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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
SBS TECHNOLOGIES, INC.
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Date of Report (Date of earliest event reported): November 24, 1997
New Mexico 1-10981 85-0359415
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(State of Incorporation) (Commission File No.) (IRS Employer I.D. No.)
2400 Louisiana Blvd, NE AFC Bldg 5-600 Albuquerque, New Mexico 87110
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (505) 875-0600
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ITEM 2. ACQUISITION OF ASSETS
On November 24, 1997, SBS Technologies, Inc. ("SBS") acquired all of the
outstanding common stock of Micro Alliance, Inc. ("Micro Alliance") from the
two founders. Micro Alliance is a California corporation that designs and
produces PC-compatible industrial computer systems in a variety of shapes and
sizes, including rack mount, desktop, and mobile, for the embedded computer
market. The systems are typically passive backplane-based and allow up to 20
ISA or PCI cards to be added. Micro Alliance, founded in 1992, provides
these customized systems to a wide range of OEMs throughout the U.S. Micro
Alliance will be renamed SBS Micro Alliance and will operate as a
wholly-owned subsidiary of SBS for the foreseeable future.
SBS will account for the acquisition as a purchase. The purchase price for
the outstanding stock was $5.9 million and was paid in cash at closing. $5.4
million was paid directly to the sellers; $250,000 has been placed in an
escrow fund to be held until final determination of certain tax matters; and
$250,000 was placed in another escrow fund and will be distributed between
the sellers and SBS based upon stockholders' equity as disclosed on a closing
balance sheet now being prepared. The cash was obtained from SBS' net cash
from operating activities and funds received from the SBS Follow-On Public
Stock Offering, which closed in November 1996.
One former stockholder of Micro Alliance's outstanding stock has entered into
a five-year covenant not to compete with SBS. The other stockholder and
certain key employees of Micro Alliance entered into employment agreements to
provide services to SBS.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
The audited financial statements and exhibits required under Item 7 have been
completed and are filed herewith electronically as Exhibit VE2 of the
Purchase Agreement. The Registrant will file the proforma financial
statements and exhibits within the required extension period. The Purchase
Agreement among Micro Alliance, Jeffrey Huston, Edward Larson, Sherrin W.
Larson and the Registrant dated November 24, 1997 and the Exhibits thereto
are filed herewith electronically.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SBS TECHNOLOGIES, INC.
Date: December 9, 1997
By: /s/ James E. Dixon
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James E. Dixon, Vice President
Finance & Administration
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SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Method of Filing
- -------------- --------------------------------- ----------------------------------
<S> <C> <C>
10.aa Purchase Agreement among Micro Filed herewith electronically
Alliance, Jeffrey Huston, Edward
Larson, Sherrin W. Larson and the
Registrant dated November 24, 1997
</TABLE>
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PURCHASE AGREEMENT
Micro Alliance, Inc. ("MAI"), a California corporation, and Jeffrey
Huston, Edward Larson, and Sherrin W. Larson (together "Shareholders") and
SBS Technologies, Inc., a New Mexico Corporation ("Buyer"), agree:
I. RECITALS.
A. OWNERSHIP. Shareholders are the owners of all of the outstanding
common stock ("MAI Shares") of MAI, in the amounts set out on Exhibit IA to
this Agreement, and wish to sell the MAI Shares to Buyer for cash
consideration.
B. RECEIPT OF SHARES. Buyer wishes to purchase the MAI Shares under
the terms and conditions of this Agreement.
C. PURCHASE TREATMENT. The parties intend that the Transactions (as
later defined) be accounted for as a purchase in accordance with generally
accepted accounting principles, and that a Section 338(h)(10) election be
made under the Internal Revenue Code of 1986, as amended ("IRC").
D. EMPLOYMENT ARRANGEMENTS. Upon receipt of the MAI Shares, Buyer
wishes to employ Edward Larson, who is an employee of MAI, as well as other
employees of MAI as provided in this Agreement. Larson wishes to be employed
by Buyer.
E. COVENANTS NOT TO COMPETE. As part of the Transactions, Shareholders
will enter into Covenants Not to Compete with Buyer.
II. ACQUISITION.
A. ACTION. Subject to the terms and conditions of this Agreement,
Buyer will acquire the MAI Shares at closing ("Closing") of the transactions
contemplated by this Agreement ("Transactions").
B. CONSIDERATION. At Closing, Buyer will pay ("Purchase Price") to the
Shareholders, for their MAI Shares and in the proportion in which they own
those MAI Shares, a total of $5.9 million in cash, adjusted up or down, as
appropriate, on a dollar for dollar basis for changes in the equity of MAI
from $1.436 million, as reported in the Closing Balance Sheet (as later
defined). For example, if the equity of MAI on the Closing Balance Sheet is
$1.555 million, the Purchase Price will be $6.019 million, that is, increased
by $119,000 as a result of the difference between $1.555 million and $1.436
million.
C. OFFICERS. MAI's directors and officers will submit their
resignations from those positions at Closing. At Closing, Buyer will
designate such directors and officers as it may
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determine to be in the best interest of MAI. Nothing in this paragraph shall
entitle any director or officer to maintain that position if not thereafter
duly elected or appointed to it.
III. EMPLOYMENT AGREEMENTS, COVENANTS NOT TO COMPETE, AND OPTIONS.
A. SHAREHOLDER EMPLOYMENT AND COVENANTS NOT TO COMPETE. At Closing,
Buyer will enter into a two-year employment agreement, substantially as set
forth in Exhibit IIIA, with Edward Larson ("Shareholder Employment
Agreement"). Shareholders will enter into Non-Compete Agreements in the form
attached as IIIA2.
B. SHAREHOLDER OPTIONS. In connection with the Shareholder
Employment Agreement, Buyer will issue, at Closing, to Edward Larson
incentive stock options under Buyer's 1998 Long-Term Equity Incentive Plan
("Plan") for 35,000 shares of Buyer common stock (the "Shareholder Options").
The Larson option will be in the form set forth as Exhibit IIIB.
C. OTHER EMPLOYMENT AGREEMENTS. At Closing, Buyer will enter into
employment agreements in its standard form for Buyer employees with each
employee of MAI wishing to continue his or her employment after Closing. The
agreements will provide for MAI employees to continue at their MAI rate of
compensation as of the date of Closing and to receive the same standard
benefits which are available to all Buyer employees.
D. EMPLOYEE OPTIONS. At Closing, Buyer will issue to Jeff Jones and
Olav Kok, employees of MAI, if they become Buyer employees at Closing,
incentive stock options for 20,000 and 10,000 shares, respectively, of Buyer
common stock, under the terms of the Plan ("Employee Options").
IV. IRC ELECTION.
Each of Buyer and Shareholders hereby covenant and agree to make a
Section 338(h)(10) election under the IRC and to take all actions necessary
to make that election effective.
V. SHAREHOLDERS'S REPRESENTATIONS AND WARRANTIES.
Shareholders and MAI, 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 (which exceptions must be reasonably acceptable
to Buyer):
A. ORGANIZATION AND STANDING OF MAI. MAI is a corporation validly
existing under the laws of the State of California, 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. MAI conducts
its business and owns or
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leases properties solely in the State of California and is not required to be
licensed or qualified to transact its business or own or lease its properties
in any other jurisdiction.
B. CAPITALIZATION. MAI is authorized to issue 1,000,000 shares of no
par value common stock and only 90,000 shares, constituting the MAI Shares,
are issued and outstanding. MAI holds no shares of MAI stock as treasury
shares. The MAI 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 MAI
are outstanding.
C. STOCK OWNERSHIP. Shareholders have good and marketable title to the
MAI 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 transfer the MAI Shares pursuant to this Agreement. Shareholder
Jeffrey Huston (and not other Shareholders) represents and warrants that he
is the sole owner of the MAI Shares held in his name, and Julie A. Huston has
transferred any ownership interest in those MAI Shares to him and has no
claim of any nature whatsoever in and to those MAI Shares. Jeffrey Huston
and Julie A. Huston have executed an agreement for dissolution of marriage,
and that agreement has been duly and validly executed, and constitutes the
legal, valid and binding obligation of Jeffrey Huston and Julie A. Huston,
enforceable in accordance with its terms (subject to limitations on
enforcement of remedies and the discretion of courts in awarding equitable
relief), and provides that all MAI Shares to be transferred by Jeffrey Huston
in accordance with this Purchase Agreement are owned solely by him without a
claim to those MAI Shares from Julie A. Huston.
D. APPROVAL. Each of Shareholders has approved, and, to the extent
corporate approval for MAI is required, the MAI board of directors has taken
all necessary action approving this Agreement. Except as described above, no
other approval is necessary to consummate the Transactions contemplated by
this Agreement. This Agreement constitutes the legal, valid and binding
obligation of Shareholders and MAI, 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). MAI and Shareholders individually have waived by all necessary
action all rights to purchase MAI Shares being transferred and the right to
cause MAI to purchase offered MAI Shares, as set forth in Section 10.04 of
MAI's Bylaws.
E. FINANCIAL STATEMENTS. The Closing Balance Sheet (Exhibit IVE) and
supporting information, when delivered by Shareholders and MAI to Buyer, will
be, and the books and records
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on which they are based are and will be, correct in all material respects,
fairly represent the financial and operational condition of MAI as of the
date of Closing, and reflect that all items relating to personal transactions
by Jeffrey Huston have been cleared. The Year-End Financial Statements
(Exhibit IVE2) and the Third Quarter Financial Statements (Exhibit IVE3), and
the books and records on which they are based, are correct in all material
respects and fairly represent the financial and operational condition of MAI
as of MAI's most recent year end and the end of MAI's most recent third
quarter, respectively. Buyer, and Shareholders and MAI, agree that the
Closing Balance Sheet, the Year-End Financial Statements, the Third Quarter
Financial Statements, and any other financial statements provided to Buyer,
will be and have been prepared in accordance with generally accepted
accounting principles, consistently applied, and that the Year-End Financial
Statements and Third Quarter Financial Statements have been audited by
Buyer's public accounting firm before Closing and the auditors have not
recommended or reported any adjustments exceeding $25,000 in the aggregate.
F. OWNERSHIP OF MAI. As of the date of Closing, except for this
Agreement, there will not be any outstanding or authorized warrants, calls,
rights, commitments or other agreements of any nature to which MAI is a
party, or by which it may be bound, 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 MAI.
G. ABSENCE OF CERTAIN CHANGES. Since September 30, 1997, there have
not been (i) any material changes in MAI's financial or operational
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 MAI's properties or business or the
assets; (iii) any labor trouble or any event or condition of any character
materially and adversely affecting MAI's business; (iv) any indebtedness
incurred by MAI for borrowed money or any commitment to borrow money entered
into or any guarantee given by MAI, 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 MAI's
assets or its business, (vi) any failure to maintain insurance policies or
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 MAI to any officer, director or key employee of MAI, except for normal
distributions to shareholders.
H. TITLE TO PROPERTIES. MAI owns, free and clear of any liens,
encumbrances, claims, charges, contractual or other
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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, for which accruals have been
made.
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 substantially conducted by MAI, including without
limitation, those with purveyors or suppliers of items used in the conduct of
MAI's business. MAI has materially performed all its contracts, to the
extent performance is due, and has cured all defaults of which it is aware or
should reasonably have been aware.
J. ACTIONS. There are no judgments, actions, suits, claims,
proceedings, investigations, bankruptcy or insolvency proceedings or
receiverships (collectively, "Actions") pending or, to the best of MAI's and
Shareholders' knowledge, threatened against or relating to MAI, its assets or
business, in any court, in arbitration, or before any governmental department
or agency, nor is MAI or any of its assets subject to any unsatisfied
judgment, order or award as a result of any such Actions. To the best of
MAI's and Shareholders' knowledge, there is no basis for any such Actions.
K. TAX MATTERS. The representations concerning tax matters contained
in the Closing Balance Sheet, Third Quarter Financial Statements and Year-End
Financial Statements are, and will be at Closing, true and correct in all
material respects as of their dates. All tax returns required to be filed
before Closing with respect to MAI or its operations by MAI or Shareholders
with any taxing authority as of Closing have been filed or, as to
Shareholders, and Shareholders and MAI with respect to the short period from
January 1, 1997 to Closing ("Short Period"), 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, including the Short Period, have been paid
or accrued or adequate reserves, as shown on the Closing Balance Sheet, for
the payment thereof have been established. MAI is not delinquent in the
payment of any tax, assessment or governmental charge. Shareholders will be
responsible for the payment of all personal taxes imposed on them with
respect to the S Corporation earnings of MAI or distributions and dividends
paid to them by MAI before Closing, as well as any other personal taxes
resulting from the Transactions and any taxes on built-in gain imposed on MAI
or Shareholders because of MAI's election to be treated as an S corporation.
L. DISCLOSURE. In information provided to Buyer, any of Shareholders
or MAI has 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.
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M. NO VIOLATION OF CORPORATION INSTRUMENTS OR OTHER AGREEMENTS. The
execution and delivery of this Agreement does not, and the consummation of
the Transactions will not: (i) violate any provision of the Articles of
Incorporation, Bylaws, Stock Certificates, Stock Records or Minute Book of
MAI, or of any stock restriction, buy-sell or similar agreement to which any
of Shareholders may be subject; (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 MAI and Shareholders are bound; (iii)
require any consent, approval or authorization of any governmental or
regulatory authority; (iv) violate any order, writ, injunction, judgment,
decree, or violate in any material respect any statute (including without
limitation environmental and business statutes), rule or regulation
applicable to MAI or Shareholders or MAI's business or any of MAI'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
Shareholders or MAI.
O. PERMITS, LICENSES AND FRANCHISES. To the best of Shareholders' and
MAI's knowledge, (i) MAI 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)
MAI and Shareholders 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 MAI or the
operation of the business, and (iii) neither MAI nor Shareholders (or either
of them) has knowledge of any action, threat or proceeding looking to or
contemplating the revocation or suspension of any thereof.
P. INTELLECTUAL PROPERTY. For purposes of this paragraph, intellectual
property means (i) all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and re-examinations thereof, (ii) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combination thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (iii) all copyrights,
and all applications, registrations, and renewals in connection therewith,
(iv) all mask works and all applications, registrations, and renewals in
connection therewith, (v) all trade secrets and confidential business
information (including research
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and development, know-how, formulae, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals), (vi) all computer software
(including data and related documentation), (vii) all other proprietary
rights, and (viii) all copies and tangible embodiments thereof (in whatever
form or medium).
1. MAI owns or has the right to use pursuant to license,
sublicense, agreement, or permission all intellectual property necessary or
desirable to design, manufacture and sell its current products and for office
administration, the failure to possess which would have a material adverse
effect on MAI. Each material item of intellectual property owned or used by
MAI immediately before the Closing will be owned or available for use by MAI
on identical terms and conditions immediately after the Closing. MAI has
taken appropriate action to maintain and protect as a trade secret each
material item of intellectual property that it owns or uses.
2. To MAI's and Shareholders' best knowledge, none of the products
manufactured by MAI infringes upon any intellectual property rights of third
parties, and none of the Shareholders nor MAI has received any written
charge, complaint, claim, demand, or notice alleging any such infringement
(including any claim that MAI must license or refrain from using any
intellectual property rights of any third party).
3. MAI owns the patents listed on Exhibit VP3. MAI has not
granted to any third party any license with respect to any of its
intellectual property to manufacture or produce any product.
4. The Disclosure Schedule identifies each item of intellectual
property that any third party owns and that MAI embodies or incorporates in
MAI's products, pursuant to license, sublicense, agreement, or permission.
The Shareholders and MAI have delivered to Buyer correct and complete copies
of all such licenses, sublicenses, agreements, and permissions, (as amended
to date). With respect to each item of intellectual property required to be
identified in the Disclosure Schedule, the license, sublicense, agreement, or
permission covering the item is, to the Shareholder's best knowledge, the
legal, valid and binding obligation of MAI, enforceable in accordance with
its terms, and in full force and effect, and will stay in effect following
the Closing.
Q. EMPLOYEES. To the best of MAI's and Shareholders' knowledge, no
third party has claimed that any person employed or affiliated with MAI 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
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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. Shareholders have no knowledge
that any key employee of MAI intends to leave or is leaving the employ of MAI
in order to take part, as an employee or otherwise, in any business in
competition with MAI.
R. ENVIRONMENTAL, HEALTH AND SAFETY. (i) MAI has materially 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 the preceding, each of MAI
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 MAI, 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 Shareholders' and
MAI's knowledge, all properties and equipment used in MAI'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.
S. PRODUCT LIABILITY. MAI has, to the best of Shareholders' and MAI's
knowledge, 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
MAI.
T. SHAREHOLDER INTERESTS AND AGREEMENT. Shareholders represent and
warrant that they hold all of the issued and outstanding shares of capital
stock of MAI, and that no disputes of any nature, whether claims, lawsuits
or other disagreements formally filed or informally pursued exist among them
or between them and another person or entity or on their behalf (individually
or jointly) with respect to that share ownership, and no such disputes have
been threatened. Shareholders individually and jointly waive, release and
renounce any and all claims of any nature whatsoever against Buyer or between
each other arising out of Buyer's form, method or allocation of payment of
the Purchase Price and any other consideration under this Agreement as
provided
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in this Agreement or, to the extent not specifically directed in this
Agreement, as otherwise directed by a Shareholder.
U. DUE DILIGENCE. Except for the specific representations and
warranties of MAI and Shareholders as set forth in this Agreement, Buyer is
acquiring the MAI Shares and closing the Transactions based upon its own
investigation and audit of MAI and its operations, assets and financial
statements and not in reliance upon any oral representations or assurances
from MAI, its employees, officers, directors or Shareholders with respect to
the business prospects or future results of the business of MAI, whether
contained in forecasts, projections or otherwise. Shareholders have provided
to Buyer, its counsel, accountants and other representatives full access to
all property, assets, books, accounts, records, files, contracts and
documents relating to MAI and its operations, and Buyer has reviewed these to
the extent Buyer has deemed appropriate in determining to close the
Transactions.
VI. BUYER'S WARRANTIES AND REPRESENTATIONS.
Buyer represents and warrants to MAI and Shareholders that the following
are true as of the date of this Agreement and will be true at Closing except
as disclosed on the Disclosure Schedule designated as Exhibit VI to this
Agreement (which exceptions must be reasonably acceptable to Buyer):
A. ORGANIZATION AND STANDING OF BUYER. Buyer 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 four subsidiaries: GreenSpring Computers, Inc. (SBS
GreenSpring Modular I/O, Inc.), Berg Systems International, Inc. (SBS Berg
Telemetry Systems, Inc.), Bit 3 Computer Corporation (SBS Bit 3 Operations,
Inc.), and Logical Design Group, Inc. (SBS Embedded Computers, Inc.). Buyer
is duly licensed or qualified to transact business as a foreign corporation
in California 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. APPROVAL. Buyer's Board of Directors and, to the extent required,
its shareholders, have approved, by all necessary corporate action, the
execution, delivery and performance of this 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
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law, the Articles of Incorporation or Bylaws of Buyer or otherwise to
authorize the execution and delivery of this Agreement and the consummation
of the Transactions and this Agreement constitutes the legal, valid and
binding obligation of Buyer, 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).
C. NO VIOLATION OF CORPORATE INSTRUMENTS OR OTHER AGREEMENTS. The
execution and delivery of this Agreement does not, and the consummation 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. BROKERAGE. No brokerage fees are payable by Buyer in connection
with the Transactions resulting from any brokerage agreements entered into by
Buyer.
E. FINANCIAL STATEMENTS. Buyer has filed Annual Report on From 10-K
for the fiscal year ended June 30, 1997 ("Public Report"). The financial
statements included in or incorporated by reference into that Public Report
(including the related notes and schedules) have been prepared in accordance
with generally accepted accounting principles, applied on a consistent basis
throughout the periods covered by them, are correct in all material respects,
and present fairly the financial and operational condition of Buyer as of the
indicated dates and the results of operations of Buyer for the indicated
periods. Since the end of the most recent fiscal year as reported in the
Public Report, there has not been any material adverse change in the
financial or operational condition of Buyer and its subsidiaries taken as a
whole.
F. DISCLOSURE. In information provided to Shareholders, Buyer has 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.
VII. BUYER'S CONDITIONS PRECEDENT.
All obligations of Buyer under this Agreement to close the
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Transactions are subject to the fulfillment before Closing, of each of the
following conditions:
A. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Shareholders' and
MAI's representations and warranties contained in this Agreement are true at
the time of Closing.
B. PERFORMANCE. Shareholders and MAI have performed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by Shareholders and MAI at Closing.
C. CONSENTS. Any consents necessary to allow the Transactions to occur
have been obtained in writing, in form satisfactory to Buyer.
D. MAI BANKRUPTCY. MAI is not in a bankruptcy, reorganization or
insolvency proceeding, nor is any such proceeding contemplated.
E. JULIE A. HUSTON CERTIFICATION. Julie A. Huston has provided a
certified written statement in the form attached as Exhibit VIIE
("Certification") (i) warranting and representing that Jeffrey Huston is the
sole owner of all MAI Shares in which she had or might have had an interest,
that she and Jeffrey Huston are parties to an agreement in respect of
dissolution of marriage which awards all interest in MAI Shares to Jeffrey
Huston and that the agreement has been duly executed, and constitutes the
legal, valid and binding obligation of Jeffrey Huston and Julie A. Huston,
enforceable in accordance with its terms (subject to limitations on
enforcement of remedies and the discretion of courts in awarding equitable
relief), and provides that all MAI Shares to be transferred by Jeffrey Huston
in accordance with this Purchase Agreement are owned solely by him without a
claim to those MAI Shares from Julie A. Huston, (ii) that no disputes of any
nature, whether claims, lawsuits or other disagreements formally filed or
informally pursued exist among the Shareholders and Julie A. Huston or
between them and another person or entity or on their behalf (individually or
jointly) with respect to that share ownership, and no such disputes have been
threatened, except for the dissolution of marriage action between Julie and
Jeffrey Huston, which has been resolved by their marital settlement agreement
which provides for the transfer of all MAI Shares to Jeffrey Huston, and
(iii) that Julie A. Huston waives, releases and renounces any and all claims
of any nature whatsoever against Buyer arising out of Buyer's form, method or
allocation of payment of the Purchase Price and any other consideration under
this Agreement as provided in this Agreement or, to the extent not
specifically directed in this Agreement, as otherwise directed by a
Shareholder.
VIII.SHAREHOLDERS'S CONDITIONS PRECEDENT. All obligations of Shareholders
under this Agreement to close the Transactions are
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 11
<PAGE>
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 Agreement are true at the
time of Closing.
B. PERFORMANCE. Buyer has performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with by
Buyer before or at Closing.
C. CERTIFIED RESOLUTIONS. Buyer has furnished to Shareholders 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.
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 at a place agreed
upon by the parties, but in any event not later than November 26, 1997. If
Shareholders' 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. SHAREHOLDERS' DUTIES. Shareholders and MAI, as appropriate, will
deliver to Buyer at Closing simultaneously with confirmation that the
Purchase Price (less the Escrow Amount, as defined below) has been wired to
Shareholders' accounts:
1. The MAI Shares, properly endorsed for transfer;
2. Executed resignation letters of officers and directors of MAI;
3. Executed Shareholder Employment Agreement of Edward Larson with
Buyer;
4. Executed Covenants Not to Compete from all Shareholders;
5. Executed Shareholder Options;
6. Letter from Wells Fargo Bank in a form approved by Buyer
substantially stating that the Business Loan Agreement between the Bank and
MAI dated March 20, 1996 has been terminated, that no balance was outstanding
under it, and that a UCC3
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 12
<PAGE>
Termination Statement will be filed promptly in the proper filing records
releasing all liens and encumbrances filed or asserted pursuant to the
Business Loan Agreement by the Bank against any assets of MAI;
7. Waiver by each Shareholder of rights under Section 10.04 of
MAI's Bylaws;
8. The Certification; and
9. Any and all other documents required by this Agreement to be
delivered to Buyer at Closing.
B. BUYER'S DUTIES. Buyer will deliver to Shareholders at Closing:
1. The Purchase Price (paid by wire transfer in accordance with
instructions delivered to Buyer at least five business days before Closing),
less $250,000 (the "Escrow Amount"), simultaneously with delivery of the MAI
Shares, to each Shareholder in accordance with the distribution amounts set
forth on Exhibit IXB;
2. Executed Shareholders Employment Agreement;
3. Executed Shareholder Options;
4. Executed Employee Options;
5. Certified copy of resolutions of Buyer's Board of Directors
authorizing the Transactions; and
6. Any and all other documents required by this Agreement to be
delivered to Shareholders at Closing.
C. ESCROW AMOUNT AND TAX FUND AMOUNT.
1. Buyer will deliver to the trust account of Alison K. Schuler,
Esquire, ("Escrow Agent") the Escrow Amount, to be held in escrow until
notification from Mr. James E. Dixon, on behalf of the Buyer, and Mr. Jeffrey
Huston, on behalf of the Shareholders and MAI, that the Closing Balance Sheet
has been prepared and that any adjustment in Purchase Price has been
calculated ("Adjustment Amount"). The notice shall direct the Escrow Agent
to pay to Shareholders, in the individual amounts and to the accounts
indicated in the notice, (i) the Escrow Amount less the Adjustment Amount, if
the Adjustment Amount decreases the Purchase Price, and to return to Buyer
the Adjustment Amount, or (ii) the Escrow Amount, if the Adjustment Amount is
zero or increases the Purchase Price. If the Adjustment Amount increases the
Purchase Price in excess of $5.9 million, Buyer will immediately wire the
Adjustment Amount to the Shareholders in the individual amounts directed by
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 13
<PAGE>
Shareholders, which will be based on a ratio of 88.89% to Shareholder Jeffrey
Huston and 11.11% to Shareholders Edward and Sherrin Larson. The parties
shall complete the Closing Balance Sheet and distribute any and all
Adjustment Amounts no later than thirty days after the Closing.
2. With respect to any potential tax liability of the Shareholders
under Section VK, Buyer will deliver to the trust account of the Escrow Agent
the amount of $250,000 ("Tax Fund Amount") to be held in escrow until such
time as the parties can establish an escrow account or other similar account
with a California financial or escrow institution acceptable to all parties
for deposit of the Tax Fund Amount ("Tax Escrow Account"). The Tax Escrow
Account shall be established in two accounts, one in an amount of $222,225
for Jeffrey Huston, and the other in an amount of $27,775 for Edward and
Sherrin Larson. Both accounts shall be established so that no monies will be
released without the signatures of all parties. Buyer and Shareholders shall
set up such accounts within thirty days of Closing. Buyer shall bear all
fees of those accounts. The accounts will bear interest, and all such
interest shall accrue to the benefit of and be released to the respective
Shareholders of each account unless required for payment as provided in this
paragraph. The Tax Escrow Account shall remain in place until the earlier of
(i) final resolution with the IRS and the FTB of any dispute of any tax
return of MAI prepared or which should have been prepared and any tax,
penalties, interest and fines paid or payable with respect to Sections VK and
XII for the time period before Closing ("Tax Liability"); or (ii) the end of
any applicable statute of limitations, but in no event longer than three
years from the date of filing of tax returns reporting the Transactions
unless an action or dispute with the IRS or FTB is pending. If it is
determined that MAI owes any Tax Liability to the FTB or the IRS as a result
of such a dispute, and after any final settlement or termination of any
actions between the respective Shareholders and the IRS and/or the FTB, the
parties shall release the necessary funds from such accounts to pay SBS on
account of MAI's Tax Liability. Any disputes between the parties with respect
to such issues shall be handled by arbitration in accordance with Section XI.
Nothing in this paragraph is intended to limit the liability of the
Shareholders under Sections VK and XII. All funds which have not been paid
to Buyer and are not owed to Buyer under this paragraph shall be released to
the respective Shareholders upon termination of the accounts.
3. The Escrow Agent will have no responsibility or liability of
any sort whatsoever arising from disbursement of the Escrow Amount in
accordance with the notice or in any case for any action or nonaction taken
or not taken, except for malfeasance. Except as provided in this paragraph,
all conditions to the obligations of the parties to consummate the
Transactions will be deemed to be satisfied without exception at Closing, and
this Agreement will be a binding and unconditional agreement between the
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 14
<PAGE>
parties subject only to the obligations of this paragraph.
D. JOINT DUTIES. Buyer and Shareholders will execute any further
documents and do all things necessary to consummate the Transactions
contemplated by and establish the escrow accounts provided for in this
Agreement.
X. PROPRIETARY INFORMATION. Shareholders agree, represent and warrant that,
unless Buyer's prior written consent has been obtained, Shareholders will
not, at any time after Closing, use for the benefit of other than Buyer,
directly or indirectly, on behalf of Shareholders or any other person or
business entity, any trade secrets, proprietary information, or confidential
information (collectively, the "Confidential Information") (i) concerning the
business of MAI, including the composition, plans or technology of the
products produced by MAI and the method of their manufacture, and MAI
financial data and related information or (ii) provided by Buyer to
Shareholders in connection with this Agreement. Confidential Information
does not include information generally known in the industry in which MAI and
Buyer engage or information which is available from public records or public
sources, in either case not as a result of violation of this paragraph.
Shareholders 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.
XI. REMEDY FOR BREACH OF WARRANTY. If any warranty or representation in this
Agreement other than the warranty and representation in Section VK, Tax
Matters, is claimed within twenty-four 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, or, as to the
warranty and representation in Section VK, Tax Matters, the later of the
expiration of the last applicable statute of limitations or the final
adjudication or settlement without further recourse with respect to matters
arising under Section VK, (in each case, the "Warranty Period") 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 other party not later than one
business day after the expiration of the Warranty Period express written
notice of the details of such breach and the intent to make a claim. If the
parties cannot reach resolution within 90 days of the notice, the party
claiming such a breach shall expeditiously request an arbitration conducted
under the rules of the American Arbitration Association (the parties to
select one arbitrator) for the purpose of determining liability and
compensation. The arbitration will take place in San Diego County,
California. 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
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 15
<PAGE>
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. Except with respect to Section VK, unless the cumulative total
of all damages being sought for all claims has exceeded $25,000, 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 $25,000 limit is
exceeded, the liable party shall be liable for the full amount of the breach.
To the extent damages resulting from an event which could be the basis for
any claimed breach of a warranty or representation, other than Section VK, by
Shareholders or MAI are covered by insurance of MAI under policies in
existence for MAI before the Closing date or with respect to product
liability claims for which MAI is covered by insurance under policies in
existence for MAI either before or after the Closing date (the Shareholders
and Buyer having agreed that MAI's current policy of insurance will be
renewed for a period of one year, the portion of the renewal premium relating
to product liability to be accrued on the Closing Balance Sheet and paid by
Shareholders), the amount of any damages awarded to a prevailing party
hereunder shall be reduced by the amount of insurance proceeds paid to that
party on any policies covering the damage or event which is the subject of
the breach of warranty or representation. For example, if Buyer claimed a
breach of the warranty and representation regarding product liability set
forth in paragraph VR above, and any damages arising from any losses caused
by that breach are covered by product liability insurance under policies in
existence for MAI before the Closing date or as provided for in this
paragraph, then any award to Buyer will be reduced by the amount of the
insurance proceeds paid to Buyer or MAI. Any judgment upon an award rendered
by the arbitrator may be entered in any court having jurisdiction thereof.
All warranties and representations of the parties herein shall terminate and
be of no further force and effect at the end of the Warranty Period. No
party may make any claim for breach of any warranty or representation after
the Warranty Period.
XII. TAX MATTERS.
In reliance on the representation and warranty in Section VK, Tax
Matters, Buyer agrees to cooperate with Shareholders in filing any Short
Period tax returns prepared and signed by Shareholders and their accountant
and shall cause MAI to execute any such returns. If the Internal Revenue
Service ("IRS") or the State of California Franchise Tax Board ("FTB") audits
any returns of the Shareholders or MAI for periods before the Closing,
including any tax returns filed for the Short Period, Buyer shall cooperate
with the Shareholders in contesting any audit or positions taken by the IRS
or the FTB and shall allow the Shareholders, on behalf of MAI, to contest and
dispute any claims for additional tax liabilities by the IRS or the FTB.
Shareholders will defend and hold Buyer harmless from any amounts, including
without limitation, taxes, interest, penalties and fines, which may be found
by audit, action
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 16
<PAGE>
or otherwise to be due with respect to the matters covered by Section VK and
this Section and all costs and expenses (including without limitation legal
and other professional fees) incurred in respect of defense or prosecution
thereof, based on a ratio of 88.89% for Jeffrey Huston and 11.11% for Edward
and Sherrin Larson.
XIII. COOPERATION.
A. Shareholders and MAI, and Buyer will cooperate to effectuate the
purposes of this Agreement. Shareholders and MAI, and Buyer will, without
additional consideration, execute any other documents and take any other
action reasonably necessary to carry out the purposes of this Agreement.
Until Closing, no news release about the Transactions will be released to the
public via any media by any Shareholders or MAI, on the one hand, or Buyer,
on the other hand, without prior written approval of Buyer or MIA, as the
case may be, except as may be required by law, in which case, MIA or Buyer
will have a reasonable opportunity for review of and comment on a proposed
news release.
B. Shareholders and MAI will cooperate with Buyer in connection with
any actions, proceedings, arrangements or disputes involving MAI's business
or based upon the consummation of the Transactions or upon contracts,
arrangements or acts of Shareholders or MAI which were in effect or occurred
on or before the Closing date.
C. Shareholders and MAI 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 Shareholders's operation of the business before MAI's
incorporation), including an audit, needed by Buyer to comply with reporting
and filing requirements imposed on Buyer by federal and state regulatory
authorities. The expense of preparation of this financial and other
information by Buyer's accountants will be borne solely by Buyer.
XIV. MISCELLANEOUS.
This Agreement binds and benefits the parties, their successors, assigns
and transferees. This Agreement is specifically enforceable and is governed
by New Mexico law. This Agreement and the Employment Agreement 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 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 Agreement for the benefit of the parties in referring to
this Agreement, but will not be construed or interpreted as part of this
Agreement. Each of
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 17
<PAGE>
Shareholders and MAI, and Buyer, will pay its expenses, including without
limitation attorneys' fees, arising out of the Transactions and the
agreements embodying them.
XV. NOTICES. Any notice or other communication required under this Agreement
or desired to be given by any of the parties to this 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 other party, or one
day after being delivered pre-paid for over-night delivery to an express
service, addressed as follows:
BUYER:
SBS Technologies, Inc.
Attn: James E. Dixon, Jr., Vice 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
4300 San Mateo Boulevard NE, Suite B-380
Albuquerque, New Mexico 87110
Telephone: (505) 872-0800
SHAREHOLDERS:
Mr. Jeffrey Huston
2901 Candil Place
Carlsbad, California 92009
Telephone: (760) 930-9279
Mr. Edward Larson
723 Hollyridge Drive
Encinitas, California 92024
Mrs. Sherrin Larson
723 Hollyridge Drive
Encinitas, California 92024
MAI:
Micro Alliance, Inc.
1384-A Poinsettia Avenue
Vista, California 92083
Telephone: (760) 598-1900
Facsimile: (760) 598-7462
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 18
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Copy to: Edward F. Whittler, Esquire
Peterson & Price
530 B. Street, Suite 2300
San Diego, California 92101-4454
Or to such other address which may be furnished in writing.
DATED: November 24 , 1997
------
BUYER: Shareholders:
SBS TECHNOLOGIES, INC.
By: Steve Cooper /s/
-----------------------------
Jeffrey Huston
Its: President
/s/
------------------------------
Edward Larson
/s/
------------------------------
Sherrin W. Larson
Micro Alliance, Inc.
By: Jeffrey Huston
---------------------------
Its: President
By: Edward Larson
---------------------------
Its: Secretary
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 19
<PAGE>
EXHIBIT IA
MAI SHARES
80,000 - Jeffrey E. Huston
10,000 - Ed Larson
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 20
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EXHIBIT IIIA
SHAREHOLDER EMPLOYMENT AGREEMENT
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 21
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EMPLOYMENT AGREEMENT
SBS Technologies, Inc. ("Company") and Edward Larson ("Employee") agree:
1. EMPLOYMENT. Company employs Employee for the period beginning on
the date of this Employment Agreement as set forth below, and ending two
years from its date or upon discharge or resignation of Employee solely in
accordance with the terms of this Agreement (the "Employment Period").
During the Employment Period, Employee will serve in the position of Vice
President of Sales and Marketing of Micro Alliance, Inc. or other management
position as determined by the 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. RENEWAL. This Agreement may be renewed at the end of the Employment
Period upon written agreement by Company and Employee. Company and Employee
agree to negotiate renewal in good faith.
3. COMPENSATION. For all services performed by Employee for Company
during the Employment Period, Company will pay Employee the salary and
benefits set forth on Appendix "A". 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 and Appendix
A. 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
agrees to follow Company's written policies with regard to reimbursable
expenses.
5. SICK LEAVE AND DISABILITY. Employee will be entitled to sick leave
and disability as described in the Company's written policies.
6. RESIGNATION AND DISCHARGE. Employee may resign or be discharged
pursuant to the terms of this paragraph. If Employee (i) resigns, Employee
must give 30 days' notice to Company; (ii) is discharged for cause (as later
defined), Company may discharge Employee immediately, without notice; or
(iii) is discharged not for cause, Company must give 6 months' notice to
Employee. In
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 22
<PAGE>
each of the above cases, severance pay will be paid and benefits accorded in
accordance with the Company's written policies then in effect.
For purposes of this paragraph, "for cause" means that during the Employment
Period, Employee materially breaches any provision or restriction or fails to
perform any obligation contained in this Employment Agreement or in any
written 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 non-discrimination 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).
7. CONFIDENTIAL INFORMATION RESTRICTIONS. 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 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 the Employment Period, and for a period of one year
following termination for any reason, as to Confidential Information of Micro
Alliance, Inc. ("MAI"), and after termination for any reason for all other
Company Confidential Information 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
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 23
<PAGE>
of, Employee pertaining to Company's business including any that contain any
Confidential Information or Company Inventions.
Employee acknowledges Company's efforts to establish valuable business
relationships with its clients, customers and suppliers. Employee recognizes
that Company has invested resources in the training and the professional
development of Employee, and Employee further recognizes Employee's
responsibility to the Company when Company entrusts Employee with
Confidential Information. In view of Company's efforts, Employee agrees that
unless Company authorizes Employee to do so in writing, Employee will not,
for a period of six months after termination of employment with Company,
solicit the purchase of products or services directly competing with products
and services of MAI from any person, corporation, business organization or
enterprise which:
(I) has made any purchase of products or services from Company within
the two years immediately preceding termination of former
Employee's employment ("Customer"); or
(ii) has been contacted by Employee during the last 12 months of
Employee's employment for the purpose of securing the purchase of
products or services from Company ("Prospective Customer").
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.
8. 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.
9. 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
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 24
<PAGE>
the benefit of and shall be binding upon Employer's successor and assigns.
10. PERSONNEL POLICIES. Company's written 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.
11. 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.
12. BINDING EFFECT. This Employment Agreement constitutes the entire
understanding of the parties, may be modified only in writing, is governed by
laws of California, and will bind and inure
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 25
<PAGE>
to the benefit of Employee and Employee's personal representative and Company
and Company's successors and assigns.
DATED: , 1997.
-----------------------
COMPANY:
SBS Technologies, Inc.
By:
-------------------------------------------------
Its:
-------------------------------------------------
EMPLOYEE:
-------------------------------------------------
Edward Larson
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 26
<PAGE>
Appendix A
to
Employment Agreement
Edward Larson
Employee
Position: Vice President of Sales and Marketing of Micro Alliance, Inc.
Compensation: $150,000 base salary, plus participation in SBS Management
Incentive Plan based on the accomplishment of performance goals established
by SBS management.
Standard Employee
Benefits: Medical Insurance
Dental Insurance
Life Insurance
Long and Short-Term Disability Insurance
Twenty Vacation Days Per Year
Ten Holidays Per Year
Sick Leave
Optional: 401(k) Plan
Flexible Spending Account Program
Supplemental Life Insurance
All as provided by the Company to employees generally, and subject to
modification from time to time by the Company.
Stock Option Grant: Incentive stock options for 35,000 shares of common
stock, with exercise, termination and other terms as provided in a Stock
Option Agreement and the 1998 Long-Term Equity Incentive Plan under which it
is issued, including the following:
The Options will vest on the following schedule:
Amount Date
------ ----
11,666 November 24, 1998
11,667 November 24, 1999
11,667 November 24, 2000
The Options will terminate ten years from the date of grant.
Exercise price for the options will be the closing price as provided in
the Long Term Incentive Plan.
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 27
<PAGE>
Management Incentive Program (MIP) for FY '98
The following bonuses will be paid based on the accomplishment of the related
goals. Each respective bonus will be paid if and only if the associated goal
is achieved:
Bonus Amount Goal*
------------ -----
$20,000 MAI revenues exceed $3,672,108
in FY '98
$20,000 MAI pre-tax earnings exceed
$541,008 in FY '98
$10,000 SBS' earnings per share meet or
exceed $1.67 for FY '98
(adjusted to account for any
acquisitions subsequent to the
MAI acquisition)
*Includes cost of bonus. Fiscal year and quarters refer to SBS
Technologies, Inc. fiscal year.
Employee will participate in the SBS MIP in future years if MIP programs
are authorized by SBS Board of Directors.
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 28
<PAGE>
EXHIBIT IIIA2
COVENANTS NOT TO COMPETE
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 29
<PAGE>
COVENANT NOT TO COMPETE
Jeffrey Huston ("Seller") and SBS Technologies, Inc., a New Mexico
corporation ("SBS") agree as follows:
I. RECITALS
A. SBS and Seller (or Seller's family trust) are, simultaneously with
the execution of this Covenant, entering into a purchase agreement ("Purchase
Agreement") under which SBS will acquire all of the outstanding stock of Micro
Alliance, Inc., a California corporation, ("MAI") for cash.
B. SBS wishes to assure that Seller will refrain from competing with SBS
in the areas of MAI's business, and Seller is willing to so refrain as provided
in this Covenant.
II. COVENANT
A. Seller agrees that, during the term of the Covenant, Seller will not,
without prior written consent of SBS, for Seller'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
development, manufacture, or sale of passive backplane ISA/PCI computer
enclosures or systems (together the "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 Products.
B. Seller 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 the
Products) if that class is regularly traded on a national securities exchange
or in the over-the-counter market.
III. TERM
The term of the Covenant will be three years from the date of this
Covenant ("Term").
IV. TERRITORY
<PAGE>
The territory covered by this Covenant is the world ("Territory").
V. CONSIDERATION
The consideration for the Covenant is the Purchase Agreement and an
undivided amount of the Purchase Price paid to Seller or Seller's benefit under
the Purchase Agreement.
VI. ACKNOWLEDGEMENT
Seller recognizes the importance of the Covenant and acknowledges that,
based on Seller's past experiences and expertise, and Seller's past
development, exploitation and management of MAI's Products, the close
relationships Seller has with MAI customers and SBS's intent to utilize and
exploit MAI's Products and expand MAI'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 Seller's rights as
an individual.
VII. BREACH
If Seller 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, Seller 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 shall be payable in
full notwithstanding any such construction, finding or revision.
IX. MISCELLANEOUS
This Covenant binds and benefits the parties, their
2
<PAGE>
successors, assigns and transferees, is specifically enforceable, constitutes
(together with the Purchase 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 Southern District of California, 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, when mailed by certified or
registered mail, return receipt requested, postage prepaid, or when delivered
pre-paid to a next-day expedited delivery service to the other party, addressed
as follows:
SBS:
SBS Technologies, Inc.
Attn: James E. Dixon, Jr., Vice President
2400 Louisiana Blvd. NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
Copy to:
Alison K. Schuler, Esquire
4300 San Mateo Boulevard, NE, Suite B-380
Albuquerque, New Mexico 87110
SELLER:
Jeffrey Huston
**
Any party may change its address for notice by giving written notice of
the change pursuant to this Section.
3
<PAGE>
XI. ANNOUNCEMENTS
Seller, 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: November , 1997
SELLER: SBS TECHNOLOGIES, INC.
__________________________ By:_______________________
Jeffrey Huston
Its:______________________
4
<PAGE>
COVENANT NOT TO COMPETE
Sherrin W. Larson ("Seller") and SBS Technologies, Inc., a New Mexico
corporation ("SBS") agree as follows:
I. RECITALS
A. SBS and Seller are, simultaneously with the execution of this
Covenant, entering into a purchase agreement ("Purchase Agreement") under which
SBS will acquire all of the outstanding stock of Micro Alliance, Inc., a
California corporation, ("MAI") for cash, and an Employment Agreement with
Seller's spouse, Edward Larson, providing for the employment of Edward Larson
by SBS.
B. SBS wishes to assure that Seller will refrain from competing with SBS
in the areas of MAI's business, and Seller is willing to so refrain as provided
in this Covenant.
II. COVENANT
A. Seller agrees that, during the term of the Covenant, Seller will not,
without prior written consent of SBS, for Seller'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
development, manufacture, or sale of passive backplane ISA/PCI computer
enclosures or systems (together the "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 Products.
B. Seller 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 the
Products) if that class is regularly traded on a national securities exchange
or in the over-the-counter market.
III. TERM
The term of the Covenant will be (i) the duration of the Employment
Agreement if Edward Larson remains employed, (ii) the duration of the initial
term of the Employment Agreement if Edward Larson resigns or is terminated for
cause, or (iii) six months from the date SBS gives notice of Edward Larson's
termination of
<PAGE>
employment not for cause ("Term").
IV. TERRITORY
The territory covered by this Covenant is the world ("Territory").
V. CONSIDERATION
The consideration for the Covenant is the Purchase Agreement and an
undivided amount of the Purchase Price paid to Seller under the Purchase
Agreement.
VI. ACKNOWLEDGEMENT
Seller recognizes the importance of the Covenant and acknowledges that,
based on Seller's past experiences and expertise, and Seller's past
development, exploitation and management of MAI's Products, the close
relationships Seller has with MAI customers and SBS's intent to utilize and
exploit MAI's Products and expand MAI'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 Seller's rights as
an individual.
VII. BREACH
If Seller 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, Seller 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 shall be payable in
full notwithstanding any such construction, finding or revision.
IX. MISCELLANEOUS
2
<PAGE>
This Covenant binds and benefits the parties, their successors, assigns
and transferees, is specifically enforceable, constitutes (together with the
Purchase 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 Southern District
of California, 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, when mailed by certified or
registered mail, return receipt requested, postage prepaid, or when delivered
pre-paid to a next-day expedited delivery service to the other party, addressed
as follows:
SBS:
SBS Technologies, Inc.
Attn: James E. Dixon, Jr., Vice President
2400 Louisiana Blvd. NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
Copy to:
Alison K. Schuler, Esquire
4300 San Mateo Boulevard, NE, Suite B-380
Albuquerque, New Mexico 87110
3
<PAGE>
SELLER:
Sherrin W. Larson
**
Any party may change its address for notice by giving written notice of
the change pursuant to this Section.
XI. ANNOUNCEMENTS
Seller, 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: November , 1997
SELLER: SBS TECHNOLOGIES, INC.
__________________________ By:_______________________
Sherrin W. Larson
Its:______________________
4
<PAGE>
COVENANT NOT TO COMPETE
Edward Larson ("Seller") and SBS Technologies, Inc., a New Mexico
corporation ("SBS") agree as follows:
I. RECITALS
A. SBS and Seller are, simultaneously with the execution of this
Covenant, entering into a purchase agreement ("Purchase Agreement") under
which SBS will acquire all of the outstanding stock of Micro Alliance, Inc.,
a California corporation, ("MAI") for cash, and an Employment Agreement,
providing for the employment of Seller by SBS.
B. SBS wishes to assure that Seller will refrain from competing with
SBS in the areas of MAI's business, and Seller is willing to so refrain as
provided in this Covenant.
II. COVENANT
A. Seller agrees that, during the term of the Covenant, Seller will
not, without prior written consent of SBS, for Seller'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 development, manufacture, or sale of passive backplane ISA/PCI
computer enclosures or systems (together the "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 Products.
B. Seller 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 the
Products) if that class is regularly traded on a national securities exchange
or in the over-the-counter market.
III. TERM
The term of the Covenant will be (i) the duration of the Employment
Agreement if Seller remains employed, (ii) the duration of the initial term
of the Employment Agreement if Seller resigns
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 30
<PAGE>
or is terminated for cause, or (iii) six months from the date SBS gives
notice of Seller's termination of employment not for cause ("Term").
IV. TERRITORY
The territory covered by this Covenant is the world ("Territory").
V. CONSIDERATION
The consideration for the Covenant is the Purchase Agreement and an
undivided amount of the Purchase Price paid to Seller under the Purchase
Agreement.
VI. ACKNOWLEDGEMENT
Seller recognizes the importance of the Covenant and acknowledges
that, based on Seller's past experiences and expertise, and Seller's past
development, exploitation and management of MAI's Products, the close
relationships Seller has with MAI customers and SBS's intent to utilize and
exploit MAI's Products and expand MAI'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 Seller's rights as
an individual.
VII. BREACH
If Seller 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, Seller 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 shall be payable in full notwithstanding any such
construction, finding or revision.
IX. MISCELLANEOUS
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 31
<PAGE>
This Covenant binds and benefits the parties, their successors, assigns
and transferees, is specifically enforceable, constitutes (together with the
Purchase 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 Southern District of California, 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, when mailed by
certified or registered mail, return receipt requested, postage prepaid, or
when delivered pre-paid to a next-day expedited delivery service to the other
party, addressed as follows:
SBS:
SBS Technologies, Inc.
Attn: James E. Dixon, Jr., Vice President
2400 Louisiana Blvd. NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
Copy to:
Alison K. Schuler, Esquire
4300 San Mateo Boulevard, NE, Suite B-380
Albuquerque, New Mexico 87110
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 32
<PAGE>
Seller:
Edward Larson
**
Any party may change its address for notice by giving written notice of
the change pursuant to this Section.
XI. ANNOUNCEMENTS
Seller, 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: November , 1997
Seller: SBS Technologies, Inc.
By:
- ---------------------------- ----------------------
Edward Larson Its:
----------------------
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 33
<PAGE>
EXHIBIT IIIB
SHAREHOLDER OPTIONS
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 34
<PAGE>
1998 LONG TERM EQUITY INCENTIVE AGREEMENT
SBS TECHNOLOGIES, INC., a New Mexico corporation, ("Company") and Edward
Larson ("Employee") agree:
I. Recitals
A. Company has adopted the 1998 Long-Term Incentive Equity Plan for
the benefit of Company's officers, directors and full-time employees. This
Plan is intended to be a non-compensatory stock option plan.
B. The Board of Directors of Company has determined that Company
will benefit by granting, pursuant to the 1998 Long Term Incentive Equity
Plan, this Incentive Stock Option to Employee for the purpose of inducing
Employee to remain in the service of Company and its subsidiary companies and
as an incentive for increased effort during that service.
II. Definitions
A. "Company" means SBS Technologies, Inc., its parents,
subsidiaries and a corporation (and its parents and subsidiaries) issuing or
assuming a stock option in a transaction to which IRC 425(a) applies, as
appropriate in the context.
B. "Code" means the Internal Revenue Code of 1986, as amended from
time to time;
C "Common Stock" means the no par value common stock of the Company
or such other security or right or instrument into which that Common Stock
may be changed or converted in the future.
D. "Date of Grant" means the date on which the Grant is made by
the Committee under the Plan.
E. "Disability" means (i) the mental or physical disability, either
occupational or non occupational in origin, of the Participant defined as
"total disability" in the Plan currently in effect and as amended from time
to time; or (ii) a determination by the Committee of "Total Disability" based
on medical evidence that precludes the Participant from engaging in any
occupation or employment for wage or profit for at least twelve months and
appears to be permanent.
F. "Levy" means attachment, execution, levy or similar process.
G. "Major Shareholder" means an individual possessing more than
10% of the total combined voting power of all classes of stock of SBS
Technologies, Inc. or of its parent or subsidiary
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 35
<PAGE>
corporation.
H. "Option" means the right to acquire Option Shares under this
Agreement.
I. "Option Shares" means the number of shares of Common Stock
which Employee may purchase pursuant to this Option, as shown on Appendix A.
J. "Plan" means the SBS Technologies, Inc. 1998 Long- Term Equity
Incentive Plan.
K. "Purchase Price" means, if Employee is not a Major Shareholder,
the fair market value per share of the Common Stock on the Date of Grant and,
if Employee is a Major Shareholder, 110% of the fair market value per share
of Common Stock on the Date of Grant, as shown on Appendix A.
L. "Transfer" means to transfer, assign, pledge, or hypothecate in
any way (whether by operation of law or otherwise).
III. Grant of Option
Subject to the terms and conditions of this Option, Company grants
to Employee the right to acquire the Option Shares at the Purchase Price.
IV. Exercise of Option
A. Employee may exercise the Option on the schedule set forth on
Appendix A. If an Employee exercises this Option and/or any other option
under a Company incentive stock option plan first exercisable during a
calendar year for an amount of Common Stock valued, as of the date of grant,
in an amount in excess of $100,000 for that calendar year, Employee
understands that the amount exercised in excess may be taxable as a
non-qualified option and not an incentive stock option. Employee further
understands that any Options not held for two years from the date of grant
and one year from the date of exercise may lose the tax benefit of those
Options. Options which first became exercisable in prior calendar years will
not affect the amount exercisable under this Option.
B. If Employee does not purchase the full number of Option Shares
to which Employee is entitled at any given time, Employee may purchase the
remaining Option Shares from that period in any subsequent period in addition
to the Option Shares purchasable during that subsequent period.
C. Employee may not exercise the Option for less than 25 shares
each time.
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 36
<PAGE>
D. Exercise of this Option and delivery of the Option Shares are
subject to and contingent upon compliance with applicable federal and state
securities and other laws. Company is not obligated to take any action to
register, qualify or provide an exemption pursuant to which the Option Shares
could be issued or to take any other action to cause the issuance and
delivery of the Option Shares to comply with applicable law. Company shall
refund to Employee the Purchase Price of any Option Shares not deliverable
under this paragraph.
E. This Option may be exercised only by Employee during Employee's
lifetime or, upon Employee's death, by Employee's executor or administrator
or the heir or devisee to whom the rights to the Option pass pursuant to
Employee's will or the laws of descent or distribution.
V. Termination of Option
This Option and all rights to acquire Option Shares under it shall
terminate on the earlier of:
A. Three months from the date Employee ceases to be employed by the
Company, unless Employee is Disabled.
B. One year from the date Employee ceases to be employed by the
Company if Employee is Disabled.
C. If Employee dies while in the employ of Company, the earlier of
six months from the date of issuance of letters testamentary or letters of
administration to Employee's executor or administrator, or one year after
Employee's death.
D. Ten years, or, if Employee is a Major Shareholder, five years,
from the Date of Grant.
E. Employee's attempt to Transfer this Option in violation of its
terms or a Levy by any person or entity.
F. Dissolution or liquidation of Company.
G. Failure of Company's shareholders to approve the Plan as
provided in the Plan and this Agreement.
H. Employee's (i) commission of any act of malfeasance or
wrongdoing affecting Company, (ii) breach of any covenant not to compete or
employment contract with Company, or (iii) engaging in conduct that would
warrant Employee's discharge for cause (excluding general dissatisfaction
with Employee's performance of Employee's duties, but including any act of
disloyalty or any conduct clearly tending to bring discredit upon Company).
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 37
<PAGE>
VI. Limitation Upon Transfer
This Option and the rights under it:
A. May not be Transferred during the lifetime of Employee.
B. Are not subject to Levy.
C. May only be transferred by will or pursuant to the laws of
descent and distribution.
VII. Reclassification, Consolidation, Merger or Exchange
If and to the extent that the number of issued and outstanding shares of
Common Stock is increased or reduced by change in par value, split up,
reclassification, distribution of a dividend payable in Common Stock, or the
like, the number of Option Shares and the Purchase Price will be
proportionately adjusted. If the Company is reorganized, consolidated, or
merged, or shares of Common Stock are exchanged, with another corporation (an
"Event"), the Employee will be entitled to receive options covering shares of
the reorganized, consolidated, or merged company, or shares exchanged, in the
same proportion, at an equivalent price, and subject to the same conditions,
in accordance with IRC 425. The excess of the aggregate fair market value of
the shares subject to the option immediately after the Event over the
aggregate price of those shares will not be more than the excess of the
aggregate fair market value of all Option Shares immediately before the Event
over the aggregate Purchase Price for the Option Shares, and the new option
or assumption of the old Option will not give the Employee additional
benefits Employee did not have under the old Option or deprive Employee of
benefits which the Employee had under the old Option.
VIII. Rights as Shareholder and Employee
Employee shall have no rights as a shareholder of Company with respect
to any Option Shares before the date of issuance to Employee of the
certificates for those Option Shares. The Option does not confer on Employee
any right to continue in the employ of the Company.
IX. Notice
All notices and communications must be given in writing and will be
deemed to have been given if delivered in person or by expedited delivery
service or mailed by certified or registered mail, return receipt requested,
postage prepaid, and addressed to Company or Employee at the following
addresses unless either party changes its address by giving written notice of
that change to the other:
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 38
<PAGE>
A. Notice to Company at:
SBS Technologies, Inc.
Attention: James E. Dixon, Jr.
Vice President Finance and Administration
2400 Louisiana Boulevard NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
B. Notice to Employee:
At the address specified on
Appendix A.
X. Approval of Shareholders
This Agreement and the issuance of any Option Shares under it are
expressly subject to the ratification and approval of the Plan by the
shareholders of the Company at a meeting to be held within 12 months after
the date of adoption of The Plan.
XI. Option Shares as Investment
Employee, by accepting this Option, acknowledges for Employee and
Employee's heirs and legatees, that Employee is acquiring Option Shares for
investment and not with a view to distribution. Employee, or Employee's
heirs and legatees, as the case may be, will not transfer, in any manner, any
Option Shares without first giving 30 days' notice to Company and, unless the
Option Shares have been registered pursuant to an effective registration
statement and have complied with state qualification requirements, providing
to Company an opinion, satisfactory to Company in all respects, of Employee's
counsel, also satisfactory to Company in all respects, that the Option Shares
will be transferred in compliance with all applicable securities laws.
Employee recognizes that under IRC 422(a)(1), an Option Share must be held
for a period of two years from the Date of Grant of the Option and one year
from the date of transfer to Employee of the Option Share.
XII. Miscellaneous
This Agreement shall be governed by the laws of the State of New Mexico,
represents the entire understanding of the parties, supersedes all prior
agreements, may not be assigned by Employee, may be modified only in writing,
and is binding upon the parties, their heirs, executors, administrators and
assigns.
Dated:
------------------------------------
SBS Technologies, Inc.
By:
-----------------------------
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 39
<PAGE>
Its
-------------------------------
Employee
-------------------------------
Edward Larson
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 40
<PAGE>
APPENDIX A
II I. The aggregate number of Option Shares is 35,000.
II K. The Purchase Price is $30.75 per share.
IV A. The exercise schedule is:
These Options will vest in accordance with the following schedule:
Amount Vesting Date
11,666 11/24/98
11,667 11/24/99
11,667 11/24/00
This Option is intended to be non-compensatory in nature.
IX. The Employee's address for notice purposes is:
Edward Larson
------------------------------------
------------------------------------
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 41
<PAGE>
EXHIBIT V
SHAREHOLDERS AND MAI DISCLOSURE SCHEDULE
1. Lease for property and improvements at 1384-A Poinsettia Avenue, Vista,
California 92083
2. Lease with Pitney Bowes for postage meter
3. Outstanding purchase orders in normal course of business
4. Employment Agreement with Michael Schultz, Regional Sales Manager
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 42
<PAGE>
EXHIBIT VE
CLOSING BALANCE SHEET
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 43
<PAGE>
EXHIBIT VE2
YEAR-END FINANCIAL STATEMENTS
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 44
<PAGE>
MICRO ALLIANCE, INC.
Financial Statements
September 30, 1997 and December 31, 1996
(With Independent Auditors' Report Thereon)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
SBS Technologies, Inc.:
We have audited the accompanying balance sheets of Micro Alliance, Inc. as of
September 30, 1997 and December 31, 1996, and the related statements of
operations, changes in stockholders' equity, and cash flows for the nine
months ended September 30, 1997 and the year ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Micro Alliance, Inc. as of
September 30, 1997 and December 31, 1996, and the results of its operations
and its cash flows for the nine months ended September 30, 1997 and the year
ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
- --------------------------------------
November 7, 1997, except as to note 7,
which is as of November 24, 1997
<PAGE>
MICRO ALLIANCE, INC.
Balance Sheets
September 30, 1997 and December 31, 1996
ASSETS 1997 1996
------ ---- ----
Current assets:
Cash $ 342,124 534,354
Accounts receivable, net of allowance
of $19,440 and $600 in 1997 and 1996,
respectively 805,065 940,423
Trade notes receivable 9,044 44,924
Note receivable - stockholder 50,467 --
Inventories 519,432 346,856
Prepaid expenses 11,028 --
---------- ---------
Total current assets 1,737,160 1,866,557
---------- ---------
Furniture and equipment, at cost 43,193 22,245
Less accumulated depreciation 9,987 7,180
---------- ---------
Net property and equipment 33,206 15,065
---------- ---------
Other assets 6,191 4,937
---------- ---------
Total assets $1,776,557 1,886,559
---------- ---------
---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 322,050 200,018
Due to related party 50,000 50,000
Due to former stockholder -- 50,000
Accrued sales commissions 46,133 78,624
Deferred income 93,044 37,739
Accrued salaries 43,762 85,152
Other current liabilities 8,929 65,202
---------- ---------
Total current liabilities 563,918 566,735
---------- ---------
Stockholders' equity:
Common stock, no par value, authorized 1,000,000;
90,000 issued and outstanding 70,200 70,200
Retained earnings 1,142,439 1,249,624
---------- ---------
Total stockholders' equity 1,212,639 1,319,824
Commitments (notes 4 and 5)
---------- ---------
Total liabilities and stockholders' equity $ 1,776,557 1,886,559
---------- ---------
---------- ---------
See accompanying notes to financial statements.
<PAGE>
MICRO ALLIANCE, INC.
Statements of Operations
Nine months
ended Year ended
September 30, December 31,
1997 1996
---- ----
Net sales $3,960,366 5,634,170
Cost of sales 2,232,739 2,946,989
--------- ---------
Gross profit 1,727,627 2,687,181
Selling, general and administrative expense 996,794 1,227,566
Research and development expense 156,711 89,442
--------- ---------
Operating income 574,122 1,370,173
Interest income 15,587 10,615
--------- ---------
Income before income taxes 589,709 1,380,788
State income taxes 8,900 21,409
--------- ---------
Net income $ 580,809 1,359,379
--------- ---------
--------- ---------
See accompanying notes to financial statements.
<PAGE>
MICRO ALLIANCE, INC.
Statements of Changes in Stockholders' Equity
Nine months ended September 30, 1997
and year ended December 31, 1996
<TABLE>
<CAPTION>
Common
Stock
------------------ Retained
Shares Amount earnings Total
------ ------ -------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1995 90,000 $70,200 713,245 783,445
Net income - - 1,359,379 1,359,379
Distributions to stockholders - - (823,000) (823,000)
------ ------ --------- ---------
Balance at December 31, 1996 90,000 70,200 1,249,624 1,319,824
Net income - - 580,809 580,809
Distributions to stockholders - - (687,994) (687,994)
------ ------ --------- ---------
Balance at September 30, 1997 90,000 $70,200 1,142,439 1,212,639
------ ------ --------- ---------
------ ------ --------- ---------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MICRO ALLIANCE, INC.
Statements of Cash Flows
<TABLE>
Nine months
ended Year ended
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 580,809 1,359,379
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 3,449 3,212
Bad debt expense 18,840 --
Changes in operating assets and liabilities:
Accounts receivable and trade notes receivable 152,398 (326,648)
Inventories (172,576) (136,256)
Prepaid expenses and other (12,749) (1,344)
Trade accounts payable 122,032 77,897
Accrued expenses, deferred income and other (74,849) 141,647
--------- ----------
Net cash provided by operating activities 617,354 1,117,887
--------- ----------
Cash flows from investing activities:
Purchases of property and equipment, net (21,590) (4,094)
Disbursements on note receivable (50,000) --
--------- ----------
Net cash used in investing activities (71,590) (4,094)
--------- ----------
Cash flows from financing activities:
Payments on due to former stockholder (50,000) (170,000)
Distributions to stockholders (687,994) (823,000)
--------- ----------
Net cash used in financing activities (737,994) (993,000)
--------- ----------
Net (decrease) increase in cash (192,230) 120,793
Cash at beginning of period 534,354 413,561
--------- ----------
Cash at end of period $ 342,124 534,354
--------- ----------
--------- ----------
Supplemental information - state income taxes paid $ 16,200 19,871
--------- ----------
--------- ----------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MICRO ALLIANCE, INC.
Notes to Financial Statements
September 30, 1997 and December 31, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) GENERAL
Micro Alliance, Inc. (the Company) is in the business of assembly and
marketing of industrial grade computer systems, similar to
desktop machines, which are designed for mounting on rack systems
in warehouse or shop environments. Custom features include shock
brackets, heavy duty fans and heavy duty power supplies. Product
users are primarily large manufacturing companies and the
aerospace industry.
(b) SALES RECOGNITION
Sales are recognized when goods are shipped to the customer.
(c) INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out
method) or market:
September 30, December 31,
1997 1996
---- ----
Raw materials $332,306 255,364
Work in process 142,444 58,202
Finished goods 44,682 33,290
------- -------
$519,432 346,856
------- -------
------- -------
Finished goods inventory is comprised of primarily demonstration
equipment which is being evaluated by customers.
(d) FURNITURE AND EQUIPMENT
Depreciation of furniture and equipment is provided over the estimated
useful lives (five to seven years) of the respective assets using
straight-line and accelerated methods.
(e) DISTRIBUTIONS TO STOCKHOLDERS
Distributions to stockholders are made at the discretion of the board
of directors.
(Continued)
<PAGE>
2
MICRO ALLIANCE, INC.
Notes to Financial Statements
(f) INCOME TAXES
The Company has elected to be taxed under Subchapter S of the Internal
Revenue Code and applicable state statutes. Accordingly, taxable
income of the Company is taxed to the individual stockholder and
no provision for federal income taxes was made in the
accompanying financial statements.
(g) 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.
(2) SIGNIFICANT CUSTOMERS
For the nine months ended September 30, 1997 two of the Company's
customers accounted for 13.5 percent and 12.9 percent of net sales.
For the year ended December 31, 1996, one customer accounted for
11.8 percent of the Company's net sales. No other customers exceeded
10 percent of the Company's net sales in 1997 and 1996. All of the
Company's operations are conducted in the United States.
(3) FINANCING
The Company has an available bank line of credit of $200,000, which
matures in April 1998. Interest is payable monthly at the bank's
index rate plus 1 percent (9.25% at September 30, 1997). The Company
had no amounts drawn on this line of credit at September 30, 1997 or
December 31, 1996. The line of credit provides for security interests
in the Company's receivables, inventories and equipment, and is
guaranteed by the Company's principal stockholder. Management
anticipates that the line of credit will be renewed at maturity in the
normal course of business.
(4) LEASES
The Company leases its main facility in Vista, California under a
noncancelable operating lease which expires in August 1998. Future
minimum lease payments are $17,910 and $47,760 for the three months
ending December 31, 1997 and the year ending December 31, 1998,
respectively.
(Continued)
<PAGE>
3
MICRO ALLIANCE, INC.
Notes to Financial Statements
Total rental expense for operating leases for the nine months ended
September 30, 1997 and the year ended December 31, 1996 was $48,714
and $44,994, respectively.
(5) RETIREMENT PLAN
The Company maintains a SEP/IRA Plan (the Plan). Employees are eligible
to participate in the Plan after three years of service. The Plan is
funded by contributions at the discretion of the board of directors.
The Company made no contributions to the Plan during the nine months
ended September 30, 1997 and the year ended December 31, 1996.
(6) RELATED PARTY TRANSACTIONS
Note receivable - stockholder is a balance due from the Company's
principal stockholder for funds advanced during the nine-month period
ended September 30, 1997. Interest accrues at 6 percent and the
balance is payable on December 31, 1997.
Due to related party represents a balance due to Westemp, a company wholly
owned by the Company's principal stockholder. The balance payable is
for services rendered to the Company during 1993.
Due to former stockholder represents the final installment of a note
payable to a former stockholder issued to repurchase 10,000 shares of
the Company's common stock in January 1995. Such balance was paid in
July 1997.
(7) SUBSEQUENT EVENT
On November 24, 1997, all of the outstanding shares of the Company's
common stock were sold to a third party.
<PAGE>
EXHIBIT VE3
FINANCIAL STATEMENTS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997
See Exhibit VE2.
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 45
<PAGE>
EXHIBIT VP3
PATENTS
None
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 46
<PAGE>
EXHIBIT VI
BUYER'S DISCLOSURE SCHEDULE
None
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 47
<PAGE>
EXHIBIT VIIE
CERTIFICATION
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 48
<PAGE>
CERTIFICATION OF JULIE A. HUSTON
Julie A. Huston hereby represents, warrants and covenants as follows:
1. That Jeffrey Huston is the sole owner of all Micro Alliance, Inc.
(MAI) shares in which Julie A. Huston had or might have had an
ownership interest, that she and Jeffrey Huston are parties to a
Marital Settlement Agreement, an agreement effective November 21,
1997 in respect of dissolution of the marriage of Julie A. and
Jeffrey Huston, which awards all interest in MAI shares in which
Julie A. and Jeffrey Huston had or might have had an ownership
interest, and that the agreement has been duly executed, and
constitutes the legal, valid and binding obligation of Jeffrey
Huston and Julie A. Huston, enforceable in accordance with its terms
(subject to limitations on enforcement of remedies and the
discretion of courts in awarding equitable relief), and provides
that all MAI Shares in which Julie A. Huston had or might have had an
ownership interest are and have been transferred to Jeffrey Huston as
his sole and separate property free of any claim, title or ownership
interest by Julie A. Huston.
2. That except for the dissolution of marriage action between Julie A.
and Jeffrey Huston which has been resolved by their Marital
Settlement Agreement, no disputes of any nature, whether claims,
lawsuits or other disagreements formally filed or informally pursued
exist by Julie A. Huston against Jeffrey Huston or Ed Larson or
another person or entity and no disputes are currently being
threatened by Julie A. Huston with respect to the MAI shares in
which Julie A. Huston had or might have had an ownership interest.
3. That Julie A. Huston understands SBS Technologies, Inc. (SBS)
is purchasing MAI shares (including those which Julie A. Huston
transferred to Jeffrey Huston as his sole and separate property
incident to the divorce and pursuant to the Marital Settlement
Agreement) from Jeffrey Huston, Julie A. Huston waives, releases and
renounces any and all claims against SBS arising out of SBS's form,
method or allocation of any payments or any other consideration from
SBS to Jeffrey Huston associated with the sale Jeffrey Huston is
making of MAI stock to SBS.
Dated: November 24, 1997 /s/ JULIE A. HUSTON
-----------------------------
JULIE A. HUSTON
<PAGE>
EXHIBIT IXB
PURCHASE PRICE DISTRIBUTION
The Purchase Price, less the Escrow Amount, will be paid as follows:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shareholder Amount Bank Information
- --------------------------------------------------------------------------------
Jeffrey Huston, $4,700,060 Wells Fargo Bank
Rancho Santa Fe Office,
6008 Paseo Delicias,
Rancho Santa Fe,
California 92067;
ABA/Routing No.
121-000-248
Credit Account of
Jeffrey E. Huston
Account # 0829-373026
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Edward & Sherrin $699,940 Wells Fargo Bank
Larson 276 North El Camino
Real, Encinitas,
California 92024
ABA/Routing No.
121-000-248
Money Market Account
in the name of Edward
Larson, Account #670 196
6129
- --------------------------------------------------------------------------------
$5,400,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Escrow Amount of $250,000 will be paid at Closing to the trust account of
Alison K. Schuler, Esquire for distribution in accordance with the terms of a
notice to be provided by the parties as provided in the Purchase Agreement.
A Tax Fund Amount of $250,000 will paid at Closing to the trust account of
Alison K. Schuler, Esquire for distribution to a Tax Escrow Amount as provided
in the Purchase Agreement.
Micro Alliance, Inc.
SBS Technologies, Inc.
Purchase Agreement - Page 49
