Loan Document, or at Law or in equity, shall
not preclude the concurrent or subsequent exercise of any other right or remedy.
Lender shall have all rights, remedies and recourses afforded to Lender by
reason of this Guaranty or any other Loan Document or by Law or equity or
otherwise, and the same (a) shall be cumulative and concurrent, (b) may be
pursued separately, successively or concurrently against Guarantor or others
obligated for the Guaranteed Obligations, or any part thereof, or against any
one or more of them, or against any security or otherwise, at the sole
discretion of Lender, (c) may be exercised as often as occasion therefor shall
arise, it being agreed by Guarantor that the exercise of, discontinuance of the
exercise of or failure to exercise any of such rights, remedies, or recourses
shall in no event be construed as a waiver or release thereof or of any other
right, remedy, or recourse, and (d) are intended to be, and shall be,
nonexclusive. No waiver of any default on the part of Guarantor or of any
breach of any of the provisions of this Guaranty or of any other document shall
be considered a waiver of any other or subsequent default or breach, and no
delay or omission in exercising or enforcing the rights and powers granted
herein or in any other document shall be construed as a waiver of such rights
and powers, and no exercise or enforcement of any rights or powers hereunder or
under any other document shall be held to exhaust such rights and powers, and
every such right and power may be exercised from time to time. The granting of
any consent, approval or waiver by Lender shall be limited to the specific
instance and purpose therefor and shall not constitute consent or approval in
any other instance or for any other purpose. No notice to or demand on
Guarantor in any case shall of itself entitle Guarantor to any other or further
notice or demand in similar or other circumstances. No provision
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of this Guaranty or any right, remedy or recourse of Lender with respect hereto,
or any default or breach, can be waived, nor can this Guaranty or Guarantor be
released or discharged in any way or to any extent, except specifically in each
case by a writing intended for that purpose (and which refers specifically to
this Guaranty) executed, and delivered to Guarantor, by Lender.
17. TERM OF GUARANTY. This Guaranty shall continue in effect until all the
Guaranteed Obligations are fully and finally paid, performed, and discharged,
except that, and notwithstanding any return of this Guaranty to Guarantor, this
Guaranty shall continue in effect (i) with respect to any of the Guaranteed
Obligations that survive the discharge of the Guaranteed Obligations, (ii) with
respect to all obligations and liabilities of Guarantor under SECTION 11, and
(iii) as provided in SECTION 4(b).
18. FINANCIAL STATEMENTS. Guarantor shall furnish or cause to be furnished to
Lender such financial statements as are required under Section 3.2 of the Credit
Agreement or are otherwise reasonably requested by Lender from time to time.
19. DISCLOSURE OF INFORMATION. Lender may sell or offer to sell the
Indebtedness or portions of or interests in the Indebtedness to one or more
assignees or participants and may disclose to any such assignee or participant
or prospective assignee or participant any information Lender has pertaining to
the Guaranteed Obligations, this Guaranty, or Guarantor, including, without
limitation, information regarding any security for the Guaranteed Obligations or
for this Guaranty, credit information on Guarantor, Borrower, and/or any other
party liable, directly or indirectly, for any part of the Guaranteed
Obligations. Lender also may disclose any such information to any regulatory
body having jurisdiction over Lender and to any agent or attorney of Lender and
in such other circumstances and to such other parties as necessary or
appropriate in Lender's reasonable judgment.
20. RIGHT OF SET-OFF. Upon the occurrence and during the continuance of any
Default in the payment or performance when due of any of the Guaranteed
Obligations, Lender is hereby authorized at any time and from time to time, to
the fullest extent permitted by applicable Law, without notice to any Person
(any such notice being expressly waived by Guarantor to the fullest extent
permitted by applicable law), to set off and apply any and all deposits (general
or special, time or demand, provisional or final), funds, or assets at any time
held and other indebtedness at any time owing by Lender to or for the credit or
the account of Guarantor against any and all of the obligations of Guarantor now
or hereafter existing under this Guaranty, whether or not Lender shall have made
any demand under this Guaranty or exercised any other right or remedy hereunder
and although such obligations may be unmatured. Lender will promptly notify
Guarantor after any such set-off and application made by Lender, provided that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of Lender under this Section 20 are in addition to
the other rights and remedies (including other rights of set-off) that Lender
may have.
21. COMPLIANCE WITH LOAN DOCUMENTS. Guarantor shall comply with, observe and
be bound by the provisions of the Loan Documents which pertain to Guarantor.
22. INDUCEMENT TO LENDER. Guarantor acknowledges that this Guaranty is given
to induce Lender to extend credit to Borrower and that such credit would not be
extended except in reliance upon this Guaranty.
23. PAYMENTS ON THE INDEBTEDNESS. Each payment on the Indebtedness shall be
deemed to have been made by Borrower unless express written notice is given to
Lender at the time of such payment that such payment is made by Guarantor as
specified in such notice.
24. FURTHER ASSURANCES. Guarantor at Guarantor's expense will promptly execute
and deliver to Lender upon Lender's request all such other and further
documents, agreements, and instruments in compliance with or accomplishment of
the agreements of Guarantor under this Guaranty.
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25. NO FIDUCIARY RELATIONSHIP. The relationship between Lender and Guarantor
is solely that of lender and guarantor. Lender has no fiduciary or other
special relationship with or duty to Guarantor and none is created hereby.
26. INTERPRETATION. If this Guaranty is signed by more than one Person as
"Guarantor", then the term "Guarantor" as used in this Guaranty shall refer to
all such Persons jointly and severally, and all of the obligations, promises,
agreements, covenants, waivers, consents, representations, warranties and other
provisions in this Agreement are made by and shall be binding upon each and
every such undersigned Person, jointly and severally, and their respective
heirs, personal representatives, successors and assigns. The term "Lender"
shall be deemed to include any subsequent holder(s) of the Note. Whenever the
context of any provisions hereof shall require it, words in the singular shall
include the plural, words in the plural shall include the singular, and pronouns
of any gender shall include the other genders. Words importing persons herein
shall include firms, associations, partnerships (including limited
partnerships), joint ventures, trusts, corporations and other legal entities,
including public or governmental bodies, agencies or instrumentalities, as well
as natural persons. Captions and headings in the Loan Documents are for
convenience only and shall not affect the construction of the Loan Documents.
All references in this Guaranty to Schedules, Articles, Sections, Subsections,
paragraphs and subparagraphs refer to the respective subdivisions of this
Guaranty, unless such reference specifically identifies another document. The
terms "herein", "hereof", "hereto", "hereunder" and similar terms refer to this
Guaranty and not to any particular Section or subsection of this Guaranty. The
terms "include" and "including" shall be interpreted as if followed by the words
"without limitation". All references in this Guaranty to sums denominated in
dollars or with the symbol "$" refer to the lawful currency of the United States
of America, unless such reference specifically identifies another currency.
27. TIME OF ESSENCE. Time shall be of the essence in this Guaranty with
respect to all of Guarantor's obligations hereunder.
28. COUNTERPARTS. This Guaranty may be executed in multiple counterparts, each
of which, for all purposes, shall be deemed an original, and all of which
together shall constitute one and the same agreement.
29. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR HEREBY WAIVES ANY RIGHT
THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT,
CONTRACT, EQUITY OR OTHERWISE) ARISING UNDER OR RELATING TO THIS GUARANTY, THE
OTHER LOAN DOCUMENTS OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
30. ENTIRE AGREEMENT. This Guaranty embodies the entire agreement between
Lender and Guarantor with respect to the guaranty by Guarantor of the Guaranteed
Obligations. This Guaranty supersedes all prior agreements and understandings,
if any, with respect to guaranty by Guarantor of the Guaranteed Obligations. No
condition or conditions precedent to the effectiveness of this Guaranty exist.
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
This Guaranty is executed in amendment and restatement of that certain
Guaranty Agreement dated April 28, 1995, executed by Guarantor in favor of
Lender in connection with the Original Credit Agreement.
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IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty as of
the date first written above.
Address of Guarantor: GUARANTOR:
2400 Louisiana Blvd., NE BERG SYSTEMS INTERNATIONAL, INC.,
AFC Building 5, Suite 600 a California corporation
Albuquerque, New Mexico 87110
Attn: Christopher J. Amenson
By: /s/ CHRISTOPHER J. AMENSON
------------------------------
Name: Christopher J. Amenson
----------------------------
Title: Director, Chairman & Chief
Executive Officer
----------------------------
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AMENDED AND RESTATED GUARANTY AGREEMENT
This Amended and Restated Guaranty Agreement (this "GUARANTY") is made
as of the 26th day of April, 1996, by GreenSpring Computers, Inc., a California
corporation ("GUARANTOR"), in favor of NationsBank of Texas, N.A., a national
banking association (LENDER), and its successors and assigns.
PRELIMINARY STATEMENTS.
(1) SBS Technologies, Inc. (formerly known as SBS Engineering, Inc.),
a New Mexico corporation ("BORROWER"), and Lender have entered into that certain
Amended and Restated Credit Agreement dated of even date herewith (herein
called, as it may hereafter be modified, supplemented, extended, renewed or
restated, and as in effect from time to time, the "CREDIT AGREEMENT"), which
Credit Agreement (i) sets forth the terms and conditions of a term loan and a
revolving credit facility to Borrower secured by all personal property of
Borrower and its Subsidiaries, as more particularly described in the Credit
Agreement and identified therein as the Collateral, and (ii) was executed in
modification, renewal and restatement of that certain Credit Agreement (the
"ORIGINAL CREDIT AGREEMENT") dated as of April 28, 1995, executed by and between
Borrower and Lender.
(2) A condition precedent to the modification and restatement of the
Original Credit Agreement and the extension of credit to Borrower pursuant to
the Credit Agreement is Guarantor's execution and delivery to Lender of this
Guaranty.
(3) The loans made under the Credit Agreement are or will be,
evidenced by (i) that certain Amended and Restated Promissory Note of even date
with the Credit Agreement, executed by Borrower and payable to the order of
Lender in the principal face amount of Six Million Seven Hundred Fifty Thousand
and No/100 Dollars ($6,750,000.00) (such note, as it may hereafter be renewed,
extended, supplemented, increased or modified and in effect from time to time,
and all other notes given in substitution therefor, or in modification, renewal,
or extension thereof, in whole or in part, is herein called the "TERM NOTE"),
and (ii) that certain Amended and Restated Revolving Promissory Note of even
date with the Credit Agreement, executed by Borrower and payable to the order of
Lender in the principal face amount of Two Million Five Hundred Thousand and
No/100 Dollars ($2,500,000.00) (such note, as it may hereafter be renewed,
extended, supplemented, increased or modified and in effect from time to time,
and all other notes given in substitution therefor, or in modification, renewal,
or extension thereof, in whole or in part, is herein called the "REVOLVING
NOTE") (the Term Note and the Revolving Note being sometimes referred to herein
collectively as the "NOTES").
(4) Any capitalized term used and not defined in this Guaranty shall
have the meaning given to such term in the Credit Agreement. This Guaranty is
one of the Loan Documents described in the Credit Agreement.
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, and as a material inducement to Lender to extend credit
to Borrower, Guarantor hereby guarantees to Lender the prompt and full payment
and performance of the indebtedness and obligations described below in this
Guaranty (collectively called the "GUARANTEED OBLIGATIONS"), this Guaranty being
upon the following terms and conditions:
1. GUARANTY OF PAYMENT. Guarantor hereby unconditionally and irrevocably
guarantees to Lender the punctual payment when due, whether by lapse of time, by
acceleration of maturity, or otherwise, and at all times thereafter, of all
principal, interest (including interest accruing after the commencement of any
bankruptcy or insolvency proceeding by or against Borrower, whether or not
allowed in such proceeding), fees, costs, expenses, indemnification
indebtedness, and other sums of money now or hereafter due and owing pursuant to
(i) the terms of the Notes, the Credit Agreement, the Collateral Documents and
the other Loan Documents, including any indemnifications contained in such Loan
Documents, now or hereafter existing, and (ii) all renewals, extensions,
refinancings, modifications, supplements or amendments of such indebtedness or
any part thereof (the indebtedness described in clauses (i) and
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(ii) above in this Section 1 is herein collectively called the "INDEBTEDNESS").
This Guaranty covers the Indebtedness, whether presently outstanding or arising
subsequent to the date hereof, including all amounts advanced by Lender in
stages or installments. The guaranty of Guarantor as set forth in this
Section 1 is a continuing guaranty of payment and not a guaranty of collection.
2. GUARANTY OF PERFORMANCE. Guarantor additionally hereby unconditionally and
irrevocably guarantees to Lender the timely performance of all other obligations
of Borrower under all of the Loan Documents. If any of such obligations of
Borrower are not complied with, in any respect whatsoever, and without the
necessity of any notice from Lender to Guarantor, Guarantor agrees to timely
perform such obligations.
3. PRIMARY LIABILITY OF GUARANTOR.
(a) This Guaranty is an absolute, irrevocable and unconditional
guaranty of payment and performance. Guarantor shall be liable for the payment
and performance of the Guaranteed Obligations, as set forth in this Guaranty, as
a primary obligor. This Guaranty shall be effective as a waiver of, and
Guarantor hereby expressly waives, any and all rights to which Guarantor may
otherwise have been entitled under any suretyship laws in effect from time to
time, including, without limitation, any rights pursuant to Rule 31 of the Texas
Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice and
Remedies Code, and Chapter 34 of the Texas Business and Commerce Code.
(b) In the event of default by Borrower in payment or performance of
the Guaranteed Obligations, or any part thereof, when such indebtedness or
performance becomes due, either by its terms or as the result of the exercise of
any power to accelerate, Guarantor shall, on demand and without presentment,
protest, notice of protest, further notice of nonpayment or of dishonor or of
default or nonperformance, or notice of acceleration or of intent to accelerate,
or any other notice whatsoever, without any notice having been given to
Guarantor previous to such demand of the acceptance by Lender of this Guaranty,
and without any notice having been given to Guarantor previous to such demand of
the creating or incurring of such indebtedness or of such obligation to perform,
all such notices being hereby waived by Guarantor, pay the amount due thereon to
Lender or perform or observe the agreement, covenant, term or condition, as the
case may be, and it shall not be necessary for Lender, in order to enforce such
payment or performance by Guarantor, first to institute suit or pursue or
exhaust any rights or remedies against Borrower or others liable on such
indebtedness or for such performance, or to enforce any rights against any
security that shall ever have been given to secure such indebtedness or
performance, or to join Borrower or any others liable for the payment or
performance of the Guaranteed Obligations or any part thereof in any action to
enforce this Guaranty, or to resort to any other means of obtaining payment or
performance of the Guaranteed Obligations.
(c) Suit may be brought or demand may be made against all parties who
have signed this Guaranty or any other guaranty covering all or any part of the
Guaranteed Obligations, or against any one or more of them, separately or
together, without impairing the rights of Lender against any party hereto. Any
time that Lender is entitled to exercise its rights or remedies hereunder, it
may in its discretion elect to demand payment and/or performance. If Lender
elects to demand performance, it shall at all times thereafter have the right to
demand payment until all of the Guaranteed Obligations have been paid and
performed in full. If Lender elects to demand payment, it shall at all times
thereafter have the right to demand performance until all of the Guaranteed
Obligations have been paid and performed in full.
4. CERTAIN AGREEMENTS AND WAIVERS BY GUARANTOR.
(a) Guarantor hereby agrees that neither Lender's rights or remedies
nor Guarantor's obligations under the terms of this Guaranty shall be released,
diminished, impaired, reduced or affected by any one or more of the following
events, actions, facts, or circumstances, and the liability of Guarantor under
this Guaranty shall be absolute and unconditional irrespective of:
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(i) any limitation of liability or recourse in any other Loan
Document or arising under any Law;
(ii) the taking or accepting of any other security or guaranty for,
or right of recourse with respect to, any or all of the Guaranteed
Obligations;
(iii) any release, surrender, abandonment, exchange, alteration, sale
or other disposition, subordination, deterioration, waste, failure to
protect or preserve, impairment, or loss of, or any failure to create or
perfect any lien or security interest with respect to, or any other
dealings with, any collateral or security at any time existing or
purported, believed or expected to exist in connection with any or all of
the Guaranteed Obligations;
(iv) whether express or by operation of Law, any partial release of
the liability of Guarantor hereunder, or if one or more other guaranties
are now or hereafter obtained by Lender covering all or any part of the
Guaranteed Obligations, any complete or partial release of any one or more
of such guarantors under any such other guaranty, or any complete or
partial release of Borrower or any other party liable, directly or
indirectly, for the payment or performance of any or all of the Guaranteed
Obligations;
(v) the death, insolvency, bankruptcy, disability, dissolution,
liquidation, termination, receivership, reorganization, merger,
consolidation, change of form, structure or ownership, sale of all assets,
or lack of corporate, partnership or other power of Borrower or any other
party at any time liable for the payment or performance of any or all of
the Guaranteed Obligations;
(vi) either with or without notice to or consent of Guarantor: any
renewal, extension, modification or rearrangement of the terms of any or
all of the Guaranteed Obligations and/or any of the Loan Documents,
including, without limitation, material alterations of the terms of payment
(including changes in maturity date(s) and interest rate(s)) or performance
or any other terms thereof, or any waiver, termination, or release of, or
consent to departure from, any of the Loan Documents or any other guaranty
of any or all of the Guaranteed Obligations, or any adjustment, indulgence,
forbearance, or compromise that may be granted from time to time by Lender
to Borrower, Guarantor, and/or any other party at any time liable for the
payment or performance of any or all of the Guaranteed Obligations;
(vii) any neglect, lack of diligence, delay, omission, failure, or
refusal of Lender to take or prosecute (or in taking or prosecuting) any
action for the collection or enforcement of any of the Guaranteed
Obligations, or to foreclose or take or prosecute any action to foreclose
(or in foreclosing or taking or prosecuting any action to foreclose) upon
any security therefor, or to exercise (or in exercising) any other right or
power with respect to any security therefor, or to take or prosecute (or in
taking or prosecuting) any action in connection with any Loan Document, or
any failure to sell or otherwise dispose of in a commercially reasonable
manner any collateral securing any or all of the Guaranteed Obligations
(excepting only, with respect to any such sale or other disposition of
collateral, any such requirement imposed at the time in question by then
applicable law and not waivable by Guarantor, and Guarantor agreeing, with
respect to any such sale or other disposition to which Section 9.504(c) of
the Texas Business and Commerce Code or other similar provision of
applicable law, is determined to be applicable, that ten days' notice shall
constitute reasonable notification; and provided that, except for any such
non-waivable requirement applicable to any sale or other disposition of any
such collateral, no provision of this Guaranty shall be construed to limit
or otherwise adversely affect Lender's absolute and discretionary rights,
as set forth in this Guaranty, to release and/or otherwise deal or fail to
deal with any such collateral without affecting or impairing Guarantor's
liability hereunder);
(viii) any failure of Lender to notify Guarantor of any creation,
renewal, extension, rearrangement, modification, supplement, or assignment
of the Guaranteed Obligations or any part thereof,
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or of any Loan Document, or of any release of or change in any security or
of any other action taken or refrained from being taken by Lender against
Borrower or any security or other recourse or of any new agreement between
Lender and Borrower, it being understood that Lender shall not be required
to give Guarantor any notice of any kind under any circumstances with
respect to or in connection with the Guaranteed Obligations, any and all
rights to notice Guarantor may have otherwise had being hereby waived by
Guarantor (excepting only any notice, if any, required at the time in
question by then applicable law and not waivable by Guarantor);
(ix) if for any reason Lender is required to refund any payment by
Borrower to any other party liable for the payment or performance of any or
all of the Guaranteed Obligations or pay the amount thereof to someone
else;
(x) the existence of any claim, set-off, or other right that
Guarantor may at any time have against Borrower, Lender, or any other
Person, whether or not arising in connection with this Guaranty, the Note,
the Credit Agreement, or any other Loan Document (provided, that nothing
contained herein shall prevent the assertion of any such claim by separate
suit or compulsory counterclaim); or
(xi) the unenforceability of all or any part of the Guaranteed
Obligations against Borrower, whether because the Guaranteed Obligations
exceed the amount permitted by law or violate any usury law, or because the
act of creating the Guaranteed Obligations, or any part thereof, is ULTRA
VIRES, or because the officers or Persons creating same acted in excess of
their authority, or because of a lack of validity or enforceability of or
defect or deficiency in any of the Loan Documents, or because Borrower has
any valid defense, claim or offset with respect thereto, or because
Borrower's obligation ceases to exist by operation of law, or because of
any other reason or circumstance, it being agreed that Guarantor shall
remain liable hereon regardless of whether Borrower or any other Person be
found not liable on the Guaranteed Obligations, or any part thereof, for
any reason (and regardless of any joinder of Borrower or any other party in
any action to obtain payment or performance of any or all of the Guaranteed
Obligations).
(b) In the event any payment by Borrower or any other party to Lender
is held to constitute a preference, fraudulent transfer or other voidable
payment under any bankruptcy, insolvency or similar law, or if for any other
reason Lender is required to refund such payment or pay the amount thereof to
any other party, such payment by Borrower or any other party to Lender shall not
constitute a release of Guarantor from any liability hereunder, and this
Guaranty shall continue to be effective or shall be reinstated (notwithstanding
any prior release or discharge by Lender of this Guaranty or of Guarantor), as
the case may be, with respect to, and this Guaranty shall apply to, any and all
amounts so refunded by Lender or paid by Lender to another party (which amounts
shall constitute part of the Guaranteed Obligations), and any interest paid by
Lender and any attorneys' fees, costs and expenses paid or incurred by Lender in
connection with any such event. It is the intent of Guarantor and Lender that
the obligations and liabilities of Guarantor hereunder are absolute and
unconditional under any and all circumstances and that until the Guaranteed
Obligations are fully and finally paid and performed, and not subject to refund
or disgorgement, the obligations and liabilities of Guarantor hereunder shall
not be discharged or released, in whole or in part, by any act or occurrence
that might, but for the provisions of this Guaranty, be deemed a legal or
equitable discharge or release of a guarantor. Lender shall be entitled to
continue to hold this Guaranty in its possession for a period of one year from
the date the Guaranteed Obligations are paid and performed in full and for so
long thereafter as may be necessary to enforce any obligation of Guarantor
hereunder and/or to exercise any right or remedy of Lender hereunder.
(c) If acceleration of the time for payment of any amount payable by
Borrower under the Note, the Credit Agreement, or any other Loan Document is
stayed or delayed by any Law or applicable tribunal, all such amounts shall
nonetheless be payable by Guarantor on demand by Lender.
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5. SUBORDINATION. If, for any reason whatsoever, Borrower is now or hereafter
becomes indebted to Guarantor:
(a) Such indebtedness and all interest thereon and all liens,
security interests and rights now or hereafter existing with respect to property
of Borrower securing same shall, at all times, be subordinate in all respects to
the Guaranteed Obligations and to all liens, security interests and rights now
or hereafter existing to secure the Guaranteed Obligations;
(b) Guarantor shall not be entitled to enforce or receive payment,
directly or indirectly, of any such indebtedness of Borrower to Guarantor until
the Guaranteed Obligations have been fully and finally paid and performed; and
(c) Guarantor shall promptly upon request of Lender from time to time
execute such documents and perform such acts as Lender may require to evidence
and perfect its interest and to permit or facilitate exercise of its rights
under this Section 5, including, but not limited to, execution and delivery of
financing statements, proofs of claim, further assignments and security
agreements, and delivery to Lender of any promissory notes or other instruments
evidencing indebtedness of Borrower to Guarantor.
Guarantor hereby assigns and grants to Lender a security interest in all
such indebtedness and security therefor, if any, of Borrower to Guarantor now
existing or hereafter arising, including any dividends and payments pursuant to
debtor relief or insolvency proceedings referred to below. In the event of
receivership, bankruptcy, reorganization, arrangement or other debtor relief or
insolvency proceedings involving Borrower as debtor, Lender shall have the right
to prove its claim in any such proceeding so as to establish its rights
hereunder and shall have the right to receive directly from the receiver,
trustee or other custodian (whether or not a default shall have occurred or be
continuing under any of the Loan Documents), dividends and payments that are
payable upon any obligation of Borrower to Guarantor now existing or hereafter
arising, and to have all benefits of any security therefor, until the Guaranteed
Obligations have been fully and finally paid and performed. If, notwithstanding
the foregoing provisions, Guarantor should receive any payment, claim or
distribution that is prohibited as provided above in this Section 5, Guarantor
shall pay the same to Lender immediately, Guarantor hereby agreeing that it
shall receive the payment, claim or distribution in trust for Lender and shall
have absolutely no dominion over the same except to pay it immediately to
Lender. All promissory notes, accounts receivable ledgers or other evidences,
now or hereafter held by Guarantor, of obligations of Borrower to Guarantor
shall contain a specific written notice thereon that the indebtedness evidenced
thereby is subordinated under and is subject to the terms of this Guaranty.
6. OTHER LIABILITY OF GUARANTOR OR BORROWER. If Guarantor becomes liable, by
endorsement or otherwise, for any indebtedness owing by Borrower to Lender other
than under this Guaranty, such liability shall not be in any manner impaired or
affected hereby, and the rights of Lender hereunder shall be cumulative of any
and all other rights that Lender may have against Guarantor. If Borrower is or
becomes indebted to Lender for any indebtedness other than or in excess of the
Indebtedness for which Guarantor is liable under this Guaranty, any payment
received or recovery realized upon any indebtedness of Borrower to Lender may,
except to the extent paid by Guarantor on the Indebtedness for which Guarantor
is liable under this Guaranty or specifically required by Law or agreement of
Lender to be applied to the Indebtedness for which Guarantor is liable under
this Guaranty, in Lender's sole discretion, be applied upon indebtedness of
Borrower to Lender other than the Indebtedness for which Guarantor is liable
under this Guaranty.
7. LENDER'S ASSIGNS. This Guaranty is for the benefit of Lender and Lender's
successors and assigns, and in the event of an assignment of the Indebtedness or
other Guaranteed Obligations, or any part thereof or any interest therein, the
rights and benefits hereunder, to the extent applicable to the Guaranteed
Obligations so assigned, may be transferred with such Guaranteed Obligations.
Guarantor waives notice of any transfer or assignment of the Guaranteed
Obligations, or any part thereof, and agrees that failure to give notice will
not affect the liabilities of Guarantor hereunder.
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8. BINDING EFFECT. This Guaranty is binding not only on Guarantor, but also
on Guarantor's successors and assigns.
9. GOVERNING LAW; FORUM. THIS GUARANTY, AND ITS VALIDITY, ENFORCEMENT, AND
INTERPRETATION, SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE UNITED STATES
FEDERAL LAW, AND IS INTENDED TO BE PERFORMED IN ACCORDANCE WITH, AND ONLY TO THE
EXTENT PERMITTED BY, SUCH LAWS. All obligations of Guarantor hereunder are
payable and performable at the place or places where the Guaranteed Obligations
are payable and performable. Guarantor hereby irrevocably submits generally and
unconditionally for Guarantor and in respect of Guarantor's property to the
non-exclusive jurisdiction of any Texas state court, or any United States
federal court, sitting in the City of Dallas, Texas, and to the non-exclusive
jurisdiction of any state or United States federal court sitting in the state in
which any of the Collateral is located, over any suit, action or proceeding
arising out of or relating to this Guaranty or the Guaranteed Obligations.
10. INVALIDITY OF CERTAIN PROVISIONS. If any provision of this Guaranty or the
application thereof to any person or circumstance shall, for any reason and to
any extent, be judicially declared to be invalid or unenforceable, neither the
remaining provisions of this Guaranty nor the application of such provision to
any other Person or circumstance shall be affected thereby, and the remaining
provisions of this Guaranty, or the applicability of such provision to other
Persons or circumstances, as applicable, shall remain in effect and be
enforceable to the maximum extent permitted by applicable Law.
11. ATTORNEYS' FEES AND COSTS OF COLLECTION. Guarantor shall pay on demand all
reasonable attorneys' fees and all other costs and expenses incurred by Lender
in the enforcement of or preservation of Lender's rights under this Guaranty.
Guarantor agrees to pay interest on any expenses or other sums due to Lender
under this Section 11 that are not paid when due, at a rate per annum equal to
the lesser of (i) the Highest Lawful Rate, or (ii) the Prime Rate plus 4%.
Guarantor's obligations and liabilities under this Section 11 shall survive any
payment or discharge in full of the Guaranteed Obligations.
12. PAYMENTS. All sums payable under this Guaranty shall be paid in lawful
money of the United States of America that at the time of payment is legal
tender for the payment of public and private debts.
13. CONTROLLING AGREEMENT. It is not the intention of Lender or Guarantor to
charge or to obligate Guarantor to pay interest in excess of that lawfully
permitted to be paid by Guarantor under applicable Law. To the extent that any
law limiting the amount of interest that may be contracted for, charged or
received is applicable to the obligations of Guarantor under this Guaranty, no
provision of this Guaranty shall require the payment or permit the collection of
any sum in excess of the maximum lawful amount applicable to Guarantor's
obligations under this Guaranty. Should it be determined that any portion of
the Guaranteed Obligations or any other amount payable by Guarantor under this
Guaranty constitutes interest in excess of the maximum amount of interest that
Guarantor, in Guarantor's capacity as guarantor, may lawfully be required to pay
under applicable Law, the obligation of Guarantor to pay such interest shall
automatically be limited to the payment thereof in the maximum amount so
permitted under applicable Law. All interest paid or agreed to be paid to
Lender, to the extent permitted by applicable law, shall be amortized, prorated,
allocated, and spread throughout the full period until payment in full of the
principal of the Indebtedness (including the period of any renewal or extension
thereof) so that the interest thereon for such full period shall not exceed the
maximum amount permitted by applicable law. The intention of Guarantor and
Lender hereunder is to comply with all laws applicable to this Guaranty and
Guarantor's obligations hereunder. The provisions of this Section 13 shall
override and control all other provisions of this Guaranty and of any other
agreement between Guarantor and Lender.
14. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF GUARANTOR. In addition to
the representations, warranties and acknowledgments of Guarantor contained in
the Credit Agreement, Guarantor hereby represents, warrants, and covenants that
(a) the board of directors of Guarantor have determined that the execution and
delivery of this
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Guaranty by Guarantor is in the best interests of Guarantor and Guarantor will
derive substantial benefit, directly or indirectly, from the extensions of
credit by Lender to Borrower under the Credit Agreement and the Notes and from
the making of this Guaranty by Guarantor, in an amount not less than the amount
guaranteed hereunder taking into account any right of contribution of Guarantor
against Borrower and each of the other guarantors of the Indebtedness and other
Guaranteed Obligations; (b) this Guaranty is duly authorized and valid, and is
binding upon and enforceable against Guarantor; (c) Guarantor is not, and the
execution, delivery and performance by Guarantor of this Guaranty will not cause
Guarantor to be, in violation of or in default with respect to any Law or in
default (or at risk of acceleration of indebtedness) under any material
agreement or restriction by which Guarantor is bound or affected; (d) Guarantor
is duly organized, validly existing, and in good standing under the Laws of the
state of its organization, and has full power and authority to enter into and
perform this Guaranty; (e) there is no Litigation pending or, to the knowledge
of Guarantor, threatened before or by any Tribunal against or affecting
Guarantor; (f) all of the most recent financial statements and information
heretofore furnished to Lender by or on behalf of Guarantor do, and all
financial statements hereafter furnished to Lender by Guarantor will, fully and
accurately present the condition (financial or otherwise) of Guarantor as of
their dates and the results of Guarantor's operations for the periods therein
specified, and, since the date of the most recent financial statements of
Guarantor heretofore furnished to Lender, no material adverse change has
occurred in the financial condition of Guarantor, nor, except as heretofore
disclosed in writing to Lender, has Guarantor incurred any material liability,
direct or indirect, fixed or contingent; (g) after giving effect to this
Guaranty, Guarantor is solvent, is not engaged or about to engage in business or
a transaction for which the property of Guarantor is an unreasonably small
capital, and does not intend to incur or believe that it will incur debts that
will be beyond its ability to pay as such debts mature; (h) Lender has no duty
at any time to investigate or inform Guarantor of the financial or business
condition or affairs of Borrower or any change therein, and Guarantor will keep
itself fully appraised of Borrower's financial and business condition;
(i) Guarantor acknowledges and agrees that Guarantor may be required to pay and
perform the Guaranteed Obligations in full without assistance or support from
Borrower or any other party; (j) Guarantor has the full rights of contribution
afforded under law as against Borrower and each of the other guarantors of the
Guaranteed Obligations, and Guarantor has not waived or agreed to limit or alter
any such rights and shall not do so in the future; and (k) Guarantor has read
and fully understands the provisions contained in the Notes, the Credit
Agreement and the other Loan Documents. Guarantor's representations, warranties
and covenants are a material inducement to Lender to enter into the other Loan
Documents and shall survive the execution hereof and any bankruptcy,
foreclosure, transfer of security or other event affecting Borrower, Guarantor,
any other party, or any security for all or any part of the Guaranteed
Obligations.
15. NOTICES. Unless specifically provided otherwise, any notices, requests,
demands or other communications required or given for purposes of this Guaranty
or any other Loan Document shall be given in writing and shall be deemed
sufficiently given if delivered in accordance with Section 7.6 of the Credit
Agreement. This Section 15 shall not be construed in any way to affect or
impair any waiver of notice or demand provided in this Guaranty or in any other
Loan Document or to require giving notice or demand to or upon any Person in any
situation or for any reason.
16. CUMULATIVE RIGHTS; NO WAIVER, ETC. The exercise by Lender of any right or
remedy hereunder or under any other Loan Document, or at Law or in equity, shall
not preclude the concurrent or subsequent exercise of any other right or remedy.
Lender shall have all rights, remedies and recourses afforded to Lender by
reason of this Guaranty or any other Loan Document or by Law or equity or
otherwise, and the same (a) shall be cumulative and concurrent, (b) may be
pursued separately, successively or concurrently against Guarantor or others
obligated for the Guaranteed Obligations, or any part thereof, or against any
one or more of them, or against any security or otherwise, at the sole
discretion of Lender, (c) may be exercised as often as occasion therefor shall
arise, it being agreed by Guarantor that the exercise of, discontinuance of the
exercise of or failure to exercise any of such rights, remedies, or recourses
shall in no event be construed as a waiver or release thereof or of any other
right, remedy, or recourse, and (d) are intended to be, and shall be,
nonexclusive. No waiver of any default on the part of Guarantor or of any
breach of any of the provisions of this Guaranty or of any other document shall
be considered a waiver of any other or subsequent default or breach, and no
delay or omission in exercising or enforcing the rights and powers granted
herein or in any other document shall be construed as a waiver of such rights
and powers, and no exercise or
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enforcement of any rights or powers hereunder or under any other document shall
be held to exhaust such rights and powers, and every such right and power may be
exercised from time to time. The granting of any consent, approval or waiver by
Lender shall be limited to the specific instance and purpose therefor and shall
not constitute consent or approval in any other instance or for any other
purpose. No notice to or demand on Guarantor in any case shall of itself
entitle Guarantor to any other or further notice or demand in similar or other
circumstances. No provision of this Guaranty or any right, remedy or recourse
of Lender with respect hereto, or any default or breach, can be waived, nor can
this Guaranty or Guarantor be released or discharged in any way or to any
extent, except specifically in each case by a writing intended for that purpose
(and which refers specifically to this Guaranty) executed, and delivered to
Guarantor, by Lender.
17. TERM OF GUARANTY. This Guaranty shall continue in effect until all the
Guaranteed Obligations are fully and finally paid, performed, and discharged,
except that, and notwithstanding any return of this Guaranty to Guarantor, this
Guaranty shall continue in effect (i) with respect to any of the Guaranteed
Obligations that survive the discharge of the Guaranteed Obligations, (ii) with
respect to all obligations and liabilities of Guarantor under SECTION 11, and
(iii) as provided in SECTION 4(b).
18. FINANCIAL STATEMENTS. Guarantor shall furnish or cause to be furnished to
Lender such financial statements as are required under Section 3.2 of the Credit
Agreement or are otherwise reasonably requested by Lender from time to time.
19. DISCLOSURE OF INFORMATION. Lender may sell or offer to sell the
Indebtedness or portions of or interests in the Indebtedness to one or more
assignees or participants and may disclose to any such assignee or participant
or prospective assignee or participant any information Lender has pertaining to
the Guaranteed Obligations, this Guaranty, or Guarantor, including, without
limitation, information regarding any security for the Guaranteed Obligations or
for this Guaranty, credit information on Guarantor, Borrower, and/or any other
party liable, directly or indirectly, for any part of the Guaranteed
Obligations. Lender also may disclose any such information to any regulatory
body having jurisdiction over Lender and to any agent or attorney of Lender and
in such other circumstances and to such other parties as necessary or
appropriate in Lender's reasonable judgment.
20. RIGHT OF SET-OFF. Upon the occurrence and during the continuance of any
Default in the payment or performance when due of any of the Guaranteed
Obligations, Lender is hereby authorized at any time and from time to time, to
the fullest extent permitted by applicable Law, without notice to any Person
(any such notice being expressly waived by Guarantor to the fullest extent
permitted by applicable law), to set off and apply any and all deposits (general
or special, time or demand, provisional or final), funds, or assets at any time
held and other indebtedness at any time owing by Lender to or for the credit or
the account of Guarantor against any and all of the obligations of Guarantor now
or hereafter existing under this Guaranty, whether or not Lender shall have made
any demand under this Guaranty or exercised any other right or remedy hereunder
and although such obligations may be unmatured. Lender will promptly notify
Guarantor after any such set-off and application made by Lender, provided that
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of Lender under this Section 20 are in addition to
the other rights and remedies (including other rights of set-off) that Lender
may have.
21. COMPLIANCE WITH LOAN DOCUMENTS. Guarantor shall comply with, observe and
be bound by the provisions of the Loan Documents which pertain to Guarantor.
22. INDUCEMENT TO LENDER. Guarantor acknowledges that this Guaranty is given
to induce Lender to extend credit to Borrower and that such credit would not be
extended except in reliance upon this Guaranty.
23. PAYMENTS ON THE INDEBTEDNESS. Each payment on the Indebtedness shall be
deemed to have been made by Borrower unless express written notice is given to
Lender at the time of such payment that such payment is made by Guarantor as
specified in such notice.
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24. FURTHER ASSURANCES. Guarantor at Guarantor's expense will promptly execute
and deliver to Lender upon Lender's request all such other and further
documents, agreements, and instruments in compliance with or accomplishment of
the agreements of Guarantor under this Guaranty.
25. NO FIDUCIARY RELATIONSHIP. The relationship between Lender and Guarantor
is solely that of lender and guarantor. Lender has no fiduciary or other
special relationship with or duty to Guarantor and none is created hereby.
26. INTERPRETATION. If this Guaranty is signed by more than one Person as
"Guarantor", then the term "Guarantor" as used in this Guaranty shall refer to
all such Persons jointly and severally, and all of the obligations, promises,
agreements, covenants, waivers, consents, representations, warranties and other
provisions in this Agreement are made by and shall be binding upon each and
every such undersigned Person, jointly and severally, and their respective
heirs, personal representatives, successors and assigns. The term "Lender"
shall be deemed to include any subsequent holder(s) of the Note. Whenever the
context of any provisions hereof shall require it, words in the singular shall
include the plural, words in the plural shall include the singular, and pronouns
of any gender shall include the other genders. Words importing persons herein
shall include firms, associations, partnerships (including limited
partnerships), joint ventures, trusts, corporations and other legal entities,
including public or governmental bodies, agencies or instrumentalities, as well
as natural persons. Captions and headings in the Loan Documents are for
convenience only and shall not affect the construction of the Loan Documents.
All references in this Guaranty to Schedules, Articles, Sections, Subsections,
paragraphs and subparagraphs refer to the respective subdivisions of this
Guaranty, unless such reference specifically identifies another document. The
terms "herein", "hereof", "hereto", "hereunder" and similar terms refer to this
Guaranty and not to any particular Section or subsection of this Guaranty. The
terms "include" and "including" shall be interpreted as if followed by the words
"without limitation". All references in this Guaranty to sums denominated in
dollars or with the symbol "$" refer to the lawful currency of the United States
of America, unless such reference specifically identifies another currency.
27. TIME OF ESSENCE. Time shall be of the essence in this Guaranty with
respect to all of Guarantor's obligations hereunder.
28. COUNTERPARTS. This Guaranty may be executed in multiple counterparts, each
of which, for all purposes, shall be deemed an original, and all of which
together shall constitute one and the same agreement.
29. TO THE MAXIMUM EXTENT PERMITTED BY LAW, GUARANTOR HEREBY WAIVES ANY RIGHT
THAT IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT,
CONTRACT, EQUITY OR OTHERWISE) ARISING UNDER OR RELATING TO THIS GUARANTY, THE
OTHER LOAN DOCUMENTS OR ANY RELATED MATTERS, AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
30. ENTIRE AGREEMENT. This Guaranty embodies the entire agreement between
Lender and Guarantor with respect to the guaranty by Guarantor of the Guaranteed
Obligations. This Guaranty supersedes all prior agreements and understandings,
if any, with respect to guaranty by Guarantor of the Guaranteed Obligations. No
condition or conditions precedent to the effectiveness of this Guaranty exist.
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
31. EFFECTIVENESS. The loan evidenced by the Term Note is being made to
Borrower to finance Borrower's acquisition of all of the outstanding capital
stock and stock options of Guarantor pursuant to the Acquisition Agreement,
whereupon Guarantor will become a wholly-owned subsidiary of Borrower; and
advances under the
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Revolving Note will be available for working capital needs of Borrower and its
subsidiaries. Notwithstanding the actual sequence and timing of execution of
this Guaranty and the other Loan Documents, this Guaranty shall be deemed
effective as and when the closing of the transactions under both the Credit
Agreement and the Acquisition Agreement are consummated.
This Guaranty is executed in amendment and restatement of that certain
Guaranty Agreement dated April 28, 1995, executed by Guarantor in favor of
Lender in connection with the Original Credit Agreement.
IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty as of
the date first written above.
Address of Guarantor: GUARANTOR:
2400 Louisiana Blvd., NE GREENSPRING COMPUTERS, INC.,
AFC Building 5, Suite 600 a California corporation
Albuquerque, New Mexico 87110
Attn: Christopher J. Amenson
By: /s/ CHRISTOPHER J. AMENSON
--------------------------------------
Name: Christopher J. Amenson
------------------------------------
Title: Chairman & Chief Executive Officer
------------------------------------
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MODIFICATION OF SECURITY AGREEMENTS
THIS MODIFICATION OF SECURITY AGREEMENTS (this "MODIFICATION"), is
made and entered into as of April 26, 1996, by and between SBS TECHNOLOGIES,
INC., formerly known as SBS Engineering, Inc., a New Mexico corporation ("SBS"),
BERG SYSTEMS INTERNATIONAL, INC., a California corporation ("BERG"), GREENSPRING
COMPUTERS, INC., a California corporation ("GREENSPRING") (SBS, Berg and
GreenSpring being hereinafter sometimes referred to collectively as "DEBTOR"),
and NATIONSBANK OF TEXAS, N.A., a national banking association ("LENDER").
RECITALS
I. Pursuant to the terms and provisions of that certain Credit Agreement
(the "ORIGINAL CREDIT AGREEMENT") dated as of April 28, 1995, executed by and
between SBS and Lender (and acknowledged by Berg and GreenSpring), Lender agreed
to provide (i) a revolving credit loan to SBS in an aggregate amount not to
exceed $4,000,000.00, and (ii) a term loan to SBS in the amount of $7,000,000.00
(collectively, the "LOANS"). The Original Credit Agreement previously has been
modified pursuant to that certain First Amendment to Credit Agreement dated May
25, 1995, and that certain Second Amendment to Credit Agreement dated November
1, 1995, both executed by Lender and SBS and acknowledged by Berg and
GreenSpring. Effective as of the date hereof, the Original Credit Agreement has
been amended and restated in its entirety pursuant to the terms of that certain
Amended and Restated Credit Agreement (such Amended and Restated Credit
Agreement, as the same may be amended, modified, supplemented, extended or
restated and in effect from time to time being hereinafter referred to as the
"RESTATED CREDIT AGREEMENT"). Each capitalized term used but not defined herein
shall have the meaning given such term in the Restated Credit Agreement.
II. In connection with the execution of the Restated Credit Agreement, SBS
has executed (i) that certain Amended and Restated Revolving Promissory Note of
even date herewith in the new original principal face amount of $2,500,000.00,
and (ii) that certain Amended and Restated Promissory Note of even date herewith
in the original principal amount of $6,750,000.00 (collectively, the "RESTATED
NOTES"). The Restated Notes have been executed in amendment and restatement of
the two notes executed by SBS in connection with the Original Credit Agreement
and now evidence the Loans as modified pursuant to the Restated Credit
Agreement.
III. All of the obligations, indebtedness and liabilities of Debtor to
Lender, including without limitation all obligations, indebtedness and
liabilities under the Restated Notes, the Restated Credit Agreement and the
other Loan Documents are secured by (i) that certain Security Agreement (the
"SBS SECURITY AGREEMENT") dated April 28, 1995, executed by SBS and Lender, (ii)
that certain Security Agreement (the "BERG SECURITY AGREEMENT") dated April 28,
1995, executed by Berg and Lender, (iii) that certain Security Agreement (the
"GREENSPRING SECURITY AGREEMENT") dated April 28, 1995, executed by GreenSpring
and Lender, (iv) that
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certain Patent, Copyright and Trademark Collateral Assignment and Security
Agreement (the "IP SECURITY AGREEMENT") dated April 28, 1995, executed by SBS,
Berg, GreenSpring and Lender, and (v) that certain Stock Pledge Agreement dated
April 28, 1995, executed by and between Borrower and Lender (the SBS Security
Agreement, the Berg Security Agreement, the GreenSpring Security Agreement, the
IP Security Agreement, and the Stock Pledge Agreement being sometimes referred
to herein collectively as the "SECURITY AGREEMENTS").
NOW, THEREFORE, in consideration of the covenants and agreements herein and
the modification of the Loans pursuant to the Restated Credit Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and confessed, SBS, Berg, GreenSpring and Lender, hereby
agree as follows:
1. MODIFICATION OF SECURITY AGREEMENTS. Each of the Security Agreements
is hereby modified to expressly refer to, cover and secure the Restated Credit
Agreement and the Restated Notes, as well as any and all other obligations,
indebtedness and liabilities of Debtor (or any of them) to Lender as provided
therein. Accordingly, as used in each of the Security Agreements, (i) the term
"Credit Agreement" shall mean and refer to the Restated Credit Agreement, (ii)
the term "Notes" shall mean and refer to the Restated Notes, and the term
"Loans" shall mean and refer to the modified revolving credit loan and term loan
provided for under the Restated Credit Agreement and evidenced by the Restated
Notes.
2. FURTHER ASSURANCES. Each Debtor agrees to do such further acts and
things and to execute and deliver such additional documentation as Lender from
time to time may reasonably request in connection with the administration or
enforcement of this Modification or the Security Agreements, whether related to
the Collateral or any part thereof, to evidence, confirm, perfect or protect any
security interest granted or required to have been granted under the Security
Agreements, as modified hereby, or in order better to assure and confirm unto
Lender its rights, powers and remedies. Without limiting the foregoing, each
Debtor shall execute and deliver to Lender such documentation as Lender may
require, and take any and all actions that Lender may require, to perfect the
assignment and security interest in the Collateral granted in the Security
Agreements under applicable law, in form and substance satisfactory to Lender,
including any UCC-3 financing statement amendments and any filings with the
United States Patent and Trademark Office deemed by Lender to be necessary or
advisable.
3. VALIDITY OF LIENS. Each Debtor hereby (a) affirms the liens and
security interests created pursuant to the Security Agreements, as modified
hereby, (b) agrees that all such liens and security interests shall remain in
place until such time as the Notes have both been paid in full, (c) agrees that
this Modification shall in no manner affect or impair such liens and security
interests, and that the liens shall not in any manner be waived, the purpose of
this Modification being to modify the Security Agreements, and (d) acknowledges
that all such liens and security interests are valid and subsisting and in full
force and effect. Nothing contained herein shall affect or impair the priority
of the liens and security interests arising under the Security Agreements.
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4. CONFORMING PROVISIONS. Any and all of the terms and provisions of the
Security Agreements are hereby amended and modified wherever necessary, and even
though not specifically addressed herein, so as to conform to the amendments and
modifications thereto set forth in this Modification.
5. FULL FORCE AND EFFECT. All terms and provisions of the Security
Agreements shall be and remain in full force and effect as therein written,
except as otherwise expressly modified by this Modification.
6. AUTHORITY. Each Debtor represents and warrants that all requisite
corporate action necessary for it to enter into and perform the agreements set
forth in this Modification and the Restated Credit Agreement has been taken, and
that the signatory below has been duly authorized by all necessary corporate
action to make and enter into this Modification and the Restated Credit
Agreement as the duly authorized act and deed of such entity.
7. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns.
8. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
9. ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE OTHER
WRITTEN MODIFICATION DOCUMENTS AND THE LOAN DOCUMENTS, REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES HERETO.
10. COUNTERPARTS. This Agreement may be executed in any number of
original counterparts, each of which when so executed and delivered shall be
deemed an original, and all of which, collectively, shall constitute one
agreement, it being understood and agreed that the signature pages may be
detached from one or more of such counterparts and combined with the signature
pages from any other counterpart in order that one or more fully executed
originals may be assembled.
Page 3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Modification to be
executed as of the date first written above.
DEBTORS:
SBS TECHNOLOGIES, INC.
By: /s/ CHRISTOPHER J. AMENSON
-----------------------------------
Name: Christopher J. Amenson
-----------------------------
Title: President
-----------------------------
BERG SYSTEMS INTERNATIONAL, INC.
By: /s/ CHRISTOPHER J. AMENSON
-----------------------------------
Name: Christopher J. Amenson
-----------------------------
Title: Director, Chairman & Chief
Executive Officer
-----------------------------
GREENSPRING COMPUTERS, INC.
By: /s/ CHRISTOPHER J. AMENSON
-----------------------------------
Name: Christopher J. Amenson
-----------------------------
Title: Chairman & Chief
Executive Officer
-----------------------------
LENDER:
NATIONSBANK OF TEXAS, N.A.
By: /s/ BRIAN GORDON
-----------------------------------
Name: Brian Gordon
-----------------------------
Title: Vice President
-----------------------------
Page 4
<PAGE>
THE STATE OF NEW MEXICO )
)
COUNTY OF BERNALILLO )
This instrument was acknowledged before me on April 25, 1996, by
CHRISTOPHER J. AMENSON, PRESIDENT, of SBS TECHNOLOGIES, INC., formerly known as
SBS Engineering, Inc., a New Mexico corporation, on behalf of said corporation.
/s/ CAROL BAHR
----------------------------------------
Notary Public - State of NEW MEXICO
My commission expires:
8-19-97
THE STATE OF NEW MEXICO )
)
COUNTY OF BERNALILLO )
This instrument was acknowledged before me on April 25, 1996, by
CHRISTOPHER J. AMENSON, DIRECTOR, of BERG SYSTEMS INTERNATIONAL, INC., a
California corporation, on behalf of said corporation.
/s/ CAROL BAHR
----------------------------------------
Notary Public - State of NEW MEXICO
My commission expires:
8-19-97
THE STATE OF NEW MEXICO )
)
COUNTY OF BERNALILLO )
This instrument was acknowledged before me on April 25, 1996, by
CHRISTOPHER J. AMENSON, CHAIRMAN of GREENSPRING COMPUTERS, INC., a California
corporation, on behalf of said corporation.
/s/ CAROL BAHR
----------------------------------------
Notary Public - State of NEW MEXICO
My commission expires:
8-19-97
Page 5
<PAGE>
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on April 26, 1996, by BRIAN
GORDON, VICE PRES of NATIONSBANK OF TEXAS, N.A., a national banking association,
on behalf of said association.
/s/ MARY R. KINSEY
----------------------------------------
Notary Public - State of Texas
My commission expires:
Stamp appears here. Stamp includes a star
with a circle around it and outside the circle the words
"NOTARY PUBLIC * STATE OF TEXAS* and a circle
outside the words. To the right of the star the following
words appear: MARY R. KINSEY
NOTARY PUBLIC
STATE OF TEXAS
Exp. 11-30-96
Page 6
<PAGE>
This STATEMENT is presented to a filing officer for filing pursuant to the
Uniform Commercial Code | 3.Maturity date (if any):5-14-2000|
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
1. Debtor(s) (Last Name First) and address(es) 2. Secured Party(ies) and address(es) 3. For Filing Officer
(Date, Time and
Filing Office)
SBS Engineering, Inc. L&V Lehmann Trust dated January, 15.00 (2)111
5550 Midway Park Place NE 1991,individually and as agent 950519098
Albuquerque, NM 87109 for Kim Rubin, Fred Trevor and 5-23-96 9:45
Kevin Yurek NMSIS
49 Montwood Circle
Redwood City, CA 94061
- ---------------------------------------------------------------------------------------------------------------
4. This statement refers to original Financing Statement bearing File No. 950519098
---------
Filed with Secy of State-New Mex. Date Filed May 19 1995
---------------------- ----------- --
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
5./ / CONTINUATION. The original financing statement between the foregoing
Debtor and Secured Party, bearing file number shown above, is still
effective.
6./X/ TERMINATION. Secured party no longer claims a security interest under
the financing statement bearing file number shown above.
7./ / ASSIGNMENT. The secured party's right under the financing statement
bearing file number shown above to the property described in Item 10
have been assigned to the assignee whose name and address appears in
Item 10.
8./ / AMENDMENT. Financing Statement bearing file number shown above is
amended as set forth in Item 10.
9./ / RELEASE. Secured Party releases the collateral described in Item 10
from the financing statement bearing file number shown above.
- --------------------------------------------------------------------------------
10.
TERMINATION
No. of additional Sheets presented:
- --------------------------------------------------------------------------------
- ------------------------------------- --------------------------------------
By: By: SEE ATTACHED SIGNATURE PAGE
- ------------------------------------- --------------------------------------
Signature(s) of Debtor(s) Signature(s) of Secured
(necessary only if Item 8 is Party(ies)
applicable).
(2) FILING OFFICER COPY-NUMERICAL STANDARD FORM - FORM UCC-3
<PAGE>
SIGNATURE PAGE
SECURED PARTY:
L&V Lehmann Trust dated January, 1991,
individually and as agent for Kim Rubin,
Fred Trevor and Kevin Yurek
By: /s/ LEONARD A. LEHMANN
------------------------------------
Name: Leonard A. Lehmann
---------------------------------
Title: Trustee
---------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
This STATEMENT is presented for filing pursuant to the California Uniform Commercial Code
- -------------------------------------------------------------------------------------------------------------------------------
1. FILE NO. OF ORIG. 1A. DATE OF FILING OF ORIG 1B. DATE OF ORIG. FINANCING STATEMENT 1C. PLACE OF FILING ORIG.
FINANCING STATEMENT FINANCING STATEMENT FINANCING STATMENT
9514362011 May 18, 1995 May 18, 1995 Secy of State-CA
- -------------------------------------------------------------------------------------------------------------------------------
2. DEBTOR (LAST NAME FIRST) 2A. SOCIAL SECURITY NO.,
FEDERAL TAX NO.
SBS Engineering, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
5550 Midway Park Place NE Albuquerque, New Mexico 87109
- -------------------------------------------------------------------------------------------------------------------------------
3. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST) 3A. SOCIAL SECURITY OR
FEDERAL TAX NO.
- -------------------------------------------------------------------------------------------------------------------------------
3B. MAILING ADDRESS 3C. CITY, STATE 3D. ZIP CODE
- -------------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A. SOCIAL SECURITY NO.,
NAME L&V Lehmann Trust dated January, 1991, individually and FEDERAL TAX NO. OR
as agent for Kim Rubin, BANK TRANSIT AND A.B.A. NO.
Fred Trevor and Kevin Yurek
MAILING ADDRESS 49 Montwood Circle
CITY Redwood City STATE California ZIP CODE 94061
- -------------------------------------------------------------------------------------------------------------------------------
5. SECURED PARTY 5A. SOCIAL SECURITY NO.,
NAME FEDERAL TAX NO. OR
BANK TRANSIT AND A.B.A. NO.
MAILING ADDRESS
CITY STATE ZIP CODE
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6. A/ / CONTINUATION-The original Financing Statement between the foregoing
Debtor and Secured Party bearing the file number and date shown above
is continued. If collateral is crops or timber, check here / / and
insert description of real property on which growing or to be grown in
Item 7 below.
---------------------------------------------------------------------------
B/ / RELEASE-From the collateral described in the Financing Statement
bearing the file number shown above, the Secured Party releases the
collateral described in Item 7 below.
---------------------------------------------------------------------------
C/ / ASSIGNMENT-The Secured Party certifies that the Secured Party has
assigned to the Assignee above named, all the Secured Party's rights
under the Financing Statement bearing the file number shown above in
the collateral described in Item 7 below.
---------------------------------------------------------------------------
D/X/ TERMINATION-The Secured Party certifies that the Secured Party no
longer claims a security interest under the Financing Statement
bearing the file number shown above.
---------------------------------------------------------------------------
E/ / AMENDMENT-The Financing Statement bearing the file number shown above
is amended as set forth in Item 7 below. (Signature of Debtor
required on all amendments.)
---------------------------------------------------------------------------
F/ / OTHER
- --------------------------------------------------------------------------------
7.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
8. |C| 9. This Space for Use of Filing Officer
|O| (Date, Time, Filing Office)
(Date) 19 |D|
---------- ---- |E|
|-| 96145C0137
| |
---------------------------------------------------|1|
|2|
By: |3| Bar code apears here
-------------------------------------------------|4|
SIGNATURE(S) OF DEBTOR(S) (TITLE) |5|
|6|
---------------------------------------------------|7|
By: SEE ATTACHED SIGNATURE PAGE |8| Bar code appears here
------------------------------------------------|9|
SIGNATURE(S) OF SECURED PARTY(IES) (TITLE) | |
- ------------------------------------------------------| |
10. RETURN COPY TO | |
NAME J. Colter Harris, Esq. | |
ADDRESS Jackson & Walker, LLP | | FILED
CITY AND 901 Main Street, Suite 6000 | | SACRAMENTO, CA
STATE Dallas, TX 75202 | | May 23, 1996 at 0800
| |
Filing Officer is requested to note date and hour | | BILL JONES
(2) Filing Officer Copy-Acknowledgement-of | | SECRETARY OF STATE
filing on this copy and return to the above party.
STANDARD FORM-FILING FEE UNIFORM COMMERCIAL CODE-FORM UCC-2
Approved by the Secretary of State
</TABLE>
<PAGE>
SIGNATURE PAGE
SECURED PARTY:
L&V Lehmann Trust dated January, 1991,
individually and as agent for Kim Rubin,
Fred Trevor and Kevin Yurek
By: /s/ LEONARD A. LEHMANN
-------------------------------
Name: Leonard A. Lehmann
------------------------------
Title: Trustee
------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
This STATEMENT is presented for filing pursuant to the California Uniform Commercial Code
- ------------------------------------------------------------------------------------------------------------------------------
1. FILE NO. OF ORIG. 1A. DATE OF FILING OF ORIG 1B. DATE OF ORIG. FINANCING STATEMENT 1C. PLACE OF FILING ORIG.
FINANCING STATEMENT FINANCING STATEMENT FINANCING STATMENT
9513961054 May 17, 1995 May 17, 1995 Secy of State-CA
- ------------------------------------------------------------------------------------------------------------------------------
2. DEBTOR (LAST NAME FIRST) 2A. SOCIAL SECURITY NO.,
FEDERAL TAX NO.
Greenspring Computers, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
1204 O'Brien Dr. Menlo Park, California 94025
- ------------------------------------------------------------------------------------------------------------------------------
3. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST) 3A. SOCIAL SECURITY OR
FEDERAL TAX NO.
- ------------------------------------------------------------------------------------------------------------------------------
3B. MAILING ADDRESS 3C. CITY, STATE 3D. ZIP CODE
- ------------------------------------------------------------------------------------------------------------------------------
4. SECURED PARTY 4A. SOCIAL SECURITY NO.,
FEDERAL TAX NO.
NAME L&V Lehmann Trust dated January, 1991, OR BANK TRANSIT AND
MAILING ADDRESS A.B.A. NO.
491 Montwood CR c/o Leonard A. Lehmann
CITY Redwood City STATE California ZIP CODE 94061
- ------------------------------------------------------------------------------------------------------------------------------
5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO.,
FEDERAL TAX NO.
NAME OR BANK TRANSIT AND
MAILING ADDRESS A.B.A. NO.
CITY
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6. A/ / CONTINUATION-The original Financing Statement between the foregoing
Debtor and Secured Party bearing the file number and date shown above
is continued. If collateral is crops or timber, check here / / and
insert description of real property on which growing or to be grown in
Item 7 below.
- --------------------------------------------------------------------------------
B/ / RELEASE-From the collateral described in the Financing Statement
bearing the file number shown above, the Secured Party releases the
collateral described in Item 7 below.
- --------------------------------------------------------------------------------
C/ / ASSIGNMENT-The Secured Party certifies that the Secured Party has
assigned to the Assignee above named, all the Secured Party's rights
under the Financing Statement bearing the file number shown above in
the collateral described in Item 7 below.
- --------------------------------------------------------------------------------
D/X/ TERMINATION-The Secured Party certifies that the Secured Party no
longer claims a security interest under the Financing Statement
bearing the file number shown above.
- --------------------------------------------------------------------------------
E/ / AMENDMENT-The Financing Statement bearing the file number shown above
is amended as set forth in Item 7 below. (Signature of Debtor
required on all amendments.)
- --------------------------------------------------------------------------------
F/ / OTHER
- --------------------------------------------------------------------------------
7.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
8. |C| 9. This Space for Use of Filing Officer
|O| (Date, Time, Filing Office)
(Date) 19 |D|
--------------- ----- |E|
|-| 96145C0138
| |
|1|
|2|
By: |3| Bar code apears here
---------------------------------------------|4|
SIGNATURE(S) OF DEBTOR(S) (TITLE) |5|
|6|
L&V LEHMANN TRUST DATED JANUARY, 1991 |7|
--------------------------------------------------|8|
BY: /s Leonard A. Lehmann trustee |9| Bar code appears here
---------------------------------------------| |
SIGNATURE(S) OF SECURED PARTY(IES) (TITLE) | |
- ------------------------------------------------------| |
10. RETURN COPY TO | |
NAME J. Colter Harris | |
ADDRESS Jackson & Walker, LLP | | FILED
CITY AND 901 Main Street, Suite 6000 | | SACRAMENTO, CA
STATE Dallas, TX 75202 | | May 23, 1996 at 0800
Filing Officer is requested to note date and hour BILL JONES
(2) Filing Officer Copy-Acknowledgement-of SECRETARY OF STATE
filing on this copy and return to the above party.
STANDARD FORM-FILING FEE UNIFORM COMMERCIAL CODE-FORM UCC-2
Approved by the Secretary of State
</TABLE>
<PAGE>
April 25, 1996
NationsBank of Texas, N.A.
Nations Bank Plaza
901 Main Street, 7th Floor
Dallas, TX 75202
Attention: Commercial Banking Group
Re: Amended and Restated Credit Agreement (the "CREDIT AGREEMENT")
dated as of April 26, 1996 between SBS Technologies, Inc, f/k/a
SBS Engineering, Inc. a New Mexico corporation ("BORROWER") and
NationsBank of Texas, N.A. ("LENDER")
Ladies and Gentlemen:
The undersigned, L & V Lehmann Trust dated January 1991, Kim Rubin, Fred
Trevor and Kevin Yurek ("SUBORDINATE LENDERS") have been informed by Borrower
that Borrower has entered into a financing arrangement pursuant to the Credit
Agreement and that Borrower will be using the proceeds of certain loans made in
connection therewith to pay off all of the liabilities, obligations and
indebtedness owing by Borrower to each of the undersigned (the "SUBJECT
OBLIGATIONS"). If paid by the close of business on April 26, 1996, the amount
necessary to pay in full the Subject Obligations owing by Borrower to each of
the undersigned (the "PAYOFF AMOUNT") is as set forth below, and interest will
continue to accrue and be payable until the Payoff Amount is paid in full in the
amounts set forth below (the "PER DIEM AMOUNT"):
HOLDER PAYOFF AMOUNT PER DIEM AMOUNT
------------------- ------------- ---------------
L & V Lehmann Trust $836,603.00 $31,538.79
Kim Rubin $150,000.00 $ 5,654.79
Fred Trevor $ 12,700.00 $ 478.77
Kevin Yurek $ 697.00 $ 26.28
This letter will confirm that upon payment in full of the Payoff Amount, plus
the Per Diem Amount, if applicable, to the following accounts:
<PAGE>
HOLDER: L & V LEHMANN TRUST
Wells Fargo Bank
ABA # 121000248
Beneficiary: The L & V Lehmann Trust
Account #6331-567065
HOLDER: KIM RUBIN
Chemical Bank
55 Water Street, 2nd Floor
New York, NY 10041
ABA# 021-000128
For Smith Barney Account #066-198-038
For Credit to Account #449-76424-15-401
Client Name: Kim T. Rubin and Jan E. Hollander Trustees of the
Kim T. Rubin and Jan E. Hollander Family Trust
HOLDER: FRED TREVOR
Great Western Bank
Routing #321080796
Bank Account #1278042767
HOLDER: KEVIN YUREK
Great Western Bank
Routing #321080796
Bank Account #3138080886
the liens and security interests of the undersigned in any and all of the
property of Borrower, GreenSpring Computers, Inc., a California corporation and
Berg Systems International, Inc., a California corporation (collectively,
"DEBTOR") including, without limitation, those granted by that certain Security
Agreement dated as of April 28, 1995 executed by Borrower in favor or the
Subordinate Lenders, shall be deemed to be released and terminated and all of
the Subject Obligations owing by Debtor to the undersigned shall be deemed to
have been satisfied in full.
The undersigned will deliver to Borrower, promptly following receipt of the
aforesaid funds, all four of the original promissory notes evidencing the
Subject Obligations, marked "Paid." The undersigned hereby represent that
SCHEDULE I contains a complete list of all filings with any filing agency or
officer of any state or governmental agency evidencing or perfecting any liens
and security interests of the undersigned in any of the property of Debtor,
including, without limitation, those granted by that certain Security Agreement
dated as of April 28, 1995 executed by Borrower in favor of the Subordinate
Lenders (the "FINANCING STATEMENT"). The undersigned will deliver to you,
promptly following receipt of the aforesaid funds, all releases and termination
statements as are necessary to have the Financing Statements terminated of
record and will in the future, deliver such releases and termination statements
as are requested by Lender from time to time pertaining to any liens and
security interests of the undersigned in any of the property of Debtor.
<PAGE>
This letter may be executed in one or more counterparts, all of which taken
together shall constitute one and the same instrument. In addition, the
execution of this letter by any signatory may be evidenced by a telecopy
reflecting such person's signature. NationsBank of Texas, N.A. shall be
entitled to receive, upon request, from any signatory that has previously
forwarded an executed counterpart of this letter by telecopy, a duplicate of
this letter bearing such signatory's ink original signature.
Very truly yours,
L & V Lehmann Trust
By: /s/ LEONARD A. LEHMANN
------------------------------
Name: Leonard A Lehmann
------------------------------
Title: Trustee
------------------------------
Kim Rubin:
------------------------
Fred Trevor:
------------------------
Kevin Yurek:
------------------------
<PAGE>
This letter may be executed in one or more counterparts, all of which taken
together shall constitute one and the same instrument. In addition, the
execution of this letter by any signatory may be evidenced by a telecopy
reflecting such person's signature. NationsBank of Texas, N.A. shall be
entitled to receive, upon request, from any signatory that has previously
forwarded an executed counterpart of this letter by telecopy, a duplicate of
this letter bearing such signatory's ink original signature.
Very truly yours,
L & V Lehmann Trust
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Kim Rubin: /s/ KIM RUBIN 4-25-96
------------------------
Fred Trevor: /s/ FRED TREVOR
------------------------
Kevin Yurek: /s/ KEVIN YUREK
------------------------
<PAGE>
SCHEDULE I
1. UCC-1 Financing Statement Number 950519098 filed for record on May 19, 1995
in the office of the Secretary of State of New Mexico:
Debtor: SBS Engineering, Inc.
5550 Midway Park Place NE
Albuquerque, NM 87109
Secured Party: L & V Lehmann Trust dated January, 1991,
individually and as agent for Kim Rubin,
Fred Trevor and Kevin Yurek.
49 Montwood Circle
Redwood City, CA 94061
2. UCC-2 Financing Statement Number 9514360211 filed for record on May 18,
1995 in the office of the Secretary of State of California:
Debtor: SBS Engineering, Inc.
5550 Midway Park Place NE
Albuquerque, NM 87109
Secured Party: L & V Lehmann Trust dated January, 1991,
individually and as agent for Kim Rubin,
Fred Trevor and Kevin Yurek.
49 Montwood Circle
Redwood City, CA 94061
3. UCC-1 Financing Statement Number 9513961054 filed for record on May 17,
1995 in the office of the Secretary of State of California:
Debtor: GreenSpring Computers, Inc., a California
corporation.
1204 O'Brien Drive
Menlo Park, CA 94025
Secured Party: L & V Lehmann Trust dated January, 1991
491 Montwood Circle, c/o Leonard A. Lehmann
Redwood City, CA 94061
<PAGE>
[LETTERHEAD]
April 26, 1996
NationsBank of Texas, N.A.
901 Main Street, 7th Floor
Dallas, Texas 75202
Re: Amended and Restated Loans from NationsBank of Texas, N.A. to SBS
Technologies, Inc.
Ladies and Gentlemen:
We are general corporate counsel for SBS Technologies, Inc. (formerly known
as SBS Engineering, Inc.), a New Mexico corporation ("BORROWER"), and special
New Mexico counsel for Berg Systems International, Inc., a California
corporation ("BERG"), and GreenSpring Computers, Inc., a California corporation
("GREENSPRING") (Berg and GreenSpring being sometimes referred to herein
collective as the "SUBSIDIARIES"). As such counsel, we have represented
Borrower and the Subsidiaries in connection with the that certain Amended and
Restated Credit Agreement (the "CREDIT AGREEMENT"), dated as of April 26, 1996,
by and between Borrower and NationsBank of Texas, N.A. ("LENDER"), pursuant to
which Lender will make (i) a $6,750,000 term loan to Borrower and (ii) a
revolving credit facility available to Borrower and its Subsidiaries in an
amount up to $2,500,000.
This opinion is being delivered to you pursuant to SECTION 4.1(1) of the
Credit Agreement. Capitalized terms used but not otherwise defined herein shall
have the meanings assigned to them in the Credit Agreement.
For purposes of the opinions contained herein, we have assumed (a) the
genuineness of all signatures other than those of Borrower, Berg and
GreenSpring, (b) the authenticity of all documents submitted to us as originals
and the conformity to authentic original documents of all documents submitted to
us as certified, conformed or photostatic copies, (c) that each of Borrower,
Berg
1
<PAGE>
and GreenSpring have good and indefeasible title to all of the assets described
in the Loan Documents. For purposes of factual matters material to the
opinions expressed herein, we have relied generally upon certificates of
officers of Borrower and the Subsidiaries, the representations contained in the
Credit Agreement and other Loan Documents, and of public officials. In reaching
the conclusions expressed in this opinion, we have examined such certificates of
public officials and of officers of Borrower and the Subsidiaries, copies of
other documents, and matters of law as we deemed necessary or appropriate,
including, without limitation:
(a) the Credit Agreement;
(b) the Amended and Restated Term Promissory Note (the "Term Note") dated
as of April 26, 1996, executed by Borrower and payable to the order of Lender;
(c) the Amended and Restated Revolving Promissory Note (the "Revolving
Note") dated as of April 26, 1996, executed by Borrower and payable to the order
of Lender;
(d) the Modification of Security Agreements dated as of April 26, 1996,
executed by Borrower, Berg and GreenSpring in favor of Lender (the
"MODIFICATION");
(e) the Amended and Restated Guaranty Agreement dated as of April 26,
1996, executed by GreenSpring in favor of Lender (the "GREENSPRING GUARANTY");
(f) the Amended and Restated Guaranty Agreement dated as of April 26,
1996, executed by Berg in favor of Lender (the "BERG GUARANTY");
The document set forth in (d) above are sometimes referred to herein
collectively as the "SECURITY AGREEMENTS". The documents set forth in (a)
through (f) above are sometimes referred to herein collectively as the "LOAN
DOCUMENTS."
Based upon the foregoing, it is our opinion that:
1. Borrower is a corporation incorporated, validly existing and in good
standing under the laws of the State of New Mexico and is duly licensed and
qualified to do business and is in good standing in the States of California,
Texas, New Mexico and every other jurisdiction in which the ownership of its
property or the conduct of its business requires such licensing and
qualification, and Borrower has all powers, permits, consents and authorizations
necessary to own and operate its properties and to carry on its business as
presently conducted.
2
<PAGE>
2. Berg is a corporation incorporated, validly existing (but not
currently in good standing) under the laws of the State of California, and Berg
has all powers, permits, consents and authorizations necessary to own and
operate its properties and to carry on its business as presently conducted.
3. GreenSpring is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of California, and is duly licensed
and qualified to do business and is in good standing under the laws of the State
of California and in every other jurisdiction in which, to our current, actual
knowledge, the nature of its business or ownership of its property requires such
licensing or qualification, and GreenSpring has all powers, permits, consents
and authorizations necessary to own and operate its properties and to carry on
its business as presently conducted.
4. Borrower has no Subsidiaries other than Berg and GreenSpring.
5. The execution and delivery by Borrower and the Subsidiaries of the
Loan Documents, to the extent each is a party thereto, have been duly authorized
and approved by all necessary corporate action. Each of the Loan Documents has
been duly executed and delivered by each of Borrower and the Subsidiaries to the
extent it is a party thereto, and the Loan Documents constitute the legal valid
and binding obligations of Borrower and the Subsidiaries (as applicable)
enforceable against Borrower and the Subsidiaries (as applicable) in accordance
with their respective terms.
6. The execution, delivery and performance of the Loan Documents and the
consummation of the transactions contemplated thereby and the compliance with
the terms and conditions thereof, (a) do not violate any federal or New Mexico
statute, rule or regulation binding on Borrower, Berg or, to our current, actual
knowledge, GreenSpring; (b) do not conflict with, result in a breach of, or
constitute a default under, any of the terms, conditions, or provisions of (i)
the Articles (or Certificate) of Incorporation or the Bylaws of Borrower or
either of the Subsidiaries; (ii) to the best of our knowledge, any material
indenture, agreement or other instrument binding upon Borrower or either of the
Subsidiaries; or (iii) any judgment, order, writ, injunction, determination or
award or decree known to us of any governmental authority to which Borrower or
either of the Subsidiaries is subject; and (c) to the best of our knowledge, do
not result in the creation of any mortgage, lien, security interest, charge, or
encumbrance upon any assets or properties of the Borrower or the Subsidiaries
except as permitted under the Loan Documents.
3
<PAGE>
7. To our current, actual knowledge, except for those that have been
obtained or made and which remain in full force and effect, or as otherwise
contained in the Loan Documents, no consent, approval, authorization, filing,
order or any other act by, or in respect of any person, governmental department,
administrative agency or instrumentality having jurisdiction over Borrower or
either of the Subsidiaries is required for (a) the execution and delivery by
each of Borrower and the Subsidiaries of the Loan Documents to which it is a
party, (b) the consummation of the transactions contemplated by the Loan
Documents, and (c) the performance by each of Borrower and the Subsidiaries of
its obligations under the Loan Documents to which it is a party.
8. To the best of our knowledge, except as disclosed in the Loan
Documents, and except for an appeal, in which the Borrower is a real party in
interest, filed by Firearms Training Systems, Inc. against the State of
California, Department of General Services and State Board of Control seeking to
set aside the award of a contract by the California Highway Patrol to the
Company, which contract has been fully performed and under which the Company has
been full paid, there is no action, suit or proceeding pending or threatened
against Borrower or the Subsidiaries, or the Collateral before any court,
governmental department, administrative agency or instrumentality which, if such
action, suit or proceeding were adversely determined would, in any case or in
the aggregate, adversely affect the property, assets, financial position,
business or the results of operations of Borrower or the Subsidiaries or their
respective businesses, or the ability of Borrower or the Subsidiaries to perform
their obligations under the Loan Documents.
9. To our current, actual knowledge, based solely upon certification made
to us by principals of the Borrower and the Subsidiaries, each of Borrower and
the Subsidiaries is in compliance with all applicable laws, rules, regulations,
and the other legal requirements with respect to its business and the use,
maintenance, and operations of the real and personal property owned or leased by
it in the conduct of its business, the violation of which would materially
adversely affect the property, assets, financial condition, or business of
Borrower or the Subsidiaries or materially impair the right or ability of
Borrower or the Subsidiaries to carry on its operations substantially as
conducted on the date hereof.
10. [Intentionally omitted].
10 Borrower is not an investment company within the meaning of the
Investment Company Act of 1940.
11. The compensation contracted for, charged or to be received pursuant to
the terms of the Credit Agreement, the Term Note, the Revolving Note and the
other Loan Documents is not
4
<PAGE>
usurious under Applicable Laws. For the purposes of this opinion, the term
"Applicable Laws" means all federal and New Mexico constitutional, legislative,
judicial, and administrative provisions, statutes, regulations, decisions,
rulings, and other laws (without taking into account conflict of laws principles
that might cause the laws of a state other than the State of New Mexico to
apply).
12. In a properly presented case, a state or federal court located in New
Mexico should give effect to the choice of Texas law contained in the Loan
Documents.
This opinion is limited by, subject to and based on the following:
(a) We have assumed that Lender is validly existing, has all requisite
power and authority to enter into and perform its obligations under the Loan
Documents, has duly authorized, executed and delivered the Loan Documents, and
the obligations of Lender under the Loan Documents are valid, binding and
enforceable.
(b) The enforceability of the respective obligations of the parties to the
Loan Documents and the availability of certain rights and remedies provided for
therein may be limited by (i) applicable state and federal laws and judicial
decisions that may hinder or delay the exercise of rights and remedies, but
should not materially diminish the practical realization of such enforceability,
(ii) principles of equity (regardless of whether raised in a proceeding at law
or equity) and commercial reasonableness, (iii) applicable bankruptcy,
fraudulent transfer, fraudulent conveyance, insolvency, reorganization,
moratorium, liquidation, conservatorship, rearrangement or similar laws
affecting creditors' rights generally, (iv) rights of the United States under
the Federal Tax Lien Act of 1966, as amended, and (v) indemnification provisions
therein which may be limited by applicable public policy.
(c) The enforcement by Lender of any of its rights and remedies under the
Loan Documents is subject to any implied duty of good faith and, as to any of
its rights and remedies, its duty to comply with the provisions of the UCC, as
applicable.
(d) We express no opinion with respect to the enforceability of any
provision of the Loan Documents (i) providing for the waiver of certain notices
to or defenses or rights of Borrower, including, without limitation, the benefit
of statutes providing for limitations on actions or the right to trial by jury,
(ii) providing for the appointment of a receiver to the extent the appointment
of a receiver is governed by applicable court rules or statutory requirements
and to the extent such provisions do not comply with such requirements,
(iii) providing for consent to
5
<PAGE>
venue, (iv) providing for the restriction of access to legal or equitable
remedies, (v) that purport to establish evidentiary standards for suits or
proceedings to enforce the Loan Documents, (vi) relating to subrogation rights,
delay, omission or enforcement of remedies or severance, (vii) providing for
remedies without judicial process, or (viii) purporting to bind parties to agree
to the validity of future acts.
(e) The opinions contained herein are limited solely to the laws of the
United States (but expressly excluding federal laws governing intellectual
property), and the State of New Mexico. For the purposes of each opinion
contained herein except paragraph 12, we have assumed with your permission with
respect to each Loan Document that it is governed by the laws of the State of
New Mexico without giving effect to any choice of law principles that might
cause the laws of another state to govern its terms. We have assumed for
purposes of the opinion contained in paragraph 12, that the Loan Documents are
payable in Texas and the last act to cause the Loan Documents to become binding
contracts, being the final signatures by Lender to those Loan Documents to which
Lender is a signator, occurred in the State of Texas. The assumptions in the
immediately preceding sentence are based on the lack of any case law in New
Mexico construing a contractual choice-of-law provision not governed by the
Uniform Commercial Code, and the existing case law suggesting that in a multi-
state transaction, the law of the state in which the last act occurred to cause
a binding contract to be formed will govern the contract. We express no
opinions regarding any matters of Texas law, including but not limited to
references to Texas statutes contained in the Loan Documents, any matters
involving Texas usury laws and references to banker's liens.
(f) We have made no examinations and express no opinion with respect to
title to any real or personal property interests covered by any of the Security
Agreements or as to the application of any securities laws to the opinions
contained herein.
(g) We express no opinion with respect to any security interest granted by
the Loan Documents in any collateral that is an agreement between Borrower or
either of the Subsidiaries and a third party and therefore is subject to the
terms thereof.
(h) The opinions contained herein are limited to the matters expressly set
forth in herein, and no opinion may be implied or inferred beyond the matters
expressly so stated.
(i) This opinion is given as of the date hereof and we disclaim any
obligation to update or supplement this opinion to reflect any facts or
circumstances that may hereafter come to our attention or any changes in law
that may hereafter occur.
6
<PAGE>
This opinion is delivered to you in connection with the Loan Documents and the
transactions contemplated thereby and may be relied upon by you, any other
person or entity to whom you sell or assign an interest in the Loan Documents or
the transactions evidenced thereby, and your counsel, by may not otherwise be
relied upon by or quoted to anyone without our prior express written consent.
Very truly yours,
KEMP, SMITH DUNCAN & HAMMOND, P.C.
By /s/ BRUCE E. CASTLE
----------------------------------
Bruce E. Castle
7
<PAGE>
CERTIFICATE IN SUPPORT OF OPINION
The undersigned, being the President and Chief Operating Officer and Chief
Financial Officer, respectively, of SBS Technologies, Inc. (the "COMPANY"),
Chairman of the Board and Chief Executive Officer and Chief Financial Officer,
respectively, of GreenSpring Computers, Inc. ("GREENSPRING"), and a Director and
Treasurer, respectively, of Berg Systems International, Inc. ("BERG"), hereby
certify to Kemp, Smith, Duncan & Hammond, P.C., as follows:
1. The Company currently has active business operations, including
facilities, only in the states of New Mexico and California.
2. Berg and GreenSpring are the only subsidiaries of the Company.
3. Berg's only assets are contracts and purchase orders. To the best of
our knowledge, Berg conducts business only in the State of California, though it
sells to customers located around the world, and Berg has no debt except to
trade creditors in the ordinary course of business.
4. To the best of our knowledge, GreenSpring conducts business only in
the State of California, though it sells to customers located around the world,
and GreenSpring has no debt except to trade creditors in the ordinary course of
business.
5. Each of the Loan Documents has been duly executed and delivered by
each of the Company, Berg and GreenSpring.
6. We are aware of no action, suit or proceeding pending or threatened
against the Company, Berg or GreenSpring before any court, governmental
department, administrative agency or instrumentality except an appeal, in which
the Company is a real party in interest, filed by Firearms Training Systems,
Inc. against the State of California, Department of General Services and State
Board of Control seeking to set aside the award of a contract by the California
Highway Patrol to the Company, which contract has been fully performed and under
which the Company has been full paid.
7. None of the contracts between any governmental department,
administrative agency or instrumentality (the "GOVERNMENTAL ENTITY") and any of
the Company, Berg or GreenSpring require any notice approval or consent to
permit each of the Company and GreenSpring to enter into the loan transaction
with NationsBank of Texas, N.A. ("LENDER") or perform its obligations contained
the Loan Documents.
8. We are unaware of any security interests, mortgages, liens or
encumbrances against any assets of the Company, Berg or GreenSpring except as
specifically disclosed in the Credit Agreement.
9. None of the Company, Berg, nor GreenSpring has registered any
trademarks, trademark rights, patents, patent rights, licenses, permits,
tradenames, tradename rights, copyrights and approvals, except that GreenSpring
has filed the name "Industry Pack" as a
<PAGE>
trademark and the Company has filed the name "SBS Technologies" as a trademark.
No additional filings, to the best of our knowledge, are required to conduct any
business of the Company, Berg or GreenSpring as now conducted without conflict
with the rights or claimed rights of others.
10. Except that Berg is currently not in good standing in the State of
California, to the best of our knowledge, each of Company, Berg and GreenSpring
is in compliance with all, and neither the Company, Berg or GreenSpring has
received any notice of noncompliance with any, applicable laws, rules,
regulations and the other legal requirements with respect to its business and
the use, maintenance, and operations of the real and personal property owned or
leased by it in the conduct of its business.
11. All of the issued and outstanding capital stock of Berg and
GreenSpring is owned legally, beneficially and of record by the Company. All of
such shares are of one class and have been validly issued in full compliance
with all applicable federal and state laws, and are fully paid and non-
accessible. No other shares of Berg or GreenSpring of any class or type are
outstanding. There are no outstanding subscription rights, preemptive rights,
options, calls, warrants, conversion rights, commitment rights or agreements of
any kind, character or nature, written or oral, whatsoever for the sale, grant
or issuance by Berg or GreenSpring of any of its capital stock or securities of
any kind.
12. Each of the capitalized terms used in this Certificate, to the extent
not specifically defined herein, shall have the definitions ascribed thereto in
that certain Amended and Restated Credit Agreement ("CREDIT AGREEMENT") dated as
of April 26, 1996 by and between the Company and Lender.
13. The undersigned hereby acknowledge that Kemp, Smith, Duncan & Hammond,
P.C. is relying upon this Certificate to enable it to provide the opinion
required by Lender to make the loans contemplated by the Credit Agreement.
DATED as of April 26, 1996.
/s/ CHRISTOPHER J. AMENSON
------------------------------------------
Christopher J. Amenson
/s/ JAMES E. DIXON
------------------------------------------
James E. Dixon
2
<PAGE>
CLOSING CERTIFICATE
This Certificate is delivered to NationsBank of Texas, N.A. ("Lender"),
pursuant to Section 4.1(i) of that certain Amended and Restated Credit Agreement
(the "Credit Agreement") dated as of April 26, 1996, executed by and between
Lender and SBS Technologies, Inc. ("Borrower"), and acknowledged and consented
to by Berg Systems International, Inc. ("Berg") and GreenSpring Computers, Inc.
(GreenSpring"), in connection with the amendment and restatement of existing
revolving and term loans made by Lender to Borrower under the Credit Agreement
as of April 26, 1996 (the "Closing Date").
Each of Borrower, Berg and GreenSpring hereby certifies to Lender as
follows:
1. No Default or Event of Default (as such terms are defined in the
Credit Agreement) exists on the Closing Date.
2. All of the representations and warranties contained in Article VII of
the Credit Agreement and in the other Loan Documents (as defined in
the Credit Agreement) are true and correct on the Closing Date.
3. Each of Borrower, Berg and GreenSpring has performed and complied with
all agreements and conditions required to be performed or complied
with by it prior to or on the Closing Date.
4. The following persons are authorized to sign the Loan Documents for
and on behalf of Borrower, Berg and GreenSpring respectively:
For Borrower: Christopher J. Amenson
President
/s/ CHRISTOPHER J. AMENSON
---------------------------------------------
(signature)
For Berg: Name: Christopher J. Amenson
----------------------------------------
Title: Chief Executive Officer
---------------------------------------
/s/ CHRISTOPHER J. AMENSON
---------------------------------------------
(signature)
For GreenSpring: Christopher J. Amenson
Chairman of the Board and Chief
Executive Officer
/s/ CHRISTOPHER J. AMENSON
---------------------------------------------
(signature)
<PAGE>
The undersigned acknowledge that Lender is relying on this Certificate and
the statements made herein.
SBS TECHNOLOGIES, INC.
By: /s/ J. E. DIXON
------------------------------
J. E. Dixon
Vice President of Finance
and Administration
BERG SYSTEMS INTERNATIONAL, INC.
By: /s/ CHRISTOPHER J. AMENSON
------------------------------------
Name: Christopher J. Amenson
------------------------------------
Title: Chief Executive Officer
------------------------------------
GREENSPRING COMPUTERS, INC.
By: /s/ CHRISTOPHER J. AMENSON
------------------------------------
Name: Christopher J. Amenson
------------------------------------
Title: Chairman
------------------------------------
<PAGE>
SBS TECHNOLOGIES, INC.
CERTIFICATE OF SECRETARY REGARDING
ARTICLES, BYLAWS, AND BOARD RESOLUTIONS
I. Scott A. Alexander, hereby certify that I am the duly elected,
qualified, and acting Secretary of SBS Technologies, Inc., a New Mexico
corporation (the ("COMPANY"), and that I am authorized to execute and deliver
this Certificate, and further, I certify as follows:
1. Attached hereto as EXHIBIT "A" are true, correct and complete copies of the
Articles of Incorporation, as may be amended, of the Company, in effect as
of the date hereof.
2. Attached hereto as EXHIBIT "B" are true, correct and complete copies of the
Bylaws, as may be amended, of the Company, in effect as of the date hereof.
3. Attached hereto as EXHIBIT "C" is a true, correct and complete copy of the
resolutions duly adopted by the unanimous consent of the Board of Directors
of the Company effective April 26, 1996, authorizing the execution,
delivery and performance of a loan from NationsBank of Texas, N.A. in an
amount not to exceed $9,250,000, and authorizing related actions, and such
resolutions have not been amended or revoked, and are now in full force and
effect.
April 26, 1996.
/s/ SCOTT A. ALEXANDER
----------------------------------------
Scott A. Alexander, Secretary
(SEAL)
<PAGE>
EXHIBIT "A"
[ARTICLES OF INCORPORATION]
<PAGE>
STATE OF NEW MEXICO
[SEAL]
CERTIFICATE OF INCORPORATION
OF
SBE ENGINEERING, INC.
1332881
The State Corporation Commission certifies that duplicate originals of the
Articles of Incorporation attached hereto, duly signed and verified pursuant to
the provisions of the BUSINESS Corporation Act, have been received by it and are
found to conform to law.
Accordingly, by virtue of the authority vested in it by law, the State
Corporation Commission issues this Certificate of Incorporation and attaches
hereto a duplicate original of the Articles of Incorporation.
Dated: NOVEMBER 21, 1986
[SEAL]
In Testimony Whereof, the State
Corporation Commission of the State
of New Mexico has caused this
certificate to be signed by its
Chairman and the Seal of said
Commission to be affixed at the city
of Santa Fe
/s/ ERIC P. SERNA
-------------------------------------
Chairman
/s/ MERCIE CANDILARIA
-------------------------------------
For Director
<PAGE>
NOV 21 1986
CORPORATION AND
FRANCHISE TAX DEPTS.
ARTICLES OF INCORPORATION
The undersigned, acting as an Incorporator of a corporation under the New
Mexico Business Corporation Act, adopts the following Articles of Incorporation
for the corporation:
ARTICLE I
Its corporate name will be SBE Engineering, Inc.
ARTICLE II
It is organized to provide engineering and related services and for every
other purpose permitted by the Business Corporation Act.
ARTICLE III
It will have authority to issue one class of 500,000 shares of common
stock.
ARTICLE IV
Its initial registered office address will be 10001 Coors Boulevard, N.W.,
Albuquerque, New Mexico, 87114 and its initial registered agent at that address
will be A. Rolfe Black.
ARTICLE V
The name and address of the sole Director who will constitute its initial
Board of Directors is:
A. Rolfe Black
10001 Coors Boulevard, N.W.
Albuquerque, New Mexico 87114
Exhibit "A"
<PAGE>
ARTICLE VI
Its shareholders will have no preemptive right to acquire authorized but
unissued shares, or securities convertible into such shares or carrying a right
to subscribe to or acquire such shares.
DATED: NOVEMBER 10, 1986
----------------------
/s/ ALISON SCHULER
------------------------------------
Alison K. Schuler
707 Broadway Place, N.E.
Albuquerque, New Mexico 87125
ARTICLES OF INCORPORATION - Page 2
<PAGE>
NOV 21 1986
CORPORATION AND
FRANCHISE TAX DEPTS.
ACCEPTANCE OF APPOINTMENT
AS REGISTERED AGENT
The undersigned, being duly sworn, accepts appointment as Registered Agent
pursuant to the Business Corporation Act for SBE Engineering, Inc., a New Mexico
corporation.
By: /s/ A. ROLFE BLACK
------------------------------
A. Rolfe Black
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
SUBSCRIBED AND SWORN TO before me on NOVEMBER 17, 1986.
-----------
/s/ DOROTHY PITSFORD
-------------------------
NOTARY PUBLIC
My Commission Expires:
3-30-87
- ----------------------
15,63/85
ARTICLES OF INCORPORATION - Page 3
<PAGE>
STATE OF NEW MEXICO
[SEAL]
OFFICE OF
THE STATE CORPORATION COMMISSION
CERTIFICATE OF AMENDMENT
OF
SBE ENGINEERING, INC.
3012275
The State Corporation Commission certifies that duplicate originals of the
Articles of Amendment attached hereto, duly signed and verified pursuant to the
provisions of the BUSINESS Corporation Act, have been received by it and are
found to conform to law.
Accordingly, by virtue of the authority vested in it by law, the State
Corporation Commission issues this Certificate of Amendment and attaches hereto
a duplicate original of the Articles of Amendment.
Dated: MARCH 10, 1989
[SEAL]
In Testimony Whereof, the State
Corporation Commission of the State
of New Mexico has caused this
certificate to be signed by its
Chairman and the Seal of said
Commission to be affixed at the city
of Santa Fe
/s/ ERIC P. SERNA
----------------------------------------
Chairman
/s/ MANUEL E. SALIZ
----------------------------------------
Director
<PAGE>
STATE CORPORATION COMMISSION
OF NEW MEXICO
MAR 10 1989
CORPORATION DEPT.
ARTICLES OF AMENDMENT
SBE ENGINEERING, INC. adopts the following Articles of Amendment under the
New Mexico Business Corporation Act:
ARTICLE ONE
The Shareholders adopted the following amendment to the Articles of
Incorporation on September 30, 1988:
RESOLVED, that the Articles of Incorporation be amended by deleting ARTICLE
III and substituting the following:
ARTICLE III
It will have authority to issue one class of
5,000,000 shares of common stock.
ARTICLE TWO
The number of shares issued at the time of adoption was 100,000, all of
which were entitled to vote on the amendment. 100,000 voted for the amendment
and 0 voted against it.
DATED: 9/30/88, 1988.
-------
SBE ENGINEERING, INC.
By /s/ ANDREW C. CRUCE
-------------------------------
Andrew C. Cruce
Its President
Stamped "Received" on March 10, 1989
NM ST.CORP.COMM.
CORPORATION DEPT.
<PAGE>
-and-
By /s/ SCOTT ALEXANDER
--------------------------------
Scott Alexander
Its Secretary
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
I certify that on FEBRUARY 6, 1989 , ANDREW C. CRUCE AND SCOTT
ALEXANDER, being duly sworn, declared they are the corporate officers who signed
the foregoing document executed by the Corporation, and that the statements
contained therein are true.
/s/ BRUCE E. WIGGINS
--------------------------------
Notary Public
My commission expires:
3/13/89
- ----------------------
3044H
Stamped "Received" on March 10, 1989
NM ST.CORP.COMM.
CORPORATION DEPT.
-2-
<PAGE>
STATE OF NEW MEXICO
[SEAL]
OFFICE OF
THE STATE CORPORATION COMMISSION
CERTIFICATE OF AMENDMENT
OF
SBS ENGINEERING, INC.
3021615
The State Corporation Commission certifies that duplicate originals of the
Articles of Amendment attached hereto, duly signed and verified pursuant to the
provisions of the BUSINESS Corporation Act, have been received by it and are
found to conform to law.
Accordingly, by virtue of the authority vested in it by law, the State
Corporation Commission issues this Certificate of Amendment and attaches hereto
a duplicate original of the Articles of Amendment.
Dated: OCTOBER 17, 1989
[SEAL]
In Testimony Whereof, the State
Corporation Commission of the State
of New Mexico has caused this
certificate to be signed by its
Chairman and the Seal of said
Commission to be affixed at the city
of Santa Fe
/s/ ERIC P. SERNA
----------------------------------------
Chairman
/s/ MANUEL E. SALIZ
----------------------------------------
Director
<PAGE>
ARTICLES OF AMENDMENT
SBE ENGINEERING, INC. adopts the following Articles of Amendment pursuant
to the New Mexico Corporation Act:
ARTICLE I
The shareholders adopted the following amendment to the Articles of
Incorporation on September 30, 1989:
Article I of the Corporation's Articles of Incorporation is
amended to change the name of the Corporation to "SBS
ENGINEERING, INC."
ARTICLE II
A new article VII is added as follows:
A director shall not be personally liable to the Corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director
unless:
(1) the director has breached or failed to perform the
duties of the director's office in compliance with the
New Mexico Business Corporation Act, as amended from
time to time; and
(2) the breach or failure to perform constitutes:
(a) negligence, willful misconduct or recklessness in
the case of a director who has either an ownership
interest in the Corporation or receives in the
capacity as a director or as an employee of the
Corporation compensation of more than two thousand
dollars ($2,000) from the Corporation in any
calendar year; or
(b) willful misconduct or recklessness in the case of
a director who does not have an ownership interest
in the Corporation and does not receive in the
capacity as director or as an employee of the
Corporation compensation of more than two thousand
dollars ($2,000) from the Corporation in any
calendar year.
<PAGE>
ARTICLE III
1,000,000 shares of the Corporation's Common Stock were issued and
outstanding and entitled to vote on the Amendment, when this Amendment was
adopted. All shares voted for the Amendment, no shares voted against the
Amendment.
DATED: SEPTEMBER 30, 1989.
------------------------
SBE ENGINEERING, INC.
/s/ ANDREW C. CRUCE
------------------------------
ANDREW C. CRUCE, President
/s/ SCOTT ALEXANDER
------------------------------
SCOTT ALEXANDER, Secretary
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
Personally appeared before me ANDREW C. CRUCE, President, this 30 day of
SEPTEMBER, 1989, who, being first duly sworn, declared that he is the person who
signed the foregoing document as President and that the statements therein
contained are true.
/s/ DOROTHY PITSFORD
------------------------------
NOTARY PUBLIC
My Commission Expires: [SEAL]
3-30-91
- ----------------------
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
Personally appeared before me SCOTT ALEXANDER, Secretary, this 30 day of
SEPTEMBER, 1989, who, being first duly sworn, declared that he is the person who
signed the foregoing document as Secretary and that the statements therein
contained are true.
/s/ DOROTHY PITSFORD
------------------------------
NOTARY PUBLIC
My Commission Expires: [SEAL]
3-30-91
- ----------------------
<PAGE>
STATE OF NEW MEXICO
[STATE OF NEW MEXICO SEAL]
OFFICE OF
THE STATE CORPORATION COMMISSION
CERTIFICATE OF AMENDMENT
OF
SBS ENGINEERING, INC.
3051083
The State Corporation Commission certifies that duplicate originals of the
Articles of Amendment attached hereto, duly signed and verified pursuant to the
provisions of the BUSINESS Corporation Act, have been received by it and are
found to conform to law.
Accordingly, by virtue of the authority vested in it by law, the State
Corporation Commission issues this Certificate of Amendment and attaches hereto
a duplicate original of the Articles of Amendment.
Dated: OCTOBER 10, 1991
In Testimony Whereof, the State
Corporation Commission of the
[STATE SEAL OF NEW MEXICO] State of New Mexico has caused
this certificate to be signed by its
Chairman and the Seal of said
Commission to be affixed at the city
of Santa Fe
/s/ LOUIS GALLEGOS
------------------------------
Chairman
/s/ MANUEL E. SALIZ
------------------------------
Director
<PAGE>
ARTICLES OF AMENDMENT
SBS Engineering, Inc. adopts the following Articles of Amendment
pursuant to the New Mexico Business Corporation Act.
ARTICLE ONE
The Shareholders of the Corporation adopted the following amendment to
Article III of the Articles of Incorporation on September 20, 1991:
"The Corporation will split its common stock by 1.828467 to 1 and
increase the authorized common stock to 30,000,000 shares."
ARTICLE TWO
The Shareholders of the Corporation adopted the following amendment to
the Articles of Incorporation on September 20, 1991:
A new Article VIII is added as follows:
"An affidavit signed by each Director that he or she consents to be a
Director of the Corporation is on file at the office of the Corporation."
ARTICLE THREE
1,035,500 shares were issued and outstanding and entitled to vote on
the amendment. 782,250 shares voted for the amendment; No shares voted against
the amendment.
Dated: SEPTEMBER 20, 1991
----------------------
SBS Engineering, Inc.
By: /s/ ANDREW C. CRUCE
------------------------------------
Andrew C. Cruce, President
and
By: /s/ SCOTT A. ALEXANDER
-------------------------------------
Scott A. Alexander, Secretary
ARTICLES OF AMENDMENT - PAGE 1
<PAGE>
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
Personally appeared before me Andrew C. Cruce, President, this 7th day
of October, 1991, who, being first duly sworn, declared that he is the person
who signed the foregoing document as President and that the statements therein
contained are true.
/s/ DOROTHY PITSFORD
------------------------------
NOTARY PUBLIC
My Commission Expires:
3-30-95
- ----------------------
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
Personally appeared before me Scott A. Alexander, Secretary, this 7th
day of October, 1991 who, being first duly sworn, declared that he is the person
who signed the foregoing document as President and that the statements therein
contained are true.
/s/ DOROTHY PITSFORD
------------------------------
NOTARY PUBLIC
My Commission Expires:
3-30-95
- ----------------------
ARTICLES OF AMENDMENT - PAGE 2
<PAGE>
ARTICLES OF AMENDMENT
SBS ENGINEERING, INC.
Pursuant to the New Mexico Business Corporation Act, the Shareholders of
SBS ENGINEERING, INC. adopt the following Amendment to its Restated Articles of
Incorporation:
SECTION 1
The current name of the corporation is SBS Engineering, Inc.
SECTION 2
The following amendment to the Articles of Incorporation was adopted by the
shareholders of the corporation on December 15, 1994, in the manner prescribed
by the New Mexico Business Corporation Act:
Article I of the Articles of Incorporation of SBS Engineering, Inc.
is hereby amended in its entirety to read as follows:
ARTICLE I
The name of the corporation is SBS Technologies, Inc.
SECTION 3
The number of shares issued at the time of adoption was 2,818,657, all of
which were entitled to vote on the amendment. 1,588,928 shares voted for the
amendment, and 0 voted against it.
DATED: JUNE 27, 1995
-----------------------
SBS ENGINEERING, INC.
By /s/ CHRISTOPHER J. AMENSON
------------------------------------
Christopher J. Amenson
Its President
and
<PAGE>
By /s/ SCOTT A. ALEXANDER
------------------------------------
Scott A. Alexander
Its Secretary
I verify that I am one of the corporate officers who signed the foregoing
document executed by the corporation, and that the statements contained therein
are true and correct to the best of my knowledge.
/s/ CHRISTOPHER J. AMENSON
------------------------------------
Christopher J. Amenson
STATE OF NEW MEXICO )
) ss.
COUNTY OF BERNALILLO )
I certify that on 6/27, 1995, Christopher Amenson, being duly sworn,
declared he is one of the corporate officers who signed the foregoing document
executed by the Corporation, and that the statements contained therein are true.
/s/ ELIZABETH CANTRELL
------------------------------------
Notary Public
My commission expires:
6/2/98
- ----------------------
<PAGE>
STATE OF NEW MEXICO
[STATE OF NEW MEXICO SEAL]
OFFICE OF
THE STATE CORPORATION COMMISSION
CERTIFICATE OF AMENDMENT
OF
SBS TECHNOLOGIES, INC.
3111705
The State Corporation Commission certifies that duplicate originals of the
Articles of Amendment attached hereto, duly signed and verified pursuant to the
provisions of the
BUSINESS CORPORATION ACT
(53-11-1 TO 53-18-12 NMSA 1978)
have been received by it and are found to conform to law.
Accordingly, by virtue of the authority vested in it by law, the State
Corporation Commission issues this Certificate of Amendment and attaches hereto
a duplicate original of the Articles of Amendment.
Dated: JUNE 28, 1995
[STATE OF NEW MEXICO SEAL] In Testimony Whereof, the State
Corporation Commission of the State of
New Mexico has caused this certificate
to be signed by its Chairman and the Seal
of said Commission to be affixed at the
City of Santa Fe
/s/ JEROME D. BLOCK
-----------------------------------
Chairman
/s/ JOY JIMENEZ
-----------------------------------
for Director
<PAGE>
EXHIBIT "B"
[BYLAWS]
<PAGE>
BYLAWS
OF
SBE ENGINEERING, INC.
ARTICLE I
SHAREHOLDERS
A. ANNUAL MEETING. The annual meeting of the shareholders will be held
during the month of November of each year at a time and place fixed by the Board
of Directors for the purpose of electing Directors and for the transaction of
any other business as may come before the meeting. If no place is designated
for the meeting it will be held at the registered office of the Corporation. If
the day fixed for the annual meeting is a legal holiday, the meeting will be
held on the next succeeding business day.
B. SPECIAL MEETING. Special meetings of the shareholders may be called
by the President, the Board of Directors or by the holders of not less than one
tenth of all the shares entitled to vote at the meeting.
C. NOTICE OF SHAREHOLDERS' MEETINGS. Written notice of all shareholders'
meetings stating the time and the place, and the purpose of the meetings, will
be given by the President or a Vice President or the Secretary or an Assistant
Secretary or by the officer or persons calling the meeting either personally, by
telegram or similar data transmission system or by mail or expedited delivery
service, not less than ten nor more than fifty days before the date of the
meeting, to each shareholder of record entitled to vote at the meeting at the
address as it appears on the stock transfer books of the Corporation, unless the
shareholder has filed with the Secretary of the Corporation a written request
that notice intended for the shareholder be mailed to some other address.
Notice will be deemed to be delivered when deposited, postage pre-paid in the
United States mail or when delivered, charges prepaid, to the expedited delivery
service or when delivered, charges prepaid, to the telegraph company or similar
data transmission company. Attendance of a shareholder in person or by proxy at
a meeting constitutes a waiver of notice of the meeting, except where a
shareholder attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
D. QUORUM OF SHAREHOLDERS. At any meeting of the shareholders, a
majority of shares entitled to vote, represented in person or by proxy, will
constitute a quorum. A quorum once
Exhibit "B"
<PAGE>
attained at a meeting will continue until adjournment notwithstanding the
withdrawal of enough shares to leave less than a quorum. When a quorum is
present at any meeting, a majority of the shares represented at the meeting and
entitled to vote on a matter will decide any question brought before the
meeting, unless the vote of a greater number or class voting is required by law
or the Articles of Incorporation.
E. PROXIES. At all meetings of shareholders, a shareholder may vote by
proxy executed in writing by the shareholder or by his or her duly authorized
attorney-in-fact. That proxy will be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy will be valid after
eleven months from the date of its execution unless otherwise provided in the
proxy and permitted by law.
F. ACTION BY CONSENT. Any action required to be taken at a meeting of
the shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken is signed by all of the shareholders entitled to vote
on the subject matter of the action. The consent will have the effect of a
unanimous vote.
ARTICLE II
SHARES CERTIFICATES
A. CERTIFICATES. Certificates of stock will be in a form approved by the
Board of Directors. The certificates will be signed by the Chairman or Vice-
Chairman of the Board of Directors or the President or a Vice President and by
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, and may be sealed by the corporate seal or a facsimile. Each
certificate will be consecutively numbered and state upon its face the
information required by law. The name and address of the person owning the
shares, with the number of shares and the date of issue, will be entered on the
Corporation's books. The person or entity in whose name shares appear on the
record of shareholders of the Corporation will be the shareholder and will be
deemed by the Corporation to be the owner of the shares for all purposes whether
or not the Corporation has other knowledge.
Unless otherwise provided in the Articles of Incorporation, the Board
of Directors may provide by resolution that some or all of any classes or series
of its shares will be uncertificated shares, provided that the resolution will
not apply to shares represented by a certificate until that certificate is
surrendered to the Corporation. Within a reasonable time after the issuance or
transfer of uncertificated shares, the Corporation will send to the registered
owner of the shares written notice containing the name of the person to whom the
shares are registered and the number, class and series which
BYLAWS - Page 2
<PAGE>
the shares represent. Except as otherwise expressly provided by the law, the
rights and obligations of the holders of uncertificated shares and the rights
and obligations of the holders of certificates representing shares of the same
class and series will be identical.
B. ASSIGNMENT AND CANCELLATION. All certificates of shares transferred
by assignment will be surrendered to the Secretary for cancellation and new
certificates issued to the purchasers or assignees.
C. TRANSFER. Shares of stock will be transferred only on the stock
transfer books of the Corporation. Share transfer and issuance will be done by
the Secretary in the manner provided by the Business Corporation Act and the
Uniform Commercial Code of New Mexico.
ARTICLE III
DIRECTORS
A. NUMBER, TENURE, QUALIFICATIONS AND ELECTION. The number of Directors
of the Corporation will be not fewer than one nor more than 4. Each Director
will be elected annually at the annual meeting of shareholders and will serve
until that Director's successor has been elected and qualified. Directors need
not be residents of New Mexico nor shareholders of the Corporation.
B. ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of
Directors will be held without other notice than this bylaw, immediately after,
and at the same place as, the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place, either within or
without the State of New Mexico, for the holding of regular meetings without
other notice than that resolution.
C. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by or at the request of the President or any one Director. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of New Mexico, as the place for
holding any special meeting of the Board of Directors.
D. NOTICE. Notice of any special meeting will be given at least two days
before the meeting by written notice delivered personally or by mail or
expedited delivery service to each Director at his or her business address, or
by telephone, telegram or similar data transmission system. Notice, if written,
will be deemed to be delivered when deposited, postage prepaid, in the United
States mail in a sealed envelope so addressed or when delivered, charges
prepaid, to an expedited
BYLAWS - Page 3
<PAGE>
delivery service. If notice is given by telegram or similar data transmission
system, the notice will be deemed to be delivered when the communication is
delivered, charges prepaid, to the telegraph company or to the data transmission
company, as appropriate. If notice is given by telephone or similar voice
transmission system, the notice will be deemed given if the call is monitored by
one other director. Any Director may waive notice of any meeting. The
attendance of a Director at any meeting will constitute a waiver of notice of
the meeting, except where a Director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened.
E. QUORUM. A majority of the number of Directors fixed by these Bylaws
as constituting the Board of Directors will constitute a quorum for the
transaction of business. A quorum once attained will continue notwithstanding
the voluntary withdrawal of enough Directors to leave less than a quorum. A
majority of the members present at a meeting where a quorum is present shall
decide any question brought before the meeting unless a greater number is
required by law or the Articles of Incorporation.
F. ACTION BY CONSENT. Any action required to be taken at a meeting of
the Directors, or any other action which may be taken at a meeting of Directors,
may be taken without a meeting if a consent in writing, setting forth the action
so taken, is signed by all of the Directors entitled to vote with respect to the
subject matter of the meeting. The consent will have the effect of a unanimous
vote and will be equally valid as if the action were approved at a meeting.
G. PARTICIPATION BY TELEPHONE. Any one or more members of the Board of
Directors may participate in a meeting of the Board of Directors by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by this means will constitute presence in person at the meeting.
H. VACANCIES. Any vacancy occurring in the Board of Directors, or in a
directorship to be filled by reason of any increase in the number of Directors,
may be filled by a majority vote of the remaining Directors. A Director elected
to fill a vacancy will be elected for the unexpired term of the Director's
predecessor in office.
I. COMPENSATION. Directors as such will not receive any stated salaries
for their services, but by resolution of the Board of Directors, a fixed sum and
expenses of attendance, of any, may be allowed for attendance at each regular or
special meeting of the Board of Directors. Nothing in this section will be
construed to preclude any Director from serving the
BYLAWS - Page 4
<PAGE>
Corporation in any other capacity and receiving compensation therefor.
J. REMOVAL. At a meeting of the shareholders called expressly for that
purpose, any Director or the entire Board of Directors may be removed, with or
without cause, by a vote of a majority of the shares then entitled to vote at an
election of Directors.
ARTICLE IV
OFFICERS
A. NUMBER. The officers of the Corporation will consist of a President,
one or more Vice Presidents, a Secretary, a Treasurer and such other officers as
the Board of Directors may deem necessary. The additional officers may be
appointed or elected in accordance with the provisions of this Article. Any two
or more offices may be held by the same person, except the offices of President
and Secretary.
B. ELECTION AND TERM OF OFFICE. The officers of the Corporation will be
elected annually by the Board of Directors at the annual meeting of the Board of
Directors. Vacancies may be filled or new offices may be created and filled at
any meeting of the Board of Directors. Each officer will hold office until the
officer's successor has been duly elected and qualified or until the officer's
death or until the officer resigns or has been removed in the manner provided in
this Article.
C. REMOVAL. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation would be served by the officer or agent's
removal, but that removal will be without prejudice to the contract right, if
any, of the person removed.
D. PRESIDENT. The President will be chief executive officer of the
Corporation. The President, unless some other person is specifically authorized
by vote of the Board of Directors, will sign all certificates of stock, bonds,
deeds, mortgages, extension agreements, modification of mortgages agreements,
leases, and contracts of the Corporation. The President will perform all the
duties commonly incident to the President's office and will perform any other
duties the Board of Directors designates.
E. VICE PRESIDENT. Except as specially limited by vote of the Board of
Directors, any Vice President will perform the duties and have the powers of the
President during the absence, disability or failure to act of the President.
The Vice President will perform other duties and have other powers as the Board
of Directors designates.
BYLAWS - Page 5
<PAGE>
F. SECRETARY AND ASSISTANT SECRETARY. The Secretary or the Assistant
Secretary in the absence, disability or failure to act of the Secretary, will
keep accurate minutes of all meetings of the shareholders and the Board of
Directors, and will perform all the duties commonly incident to that office, and
will perform any other duties and have any other powers the Board of Directors
designates. The Secretary will have power, together with the President or a
Vice President, to sign certificates of stock of the Corporation.
G. TREASURER AND ASSISTANT TREASURER. The Treasurer or the Assistant
Treasurer in the absence, disability or failure to act of the Treasurer, subject
to the order of the Board of Directors, will have the care and custody of the
money, funds, valuable papers, and documents of the Corporation and will have
and exercise, under the supervision of the Board of Directors, all the powers
and duties commonly incident to that office. The Treasurer will keep accurate
books of account of the Corporation's transactions which will be the property of
the Corporation, and will be subject at all times to the inspection and control
of the Board of Directors.
H. SALARIES. The salaries of the officers will be fixed from time to
time by the Board of Directors. No officer will be prevented from receiving a
salary by reason of the fact that the officer is also a Director of the
Corporation.
ARTICLE V
FUNDS AND BORROWING
The depository for Corporation funds, the persons entitled to draw against
these funds, the persons entitled to borrow on behalf of the Corporation and the
manner of accomplishing these matters will be determined by the Board of
Directors.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation will be determined by the Board of
Directors.
ARTICLE VII
DIVIDENDS
A. SOURCE AND FORM. Dividends may be declared in the form of cash, in
the Corporation's authorized but unissued shares, or in the property of the
Corporation. No dividends will be declared or paid on the stock of the
Corporation if, were the
BYLAWS - Page 6
<PAGE>
dividends paid, either (1) the Corporation would be unable to pay its debts as
they become due in the usual course of its business; or (2) the Corporation's
total assets would be less than the sum of its total liabilities and the maximum
amount that then would be payable, in any liquidation, with respect to all
outstanding shares having preferential rights in liquidation.
B. DECLARATION. The date for the declaration of dividends will be the
date of the meeting of the Board of Directors at which the dividends are
declared. The Board of Directors in its discretion will declare what, if any,
dividends will be issued upon the stock of the Corporation. Dividends may be
declared at any meeting, regular or special, of the Board of Directors. The
Board of Directors may fix in advance a record date for the determination of the
shareholders entitled to a dividend distribution. The shareholders of record as
of the record date will be entitled to receive the dividends.
ARTICLE VIII
INTERESTED PARTIES
No transaction of the Corporation will be affected because a shareholder,
Director, officer, or employee of the Corporation is interested in the
transaction. Those interested parties will be counted for quorum purposes and
may vote, when the Corporation considers the transaction. Those interested
parties will not be liable to the Corporation for the party's profits or the
Corporation's losses, from the transaction.
ARTICLE IX
WAIVER OF NOTICE
Whenever any notice is required to be given under the provisions of these
Bylaws or under the provisions of the law under which this Corporation is
organized, a waiver notice in writing, signed by the person or persons entitled
to that notice, will be deemed equivalent to the giving of the notice.
ARTICLE X
AMENDMENTS
These Bylaws may be altered, amended or repealed and new Bylaws may be
adopted, at any annual meeting or regular meeting of the Board of Directors of
the Corporation or at any special meeting when the proposal to amend these
Bylaws has been stated in the notice of the special meeting by a majority vote
of the Directors represented at the meeting.
BYLAWS - Page 7
<PAGE>
FIRST AMENDMENT
TO
BYLAWS
OF
SBE ENGINEERING, INC.
The first sentence of Article III, Section A of the Corporation's Bylaws is
amended to provide that the number of Directors of the Corporation will be not
fewer than one nor more than nine.
Dated: September 16, 1987
<PAGE>
SECOND AMENDMENT
TO
BYLAWS OF
SBS ENGINEERING, INC.
ARTICLE VIII
The current Article VII, Interested Parties, is deleted in its entirely and
the following is substituted therefor:
INTERESTED PARTIES
No transaction of the Corporation will be affected because a shareholder,
Director, officer, or employee of the Corporation is interested in the
transaction if (i) the material facts of the transaction and the Director's
interest were disclosed or known to the Board of Directors or a committee of the
Board of Directors and the Board of Directors or committee authorized, approved
or ratified the transaction, (ii) the material facts of the transaction and the
interest of the Director were disclosed or known to the shareholders entitled to
vote and they authorized, approved or ratified the transaction or (iii) the
transaction was fair to the Corporation. Those interested parties will be
counted for quorum purposes and may vote, when the Corporation considers the
transaction provided that a majority of the Board of Directors who have no
direct or indirect interest in the transaction is required to approve the
transaction or, if appropriate, a majority of those entitled to vote on a
transaction. Those interested parties will not be liable to the Corporation for
the parties' profits or the Corporation's losses, from the transaction.
A new Article XI is added to the Bylaws as follows:
INDEMNIFICATION
The corporation shall indemnify persons to the full extent permitted in the
New Mexico Business Corporation Act, as amended from time to time.
DIRECTORS
A new paragraph J. Committees is added to Article III, Directors as
follows:
J. COMMITTEES. The Board of Directors by resolution adopted by majority
of the Board of Directors may designate from among its members an executive
committee and one or more other committees, each of which, to the extent
provided in the resolution or in these Bylaws will have and may exercise all the
authority of the Board of
<PAGE>
Directors except that no committee (1) may declare dividends or authorized
distributions, (2) approve or recommend to stockholders actions or proposals
required by law to be approved by stockholders, (3) designate candidates for the
office of Director or fill vacancies on the Board of Directors or any committee
(4) amend Bylaws (5) approve a plan of merger not requiring stockholder
approval, authorize or approve the reacquisition of shares and (6) authorize and
approve the issuance or sale of, or any contract to sell shares or designate
terms of a series of a class of shares. The action of any committee appointed
by the Board of Directors is subject to review and revision by the Board of
Directors.
<PAGE>
THIRD AMENDMENT
TO
BYLAWS OF
SBS ENGINEERING, INC.
ARTICLE IV
This first sentence of Article IV, Section D, PRESIDENT is amended to read
as follows: "The President will be the chief operating officer of the
Corporation."
A new Article IV, Section I is added as follows:
"CHAIRMAN OF THE BOARD. The Chairman of the Board will be the chief
executive officer of the Corporation. The Chairman will perform other duties
and have other powers as the Board of Directors designates."
<PAGE>
FOURTH AMENDMENT
TO
BYLAWS OF
SBS ENGINEERING, INC.
The Second Amendment to Bylaws, establishing Committees is to be paragraph K.
instead of Paragraph J., correcting an identification error, and paragraph K. is
hereby amended, deleting "(3) designate candidates for the office of Director or
fill vacancies on the Board of Directors or any committee".
The following shall be added to Paragraph K. is "The Chairman shall nominate
four existing Directors to be a Nominating Committee which, by July 1 of each
year, shall nominate a proposed slate of Directors for the ensuing year, which
shall be voted upon by the Board of Directors at its next meeting, and shall be
put forth to the stockholders for election via the ensuing proxy. If the Board
shall fail to approve the slate put forth by the Nominating Committee, the Board
of Directors shall stay in session until an alternate slate of Directors is
agreed upon.
Dated: May 8, 1995
<PAGE>
EXHIBIT "C"
UNANIMOUS CONSENT
The undersigned, being each of the directors of SBS Technologies, Inc. (the
"CORPORATION"), waiving all notices of a meeting of directors that might
otherwise be required to adopt this resolution, hereby unanimously agree and
consent to the following resolutions effective as of this 26th day of April,
1996:
WHEREAS, the Corporation, as borrower, and NationsBank of Texas, N.A., a
national banking association, as lender ("LENDER"), have entered into a certain
Credit Agreement (the "ORIGINAL CREDIT AGREEMENT") effective as of April 28,
1995, by which Lender agreed to make certain loans not to exceed $11,000,000, to
be used, in part, to fund working capital of the Corporation and its
subsidiaries, being Berg Systems International, Inc. and GreenSpring Computers,
Inc. (the "LOANS"), which Original Credit Agreement was previously amended
pursuant to (i) that certain First Amendment to Credit Agreement dated as of May
25, 1995, executed by and between the Corporation and Lender, and (ii) that
certain Second Amendment to Credit Agreement and Related Loan Documents dated as
of November 1, 1995, executed by and between the Corporation and Lender; and
WHEREAS, the Original Credit Agreement expires on April 26, 1996; and
WHEREAS, the Corporation and the Lender desire to further amend the
Original Credit Agreement and the documents executed in connection therewith and
to amend and restate such documents in their entirety, by executing certain
superseding and amending documents, including but not limited to the Amended and
Restated Credit Agreement dated as of April 26, 1996 by and between Corporation
and Lender attached hereto (the "CREDIT AGREEMENT") evidencing a reduction in
principal balance of the Loans to $9,250,000; and
WHEREAS, the Lender will allow the Corporation to use proceeds of the loan
pursuant to the Credit Agreement to repay in full the subordinated debt owed by
the Corporation to the former shareholders of GreenSpring Computers, Inc. in the
principal amount $1,000,000;
RESOLVED, that the Directors, after due consideration, find that these
transactions will enhance the financial resources of the Corporation and are in
the best interest of the Corporation.
RESOLVED, that the Chairman of the Board and Chief Executive Officer, the
President and Chief Operating Officer, the Chief Financial Officer or any Vice
President of the Corporation be and each are authorized and directed to enter
into the Credit Agreement providing for the borrowing of monies by the
Corporation in an amount not to exceed $9,250,000 from NationsBank of Texas,
N.A., for the purposes of obtaining additional working capital for the
Corporation and refunding current indebtedness outstanding from
<PAGE>
Lender, upon such terms and conditions substantially as provided in the Credit
Agreement, such approval to be conclusively presumed by the execution by such
officer of documents containing such terms and conditions; and
RESOLVED, that the Chairman of the Board and Chief Executive Officer, the
President and Chief Operating Officer, the Chief Financial Officer and any Vice
President of the Corporation be and each are further authorized and directed to
sign and deliver and to cause the appropriate officers of Berg Systems
International, Inc., and GreenSpring Computers, Inc. to sign and deliver all
contracts, agreements, credit agreements, promissory notes, guaranties, pledges,
assignments, mortgages, deeds of trust, security agreements, financing
statements, certificates and other documents and instruments in writing
necessary or appropriate to carry out and consummate the transactions
contemplated by the foregoing resolution.
RESOLVED, that the actions of each of the Chairman of the Board and Chief
Executive Officer, the President and Chief Operating Officer, the Chief
Financial Officer and any Vice President of the Corporation to carry out and
consummate the transactions contemplated by the foregoing resolutions is hereby
fully ratified and confirmed.
DIRECTORS
/s/ ANDREW C. CRUCE
------------------------
Dr. Andrew C. Cruce
/s/ CHRISTOPHER J. AMENSON
------------------------
Christopher J. Amenson
/s/ SCOTT A. ALEXANDER
------------------------
Scott A. Alexander
------------------------
William J. Becker
------------------------
Lawrence A. Bennigson
------------------------
A. Wade Black
------------------------
Joseph N. Najjar, Jr.
<PAGE>
Lender, upon such terms and conditions substantially as provided in the Credit
Agreement, such approval to be conclusively presumed by the execution by such
officer of documents containing such terms and conditions; and
RESOLVED, that the Chairman of the Board and Chief Executive Officer, the
President and Chief Operating Officer, the Chief Financial Officer and any Vice
President of the Corporation be and each are further authorized and directed to
sign and deliver and to cause the appropriate officers of Berg Systems
International, Inc., and GreenSpring Computers, Inc. to sign and deliver all
contracts, agreements, credit agreements, promissory notes, guaranties, pledges,
assignments, mortgages, deeds of trust, security agreements, financing
statements, certificates and other documents and instruments in writing
necessary or appropriate to carry out and consummate the transactions
contemplated by the foregoing resolution.
RESOLVED, that the actions of each of the Chairman of the Board and Chief
Executive Officer, the President and Chief Operating Officer, the Chief
Financial Officer and any Vice President of the Corporation to carry out and
consummate the transactions contemplated by the foregoing resolutions is hereby
fully ratified and confirmed.
DIRECTORS
------------------------
Dr. Andrew C. Cruce
/s/ CHRISTOPHER J. AMENSON
------------------------
Christopher J. Amenson
/s/ SCOTT A. ALEXANDER
------------------------
Scott A. Alexander
/s/ WILLIAM J. BECKER
------------------------
William J. Becker
------------------------
Lawrence A. Bennigson
------------------------
A. Wade Black
------------------------
Joseph N. Najjar, Jr.
<PAGE>
Lender, upon such terms and conditions substantially as provided in the Credit
Agreement, such approval to be conclusively presumed by the execution by such
officer of documents containing such terms and conditions; and
RESOLVED, that the Chairman of the Board and Chief Executive Officer, the
President and Chief Operating Officer, the Chief Financial Officer and any Vice
President of the Corporation be and each are further authorized and directed to
sign and deliver and to cause the appropriate officers of Berg Systems
International, Inc., and GreenSpring Computers, Inc. to sign and deliver all
contracts, agreements, credit agreements, promissory notes, guaranties, pledges,
assignments, mortgages, deeds of trust, security agreements, financing
statements, certificates and other documents and instruments in writing
necessary or appropriate to carry out and consummate the transactions
contemplated by the foregoing resolution.
RESOLVED, that the actions of each of the Chairman of the Board and Chief
Executive Officer, the President and Chief Operating Officer, the Chief
Financial Officer and any Vice President of the Corporation to carry out and
consummate the transactions contemplated by the foregoing resolutions is hereby
fully ratified and confirmed.
DIRECTORS
/s/ ANDREW C. CRUCE
------------------------------
Dr. Andrew C. Cruce
/s/ CHRISTOPHER J. AMENSON
------------------------------
Christopher J. Amenson
/s/ SCOTT A. ALEXANDER
------------------------------
Scott A. Alexander
------------------------------
William J. Becker
/s/ LAWRENCE A. BENNIGSON
------------------------------
Lawrence A. Bennigson
------------------------------
A. Wade Black
------------------------------
Joseph N. Najjar, Jr.
<PAGE>
Lender, upon such terms and conditions substantially as provided in the Credit
Agreement, such approval to be conclusively presumed by the execution by such
officer of documents containing such terms and conditions; and
RESOLVED, that the Chairman of the Board and Chief Executive Officer, the
President and Chief Operating Officer, the Chief Financial Officer and any Vice
President of the Corporation be and each are further authorized and directed to
sign and deliver and to cause the appropriate officers of Berg Systems
International, Inc., and GreenSpring Computers, Inc. to sign and deliver all
contracts, agreements, credit agreements, promissory notes, guaranties, pledges,
assignments, mortgages, deeds of trust, security agreements, financing
statements, certificates and other documents and instruments in writing
necessary or appropriate to carry out and consummate the transactions
contemplated by the foregoing resolution.
RESOLVED, that the actions of each of the Chairman of the Board and Chief
Executive Officer, the President and Chief Operating Officer, the Chief
Financial Officer and any Vice President of the Corporation to carry out and
consummate the transactions contemplated by the foregoing resolutions is hereby
fully ratified and confirmed.
DIRECTORS
------------------------------
Dr. Andrew C. Cruce
/s/ CHRISTOPHER J. AMENSON
------------------------------
Christopher J. Amenson
/s/ SCOTT A. ALEXANDER
------------------------------
Scott A. Alexander
------------------------------
William J. Becker
-----------------------------
Lawrence A. Bennigson
/s/ A. WADE BLACK
-----------------------------
A. Wade Black
-----------------------------
Joseph N. Najjar, Jr.
<PAGE>
Lender, upon such terms and conditions substantially as provided in the Credit
Agreement, such approval to be conclusively presumed by the execution by such
officer of documents containing such terms and conditions; and
RESOLVED, that the Chairman of the Board and Chief Executive Officer, the
President and Chief Operating Officer, the Chief Financial Officer and any Vice
President of the Corporation be and each are further authorized and directed to
sign and deliver and to cause the appropriate officers of Berg Systems
International, Inc., and GreenSpring Computers, Inc. to sign and deliver all
contracts, agreements, credit agreements, promissory notes, guaranties, pledges,
assignments, mortgages, deeds of trust, security agreements, financing
statements, certificates and other documents and instruments in writing
necessary or appropriate to carry out and consummate the transactions
contemplated by the foregoing resolution.
RESOLVED, that the actions of each of the Chairman of the Board and Chief
Executive Officer, the President and Chief Operating Officer, the Chief
Financial Officer and any Vice President of the Corporation to carry out and
consummate the transactions contemplated by the foregoing resolutions is hereby
fully ratified and confirmed.
DIRECTORS
------------------------
Dr. Andrew C. Cruce
------------------------
Christopher J. Amenson
------------------------
Scott A. Alexander
------------------------
William J. Becker
------------------------
Lawrence A. Bennigson
------------------------
A. Wade Black
/s/ JOSEPH N. NAJJAR, JR.
-------------------------
Joseph N. Najjar, Jr.
<PAGE>
State
of
California
SECRETARY OF STATE
CERTIFICATE OF STATUS
FOREIGN CORPORATION
I, BILL JONES, SECRETARY OF STATE OF THE STATE OF CALIFORNIA, HEREBY CERTIFY:
THAT ON THE 31st DAY OF AUGUST , 1988,
---------------------- --------------------
SBS TECHNOLOGIES, INC.
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,
- ------------------------------------------------------------------------------
A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF NEW MEXICO ,
COMPLIED WITH THE REQUIREMENTS OF CALIFORNIA LAW IN EFFECT ON THAT DATE FOR THE
PURPOSE OF QUALIFYING TO TRANSACT INTRASTATE BUSINESS IN THIS STATE; AND
THAT THE ABOVE CORPORATION IS ENTITLED TO TRANSACT INTRASTATE BUSINESS IN THE
STATE OF CALIFORNIA AS OF THE DATE OF THIS CERTIFICATE, HOWEVER, SUBJECT TO ANY
LICENSING REQUIREMENTS OTHERWISE IMPOSED BY THE LAWS OF THIS STATE, AND
THAT NO INFORMATION IS AVAILABLE IN THIS OFFICE ON THE FINANCIAL CONDITION,
BUSINESS ACTIVITY OR PRACTICES OF THIS CORPORATION.
[SEAL]
IN WITNESS WHEREOF, I EXECUTE
THIS CERTIFICATE AND AFFIX THE GREAT
SEAL OF THE STATE OF CALIFORNIA THIS
26TH DAY OF APRIL, 1996
/s/ BILL JONES
---------------------------------------
Bill Jones
Secretary of State
<PAGE>
STATE OF NEW MEXICO
[SEAL]
OFFICE OF
THE STATE CORPORATION COMMISSION
CERTIFICATE OF GOOD STANDING AND COMPLIANCE
IT IS HEREBY CERTIFIED that:
SBS TECHNOLOGIES, INC.
1332881
a corporation organized under the laws of
NEW MEXICO
is duly authorized to transact business in New Mexico, as a Domestic Profit
corporation, under the
BUSINESS CORPORATION ACT
(53-11-1 to 53-18-12 NMSA 1978)
having filed its Articles of Incorporation NOVEMBER 21, 1986 and Certificate of
Incorporation issued as of said date.
IT IS FURTHER CERTIFIED that the fees due the State Corporation Commission,
which have been assessed against the aforesaid corporation, have been paid to
date and aforesaid corporation is in corporate good standing and duly authorized
to transact business as its corporate existence has not been revoked in New
Mexico. This Certificate is not to be construed as an endorsement,
recommendation or notice of approval of the corporation's financial condition or
business activities and practices. This Certificate of Good Standing and
Compliance expires SEPTEMBER 15, 1997
Dated: APRIL 26, 1996
[SEAL] In Testimony Whereof, the State
Corporation Commission of the State of
New Mexico has caused this certificate
to be signed by its Chairman and the Seal
of said Commission to be affixed at the
City of Santa Fe
/s/ GLORIA TRISTANI
------------------------------
Chairman
/s/ MANUEL W. SALIS
------------------------------
Director
<PAGE>
[LETTERHEAD]
CERTIFICATION OF ACCOUNT STATUS
THE STATE OF TEXAS
COUNTY OF TRAVIS
I, John Sharp, Comptroller of Public Accounts of the State of Texas, DO HEREBY
CERTIFY that according to the records of this office
SBS TECHNOLOGIES, INC.
is, as of this date, in good standing with this office having no franchise tax
reports or payments due at this time.
This certificate is valid through the date that the next franchise tax report
will be due, MAY 15, 1996.
This certificate is not valid for the purpose of dissolution, merger or
withdrawal.
GIVEN UNDER MY HAND AND
SEAL OF OFFICE in the City of
Austin, this 26TH day of
APRIL, 1996 A.D.
/s/ JOHN SHARP
- ------------------------------
John Sharp
Comptroller of Public Accounts
Charter/C.O.A. number: 00077598
<PAGE>
[SEAL]
THE STATE OF TEXAS
SECRETARY OF STATE
IT IS HEREBY CERTIFIED, that
SBS TECHNOLOGIES, INC.
CERTIFICATE OF AUTHORITY NO. 77598-06
a NEW MEXICO corporation, was issued a Certificate of Authority to
do business in the State of Texas on
AUGUST 31, 1988;
THAT so far as is shown by the records of this department, no Certificate
of Withdrawal has been issued.
[SEAL] IN TESTIMONY WHEREOF, I HAVE HEREUNTO
SIGNED MY NAME OFFICIALLY AND CAUSED TO BE
IMPRESSED HEREON THE SEAL OF STATE AT MY OFFICE IN
THE CITY OF AUSTIN, ON APRIL 26, 1996.
/s/ ANTONIO O. GARZA, JR.
------------------------------------------
Antonio O. Garza, Jr. MAC
Secretary of State
<PAGE>
BERG SYSTEMS INTERNATIONAL, INC.
CERTIFICATE OF SECRETARY REGARDING
ARTICLES, BYLAWS, AND BOARD RESOLUTIONS
I, Marcia N. Berg, hereby certify that I am the duly elected, qualified,
and acting Secretary of Berg Systems International, Inc., a California
corporation (the "COMPANY"), and that I am authorized to execute and deliver
this Certificate, and further, I certify as follows:
1. Attached hereto as EXHIBIT "A" are true, correct and complete copies of the
Articles of Incorporation, as may be amended, of the Company, in effect as
of the date hereof.
2. Attached hereto as EXHIBIT "B" are true, correct and complete copies of the
Bylaws, as may be amended, of the Company, in effect as of the date hereof.
3. Attached hereto as EXHIBIT "C" is a true, correct and complete copy of the
resolutions duly adopted by unanimous consent of the Board of Directors of
the Company effective April 26, 1996, authorizing the execution, delivery,
and performance of collateral documents and guaranties in connection with a
loan from NationsBank of Texas, N.A. to SBS Technologies, Inc., and
authorizing related actions, and such resolutions have not been amended or
revoked, and are now in full force and effect.
Effective April 26, 1996.
/s/ MARCIA N. BERG
------------------------------
Marcia N. Berg
Secretary
(SEAL)
<PAGE>
EXHIBIT "A"
[ARTICLES OF INCORPORATION]
<PAGE>
STATE
OF
CALIFORNIA
OFFICE OF THE SECRETARY OF STATE
CORPORATION DIVISION
1572729
I, MARCH FONG EU, Secretary of State of the State of California, hereby
certify:
That the annexed transcript has been compared with the corporate record
on file in this office, of which it purports to be a copy, and that same is
full, true and correct.
IN WITNESS WHEREOF, I execute
this certificate and affix the Great
Seal of the State of California this
FEB 27 1991
-------------------------
[SEAL] /s/ MARCH FONG EU
-------------------------
SECRETARY OF STATE
<PAGE>
ARTICLES OF INCORPORATION
OF
BERG SYSTEMS INTERNATIONAL, INC.
I
The name of this corporation is BERG SYSTEMS INTERNATIONAL, INC..
II
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
The name and address in the State of California of this corporation's
initial agent for service of process is:
Peter Berg
3978 Syme Drive
Carlsbad CA 92008
IV
This corporation is authorized to issue only one class of shares of stock;
and the total number of shares which this corporation is authorized to issue is
One Million (1,000,000).
V
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
Dated: 2/26/91 /s/ WILLIAM C. PULTZ
------------------ ------------------------------------
William C. Pultz
Incorporator
I hereby declare that I am the person who executed the foregoing Articles
of Incorporation, which execution is my act and deed.
/s/ WILLIAM C. PULTZ
------------------------------------------
William C. Pultz
<PAGE>
EXHIBIT "B"
[BYLAWS]
<PAGE>
CORPORATE BYLAWS
OF
BERG SYSTEMS INTERNATIONAL, INC.
WILLIAM C. PULTZ
Attorney at Law
751 E. Rancheros Dr., #1
San Marcos, CA 92069
(619) 744-6300
Exhibit "B"
<PAGE>
BYLAWS
(Table of Contents)
Page
ARTICLE I - OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. Principal Office . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02. Other Offices. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - MEETINGS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . 1
2.01. Place of Meeting . . . . . . . . . . . . . . . . . . . . . . . . 1
2.02. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.03. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . 2
2.04. Notice of Shareholders' Meetings . . . . . . . . . . . . . . . . 2
2.05. Manner of Giving Notice; Affidavit of Notice . . . . . . . . . . 3
2.06. Quorum; Adjourned Meeting; Voting. . . . . . . . . . . . . . . . 3
2.07. Adjourned Meeting; Notice. . . . . . . . . . . . . . . . . . . . 4
2.08. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.09. Waiver of Notice or Consent by Absent Shareholder. . . . . . . . 5
2.10. Shareholder Action by Written Consent Without a Meeting. . . . . 6
2.11. Record Date for Shareholder Notice, Voting and Giving Consents . 7
2.12. Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.13. Inspectors of Election . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III - DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.01. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.02. Number and Qualification of Directors. . . . . . . . . . . . . . 9
3.03. Election and Term of Office of Directors . . . . . . . . . . . . 9
3.04. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.05. Place of Meetings and Meetings by Telephone. . . . . . . . . . . 10
3.06. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.07. Other Regular Meetings . . . . . . . . . . . . . . . . . . . . . 11
3.08. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . 11
3.09. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.10. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . 12
3.11. Adjournment. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.12. Notice of Adjournment. . . . . . . . . . . . . . . . . . . . . . 12
3.13. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . 12
3.14. Fees and Compensation of Directors . . . . . . . . . . . . . . . 13
ARTICLE IV - COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.01. Committees of Directors. . . . . . . . . . . . . . . . . . . . . 13
4.02. Meetings and Action of Committees. . . . . . . . . . . . . . . . 14
<PAGE>
ARTICLE V - OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.01. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.02. Election of Officers . . . . . . . . . . . . . . . . . . . . . . 14
5.03. Subordinate Officers . . . . . . . . . . . . . . . . . . . . . . 15
5.04. Removal and Resignation of Officers. . . . . . . . . . . . . . . 15
5.05. Vacancies in Offices . . . . . . . . . . . . . . . . . . . . . . 15
5.06. Chairman of the Board. . . . . . . . . . . . . . . . . . . . . . 15
5.07. President. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.08. Vice Presidents. . . . . . . . . . . . . . . . . . . . . . . . . 16
5.09. Secretary. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.10. Chief Financial Officer. . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS . . . . . . . . . . . . . . . 17
6.01. Indemnification of Directors, Officers, Employees
And Other Agents. . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VII - RECORDS AND REPORTS. . . . . . . . . . . . . . . . . . . . . 18
7.01. Maintenance and Inspection of Record of Shareholder . . . . . . . 18
7.02. Maintenance and Inspection of Bylaws. . . . . . . . . . . . . . . 18
7.03. Maintenance and Inspection of Other Corporate
Records. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.04. Inspection by Directors . . . . . . . . . . . . . . . . . . . . . 19
7.05. Annual Report to Shareholders . . . . . . . . . . . . . . . . . . 19
7.06. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VIII - GENERAL CORPORATE MATTERS . . . . . . . . . . . . . . . . . 20
8.01. Record Date for Purposes Other Than Notice and
Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.02. Checks, Drafts, Evidences of Indebtedness . . . . . . . . . . . . 21
8.03. Corporate Contracts and Instruments; How Executed . . . . . . . . 21
8.04. Certificates for Shares . . . . . . . . . . . . . . . . . . . . . 21
8.05. Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . 22
8.06. Representation of Shares of Other Corporations. . . . . . . . . . 22
8.07. Construction and Definitions. . . . . . . . . . . . . . . . . . . 22
8.08. Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IX - AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.01. Amendment by Shareholder. . . . . . . . . . . . . . . . . . . . . 23
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
<PAGE>
CORPORATE BYLAWS
ARTICLE I
OFFICES
1.01. PRINCIPAL OFFICE.
The Board of Directors shall fix the location of the principal
executive office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside this state,
and the corporation has one or more business offices in this state, the Board of
Directors shall fix and designate a principal business office in the State of
California.
1.02. OTHER OFFICES.
The Board of Directors may at any time establish branch or
subordinate offices at any place or places.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.01. PLACE OF MEETINGS.
Meetings of Shareholders shall be held at any place within or
outside the State of California designated by the Board of Directors. In the
absence of any such designation, shareholders' meetings shall be held at the
principal executive office of the corporation.
2.02. ANNUAL MEETING.
The annual meeting of shareholders shall be held each year on the
second Wednesday in December. At each annual meeting, directors shall be
elected, and any other proper business within the power of the shareholders may
be transacted.
1
<PAGE>
2.03. SPECIAL MEETINGS.
A special meeting of the shareholders may be called at any time by
the Board of Directors, or by the Chairman of the Board, or by the President or
Vice President, or by one or more shareholders holding shares in the aggregate
entitled to cast not less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the Chairman of the Board, the President, any
Vice President, or the Secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the shareholders entitled to
vote; in accordance with the provisions of paragraphs 2.04 and 2.05 of this
Article II, that a meeting will be held at the time requested by the person or
persons calling the meeting, not less than thirty-five (35) nor more than sixty
(60) days after the receipt of the request. If the notice is not given within
twenty (20) days after receipt of the request, the person or person requesting
the meeting may give the notice. Nothing contained in this paragraph 2.03
shall be construed as limiting, fixing, or affecting the time when a meeting of
shareholders called by action of the Board of Directors may be held.
2.04. NOTICE OF SHAREHOLDERS' MEETINGS.
All notices of meetings of shareholders shall be sent or otherwise
given in accordance with paragraph 2.05 of this Article II not less than ten
(10) nor more than sixty (60) days before the date of the meeting. The notice
shall specify the place, date and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted, or (ii) in
the case of the annual meeting, those matters which the Board of Directors, at
the time of giving the notice, intends to present for action by the
shareholders. The notice of any meeting at which directors are to be elected
shall include the name of any nominee or nominees whom, at the time of the
notice, management intends to present for election.
If action is proposed to be taken at any meeting for approval of (i)
a contract or transaction in which a director has a direct or indirect financial
interest under Section 310 of the Corporations Code of California, (ii) an
amendment of the Articles of Incorporation under Section 902 of that Code, (iii)
a reorganization of the corporation, under Section 1201 of that Code, (iv) a
voluntary dissolution of the corporation under
2
<PAGE>
Section 1900 of that Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding pre-ferred shares under Section 2007
of that Code, the notice shall also state the general nature of that proposal.
2.05. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Notice of any shareholders' meeting shall be given either personally
or by first-class mail or telegraphic or other written communication, charges
prepaid, addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or has been so given, notice shall be deemed to have been
given if sent to that shareholder by first-class mail or telegraphic or other
written communication to the corporation's principal executive office, or if
published at least once in a newspaper of general circulation in the county
where that office is located. Notice shall be deemed to have been given at the
time when delivered personally, deposited in the mail, delivered to a common
carrier for transmission to the recipient, actually transmitted by electronic
means to the recipient by the person giving the notice, or sent by other means
of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, all future notices or reports shall be deemed to have been duly
given without further mailing if these shall be available to the shareholder on
written demand of the shareholder at the principal executive office of the
corporation for a period of one year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of
any shareholders' meeting may be executed by the Secretary, Assistant Secretary,
or any transfer agent of the corporation giving the notice, and filed an
maintained in the minute book of the corporation.
2.06. QUORUM; ADJOURNED MEETING; VOTING.
The presence in person or by proxy of the holders of a majority of
the shares entitled to vote at any meeting of shareholders shall constitute a
quorum for the transaction of business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
3
<PAGE>
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.07. ADJOURNED MEETING; NOTICE.
Any shareholders' meeting, annual or special, whether or not a
quorum is present, may be adjourned from time to time by the vote of the
majority of the shares represented at that meeting, either in person or by
proxy, but in the absence of a quorum, no other business may be transacted at
that meeting, except as provided in paragraph 2.06 of this Article II.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than forty-five (45) days from the
date set forth original meeting, in which case the Board of Directors shall set
a new record date. Notice of any such adjourned meeting, if required, shall be
given to each shareholder of record entitled to vote at the adjourned meeting
in accordance with the provisions of paragraph 2.04 and 2.05 of this Article II.
At any adjourned meeting, the corporation may transact any business that might
have been transacted at the original meeting.
2.08. VOTING.
The shareholders entitled to vote at any meeting of shareholders
shall be determined in accordance with the provisions of paragraph 2.11 of this
Article II, subject to the provisions of Sections 702 to 704, inclusive, of the
Corporations Code of California (relating to voting shares held by a fiduciary,
in the name of a corporation, or in joint ownership). THe shareholders' vote
may be by voice vote or by ballot; provided, however, that any election for
directors must be by ballot if demanded by any shareholder before the voting has
begun. On any matter other than the election of directors, any shareholder may
vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or vote them against the proposal, but, if the shareholder
fails to specify the number of shares which the shareholder is voting
affirmatively, it will be conclusively presumed that the shareholder's approving
vote is with respect to all shares that the shareholder is entitled to vote. If
a quorum is present (or if a quorum had been present earlier at the meeting but
some shareholders had withdrawn) the affirmative vote of a majority of the
shares represented and voting, provided such shares voting affirmatively also
constitutes a majority of the number of shares required for a quorum, shall be
the act of the shareholders, unless the vote of a greater number of voting by
classes is
4
<PAGE>
required by California General Corporation Law or by the Articles of
Incorporation.
At a shareholders' meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder normally
is entitled to cast), unless the candidates' names have been place in
nomination before commencement of the voting and a shareholder has given such a
notice, then every shareholder entitled to vote may cumulate votes for
candidates in nomination and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
that shareholder's shares are normally entitled, or distribute the shareholder's
votes on the same principal among any or all of the candidates, as the
shareholder thinks fit. The candidates receiving the highest number of votes,
up to the number of directors to be elected, shall be elected.
2.09. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS.
The transactions of any meeting of shareholders, either annual or
special, however, called and noticed, and wherever held, shall be a valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice of a consent to a holding of the
meeting, or an approval of the minutes. The waiver of transacted or the purpose
of any annual or special meeting of shareholders, except that if action is take
or proposed to be taken for approval of any of those matters specified in the
second paragraph of paragraph 2.04 of this Article II, the waiver of notice or
consent shall state the general nature of the proposal. All such waivers,
consents, or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver
of notice of that meeting, except when the person objects, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened, and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters required by law to
be included in the notice of the meeting, but not so included, if that objection
is expressly made at the meeting.
5
<PAGE>
2.10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
Directors may be elected by written consent without a meeting only
if the written consents of all outstanding shares entitled to vote are obtained,
except that a vacancy in the board (other than a vacancy created by removal of a
director) not filled by the board may be filled by the written consent of the
holders of a majority of the outstanding shares entitled to vote.
All such consents shall be filed with the Secretary of the
corporation and shall be maintained in the corporate records. Any shareholder
giving a written consent, or the shareholder's proxy holder, or a transferee of
the shares or a personal representative of the shareholder or their respective
proxy holders, may revoke the consent by a writing received by the Secretary of
the corporation before written consents of the number of shares required to
authorize the proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of the corporate action approved by the shareholders without a meeting.
This notice shall be given in the manner specified in paragraph 2.05 of this
Article II. In the case of approval of (i) contracts or transactions in which
a director has a direct or indirect financial interest under Section 310 of the
Corporations Code of California, (ii) indemnification of agents of the
corporation, under Section 317 of that Code, (iii) a reorganization of the
corporation, under Section 1201 of that Code, or (iv) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, under Section 2007 of that Code, notice of such approval shall be given
at least ten (10) days before the consummation of any action authorized by that
approval.
6
<PAGE>
2.11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING CONSENTS.
For purposes of determining the shareholders entitled to notice of
any meeting or to vote or entitled to give consent to corporate action without a
meeting or to vote or entitled to give consent to corporate action without a
meeting, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) days or less than ten (10) days before the date of
any such meeting or more than sixty (60) days before any such action without a
meeting, and in this event only shareholders of record at the close of business
on the date so fixed are entitled to notice and to vote or to give consents, as
the case may be, notwithstanding any transfer of any shares on the case of the
corporation after the record date, except as otherwise provided in the
California General Corporation Law.
If the Board of Directors does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business day next preceding the day on
which the meeting is held.
(b) The record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
2.12. PROXIES.
Every person entitled to vote for directors or on any other matter
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the Secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name is
place on the proxy (whether by manual signature, typewriting, telegraphic
transmission, or otherwise) by the shareholder or the shareholder's attorney-in-
fact. A validly executed proxy that does not state that it is irrevocable shall
continue in full force and effect unless (i) revoked by the person executing it,
before the vote pursuant to that proxy, by a writing delivered to the
corporation stating that the proxy is revoked, or by attendance at the meeting
and voting in person by the person executing the proxy or by a subsequent proxy
executed by the same person and presented at the meeting; or (ii) written notice
of the death or incapacity
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of the maker of that proxy is received by the corporation before the vote
pursuant to that proxy is counted; provided, however, that not proxy shall be
valid after the expiration of eleven (11) months from the date of the proxy,
unless otherwise provided in the proxy. The revocability of a proxy that states
on its face that it is irrevocable shall be governed by the provisions of
Sections 705(e) and 705(f) of the Corporations Code of California.
2.13. INSPECTORS OF ELECTION.
Before any meeting of shareholders, the Board of Directors may
appoint any persons other than nominees for office to act as inspectors of
election at the meeting or its adjournment. If no inspectors of election are
so appointed, the chairman of the meeting may, and on the request of any
shareholder or a shareholder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one (1) or three (3). If
inspectors are appointed at a meeting on the request of one or more shareholders
or proxies, the holders of a majority of shares or their proxies present at the
meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may, and upon the request of any
shareholder or a shareholder's proxy shall, appoint a person to fill that
vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a quorum,
and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
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ARTICLE III
DIRECTORS
3.01. POWERS.
Subject to the provisions of the California General Corporation Law
and any limitations in the Articles of Incorporation and these Bylaws relating
to action required to be approved by the shareholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors.
3.02. NUMBER AND QUALIFICATION OF DIRECTORS.
The authorized number of directors shall be two (2) until changed by
a duly adopted amendment to the Articles of Incorporation or by an amendment to
these Bylaws adopted by the vote or written consent of holders of a majority of
the outstanding shares entitled to vote; provided, however, that an amendment
reducing the number of directors to a number less than five (5) cannot be
adopted if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of action by written consent, are equal to or more than
16-2/3 percent of the outstanding shares entitled to vote.
3.03. ELECTION AND TERM OF OFFICE OF DIRECTORS.
Directors shall be elected at each annual meeting of the
shareholders to hold office until the next annual meeting. Each director,
including a director elected to fill a vacancy, shall hold office until the
expiration of the term for which elected and until a successor has been elected
and qualified.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.04. VACANCIES.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist in the event of the death, resignation, or removal of any director, or if
the Board of Directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, or if the authorized number of directors is increased, or if the
shareholders fail at any meeting of shareholders at which any director or
directors are elected to elect the number of directors to be voted for at that
meeting.
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Any director may resign effective on giving written notice to the
Chairman of the Board, the President, the Secretary and the Board of Directors,
unless the notice specifies a later date for that resignation to become
effective. If the resignation of a director is effective at a future time, the
Board of Directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the Board of Directors may be filled by a majority of
the remaining directors, whether or not less than a quorum, or by a sole
remaining director, except that a vacancy created by the removal of a director
by the vote or written consent of the shareholders or by court order may be
filled only by the vote of a majority of the shares entitled to vote represented
at a duly held meeting at which a quorum is present, or by the unanimous
written consent of the holders of the outstanding shares entitled to vote. The
shareholders may elect a director or directors at any time to fill any vacancy
or vacancies not filled by the directors, but any such election by written
consent shall require the consent of a majority of the outstanding shares
entitled to vote, except that filling a vacancy created by removal of a director
shall require the written consent of the holders of all outstanding shares
entitled to vote.
Each director so elected shall hold office until the next annual
meeting of the shareholders and until a successor has been elected and
qualified.
3.05. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE.
Regular meetings of the Board of Directors may be held at any place
within or outside the State of California that has been designated from time to
time by the board. In the absence of such a designation, regular meetings shall
be held at the principal executive office of the corporation. Special meetings
of the board shall be held at any place within or outside the State of
California that has been designated in the notice of the meeting or, if not
stated in the notice or if there is no notice, at the principal executive office
of the corporation. Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, as long as all directors
participating in the meeting can hear one another, and all such directors
shall be deemed to be present in person at the meeting.
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3.06. ANNUAL MEETING.
Immediately following each annual meeting of shareholders, the Board
of Directors shall hold a regular meeting at the place that the annual meeting
of shareholders was held or at any other place that shall have been designated
by the Board of Directors, for the purpose of organization, any desired election
of officers, and the transaction of other business. Notice of this meeting
shall not be required.
3.07. OTHER REGULAR MEETINGS.
Other regular meetings of the Board of Directors shall be held
without call at such time as shall from time to time be fixed by the Board of
Directors. Such regular meetings may be held without notice.
3.08. SPECIAL MEETINGS.
Special meetings of the Board of Directors for any purpose or
purposes may be called at any time by the Chairman of the Board or the
President, any Vice President, the Secretary, or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. In case the notice is mailed,
it shall be deposited in the United States mail at least four (4) days before
the time of meeting. In case the notice is delivered personally, or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director whom the
person giving the notice has reason to believe will promptly communicate it to
the directors. The notice need not specify the purpose of the meeting, nor need
it specify the place if the meeting is to be held at the principal executive
office of the corporation.
3.09. QUORUM.
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in
paragraph 3.11 of this Article III. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors, subject to the
provisions of Section 310 of the Corporations Code of California (as to approval
of contracts or transactions in which a director
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has a direct or indirect material financial interest), Section 311 of that Code
(as to appointment of committees), and Section 317 (e) of that code (as to
indemnification of directors). A meeting at which a quorum is initially present
may continue to transact business notwithstanding the withdrawal of directors,
if any action taken is approved by at least a majority of the required quorum
for that meeting.
3.10. WAIVER OF NOTICE.
The transactions of any meeting of the Board of Directors, however
called and noticed or wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice if a quorum is present and if
each director; (a) has received notice of the meeting, (b) attends the meeting
without protesting before or at the beginning of the meeting, the lack of notice
to such director, or (c) before or after the meting signs a waiver of notice, a
consent to holding the meeting, or an approval of the minutes of the meeting.
Any such waiver of notice or consent need not specify the purpose of the
meeting. All such waivers, consents, and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
3.11. ADJOURNMENT.
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.12. NOTICE OF ADJOURNMENT.
Notice of the time and place of holding an adjourned meeting need
not be given, unless the meeting is adjourned for more than twenty-four (24)
hours, in which case notice of the time and place shall be given before the time
of the adjourned meeting, in the manner specified in paragraph 3.08 of this
Article III, to the directors who were not present at the time of the
adjournment.
3.13. ACTION WITHOUT MEETING.
Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting, if all members of the board shall
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
Board of Directors. Such written consent or consents shall be filed with the
minutes of the proceedings of the board.
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3.14. FEES AND COMPENSATION OF DIRECTORS.
Directors and members of committees may receive such compensation,
if any, for their services, and such reimbursement of expenses, as may be fixed
or determined by resolution of the Board of Directors. This Paragraph 3.14
shall not be construed to preclude any director from serving the corporation in
any other capacity as an officer, agent, employee, or otherwise, and receiving
compensation for those services.
ARTICLE IV
COMMITTEES
4.01. COMMITTEES OF DIRECTORS.
The Board of Directors may, by resolution adopted by a majority of
the authorized number of directors, designate one or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent member at any meeting of the committee. Any
committee, to the extent provided in the resolution of the board, shall have all
the authority of the board, except with respect to:
(a) The approval of any action which, under the General
Corporation Law of California, also requires shareholders' approval or approval
of the outstanding shares;
(b) The filling of vacancies on the Board of Directors or in any
committee;
(c) The fixing of compensation of the directors for serving on
the board or on any committee;
(d) The amendment or repeal of bylaws of the adoption of new
bylaws;
(e) The amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or repealable;
(f) A distribution to the shareholders of the corporation,
except at a rate or in a periodic amount or within a price range determined by
the Board of Directors;
(g) The appointment of any other committees of the Board of
Directors or the members of these committees.
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4.02. MEETINGS AND ACTION OF COMMITTEES.
Meetings and action of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Paragraph 3.05 (Place of Meetings), Para-graph 3.07 (Regular Meetings),
Paragraph 3.08 (Special Meetings and Notice), Paragraph .309 (Quorum), Paragraph
3.10 (Waiver of Notice), Paragraph 3.11 (Adjournment), Paragraph 3.12 (Notice of
Adjournment), and Paragraph 3.13 (Action Without Meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee and its
members for the Board of Directors and its members, except that the time of
regular meetings of committees may be determined either by resolution of the
Board of Directors or by resolution of the committee; special meetings of
committees may also be called by resolution of the Board of Directors; and
notice of special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the committee. The
Board of Directors may adopt rules for the government of any committee not
inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.01. OFFICERS.
The officers of the corporation shall be a president, a secretary,
and a chief financial officer. The corporation may also have, at the discretion
of the Board of Directors, a chair-man of the board, one or more vice
presidents, one or more assistant secretaries, one or more assistant treasurers,
and such other officers as may be appointed in accordance with the provisions of
Paragraph 5.03 of this Article V. Any number of offices may be held by the same
person.
5.02. ELECTION OF OFFICERS.
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Paragraph 5.03 of this Article V,
shall be chosen by the Board of Directors, and each shall serve at the pleasure
of the board, subject to the rights, if any, of an officer under any contract of
employment.
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5.03. SUBORDINATE OFFICERS.
The Board of Directors may appoint, any may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority and perform
such duties as are provided in the bylaws or as the Board of Directors may from
time to time determine.
5.04. REMOVAL AND RESIGNATION OF OFFICERS.
Subject to the rights, if any, of an officer under any contract of
employment any officer may be removed, either with or without cause, by the
Board of Directors, at any regular or special meeting of the board, or, except
in case of an officer chosen by the Board of Directors, by an officer upon whom
such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.05. VACANCIES IN OFFICES.
A vacancy in any office because of death, resignation, removal,
disqualification, or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.06. CHAIRMAN OF THE BOARD.
The chairman of the board, if such an officer is elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may be from time to time assigned to him by the
Board of Directors or prescribed by the bylaws. If there is no president, the
chairman of the board shall in addition be the chief executive officer of the
corporation and shall have the powers and duties prescribed in Paragraph 5.07 of
this Article V.
5.07. PRESIDENT.
Subject to such powers, if any, as may be given by the bylaws or
Board of Directors to the chairman of the board, if there is such an officer,
the president shall be the general manager and chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision,
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direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence of the
chairman of the board, or, if there is none, at all meetings of the Board of
Directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the Board of Directors or the bylaws.
5.08. VICE PRESIDENTS.
In the absence or disability of the president, the vice presidents,
if any, in order of their rank as fixed by the Board of Directors, or, if not
ranked, a vice president designated by the Board of Directors, shall perform all
the duties of the president, and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board of Directors or the bylaws,
and the president, or the chairman of the board if there is no president.
5.09. SECRETARY.
The secretary shall keep or cause to be kept, at the principal
executive office or such other place as the Board of Directors may direct, a
book of minutes of all meetings and actions of directors, committees of
directors, and shareholders, with the time and place of holding, whether regular
or special, and, if special, how authorized, the notice given, the names of
those present at directors' meetings or committee meetings, the number of shares
present or represented at shareholders' meet-ings, and the proceedings.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation's transfer agent or registrar, as determined
by resolution of the Board of Directors, a record of shareholders, or a
duplicate record of shareholders, showing the names of all shareholders and
their addresses, the number and classes of shares held by each, the number and
date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary or assistant secretary, or if they are absent or
unable to act or refuse to act, any other officer of the corporation, shall
give, or cause to be given, notice of all meetings of the shareholders, of the
Board of Directors, and of committees of the Board of Directors, required by the
laws or by law to be given. The secretary shall keep the seal of the
corporation if one is adopted, in safe custody, and shall have such other powers
and perform such other duties as may be pre-scribed by the Board of Directors or
by the bylaws.
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5.10. CHIEF FINANCIAL OFFICER.
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all monies and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the corporation as may be ordered by the Board of Directors, shall
render to the president and directors, whenever they request it, an account of
all of his transactions as chief financial officer and of the financial
condition of the corporation, and shall have other powers and perform such other
duties as may be prescribed by the Board of Directors or the bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
6.01. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS.
The corporation shall, to the maximum extent permitted by the
California General Corporation Law, have power to indemnify each of its agents
against expenses, judgments, fines, settle-ments and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact any such person is or was an agent of the corporation, and shall have power
to advance to each such agent expenses incurred in defend-ing any such
proceeding to the maximum extent permitted by that law. For purposes of this
Article, an "agent' of the corporation includes any person who is or was a
director, officer, employee, or other agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or was a director, officer, employee, or agent of a corporation
which was a predecessor corporation of the corporation or of another enterprise
at the request of such predecessor corporation.
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ARTICLE VII
RECORDS AND REPORTS
7.01. MAINTENANCE AND INSPECTION OF RECORD OF SHAREHOLDERS.
The corporation shall keep at its principal executive office, or at
the office of its transfer agent or registrar, if either be appointed and as
determined by resolution of the Board of Directors, a record if its
shareholders, giving the names and addresses of all shareholders and the number
and class of shares held by each shareholder.
A shareholder or shareholders of the corporation holding at least
five percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (i) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours on five days' prior
written demand on the corporation, and (ii) obtain from the transfer agent of
the corporation, on written demand and on the tender of such transfer agent's
usual charges for such list, a list of the shareholders' names and addresses,
who are entitled to vote for the election of directors, and their shareholdings,
as of the most recent record date for which that list has been compiled or as of
a date specified by the shareholder after the date of demand. This list shall
be made available to any such shareholder or shareholders by the transfer agent
on or before the later of five (5) days after the demand is received or the date
specified in the demand as the date as of which the list is to be compiled. The
record of shareholders shall also be open to inspection on the written demand of
any shareholder or holder of a voting trust certifi-cate, at any time during
usual business hours, for purpose reasonably related to the holder's interests
as a shareholder or as the holder of a voting trust certificate. Any inspection
and copying under this Paragraph 7.01 may be made in person or by an agent or
attorney of the shareholder or holder of a voting trust certificate making the
demand.
7.02. MAINTENANCE AND INSPECTION OF BYLAWS.
The corporation shall keep at its principal executive office, or if
its principal executive office is not in the State of California, at its
principal business office in this state, the original or copy of the bylaws as
amended to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in this state, the Secretary shall, upon the written
request of any shareholder, furnish to that shareholder a copy of the bylaws as
amended to date.
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7.03. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS.
The accounting books and records and minutes of proceedings of the
shareholders and the Board of Directors and any committee or committees of the
Board of Directors shall be kept at such place or places designated by the Board
of Directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written demand
of any shareholder or holder of a voting trust certificate, at any reasonable
time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate. The inspection may be made in person or by an agent or attorney,
and shall include the right to copy and make extracts. These rights of
inspection shall extend to the records of each subsidiary corporation of the
corporation.
7.04. INSPECTION BY DIRECTORS.
Every director shall have the absolute right at any reasonable time
to inspect all books, records, and documents of every kind and the physical
properties of the corporation and each of its subsidiary corporations. This
inspection by a director may be made in person or by an agent or attorney and
the right of inspection includes the right to copy and make extracts of
documents.
7.05. ANNUAL REPORT TO SHAREHOLDERS.
The annual report to shareholders referred to in Section 1501 of the
California General Corporation Law is expressly dispensed with, but nothing
herein shall be interpreted as prohibiting the Board of Directors from issuing
annual or other periodic reports to the shareholders of the corporation as they
consider appropriate.
7.06. FINANCIAL STATEMENTS.
A copy of any annual financial statement and any income statement of
the corporation for each quarterly period of each fiscal year, and any
accompanying balance sheet of the corpora-tion as of the end of each such
period, that has been prepared by the corporation shall be kept on file in the
principal executive office of the corporation for twelve (12) months and each
such statement shall be exhibited at all reasonable times to any shareholder
demanding an examination of any such statement or a copy shall be mailed to any
such shareholder.
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If a shareholder or shareholders holding at least five percent (5%)
of the outstanding shares of any class of stock of the corporation make a
written request to the corporation for an income statement of the corporation
for the three-month, six-month or nine-month period of the current fiscal year
ended more than thirty (30) days before the date of the request, and a balance
sheet of the corporation as of the end of that period, the chief financial
officer shall cause that statement to be prepared, if not already prepared, and
shall deliver personally or mail that statement or statements to the person
making the request withing thirty (30) days after the receipt of the request.
If the corporation has not sent the shareholders its annual report for the last
fiscal year, this report shall likewise be delivered or mailed to the
shareholder or shareholders within thirty (30) days after the request.
The corporation shall also, on the written request of any
shareholder, mail to the shareholder a copy of the last annual, semi-annual, or
quarterly income statement which it has prepared, and a balance sheet as of the
end of that period.
The quarterly income statements and balance sheets referred to in
this paragraph shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
ARTICLE VIII
GENERAL CORPORATE MATTERS
8.01. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING.
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allot-ment of any rights or
entitled to exercise any rights in respect of any other lawful action (other
than action by shareholders by written consent without a meeting), the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days before any such action, and in that case only
shareholders of record on the date so fixed are entitled to receive the
dividend, distribution or allotment of rights or to exercise the rights, as the
case may be, not-withstanding any transfer of any shares on the books of the
corporation after the record date so fixed, except as otherwise provided in the
California General Corporation Law.
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If the Board of Directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
8.02. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS.
All checks, drafts, or other orders for payment of money, notes, or
other evidences of indebtedness, issued in the name of or payable to the
corporation, shall be signed or endorsed by such person or persons and in such
manner as, from time to time, shall be determined by resolution of the Board of
Directors.
8.03. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.
The Board of Directors, except as otherwise provided in these
bylaws, may authorize any officer or officers, agent or agents, to enter into
any contract or execute any instrument in the name of and on behalf of the
corporation, and this authority may be general or confined to specific
instances; and, unless so authorized or ratified by the Board of Directors or
within the agency power of an officer, no officer, agent, or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any amount.
8.04. CERTIFICATES FOR SHARES.
A certificate or certificates for shares of the capital stock of the
corporation shall be issued to each shareholder when any of these shares are
fully paid, and the Board of Directors may authorize the issuance of
certificates or shares as partly paid provided that these certificates shall
state the amount of the consideration to be paid for them and the amount paid.
All certificates shall be signed in the name of the corporation by the chairman
of the board or vice chairman of the board or the president or vice president
and by the chief financial officer or an assistant treasurer or the secretary or
any assistant secretary, certifying the number of shares and the class or series
of shares owed by the shareholder. None of the signatures on the certificate
may be facsimile. In case any officer, transfer agent, or registrar who has
signed a certificate shall have ceased to be that officer, transfer agent, or
registrar before that certificate is issued, it may be issued by the corporation
with the same effect as if that person were an officer, transfer agent, or
registrar at the date of issue.
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8.05. LOST CERTIFICATES.
Except as provided in this Paragraph 8.05, no new certificates for
shares shall be issued to replace an old certificate unless the latter is
surrendered to the corporation and canceled at the same time. The Board of
Directors may, in case any share certificate or certificate for any other
security is lost, stolen, or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the board may re-quire, including
provision for indemnification of the corporation secured by a bond or other
adequate security sufficient to pro-tect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.
8.06. REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
The chairman of the board, the president, or any vice president, or
any other person authorized by resolution of the Board of Directors or by any of
the foregoing designated officers, is authorized to vote on behalf of the
corporation any and all shares of any other corporation or corporations. The
authority granted to these officers to vote or represent on behalf of the
corporation any and all shares held by the corpora-tion in any other corporation
or corporations may be exercised by any of these officers in person or by any
person authorized to do so by a proxy duly executed by these officers.
8.07. CONSTRUCTION AND DEFINITIONS.
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the California General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person' includes both a corporation and a
natural person.
8.08. REIMBURSEMENT.
If all or part of the salary or other compensation, paid to an
employee/officer/director, etc., of the corporation is finally determined not to
be allowable as federal or state income tax deduction, the
(employee/officer/director/etc.) shall repay to the corporation the amount
disallowed. The Board of Directors shall enforce repayment of each such amount
disallowed.
22
<PAGE>
ARTICLE IX
AMENDMENTS
9.01. AMENDMENT BY SHAREHOLDER.
New bylaws may be adopted or these bylaws may be amended or repealed
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote, except as otherwise provided by law, these bylaws, or
the Articles of Incorporation provided, however, that if the Articles of
Incorporation of the corporation set forth the number of autho-rized directors
of the corporation, the authorized number of directors may be changed only be an
amendment of the Articles of Incorporation.
23
<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
ADOPTION BY INCORPORATOR OR FIRST DIRECTOR
The undersigned person appointed in the Articles of Incorporation to
act as the Incorporator or First Director of the above-named corporation hereby
adopts the same as the bylaws of said corporation.
Executed this day of , 1991.
--------- ----------------------
------------------------------
William C Pultz
Incorporator
THIS IS TO CERTIFY:
That I am the duly elected, qualified and acting Secretary of the
above-named corporation; that the foregoing bylaws were adopted as the bylaws of
said corporation on the date set forth above by the person appointed in the
Articles of Incorporation to act as the Incorporator or First Director of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal this 11 day of December, 1991.
/s/ MARCIA N. BERG
------------------------------
Secretary
CERTIFICATE BY SECRETARY OF ADOPTION BY SHAREHOLDER'S VOTE.
THIS IS TO CERTIFY
That I the duly elected, qualified and acting Secretary of the
above-named corporation and that the above and foregoing code of bylaws was
submitted to the shareholders at their first meeting held on the date set forth
in the bylaws and recorded in the minutes thereof, was ratified by the vote of
shareholders entitled to exercise the majority of the voting power of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 11 day of
December, 1991.
/s/ MARCIA N. BERG
------------------------------
24
<PAGE>
EXHIBIT "C"
UNANIMOUS CONSENT
BERG SYSTEMS INTERNATIONAL, INC.
The undersigned, being each of the directors of Berg Systems International,
Inc. (the "CORPORATION"), waiving all notices, hereby unanimously agree and
consent to the following resolutions effective as this 26th day of April, 1996:
WHEREAS, the SBS Technologies, Inc., formerly known as SBS Engineering,
Inc. ("BORROWER") and NationsBank of Texas, N.A., a national banking
association, as lender ("LENDER") having entered into a certain Credit Agreement
(the "ORIGINAL CREDIT AGREEMENT") effective as of April 28, 1995, by which
Lender agreed to make certain loans not to exceed $11,000,000, to be used, in
part, to fund working capital of the Borrower and its subsidiaries, including
the Corporation (the "LOANS"), which Original Credit Agreement was previously
amended pursuant to (i) that certain First Amendment to Credit Agreement dated
as of May 25, 1995, executed by and between the Borrower and Lender, and (ii)
that certain Second Amendment to Credit Agreement and Related Loan Documents
dated as of November 1, 1995, executed by and between the Borrower and Lender;
and
WHEREAS, each of the Borrower, Corporation, and Lender wish to further
amend the Original Credit Agreement and the documents executed in connection
therewith and to amend and restate such documents in their entirety, including
but not limited to the execution of a certain Amended and Restated Credit
Agreement dated as of April 26, 1996 by and between Borrower and Lender (the
"CREDIT AGREEMENT") evidencing a reduction in principal balance of the Loans to
$9,250,000; and
WHEREAS, pursuant to the terms of the Credit Agreement, the Borrower and
its subsidiaries, including the Corporation, are required to execute, deliver
and perform certain guaranties and other documents pledging their assets to
secure the Loans; and
WHEREAS, Borrower has offered, as consideration for the Corporation's
pledge of assets and guaranty in connection with the Loan, to continue to employ
all persons working for the Corporation and pay all salaries and employee
benefits in connection therewith, fund any new equipment purchases by the
Corporation, and fund any growth in inventory or receivables of the Corporation
(collectively, the "CONSIDERATION");
RESOLVED, that the Directors, after due consideration, find that these
transactions will enhance the financial resources of the Corporation and are in
the best interest of the Corporation.
RESOLVED, that the Corporation accepts the officer by the Borrower of the
Consideration.
<PAGE>
RESOLVED, that the President, any Vice President, or the Treasurer of the
Corporation be and each are authorized and directed to enter into one or more
agreements in connection with the borrowing of monies by Borrower from the
Lender in accordance with the Credit Agreement as it may be amended from time to
time, upon such terms and conditions as said officer shall deem necessary and
appropriate, such approval to be conclusively presumed by the execution by such
officer of documents containing such terms and conditions; and
RESOLVED, that the President, any Vice President, and the Treasurer of the
Corporation be and each are further authorized and directed to sign and deliver
all contracts, agreements, credit agreements, promissory notes, guaranties,
pledges, assignments, mortgages, deeds of trust, security agreements, financing
statements, certificates and other documents and instruments in writing
necessary or appropriate to carry out and consummate the transactions
contemplated by the foregoing resolution.
RESOLVED, that the actions of each of the President, any Vice President, and the
Treasurer of the Corporation to carry out and consummate the transactions
contemplated by the Credit Agreement are hereby fully ratified and confirmed.
DIRECTORS
/s/ CHRISTOPHER J. AMENSON
------------------------------
Christopher J. Amenson
/s/ MARCIA N. BERG
------------------------------
Marcia N. Berg
/s/ PETER BERG
------------------------------
Peter Berg
/s/ ANDREW C. CRUCE
------------------------------
Andrew C. Cruce
/s/ DEREK HEAD
------------------------------
Derek Head
/s/ JOHN REESER
------------------------------
John Reeser
/s/ SCOTT A. ALEXANDER
------------------------------
Scott A. Alexander
<PAGE>
[logo] STATE OF CALIFORNIA
SECRETARY OF STATE'S OFFICE
CERTIFICATE OF FILING AND SUSPENSION
I, BILL JONES, SECRETARY OF STATE OF THE STATE OF CALIFORNIA, HEREBY CERTIFY:
THAT THE CORPORATION NAMED BELOW BECAME INCORPORATED UNDER THE LAWS OF THE STATE
OF CALIFORNIA BY FILING ITS ARTICLES OF INCORPORATION IN THIS OFFICE.
THAT ON JANUARY 3, 1995, PURSUANT TO THE PROVISIONS OF THE CALIFORNIA BANK AND
CORPORATION TAX LAW, MORE PARTICULARLY SECTION 23302 OF THE REVENUE AND TAXATION
CODE, THE FRANCHISE TAX BOARD TRANSMITTED TO THIS OFFICE THE NAME OF THE
DOMESTIC CORPORATION NAMED BELOW WHOSE CORPORATE POWERS, RIGHTS AND PRIVILEGES
WERE SUSPENDED UNDER SAID LAW.
BERG SYSTEMS INTERNATIONAL, INC. 1572729
- ----------------------------------------------------------------------
NAME CORPORATION NUMBER
FURTHER, THAT THE CORPORATE POWERS, RIGHTS AND PRIVILEGES OF SAID CORPORATION
WERE SUSPENDED ON THE AFORESAID DATE, AS IN SAID SECTION 23302 PROVIDED, AND
REMAIN SUSPENDED, REINSTATEMENT NEVER HAVING BEEN EFFECTED.
[seal] IN WITNESS WHEREOF, I EXECUTE
THIS CERTIFICATE AND AFFIX THE GREAT
SEAL OF THE STATE OF CALIFORNIA THIS
26th DAY OF April, 1996
/s/ BILL JONES
SECRETARY OF STATE
<PAGE>
STATE OF CALIFORNIA [seal]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FRANCHISE TAX BOARD
P.O. BOX 942857
SACRAMENTO, CA 94257-0540
In Reply Refer To :357:AG:LGS
Date :04-29-96
CALIFORNIA LENDERS'
AND ATTORNEYS' SERVICES
1000 G STREET, SUITE 225
SACRAMENTO, CA 95814
Corporation Name : BERG SYSTEMS INTERNATIONAL, INC.
Corporation Number : 1572729
/ / 1. The above corporation is in good standing with this agency.
/ / 2. Information on record with this agency indicates the above corporation
is not qualified to transact business in California.
/ / 3. The above corporation was incorporated or qualified on .
------------
/X/ 4. The above corporation has an unpaid liability of $ 167,0445,15 for
income year ended 12/93.
/ / 5. Our records do not show that the above corporation filed franchise tax
returns for the income years ended .
---------------
/X/ 6. The above corporation was SUSPENDED effective 01-03-96.
/ / 7. The above corporation's current address on record with this agency is:
------------------------------
------------------------------
------------------------------
/ / 8. We have no current information on the above corporation.
Comments:
---------------------------------------------------------------
- ------------------------------------------------------------------------
- ------------------------------------------------------------------------
[illegible]
------------------------------
REPRESENTATIVE
TELEPHONE ASSISTANCE
- --------------------------------------------------------------------------------
Our regular toll-free telephone service is available from 7:00 a.m. until
8:00 p.m. Monday through Friday from the first working day in January through
April 15. The best times to call are between 7:00 and 10:00 in the morning and
between 6:00 and 8:00 in the evening. Service is also available from 8:00 a.m.
through 5:00 p.m. on the two Saturdays prior to April 15. After April 15,
service is available Monday through Friday, between 8:00 a.m. and 5:00 p.m.
From within the United States, call . . . . . . . . . . . 1-800-852-5711
From outside the United States, call (not toll-free). . . 1-916-845-6500
For hearing impaired with TDD, call . . . . . . . . . . . 1-800-822-6268
<PAGE>
GREENSPRING COMPUTERS, INC.
CERTIFICATE OF SECRETARY REGARDING
ARTICLES, BYLAWS, UNANIMOUS CONSENT OF SHAREHOLDERS
UNANIMOUS CONSENT OF DIRECTORS
I, James E. Dixon, hereby certify that I am the duly elected,
qualified, and acting Secretary of GreenSpring Computers, Inc., a California
corporation (the "COMPANY"), and that I am authorized to execute and deliver
this Certificate, and further, I certify as follows:
1. Attached hereto as EXHIBIT "A" are true, correct and complete copies
of the Articles of Incorporation, as may be amended, of the Company,
in effect as of the date hereof.
2. Attached hereto as EXHIBIT "B" are true, correct and complete copies
of the Bylaws, as may be amended, of the Company, in effect as of the
date hereof.
3. Attached hereto as EXHIBIT "C" is a true, correct and complete copy of
the resolutions duly adopted by unanimous consent of the Board of
Directors of the Company effective April 26, 1996, authorizing the
execution, delivery, and performance of collateral documents and
guaranties in connection with a loan from NationsBank of Texas, N.A.
to SBS Technologies, Inc., and authorizing related actions, and such
resolutions have not been amended or revoked, and are now in full
force and effect.
Effective April 26, 1996.
/s/ JAMES E. DIXON
------------------------------
James E. Dixon
Secretary
[SEAL]
<PAGE>
EXHIBIT "A"
[ARTICLES OF INCORPORATION]
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
Leonard A. Lehmann and Henry Lehmann certify that:
1. They are the President and the Secretary respectively of VME
SPECIALISTS, INC., a California Corporation.
2. The articles of incorporation of this corporation are amended and
restated to read as follows:
"ARTICLE I
The name of this corporation is GREENSPRING COMPUTERS, INC.
ARTICLE II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be
incorporated by the California Corporations Code.
ARTICLE III
DIRECTORS LIABILITY AND INDEMNIFICATION
(a) The liability of the directors of the corporation for monetary
damages shall be eliminated to the fullest extent permissible under
California law.
(b) The corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the California Corporations Code) for
breach of duty to the corporation and its shareholders through bylaw
provisions, agreements with the agents, vote of shareholders or
disinterested directors or otherwise, in excess of the indemnification
otherwise permitted by Section 317 of the California Corporations Code,
subject to the limits on such excess indemnification set forth in Section
204 of the Corporations Code.
(c) Any repeal or modification of this Article shall only be
prospective and shall not affect the rights under this Article in effect at
the time of the alleged occurrence of any act or omission to act giving
rise to liability or indemnification.
1
<PAGE>
ARTICLE IV
This corporation is authorized to issue only one class of shares of
stock; and the total number of shares is ten million (10,000,000)
shares.''
3. The foregoing amendment and restatement of articles of incorporation
has been duly approved by the board of directors.
4. The foregoing amendment and restatement of articles of incorporation
has been duly approved by the required vote of shareholders in accordance with
Section 902 of the Corporations Code. The total number of outstanding shares of
the corporation is one million (1,000,000) shares. The number of shares voting
in favor of the amendment equalled or exceeded the voted required. The
percentage vote required was more than fifty percent (50%).
I further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of my own knowledge.
Dated: April 11, 1989 /s/ LEONARD A. LEHMANN
---------------------- ------------------------------
Leonard A. Lehmann, President
/s/ HENRY LEHMANN
------------------------------
Henry Lehmann, Secretary
2
<PAGE>
EXHIBIT "B"
[BYLAWS]
<PAGE>
BY-LAWS OF
VME SPECIALISTS, INC.
(A California Corporation)
ARTICLE I
SHAREHOLDERS' MEETINGS
SECTION 1. TIME. An annual meeting for the election of directors and for
the transaction of any other proper business and any special meeting shall be
held on the date and at the time as the Board of Directors shall from time to
time fix.
Time of Meeting: o'clock .M. Date of Meeting: The
day of
SECTION 2. PLACE. Annual meetings and special meetings shall be held at
such place, within or without the State of California, as the Directors may,
from time to time, fix. Whenever the Directors shall fail to fix such place,
the meetings shall be held at the principal executive office of the corporation.
SECTION 3. CALL. Annual meetings may be called by the Directors, by the
Chairman of the Board, if any, Vice Chairman of the Board, if any, the
President, if any, the Secretary, or by any officer instructed by the Directors
to call the meeting. Special meetings may be called in like manner and by the
holders of shares entitled to cast not less than ten percent of the votes at the
meeting being called.
SECTION 4. NOTICE. Written notice stating the place, day and hour of each
meeting, and, in the case of a special meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall be given not less than ten days
(or not less than any such other minimum period of days as may be prescribed by
the General Corporation Law) or more than sixty days (or more than any such
maximum period of days as may be prescribed by the General Corporation Law)
before the date of the meeting, by mail, personally, or by other means of
written communication, charges prepaid by or at the direction of the Directors,
the President, if any, the Secretary or the officer or persons calling the
meeting, addressed to each shareholder at his address appearing on the books of
the corporation or given by him to the corporation for the purpose of notice,
or, if no such address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at least once
in a newspaper of general
-1- EXHIBIT "B"
<PAGE>
circulation in the county in which the said principal executive office is
located. Such notice shall be deemed to be delivered when deposited in the
United States mail with first class postage therein prepaid, or sent by other
means of written communication addressed to the shareholder at his address as it
appears on the stock transfer books of the corporation. The notice of any
meeting at which directors are to be elected shall include the names of nominees
intended at the time of notice to be presented by management for election. At
an annual meeting of shareholders, any matter relating to the affairs of the
corporation, whether or not stated in the notice of the meeting, may be brought
up for action except matters which the General Corporation Law requires to be
stated in the notice of the meeting. The notice of any annual or special
meeting shall also include, or be accompanied by, any additional statements,
information, or documents prescribed by the General Corporation Law. When a
meeting is adjourned to another time or place, notice of the adjourned meeting
need not be given if the time and place thereof are announced at the meeting at
which the adjournment is taken; provided that, if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder. At the adjourned meeting, the
corporation may transact any business which might have been transacted at the
original meeting.
SECTION 5. CONSENT. The transaction of any meeting, however called and
noticed, and wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum is present and if, either before
or after the meeting, each of the shareholders or his proxy signs a written
waiver of notice or a consent to the holding of the meeting or an approval of
the minutes thereof. All such waivers, consents and approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
Attendance of a person at a meeting constitutes a waiver of notice of such
meeting, except when the person objects, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting shall not constitute a waiver
of any right to object to the consideration of matters required by the General
Corporation Law to be included in the notice if such objection is expressly made
at the meeting. Except as otherwise provided in subdivision (f) of Section 601
of the General Corporation Law, neither the business to be transacted at nor the
purpose of any regular or special meeting need be specified in any written
waiver of notice.
SECTION 6. CONDUCT OF MEETING. Meetings of the shareholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting -- the Chairman of the Board, if any, the Vice-Chairman of
the Board, if any, the President, if any, a Vice President, or, if none of the
foregoing is in office and present and acting, by a chairman to be chosen by the
shareholders. The Secretary of the corporation, or in his absence, an Assistant
Secretary, shall act as secretary of every meeting, but,
-2-
<PAGE>
if neither the Secretary nor an Assistant Secretary is present, the Chairman of
the meeting shall appoint a secretary of the meeting.
SECTION 7. PROXY REPRESENTATION. Every shareholder may authorize another
person or persons to act as his proxy at a meeting or by written action. No
proxy shall be valid after the expiration of eleven months from the date of its
execution unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the person executing it prior to the vote or
written action pursuant thereto, except as otherwise provided by the General
Corporation Law. As used herein, a "proxy" shall be deemed to mean a written
authorization signed by a shareholder or a shareholder's attorney in fact giving
another person or persons power to vote or consent in writing with respect to
the shares of such shareholder, and "Signed" as used herein shall be deemed to
mean the placing of such shareholders's name on the proxy, whether by manual
signature, typewriting, telegraphic transmission or otherwise by such
shareholder or such shareholder's attorney in fact. Where applicable, the form
of any proxy shall comply with the provisions of Section 604 of the General
Corporation Law.
SECTION 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the
Board of Directors may appoint inspectors of election to act at the meeting and
any adjournment thereof. If inspectors of election are not so appointed, or, if
any persons so appointed fail to appear or refuse to act, the Chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election, or persons to replace
any of those who so fail or refuse, at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one
or more shareholders or proxies, the majority of shares represented shall
determine whether one or three inspectors are to be appointed.
The inspectors of election shall determine the number of shares outstanding
and the voting power of each, the shares represented at the meeting, the
existence of a quorum, the authenticity, validity, and effect of proxies,
receive votes, ballots, if any, or consents, hear and determine all challenges
and questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result, and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders. If there are three inspectors of election,
the decision, act, or certificate of a majority shall be effective in all
respects as the decision, act, or certificate of all.
SECTION 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
subsidiary shall not be entitled to vote on any matter. A subsidiary for these
purposes is defined as a corporation, the shares of which possessing more than
25% of the total combined voting power of all classes of shares entitled to
vote, are owned directly or indirectly through one or more subsidiaries.
-3-
<PAGE>
SECTION 10. QUORUM; VOTE; WRITTEN CONSENT. The holders of a majority of
the voting shares shall constitute a quorum at a meeting of shareholders for the
transaction of any business. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum. In the absence
of a quorum, any meeting of shareholders may be adjourned from time to time by
the vote of a majority of the shares represented thereat, but no other business
may be transacted except as hereinbefore provided.
In the election of directors, a plurality of the votes cast shall elect.
No shareholder shall be entitled to exercise the right of cumulative voting at a
meeting for the election of directors unless the candidate's name or the
candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
such candidates in nomination.
Except as otherwise provided by the General Corporation Law, the Articles
of Incorporation or these By-Laws, any action required or permitted to be taken
at a meeting at which a quorum is present shall be authorized by the affirmative
vote of a majority of the shares represented at the meeting.
Except in the election of directors by written consent in lieu of a
meeting, and except as may otherwise be provided by the General Corporation Law,
the Articles of Incorporation or these By-Laws, any action which may be taken at
any annual or special meeting may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, shall be
signed by holders of shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Directors may not
be elected by written consent except by unanimous written consent of all shares
entitled to vote for the election of directors. Notice of any shareholder
approval pursuant to Section 310, 317, 1201 or 2007 without a meeting by less
than unanimous written consent shall be given at least ten days before the
consummation of the action authorized by such approval, and prompt notice shall
be given of the taking of any other corporate action approved by shareholders
without a meeting by less than unanimous written consent to those shareholders
entitled to vote who have not consented in writing.
SECTION 11. BALLOT. Elections of directors at a meeting need not be by
ballot unless a shareholder demands election by ballot at the election and
before the voting begins. In all other matters, voting need not be by ballot.
SECTION 12. SHAREHOLDERS' AGREEMENTS. Notwithstanding the above
provisions in the event this corporation elects to become a close corporation,
an agreement between two or more shareholders thereof,
-4-
<PAGE>
if in writing and signed by the parties thereof, may provide that in exercising
any voting rights the shares held by them shall be voted as provided therein or
in Section 706, and may otherwise modify these provisions as to shareholders'
meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. FUNCTIONS. The business and affairs of the corporation shall
be managed and all corporate powers shall be exercised by or under the direction
of its Board of Directors. The Board of Directors may delegate the management
of the day-to-day operation of the business of the corporation to a management
company or other person, provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board of Directors. The Board of Directors shall
have authority to fix the compensation of directors for services in any lawful
capacity.
Each director shall exercise such powers and otherwise perform such duties
in good faith, in the manner such director believes to be in the best interests
of the corporation, and with care, including reasonable inquiry, using ordinary
prudence, as a person in a like position would use under similar circumstances.
(Section 309).
SECTION 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the provisions
of Section 1, in the event that this corporation shall elect to become a close
corporation as defined in Section 158, its shareholders may enter into a
Shareholders' Agreement as provided in Section 300 (b). Said Agreement may
provide for the exercise of corporate powers and the management of the business
and affairs of this corporation by the shareholders, provided however such
agreement shall, to the extent and so long as the discretion or the powers of
the Board in its management of corporate affairs is controlled by such
agreement, impose upon each shareholder who is a party thereof, liability for
managerial acts performed or omitted by such person pursuant thereto otherwise
imposed upon Directors as provided in Section 300 (d).
SECTION 3. QUALIFICATIONS AND NUMBER. A director need not be a
shareholder of the corporation, a citizen of the United States, or a resident of
the State of California. The authorized number of directors constituting the
Board of Directors shall be not less than three (3) nor more than five (5) with
the exact number of directors to be fixed by approval of the Board. Thereafter,
the authorized number of directors constituting the Board shall be at least
three provided that, whenever the corporation shall have only two shareholders,
the number of directors may be at least two, and, whenever the corporation shall
have only one shareholder, the number of directors may be at least one. Subject
to the foregoing provision the number of directors may be changed from time to
time by an amendment of these By-Laws adopted by the shareholders. Any such
amendment reducing the number of directors to fewer than five cannot be adopted
if the votes cast against its adoption at a meeting or the shares not consenting
in writing in the case of action by written
-5-
<PAGE>
consent are equal to more than sixteen and two-thirds percent of the outstanding
shares. No decrease in the authorized number of directors shall have the effect
of shortening the term of any incumbent director.
SECTION 4. ELECTION AND TERM. The initial Board of Directors shall consist
of the persons elected at the meeting of the incorporator, all of whom shall
hold office until the first annual meeting of shareholders and until their
successors have been elected and qualified, or until their earlier resignation
or removal from office. Thereafter, directors who are elected to replace any or
all of the members of the initial Board of Directors or who are elected at an
annual meeting of shareholders, and directors who are elected in the interim to
fill vacancies, shall hold office until the next annual meeting of shareholders
and until their successors have been elected and qualified, or until their
earlier resignation, removal from office, or death. In the interim between
annual meetings of shareholders or of special meetings of shareholders called
for the election of directors, any vacancies in the Board of Directors,
including vacancies resulting from an increase in the authorized number of
directors which have not been filled by the shareholders, including any other
vacancies which the General Corporation Law authorizes directors to fill, and
including vacancies resulting from the removal of directors which are not filled
at the meeting of shareholders at which any such removal has been effected, if
the Articles of Incorporation or a By-Law adopted by the shareholders so
provides, may be filled by the vote of a majority of the directors then in
office or of the sole remaining director, although less than a quorum exists.
Any director may resign effective upon giving written notice to the Chairman of
the Board, if any, the President, the Secretary or the Board of Directors,
unless the notice specifies a later time for the effectiveness of such
resignation. If the resignation is effective at a future time, a successor may
be elected to the office when the resignation becomes effective.
The shareholders may elect a director at any time to fill any vacancy
which the directors are entitled to fill, but which they have not filled. Any
such election by written consent shall require the consent of a majority of the
shares.
SECTION 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
The corporation may indemnify any Director, Officer, agent or employee
as to those liabilities and on those terms and conditions as are specified in
Section 317. In any event, the corporation shall have the right to purchase and
maintain insurance on behalf of any such persons whether nor not the corporation
would have the power to indemnify such person against the liability insured
against.
SECTION 6. MEETINGS.
TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
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PLACE. Meetings may be held at any place, within or without the State of
California, which has been designated in any notice of the meeting, or, if not
stated in said notice, or, if there is no notice given, at the place designated
by resolution of the Board of Directors.
CALL. Meetings may be called by the Chairman of the Board, if any and
acting, by the Vice Chairman of the Board, if any, by the President, if any, by
any Vice President or Secretary, or by any two directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular
meetings for which the time and place have been fixed by the Board of Directors.
Special meetings shall be held upon at least four days' notice by mail or upon
at least forty-eight hours' notice delivered personally or by telephone or
telegraph. Notice of a meeting need not be given to any director who signs a
waiver of notice, whether before or after the meeting, or who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. A notice or waiver of notice need not specify the
purpose of any regular or special meeting of the Board of Directors.
SECTION 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION.
In the event only one director is required by the By-Laws or Articles of
Incorporation, then any reference herein to notices, waivers, consents, meetings
or other actions by a majority or quorum of the directors shall be deemed to
refer to such notice, waiver, etc., by such sole director, who shall have all
the rights and duties and shall be entitled to exercise all of the powers and
shall assume all the responsibilities otherwise herein described as given to a
Board of Directors.
SECTION 8. QUORUM AND ACTION. A majority of the authorized number of
directors shall constitute a quorum except when a vacancy or vacancies prevents
such majority, whereupon a majority of the directors in office shall constitute
a quorum, provided such majority shall constitute at least either one-third of
the authorized number of directors or at least two directors, whichever is
larger, or unless the authorized number of directors is only one. A majority of
the directors present, whether or not a quorum is present, may adjourn any
meeting to another time and place. If the meeting is adjourned for more than
twenty-four hours, notice of any adjournment to another time or place shall be
given prior to the time of the adjourned meeting to the directors, if any, who
were not present at the time of the adjournment. Except as the Articles of
Incorporation, these By-Laws and the General Corporation Law may otherwise
provide, the act or decision done or made by a majority of the directors present
at a meeting duly held at which a quorum is present shall be the act of the
Board of Directors. Members of the Board of Directors may participate in a
meeting through use of conference telephone or similar communications equipment,
so long as all members participating in such meeting can hear one another,
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and participation by such use shall be deemed to constitute presence in person
at any such meeting.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, provided that any action
which may be taken is approved by at least a majority of the required quorum for
such meeting.
SECTION 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, the Vice Chairman of the Board, if any and if present and
acting, shall preside at all meetings. Otherwise, the President, if any and
present and acting, or any director chosen by the Board, shall preside.
SECTION 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any
individual director may be removed from office without cause by approval of the
holders of at least a majority of the shares provided, that unless the entire
Board is removed, an individual director shall not be removed when the votes
cast against such removal, or not consenting in writing to such removal, would
be sufficient to elect such director if voted cumulatively at an election of
directors at which the same total number of votes were cast, or, if such action
is taken by written consent, in lieu of a meeting, all shares entitled to vote
were voted, and the entire number of directors authorized at the time of the
director's most recent election were then being elected. If any or all
directors are so removed, new directors may be elected at the same meeting or by
such written consent. The Board of Directors may declare vacant the office of
any director who has been declared of unsound mind by an order of court or
convicted of a felony.
SECTION 11. COMMITTEES. The Board of Directors, by resolution adopted by a
majority of the authorized number of directors, may designate one ore more
committees, each consisting of two or more directors to serve at the pleasure of
the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any absent
member at any meeting of such committee. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have all the
authority of the Board of Directors except such authority as may not be
delegated by the provisions of the General Corporation Law.
SECTION 12. INFORMAL ACTION. The transactions of any meeting of the Board
of Directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting, each of the directors not
present signs a written waiver of notice, a consent to holding the meeting, or
an approval of the minutes thereof. All such waivers, consents, or approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting.
SECTION 13. WRITTEN ACTION. Any action required or permitted to be taken
may be taken without a meeting if all of the members of
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the Board of Directors shall individually or collectively consent in writing to
such action. Any such written consent or consents shall be filed with the
minutes of the proceedings of the Board. Such action by written consent shall
have the same force and effect as a unanimous vote of such directors.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a Chairman of
the Board or a President or both, a Secretary and a Chief Financial Officer.
The corporation may also have, at the discretion of the Board of Directors, one
or more Vice Presidents, one or more Assistant Secretaries and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article. One person may hold two or more offices.
SECTION 2. ELECTION. The officers of the corporation, except such officers
as may be appointed in accordance with the provisions of Section 3 or Section 5
of this Article shall be chosen annually by the Board of Directors, and each
shall hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
SECTION 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint
such other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as are provided in the By-Laws or as the Board of Directors may from time to
time determine.
SECTION 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with
or without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board, or, except in case of an officer chosen
by the Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the Board of
Directors, or to the President, or to the Secretary of the corporation. Any
such resignation shall take effect at the date of the receipt of such notice or
at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
SECTION 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-Laws for regular appointments to such office.
SECTION 6. CHAIRMAN OF BOARD. The Chairman of the Board, if there shall be
such an officer, shall, if present, preside at all meetings of the Board of
Directors, and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by the By-
Laws.
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SECTION 7. PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex officio a member of all the standing
committees, including the Executive Committee, if any, and shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or the By-Laws.
SECTION 8. VICE PRESIDENT. In the absence or disability of the
President, the Vice Presidents, in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and be subject to, all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the By-Laws.
SECTION 9. SECRETARY. The Secretary shall keep, or cause to be kept, a
book of minutes at the principal office or such other place as the Board of
Directors may order, of all meetings of Directors and Shareholders, with the
time and place of holding, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those present at Directors'
meetings, the number of shares present or represented at Shareholders' meetings
and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office or
at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date of
certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings
of the shareholders and of the Board of Directors required by the By-Laws or by
law to be given, and he shall keep the seal of the corporation in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or by the By-Laws.
SECTION 10. CHIEF FINANCIAL OFFICER. This officer shall keep and maintain, or
cause to be kept and maintained in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, earnings (or surplus) and
shares. The books of account shall at all reasonable times be
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open to inspection by any director.
This officer shall deposit all monies and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the Board of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all his transactions and of
the financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or the
By-Laws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
SECTION 1. CERTIFICATES FOR SHARES. Each certificate for shares of the
corporation shall set forth therein the name of the record holder of the shares
represented thereby, the number of shares and the class or series of shares
owned by said holder, the par value, if any, of the shares represented thereby,
and such other statements, as applicable, prescribed by Sections 416-419,
inclusive, and other relevant Sections of the General Corporation Law of the
State of California (the "General Corporation Law") and such other statements,
as applicable, which may be prescribed by the Corporate Securities Law of the
State of California and any other applicable provision of the law. Each such
certificate issued shall be signed in the name of the corporation by the
Chairman of the Board of Directors, if any, or the Vice Chairman of the Board of
Directors, if any, the President, if any, or a Vice President, if any, and by
the Chief Financial Officer or an Assistant Treasurer or the Secretary or an
Assistant Secretary. Any or all of the signatures on a certificate for shares
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate for
shares shall have ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
In the event that the corporation shall issue the whole or any part of its
shares as partly paid and subject to call for the remainder of the consideration
to be paid therefor, any such certificate for shares shall set forth thereon the
statements prescribed by Section 409 of the General Corporation Law.
SECTION 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation may
issue a new certificate for shares or for any other security in the place of any
other certificate theretofore issued by it, which is alleged to have been lost,
stolen or destroyed. As a condition to such issuance, the corporation may
require any such owner of the allegedly lost, stolen or destroyed certificate or
any such owner's legal representative to give the corporation a bond, or other
adequate security, sufficient to indemnify it against any claim that may be made
against it, including any expense or liability, on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
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SECTION 3. SHARE TRANSFERS. Upon compliance with any provisions of the
General Corporation Law and/or the Corporate Securities Law of 1968 which may
restrict the transferability of shares, transfers of shares of the corporation
shall be made only on the record of shareholders of the corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation or with a
transfer agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes, if
any, due thereon.
SECTION 4. RECORD DATE FOR SHAREHOLDERS. In order that the corporation may
determine the shareholders entitled to notice of any meeting or to vote or be
entitled to receive payment of any dividend or other distribution or allotment
of any rights or entitled to exercise any rights in respect of any other lawful
action, the Board of Directors may fix, in advance a record date, which shall
not be more than sixty days or fewer than ten days prior to the date of such
meeting or more than sixty days prior to any other action.
If the Board of Directors shall not have fixed a record date as aforesaid,
the record date for determining shareholders entitled to notice of or to vote at
a meeting of shareholders shall be at the close of business on the business day
next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held; the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors has been taken, shall be the day on which the first
written consent is given; and the record date for determining shareholders for
any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto, or the sixtieth day
prior to the day of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting,
but the Board of Directors shall fix a new record date if the meeting is
adjourned for more than forty-five days from the date set for the original
meeting.
Except as may be otherwise provided by the General Corporation Law,
shareholders on the record date shall be entitled to notice and to vote or to
receive any dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date.
SECTION 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of other
corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President or
any other person authorized by
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resolution of the Board of Directors.
SECTION 6. MEANING OF CERTAIN TERMS. As used in these By-Laws in respect
of the right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote threat or to assent or consent or dissent in writing in lieu
of a meeting, as the case may be, the term "share" or "shares" or "shareholder"
or "shareholders" refers to an outstanding share or shares and to a holder or
holders of record or outstanding shares when the corporation is authorized to
issue only one class of shares, and said reference is also intended to include
any outstanding share or shares and any holder or holders of record of
outstanding shares of any class upon which or upon whom the Articles of
Incorporation confer such rights where there are two or more classes or series
of shares or upon which or upon whom the General Corporation Law confers such
rights notwithstanding that the Articles of Incorporation may provide for more
than one class or series of shares, one or more of which are limited or denied
such rights thereunder.
SECTION 7. CLOSE CORPORATION CERTIFICATES. All certificates representing
shares of this corporation, in the event it shall elect to become a close
corporation, shall contain the legend required by Section 418 (c).
ARTICLE V
EFFECT OF SHAREHOLDERS' AGREEMENT-CLOSE CORPORATION
Any Shareholders' Agreement authorized by Section 300 (b) shall only be
effective to modify the terms of these By-Laws if this corporation elects to
become a close corporation with appropriate filing of or amendment to its
Articles as required by Section 202 and shall terminate when this corporation
ceases to be a close corporation. Such an agreement cannot waive or alter
Sections 158 (defining close corporations), 202 (requirements of Articles of
Incorporation), 500 and 501 relative to distributions, 111 (merger), 1201 (e)
(reorganization) or Chapters 15 (Records and Reports), 16 (Rights of
Inspection), 18 (Involuntary Dissolution) or 22 (Crimes and Penalties). Any
other provisions of the Code or these By-Laws may be altered or waived thereby,
but to the extent they are not so altered or waived, these By-Laws shall be
applicable.
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS-HOW EXECUTED
The Board of Directors, except as in the By-Laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances. Unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or agreement, or
to pledge its credit, or to render it liable for any purposes or any amount,
except as provided in Section 313 of the Corporations Code.
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ARTICLE VII
CONTROL OVER BY-LAWS
After the initial By-Laws of the corporation shall have been adopted by the
incorporator or incorporators of the corporation, the By-Laws may be amended or
repealed or new By-Laws may be adopted by the shareholders entitled to exercise
a majority of the voting power or by the Board of Directors; provided, however,
that the Board of Directors shall have no control over any By-Law which fixes or
changes the authorized number of directors of the corporation; provided,
further, than any control over the By-Laws herein vested in the Board of
Directors shall be subject to the authority of the aforesaid shareholders to
amend or repeal the By-Laws or to adopt new By-Laws; and provided further that
any By-Law amendment or new By-Law which changes the minimum number of directors
to fewer than five shall require authorization by the greater proportion of
voting power of the shareholders as hereinbefore set forth.
ARTICLE VIII
BOOKS AND RECORDS - STATUTORY AGENT
SECTION 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep at
its principal executive office in the State of California, or, if its principal
executive office is not in the State of California, the original or a copy of
the By-Laws as amended to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California, and, if
the corporation has no principal business office in the State of California, it
shall upon request of any shareholder furnish a copy of the By-Laws as amended
to date.
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees, if any, of the Board of Directors. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, a record of its shareholders, giving the names and addresses
of all shareholders and the number and class of shares held by each. Such
minutes shall be in written form. Such other books and records shall be kept
either in written from or in any other form capable of being converted into
written form.
SECTION 2. RECORD OF PAYMENTS. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 3. ANNUAL REPORT. Whenever the corporation shall have fewer than one
hundred shareholders, the Board of Directors shall not be required to cause to
be sent to the shareholders of the corporation the annual report prescribed by
Section 1501 of the General Corporation Law unless it shall determine that a
useful purpose would be served by causing the same to be sent or unless the
Department of Corporations pursuant to the provisions of the Corporate
Securities Law of 1968, shall direct the sending of the same.
SECTION 4. AGENT FOR SERVICE. The name of the agent for service of process
within the State of California is
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CERTIFICATE OF ADOPTION OF BY-LAWS
ADOPTION BY INCORPORATOR(S) OR FIRST DIRECTOR(S).
The undersigned person(s) appointed in the Articles of Incorporation to act
as the Incorporator(s) or First Directors(s) of the above-named corporation
hereby adopt the same as the By-Laws of said corporation.
Executed this 23 day of May, 1986.
/s/ LEONARD A. LEHMANN
---------------------------------
Name Leonard A. Lehmann
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of the above-
named corporation; that the foregoing By-Laws were adopted as the By-Laws of
said corporation on the date set forth above by the person(s) appointed in the
Articles of Incorporation to act as the Incorporator(s) or First Director(s) of
said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate
seal this 23 day of May, 1986.
/s/ LEONARD A. LEHMANN
---------------------------------
Secretary Leonard A. Lehmann
(SEAL)
CERTIFICATE BY SECRETARY OF ADOPTION BY SHAREHOLDERS' VOTE.
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of the above-
named corporation and that the above and foregoing Code of By-Laws was submitted
to the shareholders at their first meeting held on the date set forth in the By-
Laws and recorded in the minutes thereof, was ratified by the vote of
shareholders entitled to exercise the majority of the voting power of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand this 23 day of May, 1986.
/s/ LEONARD A. LEHMANN
---------------------------------
Secretary Leonard A. Lehmann
<PAGE>
EXHIBIT "C"
UNANIMOUS CONSENT
GREENSPRING COMPUTERS, INC.
The undersigned, being each of the directors of GreenSpring Computers, Inc.
(the "CORPORATION"), waiving all notices, hereby unanimously agree and consent
to the following resolutions effective as this 26th day of April, 1996:
WHEREAS, the SBS Technologies, Inc., formerly known as SBS Engineering,
Inc., as borrower ("BORROWER"), and NationsBank of Texas, N.A., a national
banking association, as lender ("LENDER") have entered into a certain Credit
Agreement (the "ORIGINAL CREDIT AGREEMENT") effective as of April 28, 1995, by
which Lender agreed to make certain loans not to exceed $11,000,000, to be used,
in part, to fund working capital of the Borrower and its subsidiaries, including
the Corporation (the "LOANS"), which Original Credit Agreement was previously
amended pursuant to (i) that certain First Amendment to Credit Agreement dated
as of May 25, 1995, executed by and between the Borrower and Lender, and (ii)
that certain Second Amendment to Credit Agreement and Related Loan Documents
dated as of November 1, 1995, executed by and between the Borrower and Lender;
and
WHEREAS, each of the Borrower, Corporation, and Lender wish to further
amend the Original Credit Agreement and the documents executed in connection
therewith and to amend and restate such documents in their entirety, including
but not limited to the execution of a certain Amended and Restated Credit
Agreement dated as of April 26, 1996 by and between Borrower and Lender (the
"CREDIT AGREEMENT") evidencing a reduction in principal balance of the Loans to
$9,250,000; and
WHEREAS, pursuant to the terms of the Credit Agreement, the Borrower and
its subsidiaries, including the Corporation, are required to execute, deliver
and perform certain guaranties and other documents pledging their assets to
secure the Loans; and
WHEREAS, Borrower has offered, as consideration for the Corporation's
pledge of assets and guaranty in connection with the Loan, to continue to employ
all persons working for the Corporation and pay all salaries and employee
benefits in connection therewith, fund any new equipment purchases by the
Corporation, and fund any growth in inventory or receivables of the Corporation
(collectively, the "CONSIDERATION");
RESOLVED, that the Directors, after due consideration, find that these
transactions will enhance the financial resources of the Corporation and are in
the best interest of the Corporation.
RESOLVED, that the Corporation accepts the offer by the Borrower of the
Consideration.
<PAGE>
RESOLVED, that the President, any Vice President, or the Treasurer of the
Corporation be and each are authorized and directed to enter into one or more
agreements in connection with the borrowing of monies by Borrower from the
Lender in accordance with the Credit Agreement as it may be amended from time to
time, upon such terms and conditions as said officer shall deem necessary and
appropriate, such approval to be conclusively presumed by the execution by such
officer of documents containing such terms and conditions; and
RESOLVED, that the President, any Vice President, and the Treasurer of the
Corporation be and each are further authorized and directed to sign and deliver
all contracts, agreements, credit agreements, promissory notes, guaranties,
pledges, assignments, mortgages, deeds of trust, security agreements, financing
statements, certificates and other documents and instruments in writing
necessary or appropriate to carry out and consummate the transactions
contemplated by the foregoing resolution.
RESOLVED, that the actions of each of the President, any Vice President, and the
Treasurer of the Corporation to carry out and consummate the transactions
contemplated by the Credit Agreement are hereby fully ratified and confirmed.
DIRECTORS
/s/ SCOTT A. ALEXANDER
------------------------------
Scott A. Alexander
/s/ CHRISTOPER A. AMENSON
------------------------------
Christopher A. Amenson
/s/ ANDREW C. CRUCE
------------------------------
Andrew C. Cruce
------------------------------
Henry Lehmann
------------------------------
John Reeser
/s/ X. KIM RUBIN
------------------------------
X. Kim Rubin
/s/ JOSEPH ZABKAR
------------------------------
Joseph Zabkar
<PAGE>
RESOLVED, that the President, any Vice President, or the Treasurer of the
Corporation be and each are authorized and directed to enter into one or more
agreements in connection with the borrowing of monies by Borrower from the
Lender in accordance with the Credit Agreement as it may be amended from time to
time, upon such terms and conditions as said officer shall deem necessary and
appropriate, such approval to be conclusively presumed by the execution by such
officer of documents containing such terms and conditions; and
RESOLVED, that the President, any Vice President, and the Treasurer of the
Corporation be and each are further authorized and directed to sign and deliver
all contracts, agreements, credit agreements, promissory notes, guaranties,
pledges, assignments, mortgages, deeds of trust, security agreements, financing
statements, certificates and other documents and instruments in writing
necessary or appropriate to carry out and consummate the transactions
contemplated by the foregoing resolution.
RESOLVED, that the actions of each of the President, any Vice President, and the
Treasurer of the Corporation to carry out and consummate the transactions
contemplated by the Credit Agreement are hereby fully ratified and confirmed.
DIRECTORS
/s/ SCOTT A. ALEXANDER
------------------------------
Scott A. Alexander
/s/ CHRISTOPER A. AMENSON
------------------------------
Christopher A. Amenson
/s/ ANDREW C. CRUCE
------------------------------
Andrew C. Cruce
------------------------------
Henry Lehmann
/s/ JOHN REESER
------------------------------
John Reeser
/s/ X. KIM RUBIN
------------------------------
X. Kim Rubin
/s/ JOSEPH ZABKAR
------------------------------
Joseph Zabkar
<PAGE>
RESOLVED, that the President, any Vice President, or the Treasurer of the
Corporation be and each are authorized and directed to enter into one or more
agreements in connection with the borrowing of monies by Borrower from the
Lender in accordance with the Credit Agreement as it may be amended from time to
time, upon such terms and conditions as said officer shall deem necessary and
appropriate, such approval to be conclusively presumed by the execution by such
officer of documents containing such terms and conditions; and
RESOLVED, that the President, any Vice President, and the Treasurer of the
Corporation be and each are further authorized and directed to sign and deliver
all contracts, agreements, credit agreements, promissory notes, guaranties,
pledges, assignments, mortgages, deeds of trust, security agreements, financing
statements, certificates and other documents and instruments in writing
necessary or appropriate to carry out and consummate the transactions
contemplated by the foregoing resolution.
RESOLVED, that the actions of each of the President, any Vice President, and the
Treasurer of the Corporation to carry out and consummate the transactions
contemplated by the Credit Agreement are hereby fully ratified and confirmed.
DIRECTORS
/s/ SCOTT A. ALEXANDER
------------------------------
Scott A. Alexander
/s/ CHRISTOPER A. AMENSON
------------------------------
Christopher A. Amenson
/s/ ANDREW C. CRUCE
------------------------------
Andrew C. Cruce
/s/ HENRY LEHMAN 5/16/96
------------------------------
Henry Lehmann
------------------------------
John Reeser
/s/ X. KIM RUBIN
------------------------------
X. Kim Rubin
/s/ JOSEPH ZABKAR
------------------------------
Joseph Zabkar
<PAGE>
[logo]
STATE OF CALIFORNIA
SECRETARY OF STATE
CERTIFICATE OF STATUS
DOMESTIC CORPORATION
I, BILL JONES, SECRETARY OF STATE OF THE STATE OF CALIFORNIA, HEREBY CERTIFY:
THAT ON THE 1ST DAY OF APRIL, 1986,
GREENSPRING COMPUTERS, INC.
- --------------------------------------------------------------------------------
BECAME INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA BY FILING ITS
ARTICLES OF INCORPORATION IN THIS OFFICE; AND
THAT NO RECORD EXISTS IN THIS OFFICE OF A CERTIFICATE OF DISSOLUTION OF
SAID CORPORATION NOR OF A COURT ORDER DECLARING DISSOLUTION THEREOF, NOR OF A
MERGER OR CONSOLIDATION WHICH TERMINATED ITS EXISTENCE; AND
THAT SAID CORPORATION'S CORPORATE POWERS, RIGHTS AND PRIVILEGES ARE NOT
SUSPENDED ON THE RECORDS OF THIS OFFICE; AND
THAT ACCORDING TO THE RECORDS OF THIS OFFICE, THE SAID CORPORATION IS
AUTHORIZED TO EXERCISE ALL ITS CORPORATE POWERS, RIGHTS AND PRIVILEGES AND IS IN
GOOD LEGAL STANDING IN THE STATE OF CALIFORNIA; AND
THAT NO INFORMATION IS AVAILABLE IN THIS OFFICE ON THE FINANCIAL CONDITION,
BUSINESS ACTIVITY OR PRACTICES OF THIS CORPORATION.
[seal] IN WITNESS WHEREOF, I EXECUTE THIS
CERTIFICATE AND AFFIX THE GREAT SEAL OF
THE STATE OF CALIFORNIA THIS DAY OF
APRIL 26, 1996
------------------------------------
/s/ BILL JONES
SECRETARY OF STATE
<PAGE>
STATE OF CALIFORNIA [SEAL]
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FRANCHISE TAX BOARD
P.O. BOX 942857
SACRAMENTO, CA 94257-0540
In Reply Refer To :357:AG:LGS
Date :04-29-96
CALIFORNIA LENDERS'
AND ATTORNEYS' SERVICES
1000 G STREET, SUITE 225
SACRAMENTO, CA 95814
Corporation Name : GREENSPRING COMPUTERS, INC.
Corporation Number : 1526978
/X/ 1. The above corporation is in good standing with this agency.
/ / 2. Information on record with this agency indicates the above corporation
is not qualified to transact business in California.
/ / 3. The above corporation was incorporated or qualified on .
-------------
/ / 4. The above corporation has an unpaid liability of $ for
income year ended -----------
--------------
/ / 5. Our records do not show that the above corporation filed franchise tax
returns for the income years ended .
---------------
/ / 6. The above corporation was effective .
---------------- ------------
/ / 7. The above corporation's current address on record with this agency is:
------------------------------------
------------------------------------
------------------------------------
/ / 8. We have no current information on the above corporation.
Comments
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/s/ S. Jemmez
------------------------------
REPRESENTATIVE
TELEPHONE ASSISTANCE
- --------------------------------------------------------------------------------
Our regular toll-free telephone service is available from 7:00 a.m. until
8:00p.m. Monday through Friday from the first working day in January through
April 15. The best times to call are between 7:00 and 10:00 in the morning and
between 6:00 and 8:00 in the evening. Service is also available from 8:00 a.m.
through 5:00 p.m. on the two Saturdays prior to April 15. After April 15,
service is available Monday through Friday, between 8:00 a.m. and 5:00 p.m.
From within the United States, call . . . . . . . . . . . 1-800-852-5711
From outside the United States, call (not toll-free). . . 1-916-845-6500
For hearing impaired with TDD, call . . . . . . . . . . . 1-800-822-6268
<PAGE>
TENANT:SBS TECHNOLOGIES, INC.
LEASE
TABLE OF CONTENTS
ARTICLE TITLE PAGE
- ------- ------ -----
1 Premises and Term 1
2 Rent 1
3 Landlord's Work - Tenant's Work 2
4 Streets 4
5 Utility Services 4
6 Assignment - Change of Ownership 4
7 Tenant's Additional Agreements 7
8 Use of Premises 9
9 Indemnity and Public Liability Insurance 9
10 Fire Insurance and Casualty 10
11 Repair 12
12 Fixtures & Alterations 14
13 Remedies 14
14 Bankruptcy 16
15 Surrender of Premises 17
16 Eminent Domain 17
17 Real Property Taxes 18
18 Common Area, Parking Facilities 19
19 Miscellaneous 21
<PAGE>
BUSINESS PARK LEASE
THIS LEASE, made on this 5th day of March, 1996, between BOHANNON TRUST
PARTNERSHIP II, a California corporation, herein referred to as "Landlord", and
SBS TECHNOLOGIES, INC., a New Mexico corporation, herein referred to as
"Tenant",
WITNESSETH:
ARTICLE I - PREMISES AND TERM
SECTION 1.1. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord the demised premises (as described in EXHIBIT "A" and located
substantially as shown on EXHIBIT "B" attached hereto) upon and subject to the
terms and provisions of this Lease for a demised term of four (4) years (plus
any partial period prior to the commencement of the first full calendar month),
commencing June 1, 1996 and ending May 31, 2000.
ARTICLE 2 - RENT
SECTION 2.1. Tenant covenants and agrees to pay to Landlord without set-
off, recoupment, deduction or demand of any nature whatsoever, base rent for
each year during the demised term in the amount of: for the first (1st) year of
the demised term the amount of One Hundred Sixty Six Thousand One Hundred Ninety
Eight and 80/100 Dollars ($166,198.80) per annum, payable in twelve (12) equal
monthly installments of Thirteen Thousand Eight Hundred Forty Nine and 90/100
Dollars ($13,849.90); for the second (2nd) year of the demised term the amount
of One Hundred Seventy Five Thousand Nine Hundred Seventy Five and 20/100
Dollars ($175,975.20) per annum, payable in twelve (12) equal monthly
installments of Thousand Fourteen Thousand Six Hundred Sixty Four and 60/100
Dollars ($14,664.60); for the third year of the demised term the amount of One
Hundred Eighty Five Thousand Seven Hundred Fifty One and 60/100 Dollars
($185,751.60) per annum, payable in twelve (12) equal monthly installments of
Fifteen Thousand Four Hundred Seventy Nine and 30/100 ($15,479.30); and for the
fourth year of the demised term the amount of One Hundred Ninety Five Thousand
Five Hundred Twenty Eight Dollars ($195,528.00) per annum, payable in twelve
(12) equal monthly installments of Sixteen Thousand Two Hundred Ninety Four
Dollars ($16,294.00). Base rent shall be paid monthly in advance on the first
(1st) day of each calendar month.
SECTION 2.2. For the purpose of this Lease, a year shall be twelve (12)
calendar months, commencing with the first day of the first full calendar month
of the demised term and the succeeding anniversaries thereof. For any period
prior to the commencement of the first year or subsequent to the end of the last
year of the demised term, rent shall be prorated on the basis of the rental rate
then payable.
SECTION 2.3. All sums payable and all statements deliverable to Landlord
by Tenant under this Lease shall be paid and delivered at 60 Hillsdale Mall, San
Mateo, California 94403-3497, or at such other place a s Landlord may from time
to time direct
- 1 -
<PAGE>
by notice to Tenant and all such sums shall be paid in lawful money of the
United States.
SECTION 2.4. Upon execution of this Lease, Tenant shall pay to the
Landlord the following:
(A) Thirteen Thousand Eighty Hundred Forty Nine and 90/100 Dollars
($13,849.90) which shall be applied by Landlord to the first base rent to become
due and payable under this Lease, and
(B) Sixteen Thousand Two Hundred Ninety Four Dollars ($16,294.00) which
shall be held as a Security Deposit pursuant to the terms of SECTION 19.9.
SECTION 2.5. In addition to base rent under SECTION 2.1., all other
payments to be made under this Lease by Tenant to Landlord shall be deemed to be
and shall become additional rent hereunder, whether or not the same to be
designated as such, and shall be included in the term "rent" wherever used in
this Lease; and, unless another time shall be expressly provided for the payment
thereof, all rent and additional rent shall be due and payable together with the
next succeeding installment of base rent; and Landlord shall have the same
remedies for failure to pay the same as for a nonpayment of base rent.
SECTION 2.6. Any amount due from Tenant to Landlord that is not paid
within five (5) days of when due shall bear interest at the highest rate then
permitted to be charged on late payments under leases under California law;
provided, however, the payment of any such interest shall not excuse or cure the
default upon which such interest accrued. Tenant acknowledges and agrees that
payment of such interest on late payments is reasonable compensation to Landlord
for the additional costs incurred by Landlord caused by such late payment,
including, but not limited to, collection and administration expenses and the
loss of the use of the money that was late in payment.
ARTICLE 3 - LANDLORD'S WORK - TENANT'S WORK
SECTION 3.1. Landlord shall provide certain leasehold improvements
("Tenant Improvements") to be made to the demised premises. The plans and
specifications for the Tenant Improvements (the "Plans) shall be prepared under
the direction of Stevens Design (the "Architect") and once approved by Landlord
and Tenant shall be made a part hereof as Exhibit C. Landlord's and Tenant's
approval of the Plans shall not be unreasonably withheld. Landlord shall
contribute toward the cost of the Tenant Improvements the lesser of (i) the
actual cost of the Tenant Improvements or (ii) One Hundred Fourteen Thousand
Fifty Eight Dollars ($114,058.00). To the extent the cost of the Tenant
Improvements exceeds $114,058.00, Tenant shall reimburse Landlord such excess
within fifteen (15) days following the later to occur of (i) substantial
completion of the Tenant Improvements (such that the demised premises are ready
for occupancy by Tenant) or (ii) invoicing of such excess costs by Landlord to
Tenant.
- 2 -
<PAGE>
Immediately following approval of the Plans, Landlord shall apply for all
requisite building permits and approvals for construction of the Tenant
Improvements in accordance with the Plans. Promptly following issuance of
building permits, Landlord shall cause the Contractor to commence construction
of the Tenant Improvements and diligently prosecute the same to completion on or
before commencement of the demised term in a good and workmanlike manner in
accordance with the Plans.
Tenant shall have the right to make changes in the Plans from time to time
(up to a total aggregate cost for the tenant improvements not exceeding
$114,058.00 without additional assessment hereunder) provided such changes are
approved by Landlord, such approval not to be unreasonably withheld or delayed.
To the extent any such change(s) increases the net cost to Landlord of providing
the Tenant Improvements by an amount exceeding $20,000.00 over and above the
$114,058.00 allowance, Tenant shall pay to Landlord the estimated cost thereof
prior to the implementation of the change(s). A reconciliation of actual costs
versus estimated costs will be made when the work is complete and appropriate
adjustments made with one party paying to the other any amounts owing. For
changes which would increase the net cost of the Tenant Improvements by less
than $20,000.00 over and above the $114,058.00 allowance, Tenant shall pay to
Landlord the aggregate net increase in cost for such change orders within five
(5) days after substantial completion of the Tenant Improvements. Any such
change(s) may be made only in a writing approved and signed by Landlord. As
used in this SECTION 3.1., the cost of providing the Tenant Improvements shall
include all soft costs, including without limitation, architect's fees, fees for
permits, consulting engineer fees, contractor fees, inspection fees, fees for
testing services and fees for processing and completing changes to the Plans, in
addition to actual hard costs of construction.
Except for the work described in this SECTION 3.1., Tenant, upon
substantial completion (such that the demised premises are ready for occupancy
by Tenant) of such work as certified by the Architect, shall accept the demised
premises in an "as is" condition subject to the punch list items described in
the following sentence. Tenant shall, within thirty (30) days of certification
by Architect that the Tenant Improvements are substantially complete (such that
the demised premises are ready for occupancy by Tenant), notify Landlord and
Contractor of any items of work that are defective or incomplete. Landlord
shall thereafter diligently pursue on Tenant's behalf the correction or
completion of said items.
Landlord shall also deliver the demised premises with (i) all building
mechanical, electrical and plumbing systems (including the heating, ventilating
and air conditioning system and lighting) and (ii) the ceiling, roof and
structural elements of the building, in good working order and repair.
SECTION 3.2. Any additional work to be performed other than that provided
for in SECTION 3.1. and designated as Landlord's work (i.e., Tenant Improvements
up to the cost of $114,058.00) shall be performed at the sole cost of Tenant in
accordance with detailed plans and specifications therefor which must be
approved, in writing, by Landlord or Landlord's Architect before work is
commenced. Tenant shall furnish Landlord with a set of "as built" plans after
any such work is completed.
- 3 -
<PAGE>
ARTICLE 4 - STREETS
SECTION 4.1. Tenant agrees to require employees, and to direct customers
and other persons visiting Tenant, to park in the parking area provided in the
Common Area (ARTICLE 18) as designated from time to time by Landlord (and
reasonably located with respect to the demised premises) and to allow Landlord
to post the streets for no parking.
ARTICLE 5 - UTILITY SERVICES
SECTION 5.1. Landlord has at its own cost and expense secured the
installation of water, gas, sanitary sewers and electrical services to the
demised premises and made all necessary connections thereof to the building.
Tenant shall pay all meter or service charges made by public utilities companies
and shall pay for the water, gas and/or electricity used in the demised
premises, and sewer use fees and charges whether ad valorum or not and any so
called "sewer connection charges" based on increased wastewater discharge from
the demised premises. Tenant shall maintain such connections of utilities to
the building to the extent they serve the demised premises exclusively.
SECTION 5.2. Landlord shall not be liable to Tenant for the failure of any
utility services.
ARTICLE 6 - ASSIGNMENT - CHANGE OF OWNERSHIP
SECTION 6.1.
A. Except as otherwise provided herein, Tenant shall not, by operation of
law or otherwise, transfer, assign, sublet, enter into license or concession
agreements, change ownership, mortgage or hypothecate this Lease or the Tenant's
interest in and to the demised premises without first procuring the written
consent of Landlord. Any attempted transfer, assignment, subletting, license or
concession agreement, change of ownership, mortgage or hypothecation without
Landlord's written consent shall be void and confer no rights upon any third
person. Landlord's consent to a proposed assignment or sublease shall not be
unreasonably withheld provided that the proposed assignee or sublessee shall
have: (i) a demonstrated financial capacity to meet all of Tenant's lease
obligations: (ii) been active in its current business for a minimum of three (3)
years immediately prior to the assignment or sublease; and (iii) a good
reputation in the business community; provided further that Tenant shall give
Landlord not less than sixty (60) days' notice prior to the effective date of
any such assignment or sublease, and Landlord shall have the option to terminate
this Lease with respect to the space to be assigned or subleased by notice to
Tenant given within thirty (30) days of Landlord's receipt of Tenant's notice.
Nothing herein contained shall relieve Tenant and any Guarantor from its
covenants and obligations for the demised term. Tenant agrees to reimburse
Landlord for Landlord's reasonable outside
- 4 -
<PAGE>
attorneys' fees incurred in conjunction with the processing and documentation of
any such requested transfer, assignment, subletting, licensing or concession
agreement, change of ownership, mortgage or hypothecation of this Lease or
Tenant's interest in and to the demised premises. If Landlord consents to any
assignment or sublease pursuant to this Article, Tenant shall pay Landlord, as
additional rent: fifty percent (50%) of any sublease premium derived from that
sublease "Sublease Premium" shall mean all rent, additional rent, and/or other
monies, property, and other consideration of every kind whatsoever received by
Tenant from the subtenant or assignee, for, or by reason of, the sublease or
assignment (including all amounts received by tenant for, or attributable to,
and included property), LESS:
(a) commissions and outside attorneys' fees actually paid by Tenant to
procure the sublease or assignment amortized over the term of the sublease or
assignment to an independent third party licensed real estate broker, commencing
with the date on which the sublease or assignment term commences:
(b) the actual cost of leasehold improvements undertaken by Tenant
(subject to landlord's prior written consent) solely to prepare the subleased or
assigned space for the subtenant or assignee, amortized over the period of the
term of the sublease or assignment commencing with the date on which the
sublease or assigned term commences:
(c) the unamortized cost of included Property, if any, determined on a
straight-line basis over the period of the term of the sublease or assignment as
certified to landlord by tenant's independent certified public accountant (at
Tenant's expense):
(d) fixed rent and additional rent allocable to the space covered by such
sublease or assignment (as reasonably determined by Landlord, taking into
account the useable area of the premises demised under the sublease or
assignment).
"Included Property" means all property of Tenant transferred to the
subtenant or assignee as part of the transaction (including, but not limited to,
fixtures, other leasehold improvements, furniture, equipment and furnishings).
tenant shall pay the Sublease Premium to Landlord as and when Tenant
receives payment from such subtenant or assignee.
- 5 -
<PAGE>
Notwithstanding any other provisions of this section, the Tenant may sublet
or assign this Lease and all of its rights hereunder to an affiliate, parent or
subsidiary corporation, or pursuant to any statutory merger or consolidation to
any corporation into which Tenant may be merged or with which Tenant may be
consolidated or which may purchase substantially all of Tenant's assets,
provided that, in the case of statutory merger, consolidation or sale of assets,
the surviving assignee or sublessee corporation shall, immediately following
such assignment or subletting and such merger, or consolidation or purchase of
assets, as the case may be have a net worth determined in accordance with
generally accepted accounting principles equal to or in excess of the net worth
at the date of this Lease of the original Tenant under this Lease, and that such
assignee or sublessee corporation shall, pursuant to such merger or
consolidation acquire all or substantially all of the assets of the Tenant prior
to such merger or consolidation.
B. Each transfer, assignment, subletting, license, concession agreement,
mortgage and hypothecation to which there has been consent shall be by an
instrument in writing in form satisfactory to Landlord, and shall be executed by
the transferor, assignor, sublessor, licensor, concessionaire, hypothecator or
mortgagor and the transferee, assignee, sublessee, licensee, concessionaire or
mortgagee in each instance, as the case may be; and each transferee, assignee,
sublessee, licensee, concessionaire or mortgagee shall agree in writing for the
benefit of Landlord herein to assume, to be bound by, and to perform the terms,
covenants and conditions of this Lease to be done, kept and performed by Tenant,
including the payment of all amounts due or to become due under this Lease
directly to Landlord. One (1) executed copy of such written instrument shall be
delivered to Landlord. Failure to obtain in writing Landlord's consent or
failure to comply with the provisions of this Article shall operate to prevent
any such transfer, assignment, subletting, license, concession agreement,
mortgage, or hypothecation from becoming effective.
- 6 -
<PAGE>
D. Landlord's rights to assign this Lease are and shall remain
unqualified. Upon any sale of the demised premises and provided the purchaser
assumes all obligations under this Lease, Landlord shall thereupon be entirely
released of all obligations of Landlord hereunder and shall not be subject to
any liability resulting from any act or omission or event occurring after such
sale.
E. The consent of Landlord to any transfer, assignment, sublease, license
or concession agreement, change in ownership, mortgage or hypothecation of this
Lease is not and shall not operate as a consent to any future or further
transfer, assignment, sublease, license or concession agreement, change in
ownership, mortgage or hypothecation, and Landlord specifically reserves the
right to refuse to grant any such consents except as otherwise provided in this
SECTION 6.1.
ARTICLE 7 - TENANT'S ADDITIONAL AGREEMENTS
SECTION 7.1. Tenant agrees at all times during the demised term to: (A)
Keep the demised premises in a neat and clean condition. (B) Promptly remove
all waste, garbage or refuse from the demised premises. (C) Promptly comply
with all laws and ordinances and all rules and regulations of duly constituted
governmental authorities affecting the demised premises, and the cleanliness,
safety, use and occupation thereof, but this clause (C) shall not be construed
to require Tenant to comply with any such laws, ordinances, rules or regulations
which require structural changes in the demised premises unless the same are
made necessary by act or work performed by Tenant or the nature of Tenant's
business. (D) Prevent the escape from the demised premises of all fumes, odors
and other substances which are offensive or may constitute a nuisance or
interfere with other tenants.
SECTION 7.2. Tenant agrees that it will not at any time during the demised
term without first obtaining the Landlord's written consent: (A) Conduct or
permit any fire, bankruptcy or auction sale in the demised premises. (B) Place
on the exterior walls (including both interior and exterior surfaces of windows
and doors), the roof of any buildings or any other part of the demised premises,
any sign, symbol, advertisement, neon light, other light or other object or
thing visible to public view outside of the demised premises. Tenant shall have
the right, at its sole cost and expense, subject to approval by Landlord and the
City of Menlo Park, to install a monument sign in front of the demised premises.
(C) Change the exterior color of the demised premises or of the building in
which the same are situate, or any part thereof, or the color, size, location or
composition of any sign, symbol or advertisement that may have been approved by
Landlord. (D) Park, operate, load or unload, any truck or other delivery
vehicle on any place other than the loading area designated for Tenant's use.
(E) Use the plumbing facilities for any purpose other than that for which they
were constructed or dispose of any foreign substance therein. (F) Install any
exterior lighting or plumbing facilities, shades or awnings, amplifiers or
similar devices, or use any advertising medium which may be heard or experienced
outside the demised premises, such as loudspeakers, phonographs, or radio
broadcasts. (G) Deface any portion of the
- 7 -
<PAGE>
building or improvements in which the demised premises are located, normal usage
excepted. In the event any portion of the building is defaced or damaged,
Tenant agrees to repair such damage. (H) Permit any rubbish or garbage to
accumulate on the demised premises, or any part thereof, unless confined in
metal containers so located as not to be visible to members of the public. (I)
Install, maintain or operate any sign except as approved in writing by Landlord.
(J) Store materials, supplies, equipment, finished products, raw materials or
articles of any nature outside of the demised premises. (K) Use the demised
premises for retail, commercial or residential purposes. (L) Use, store,
generate or dispose of any "hazardous material", "hazardous substance" or
"hazardous waste" as those terms are defined from time to time under applicable
laws and regulations.
SECTION 7.3. Tenant agrees that it will not at any time during the demised
term: (A) Perform any act or carry on any practice which may injure the demised
premises. (B) Burn anything in or about the demised premises. (C) Keep or
display any merchandise or other object on or otherwise obstruct any sidewalks,
walkways or areaways. (D) Use or permit the use of any portion of the demised
premises as living quarters, sleeping apartments, lodging rooms, or for any
unlawful purpose. (E) Use or permit the demised premises to be used for any
purpose which is or shall not then be allowed under the Zoning Ordinance of the
City of Menlo Park, California, in that area.
SECTION 7.4. Tenant shall, at its expense, comply with all applicable
laws, regulations, rules and orders, regardless of when they become or became
effective, including, without limitation, those relating to health, safety,
noise, environmental protection, waste disposal, and water and air quality, and
furnish satisfactory evidence of such compliance upon request of Landlord.
Should any discharge, leakage, spillage, emission or pollution of any type
occur upon or from the demised premises due to Tenant's use and occupancy
thereof, Tenant, at its expense, shall be obligated to remedy the same to the
satisfaction of Landlord and any governmental body having jurisdiction
thereover. Tenant agrees to indemnify, hold harmless, and defend Landlord
against all liability, cost, and expense (including without limitation any
fines, penalties, judgments, litigation costs, and attorneys' fees) incurred by
Landlord as a result of Tenant's breach of this section, or as a result of any
such discharge, leakage, spillage, emission, or pollution, regardless of whether
such liability, cost, or expense arises during or after the demised term, unless
such liability, cost or expense is proximately caused solely by the active
negligence of Landlord. Tenant shall not be liable to Landlord for any
discharge, leakage, spillage, emissions or pollution of any type upon or from
the demised premises not due to Tenant's use and occupancy thereof.
Tenant shall pay all amounts due Landlord under this section, as additional
rent, within ten (10) days after any such amounts become due.
Tenant shall, at least thirty (30) days prior to the termination of the
demised term, or any earlier termination of this Lease, submit a plan to the
Menlo Park Fire Protection District in accordance with applicable provisions of
the Uniform Fire Code, with a copy to Landlord, demonstrating how any hazardous
materials which were stored, dispensed, handled or used in, at or upon the
demised premises will be
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<PAGE>
transported, disposed of or reused at the expiration or sooner termination of
the demised term of this Lease; and Tenant shall, at the expiration or sooner
termination of the demised term, comply with all applicable laws, regulations,
rules and orders of any governmental body having jurisdiction thereover
(including without limitation the Menlo Park Fire Protection District) regarding
the disposal of any such hazardous materials.
Tenant's obligations under this SECTION 7.4. shall survive the expiration
or earlier termination of this Lease, including without limitation any
termination resulting from any default by Tenant under the Lease. Landlord
agrees to indemnify, hold harmless and defend Tenant against all liability, cost
and expense (including without limitation any fines, penalties, judgments
litigation costs and attorneys' fees) incurred by Tenant as a result of any
discharge, leakage, spillage, emission, or pollution, cause by landlord or
landlord's invitees, employees or contractors.
ARTICLE 8 - USE OF PREMISES
SECTION 8.1. Tenant shall use the demised premises solely for research and
development and light manufacturing of computers and computer related products
and for no other purposes without Landlord's written consent.
ARTICLE 9 - INDEMNITY AND PUBLIC LIABILITY INSURANCE
SECTION 9.1. Tenant agrees to indemnify and save harmless Landlord from
and against all claims arising from any act, omission or negligence of Tenant,
or its contractors, licensees, agents, servants, invitees or employees, or
arising from any accident, injury or damage whatsoever caused to any person, or
to the property of any person occurring during the demised term in or about the
demised premises or the building of which it is a part, the sidewalks (if any)
adjoining the same and from and against all costs, expenses and liabilities
incurred or in connection with any such claim or proceeding brought thereon,
including, but not limited to, reasonable attorneys' fees and court costs.
Tenant shall not be responsible for the negligent acts or omissions of Landlord.
SECTION 9.2. Tenant agrees to maintain in full force during the demised
term a policy of public liability and property damage insurance under which
Landlord and such other persons, firms or corporations as are designated by
Landlord and are properly includible as additional insureds under the terms of
any such policies of insurance are named as additional insureds, and the insurer
agrees to indemnify and hold Landlord and Landlord's said designees harmless
from and against all costs, expenses and/or liability arising out of or based
upon any and all claims, accidents, injuries and damage mentioned in SECTION
9.1. All public liability and property damage policies shall contain a
provision that Landlord, although named as an additional insured, shall
nevertheless be entitled to recovery under said policies for any loss occasioned
to it, its servants, agents and employees, by reason of the negligence of
Tenant. Each such policy shall be issued by a financially stable insurance
carrier licensed to do business in the state of California be noncancelable with
respect to the Landlord and
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Landlord's said designees without twenty (20) days' written notice to the
Landlord and Landlord's said designees, and a certificate thereof shall be
delivered to Landlord prior to commencement of the demised term and thereafter
thirty (30) days prior to expiration of the term of each policy. The limits of
liability of such comprehensive general liability insurance shall be Two Million
Dollars ($2,000,000.00) for injury or death to one or more persons and damage to
property , combined single limit. All public liability, property damage and
other casualty policies shall be written as primary policies, not contributing
with and not in excess of coverage which Landlord may carry.
If Tenant shall not comply with its covenants to maintain insurance made
above, or if Tenant fails to provide certificates thereof to Landlord as is
provided above, Landlord may, but shall not be required to, obtain any such
insurance and, if Landlord does obtain any such insurance, Tenant shall, on
demand, reimburse Landlord for the premium for any such insurance.
SECTION 9.3. Tenant agrees to use and occupy the demised premises and to
use all other portions of the Business Park (which it is herein given the right
to use) at its own risk and hereby releases to the full extent permitted by law,
the Landlord, its agents, servants, contractors, and employees from all claims
and demands of every kind resulting from any accident, damage or injury
occurring therein other than claims arising out of the negligent act or omission
of Landlord. Landlord shall have no responsibility or liability for any loss,
of or damage to, fixtures or other personal property of Tenant. The provisions
of this Section shall apply during the whole of the demised term.
ARTICLE 10 - FIRE INSURANCE AND CASUALTY
SECTION 10.1. If the demised premises should be damaged or destroyed
during the demised term by any casualty insurable under Landlord's standard fire
and extended coverage insurance policies, Landlord shall (except as hereinafter
provided), repair and/or rebuild the same to substantially the condition in
which the same existed immediately prior to such damage or destruction.
Landlord's obligation under this Section shall in no event exceed either (A) the
scope of the work done by Landlord in the original construction of such
building, or (B) the proceeds of any such insurance policy if Landlord keeps the
building and the demised premises insured against loss or damage by such fire
and extended coverage insurance to the extent of at least eighty percent (80%)
of the insurable value of the building, with a replacement cost endorsement if
reasonably obtainable from responsible insurance companies licensed to do
business in California, unless Landlord nevertheless elects to repair and/or
rebuild the building and the demised premises. Tenant shall in the event of any
such damage or destruction, unless this Lease shall be terminated as hereinafter
provided, be responsible for replacing or repairing all exterior signs, trade
fixtures, equipment, display cases, and other installations originally installed
by the Tenant. Tenant shall have no interest in the proceeds of any insurance
carried by Landlord.
SECTION 10.2 Tenant's base rent shall be abated proportionately during any
period in which, by reason of any such damage or destruction, the demised
premises is rendered partially or totally untenantable. Such abatement shall
continue for the period
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commencing with such destruction or damage and ending with the substantial
completion by the Landlord of such work or repair and/or reconstruction as
Landlord is obligated to do.
SECTION 10.3. If either the building or the demised premises should be
damaged or destroyed to the extent of thirty three and one-third percent
(33-1/3%) or more of the then monetary value of either thereof by an event
described in SECTION 10.1., then Landlord may terminate this Lease by written
notice to Tenant.
If the demised premises should be damaged or destroyed to the extent of
fifty percent (50%) or more of the then monetary value thereof by an event
described in SECTION 10.1. During the last year of the demised term, then Tenant
may terminate this Lease by written notice to Landlord given within thirty (30)
days of such casualty.
If neither Landlord or Tenant elects to terminate this Lease then
Landlord shall repair and/or rebuild the same as provided in SECTION 10.1. If
such damage or destruction occurs and this Lease is not so terminated, this
Lease shall remain in full force and effect and the parties waive the
provisions of any law to the contrary. The Landlord's obligation under this
Section shall in no event exceed the scope of the work to be done by the
Landlord in the original construction of said building and the demised
premises.
SECTION 10.4. Tenant agrees to comply with all of the regulations and
rules of the Insurance Service Office or any similar body and will not do,
suffer, or permit an act to be done in or about the demised premises which will
increase any insurance rate with respect thereto.
SECTION 10.5. Tenant agrees, in addition to any rent provided for herein,
to pay to the Landlord the cost of the fire and extended coverage insurance
policy carried by Landlord on the demised premises during the entire demised
term or any renewal or extension thereof. This Section expressly permits the
Landlord to carry standard fire and extended coverage policies to the extent of
one hundred percent (100%) of the insurable value.
SECTION 10.6. During the demised term, Tenant shall carry, at its expense,
insurance against loss and damage by fire with an "All Risk" endorsement for the
full insurable value of Tenant's merchandise, trade fixtures, furnishings,
operating equipment and personal property, including wall coverings, carpeting
and drapes, if installed by Tenant. A certificate evidencing such coverage
shall be delivered to Landlord prior to commencement of the demised term and
thereafter thirty (30) days prior to the expiration of the term of such policy.
Such insurance shall be written as a primary policy, not contributing with and
not in excess of coverage Landlord may carry. If Tenant shall not comply with
its covenants to maintain said insurance, or if Tenant fails to provide a
certificate thereof to Landlord, Landlord may, but shall not be required to,
obtain any such insurance, and if Landlord does obtain any such insurance,
Tenant shall, on demand, reimburse Landlord for the premium for any such
insurance.
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SECTION 10.7. In the event the demised premised or the building shall be
damaged as a result of any flood, earthquake, act of war, nuclear reaction,
nuclear radiation or radioactive contamination, or from any other casualty not
ucovered by Landlord's fire and extended coverage insurance, to any extent
whatsoever, Landlord may, within ninety (90) days following the date of such
damage, commence repair, reconstruction or restoration of the demised premises
or the building and prosecute the same diligently to completion, in which event
this Lease shall continue in full force and effect, or within said ninety (90)
day period elect not to so repair, reconstruct or restore the demised premises
or the building, in which event this Lease shall cease and terminate. In either
such event Landlord shall give Tenant written notice of its intention within
said ninety-day period. If the demised premises should be damaged or destroyed
to the extent of fifty percent (50%) or more of the then monetary value thereof
by an event described in SECTION 10.7. during the last year of the demised term,
then Tenant may terminate this Lease by written notice to Landlord given within
thirty (30) days of such casualty.
SECTION 10.8. Upon any termination of this Lease under the provisions of
this ARTICLE 10, the rent shall be adjusted as of the date of such termination
and the parties shall be released without further obligation to the other party
upon the surrender of possession of the demised premises to Landlord, except for
items that have been theretofore accrued and are then unpaid, and except for
obligations that are designated as surviving such termination.
SECTION 10.9. Notwithstanding anything in this ARTICLE 10 or elsewhere in
this Lease to the contrary, Landlord may maintain any insurance on the demised
premises that Landlord deems necessary or advisable, including, but not limited
to, any rental insurance, Landlord's protective liability insurance or any
insurance required by any mortgagee of Landlord; and Landlord may include the
amount of the premiums for such insurance in the total of the insurance premiums
which Tenant is required to pay under the terms hereof. Notwithstanding the
foregoing, Landlord agrees that any such insurance shall be commercially
reasonable and shall be carried on Landlord's other property similarly situated
(unless specifically required by Landlord's mortgagee).
ARTICLE 11 - REPAIR
SECTION 11.1. Landlord agrees, at Landlord's sole expense, to repair
structural defects of the building of which the demised premises is a part
throughout the life of the Lease. Structural defects and maintenance shall not
be deemed to include cracks or fissures in walls or floors, nor the requirement
of painting or caulking.
SECTION 11.2. Tenant agrees during the demised term or any extension
thereof to maintain the demised premises, and every part thereof, except as to
work to be performed by Landlord under SECTIONS 11.1. and 11.3. Tenant further
agrees to clean, inside and out, all of the glass on the exterior of the demised
premises. If Tenant should fail to faithfully perform its maintenance
obligations hereunder then Landlord shall, upon having given notice to Tenant of
the need for said maintenance, have the right to perform, or cause the be
performed, said maintenance and Tenant shall on demand reimburse Landlord for
Landlord's costs of providing such maintenance.
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SECTION 11.3. Landlord shall provide the following services for the
building of which the demised premises is a part and Tenant shall, in addition
to all other payments required to be made under other provisions of this Lease,
on demand reimburse Landlord for Tenant's prorata share of Landlord's actual
gross costs of: (i) maintaining, repairing and replacing the roof; (ii)
painting, maintaining and repairing the exterior of the building; (iii)
maintaining, repairing and replacing the elevator and elevator equipment room
(if any); (iv) maintenance and repair associated with the mechanical and
electrical rooms; (v) maintenance and repair of the trash enclosure utilized in
connection with the building; (vi) maintenance, repair and replacement of the
glass on the exterior of the building; and (vii) any other maintenance and
repair other than that which Landlord is required to perform at Landlord's
expense per SECTION 11.1. The Tenant's prorata share of the Landlord's gross
costs of maintenance, repair and/or replacement mentioned in this Section shall
be that portion of the whole which the floor area of the demised premises bears
to the floor area of the building(s) of which the demised premises is a part.
Tenant shall also, on demand, reimburse Landlord for all of Landlord's gross
costs of maintaining, repairing and replacing the heating and air conditioning
equipment serving the demised premises, whether furnished by Landlord or Tenant.
Landlord's said gross costs as used in this SECTION 11.3. shall include all
actual costs and expenses of every kind or nature incurred by Landlord in the
performance of such maintenance, repair or replacements. Landlord agrees that
all of its actual costs incurred hereunder will be based on competitive rates
and prices, for the type service being provided, in the Menlo Park, California
area. Landlord agrees that the demised premises will be delivered to Tenant at
the commencement of the demised term with the plumbing (as stubbed to the
demised premises) hvac and electrical systems serving the demised premises in
good condition and repair.
SECTION 11.4. If during the term of this Lease Landlord or Landlord's
insurance carrier requires the installation of any fire detection device,
because of the nature of the particular activities being carried on by Tenant in
the demised premises, then said system or device shall be installed at the sole
cost of the Tenant within the time specified.
SECTION 11.5 Notwithstanding the provisions of Sections 11.3. hereof,
Tenant's obligation to reimburse Landlord for costs associated with a
replacement of (as opposed to repairs and maintenance of) the roof during the
demised term shall be limited to a proportionate share of such replacement costs
calculated by multiplying the cost of any such replacement by a fraction, the
numerator of which is the years or partial years in the demised term (both
elapsed and remaining) and the denominator of which is the estimated useful life
of the replacement. The foregoing limitation shall not apply to any costs for
replacements made necessary on account of: (i) negligent acts or omissions of
Tenant or its agents, employees, invitees or contractors; or (ii) the particular
nature of Tenant's business or operations.
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ARTICLE 12 - FIXTURES & ALTERATIONS
SECTION 12.1. All trade fixtures owned by Tenant and installed on the
demised premises shall remain the property of Tenant and may be removed from
time to time and shall be removed at the expiration of the demised term. Tenant
shall repair any damage to the demised premises caused by the removal of said
fixtures. If Tenant fails to remove such fixtures on or before the last day of
the demised term, all such fixtures shall become the property of Landlord,
unless Landlord elects to require their removal, in which case Tenant shall
promptly remove them and restore the demised premises to its condition prior to
such removal. Landlord may also, at Landlord's sole discretion, store such
fixtures at Tenants' expense.
SECTION 12.2. Tenant shall not make any alterations, additions or
improvements in or to the demised premises or the building without submitting
plans and specifications therefor for the prior written consent of Landlord,
which consent, if granted, may be subject to such conditions as Landlord may
deem appropriate. Any such alterations, additions or improvements consented to
by Landlord shall be made at Tenant's sole cost and expense in accordance with
the plans and specifications therefor and Tenant agrees to provide Landlord with
an "as built" set of plans and specifications after any such work is completed.
Tenant shall secure any and all governmental permits, approvals or
authorizations required in connection with any such work, and shall hold
Landlord harmless from any and all liability, costs, damages, expenses
(including attorneys' fees) and any and all liens resulting therefrom. All
alterations, decorations, additions and improvements (and expressly including
all light fixtures and floor coverings installed by Tenant), except furniture,
removable paneling, wall fixtures, trade fixtures, appliances and equipment
which do not become a part of the demised premises, shall be deemed to belong to
Tenant, but shall be deemed to have been attached to the demised premises or the
building and to have become the property of Landlord upon the termination of the
demised term. Upon the expiration or sooner termination of the demised term
hereof, Tenant shall, upon written demand by Landlord, at Tenant's sole cost and
expense, forthwith remove any alterations, decorations, additions or
improvements made by Tenant, designated by Landlord to be removed, and Tenant
shall forthwith at its sole cost and expense repair any damage to the demised
premises or the building caused by such removal.
ARTICLE 13 - REMEDIES
SECTION 13.1. Should Tenant default in the performance of any of its
obligations under this Lease with reference to the payment of rent and such
default continue for five (5) days after the date such payment is due, or should
Tenant default in the performance of any other obligations under this Lease and
such default continue for thirty (30) days after receipt of written notice from
Landlord specifying such default or beyond the time reasonably necessary to cure
if such default is of a nature to require more than thirty (30) days to remedy,
then, in addition to all other rights and remedies Landlord may have under this
Lease or under applicable law, Landlord shall have the following rights and
remedies:
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(1) The Landlord has the remedy described in California Civil Code Section
1951.4 (Landlord may continue the lease in effect after Tenant's breach and
abandonment and recover Rent as it becomes due, if Tenant has the right to
sublet or assign, subject on to reasonable limitations). If Tenant breaches any
covenants of this Lease or if any event of default occurs, whether or not Tenant
abandons the demised premises, this Lease shall continue in effect until
Landlord terminates Tenant's right to possession, and Tenant shall remain liable
to perform all of its obligations under this Lease and Landlord may enforce all
of Landlord's rights and remedies, including the right to recover rent as it
falls due. If Tenant abandons the demised premises or fails to maintain and
protect the same as herein provided, Landlord shall have the right to do all
things necessary or appropriate to maintain, preserve and protect the demised
premises, including the installation of guards, and may do all things
appropriate to a reletting of the demised premises, and none of said acts shall
be deemed to terminate Tenant's right of possession, unless Landlords elects to
terminate the same by written notice to Tenant. Tenant agrees to reimburse
Landlord on demand for all amounts reasonably expended by Landlord in
maintaining, preserving and protecting the demised premises, together with
interest on the amounts expended from time to time at the maximum legal rate.
Landlord shall also have the right to repair, remodel and renovate the demised
premises at the expense of Tenant and as deemed necessary by Landlord.
(2) Landlord shall have the right to terminate Tenant's possession of the
demised premises, and if Tenant's right to possession of the demised premises is
terminated by Landlord by reason of a breach of this Lease by Tenant, or by
reason of the happening of an event of default, or by reason of abandonment of
the demised premises by Tenant, Tenant agrees to pay to Landlord on demand (i)
all unpaid rent earned at the time of termination, together with interest on all
unpaid installments from the times they were due to the date of termination at
the maximum legal rate; (ii) the amounts by which the unpaid rent which would
have been due and payable by Tenant since the date of termination exceeds the
amount of any rental loss that Tenant proves could have been avoided, together
with interest on said amounts from the dates they were due at the maximum legal
rate; (iii) the worth at the time of demand of the amount by which the unpaid
rent for the balance of the term of this Lease exceeds the amount of rental loss
that Tenant proves may reasonable be avoided, together with interest on such
amount at the maximum legal rate from the date of demand until paid; (iv) all
other amounts due Landlord from Tenant under the terms of this Lease, or
necessary to compensate Landlord for all detriment caused by Tenant's failure to
perform its obligations under this Lease. The right to possession of the
demised premises by Tenant should not be deemed terminated until Landlord gives
Tenant written notice of such termination or until Landlord re-lets all or a
portion of the demised premises. In the event that Landlord seeks to recover
the amount due, Landlord shall be entitled to recover the amounts specified in
paragraphs (a) (1), (a) (2) and (a) (4) of Section 1951.2 of the Civil Code of
California as such section reads at the date of this Lease, together with
interest on said amounts at the maximum legal rate from the dates they were due,
computed as of the date of the award, together with the worth at the time of the
award of the amount by which the unpaid rent for the balance of the term exceeds
the amount of such rental loss that Tenant proves could be reasonably have been
avoided. Landlord shall be required to mitigate damages by making a good faith
effort to re-let the demised premises.
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(3) No right to remedy herein conferred upon or reserved to Landlord is
intended to be exclusive of any other right or remedy herein or by law, provided
that each shall be cumulative and in addition to every other right or remedy
given herein or now hereafter existing at law or in equity or by statute.
SECTION 13.2. Landlord shall in no event be in default in the performance
of any of its obligations hereunder unless and until Landlord shall have failed
to perform such obligations within thirty (30) days or such additional times as
is reasonably required to correct any such default after notice by Tenant to the
Landlord properly specifying wherein the Landlord has failed to perform any such
obligation.
ARTICLE 14 - BANKRUPTCY
SECTION 14.1. Tenant shall give written notice as soon as reasonably
possible to Landlord of its intention to commence proceedings under any state or
federal insolvency or bankruptcy law, or any comparable law that is now or
hereafter may be in effect, whereby Tenant seeks to be, or would be, discharged
of its debts or the payment of its debts is sought to be delayed.
SECTION 14.2. If any of the following events occur:
(1) The entry of an order for relief under Title 11 of the United States
Code as to Tenant or its executors, administrators or assigns, if any, or the
adjudication of Tenant or its executors, administrators or assigns, if any, as
insolvent or bankrupt pursuant to the provisions of any state insolvency or
bankruptcy act;
(2) The appointment of a receiver, trustee or other custodian of the
property of Tenant by reason of the insolvency or inability of Tenant to pay its
debts;
(3) The assignment of the property of Tenant for the benefit of creditors;
(4) The commencement of any proceedings under any state or federal
insolvency or bankruptcy law, or any comparable law that is now or hereafter may
be in effect, whereby Tenant seeks to be, or would be, discharged of its debts
or the payment of its debts is sought to be delayed;
(5) The failure of Tenant to give written notice to Landlord provided for
in SECTION 14.1. above;
then Landlord may, at any time thereafter, in addition to any and all other
rights or remedies of Landlord under this Lease or under applicable law, upon
written notice to Tenant, terminate this Lease, and upon such notice this Lease
shall cease and terminate with the same force and effect as though the date set
forth in said notice were the date originally set forth herein and fixed for the
expiration of the demised term. Tenant shall thereupon vacate and surrender the
demised premises, but shall remain liable as herein provided.
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ARTICLE 15 - SURRENDER OF PREMISES
SECTION 15.1. Tenant shall, upon termination of the demised term, or any
earlier termination of this Lease, surrender to Landlord the demised premises,
including, without limitation, all building equipment and apparatus, and
fixtures (except as provided in SECTIONS 12.1. and 12.2.) then upon the demised
premises without any damage, injury, or disturbance thereto, or payment
therefor, except damages due to ordinary wear and tear, acts of God, fire and
other perils to the extent the demised premises are not required to be repaired
or restored as hereinbefore provided, and Tenant shall dispose of any hazardous
materials stored, dispensed, handled or used in, at or upon the demised premises
in accordance with the provisions of SECTION 7.4.
ARTICLE 16 - EMINENT DOMAIN
SECTION 16.1. If more than thirty-three percent (33%) of the floor area of
the demised premises shall be taken under the power of eminent domain and the
portion not so taken will not be reasonably adequate for the operation of
Tenant's business after the Landlord completes such repairs or alterations as
the Landlord is obligated or elects to make, Tenant shall have the right to
elect either to terminate this Lease, or, subject to Landlord's right to
terminate the Lease pursuant to SECTION 16.4., to continue in possession of the
remainder of the demised premises, and shall notify Landlord in writing within
ten (10) days after such taking of Tenant's election. In the event less than
thirty-three percent (33%) of the floor area of the demised premises shall be
taken or Tenant elects to remain in possession, as provided in the first
sentence hereof, all of the terms herein provided shall continue in effect,
except that the base rent shall be reduced in the same proportion that the floor
area of the demised premises taken bears to the original floor area of the
demised premises, and Landlord shall at its own cost and expense make all
necessary repairs or alterations to the demised premises so as to constitute the
portion of the demised premises not taken a complete architectural unit for the
purposes allowed by this Lease, but such work shall not exceed the scope of the
work to be done by Landlord in originally constructing the building and the
demised premises.
SECTION 16.2. Each party waives the provisions of Code of Civil Procedure
Section 1265.130 allowing either party to petition the Superior Court to
terminate this Lease in the event of a partial taking.
SECTION 16.3. All damages or awards for any taking under the power of
eminent domain whether for the whole or a part of the demised premises shall
belong to and be the property of Landlord whether such damages or awards shall
be awarded as compensation or diminution in value to the leasehold or to the fee
of the demised premises; provided, however, that Landlord shall not be entitled
to the award made to Tenant or Landlord for loss of business, depreciation to,
and cost or removal of stock and fixtures and for leasehold improvements which
have been installed by Tenant at its sole cost and expense less depreciation
which is to be computed on the basis of completely depreciating such leasehold
improvements during the initial term of this Lease, and any award made to Tenant
in excess of the then depreciated value of leasehold improvements shall be
payable to the Landlord.
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SECTION 16.4. If more than thirty-three percent (33%) of the floor areas
of the building or the demised premises shall be taken under power of eminent
domain, or if any part of the Parking and Accommodation Areas shall be so taken,
Landlord may, by written notice to Tenant delivered on or before the date of
surrendering possession to the public authority pursuant to such taking,
terminate this Lease as of such date.
SECTION 16.5. If this Lease is terminated as provided in this Article, the
rent shall be paid up to the day that possession is so taken by public authority
and Landlord shall make a prorata refund of any rent and all deposits paid by
Tenant in advance and not yet earned.
ARTICLE 17 - REAL PROPERTY TAXES
SECTION 17.1. Tenant shall reimburse Landlord for all real property taxes,
assessments and ongoing sewer fees applicable to the demised premises. Taxes
shall be prorated to lease years for purpose of making this computation. Such
payment shall be made by Tenant within thirty (30) days after receipt of
Landlord's written statement setting forth the amount of such computation
thereof. If the term of this Lease shall not expire concurrently with the
expiration date of the fiscal tax year, Tenant's liability for taxes for the
last partial lease year shall be prorated on an annual basis.
SECTION 17.2. If the demised premises are not separately assessed,
Tenant's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Landlord from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Landlord's reasonable determination thereof, in good
faith, shall be conclusive.
SECTION 17.3. Tenant shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Tenant contained in the demised premises or elsewhere.
Tenant shall cause said trade fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property of
Landlord.
If any Tenant's said personal property shall be assessed with Landlord's
real property, Tenant shall pay Landlord the taxes attributable to Tenant within
ten (10) days after receipt of a written statement setting forth the taxes
applicable to Tenant's property.
SECTION 17.4. In addition to all other payments provided for herein, the
Tenant shall on demand reimburse Landlord for any surcharges, fees, and any
similar charges required to be paid by any instrumentality of local, state or
federal government in connection with parking on the parking areas and
facilities furnished by Landlord, including policing; supervising with
attendants; other costs in connection with providing charged parking; repairs;
replacements and maintenance not properly chargeable to capital account under
good accounting principles; interest and depreciation of the actual cost of
modification or improvements to the areas, facilities and improvements
maintained in this Article either (i) required by any instrumentality of local,
state or
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federal government, or (ii) installed by Landlord to facilitate payment of a
parking charge by the general public for parking in the parking area, or both,
and other similar costs; and there shall be excluded (a) cost of construction of
such improvements which is properly chargeable to capital account and (b)
depreciation of the original cost of construction of all items not previously
mentioned in this sentence. If Landlord shall require the payment of a parking
charge by the general public for parking in the parking area, then during any
period in which such a charge is made the total revenue (after deducting excise
and similar taxes thereon and taxes, fees or surcharges imposed by any agency or
instrumentality of local, state or federal government) actually received in cash
or its equivalent by Landlord for such parking charge shall be credited against
said gross costs.
SECTION 17.5. Notwithstanding the provisions of ARTICLE 17 hereinabove,
Tenant shall pay any increase in "real property taxes" resulting from any and
all improvements of any kind whatsoever placed on or in the demised premises for
the benefit of or at the request of Tenant regardless of whether said
improvements were installed or constructed either by Landlord or Tenant.
SECTION 17.6. In addition to all other payments provided for herein, the
Tenant shall on demand reimburse Landlord for any tax (excluding income tax)
and/or business license fee or other levy that may be levied, assessed or
imposed upon the rent or other payments provided for herein or on the square
footage of the demised premises, on the act of entering into this Lease, or on
the occupancy of the Tenant however described, as a direct substitution in whole
or in part for, or in addition to, any real property taxes, whether pursuant to
laws presently existing or enacted in the future. Landlord represents that, to
its actual knowledge, as of the date hereof there are no taxes or fees of the
type described in this SECTION 17.6. that are applicable to this Lease.
ARTICLE 18 - COMMON AREA, PARKING FACILITIES
SECTION 18.1. Landlord grants to Tenant during the demised term the non-
exclusive right to use the parking facilities and other areas provided and
designated as "Common Area and Parking Facilities" on EXHIBIT "B" hereto for the
accommodation and parking of such automobiles of the Tenant, its officers,
agents, and employees and customers while working or visiting Tenant. Tenant
agrees that its officers, agents, and employees will park their automobiles only
on such parts of the Common Area and parking areas as Landlord from time to time
designates as employee parking areas and Tenant specifically agrees that such
officers, agents and employees will not park on any public streets in the
vicinity of the building(s) of which the demised premises are a part. Except as
provided in SECTION 17.4., Landlord shall not charge parking fees for such right
to use parking facilities.
SECTION 18.2. All parking areas and facilities furnished by Landlord
including, but not limited to, pedestrian sidewalks, landscaped areas and
parking areas shall at all times be subject to the control and management of
Landlord so that Landlord will be in a position to make available efficient and
convenient use thereof, and Landlord shall have the right from time to time to
establish, modify and enforce reasonable rules and
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<PAGE>
regulations with respect to all facilities and areas mentioned in this Article,
and Tenant agrees to abide by and conform therewith. Landlord shall have the
right to construct, maintain, and operate lighting facilities on all of said
areas and improvements, to police the same, from time to time to change the
area, location and arrangement of parking areas and facilities, to restrict
employee parking to employee parking areas, to construct surface, subterranean
and/or elevated parking areas and facilities, to establish and from time to time
change the level of parking surfaces, to close (if necessary), all or any
portion of said areas or facilities to such extent as may in the opinion of
Landlord's counsel be legally sufficient to prevent a dedication thereof or the
accrual of any rights of any person or of the public therein, and to do and
perform such other acts in and to said areas and improvements respectively as in
the use of good business judgment the Landlord shall determine to be advisable
with a view to the improvement of the convenience and use thereof by Tenant,
other lessees, and their respective employees and visitors.
SECTION 18.3. Tenant agrees during the demised term to pay to Landlord an
annual charges which shall be Tenant's prorata share of Landlord's actual gross
costs of operating, maintaining and/or replacing all of the areas and facilities
mentioned in this Article. The Annual charge shall be an estimate computed on
the basis of periods of twelve (12) consecutive calendar months, commencing and
ending on such dates as may be designated by Landlord, and shall be paid in
monthly installments on the first day of each calendar month in the amount
estimated by Landlord. Within ninety (90) days after the end of each such
annual period, Landlord will determine (and furnish to Tenant a statement
showing in reasonable detail) the actual annual charge for such period and the
amounts so estimated and paid during such period shall be adjusted within such
ninety (90) days (including adjustments on a prorata basis of any partial such
period at either end of the demised term) and one party shall pay to the other
on demand whatever amount is necessary to effectuate such adjustment. Tenant's
prorata share of Landlord's said gross costs shall be determined as follows:
The Tenant's prorata share of Landlord's gross costs of maintaining and
operating all areas, facilities and improvements mentioned in this Article shall
be that portion of the whole which the floor area of the demised premises bears
to the floor area of the building(s) of which the demised premises is a part.
Landlord's said gross costs shall consist of and include all actual costs
and expenses of every kind or nature incurred by Landlord in the operation,
maintenance and/or replacement of all of the areas, facilities and improvements
mentioned in this Article determined in accordance with good accounting
practices by an accountant employed by Landlord. The determination of such
accountant shall be conclusive. Without otherwise limiting the generality of
the foregoing, there shall be included in such gross costs public liability and
property damage insurance, landscape maintenance, maintenance of utilities,
water, cleaning of areas, facilities and improvements, operation of lighting
policing and sweeping of parking areas, supervising with attendants, repairs,
replacements and maintenance, and an amount equal to ten percent (10%) of the
total of all of the above for administration of the Common Areas and Parking
Facilities. Landlord agrees that all of its actual costs incurred hereunder
will be based on competitive rates and prices, for the type service being
provided, in the Menlo Park, California area.
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<PAGE>
SECTION 18.4. The Common Areas and Parking Facilities included for the
purpose of this Article are those shown on EXHIBIT "B" outside of the building
area.
ARTICLE 19 - MISCELLANEOUS
SECTION 19.1. Landlord and its designee shall have the right during
reasonable business hours to enter the demised premises except restricted areas
as established by or on behalf of the Federal Government for security purposes
(and in emergencies at all times), (i) to inspect the same, (ii) for any purpose
connected with Landlord's rights or obligations under this Lease, and (iii) for
all other lawful purposes.
SECTION 19.2. Tenant shall not be entitled to make repairs at Landlord's
expense, and Tenant waives the provisions of Civil Code Sections 1941 and 1942
with respect to Landlord's obligations for tenantability of the demised premises
and Tenant's right to make repairs and deduct the expenses of such repairs from
rent.
SECTION 19.3 This Lease shall be governed exclusively by the provisions
hereof and by the laws of the State of California as the same from time to time
exist. This Lease expresses the entire understanding and all agreements of the
parties hereto with each other and neither party hereto has made or shall be
bound by any agreement or any representation to the other party which is not
expressly set forth in this Lease.
SECTION 19.4. If Tenant should hold over after the demised term and any
extension thereof as herein provided for, the such holding over shall be
construed as a tenancy from month to month at a rent equal to 150% of that
provided for under the monthly rental of the principal term of this Lease.
SECTION 19.5. Tenant agrees to maintain all toilet and washroom facilities
within the demised premises in a neat, clean and sanitary condition.
SECTION 19.6. Landlord covenants and agrees that Tenant, subject to the
terms and provisions of this Lease, on paying the rent and observing, keeping
and performing all of the terms and provisions of this Lease on its part to be
observed, kept and performed, shall lawfully, peaceably and quietly have, hold,
occupy and enjoy the demised premises during the demised term without hindrance
or ejection by any person lawfully claiming under or against the Landlord.
SECTION 19.7. Subject to ARTICLE 6, the terms and provisions hereof shall
be construed as running with the land and shall be binding upon and inure to the
benefit of heirs, executors, administrators, successors and assigns of Landlord
and Tenant.
SECTION 19.8.
A. Tenant shall promptly pay all sums of money with respect to any labor,
services, materials, supplies or equipment furnished or alleged to have been
furnished to Tenant in, at or about the demised premises, or furnished to
Tenant's agents, employees, contractors or subcontractors, that may be secured
by any mechanic's, materialmen's, supplier's or other liens against the demised
premises or Landlord's interest therein. In the event any such or similar liens
shall be filed, Tenant shall, within three (3) days of receipt thereof, give
notice to Landlord of such lien, and Tenant
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<PAGE>
shall, within ten (10) days after receiving notice of the filing of the lien,
discharge such lien by payment of the amount due to the lien claimant. However,
Tenant may in good faith contest such lien provided that within such ten (10)
day period Tenant provides Landlord with a surety bond from a company acceptable
to Landlord, protecting against said lien in an amount at least one and one-half
(1-1/2) times the amount claimed or secured as a lien or such greater amount as
may be required by applicable law and provided further that Tenant, if it should
decide to contest such lien, shall agree to indemnify, defend and save harmless
Landlord from and against all costs arising from or in connection with any
proceeding with respect to such lien. Failure of Tenant to discharge the lien
or, if contested, to provide such bond and indemnification shall constitute a
default under this Lease and, in addition to any other right or remedy of
Landlord, Landlord may, but shall not be obligated, to discharge or secure the
release of any lien by paying the amount claimed to be due, and the amount so
paid by Landlord, and all costs and expenses incurred by Landlord therewith,
including, but not limited to, court costs and reasonable attorneys' fees, shall
be due and payable by Tenant to Landlord forthwith on demand.
B. At least fifteen (15) days before the commencement by Tenant of any
material construction or remodeling work on the demised premises, Tenant shall
give written notice thereof to Landlord. Landlord shall have the right to post
and maintain on the demised premises such Notices of Non-Responsibility, or
similar notices, provided for under applicable laws.
SECTION 19.9.
A. Tenant shall deposit with Landlord the sum specified in SECTION 2.4 (B)
hereof as a "Security Deposit." The Security Deposit shall be held by Landlord
as security for the faithful performance of all the terms of this Lease to be
observed and performed by Tenant. The Security Deposit shall not be mortgaged,
assigned, transferred or encumbered by Tenant without the written consent of
Landlord and any such act on the part of Tenant shall be without force and
effect and shall not be binding upon Landlord.
B. If any of the rents herein reserved or any other sum payable by Tenant
to Landlord shall be overdue and unpaid, or should Landlord make payments on
behalf of Tenant, or should Tenant shall fail to perform any of the terms of
this Lease, then Landlord may, at its option and without prejudice to any other
remedy which Landlord may have on account thereof, apply the entire Security
Deposit, or so much thereof as may be necessary, to compensate Landlord toward
the payment of rent or additional rent, loss, or damage sustained by Landlord
due to such breach on the part of Tenant, and Tenant shall forthwith upon demand
restore said Security Deposit to the original sum deposited. Should Tenant
comply with all of said terms and promptly pay all of the rent and all other
sums payable by Tenant to Landlord, said Security Deposit shall be returned in
full to Tenant at the end of the demised term.
C. In the event of bankruptcy or other similar proceedings listed in
ARTICLE 14 hereof, the Security Deposit shall be deemed to be applied first to
the payment of rent and other charges due Landlord for all periods prior to the
filing of such proceedings.
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<PAGE>
D. In the event Landlord delivers the Security Deposit to the purchaser of
Landlord's interest in the demised premises, Landlord, after written notice to
Tenant of said delivery, shall be discharged from any further liability with
respect to the Security Deposit. This provision shall also apply to any
subsequent transferees.
SECTION 19.10. All notices, statements, demands, requests, consents,
approvals, authorizations, offers, agreements, appointments or designations
hereunder by either party to the other shall be in writing and shall be
sufficiently given and served upon the other party or, if sent by United States
Certified mail, return receipt requested, postage prepaid and addressed as
follows:
If sent by mail to Tenant, the same shall be addressed to the Tenant at 181
Constitution Drive, Menlo Park, California 94025, or at such other place as
Tenant may from time to time designate by notice to Landlord.
If sent by mail to Landlord, the same shall be addressed to Landlord at 60
Hillsdale Mall, San Mateo, California 94403-3497, or at such other place as
Landlord may from time to time designate by notice to Tenant.
Any such notice when sent by Certified mail as above provided shall be
deemed duly served on the third business day following the date of such mailing.
SECTION 19.11. As used in this Lease and when required by the context,
each number (singular or plural) shall include all numbers, and each gender
shall include all genders; and unless the context otherwise requires, the word
"person" shall include corporation, firm or association.
SECTION 19.12. In case of litigation with respect to the mutual rights,
obligations, or duties of the parties hereunder, the prevailing party, shall be
entitled to reimbursement from the other party of all costs and reasonable
attorneys' fees actually incurred.
SECTION 19.13. Each term and each provision of this instrument performable
by Tenant shall be construed to be both a covenant and a condition.
SECTION 19.14. Except as otherwise expressly stated, each payment provided
herein to be made by Tenant to Landlord shall be in addition to and not in
substitution for the other payments to be made by Tenant to Landlord.
SECTION 19.15. Time is and shall be of the essence of this Lease and all
of the terms, provisions, covenants and conditions hereof.
SECTION 19.16. The Tenant warrants that has not had any dealings with any
realtor, broker, or agent in connection with the negotiation of this Lease
excepting only BT Commercial, whom Landlord agrees to pay whatever commission
may be due. Each party agrees to hold the other harmless from any cost, expense
or liability for any compensation, commissions or charges claimed by any
realtor, broker, or agent with respect to this Lease and/or the negotiation
thereof with whom the other party has or purportedly has dealt.
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<PAGE>
SECTION 19.17. Tenant agrees that its interest in this Lease shall be
subordinate to any mortgage, deed of trust and/or other security indenture
hereafter placed upon the demised premises and to any and all advances made or
to be made thereunder and to the interest thereon made and all renewals,
replacements, and extensions thereof, but nothing herein contained shall be
deemed to alter or limit Tenant's rights as set forth in SECTION 19.6. If any
mortgagee, trustee or holder of such security instrument elects to have the
Tenant's interest in this Lease superior to any such instrument by notice to
Tenant, then this Lease should be deemed superior to the lien of any such
mortgage, deed of trust or security indenture whether this Lease was executed
before or after said mortgage, deed of trust and/or security indenture.
SECTION 19.18. Landlord reserves the right during the last six months of
the term of this Lease or the last six months of any extension hereof to enter
the demised premises during normal working hours for the purpose of showing the
demised premises (except restricted areas established by, or on behalf of, the
Federal Government for security purposes) to prospective tenants or purchasers
and to place signs on the demised premises advertising the property for lease or
sale.
SECTION 19.19. The following term as used in this Lease shall have the
following meaning:
(a) "Unavoidable Delay" means any prevention, delay or stoppage due to
strike(s), lockout(s), labor dispute(s), act(s) of God, inability to obtain
labor or materials or reasonable substitutes therefor, governmental
restrictions, governmental regulations, governmental controls, enemy or hostile
governmental action, civil commotion, fire or other casualty, and other
conditions or causes beyond the reasonable control of the party obligated to
perform.
IN WITNESS WHEREOF, the parties have executed this instrument.
TENANT: LANDLORD:
SBS TECHNOLOGIES, INC. BOHANNON TRUSTS PARTNERSHIP II
By: /s/ Christopher J. Amenson By:/s/ Frances B. Nelson
------------------------ -------------------------
President Trustee
By:/S Scott Alexander By:/S Robert J. Walsten
-------------------------- ------------------------------
Secretary Trustee
(Multiple Tenant -
Land Building)
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<PAGE>
EXHIBIT "A"
BOHANNON PARK
181 CONSTITUTION DRIVE
MENLO PARK, CALIFORNIA
DESCRIPTION OF DEMISED PREMISES
FOR
SBS TECHNOLOGIES, INC.
All that certain real property situate in the State of California, County
of San Mateo, City of Menlo Park and is described as follows:
Commencing at the most southerly corner of Parcel 1, as said Parcel is
shown in the map entitled "Parcel Map, Being a Resubdivision of Lots 26, 27 & 28
of Bohannon Industrial Park Unit No. 6, Vol. 59 of Maps, Page 11", which map was
filed in the office of the County Recorder of San Mateo County, State of
California on March 6, 1970 in Vol. 9 of Parcel Maps at Page 33, from which
corner the point of beginning of the demised premises bears North 22 Deg. 43'
East 23.00 feet and North 67 Deg. 17' West 230.50 feet. Thence from said point
of beginning
North 67Deg.17' West 94.00 feet;
thence North 22Deg.43' East 48.17 feet;
thence North 67Deg.17' West 3.00 feet;
thence North 22Deg.43' East 122.33 feet;
thence South 67Deg.17' East 97.00 feet;
and South 22Deg.43' West 170.50 feet;
to the point of beginning.
Containing approximately 16,394 square feet, more or less.
<PAGE>
EXHIBIT B
[BUILDING AREA]
TENANT :SBS TECHNOLOGIES, INC.
181 CONSTITUTION DRIVE, MENLO PARK, CA
<PAGE>
POOLING AGREEMENT
Logical Design Group, Inc. ("Logical"), a North Carolina corporation, James
Kenneth Boyette ("Boyette") and Charles D. Pugh ("Pugh"), (Boyette and Pugh
together, "Sellers") and SBS Technologies, Inc., a New Mexico Corporation
("Buyer") and its wholly-owned subsidiary, Logical Design, Inc., a New Mexico
corporation ("Company"), agree:
I. RECITALS.
A. OWNERSHIP. Sellers are the owners of all of the outstanding common
stock ("Logical Shares") of Logical and wish to exchange the Logical Shares for
common stock of Buyer.
B. RECEIPT OF SHARES. Buyer wishes to receive the Logical Shares under
the terms and conditions of this Agreement.
C. POOLING OF INTEREST. The parties intend that the Transactions (as
later defined) be accounted for as a pooling of interests in accordance with
generally accepted accounting principles.
D. EMPLOYMENT ARRANGEMENTS. Upon receipt of the Logical Shares, Buyer
wishes to employ Sellers, who are employees of Logical. The Sellers wish to be
employed by Buyer. A form of employment agreement is attached as Exhibit I-D.
E. COVENANT NOT TO COMPETE. In connection with the acquisition of the
Logical Shares, Sellers agree to enter into a non-compete agreement in
substantially the form attached as Exhibit I-E to this Pooling Agreement
("Covenant") for the consideration specified in the Covenant.
F. TAX-FREE REORGANIZATION. The parties intend that the Transactions be
a tax-free reorganization under the Internal Revenue Code of 1986, as amended.
II. MERGER.
A. MERGER ACTION. Subject to the terms and conditions of this Pooling
Agreement, Logical will merge with and into Company ("Merger") at the time the
Merger is effective under all applicable state laws ("Effective Time"). Company
will be the surviving company ("Surviving Company").
B. EFFECT OF MERGER.
1. The Merger will become effective at the Effective Time, with the
effect set forth in applicable New Mexico and North Carolina Business
Corporation Laws. The Surviving Company may, at any time after the Effective
Time, take any action (including executing and delivering any document) in the
name and on behalf of
<PAGE>
either Logical or Company in order to carry out and effectuate the transactions,
including the Merger, contemplated by this Pooling Agreement ("Transactions").
2. The Sellers shall be nominated as directors and officers of the
Surviving Company at and as of the Effective Time. In addition, Buyer will
designate such additional directors and officers as it may determine to be in
the best interest of the Surviving Company. Nothing in this paragraph shall
entitle any director or officer to maintain that position if not thereafter duly
elected or appointed to it.
3. At and as of the Effective Time, and subject to adjustment as
provided below, each of the 20,000 issued and outstanding Logical Shares not
subject to repurchase pursuant to Charles Pugh's Corporate Employment Agreement
("Pugh Agreement") dated June 26, 1992 ("Regular Logical Shares") shall be
converted into the right to receive 12.6997 shares of the no par value common
stock of Buyer. Each of the 20,000 issued and outstanding Logical Shares
subject to the Pugh Agreement ("Callable Logical Shares") shall be converted
into the right to receive .625 shares of the no par value common stock of Buyer
(all shares of the common stock of Buyer received pursuant to this subparagraph
II.B.3 are the "Buyer Shares") (the ratio of Buyer Shares to each Logical Share
is, as to each conversion ratio, the "Conversion Ratio"). The Conversion Ratio
will be adjusted equitably if there should occur any stock split, stock
dividend, reverse stock split, or other change in the number of Logical Shares
outstanding. No Logical Share shall be deemed to be outstanding or to have any
rights other than those set forth in this subparagraph after the Effective Time.
4. At and as of the Effective Time, each share of the no par value
common stock of Company then outstanding ("Company Share") will remain
outstanding as the common stock of the Surviving Company.
5. After Closing, transfers of Logical Shares outstanding before the
Effective Time shall not be made on the stock transfer books of the Surviving
Company.
III. POOLING CONDITION. Each of Buyer, and Sellers and Logical hereby covenant
and agree to take all steps reasonably necessary in order to obtain a favorable
determination from the Securities and Exchange Commission ("SEC") that the
Transactions may be accounted for as a pooling of interests in accordance with
generally accepted accounting principles ("Pooling Condition"). If Buyer
determines, based on good faith advice of its accountants, that consummation of
the Transactions would be accounted for as a pooling of interests in accordance
with generally accepted accounting principles, then, subject to the terms and
conditions of this Agreement, the Transactions will be consummated. If the
Pooling Condition is not satisfied, Buyer has the right to terminate this
Agreement at any
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<PAGE>
time prior to Closing without liability for any damages arising out of the
termination by giving express written notice of such intent to Sellers prior to
Closing, which notice must be received by Sellers prior to Closing.
IV. REGISTRATION RIGHTS. The Buyer Shares delivered to Sellers at Closing will
not be registered under the Securities Act of 1933 ("1933 Act") or any state
securities laws, will be issued pursuant to exemptions from those laws, and will
be "restricted securities" as that term is defined under Rule 144 under the
Securities Exchange Act of 1934. Sellers will sign a Subscription Agreement
and Representation Letter in the form attached as Exhibit IV. Sellers will have
the registration rights described below.
A. DEMAND RIGHT. If, at any time after the filing with the SEC of
Buyer's Form 10-K for its 1996 fiscal year, Buyer receives a written request
from the holders of a majority of the Buyer Shares, to register the sales of all
or part of the Buyer Shares, Buyer will, as promptly as practicable, but in any
event within six months after the date of such request, use its best efforts to
prepare and file with the SEC a registration statement sufficient to permit the
public offering and sale of the Buyer Shares, provided that Buyer is eligible to
use Form S-3 for that registration. Buyer will be obligated to file only one
such registration statement and will pay all expenses (other than fees for
selling holders' counsel and underwriting discounts applicable to the Buyer
Shares sold) in connection with the offering. If, at the time of the request,
Buyer expects to undertake, or is in the process of undertaking, the
registration of an offering of Common Stock in which the Buyer Shares may be
included, Buyer may, at its option, include the Buyer Shares in that
registration instead of filing a separate registration for them.
B. PIGGYBACK RIGHT. If, at any time during the one year period
commencing on the date of Closing, Buyer files a registration statement (other
than on Form S-4, Form S-8 or other form not permitting "piggyback" of shares,
and any successor forms) with the SEC while any Buyer Shares are held by Seller
under this Pooling Agreement, Buyer will give all of the then holders of Buyer
Shares ("Eligible Holders") at least 20 days' prior written notice of the filing
of the registration statement. If requested in writing by Eligible Holders
holding not less than a majority of the Buyer Shares within 10 days after
receipt of such a notice, Buyer will, one time only, at Buyer's sole expense
(other than the fees of legal counsel to the Eligible Holders and underwriting
discounts applicable to any Buyer Shares sold), register or qualify all or, at
each Eligible Holder's option, any portion, of the Buyer Shares requested by an
Eligible Holder with the registration of the other Buyer securities being
registered. However, if the underwriter of such an offering determines that
inclusion of the Buyer Shares or any part of them in the proposed offering is
detrimental to the offering and so advises the Eligible Holders, the Buyer
Shares will
3
<PAGE>
not be registered and the Eligible Holders will be deemed not to have been given
notice under this paragraph. To the extent that the underwriter agrees to
include only part of the Buyer Shares, those Buyer Shares must be included on a
pro rata basis from the shareholders of them, and the balance of the Buyer
Shares not registered because of the underwriter's decision will be eligible for
one additional piggyback right.
C. COOPERATION. In any registration of Buyer Shares, the current
shareholders and employees of Logical and the selling holders will cooperate
fully with Buyer to facilitate the registration.
D. NOTICE. If Buyer receives a request from a holder of Buyer Shares to
register Buyer Shares under this Section, Buyer will notify all other holders of
Buyer Shares and include such of their Buyer Shares as they may request to be
registered in any registration statement if the request is received within 10
days of the date of the notice.
E. EFFECTIVE PERIOD. Buyer will use its best efforts to cause to become
effective and to keep effective for a period not to exceed 90 days any
registration filed under this Section and from time to time will amend or
supplement the registration statement as necessary.
F. DELAY AND SUSPENSION OF SALES. Notwithstanding the foregoing
provisions, Buyer may delay, for not longer than six months from Buyer's receipt
of the demand for registration, filing a registration statement, and may
withhold efforts to cause the registration statement to become effective, if
Buyer determines in good faith that (a) such a registration (i) might interfere
with or affect the negotiation or completion of any transaction that is being
contemplated by Buyer (whether or not a final decision has been made to
undertake that transaction) at the time the right to delay is exercised, (ii)
might involve initial or continuing disclosure obligations that might not be in
the best interest of the Company's stockholders, or (iii) will require
preparation of audited financial information for Buyer as of a date or for a
period which would not otherwise be required, or (b) any material circumstance
of Buyer renders the effecting of such a registration statement inappropriate at
the time. If, after a registration statement becomes effective, Buyer advises
the holders of registered shares that Buyer considers it appropriate for the
registration statement to be amended, the holders of those shares shall suspend
any further sales of their registered shares until Buyer advised them that the
registration statement has been amended. The 90-day time period referred to in
this Section during which the registration statement must be kept current after
its effective date shall be extended for an additional number of business days
equal to the number of business days during which the right to sell shares was
suspended pursuant to the preceding
4
<PAGE>
sentence, but in no event will Buyer be required to update the registration
statement after the second (or first, if Rule 144 under the 1933 Act is amended
to permit sales pursuant to the rule after one year) anniversary of Closing.
G. POOLING SALES RESTRICTIONS. Except for de minimis sales, no
affiliate of either Buyer or Logical shall sell any shares of Buyer during the
period beginning 30 days before Closing and ending on the publication date of
financial results covering at least 30 days of post-merger operations as
provided by SEC Accounting Series Release Number 130.
H. DOCUMENTS. Buyer will furnish to each selling shareholder a number of
copies of the registration statement, preliminary prospectus and prospectus and
amendments and supplements to them as the selling shareholder may reasonably
request to facilitate the disposition of the Buyer Shares in the registration.
V. SELLERS'S REPRESENTATIONS AND WARRANTIES. Sellers and Logical, jointly and
severally, represent and warrant to Buyer that the following are true at the
date of this Agreement and will be true at Closing except as disclosed on the
Disclosure Schedule designated as Exhibit V to this Agreement:
A. ORGANIZATION AND STANDING OF LOGICAL. Logical is a corporation
validly existing under the laws of the State of North Carolina, with full power
and authority to carry on its business as it is now being conducted, and to own
and operate its assets and business. It has no subsidiaries. Logical is duly
licensed or qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business
transacted by it or the character of properties owned or leased by it requires
that licensing or qualification, except where the failure to be so licensed or
qualified would not have a material adverse effect on its business, operations
or financial condition.
B. CAPITALIZATION. Logical is authorized to issue 100,000 shares of
$1.00 par value common stock and only 20,000 shares, constituting the Logical
Shares, are issued and outstanding. As of the date of Closing, there are a
total of 15,520 Regular Logical Shares issued and outstanding, of which Boyette
holds 10,000 shares and Pugh holds 5,520 shares, and 4,480 Callable Logical
Shares issued and outstanding, all of which are held by Pugh. Logical holds no
shares of Logical stock as treasury shares. The Logical Shares have been
validly issued and are fully paid and nonassessable. No outstanding
subscriptions, options, warrants, calls, commitments or agreements relating to
the authorized or issued shares of Logical are outstanding.
5
<PAGE>
C. STOCK OWNERSHIP. Sellers have good and marketable title to the
Logical Shares held by them, free from encumbrance or any contractual or other
restriction on their transfer or encumbrance, and have full power, right and
authority to surrender the Logical Shares pursuant to this Pooling Agreement.
D. APPROVAL. The Board of Directors and shareholders of Logical have
approved this Agreement. No other approval is necessary to consummate the
Transactions contemplated by this Pooling Agreement. This Pooling Agreement
constitutes the legal, valid and binding obligation of Sellers and Logical,
enforceable in accordance with its terms (subject as to enforcement of remedies,
to the discretion of courts in awarding equitable relief and to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
the rights of creditors generally).
E. FINANCIAL STATEMENTS. The Closing Balance Sheet (Exhibit V-E) and
supporting information, when delivered by Sellers and to Buyer, will be, and the
books and records on which they are based are and will be, correct in all
material respects, and fairly represent the financial condition of Logical as of
the date of Logical's most recent year end. Buyer, and Sellers and Logical
agree that the Closing Balance Sheet (and any other financial statements
provided to Buyer) will be and have been prepared on a tax basis and may be
audited by Buyer's public accounting firm.
F. OWNERSHIP OF LOGICAL. As of the date of Closing, except for this
Pooling Agreement, there will not be any outstanding or authorized warrants,
calls, rights, commitments or other agreements of any nature to which Logical is
a party, or may be bound by, requiring it to issue, transfer, sell, purchase,
redeem or acquire any shares of capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for or
acquire any shares of capital stock of Logical.
G. ABSENCE OF CERTAIN CHANGES. Since the end of the most recent Logical
fiscal year ("Most Recent Logical Year End"), there have not been (i) any
material changes in Logical's financial condition, assets, liabilities, or
business, other than changes in the ordinary course of business, none of which
has been materially adverse; (ii) any damage, destruction, or loss, whether or
not covered by insurance, materially and adversely affecting Logical's
properties or business or the assets; (iii) any labor trouble or any event or
condition of any character materially and adversely affecting Logical's
business; (iv) any indebtedness incurred by Logical for borrowed money or any
commitment to borrow money entered into or any guarantee given by Logical,
except for trade advances from customers in the ordinary course of business and
in accordance with historic business practices; (v) any mortgage, pledge,
subjection to lien, charge or encumbering of or creation of any security
interest in all or any of Logical's assets or its business, (vi) any failure to
maintain insurance policies or
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renewals thereof in force or to give all notices or claims made thereunder in a
timely fashion, or (vii) any material increase in the compensation payable by
Logical to any officer, director or key employee of Logical, except for normal
distributions to shareholders.
H. TITLE TO PROPERTIES. Logical owns, free and clear of any liens,
encumbrances, claims, charges, contractual or other restrictions on transfer,
equities, security interests, options or other restrictions, and has good title
to its assets, subject to any lien for current taxes or assessments not yet
delinquent.
I. CONTRACTS. There are no contracts, agreements, leases, or commitments
not terminable at will, which would prevent Buyer from continuing the business
as it is now conducted by Logical, including without limitation, those with
purveyors or suppliers of items used in the conduct of Logical's business.
Logical has materially performed all its contracts, to the extent performance is
due, and has cured all defaults.
J. ACTIONS. To the best knowledge of Sellers, there are no judgments,
actions, suits, claims, proceedings, investigations, bankruptcy or insolvency
proceedings or receiverships (collectively, "Actions") pending or threatened
against or relating to Logical, its assets or business, in any court, or before
any governmental department or agency, nor is Logical or any of its assets
subject to any unsatisfied judgment, order or award as a result of any such
Actions. Sellers and Logical do not know of any basis for any such Actions.
K. TAX MATTERS. As of the date of this Agreement, to the best knowledge
of Sellers and Logical, the representations concerning tax matters contained in
the financial statements are true and correct in all material respects. All tax
returns required to be filed with respect to Logical or its operations by
Logical or Sellers with any taxing authority as of Closing have been filed or
will be filed promptly after Closing or when due, and all taxes required to be
paid with respect to the periods covered by those returns have been paid or
accrued or adequate reserves for the payment thereof have been established.
Logical is not delinquent in the payment of any tax, assessment or governmental
charge.
L. DISCLOSURE. Sellers have not made any untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading.
M. NO VIOLATION OF CORPORATION INSTRUMENTS OR OTHER AGREEMENTS. The
execution and delivery of this Pooling Agreement does not, and the consummation
of the Transactions will not: (i) violate any provision of the Articles of
Incorporation, Bylaws,
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Stock Certificates, Stock Records or Minute Book of Logical; (ii) result in any
material breach or the acceleration of any material obligation under any
instrument, indenture, note, lien, bond, agreement, contract, mortgage, lease,
license, or commitment under which any or all of Logical and Sellers are bound;
(iii) require any consent, approval or authorization of any governmental or
regulatory authority; (iv) violate any order, writ, injunction, judgment,
decree, statute, rule or regulation applicable to Logical or Sellers or
Logical's business or any of Logical's assets or (v) result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
upon the assets or business.
N. BROKERAGE. No brokerage fees are payable in connection with the
Transactions resulting from any brokerage agreements entered into by Sellers or
Logical.
O. PERMITS, LICENSES AND FRANCHISES. To the best of Sellers' knowledge,
(i) Logical has all permits, licenses, franchises, and other authorizations
necessary to, and has substantially complied with all laws applicable to, the
conduct of its business in the manner in which the business is currently being
conducted, and all those permits, licenses, franchises and authorizations are
valid and in full force and effect, (ii) Logical and Sellers have not engaged in
any activity which would cause revocation or suspension of any such permit,
license, franchise or authorization which would result in a material adverse
effect on Logical or the operation of the business, and (iii) neither Logical
nor Sellers (or either of them) has knowledge of any action, threat or
proceeding looking to or contemplating the revocation or suspension of any
thereof.
P. EMPLOYEES. To the best of Sellers' knowledge, no third party has
claimed that any person employed or affiliated with Logical has violated or may
be violating any of the terms and conditions of that person's employment, non-
competition or non-disclosure agreement with that third party, or disclosed or
may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of that third party or interfered or
may be interfering in the employment relationship between that third party and
any of its present or former employees. Sellers have no knowledge that any key
employee of Logical intends to leave or is leaving the employ of Logical in
order to take part, as an employee or otherwise, in any business in competition
with Logical.
Q. ENVIRONMENTAL, HEALTH AND SAFETY. To the best of Sellers' knowledge,
(i) Logical has complied with all environmental, health and safety laws, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against it alleging any failure so
to comply; (ii) without limiting the generality of
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the preceding, each of Logical and its predecessors and affiliates has obtained
and been in material compliance with all of the terms and conditions of all
permits, licenses, and other authorizations which are required under, and has
complied with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and timetables which are
contained in, all environmental, health and safety laws; and (iii) none of
Logical, its predecessors and affiliates has any liability for damage to any
site, location, or body of water (surface or subsurface), for any illness of or
personal injury to any employee or other individual or for any reason under any
environmental, health or safety law. To the best of Sellers' and Logical's
knowledge, all properties and equipment used in Logical's and its predecessors'
and affiliates' business have been free of asbestos, PCB's, methylene chloride,
1,2-trans-dichloroethylene, dioxins, dibenzofurans, and extremely hazardous
substances, except for trichloroethylene, use of which was in compliance with
law but has been discontinued.
R. PRODUCT LIABILITY. To the best of Sellers' knowledge, Logical has no
material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by Logical.
S. CONTINUITY OF BUSINESS ENTERPRISE. Prior to the Effective Time of the
Merger, Logical has historically operated and engaged in the business enterprise
of design, production and marketing of computer equipment and software, and
historically has utilized its business assets in such business enterprise, as
contemplated by Treas. Reg. section 1.368-1(d).
T. SHAREHOLDER INTERESTS AND AGREEMENT. Sellers represent and warrant
that they hold all of the issued and outstanding shares of capital stock of
Logical, that of those outstanding shares Ken Boyette owns 10,000 and Charles
Pugh owns 5,520 of the issued Regular Logical Shares and Charles Pugh owns all
of the issued Callable Logical Shares, that they agree on those percentages of
ownership and the various Conversion Ratios placed on them, and that no disputes
of any nature, whether claims, lawsuits or other disagreements formally filed or
informally pursued exist between them or on their behalf with respect to that
share ownership or Conversion Ratio, no such disputes have been threatened and
each has fully and finally agreed to waive any right to dispute, change or
affect that ownership and their respective percentages of ownership or the
Conversion Ratio in any way.
U. LIABILITIES IN THE ORDINARY COURSE OF BUSINESS. The liabilities of
Logical assumed by Company and the liabilities to
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which the transferred assets of Logical are subject, were incurred by Logical in
the ordinary course of business.
V. INVESTMENT COMPANY. Logical is not an investment company within the
meaning of such term as used in Section 368(a)(2)(F)(iii) and (iv) of the
Internal Revenue Code.
W. EQUITY TRANSACTIONS. There have been no transactions in Logical
common stock since May 1, 1994, and no options, warrants, rights or other equity
instruments other than the previously issued common stock were outstanding
during that period.
X. OTHER LIABILITY. The default judgment against Logical in the suit by
Cameron McPhee in the Superior Court of Wake County has been paid and satisfied,
and Logical has no further liability on such judgment.
VI. BUYER'S WARRANTIES AND REPRESENTATIONS. Buyer represents and warrants to
Logical and Sellers that the following are true as of the date of this Agreement
and will be true at Closing:
A. ORGANIZATION AND STANDING OF BUYER. Each of Buyer and Company is a
corporation validly existing and in good standing under the laws of the State of
New Mexico, with full power and authority to carry on its business as it is
conducted, to own and operate its assets, and to execute this Agreement and
consummate the Transactions. Buyer has three subsidiaries, Company, GreenSpring
Computers, Inc. and Berg Systems International, Inc. Buyer is duly licensed or
qualified to transact business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires that licensing or
qualification except where the failure to be so licensed or qualified would not
have a material adverse effect on the business, operations or financial
condition of Buyer.
B. CAPITALIZATION. Buyer is authorized to issue 30,000,000 shares of
common stock and, as of June 30, 1996, 3,178,133 of its shares are issued and
outstanding. Buyer holds no treasury shares. Buyer's shares have been validly
issued and are fully paid and nonassessable. No outstanding subscriptions,
options, warrants, calls, commitments or agreements relating to the authorized
or issued shares of Buyer are outstanding except (i) pursuant to Buyer's
employee and director stock option and stock purchase plans and its acquisition
of GreenSpring Computers, Inc., (ii) as disclosed in its Form 10-K for the 1995
fiscal year and subsequent periodic filings filed with the SEC, and (iii) as
required to be issued under this Agreement.
C. NO VIOLATION OF CORPORATE INSTRUMENTS OR OTHER AGREEMENTS. Except as
set forth on Exhibit VI-C, the execution and delivery of this Pooling Agreement
does not, and the consummation
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of the Transactions will not (i) violate any provision of the Articles of
Incorporation, Bylaws, Stock Certificates, Stock Records or Minute Book of
Buyer; (ii) result in any material breach or result in the acceleration of any
material obligation under any instrument, indenture, note, lien, bond,
agreement, contract, mortgage, lease, license or commitment under which Buyer is
bound; (iii) require any consent, approval or authorization of any governmental
or regulatory authority, (iv) violate any order, writ, injunction, judgment,
decree, statute, rule or regulation applicable to Buyer, Buyer's business or any
of Buyer's assets or (v) result in the creation or imposition of any lien,
charge, restriction, claim or encumbrance of any nature upon the assets or
business.
D. APPROVAL. Buyer's Board of Directors has, and as of Closing,
Company's shareholders will have, approved, by all necessary corporate action by
Buyer, the execution, delivery and performance of this Pooling Agreement and
consummation of the Transactions and has authorized its officers to take all
action and to execute, acknowledge and deliver all documents appropriate to
consummate the Transactions. This approval constitutes all and the only actions
required by law, the Articles of Incorporation or Bylaws of Buyer or Company, as
the case may be, or otherwise to authorize the execution and delivery of this
Pooling Agreement and the consummation of the Transactions and this Pooling
Agreement constitutes the legal, valid and binding obligation of Buyer and
Company, enforceable in accordance with its terms (subject as to enforcement of
remedies, to the discretion of courts in awarding equitable relief and to
applicable bankruptcy, reorganization, insolvency, moratorium and similar laws
affecting the rights of creditors generally).
E. BROKERAGE. No brokerage fees are payable by Buyer in connection with
the Transactions.
F. SHARES. The issuance, sale and delivery of the Buyer Shares have
been duly authorized by all required corporate action; the Buyer Shares issued
at Closing will be validly issued, fully paid and nonassessable free and clear
of all liens, charges, restrictions, claims and encumbrances imposed by or
through Buyer except as imposed by securities laws. The issuance, sale or
delivery of the Buyer Shares is not subject to any preemptive right of
stockholders of Articles of Incorporation or By-laws of Buyer, each as amended,
or to any contractual right of first refusal or other right in favor of any
person.
G. FINANCIAL STATEMENTS. Buyer has filed Quarterly Reports on Form 10-Q
for the fiscal quarters ended March 31, 1996 ("Most Recent Fiscal Quarter End"),
December 31, 1995, and September 30, 1995 and an Annual Report on From 10-K for
the fiscal year ended June 30, 1995. The financial statements included in or
incorporated by reference into these Public Reports (including the
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related notes and schedules) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered by them and present fairly
the financial condition of Buyer as of the indicated dates and the results of
operations of Buyer for the indicated periods; provided, however, that the
interim statements are subject to normal year-end adjustments. Since the Most
Recent Fiscal Quarter End, there has not been any material adverse change in the
financial condition of Buyer and its subsidiaries taken as a whole.
H. FILINGS WITH SEC. Buyer has made all filings with the Securities and
Exchange Commission ("SEC") that it has been required to make within the past 12
months under the Securities Act and the Securities Exchange Act (collectively
the "Public Reports"). Each of the Public Reports has complied with the
Securities Act and the Securities Exchange Act in all material respects. None
of the Public Reports, as of their respective dates, contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements made in it, in light of the circumstances under
which they were made, not misleading. Buyer has delivered to Sellers and
Logical a correct and complete copy of each Public Report, together with all
exhibits and schedules thereto and as amended to date.
I. CONTROL OF COMPANY. Before the Merger, Buyer will be in control of
Company within the meaning of Section 368(c) of the Internal Revenue Code.
J. REDEMPTION OF SHARES. Buyer has no plan or intention to redeem or
otherwise reacquire any of the Buyer Shares to be issued in the Merger.
K. BUYER'S INTENTION. Buyer has no plan or intention to liquidate
Company, to merge Company with and into another corporation, to sell or
otherwise dispose of the stock of Company, or to cause Company to sell or
otherwise dispose of any of the assets of Logical acquired in the Merger, except
for dispositions made in the ordinary course of business or transfers described
in Section 368(a)(2)(C) of the Internal Revenue Code.
L. CONTINUATION OF HISTORIC BUSINESS AND USE OF ASSETS. Following the
Effective Time of the Merger, the Company will continue to operate and engage in
Logical's historic business enterprise of design, production and marketing of
computer equipment and software, and will continue to utilize Logical's business
assets in such business enterprise, as contemplated by Treas. Reg. section
1.368-1(d).
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M. INTERCORPORATE DEBT. There is no intercorporate debt existing between
Buyer and Logical or between Company and Logical that was issued, acquired,
settled or will be settled at a discount.
N. INVESTMENT COMPANY. Buyer and Company are not investment companies
within the meaning of such term as used in Section 368(a)(2)(F)(iii) and (iv) of
the Internal Revenue Code.
VII. BUYER'S CONDITIONS PRECEDENT. All obligations of Buyer under this Pooling
Agreement to close the Transactions are subject to the fulfillment before
Closing, of each of the following conditions:
A. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Sellers'
representations and warranties contained in this Agreement are true at the time
of Closing.
B. PERFORMANCE. Sellers have performed and complied with all agreements
and conditions required by this Pooling Agreement to be performed or complied
with by Sellers at Closing.
C. CONSENTS. Any consents necessary to allow the Transactions to occur
have been obtained in writing, in form satisfactory to Buyer.
D. LOGICAL BANKRUPTCY. Logical is not in a bankruptcy, reorganization or
insolvency proceeding, nor is any such proceeding contemplated.
E. POOLING OF INTERESTS OPINION. Buyer will have received from its
accountants an opinion, satisfactory in form and substance to it, to the effect
that the Transactions will be treated by Buyer as a "pooling of interests" for
accounting purposes and for federal income tax purposes, pursuant to Section 368
of the Internal Revenue Code of 1986, as amended.
F. ATTORNEY OPINION. Buyer will have received from Sellers' attorney an
opinion of counsel with respect to the Transactions in substantially the form
attached as Exhibit VII-F.
G. CERTIFIED RESOLUTIONS. Sellers have furnished to Buyer a certified
copy of resolutions duly adopted by the Board of Directors and the shareholders
of Logical authorizing and approving
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the execution and delivery of this Agreement and authorizing the consummation of
the Transactions.
H. ACCOUNTING OPINION. Sellers have furnished to Buyer a copy of an
opinion from Sellers' accountants to Logical and Sellers to the effect that the
Transactions will be treated by Logical and Sellers as a tax-free reorganization
for federal income tax purposes, pursuant to Section 368 of the Internal Revenue
Code of 1986, as amended.
VIII. SELLERS' CONDITIONS PRECEDENT. All obligations of Sellers under this
Pooling Agreement to close the Transactions are subject to the fulfillment by
Closing of each of the following conditions:
A. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Buyer's
representations and warranties contained in this Pooling Agreement are true at
the time of Closing.
B. PERFORMANCE. Buyer has performed and complied with all agreements and
conditions required by this Pooling Agreement to be performed or complied with
by Buyer before or at Closing.
C. CERTIFIED RESOLUTIONS. Buyer has furnished to Sellers a certified
copy of resolutions duly adopted by the Board of Directors of Buyer authorizing
and approving the execution and delivery of this Agreement and authorizing the
consummation of the Transactions.
D. ATTORNEY OPINION. Sellers will have received from Buyer's attorney an
opinion of counsel with respect to the Transactions in substantially the form
attached as Exhibit VIII-D.
E. BUYER BANKRUPTCY. Buyer is not in a bankruptcy, reorganization or
insolvency proceeding, nor is any such proceeding contemplated.
IX. CLOSING. Closing will be held as soon as practicable, but in any event not
later than August 31, 1996. If Sellers' and Buyer's conditions precedent have
been performed or waived, the Transactions will be closed. If those conditions
precedent have not been performed or waived, the Transactions will not be
closed, and the rights, duties and obligations between the parties will be
terminated without further liability.
A. SELLERS' DUTIES. Sellers and Logical, as appropriate, will deliver to
Buyer at Closing:
1. The Logical Shares, properly endorsed for transfer;
2. A certified copy of the resolutions of directors and shareholders
of Logical authorizing the Transactions;
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3. Executed resignation letters of officers and directors of
Logical;
4. Executed Employment Agreements of Sellers with Buyer;
5. Executed Covenant Not To Compete of Sellers with Buyer;
6. Executed Articles of Merger;
7. Executed Subscription Agreement and Representation Letter of
Sellers;
8. Affidavit of Sellers with respect to Stock Ownership;
9. UCC-3 Termination Statement from Southern National Bank for
August, 1993 filing;
10. Executed Option Agreements from SBS to Sellers; and
11. Any and all other documents required by this Pooling Agreement to
be delivered to Buyer at Closing.
B. BUYER'S DUTIES. Buyer will deliver to Sellers at Closing:
1. The Buyer Shares;
2. Executed Employment Agreements of Sellers with Buyer;
3. Executed Covenants Not To Compete of Sellers with Buyer;
4. Executed Articles of Merger;
5. Certified copy of resolutions of Buyer's Board of Directors
authorizing the Transactions and the issuance of the Buyer Shares; and
6. Any and all other documents required by this Pooling Agreement to
be delivered to Sellers at Closing.
C. JOINT DUTIES. Buyer and Sellers will execute any further documents
and do all things necessary to consummate the Transactions contemplated by this
Pooling Agreement, including executing and filing the Articles of Merger
required to be filed under applicable state law.
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X. PERSONAL GUARANTEES. As soon as reasonably practical after Closing, but in
no event later than sixty (60) days following Closing, Buyer and the Company
shall cause Sellers to be removed from personal guarantees as may exist on
obligations and indebtedness of Logical existing at the time of Closing, and
which are disclosed on Exhibit X.
XI. PROPRIETARY INFORMATION. Sellers each agree, represent and warrant that,
unless each of them has obtained Buyer's prior written consent, each of Sellers
will not, at any time after Closing, use for the benefit of other than Buyer,
directly or indirectly, on behalf of Sellers or either of them or any other
person or business entity, any trade secrets or confidential information (i)
concerning the business of Logical or any proprietary information relating to
the business, including the composition, plans or technology of the products
produced by Logical and the method of their manufacture, and Logical financial
data and related information or (ii) provided by Buyer to Sellers in connection
with this Agreement. Confidential information does not include information
generally known in the industry in which Logical and Buyer engage. Sellers each
agree that release of Confidential Information will cause irreparable harm to
Buyer and that, upon any breach or threatened breach of this Section, Buyer may
seek, without limitation of other actions and remedies which might be available,
equitable injunctive relief.
XII. REMEDY FOR BREACH OF WARRANTY. If any warranty or representation in this
Agreement is found within twelve months of Closing, or by the date of the
issuance of the first audited annual consolidated financial statements of the
combined entities following Closing, whichever is earlier, to be untrue or
inaccurate, the party desiring to make a claim for damages resulting from such
breach may do so by delivering to the breaching party express written notice of
the details of such breach and the intent to make a claim, such notice to be
received by the breaching party no later than twelve months following the date
of Closing. Time is of the essence for the purpose of this paragraph. The
party to whom such a representation has been made shall request an arbitration
conducted under the rules of the American Arbitration Association (each party to
select one arbitrator and the third arbitrator to be selected by the other two).
The results of the arbitration shall be binding upon all parties. The
prevailing party in such arbitration shall be entitled to recover its costs,
including reasonable attorneys' fees, incurred in the arbitration proceeding,
from the non-prevailing party, and an award of such costs and expenses shall be
included in the final judgment entered in the arbitration. Unless the
cumulative total of all damages being sought for all claims has exceeded
$50,000, the party against whom a claim is made shall not be liable for any
damages resulting from a breach or warranty hereunder; however, if the $50,000
limit is exceeded, the liable party shall be liable for the full amount of the
breach. The maximum liability of a party for breach of a
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representation or warranty hereunder, if the arbitrators determine that the
party against whom a liability is asserted did not know that the representation
or warranty was untrue, is limited to a cumulative amount of $500,000 for all
such liabilities, which in the case of the Sellers, shall apply to their
combined liabilities under this Agreement. Buyer agrees to keep in effect for
the duration of Sellers' representation and warranty regarding product liability
the amount of product liability insurance currently held by Logical.
XIII. COOPERATION.
A. Sellers and Logical, and Buyer will cooperate to effectuate the
purposes of this Agreement. Sellers and Logical, and Buyer will, without
additional consideration, execute any other documents and take any other action
reasonably necessary to carry out the purposes of this Pooling Agreement. Until
Closing, no news release about the Transactions will be released by Buyers,
Sellers, or either of them, or Logical to the public any media without prior
approval of the other parties, except as may be required by law, in which case,
the other parties will have a reasonable opportunity for review of and comment
on a proposed news release.
B. Sellers and Logical will cooperate with Buyer in connection with any
actions, proceedings, arrangements or disputes involving Logical's business or
based upon the consummation of the Transactions or upon contracts, arrangements
or acts of Sellers or Logical which were in effect or occurred on or before the
Closing date.
C. Sellers and Logical will cooperate, as reasonably required by Buyer,
in the preparation in a form satisfactory to Buyer and Buyer's accountants, of
all financial and other information (including information relating to Sellers'
operation of the business before Logical's incorporation), needed by Buyer to
comply with reporting and filing requirements imposed on Buyer by federal and
state regulatory authorities.
XIV. NATURE AND SURVIVAL OF WARRANTIES AND REPRESENTATIONS. Unless otherwise
provided, all representations and warranties will survive the consummation of
the Transactions for a period of twelve months from the date of Closing, or
until the date of issuance of the first audited annual consolidated financial
statements of the combined entities following Closing, whichever is earlier.
XV. TERMINATION OF AGREEMENT. In addition to a termination of this Pooling
Agreement pursuant to Paragraph III above, this Pooling Agreement may be
terminated by the action of the Board of Directors of Buyer at any time prior to
Closing if (i) Sellers or Logical fail to comply in any material respect with
the Pooling Condition; or (ii) it is determined that any representation or
warranty of Sellers or Logical is not true in all material respects
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when made, causing this Transaction not to be characterized as a pooling of
interest or a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended. Sellers may terminate this Pooling Agreement
at any time prior to Closing if (i) the accountant's opinion to Logical and
Sellers provided in this Pooling Agreement concludes that the Transactions will
not be a tax-free reorganization under the terms of the Internal Revenue Code;
or (ii) it is determined that any representation or warranty of Buyer is not
true in all material respects when made, causing this Transaction not to be
characterized as a pooling of interest or a tax-free reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended. Terminations
made pursuant to this Paragraph shall be without liability for any damages
arising out of the termination. The party terminating this Pooling Agreement
pursuant to this Paragraph shall give express written notice of such intent to
the non-terminating party prior to Closing, which notice must be received by the
non-terminating party prior to Closing.
XVI. MISCELLANEOUS. This Pooling Agreement binds and benefits the parties,
their successors, assigns and transferees. This Pooling Agreement is
specifically enforceable and is governed by New Mexico law. Any suits brought
by the parties arising under this Pooling Agreement shall be brought in the
United States District Court for the Eastern District of North Carolina, and the
parties expressly acknowledge that such court shall have jurisdiction over the
matter and parties, and that venue shall be proper in such court. In any
proceeding or action brought to enforce the provisions of this Pooling Agreement
or to settle disputes between the parties arising under this Pooling Agreement,
the prevailing party shall be awarded its costs, including reasonable attorneys'
fees, incurred in such proceeding or action, against the non-prevailing party.
This Pooling Agreement, the Employment Agreements and the Covenants constitute
the entire agreement and understanding of the parties and supersede all prior
oral or written agreements and understandings and may be modified only in
writing. This Pooling Agreement may be executed in multiple counterparts, each
of which shall be deemed an original, but all of which taken together will
constitute one and the same instrument. Captions and titles have been inserted
in this Pooling Agreement for the benefit of the parties in referring to this
Pooling Agreement, but will not be construed or interpreted as part of this
Pooling Agreement. Each of Sellers and Logical, and Buyer will pay its
expenses, including without limitation attorneys' fees, arising out of the
Transactions and the agreements embodying them.
XVII. NOTICES. Any notice or other communication required under this
Pooling Agreement or desired to be given by any of the parties to this Pooling
Agreement to any other party shall be deemed to be duly given when personally
delivered or five (5) business days after being mailed by certified or
registered United States mail, return receipt requested, postage prepaid, to the
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other party, or delivered pre-paid for over-night delivery to Federal Express,
United Parcel Service or the United States mail, addressed as follows:
BUYER:
SBS Technologies, Inc.
Attn: Christopher J. Amenson, President
2400 Louisiana Boulevard, NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
Telephone: (505) 875-0600
Copy to: Alison K. Schuler, Esquire
Schuler, Messersmith & McNeill
5700 Harper Drive, NE, Suite 430
Albuquerque, New Mexico 87109
Telephone: (505) 822-8826
SELLERS:
Mr. James Kenneth Boyette
4513 Kaplan Drive
Raleigh, North Carolina 27606
Telephone: (919) 859-3745
Mr. Charles D. Pugh
2928 Bally Bunion Way
Raleigh, North Carolina 27613
Telephone: (919) 848-2290
Copy to: William B. Gwyn, Esquire
Maupin Taylor Ellis & Adams, P.A.
Highwoods Tower One, Suite 500
3200 Beechleaf Court
Raleigh, North Carolina 27604-1064
Telephone: (919) 981-4000
Or to such other address which may be furnished in writing.
[Remainder of This Page Left Intentionally Blank]
19
<PAGE>
DATED: August 19, 1996
BUYER: SELLERS:
SBS TECHNOLOGIES, INC.
By: /s/ C. J. Amenson /s/ James Kenneth Boyette
-------------------- ------------------------
JAMES KENNETH BOYETTE
Its: President
------------------
/s/ Charles D. Pugh
------------------------
CHARLES D. PUGH
LOGICAL DESIGN, INC. LOGICAL DESIGN GROUP, INC.
By: /s/ C. J. Amenson By: /s/ James Kenneth Boyette
--------------------- ------------------------
Its: Chairman Its: President
--------------------- ------------------------
20
<PAGE>
EXHIBIT I-D
EMPLOYMENT AGREEMENT
<PAGE>
EMPLOYMENT AGREEMENT
SBS Technologies, Inc. ("Company") and James Kenneth Boyette ("Employee")
agree:
1. EMPLOYMENT. Company employs Employee for the period beginning on the
date of this Employment Agreement, and ending three years from its date or upon
discharge or resignation of Employee (the "Employment Period"). During the
Employment Period, Employee will serve in the position and will have such duties
as described on Schedule A attached and incorporated by reference. Employee
will devote sufficient time and energies to the business of Company to
accomplish the duties assigned, will perform to the best of Employee's ability
all duties assigned to Employee by Company and will devote Employee's best
efforts to advance the interests of Company. Employee will have the power and
authority determined by Company. For purposes of all employee benefit programs
of Company, except for any employee stock purchase plan for the fiscal year in
which this Agreement is executed, the seniority of the Employee shall include
the time while the Employee was employed by Logical Design Group, Inc.
2. RENEWAL. This Agreement may be renewed at the end of the Employment
Period. Company will give written notice of renewal to Employee thirty days
before the Employment Period is due to expire.
3. COMPENSATION. For all services performed by Employee for Company
during the Employment Period, Company will pay Employee the salary set forth on
Schedule B attached and incorporated by reference. Employee will be entitled to
participate in employee benefit programs established by Company and applicable
to all full-time employees. Employee will be entitled to vacation, national
holidays and paid sick leave in accordance with Company policy. During
vacation, national holidays and paid sick leave, Employee will receive
Employee's usual compensation.
4. REIMBURSEMENT OF EXPENSES. Company recognizes that Employee, in
performing Employee's duties hereunder, may be required to spend sums of money
in connection with those duties for the benefit of Company. Employee may
present to Company an itemized voucher listing expenses paid by Employee in the
performance of Employee's duties on behalf of Company, and on presentation of
such itemized voucher Company will reimburse Employee for all reasonable
expenses itemized thereon, including, but not limited to, travel, meals,
lodging, entertainment, and promotion with respect to all activities approved in
writing in advance by the Company. Employee may receive advances from Company
for anticipated expenses. Employee agrees that the amount by which an advance
exceeds actual expenses ("Amount") will be promptly refunded to Company upon
determination by Company that it is due, that the Amount may be deducted from
any payments of any nature, (including without limitation salary) owed by
Company to Employee, and that the Amount will constitute a debt from Employee to
Company, enforceable by Company in all respects as if Employee had
<PAGE>
executed a promissory note or other instrument acknowledging the debt, bearing
interest at a rate of 10% per year from the date repayment is due and payable in
full on demand without set-off or deduction.
5. SICK LEAVE AND DISABILITY. Employee will be entitled to sick leave
for the number of days determined by Company ("Sick Leave"). Employee will be
entitled to receive Employee's full salary during Sick Leave. Employee will be
considered to be disabled during any period in excess of Sick Leave during which
Employee is unable to work because of illness or incapacity ("Disability
Period"). During the Disability Period, Employee will receive such benefits as
are provided pursuant to the Company's short-term and long-term disability
insurance policies, if any, but no other compensation, nor shall Employee accrue
any vacation or sick leave or similar benefits during the Disability Period. In
no event will Employee be entitled to payment for other compensation for unused
Sick Leave or Disability Period, unless required by law or otherwise provided in
a policy or unemployment manual adopted by the Board of Directors of Company.
6. NON-COMPETE RESTRICTIONS. As part of Employee's employment agreement
with Company, Employee will enter into a Non-Compete Agreement in substantially
the form attached as Appendix B, which is incorporated and made a part of this
Agreement by reference.
7. RESIGNATION AND DISCHARGE. Employee may resign by giving 30 days'
written notice to Company before resigning. Employee's death will constitute a
resignation. Company may discharge Employee without cause upon 30 days' notice.
If requested by the Company in writing Employee will continue to render
Employee's services through the effective date of resignation or discharge
("Effective Date"). If Employee refuses, upon Company's request, or fails, to
render services competently and in good faith to the Company's benefit through
the Effective Date, Company may deem the Effective Date to be the date of
refusal or failure, as the case may be. If Company terminates Employee without
cause during the first year of employment, Company will pay Employee a severance
benefit equal to 12 months of Employee's base salary; during the second year of
employment, that severance benefit will be nine months of base salary; during
the third year of employment, that severance benefit will be six months of
Employee's base salary; after the third year, no severance benefit will be
payable except in accordance with Company's standard policy.
Cause for termination will be deemed to exist if during the Employment
Period, Employee materially breaches any provision or restriction, or materially
fails to perform any obligation contained in this Agreement or in any Company
policy or Company
EMPLOYMENT AGREEMENT
PAGE 2
<PAGE>
employment manual or practice, or, unless otherwise provided by Company policy
or Company employment manual, (a) fails to comply with any employment or non-
discrimination or similar law, regulation or policy, (b) abuses alcohol or uses
illegal drugs, (other than as prescribed by Employee's physician), (c) refuses
to submit to testing for alcohol or drugs, or (d) is convicted of any felony, or
a misdemeanor involving allegations of moral turpitude or violent conduct,
Company may immediately discharge Employee without liability for salary after
the date of the discharge and without any other liability to Employee. If the
Employee does not agree with the finding of the Company with respect to whether
cause for termination exists, and therefore whether the Company is obligated to
pay a severance benefit to Employee under this Agreement, the issue shall be
settled by submitting the same to arbitration in accordance with the rules and
procedures of the American Arbitration Association, Charlotte, North Carolina
office, with each party bearing one-half of the expenses of such proceeding,
except that each party shall bear its respective attorneys' fees and expenses.
Such proceeding shall be limited to determining the issue of whether the Company
is obligated to pay a severance benefit to Employee under this Agreement.
Employee's remedy for discharge or termination of this Agreement shall be
limited to pursuit of such arbitration proceeding. In the event that the
Employee is subsequently acquitted of any criminal charges as may have been the
basis of his discharge and termination under this Paragraph, such subsequent
acquittal may be grounds in the arbitration proceeding for determining that
cause for termination did not exist, and therefore that Employee is entitled to
the payment of the severance benefit, but shall not entitle the Employee to
reinstatement of his employment.
In no event will Employee be entitled, upon resignation or discharge
with or without cause, to payment for unused vacation, sick leave or similar
benefits of any kind unless required by law or otherwise provided in a policy or
employment manual adopted by the Board of Directors of Company, except for the
severance benefit as provided in this Agreement.
8. CONFIDENTIAL INFORMATION. Employee acknowledges and recognizes that
Employee is, or will be, employed by Company in a confidential relationship and
may receive and have access to the confidential non public business information,
customer names, contracts and other customer data, business methods, techniques
and trade secrets of Company not available to the public ("Confidential
Information"). Confidential Information includes information made available to
the public in violation of this Agreement. Employee may develop ideas,
conceptions, inventions, processes, methods, products and improvements; and
Employee may receive disclosures of ideas, conceptions, inventions, processes,
methods, products and improvements made by other employees of Company ("Company
EMPLOYMENT AGREEMENT
PAGE 3
<PAGE>
Inventions"). Employee may participate with Company in improving and developing
Confidential Information and Company Inventions. Confidential Information and
Company Inventions developed on behalf of Company are neither commonly known nor
readily accessible to others and are used by Company in its business to obtain a
competitive advantage over Company's competitors who do not know or use the
Confidential Information or Company Inventions. Protection of the Confidential
Information and Company Inventions against unauthorized disclosure and use is of
critical importance to Company in maintaining its competitive position.
Employee agrees that Employee will not, at any time, during or after the
Employment Period, make any independent use of, or disclose to any other person
or organization, except as authorized by Company in writing, any Confidential
Information or Company Inventions. Upon termination of the Employment Period
for any reason, Employee shall promptly deliver to Company all drawings,
manuals, letters, notes notebooks, reports, customer lists, customer data,
mailing lists, and all other materials and records of any kinds, and all copies
thereof, that may be in the possession of, or under the control of, Employee
pertaining to Company's business including any that contain any Confidential
Information or Company Inventions.
Employee and Company recognize that irreparable injury may result to
Company in the event of breach or threatened breach of this paragraph of this
Agreement by Employee. If Employee commits a breach or threatens to commit a
breach of any of the provisions of this paragraph, Company shall have the right
and remedy, in addition to any others that may be available, at law or in
equity, to have the provisions of this paragraph specifically enforced by any
court having equity jurisdiction, together with an accounting therefor, Employee
having specifically acknowledged that any such breach or threatened breach will
cause irreparable injury to Company and that money damages will not provide an
adequate remedy to Company.
9. INVALIDITY. If any provision of this Employment Agreement is later
construed to be unenforceable or invalid, the remaining provisions shall not be
affected but shall continue in full effect. If any term of this Employment
Agreement is found to be unenforceable or invalid by any court having
jurisdiction, that court shall have the power to reduce or revise the term and
the paragraph(s) shall then be fully enforceable.
10. ASSIGNMENT. Employee acknowledges that Employee's services are unique
and personal. Accordingly, Employee may not assign his rights or delegate his
duties or obligations under this Agreement. The Employer's rights and
obligations shall inure to the benefit of and shall be binding upon Employer's
successor and assigns.
EMPLOYMENT AGREEMENT
PAGE 4
<PAGE>
11. PERSONNEL POLICIES. Company's personnel policies apply to all of
Company's employees, including Employee, and describe additional terms and
conditions of employment of Employee. Those terms and conditions, as they may
be revised from time to time by Company, are incorporated by reference into this
Employment Agreement. Company reserves the right to revise the personnel
policies from time to time, as Company reasonably deems necessary. If any
personnel policy provision conflicts with a provision of this Employment
Agreement, the terms of this Employment Agreement shall govern.
12. ALCOHOL AND DRUG TESTING. Employee agrees to comply with and submit
to any Company program or policy for testing for alcohol abuse or use of drugs
and, in the absence of such a program or policy, to submit to such testing as
may be required by Company and administered in accordance with applicable law
and regulations.
13. MISCELLANEOUS. This Employment Agreement constitutes the entire
understanding of the parties, may be modified only in writing, is governed by
laws of New Mexico, and will bind and inure to the benefit of Employee and
Employee's personal representative and Company and Company's successors and
assigns. Any suit brought by the parties arising under this Agreement shall be
brought in the United States District Court for the Eastern District of North
Carolina, and the parties expressly acknowledge that such court shall have
jurisdiction over the matter and parties, and that venue shall be proper in such
court.
DATED: August 19, 1996.
COMPANY:
SBS TECHNOLOGIES, INC.
BY: /s/ C. J. Amenson
-----------------------------------
ITS: President
-----------------------------------
EMPLOYEE:
/s/ James Kenneth Boyette
----------------------------------
JAMES KENNETH BOYETTE
EMPLOYMENT AGREEMENT
PAGE 5
<PAGE>
SCHEDULE A
TO
EMPLOYMENT AGREEMENT
POSITION AND DUTIES: President of Logical Design, Inc., with all of the duties,
responsibilities and authorities normally associated with and attendant to such
position.
LOCATION FROM WHERE DUTIES SHALL BE PERFORMED: Employee shall be physically
located and shall perform his duties under this Agreement from a location which
is within a radius of thirty miles from 6301 Chapel Hill Road, Raleigh, N.C.
27607.
EMPLOYMENT AGREEMENT
PAGE 6
<PAGE>
SCHEDULE B
TO
EMPLOYMENT AGREEMENT
COMPENSATION: $150,000 base salary, plus eligibility to participate in the SBS
Management Incentive Plan ("MIP").
OTHER MATTERS: Employee and the Company will concurrently with the execution of
this Agreement enter into an Employee Stock Option Agreement pursuant to the
Company's 1992, 1995 and 1996 ISOP granting Employee the right to purchase
60,000 shares of the common stock of the Company.
EARNINGS PERFORMANCE VESTING: The options will vest and become exercisable as
indicated below if the Pretax Earnings of Logical Design, Inc. ("Logical
Design") are equal to or greater than the Pretax Earnings Hurdle amounts shown
below for the respective completed fiscal year as indicated below. If such
condition is met, the option for a respective fiscal year shall be exercisable
beginning 45 days after the end of the respective year.
Option Shares Fiscal Year Ended Pretax Earnings Hurdle
- ------------- ----------------- ----------------------
20,000 6/30/97 $510,000
20,000 6/30/98 $645,000
20,000 6/30/99 $858,000
For purposes of this Agreement, in determining vesting of the stock options,
"Pretax Earnings" shall mean the net income of Logical Design, computed as
historically computed by Logical Design Group, Inc. without deductions for
income taxes, interest expense or corporate assessments of the Company.
If the Pretax Earnings Hurdle for either or both of the first two fiscal years
are not met, the amount by which the Pretax Earnings is less than the Pretax
Earnings Hurdle for a respective year shall be added to the Pretax Earnings
Hurdle for the subsequent year for the purpose of computing a revised hurdle
("Revised Hurdle") for the unvested options from the prior fiscal year. The
previous year(s) options shall vest if the Revised Hurdle is met. However, the
Pretax Earnings Hurdle shall not be affected by the Revised Hurdle for the
purpose of determining vesting for the current year's options.
EMPLOYMENT TERMINATION VESTING: In the event of termination of employment of
the Employee by the Company without cause (as defined in Paragraph 7 of the
Agreement) within the period of employment specified in Paragraph 1 of the
Agreement, one half of the options which are unvested as of the date of
termination shall vest as of the date of termination.
EMPLOYMENT AGREEMENT
PAGE 7
<PAGE>
SEVEN YEAR VESTING: Any option not otherwise vested shall vest and become
exercisable on the date seven years from its date of grant. This Option is
intended to be non-compensatory in nature.
You are required to notify the Company of the following information within 30
days of any transaction involving the sale of exercised options: (1) date of
sale, (2) number of Shares sold, (3) price at which Shares are sold.
The Employee's address for notice purposes is:
4513 KAPLAN DRIVE
---------------------------------------
RALEIGH, NC 27606
---------------------------------------
---------------------------------------
---------------------------------------
The Company will execute and deliver a separate Option Agreement concurrently
with the execution of this Agreement. In the event of conflict between the
terms of the Option Agreement and this Agreement, the Option Agreement shall
control.
EMPLOYMENT AGREEMENT
PAGE 8
<PAGE>
EMPLOYMENT AGREEMENT
SBS Technologies, Inc. ("Company") and Charles D. Pugh ("Employee") agree:
1. EMPLOYMENT. Company employs Employee for the period beginning on the
date of this Employment Agreement, and ending three years from its date or upon
discharge or resignation of Employee (the "Employment Period"). During the
Employment Period, Employee will serve in the position and will have such duties
as described on Schedule A attached and incorporated by reference. Employee
will devote sufficient time and energies to the business of Company to
accomplish the duties assigned, will perform to the best of Employee's ability
all duties assigned to Employee by Company and will devote Employee's best
efforts to advance the interests of Company. Employee will have the power and
authority determined by Company. For purposes of all employee benefit programs
of Company, except for any employee stock purchase plan for the fiscal year in
which this Agreement is executed, the seniority of the Employee shall include
the time while the Employee was employed by Logical Design Group, Inc.
2. RENEWAL. This Agreement may be renewed at the end of the Employment
Period. Company will give written notice of renewal to Employee thirty days
before the Employment Period is due to expire.
3. COMPENSATION. For all services performed by Employee for Company
during the Employment Period, Company will pay Employee the salary set forth on
Schedule B attached and incorporated by reference. Employee will be entitled to
participate in employee benefit programs established by Company and applicable
to all full-time employees. Employee will be entitled to vacation, national
holidays and paid sick leave in accordance with Company policy. During
vacation, national holidays and paid sick leave, Employee will receive
Employee's usual compensation.
4. REIMBURSEMENT OF EXPENSES. Company recognizes that Employee, in
performing Employee's duties hereunder, may be required to spend sums of money
in connection with those duties for the benefit of Company. Employee may
present to Company an itemized voucher listing expenses paid by Employee in the
performance of Employee's duties on behalf of Company, and on presentation of
such itemized voucher Company will reimburse Employee for all reasonable
expenses itemized thereon, including, but not limited to, travel, meals,
lodging, entertainment, and promotion with respect to all activities approved in
writing in advance by the Company. Employee may receive advances from Company
for anticipated expenses. Employee agrees that the amount by which an advance
exceeds actual expenses ("Amount") will be promptly refunded to Company upon
determination by Company that it is due, that the Amount may be deducted from
any payments of any nature, (including without limitation salary) owed by
Company to Employee, and that the Amount will constitute a debt from Employee to
Company, enforceable by Company in all respects as if Employee had
<PAGE>
executed a promissory note or other instrument acknowledging the debt, bearing
interest at a rate of 10% per year from the date repayment is due and payable in
full on demand without set-off or deduction.
5. SICK LEAVE AND DISABILITY. Employee will be entitled to sick leave
for the number of days determined by Company ("Sick Leave"). Employee will be
entitled to receive Employee's full salary during Sick Leave. Employee will be
considered to be disabled during any period in excess of Sick Leave during which
Employee is unable to work because of illness or incapacity ("Disability
Period"). During the Disability Period, Employee will receive such benefits as
are provided pursuant to the Company's short-term and long-term disability
insurance policies, if any, but no other compensation, nor shall Employee accrue
any vacation or sick leave or similar benefits during the Disability Period. In
no event will Employee be entitled to payment for other compensation for unused
Sick Leave or Disability Period, unless required by law or otherwise provided in
a policy or unemployment manual adopted by the Board of Directors of Company.
6. NON-COMPETE RESTRICTIONS. As part of Employee's employment agreement
with Company, Employee will enter into a Non-Compete Agreement in substantially
the form attached as Appendix B, which is incorporated and made a part of this
Agreement by reference.
7. RESIGNATION AND DISCHARGE. Employee may resign by giving 30 days'
written notice to Company before resigning. Employee's death will constitute a
resignation. Company may discharge Employee without cause upon 30 days' notice.
If requested by the Company in writing Employee will continue to render
Employee's services through the effective date of resignation or discharge
("Effective Date"). If Employee refuses, upon Company's request, or fails, to
render services competently and in good faith to the Company's benefit through
the Effective Date, Company may deem the Effective Date to be the date of
refusal or failure, as the case may be. If Company terminates Employee without
cause during the first year of employment, Company will pay Employee a severance
benefit equal to 12 months of Employee's base salary; during the second year of
employment, that severance benefit will be nine months of base salary; during
the third year of employment, that severance benefit will be six months of
Employee's base salary; after the third year, no severance benefit will be
payable except in accordance with Company's standard policy.
Cause for termination will be deemed to exist if during the Employment
Period, Employee materially breaches any provision or restriction, or materially
fails to perform any obligation contained in this Agreement or in any Company
policy or Company
EMPLOYMENT AGREEMENT
PAGE 2
<PAGE>
employment manual or practice, or, unless otherwise provided by Company
policy or Company employment manual, (a) fails to comply with any employment
or non-discrimination or similar law, regulation or policy, (b) abuses
alcohol or uses illegal drugs, (other than as prescribed by Employee's
physician), (c) refuses to submit to testing for alcohol or drugs, or (d) is
convicted of any felony, or a misdemeanor involving allegations of moral
turpitude or violent conduct, Company may immediately discharge Employee
without liability for salary after the date of the discharge and without any
other liability to Employee. If the Employee does not agree with the finding
of the Company with respect to whether cause for termination exists, and
therefore whether the Company is obligated to pay a severance benefit to
Employee under this Agreement, the issue shall be settled by submitting the
same to arbitration in accordance with the rules and procedures of the
American Arbitration Association, Charlotte, North Carolina office, with each
party bearing one-half of the expenses of such proceeding, except that each
party shall bear its respective attorneys' fees and expenses. Such proceeding
shall be limited to determining the issue of whether the Company is obligated
to pay a severance benefit to Employee under this Agreement. Employee's
remedy for discharge or termination of this Agreement shall be limited to
pursuit of such arbitration proceeding. In the event that the Employee is
subsequently acquitted of any criminal charges as may have been the basis of
his discharge and termination under this Paragraph, such subsequent acquittal
may be grounds in the arbitration proceeding for determining that cause for
termination did not exist, and therefore that Employee is entitled to the
payment of the severance benefit, but shall not entitle the Employee to
reinstatement of his employment.
In no event will Employee be entitled, upon resignation or discharge
with or without cause, to payment for unused vacation, sick leave or similar
benefits of any kind unless required by law or otherwise provided in a policy or
employment manual adopted by the Board of Directors of Company, except for the
severance benefit as provided in this Agreement.
8. CONFIDENTIAL INFORMATION. Employee acknowledges and recognizes that
Employee is, or will be, employed by Company in a confidential relationship and
may receive and have access to the confidential non public business information,
customer names, contracts and other customer data, business methods, techniques
and trade secrets of Company not available to the public ("Confidential
Information"). Confidential Information includes information made available to
the public in violation of this Agreement. Employee may develop ideas,
conceptions, inventions, processes, methods, products and improvements; and
Employee may receive disclosures of ideas, conceptions, inventions, processes,
methods, products and improvements made by other employees of Company ("Company
EMPLOYMENT AGREEMENT
PAGE 3
<PAGE>
Inventions"). Employee may participate with Company in improving and developing
Confidential Information and Company Inventions. Confidential Information and
Company Inventions developed on behalf of Company are neither commonly known nor
readily accessible to others and are used by Company in its business to obtain a
competitive advantage over Company's competitors who do not know or use the
Confidential Information or Company Inventions. Protection of the Confidential
Information and Company Inventions against unauthorized disclosure and use is of
critical importance to Company in maintaining its competitive position.
Employee agrees that Employee will not, at any time, during or after the
Employment Period, make any independent use of, or disclose to any other person
or organization, except as authorized by Company in writing, any Confidential
Information or Company Inventions. Upon termination of the Employment Period
for any reason, Employee shall promptly deliver to Company all drawings,
manuals, letters, notes notebooks, reports, customer lists, customer data,
mailing lists, and all other materials and records of any kinds, and all copies
thereof, that may be in the possession of, or under the control of, Employee
pertaining to Company's business including any that contain any Confidential
Information or Company Inventions.
Employee and Company recognize that irreparable injury may result to
Company in the event of breach or threatened breach of this paragraph of this
Agreement by Employee. If Employee commits a breach or threatens to commit a
breach of any of the provisions of this paragraph, Company shall have the right
and remedy, in addition to any others that may be available, at law or in
equity, to have the provisions of this paragraph specifically enforced by any
court having equity jurisdiction, together with an accounting therefor, Employee
having specifically acknowledged that any such breach or threatened breach will
cause irreparable injury to Company and that money damages will not provide an
adequate remedy to Company.
9. INVALIDITY. If any provision of this Employment Agreement is later
construed to be unenforceable or invalid, the remaining provisions shall not be
affected but shall continue in full effect. If any term of this Employment
Agreement is found to be unenforceable or invalid by any court having
jurisdiction, that court shall have the power to reduce or revise the term and
the paragraph(s) shall then be fully enforceable.
10. ASSIGNMENT. Employee acknowledges that Employee's services are unique
and personal. Accordingly, Employee may not assign his rights or delegate his
duties or obligations under this Agreement. The Employer's rights and
obligations shall inure to the benefit of and shall be binding upon Employer's
successor and assigns.
EMPLOYMENT AGREEMENT
PAGE 4
<PAGE>
11. PERSONNEL POLICIES. Company's personnel policies apply to all of
Company's employees, including Employee, and describe additional terms and
conditions of employment of Employee. Those terms and conditions, as they may
be revised from time to time by Company, are incorporated by reference into this
Employment Agreement. Company reserves the right to revise the personnel
policies from time to time, as Company reasonably deems necessary. If any
personnel policy provision conflicts with a provision of this Employment
Agreement, the terms of this Employment Agreement shall govern.
12. ALCOHOL AND DRUG TESTING. Employee agrees to comply with and submit
to any Company program or policy for testing for alcohol abuse or use of drugs
and, in the absence of such a program or policy, to submit to such testing as
may be required by Company and administered in accordance with applicable law
and regulations.
13. MISCELLANEOUS. This Employment Agreement constitutes the entire
understanding of the parties, may be modified only in writing, is governed by
laws of New Mexico, and will bind and inure to the benefit of Employee and
Employee's personal representative and Company and Company's successors and
assigns. Any suit brought by the parties arising under this Agreement shall be
brought in the United States District Court for the Eastern District of North
Carolina, and the parties expressly acknowledge that such court shall have
jurisdiction over the matter and parties, and that venue shall be proper in such
court.
DATED: August 19, 1996.
COMPANY:
SBS TECHNOLOGIES, INC.
BY: /s/ C. J. Amenson
-----------------------------------
ITS: President
-----------------------------------
EMPLOYEE:
/s/ Charles D. Pugh
------------------------------------
CHARLES D. PUGH
EMPLOYMENT AGREEMENT
PAGE 5
<PAGE>
SCHEDULE A
TO
EMPLOYMENT AGREEMENT
POSITION AND DUTIES: Vice-President for Marketing and Sales of Logical Design,
Inc., with all of the duties, responsibilities and authorities normally
associated with and attendant to such position.
LOCATION FROM WHERE DUTIES SHALL BE PERFORMED: Employee shall be physically
located and shall perform his duties under this Agreement from a location which
is within a radius of thirty miles from 6301 Chapel Hill Road, Raleigh, N.C.
27607.
EMPLOYMENT AGREEMENT
PAGE 6
<PAGE>
SCHEDULE B
TO
EMPLOYMENT AGREEMENT
COMPENSATION: $150,000 base salary, plus eligibility to participate in the SBS
Management Incentive Plan ("MIP").
OTHER MATTERS: Employee and the Company will concurrently with the execution of
this Agreement enter into an Employee Stock Option Agreement pursuant to the
Company's 1992, 1995 and 1996 ISOP granting Employee the right to purchase
60,000 shares of the common stock of the Company.
EARNINGS PERFORMANCE VESTING: The options will vest and become exercisable as
indicated below if the Pretax Earnings of Logical Design, Inc. ("Logical
Design") are equal to or greater than the Pretax Earnings Hurdle amounts shown
below for the respective completed fiscal year as indicated below. If such
condition is met, the option for a respective fiscal year shall be exercisable
beginning 45 days after the end of the respective year.
Option Shares Fiscal Year Ended Pretax Earnings Hurdle
- ------------- ----------------- ----------------------
20,000 6/30/97 $510,000
20,000 6/30/98 $645,000
20,000 6/30/99 $858,000
For purposes of this Agreement, in determining vesting of the stock options,
"Pretax Earnings" shall mean the net income of Logical Design, computed as
historically computed by Logical Design Group, Inc. without deductions for
income taxes, interest expense or corporate assessments of the Company.
If the Pretax Earnings Hurdle for either or both of the first two fiscal years
are not met, the amount by which the Pretax Earnings is less than the Pretax
Earnings Hurdle for a respective year shall be added to the Pretax Earnings
Hurdle for the subsequent year for the purpose of computing a revised hurdle
("Revised Hurdle") for the unvested options from the prior fiscal year. The
previous year(s) options shall vest if the Revised Hurdle is met. However, the
Pretax Earnings Hurdle shall not be affected by the Revised Hurdle for the
purpose of determining vesting for the current year's options.
EMPLOYMENT TERMINATION VESTING: In the event of termination of employment of
the Employee by the Company without cause (as defined in Paragraph 7 of the
Agreement) within the period of employment specified in Paragraph 1 of the
Agreement, one half of the options which are unvested as of the date of
termination shall vest as of the date of termination.
EMPLOYMENT AGREEMENT
PAGE 7
<PAGE>
SEVEN YEAR VESTING: Any option not otherwise vested shall vest and become
exercisable on the date seven years from its date of grant. This Option is
intended to be non-compensatory in nature.
You are required to notify the Company of the following information within 30
days of any transaction involving the sale of exercised options: (1) date of
sale, (2) number of Shares sold, (3) price at which Shares are sold.
The Employee's address for notice purposes is:
Charles D. Pugh
---------------------------------------
2928 Bally Bunion Way
---------------------------------------
Raleigh, NC 27613
---------------------------------------
---------------------------------------
The Company will execute and deliver a separate Option Agreement concurrently
with the execution of this Agreement. In the event of conflict between the
terms of the Option Agreement and this Agreement, the Option Agreement shall
control.
EMPLOYMENT AGREEMENT
PAGE 8
<PAGE>
EXHIBIT I-E
COVENANT NOT TO COMPETE
<PAGE>
COVENANT NOT TO COMPETE
James Kenneth Boyette ("Employee") and SBS Technologies, Inc., a New Mexico
corporation ("SBS") agree as follows:
I. RECITALS
A. SBS and Employee are, simultaneously with the execution of this
Covenant, entering into a purchase agreement ("Pooling Agreement") under which
SBS's wholly owned subsidiary, Logical Design, Inc., a New Mexico corporation
("LD"), is merging with Logical Design Group, Inc., a North Carolina
corporation ("LDG"), and will exchange all the outstanding stock of LDG for
common stock of SBS, and an Employment Agreement providing for the employment of
Employee by SBS in performing services for LD.
B. SBS wishes to assure that Employee will refrain from competing with
SBS in the areas of LDG's or LD's business, and Employee is willing to so
refrain as provided in this Covenant.
II. COVENANT
A. Employee agrees that, during the term of the Covenant, Employee will
not, without prior written consent of SBS, for Employee's own account or jointly
with another, directly or indirectly, for or on behalf of any individual,
partnership, corporation or other legal entity, as principal, agent or
otherwise:
1. Own, control, manage or otherwise participate in the ownership,
control or management of a business involved within the Territory in the
manufacture, servicing or sale of any IBM/Intel-based architecture for CPU
boards for VME products which are in competition with or the same as or similar
in operation, function or construction (should that construction be unique in
the industry) to, those products now or previously offered for sale by LDG,
currently under design by LDG or which will be designed by LD (together the
"LDG and LD Products") during the term of this Covenant; or
2. Solicit, call upon, or attempt to solicit any individual,
partnership, corporation or entity for the purpose of providing to that
individual, partnership, corporation or other entity products or services which
are competitive with the LDG and LD Products.
B. Employee may, without violation of the Covenant, own, directly or
indirectly not more than two percent (2%) of any class of outstanding
securities of a corporation or partnership (even if in competition with LDG and
LD Products) if that class is regularly traded on a national securities exchange
or in the over-the-counter market.
<PAGE>
III. TERM
The term of the Covenant will be the later of three years from the date of
this Covenant or one year following termination of employment ("Term").
IV. TERRITORY
The territory covered by this Covenant is the world ("Territory").
V. CONSIDERATION
The consideration for the Covenant is fifty (50) of the Buyer Shares (as
defined in the Pooling Agreement) exchanged in, and employment as provided in,
the Pooling Agreement, and employment as provided in the Employment Agreement.
VI. ACKNOWLEDGEMENT
Employee recognizes the importance of the Covenant and acknowledges that,
based on Employee's past experiences and expertise, and Employee's past
development, exploitation and management of the LDG and LD Products, the close
relationships Employee has with LDG customers and SBS's intent to utilize and
exploit the LDG and LD Products and expand LD's customer base, the restrictions
in this Covenant are reasonable as to terms, time and area, necessary for the
protection of SBS's business and not unduly restrictive of Employee's rights as
an individual.
VII. BREACH
If Employee commits a breach or threatens to commit a breach of any of the
provisions of this Covenant, SBS shall have the right and remedy, in addition to
any others that may be available, at law or in equity, to have the provisions of
this Covenant specifically enforced by any court having equity jurisdiction,
together with an accounting therefor, Employee having specifically acknowledged
that any such breach or threatened breach will cause irreparable injury to SBS
and that money damages will not provide an adequate remedy to SBS.
VIII. INVALIDITY
If any provision of the Covenant is later construed to be unenforceable or
invalid, the remaining provisions shall not be affected but shall continue in
full effect. If the Term or Territory are found to be unenforceable or invalid
by any court having jurisdiction, that court shall have the power to reduce the
Term or Territory of the Covenant and the Covenant as revised shall then be
fully enforceable. The payment provided for in Section V
CONVENANT NOT TO COMPETE
PAGE 2
<PAGE>
shall be payable in full notwithstanding any such construction, finding or
revision.
IX. MISCELLANEOUS
This Covenant binds and benefits the parties, their successors, assigns and
transferees, is specifically enforceable, constitutes (together with the Pooling
Agreement and the Employment Agreement) the entire agreement of the parties and
supersedes all prior oral or written agreements and understandings, is governed
by New Mexico law and may be modified only in writing. This Covenant may be
executed in multiple counterparts, each of which shall be deemed an original,
but all of which taken together will constitute one and the same instrument.
Captions and titles have been inserted in this Covenant for the benefit of the
parties in referring to this Covenant, but will not be construed or interpreted
as part of this Covenant. Any suits brought by the parties arising under this
Covenant shall be brought in the United States District Court for the Eastern
District of North Carolina, and the parties expressly acknowledge that such
court shall have jurisdiction over the matter and parties, and that venue shall
be proper in such court.
X. NOTICES
Any notice or other communication required under this Covenant or desired
to be given by any of the parties to this Covenant to any other party shall be
deemed to be duly given when personally delivered or when mailed by certified or
registered mail, return receipt requested, postage prepaid, to the other party,
addressed as follows:
SBS:
SBS Technologies, Inc.
Attn: Christopher J. Amenson, President
2400 Louisiana Blvd. NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
Copy to:
Alison K. Schuler, Esquire
5700 Harper Drive, NE, Suite 430
Albuquerque, New Mexico 87109
CONVENANT NOT TO COMPETE
PAGE 3
<PAGE>
EMPLOYEE:
James Kenneth Boyette
6301 Chapel Hill Road
Raleigh, North Carolina 27607
Any party may change its address for notice by giving written notice of the
change pursuant to this Section.
XI. ANNOUNCEMENTS
Employee, without the prior written consent of SBS, will not make any
announcement, public or non-public, or issue any press release in respect of
this Covenant.
DATED: August 19, 1996
EMPLOYEE: SBS TECHNOLOGIES, INC.
/s/ James Kenneth Boyette By: /s/ C J. Amenson
- ------------------------- -----------------------------
James Kenneth Boyette
Its: President
-----------------------------
CONVENANT NOT TO COMPETE
PAGE 4
<PAGE>
COVENANT NOT TO COMPETE
Charles D. Pugh ("Employee") and SBS Technologies, Inc., a New Mexico
corporation ("SBS") agree as follows:
I. RECITALS
A. SBS and Employee are, simultaneously with the execution of this
Covenant, entering into a purchase agreement ("Pooling Agreement") under which
SBS's wholly owned subsidiary, Logical Design, Inc., a New Mexico corporation
("LD"), is merging with Logical Design Group, Inc., a North Carolina
corporation ("LDG"), and will exchange all the outstanding stock of LDG for
common stock of SBS, and an Employment Agreement providing for the employment of
Employee by SBS in performing services for LD.
B. SBS wishes to assure that Employee will refrain from competing with
SBS in the areas of LDG's or LD's business, and Employee is willing to so
refrain as provided in this Covenant.
II. COVENANT
A. Employee agrees that, during the term of the Covenant, Employee will
not, without prior written consent of SBS, for Employee's own account or jointly
with another, directly or indirectly, for or on behalf of any individual,
partnership, corporation or other legal entity, as principal, agent or
otherwise:
1. Own, control, manage or otherwise participate in the ownership,
control or management of a business involved within the Territory in the
manufacture, servicing or sale of any IBM/Intel-based architecture for CPU
boards for VME products which are in competition with or the same as or similar
in operation, function or construction (should that construction be unique in
the industry) to, those products now or previously offered for sale by LDG,
currently under design by LDG or which will be designed by LD (together the
"LDG and LD Products") during the term of this Covenant; or
2. Solicit, call upon, or attempt to solicit any individual,
partnership, corporation or entity for the purpose of providing to that
individual, partnership, corporation or other entity products or services which
are competitive with the LDG and LD Products.
B. Employee may, without violation of the Covenant, own, directly or
indirectly not more than two percent (2%) of any class of outstanding
securities of a corporation or partnership (even if in competition with LDG and
LD Products) if that class is regularly traded on a national securities exchange
or in the over-the-counter market.
<PAGE>
III. TERM
The term of the Covenant will be the later of three years from the date of
this Covenant or one year following termination of employment ("Term").
IV. TERRITORY
The territory covered by this Covenant is the world ("Territory").
V. CONSIDERATION
The consideration for the Covenant is fifty (50) of the Buyer Shares (as
defined in the Pooling Agreement) exchanged in, and employment as provided in,
the Pooling Agreement, and employment as provided in the Employment Agreement.
VI. ACKNOWLEDGEMENT
Employee recognizes the importance of the Covenant and acknowledges that,
based on Employee's past experiences and expertise, and Employee's past
development, exploitation and management of the LDG and LD Products, the close
relationships Employee has with LDG customers and SBS's intent to utilize and
exploit the LDG and LD Products and expand LD's customer base, the restrictions
in this Covenant are reasonable as to terms, time and area, necessary for the
protection of SBS's business and not unduly restrictive of Employee's rights as
an individual.
VII. BREACH
If Employee commits a breach or threatens to commit a breach of any of the
provisions of this Covenant, SBS shall have the right and remedy, in addition to
any others that may be available, at law or in equity, to have the provisions of
this Covenant specifically enforced by any court having equity jurisdiction,
together with an accounting therefor, Employee having specifically acknowledged
that any such breach or threatened breach will cause irreparable injury to SBS
and that money damages will not provide an adequate remedy to SBS.
VIII. INVALIDITY
If any provision of the Covenant is later construed to be unenforceable or
invalid, the remaining provisions shall not be affected but shall continue in
full effect. If the Term or Territory are found to be unenforceable or invalid
by any court having jurisdiction, that court shall have the power to reduce the
Term or Territory of the Covenant and the Covenant as revised shall then be
fully enforceable. The payment provided for in Section V
CONVENANT NOT TO COMPETE
PAGE 2
<PAGE>
shall be payable in full notwithstanding any such construction, finding or
revision.
IX. MISCELLANEOUS
This Covenant binds and benefits the parties, their successors, assigns and
transferees, is specifically enforceable, constitutes (together with the Pooling
Agreement and the Employment Agreement) the entire agreement of the parties and
supersedes all prior oral or written agreements and understandings, is governed
by New Mexico law and may be modified only in writing. This Covenant may be
executed in multiple counterparts, each of which shall be deemed an original,
but all of which taken together will constitute one and the same instrument.
Captions and titles have been inserted in this Covenant for the benefit of the
parties in referring to this Covenant, but will not be construed or interpreted
as part of this Covenant. Any suits brought by the parties arising under this
Covenant shall be brought in the United States District Court for the Eastern
District of North Carolina, and the parties expressly acknowledge that such
court shall have jurisdiction over the matter and parties, and that venue shall
be proper in such court.
X. NOTICES
Any notice or other communication required under this Covenant or desired
to be given by any of the parties to this Covenant to any other party shall be
deemed to be duly given when personally delivered or when mailed by certified or
registered mail, return receipt requested, postage prepaid, to the other party,
addressed as follows:
SBS:
SBS Technologies, Inc.
Attn: Christopher J. Amenson, President
2400 Louisiana Blvd. NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
Copy to:
Alison K. Schuler, Esquire
5700 Harper Drive, NE, Suite 430
Albuquerque, New Mexico 87109
CONVENANT NOT TO COMPETE
PAGE 3
<PAGE>
EMPLOYEE:
Charles D. Pugh
2928 Bally Bunion Way
Raleigh, North Carolina 27613
Any party may change its address for notice by giving written notice of the
change pursuant to this Section.
XI. ANNOUNCEMENTS
Employee, without the prior written consent of SBS, will not make any
announcement, public or non-public, or issue any press release in respect of
this Covenant.
DATED: August 19, 1996
----
EMPLOYEE: SBS TECHNOLOGIES, INC.
/s/ Charles D. Pugh By: /s/ C. J. Amenson
- ------------------------- ------------------
Charles D. Pugh Its: President
------------------
CONVENANT NOT TO COMPLETE
PAGE 4
<PAGE>
EXHIBIT IV
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
<PAGE>
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
SBS Technologies, Inc.
2400 Louisiana Boulevard NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
Ladies and Gentlemen:
I (that term referring to both prospective purchasers if the purchase of
the interest is being made with community funds) understand and agree as
follows:
1. RECEIPT OF INFORMATION. I acknowledge receipt of such information
about SBS Technologies, Inc., ("Company") as I have requested ("Information").
I have read the Information, and have had the opportunity to ask questions of
the management of the Company concerning the business of the Company, and have
received answers from management, as I have deemed necessary.
2. SALE OF STOCK. Subject to the terms and conditions of this
Subscription Agreement and Representation Letter (the "Letter"), and pursuant to
the provisions of the Pooling Agreement dated August 19, 1996 ("Pooling
Agreement"), I will exchange my shares of Logical Design Group, Inc. for a total
of 127,047 shares of the common stock of the Company ("Shares"). At closing,
Company will deliver to me a properly executed Certificate representing the
Shares. Company's obligation to close this transaction is conditioned upon my
warranties and representations herein being true at Closing.
3. WARRANTIES AND REPRESENTATIONS OF PURCHASER. I represent and warrant
to Company that:
A. I am aware that no United States federal or state agency has made
any finding or determination as to the fairness for public investment, nor any
recommendation or endorsement, of the Shares and the Shares will not be
registered under the Securities Act of 1933 (the "1933 Act"), the New Mexico
Securities Act of 1986, the North Carolina Securities Act, or the securities
laws of any other state.
B. I understand that in order to ensure that the offer and sale of
the Shares to me is exempt from registration under the 1933 Act by reason of
Sections 4(2) or 3(b) of the 1933 Act and the securities laws of any other
state, Company is required to have reasonable grounds to believe, and must
actually believe, after making reasonable inquiry and before making any
issuance, that I am purchasing the Shares for investment only. I, either alone
or with my purchaser representative, am able to evaluate the risks involved in
any investment in the Shares, and I have sufficient knowledge and experience in
financial and business matters in general, and investments in particular, to be
fully capable of evaluating the merits and risks of an investment by me in the
Shares. I have been
<PAGE>
furnished, have read, and understand the Information. I have no questions
concerning Company, the Shares or the business of Company which have not been
answered and have obtained all the information concerning these matters which I
desire. My financial condition is such that I have adequate means of providing
for my current and possible personal contingencies and I am under no present or
contemplated need to liquidate any portion of the Shares to satisfy any existing
or contemplated undertaking, need or indebtedness; and I am able to bear the
economic risk of any investment in the Shares, including the possible complete
loss of the investment and possible inability to sell or transfer the Shares for
an indefinite period of time.
C. My (and my spouse's full names(s), date(s) of birth, tax
identification number(s), and primary residence address are:
JAMES KENNETH BOYETTE 7/22/52
- --------------------------------- ----------------------------------
My Name My Date of Birth
- --------------------------------- ----------------------------------
My Spouse's Name Spouse's Date of Birth
###-##-####
- --------------------------------- ----------------------------------
My Tax Identification\ My Spouse's Tax Identification\
Social Security Number Social Security Number
4513 KAPLAN DRIVE
- ---------------------------------
RALEIGH, NC 27606
- ---------------------------------
My (Our) Residence Address
If there is no name set forth for my Spouse, it means that I am not at
present married, or no person has any community property interest in the assets
I am using to make this investment.
D. My occupation is PRESIDENT, LDG ;
-----------------------------
E. My business address is:
6301 CHAPEL HILL ROAD
--------------------------------
RALEIGH, NC 27607
--------------------------------
F. I am acquiring the Shares for my own account for investment only
and not with a view to, or for sale in connection with, the distribution or
transfer thereof, and I am not participating directly or indirectly in a
distribution or transfer of Shares, or in the underwriting of any such
distribution or
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 2
<PAGE>
transfer of the Shares, nor will I act in any way that would constitute me an
underwriter, within the meaning of the 1933 Act, of the Shares. I understand
that in order for the Shares to be qualified for an exemption from registration,
I must represent and warrant that I will not transfer or sell the Shares in the
absence of registration under the 1933 Act or an exemption therefrom. I will,
before any proposed sale, pledge, gift or other transfer, for value or
otherwise, of any or all of the Shares or any interest or interests therein (a
"Transfer"), give written notice to Company expressing my desire to effect the
Transfer and describing the Transfer in detail, accompanied by an opinion of
qualified counsel to the effect that the proposed Transfer will be exempt from
the registration provisions under applicable federal and state securities laws
and otherwise will be in compliance with such laws, and will not violate or
jeopardize exemptions upon which the Company has relied in issuing the Shares to
me. For purposes of this paragraph, "qualified counsel" shall mean an attorney
licensed to practice law in one or more jurisdictions connected with the
proposed Transfer, who devotes a significant portion of such attorney's practice
to the area of federal and state securities law, and which attorney is rated
"AV" by Martindale Hubbell Law Directory. I understand the Company will make,
or will advise the transfer agent of the Shares to make, stop transfer notations
on its records relating to the Shares and the certificate representing the
Shares will have the following legend imprinted or typed on the face of the
Certificate:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933 or any
state securities laws. No transfer or other disposition of
the Securities can be made except in compliance with the
restrictions contained in a Subscription Agreement and
Representation Letter between the Corporation and the
person(s) whose name(s) appear(s) on this certificate as
registered holder, a copy of which is on file at the office
of the Corporation."
G. I am checking the box or boxes below which describe me.
:------: Any bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in
section 3(a)(5)(A) of the Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to
section 15 of the Securities Exchange Act of 1934; any insurance
company as defined in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business
development company as
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 3
<PAGE>
defined in section 2(a)(48) of that Act; Small Business Investment
Company licensed by the U.S. Small Business Administration under
section 301(c) or (d) of the Small Business Investment Act of 1958;
any plan established and maintained by a state, its political
subdivisions or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, if such plan
has total assets in excess of $5,000,000; employee benefit plan within
the meaning of the Employee Retirement Income Security Act of 1974 if
the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or
if the employee benefit plan has total assets in excess of $5,000,000
or, if a self-directed plan, with investment decisions made solely by
persons that are accredited investors.
:------: Any private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of 1940;
:------: Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of
$5,000,000.
:------: The undersigned is a director or executive officer of
Company.
:------: The undersigned is a natural person whose individual net
worth as of the date hereof (including the net worth of the
undersigned's spouse if the undersigned is married) exceeds
$1,000,000.
:------: The undersigned is a natural person who had an individual
income that exceeded $200,000 or joint income with his or her spouse
in excess of $300,000 in each of the two most recent years and who
reasonably expects that in the current year his or her or their income
will reach the same level. For purposes of this document, the term
"income" shall mean adjusted gross income reported or to be reported
on a federal income tax return, increased by (i) any deductions for
long term capital gains (under Section 1202 of the Internal Revenue
Code (the "Code"), (II) any deductions for depletion (pursuant to
Section 601 ET SEQ. of the Code), (III) any exclusions of interest
(pursuant to Section 103 of the Code) and (IV) any losses of a
partnership allocated to the undersigned as an individual limited
partner (as reported in Schedule E of Form 1040).
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 4
<PAGE>
:------: Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered,
whose purchase is directed by a sophisticated person as described in
Section 230.506 (b)(2)(ii); and
:------: Any entity in which all of the equity owners are accredited
investors.
:------: None of the boxes above accurately describes the
undersigned.
H. I am aware that I will not be able to dispose readily of the
Shares in view of the fact that the Shares will not be registered under the 1933
Act and that Company has not, except pursuant to the terms of Paragraph IV of
the Pooling Agreement, agreed with me to register the Shares for distribution
pursuant to the 1933 Act, nor has Company agreed to comply with Regulation A or
any other exemption under the 1933 Act, and that Company has not agreed to make
publicly available such information as is required to enable me to make routine
sales of the Shares under the provisions of Rule 144. I am aware that any sales
under Rule 144 may not be made until (i) two years from the date of purchase
and then only in amounts and in the manner permitted by Rule 144, or (ii) three
years from the date of purchase without regard to the volume, manner and notice
requirements of Rule 144, but in compliance with other requirements of Rule 144,
assuming I am not an affiliate of the Company at that time. I understand that,
in the absence of any available exemption, I may have to hold the Shares
indefinitely unless and until the Shares are subsequently registered under the
1933 Act and applicable state securities laws.
I. I am acquainted with the requirements of Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations issued thereunder.
I understand that, as a result of my acquisition of Shares, and in order to
comply with Section 13(d) and the rules and regulations issued thereunder, I may
be required to file a Schedule 13D and I agree to file if that Schedule is
required.
J. The information contained in this Letter is true and correct.
DATED: August 19, 1996
PURCHASER:
/s/ James Kenneth Boyette
------------------------------
JAMES KENNETH BOYETTE
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 5
<PAGE>
RECEIVED AND ACCEPTED BY:
SBS TECHNOLOGIES, INC.
By: /s/ C. J. Amenson
----------------------------
Its: President
----------------------------
DATED: August 19, 1996
--------------------------
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 6
<PAGE>
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
SBS Technologies, Inc.
2400 Louisiana Boulevard NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
Ladies and Gentlemen:
I (that term referring to both prospective purchasers if the purchase of
the interest is being made with community funds) understand and agree as
follows:
1. RECEIPT OF INFORMATION. I acknowledge receipt of such information
about SBS Technologies, Inc., ("Company") as I have requested ("Information").
I have read the Information, and have had the opportunity to ask questions of
the management of the Company concerning the business of the Company, and have
received answers from management, as I have deemed necessary.
2. SALE OF STOCK. Subject to the terms and conditions of this
Subscription Agreement and Representation Letter (the "Letter"), and pursuant to
the provisions of the Pooling Agreement dated August 19, 1996 ("Pooling
Agreement"), I will exchange my shares of Logical Design Group, Inc. for a total
of 72,953 shares of the common stock of the Company ("Shares"). At closing,
Company will deliver to me a properly executed Certificate representing the
Shares. Company's obligation to close this transaction is conditioned upon my
warranties and representations herein being true at Closing.
3. WARRANTIES AND REPRESENTATIONS OF PURCHASER. I represent and warrant
to Company that:
A. I am aware that no United States federal or state agency has made
any finding or determination as to the fairness for public investment, nor any
recommendation or endorsement, of the Shares and the Shares will not be
registered under the Securities Act of 1933 (the "1933 Act"), the New Mexico
Securities Act of 1986, the North Carolina Securities Act, or the securities
laws of any other state.
B. I understand that in order to ensure that the offer and sale of
the Shares to me is exempt from registration under the 1933 Act by reason of
Sections 4(2) or 3(b) of the 1933 Act and the securities laws of any other
state, Company is required to have reasonable grounds to believe, and must
actually believe, after making reasonable inquiry and before making any
issuance, that I am purchasing the Shares for investment only. I, either alone
or with my purchaser representative, am able to evaluate the risks involved in
any investment in the Shares, and I have sufficient knowledge and experience in
financial and business matters in general, and investments in particular, to be
fully capable of evaluating the merits and risks of an investment by me in the
Shares. I have been
<PAGE>
furnished, have read, and understand the Information. I have no questions
concerning Company, the Shares or the business of Company which have not been
answered and have obtained all the information concerning these matters which I
desire. My financial condition is such that I have adequate means of providing
for my current and possible personal contingencies and I am under no present or
contemplated need to liquidate any portion of the Shares to satisfy any existing
or contemplated undertaking, need or indebtedness; and I am able to bear the
economic risk of any investment in the Shares, including the possible complete
loss of the investment and possible inability to sell or transfer the Shares for
an indefinite period of time.
C. My (and my spouse's full names(s), date(s) of birth, tax
identification number(s), and primary residence address are:
Charles D. Pugh April 2, 1940
- ------------------------------ ----------------------------------
My Name My Date of Birth
- ------------------------------ ----------------------------------
My Spouse's Name Spouse's Date of Birth
###-##-####
- ------------------------------ ----------------------------------
My Tax Identification\ My Spouse's Tax Identification\
Social Security Number Social Security Number
2928 Bally Bunion Way
- -------------------------------
Raleigh, NC 27613
- -------------------------------
My (Our) Residence Address
If there is no name set forth for my Spouse, it means that I am not at
present married, or no person has any community property interest in the assets
I am using to make this investment.
D. My occupation is VP, Director of Sales & Marketing;
---------------------------------
E. My business address is:
Logical Design Group, Inc.
--------------------------------
6301 Chapel Hill Rd.
--------------------------------
Raleigh, NC 27607
F. I am acquiring the Shares for my own account for investment only
and not with a view to, or for sale in connection with, the distribution or
transfer thereof, and I am not participating directly or indirectly in a
distribution or transfer of Shares, or in the underwriting of any such
distribution or
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 2
<PAGE>
transfer of the Shares, nor will I act in any way that would constitute me an
underwriter, within the meaning of the 1933 Act, of the Shares. I understand
that in order for the Shares to be qualified for an exemption from registration,
I must represent and warrant that I will not transfer or sell the Shares in the
absence of registration under the 1933 Act or an exemption therefrom. I will,
before any proposed sale, pledge, gift or other transfer, for value or
otherwise, of any or all of the Shares or any interest or interests therein (a
"Transfer"), give written notice to Company expressing my desire to effect the
Transfer and describing the Transfer in detail, accompanied by an opinion of
qualified counsel to the effect that the proposed Transfer will be exempt from
the registration provisions under applicable federal and state securities laws
and otherwise will be in compliance with such laws, and will not violate or
jeopardize exemptions upon which the Company has relied in issuing the Shares to
me. For purposes of this paragraph, "qualified counsel" shall mean an attorney
licensed to practice law in one or more jurisdictions connected with the
proposed Transfer, who devotes a significant portion of such attorney's practice
to the area of federal and state securities law, and which attorney is rated
"AV" by Martindale Hubbell Law Directory. I understand the Company will make,
or will advise the transfer agent of the Shares to make, stop transfer notations
on its records relating to the Shares and the certificate representing the
Shares will have the following legend imprinted or typed on the face of the
Certificate:
"The securities represented by this certificate have not
been registered under the Securities Act of 1933 or any
state securities laws. No transfer or other disposition of
the Securities can be made except in compliance with the
restrictions contained in a Subscription Agreement and
Representation Letter between the Corporation and the
person(s) whose name(s) appear(s) on this certificate as
registered holder, a copy of which is on file at the office
of the Corporation."
G. I am checking the box or boxes below which describe me.
:------: Any bank as defined in section 3(a)(2) of the Act, or any
savings and loan association or other institution as defined in
section 3(a)(5)(A) of the Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant to
section 15 of the Securities Exchange Act of 1934; any insurance
company as defined in section 2(13) of the Act; any investment company
registered under the Investment Company Act of 1940 or a business
development company as
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 3
<PAGE>
defined in section 2(a)(48) of that Act; Small Business Investment
Company licensed by the U.S. Small Business Administration under
section 301(c) or (d) of the Small Business Investment Act of 1958;
any plan established and maintained by a state, its political
subdivisions or any agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, if such plan
has total assets in excess of $5,000,000; employee benefit plan within
the meaning of the Employee Retirement Income Security Act of 1974 if
the investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or
if the employee benefit plan has total assets in excess of $5,000,000
or, if a self-directed plan, with investment decisions made solely by
persons that are accredited investors.
:------: Any private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of 1940;
:------: Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of
acquiring the securities offered, with total assets in excess of
$5,000,000.
:------: The undersigned is a director or executive officer of
Company.
:------: The undersigned is a natural person whose individual net
worth as of the date hereof (including the net worth of the
undersigned's spouse if the undersigned is married) exceeds
$1,000,000.
:------: The undersigned is a natural person who had an individual
income that exceeded $200,000 or joint income with his or her spouse
in excess of $300,000 in each of the two most recent years and who
reasonably expects that in the current year his or her or their income
will reach the same level. For purposes of this document, the term
"income" shall mean adjusted gross income reported or to be reported
on a federal income tax return, increased by (i) any deductions for
long term capital gains (under Section 1202 of the Internal Revenue
Code (the "Code"), (II) any deductions for depletion (pursuant to
Section 601 ET SEQ. of the Code), (III) any exclusions of interest
(pursuant to Section 103 of the Code) and (IV) any losses of a
partnership allocated to the undersigned as an individual limited
partner (as reported in Schedule E of Form 1040).
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 4
<PAGE>
:------: Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities offered,
whose purchase is directed by a sophisticated person as described in
Section 230.506 (b)(2)(ii); and
:------: Any entity in which all of the equity owners are accredited
investors.
:------: None of the boxes above accurately describes the
undersigned.
H. I am aware that I will not be able to dispose readily of the
Shares in view of the fact that the Shares will not be registered under the 1933
Act and that Company has not, except pursuant to the terms of Paragraph IV of
the Pooling Agreement, agreed with me to register the Shares for distribution
pursuant to the 1933 Act, nor has Company agreed to comply with Regulation A or
any other exemption under the 1933 Act, and that Company has not agreed to make
publicly available such information as is required to enable me to make routine
sales of the Shares under the provisions of Rule 144. I am aware that any sales
under Rule 144 may not be made until (i) two years from the date of purchase
and then only in amounts and in the manner permitted by Rule 144, or (ii) three
years from the date of purchase without regard to the volume, manner and notice
requirements of Rule 144, but in compliance with other requirements of Rule 144,
assuming I am not an affiliate of the Company at that time. I understand that,
in the absence of any available exemption, I may have to hold the Shares
indefinitely unless and until the Shares are subsequently registered under the
1933 Act and applicable state securities laws.
I. I am acquainted with the requirements of Section 13(d) of the
Securities Exchange Act of 1934 and the rules and regulations issued thereunder.
I understand that, as a result of my acquisition of Shares, and in order to
comply with Section 13(d) and the rules and regulations issued thereunder, I may
be required to file a Schedule 13D and I agree to file if that Schedule is
required.
J. The information contained in this Letter is true and correct.
DATED: August 19, 1996
PURCHASER:
/s Charles D. Pugh
---------------------------------
CHARLES D. PUGH
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 5
<PAGE>
RECEIVED AND ACCEPTED BY:
SBS TECHNOLOGIES, INC.
By: /s/ C. J. Amenson
----------------------------
Its: President
----------------------------
DATED: August 19, 1996
--------------------------
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 6
<PAGE>
EXHIBIT V
DISCLOSURE SCHEDULE
<PAGE>
POOLING AGREEMENT
EXHIBIT V
DISCLOSURE SCHEDULE
1. Logical has an agreement with Grass Valley Group, Inc, which includes a two
(2) year warranty against defects, workmanship and materials, after which
Logical will continue to support repairs and upgrades at a variable fee.
Grass Valley Group, Inc., also known as Tektronix Grass Valley Group, is
expected to be adeclining source of revenues for Logical. Additionally,
Grass Valley Group has spun off Editware, Inc., the principals of which
were the key technical contacts for Logical at Grass Valley Group.
2. Logical provides the following standard product warranties, unless
otherwise expressed provided in an individual contract:
(i) VMBbus products come with a "return to factory" warranty which covers
defects in materials and workmanship for period of two (2) years from
FROM THE DATE of product shipment to the customer, provided the
product is unmodified and has been subject to normal and proper use.
This warranty applies to all standard board level products which do
not incorporate disk drives. Products which incorporate hard or
floppy disk drives are also warrantied for two (2) years with the
exception of disk drives themselves. Disk drives will be warrantied
for a period of ninety (90) days, as is the normal period for
electromechanical components. Logical makes no warranty or
representation, express or implied, with respect to software, its
performance, quality, or fitness for a particular purpose. This does
not include the media on which the software is distributed which
includes a warranty covering defects in materials and workmanship for
a period of ninety (90) days.
3. Logical has a contract with DY4 Systems, a Canadial company, to assist
in product development. Logical has devoted a large portion of
engineering resources to this contract. However, no marketing agreement
for the product exists with DY4.
4. Logical has a contract with GE Fanuc which is terminable by Fanuc upon
change of Logical's ownership. Logical expects delining revenues from
this customer.
5. Logical currently has an agreement for manufacturing and supplying two
(2) products to GE Industrial Systems.
6. Logical has a contract to supply products to Hughes Training. Logical
has not currently completed production of the products due for the
August 15 or subsequent delivery dates.
7. Logical has received a subpoena for technical and marketing
documentation with respect
<PAGE>
to a patent infringement lawsuit brought against VMIC by XYCOM, Inc.
Although no similar patent infringement claim has been made by XYCOM
against Logical, Logical anticipates having to defend a similar suite if
XYCOM is successful against VMIC.
8. LDG has issued a purchase order for a Tektronix DSO for use in the
engineering lab at a cost of approximately $20,000. Logical has also
issued multiple purchase orders for various manufacturing equipment,
furniture and fixtures ncecessary for increased manufacturing volumes
with a total amount of approximately $26,000. Logical has also recently
leased a Fadal machining center with a purchase price of approximately
$59,958.43.
9. Logical is currently expanding its operation and has committed
approximately $15,000 for outside contractor services to be performed
within the next thirty (30) days.
10. A former employee, Helen M. Webster, voluntarily resigned her employment
as buyer to pursue another career. She has been employed since December
1992 and her employment ended July 31, 1996.
11. Since March 31, 1996 here have been a number of employee annual reviews
and pay increases authorized.
12. Ken Boyette was paid a bonus as officer of the corporation in May. The
bonus was originally planned for payment prior to March 31, 1996.
13. There are expected to be fees for professional services rendered by
attorneys and accountants to Logical related to planning, negotiations
and closing of the merger with SBS.
14. There is judgment on record in the Wake County Clerk of Superior Court's
office against Logical in favor of Cameron McPhee. It is Logical's
understanding that the total amount due under the judgment was paid by
Logical to the attorney for McPhee several years ago.
15. The contracts listed on the attached Schedule V-I are not terminable at
will.
16. The loans and leases described on the attached Outstanding Loan and
Lease Summary are not terminable at will and may be in default as a
result of the transaction contemplated by this Agreement. Each of the
loan and lease obligations describes certain assets which are either
encumbered by the respective obligation or the title to which the assets
described therein does not pass Logical except upon final payment.
17. Logical has entered into a lease dated AUGUST 1, 1986 with TEAL
PROPERTIES, A NORTH CAROLINA GENERAL PARTNERSHIP with respect to the
location of the principal office
<PAGE>
and manufacturing operation. This lease may be terminable by the
Landlord as a result of the transaction contemplated by this Agreement.
18. The following liens are encumbrances on the assets of Logical;
(i) UCC No. 96-02745 in favor of South Trust Bank of North Carolina
and recorded in the Wake County Register of Deeds' Office;
(ii) UCC No. 96-00423 in favor of BB&T Leasing Corporation and
recorded in the Wake County Register of Deeds' Office;
(iii) UCC No. 94-00229 in favor of Southern National Leasing Corp. and
recorded in the Wake County Register of Deeds' Office.
(iv) UCC No. 93-15901 in favor of Textron Financial Corp. and recorded
in the Wake County Register of Deeds' Office.
(v) UCC No. 93-13320 in favor of Southern National Bank and recorded
in the Wake County Register of Deeds' Office.
(vi) UCC No. 106-1019 in favor of Textron Financial Corp and recorded
in the N.C. Secretary of State's Office.
(vii) UCC No. 102-6563 in favor of Southern National Bank and recorded
in the N.C. Secretary of State's Office.
(viii) UCC No. 106-7665 in favor of Southern National Leasing Corp. and
recorded in the N.C. Secretary of State's Office.
(ix) UCC No. 133-1846 in favor of SouthTrust Bank of North Carolina
and recorded in the N.C. Secretary of State's Office.
<PAGE>
EXHIBIT V-E
CLOSING BALANCE SHEET
<PAGE>
LOGICAL DESIGN GROUP, INC.
STATEMENTS OF ASSETS, LIABILITIES, AND EQUITY - INCOME TAX BASIS
ASSETS
March 31,
-------------------------
1996 1995
---------- ----------
CURRENT ASSETS
Cash $ 79,969 $ 25,507
Note receivable-shareholder 25,000 50,000
Accounts receivable
Trade 410,603 227,742
Employees 1,878 1,200
Shareholder 6,700 6,700
Inventories
Finished goods 135,804 126,078
Work in process 173,318 208,564
Raw materials and supplies 544,735 629,103
Prepaid expenses 6,029 6,644
---------- ----------
Total Current Assets 1,384,036 1,281,538
---------- ----------
PROPERTY AND EQUIPMENT
Equipment 469,850 450,078
Vehicles 11,933 11,933
Furniture and fixtures 99,166 96,789
Leasehold improvements 44,856 2,044
Equipment under capital leases 81,918 64,679
---------- ----------
707,723 625,523
Less accumulated depreciation 526,824 469,905
---------- ----------
Total Property and Equipment 180,899 155,618
---------- ----------
OTHER ASSETS
Computer software (net of accumulated
amortization of $66,928 for 1996, and
$53,292 for 1995) 26,708 30,323
---------- ----------
Total Assets $1,591,643 $1,467,479
---------- ----------
---------- ----------
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31,
-------------------------
1996 1995
---------- ----------
CURRENT LIABILITIES
Notes payable $ 98,550 $ 244,800
Current portion of long-term debt 84,433 92,825
Current portion of lease obligations 17,457 12,923
Accounts payable trade 255,671 214,290
Accrued expenses
Salaries 22,046 24,098
Commissions 11,254 6,448
Payroll taxes 1,177 6,144
401(k) plan contribution 4,122 2,955
Profit sharing plan contribution 32,253 26,200
Income taxes payable 10,081 14,360
---------- ----------
Total Current Liabilities 537,044 645,043
---------- ----------
LONG-TERM DEBT AND CAPITAL LEASES
Notes payable 245,552 112,247
Lease obligations 37,664 38,715
---------- ----------
Total Long-Term Debt and Capital Leases 283,216 150,962
---------- ----------
Total Liabilities 820,260 796,005
---------- ----------
STOCKHOLDERS' EQUITY
Common stock-$1.00 par; 100,000 shares
authorized; 20,000 shares issued and
outstanding 20,000 20,000
Paid in capital 48,000 48,000
Retained earnings 703,383 603,474
---------- ----------
Total Stockholders' Equity 771,383 671,474
---------- ----------
Total Liabilities and Stockholder's Equity $1,591,643 $1,467,479
---------- ----------
---------- ----------
See accompanying notes and accountants' report.
-4-
<PAGE>
LOGICAL DESIGN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 and 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements have been prepared on the basis of
accounting used for income tax reporting; consequently, depreciation expense
on property and equipment is computed under the modified accelerated cost
recovery system in accordance with allowable federal income tax accounting
treatment. Such depreciation expense would, under generally accepted
accounting principles, be computer over the useful lives of the assets using
either accelerated accounting principles, be computed over the useful lives
of the assets using either accelerated or straight line methods. Also, the
Corporation's policy of preparing its financial statements of the income tax
basis of accounting results in its not having to account for deferred taxes
on accrued officer's salaries which cannot be deducted until paid for tax
purposes.
BUSINESS ACTIVITY
Logical Design Group, Inc. is a high tech manufacturing company that
designs, manufactures and sells a line of computer board level products.
The Corporation also develops some computer software to sell separately or
with computer hardware. The Corporation grants credit to customers located
throughout the United States including one major customer located in
California. Sales to this major customer were approximately 17 and 23
percent of total sales in the years ended March 31, 1996 and 1995,
respectively.
INVENTORY VALUATION
Inventories are valued at cost, with cost being determined on a first-in,
first-out basis. Inventory costs include all direct material and labor
costs and those indirect costs related to production, such as indirect
labor, rent and depreciation and insurance.
PROPERTY AND EQUIPMENT
Property and equipment are originally recorded at acquisition cost.
Depreciation expense is computed using the modified accelerated cost
recovery system for both book and income taxes. Repairs, maintenance and
minor replacements are expensed as incurred.
COMPUTER SOFTWARE
Computer software is originally recorded at cost and is amortized by the
straight-line method over three years for the years ended March 31, 1996 and
1995, and over five years in the preceding years.
-7-
<PAGE>
LOGICAL DESIGN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 and 1995
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
TAX CREDITS
Tax credits arising from research and development expenses are accounted for
by the flowthrough method as a reduction of current federal income taxes as
the credits become available.
NOTE RECEIVABLE
An unsecured non-interest bearing note in the amount of $25,000 is
receivable from an officer of the Corporation. Foregone interest has been
included in the financial statements as interest income to the Corporation.
The Corporation was deemed to have issued a dividend of $3,290 and $2,080 in
the years ended March 31, 1996 and 1995, respectively, to the shareholder
who was deemed to have paid imputed interest of the same amounts on the
note.
SHORT-TERM NOTE PAYABLE
BANK 1996 1995
---------- ----------
Line of credit with a maximum borrowing limit
of $250,000 for 1996 and $300,000 for 1995,
due on demand, bearing interest at prime
plus .75%, secured by all company assets. $ 98,550 $ 244,800
---------- ----------
---------- ----------
LONG-TERM DEBT
Note payable monthly at $554.83, including
interest at 6.9%, secured by a
copier. $ 7,443 $ 12,886
Note payable monthly at $1,507.01, including
interest at 8%, secured by equipment 7,542 23,019
Note payable monthly at $5,833.33, plus
interest at prime plus .875%, secured by all
company assets plus assignment of an
officer's life insurance policy. 315,000 169,167
---------- ----------
329,985 205,072
Less current maturities 84,433 92,825
---------- ----------
Total Long-Term Debt $ 245,552 $ 112,247
---------- ----------
---------- ----------
-8-
<PAGE>
LOGICAL DESIGN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 and 1995
LONG-TERM DEBT (continued)
Future principal maturities of long-term debt are as follows:
Year Ended March 31, Amount
1997 $ 84,433
1998 70,552
1999 70,000
2000 105,000
----------
$ 329,985
----------
----------
CAPITAL LEASE OBLIGATIONS
The Corporation leases certain equipment with lease terms through May, 2000.
Obligations under capital leases have been recorded in the accompanying
financial statements at the present value of future minimum lease payments.
The capitalized cost of $81,918 less accumulated depreciation of $41,915 is
included in property and equipment. Depreciation expense for the equipment
for the years ended March 31, 1996 and 1995 was $16,667 and $15,775,
respectively.
The future minimum lease payments under the capital leases and the net
present value of the future minimum lease payments are as follows for the
years ended March 31,
1997 $ 23,581
1998 21,515
1999 13,487
2000 8,670
2001 698
----------
Total future minimum lease payments 67,951
Less amount representing interest 12,830
----------
Present value of future minimum lease
payments $ 55,121
----------
----------
-9-
<PAGE>
LOGICAL DESIGN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1996 and 1995
OPERATING LEASE
The Corporation leases facilities in Raleigh, North Carolina under a non-
cancelable operating lease expiring June 30, 1998. Future minimum rental
payments as of March 31, 1996 are as follows:
Year Ended March 31, Amount
1997 $ 100,546
1998 100,546
1999 50,273
---------
Total future minimum rental payments $ 251,365
---------
---------
The rent expense for years ended March 31, 1996 and 1995 is $88,940 and
$71,695, respectively.
RELATED PARTY TRANSACTIONS
The president of the Corporation receives loan guarantee fees from the
Corporation for the guarantee of corporate debt to banks. The amounts paid
to the president were $8,740 and $9,837 for years ended March 31, 1996 and
1995, respectively.
PROFIT SHARING PLANS
All full-time employees who meet certain age and length of service
requirements are eligible to participate in the Corporation's 401(k) Profit
Sharing Retirement Plan. The Plan provides for employees to make
contributions through a salary reduction program. The Corporation makes
matching contributions equal to 50 percent of the participant's salary
reduction which does not exceed 5% of the participant's compensation.
Matching contributions charged to operations were $15,047 and $14,123 for
the years ended March 31, 1996 and 1995, respectively.
Effective April 1, 1994, the Corporation established an additional profit
sharing plan. All full-time employees who meet certain age and length of
service requirements are eligible to participate. A discretionary amount
may be contributed as determined each year by the Corporation. The
contribution charged to operations for the year ended March 31, 1996 and
1995, were $32,253 and $26,200, respectively.
-10-
<PAGE>
LOGICAL DESIGN GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
CORPORATE INCOME TAXES
The provision for income taxes is comprised of the following:
1996 1995
--------- --------
Federal income taxes $ 35,473 $21,040
Lease research tax credit 14,589 7,182
--------- -------
20,884 13,858
State income taxes 11,249 8,190
--------- -------
Total Income Taxes $ 32,133 $22,048
--------- -------
--------- -------
At March 31, 1996, the Corporation has research tax credit carryforwards of
$31,151 expiring in years 2009 through 2011 available to offset future tax.
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION
Noncash Investing and Financing Transactions:
The Corporation was deemed to have paid a dividend at March 31, 1996 and
1995 of $3,290 and $2,080, respectively, to a shareholder who was deemed to
have paid imputed interest of the same amount on his non-interest bearing
note to the Corporation.
Capital lease obligations of $17,239 and $17,316 were incurred in years
ended March 31, 1996 and 1995, respectively, for equipment leases.
Equipment with a cost of $19,076 was purchased in the year ended March 31,
1995. The Corporation paid cash of $1,080 and financed the balance of
$17,996.
Cash paid during the year for:
1996 1995
------- -------
Interest $43,669 $43,968
------- -------
------- -------
Income taxes $36,412 $5,766
------- -------
------- -------
-11-
<PAGE>
EXHIBIT V-I
CONTRACTS
<PAGE>
POOLING EXHIBIT
EXHIBIT V-I
CONTRACTS
1. Purchase Order between Tektronik and Logical Design Group, Inc., dated
5/10/96;
2. Purchase Order between Tektronik and Logical Design Group, Inc., dated
6/24/96;
3. Purchase Order between Tektronik and Logical Design Group, Inc., dated
7/29/96;
4. Purchase Order between Tektronik and Logical Design Group, Inc., dated
7/29/96;
5. Purchase Order between Tektronik and Logical Design Group, Inc., dated
8/12/96;
6. Purchase Order between Tektronik and Logical Design Group, Inc., dated
9/30/96;
7. Purchase Order between and klockner Bartelt and Logical Design Group,
Inc., dated 6-11-96;
8. Sales Order No. S0000144 by and between Hughes Training, Inc. and Logical
Design Group, dated 7-8-96;
9. Purchase Order No. CS-01A by and between Hughes Training, Inc. and Logical
Design Group, undated;
10. Certificate of Compliance: Cost Accounting Standards Rules and
Regulations by and between Hughes Training, Inc. and Logical Design Group,
Inc., dated May 22, 1996;
11. Sales Order No 7350 by and between Petri Ruokonen and Logical Design
Group, dated 7-23-96;
12. Sales Order No. X4456C by and between Northrup Grumman Norden Systems and
Logical Design Group, Inc., dated 7-23-96.
13. Sales Order No. IS0172930 by and between GE Drive Systems and Logical
Design Group, Inc., undated.
14. Sales Order No. 30101.629.7175 by and between Micro Process and Logical
Design Group, Inc., dated 7-17-96.
15. Sales Order No. A6CJ-EA5030 by and between Rockwell and Logical Design
Group, Inc., dated 7-17-96.
16. Sales Order No. EP0005262 by and between GE Drive Systems and Logical
Design Group, Inc., dated 7-15-96.
17. Sales Order No. 2309 by and between Chandler/May, Inc. and Logical Design
Group, Inc., dated 7-16-96.
18. Sales Order No. 007922 by and between Currency Systems, International and
Logical Design Group, Inc., dated 7-11-96.
19. Sales Order No. 052661 by and between Geco Prakla and Logical Design
Group, Inc., dated 7-09-96.
20. Sales Order No. 5010.09-03 by and between Practical Imagineering, Inc. and
Logical Design Group, Inc., dated 7-09-96.
21. Sales Order No. 5510 by and between McClean Anderson and Logical Design
Group, Inc., dated 7-9-96.
22. Sales Order No. 1736-1-PV10 by and between and Logical Design Group, Inc.,
dated 7-9-96.
<PAGE>
23. Sales Order No. N00164-96-M4051 by and between NAVSURFWARCENDIV and
Logical Design Group, Inc., dated 6-27-96.
24. Sales Order No. N61339-96-M-1088 by and between KC-130 COMS COR and
Logical Design Group, Inc., dated 6-27/96.
25. Sales Order No. BK1415005 by and between GE Drive Systems Operation and
Logical Design Group, Inc., dated 6-27-96.
26. Sales Order No. 1/96-LDG by and between Computer Systems Trade Ltd. and
Logical Design Group, Inc., dated 6-19-96.
27. Sales Order No. BK1415003 by and between GE Drive Systems and Logical
Design Group, Inc., dated 6-12-97.
28. Sales Order No. 6077 by and between Acromatics, Inc. and Logical Design
Group, Inc., dated 5-8-96.
29. Sales Order No. 1S016557 by and between GE Drive Systems Operation and
Logical Design Group, Inc., dated 4-24-96.
30. Sales Order No. CMC 31601 by and between AVX Corporation and Logical
Design Group, Inc., dated 4-15-96.
31. Agreement by and between GE Fanuc Automation North America, Inc. and
Logical Design Group, Inc., dated 6-14-94.
32. Certificate of Insurance by and between Durfey-Hoover-Bowden and Logical
Design Group, Inc., dated 6-28-94.
33. Agreement by and between Logical Design Group, Inc., and GE Fanuc
Automation of North America, Inc., dated 3-28-95.
34. Supplier Certificates and Representations by and between Honeywell Defense
Avionics Systems and Logical Design Group, Inc., dated 7-23-96.
35. Non-Disclosure Agreement by and between Logical Design Group, Inc. and DY4
Systems, Inc., undated.
36. Agreement by and between Logical Design Group, Inc. and DY4 Systems, Inc.,
dated 1-29-96.
37. Escrow Agreement by and between Logical Design Group, Inc. and Interstate
Electronics, dated 5-12-95.
38. Confidential Information Transmittal Records by and between Intel
Corporation and Logical Design Group, Inc., dated 4-28-96.
39. Sales Representative Agreements:
Date Name of Representative
------ ---------------------------
2/15/93 Bear Resources
4/1/96 CMI & Associates, Inc.
4/1/96 DB Electronics
11/1/92 DYNA Marketing Corporation
11/1/92 J&L Computer Sales, LLC
11/15/92 LA Sales, Inc.
11/15/94 Micrographics, Inc.
2/20/96 WEZA Projekt Technik GMBH
<PAGE>
EXHIBIT VI-C
VIOLATION OF BUYER'S CORPORATE INSTRUMENTS
AND OTHER AGREEMENTS
None
<PAGE>
EXHIBIT VII-D
SELLERS' ATTORNEY'S OPINION
<PAGE>
[LETTERHEAD]
August 19, 1996
SBS Technologies, Inc.
2400 Louisiana Boulevard, N.E.
AFC Building #5, Suite 600
Albuquerque, New Mexico 87110
Re: Logical Design Group, Inc.
Our File No. 14005.003
Ladies and Gentlemen:
We have acted as counsel to Logical Design Group, Inc., a North Carolina
corporation ("LDG"), in connection with the merger of LDG into Logical Design,
Inc., a New Mexico corporation ("LD") pursuant to a Pooling Agreement by and
among LDG, J. Kenneth Boyette, ("Boyette"), Charles D. Pugh ("Purgh"), SBS
Technologies, Inc.,. a New Mexico corporation ("SBS") and LD. We are rendering
this opinion pursuant to Section VII-F of the Pooling Agreement.
In connection with this opinion, we have reviewed and relied on originals
or copies (certified or otherwise identified to our satisfaction) of the
Articles of Incorporation and Bylaws (as amended to date) of LDG, the Pooling
Agreement, and certificates of the directors, officers and shareholders of LDG
with respect to the matters herein. We have also reviewed and relied upon such
certificates of public officials and other instruments, documents and agreements
as we have deemed necessary or appropriate to enable us to render the opinion
set forth below. Where we render an opinion "to the best of our knowledge",
such opinions are limited to the express knowledge of attorneys who are members
of our firm who have given substantive attention to the transaction contemplated
by the Pooling Agreement, without a diligent review of other files of the firm
or inquiry to other lawyers within the firm, and without any investigation made
for the purposes of giving such opinions or statements.
In giving the opinions expressed herein and making our investigations in
connection herewith, we have assumed (a) the due authorization, execution and
delivery by the parties
<PAGE>
SBS Technologies, Inc.
August 19, 1996
Page 2
thereto other than LDG, Boyette and Pugh of the Pooling Agreement and the other
documents examined by us, (b) the genuineness of all signatures of all
individuals other than the signatures of Pugh and Boyette, (c) the personal
legal capacity of all individual signatories, (d) the authenticity of all
documents presented to us as originals, (e) the conformity to the originals of
all documents presented to us as copies, and (f) the integrity and completeness
of the corporate minute books and stock records of LDG presented to us for
examination.
Based upon and subject to the foregoing and the further limitations and
qualifications hereinafter expressed, it is our opinion that:
1. LDG is a corporation duly organized, validly existing and in good
standing under the laws of the State of North Carolina. LDG has the
corporate power and authority to carry on its business as now
conducted and to enter into the merger contemplated by the Pooling
Agreement.
2. The authorized capital stock of LDG consists of 100,000 shares of
common stock, $1.00 par value, of which 20,000 shares are issued
and outstanding, fully paid and non-assessable. To the best of our
knowledge, there are no outstanding options, warrants or rights
including preemptive rights, or rights arising by statute or as a
matter of law to acquire capital stock of LDG other than as
described in the Corporate Employment Agreement between LDG and Pugh
dated as of June 26, 1992.
3. To the best of our knowledge, there exists no voting trust,
agreements or understandings to which LDG, Pugh or Boyette is a
party with respect to the voting of the capital stock of LDG.
4. The execution and delivery of the Pooling Agreement and the Articles
of Merger referenced in the Pooling Agreement have been duly
authorized by all necessary corporate action on the part of LDG.
LDG has the corporate power to execute and deliver the Pooling
Agreement, to perform its obligations thereunder, to consummate the
transactions contemplated by the Pooling Agreement and to comply
with the terms, conditions and provisions of the Pooling Agreement.
5. Boyette and Pugh have each executed and delivered an employment
agreement and a covenant not to compete as required by Section IX of
the Pooling Agreement.
6. To the best of our knowledge, except as described in Exhibit V of
the Pooling Agreement, there is not action, suit or proceeding at
law or in equity, or by or
<PAGE>
SBS Technologies, Inc.
August 19, 1996
Page 3
before any governmental instrumentality or agency or arbitral body
now pending, or overtly threatened against LDG, Pugh or Boyette.
7. The Pooling Agreement has been duly executed and delivered by LDG,
Pugh and Boyette.
8. The execution and delivery of the Pooling Agreement by LDG and the
performance by LDG of its obligations thereunder does not violate or
constitute a breach or default under the Articles of Incorporation
or Bylaws of LDG.
Notwithstanding any other provisions of this opinion letter, the
opinions hereinabove expressed are subject to the following qualifications
and limitations:
a. No opinion is given, either expressed or implied as to any
document, agreement, instrument or certificate delivered or to
be delivered in connection with the transaction contemplated by
the Pooling Agreement except as expressly qualified and limited
herein.
b. We are members of the Bar of the State of North Carolina, and
we express no opinion with respect to the laws of any other
state or jurisdiction.
The opinion set forth herein is solely for the benefit of the addressee
hereof in connection with the transaction provided for in the Pooling Agreement.
Without our prior written consent, this opinion may not be quoted in whole or in
part or otherwise referred to or reproduced in any manner and may not be used
or relied upon in any manner by, or furnished to, any persons or entity, other
than the addressee. This opinion is based on the information available to us as
of this date, and we have no obligation to update or supplement the opinion set
forth herein for any reason whatsoever.
Very truly yours,
/s/ Maupin Taylor Ellis & Adams, P.A.
<PAGE>
EXHIBIT VIII-D
BUYER'S ATTORNEY'S OPINION
<PAGE>
August 19, 1996
Mr. James Kenneth Boyette
4513 Kaplan Drive
Raleigh, NC 27606
Mr. Charles D. Pugh
2928 Bally Bunion Way
Raleigh, NC 27613
Logical Design Group, Inc.
6301 Chapel Hill Road
Raleigh, North Carolina 27607
Gentlemen:
We have acted as counsel to SBS Technologies, Inc., a New Mexico
corporation ("SBS") in connection with the merger of Logical Design Group, Inc.,
a North Carolina corporation ("LDG") into Logical Design, Inc., a New Mexico
corporation and wholly owned subsidiary of SBS ("LD"), pursuant to a Pooling
Agreement among LDG, James Kenneth Boyette ("Boyette"), Charles Pugh ("Pugh"),
SBS and LD, and the other transactions contemplated in the Pooling Agreement
(together the "Transactions"). We are rendering this opinion to each of Boyette
and Pugh individually, and to LDG, pursuant to Section VIII-D of the Pooling
Agreement. Except as otherwise defined in this opinion, capitalized terms used
but not defined have the same meanings given to them in the Pooling Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Pooling Agreement by the various parties, and original or copies
certified to our satisfaction, of those records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us",
or our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for SBS, (ii)
receipt of a certificate executed by an officer of SBS covering those matters,
and (iii) such other investigation, if any, that we specifically set forth in
this opinion.
<PAGE>
Opinion Letter
Mr. James Kenneth Boyette
Mr. Charles D. Pugh
Logical Design Group, Inc.
Page 2
In rendering this opinion, we have assumed: the genuineness and authority
of all signatures, other than officers of SBS and LD, on original documents; the
authenticity of all documents submitted to us as originals; the conformity to
originals of all documents submitted to us as copies; the accuracy, completeness
and authenticity of certificates of public officials; and the due authorization,
execution and delivery of all documents by parties other than SBS and LD, where
authorization, execution and delivery are prerequisites to the effectiveness of
those documents. We have also assumed: that the Pooling Agreement is a binding
obligation upon you; and that you have filed any required income tax returns and
have paid any required income taxes.
Our opinion is expressed only with respect to the United States federal
laws and the laws of the State of New Mexico. We express no opinion as to
whether the laws of any particular jurisdiction other than those identified
above are applicable to this opinion. This opinion is subject to, and we render
no opinion as to, the limitation and expectations applicable to the
enforceability of contracts and obligations generally, including, without
limitation, the following: (a) the effect of the laws of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyances or other similar laws now or
hereinafter in effect generally relating to or affecting the rights and remedies
of creditors, (b) the effect of general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing, and (c) the availability of specific performance, injunctive relief and
other equitable remedies.
With regard to our opinion in paragraph 2 below as to the number of shares
of SBS Common Stock outstanding, we have examined and relied solely upon the
stock books and records supplied to us by SBS and upon representations made by
officers of SBS, and have make no other independent verification.
With respect to our opinion in paragraph 4 below as to violations of pre-
emptive and other rights listed therein, we have relied solely upon (a)
inquiries of officers of SBS, and (b) stock books and records, and have made no
other independent verification.
Except as otherwise indicated, all opinions in this Opinion Letter are
rendered as of the time of Closing.
<PAGE>
Opinion Letter
Mr. James Kenneth Boyette
Mr. Charles D. Pugh
Logical Design Group, Inc.
Page 3
1. SBS is a corporation duly organized, validly existing and in good
standing under the laws of the State of New Mexico. SBS has three subsidiaries,
Berg Systems International, Inc., GreenSpring Computers, Inc., and Logical
Design, Inc. SBS has the corporate power and authority to carry on its
businesses as now conducted and to enter into the merger contemplated by the
Pooling Agreement.
2. The authorized capital stock of SBS consists of 30,000,000 shares of
SBS Common Stock, of which 3,178,133 shares are issued and outstanding, fully
paid and nonassessable. To the best of our knowledge, at the close of business
on June 30, 1996, 1,399,979 shares of SBS Common Stock were reserved for
issuance upon the exercise of SBS options or warrants. The Stock Option
Agreements between SBS and each of Boyette and Pugh have been duly authorized
and validly issued.
3. All corporate action, including approval by SBS's Board of Directors,
required to be taken to authorize SBS to consummate the Pooling Agreement, the
Employment Agreements with each of Boyette and Pugh, the Stock Option Agreements
with each of Boyette and Pugh, and the Transactions has been duly and validly
taken. SBS has the corporate power to execute and deliver the Pooling
Agreement, the Employment Agreements with each of Boyette and Pugh, and the
Stock Option Agreements with each of Boyette and Pugh, to perform its
obligations thereunder, to consummate the Transactions, and to comply with the
terms, conditions and provisions of the Pooling Agreement.
4. The execution and delivery of the Pooling Agreement by SBS, and the
performance by SBS of its obligations thereunder do not violate or constitute a
breach or default under SBS's Articles of Incorporation or Bylaws.
5. The Buyer Shares issued in connection with the Agreement are duly
authorized, validly issued, fully paid and nonassessable, and have not been
issued in violation of any preemptive right, registration right, co-sale right,
right of first refusal or other similar right.
6. The Employment Agreements and the Stock Option Agreements with each of
Boyette and Pugh have been executed and delivered by SBS and constitute legal,
valid and binding obligations of SBS enforceable according to their respective
terms.
<PAGE>
Opinion Letter
Mr. James Kenneth Boyette
Mr. Charles D. Pugh
Logical Design Group, Inc.
Page 4
This Opinion Letter is being furnished to you solely for your benefit in
connection with the Pooling Agreement, and may not be used or relied upon by you
or any other person for any other purpose whatsoever, without in each instance
our prior written consent.
Very truly yours,
SCHULER, MESSERSMITH & MCNEILL
By: /s/ Alison K. Schuler
---------------------------
Alison K. Schuler
<PAGE>
POOLING AGREEMENT
EXHIBIT X
INDEBTEDNESS OF LOGICAL PERSONALLY GUARANTEED BY SELLERS
1. Master Term Note to SouthTrust Bank dated August 14, 1995 in the initial
principal amount of $350,000.00.
2. Rotating Line of Credit to SouthTrust Bank dated August 14, 1995 in the
original amount of $250.000.00.
3. Equipment loan from BB&T (formerly Southern National Bank) dated August
10, 1993 in the original amount of $48,411.93.
4. Copier loan from Xerox Corporation dated April 25, 1994 in the initial
amount of $19,974.00.
5. Lease with BB&T Leasing dated November 30, 1993 in the original amount of
$24,653.00.
6. Lease with Textron dated December 8, 1993 in the original amount of
$22,955.00.
7. Lease with AT&T dated March 21, 1995 in the original amount of $17,316.00.
8. Lease with BB&T dated July 28, 1995 in the original amount of $17,239.00.
9. Lease with BB&T dated July 24, 1996 in the original amount of $60,558.00.
10. Lease on office and plant premises with Teal Properties as amended by
Letter Agreement dated July 18, 1995.
<PAGE>
SBS TECHNOLOGIES, INC.
MANAGEMENT INCENTIVE PLAN
SBS Technologies, Inc. (the "Company") maintains a discretionary Management
Incentive Plan (the "MIP") for certain senior managers and officers. Upon
achieving annually set financial goals based on growth in earnings over the
prior year actual performance and the achievement of certain annually set
strategic goals, participants can earn cash incentives in addition to their
annual salary. The MIP is reviewed and approved annually by the Company's Board
of Directors.
The MIP for fiscal year ended June 30, 1996 was based on the Company meeting
$0.96 earnings per share, including the cost of the incentive, providing
participants the ability to earn between 30% and 60% additional compensation.
This earnings goal was met and as a result six senior managers and four officers
eligible for the plan received a total of $611,950 additional compensation.
The MIP for fiscal 1997 is based on the Company meeting certain financial goals
as well as each participant accomplishing certain strategic goals. In fiscal
1997, five senior managers and four officers are participating in the MIP.
The financial goals for the five senior managers are set at 10% above fiscal
1996 actual results. At this level, each participant will receive a cash
incentive equal to 20% of their annual salary and for each further 1% increase
above fiscal 1996 actual financial results two participants will earn an
additional 1.6% of their annual salary and three participants will earn an
additional 2.0% of their annual salary. Additional incentive, at the discretion
of the Chief Executive Officer and the Chief Operating Officer may be earned for
accomplishing strategic goals once the minimum financial goals are achieved.
The MIP for fiscal 1997 for the four officers of the Company that participate is
based on the Company meeting certain financial goals. Additional incentive can
also be earned by each participant by accomplishing strategic goals if the
minimum financial goals are met. For 1997, an earnings target of $1.21 per
share, an increase of 125% over fiscal 1996 actual results, is the minimum
target. No MIP will be paid if fiscal 1997 results are below this target. At
$1.21 earnings per share two participants will receive a cash incentive of 35%
of their annual salary and two participants will receive a cash incentive of 40%
of their annual salary. Participants also accomplishing their strategic goals
will receive a total cash incentive of two times their base MIP payment. For
each additional $0.01 earnings per share above $1.21 each participant MIP
percent will increase 3.3%.
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF PER-SHARE INCOME
TREASURY STOCK METHOD
AS MODIFIED FOR 20% TEST
<TABLE>
<CAPTION>
Year Ended June 30, 1996
------------------------------
<S> <C>
Proceeds upon exercise of
options and warrants outstanding
(1,377,923 shares at a weighted average
exercise price of $4.979) $ 6,860,679
------------
------------
Weighted average number of shares outstanding 3,017,575
Issued shares - exercise of options and warrants 1,377,923
Shares assumed to be repurchased with proceeds from
exercise subject to 20% of average shares
outstanding maximum (603,515)
------------
Total common and common equivalent shares 3,791,983
------------
------------
Net income for the year $ 3,580,907
Add: After-tax reduction in interest expense from
the assumed repayment of debt 81,144(1)
-----------
Adjusted net income $ 3,662,051
------------
------------
Total common and common equivalent shares 3,791,983
------------
------------
Income per common and common equivalent shares $ 0.97
------------
------------
Income adjustment:
Proceeds upon exercise $ 6,860,679
Price of shares assumed repurchased:
Number of shares 603,515
Average market value based on average monthly market
close information as published by NASDAQ 9.127
------------
5,508,281
------------
Repayment of debt 1,352,397
Interest Rate (estimated average interest rate
on debt for year) 10%
After tax effect (1 - 40%) 60%
------------
$ 81,144(1)
------------
------------
</TABLE>
<PAGE>
EXHIBIT 22 -- Subsidiaries of the Registrant
SBS Technologies, Inc. has the following subsidiaries:
Name State of Incorporation
----- ----------------------
Berg Systems International, Inc. California
GreenSpring Computers, Inc. California
Logical Design Group, Inc. North Carolina
<PAGE>
EXHIBIT 25
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Andrew C. Cruce and Christopher J. Amenson,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Andrew C. Cruce Chairman of the Board, September 16, 1996
- ------------------------- Chief Executive Officer, -------------------
Andrew C. Cruce Treasurer & Director
/s/ Christopher J. Amenson President, Chief Operating September 16, 1996
- ------------------------- Officer & Director -------------------
Christopher J. Amenson
/s/ Scott A. Alexander Vice President, Secretary & September 17, 1996
- ------------------------- Director -------------------
Scott A. Alexander
/s/ James E. Dixon Vice President, Finance & September 14, 1996
- ------------------------- Administration -------------------
James E. Dixon
/s/ William J. Becker Director September 20, 1996
- ------------------------- -------------------
William J. Becker
/s/ Lawrence A. Bennigson Director September 24, 1996
- ------------------------- -------------------
Lawrence A. Bennigson
Director
- ------------------------- -------------------
A. Wade Black
Director
- ------------------------ -------------------
Joseph N. Najjar, Jr.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND IN
THE COMPANY'S 10-K FOR THE YEAR, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,130,030
<SECURITIES> 0
<RECEIVABLES> 6,421,224
<ALLOWANCES> 0
<INVENTORY> 5,160,962
<CURRENT-ASSETS> 13,437,411
<PP&E> 2,389,289
<DEPRECIATION> 1,041,719
<TOTAL-ASSETS> 20,443,672
<CURRENT-LIABILITIES> 5,204,432
<BONDS> 0
0
0
<COMMON> 4,690,786
<OTHER-SE> 5,360,134
<TOTAL-LIABILITY-AND-EQUITY> 20,443,672
<SALES> 31,331,793
<TOTAL-REVENUES> 31,331,793
<CGS> 14,510,106
<TOTAL-COSTS> 24,533,798
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 839,028
<INCOME-PRETAX> 5,968,177
<INCOME-TAX> 2,387,270
<INCOME-CONTINUING> 3,580,907
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,580,907
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.00
</TABLE>
