<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934 for the quarterly period ended DECEMBER 31, 1999
or
Transition report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
COMMISSION FILE NUMBER 1-10981
SBS TECHNOLOGIES, INC.
New Mexico 85-0359415
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
2400 Louisiana Blvd. NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
(505) 875-0600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
--------- --------
As of January 31, 2000, the Registrant had 6,282,627 shares of its
common stock outstanding.
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS December 31, 1999 June 30, 1999
--------------------------- ---------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,681,294 3,500,556
Receivables, net (note 2) 23,431,497 21,442,108
Inventories (note 3) 19,207,312 15,755,379
Deferred income taxes 2,234,485 2,179,143
Income tax receivable 808,025 31,728
Prepaid expenses 660,282 632,798
Other current assets 220,901 322,511
---------------- -----------------
Total current assets 53,243,796 43,864,223
---------------- -----------------
Property and equipment, net 7,455,689 7,321,717
Intangible assets, net 33,221,203 36,228,105
Deferred income taxes 4,489,205 4,488,059
Other assets 103,573 105,751
---------------- -----------------
Total assets $ 98,513,466 92,007,855
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ - 3,900,000
Notes payable to related parties - 1,391,216
Accounts payable 5,241,581 3,319,664
Accrued representative commissions 660,855 529,765
Accrued salaries 1,936,331 2,632,993
Accrued compensated absences 1,103,661 1,201,653
Other current liabilities 1,680,890 1,804,591
---------------- -----------------
Total current liabilities 10,623,318 14,779,882
---------------- -----------------
Total liabilities 10,623,318 14,779,882
---------------- -----------------
Stockholders' equity:
Common stock, no par value; 100,000,000 shares authorized, 6,275,227
issued and outstanding at December 31, 1999
5,837,483 issued and outstanding at June 30, 1999 54,838,979 50,554,450
Common stock warrants - 38,425
Accumulated other comprehensive loss (2,922,687) (2,059,126)
Retained earnings 35,973,856 28,694,224
---------------- -----------------
Total stockholders' equity 87,890,148 77,227,973
---------------- -----------------
Total liabilities and stockholders' equity $ 98,513,466 92,007,855
================ =================
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 2
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended December 31 Three Months Ended December 31
---------------------------------------- -------------------------------------
1999 1998 1999 1998
--------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Sales $ 60,452,721 51,494,920 32,429,599 26,942,047
Cost of sales 27,750,177 21,176,572 15,297,550 11,529,132
--------------- ---------------- ---------------- ----------------
Gross Profit 32,702,544 30,318,348 17,132,049 15,412,915
Selling, general and administrative expense 12,262,174 11,813,429 6,350,859 6,028,262
Research and development expense 7,538,146 6,855,574 3,869,902 3,698,989
Acquired in-process research and
development charge - 527,514 - -
Amortization of intangible assets 2,221,756 1,702,238 1,108,730 882,192
--------------- ---------------- ---------------- ----------------
Operating income 10,680,468 9,419,593 5,802,558 4,803,472
--------------- ---------------- ---------------- ----------------
Interest income, net 174,787 153,816 87,925 40,944
Foreign exchange gains (losses) (29,982) 57,266 (42,122) 57,266
--------------- ---------------- ---------------- ----------------
144,805 211,082 45,803 98,210
--------------- ---------------- ---------------- ----------------
Income before income taxes and minority interest 10,825,273 9,630,675 5,848,361 4,901,682
Income taxes 3,750,293 3,659,866 1,907,273 1,843,737
--------------- ---------------- ---------------- ----------------
Income before minority interest 7,074,980 5,970,809 3,941,088 3,057,945
Minority interest - 444,383 - 208,702
--------------- ---------------- ---------------- ----------------
Net income $ 7,074,980 5,526,426 3,941,088 2,849,243
=============== ================ ================ ================
Net income per common share $ 1.18 0.95 0.64 0.49
===== ===== ===== ====
Net income per common share -
assuming dilution $ 1.09 0.90 0.59 0.47
===== ===== ===== ====
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 3
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Common Accumulated Total
stock Common Other stock-
------------------------ stock Retained Comprehensive holders'
Shares Amount warrants earnings Loss equity
----------- ------------ ----------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1999 5,837,483 $ 50,554,450 $ 38,425 $ 28,694,224 $ (2,059,126) $ 77,227,973
Exercise of stock options and warrants 262,881 3,050,091 (38,425) - - 3,011,666
Stock-based compensation - 14,062 - - - 14,062
Acquisition of SciTech, Inc. 174,863 100 - 642,692 - 642,792
Dividends paid to former shareholders
of SciTech, Inc. - - - (438,040) - (438,040)
Income tax benefit from stock
options exercised - 1,220,276 - - - 1,220,276
Net income - - - 7,074,980 - 7,074,980
Other comprehensive income:
Foreign currency translation adjustment - - - - (863,561) (863,561)
----------- ------------- ---------- ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1999 6,275,227 $ 54,838,979 $ - $ 35,973,856 $ (2,922,687) $ 87,890,148
=========== ============= ========== ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 4
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended December 31,
-------------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,074,980 5,526,426
---------------- ----------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 951,614 813,772
Amortization of intangible assets 2,221,756 1,702,238
Bad debt expense (17,413) 100,509
Deferred income taxes (71,634) (261,818)
Loss on disposition of assets - 29,469
Foreign exchange (gains) losses 29,982 (57,266)
Stock-based compensation 14,062 -
Acquired in-process research and development charge - 527,514
Minority interest - 444,383
Changes in assets and liabilities, net of effects of acquisitions:
Receivables (1,726,900) (2,131,023)
Inventories (3,071,145) (2,654,339)
Prepaids and other assets 56,738 120,003
Accounts payable 1,835,433 (1,025,731)
Accrued representative commissions 131,090 200,534
Accrued salaries (702,595) (2,213,024)
Accrued compensated absences (93,272) 129,206
Income taxes (772,087) (1,126,568)
Other current liabilities (66,045) 41,411
---------------- ----------------
Net adjustments (1,280,416) (5,360,730)
---------------- ----------------
Net cash provided by operating activities 5,794,564 165,696
---------------- ----------------
Cash flows from investing activities:
Cash received from sale of assets - 201
Business acquisitions (note 5) 64,162 (14,353,448)
Acquisition of property and equipment (1,085,635) (1,373,109)
---------------- ----------------
Net cash used by investing activities (1,021,473) (15,726,356)
---------------- ----------------
Cash flows from financing activities:
Payments on long-term borrowings and capital leases - (3,000,000)
Payments on notes payable to related parties (1,391,216) (1,607,467)
Payments on notes payable (3,975,060) -
Dividends paid to former shareholders of SciTech, Inc. (438,040) -
Proceeds from exercise of stock options and warrants 3,011,666 1,111,899
Repurchase of common stock, net - (181,928)
Income tax benefit of stock options exercised 1,220,276 396,000
---------------- ----------------
Net cash used by financing activities (1,572,374) (3,281,496)
---------------- ----------------
</TABLE>
(Continued)
Page 5
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended December 31
---------------------------------------
1999 1998
---- ----
<S> <C> <C>
Effect of exchange rate changes on cash (19,979) 99,691
---------------- ----------------
Net change in cash and cash equivalents 3,180,738 (18,742,465)
Cash and cash equivalents at beginning of period 3,500,556 22,874,754
---------------- ----------------
Cash and cash equivalents at end of period $ 6,681,294 4,132,289
================ ================
Supplemental disclosure of cash flow information:
Interest paid $ 86,260 12,327
Income taxes paid 3,558,088 2,512,390
Noncash financing and investing activities:
Accrued acquisition costs - 284,344
Debt issued for exercise of option to purchase minority interest - 10,722,955
Stock issued for acquisition - 713,878
Summary of assets acquired and liabilities assumed through acquisition:
Cash and cash equivalents $ 64,162 531,475
Receivables 382,065 5,314,703
Inventories 480,191 3,378,652
Deferred income taxes - (105,638)
Prepaid expenses and other current assets - 102,512
Goodwill - 13,120,525
Covenant not to compete - 200,000
Property and equipment 80,500 556,258
Accumulated depreciation (66,481) -
Note payable - related party - (2,865,603)
Note payable (75,060) -
Accounts payable (201,061) (851,903)
Accrued salaries (21,524) (1,753,948)
Accrued compensated absences - (82,225)
Income taxes - (1,888,522)
Other current liabilities - (771,363)
Common stock (100) -
Retained earnings (642,692) -
================ ================
</TABLE>
See accompanying notes to condensed consolidated financial statements
Page 6
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(Unaudited)
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies as set forth in SBS Technologies, Inc.'s (the
"Company") Annual Report on Form 10-K dated September 23, 1999 have been
adhered to in preparing the accompanying interim consolidated financial
statements. These statements are unaudited but include all adjustments,
consisting of normal recurring adjustments, that the Company considers
necessary for a fair presentation of the financial position, results of
operations, and cash flows for such interim periods. Results for such
interim periods are not necessarily indicative of results for a full
year.
2) RECEIVABLES, NET
Receivables, net consist of the following:
<TABLE>
<CAPTION>
December 31, 1999 June 30, 1999
----------------- -------------
<S> <C> <C>
Accounts receivable $ 24,140,081 22,205,155
Less: allowance for doubtful accounts (708,584) (763,047)
------------ -------------
$ 23,431,497 21,442,108
============ =============
</TABLE>
3) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, 1999 June 30, 1999
----------------- -------------
<S> <C> <C>
Raw materials $ 11,203,179 7,598,642
Work in process 3,771,272 4,150,779
Finished goods 4,232,861 4,005,958
----------- ----------
$ 19,207,312 15,755,379
============ =============
</TABLE>
4) EARNINGS PER SHARE
Net income per common share is based on weighted average shares
outstanding. Net income per common share - assuming dilution includes the
dilutive effects of potential common shares outstanding during the
period.
A reconciliation of the numerator and denominator of the per share and
per share - assuming dilution calculation follows:
<TABLE>
<CAPTION>
Six Months Ended December 31
----------------------------------------------------------------------------
1999 1998
----------------------------------------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------- -- ------------ ---------- ---------- -- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Net Income $7,074,980 5,989,237 $1.18 $5,526,426 5,821,739 $0.95
===== =====
EFFECT OF DILUTIVE SECURITIES
Dilutive options and warrants - 528,119 - 356,276
---------- ------------ ---------- -----------
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION
Net Income $7,074,980 6,517,356 $1.09 $5,526,426 6,178,015 $0.90
===== =====
</TABLE>
Page 7
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31
----------------------------------------------------------------------------
1999 1998
----------------------------------------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------ ------------ ---------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Net Income $3,941,088 6,138,571 $0.64 $2,849,243 5,832,058 $0.49
===== =====
EFFECT OF DILUTIVE SECURITIES
Dilutive options and warrants - 591,593 - 279,284
---------- ------------ ---------- -----------
NET INCOME PER COMMON SHARE
- ASSUMING DILUTION
Net Income $3,941,088 6,730,164 $0.59 $2,849,243 6,111,342 $0.47
===== =====
</TABLE>
For the six and three months ended December 31, 1999 and 1998, options to
purchase 527,918 and 891,181 shares and 269,581 and 1,046,703 shares of
common stock, respectively, were outstanding but were not included in the
computation of net income per common share - assuming dilution because
the options' exercise price was greater than the average market price of
the common shares.
5) BUSINESS ACQUISITION
On December 20, 1999, the Company acquired SciTech, Inc., a Madison,
Wisconsin based designer and manufacturer of communications network I/O
products based on PMC and PCI form factors. The acquisition qualified as
a pooling of interests for accounting purposes and constituted a tax free
reorganization for federal income tax purposes. Under the terms of the
agreement, SciTech Inc.'s shareholders exchanged all outstanding shares
of SciTech, Inc. stock for 174,863 shares of the Company's stock.
SciTech, Inc. was subsequently merged into SBS Technologies, Inc.,
Communications Products (formerly SBS Technologies, Inc., Embedded PPC
Products).
SciTech, Inc.'s historical results do not have a material effect on
combined financial position or results of operations, and as such, the
financial position and results of operations of the Company and SciTech,
Inc. are combined from October 1, 1999.
6) COMPREHENSIVE INCOME
Comprehensive income for the six and three months ended December 31, 1999
was $6.2 million and $3.0 million, respectively. Comprehensive income for
the six and three months ended December 31, 1998 was $5.8 million and
$2.7 million, respectively. The difference between comprehensive income
and net income was related to foreign currency translation adjustments.
7) SEGMENT FINANCIAL DATA
The Company operates internationally through three operating segments:
the Computer Group, the Aerospace Group, and the European Group. These
segments are based on the markets that are served, the products that are
provided to those markets, the geographic area from which sales are
generated, and are managed by three managers who report directly to the
chief operating decision-maker. In addition, each segment utilizes a
common sales group.
The Company measures its segments' results of operations based on income
before income taxes and minority interest and prior to allocation of
corporate overhead expenses, substantially all amortization of goodwill
and intangibles, corporate interest income and expense, and acquired
in-process research and development charges associated with purchase
business combinations. The accounting policies used to measure segment
results of operations are the same as those described in Note 1.
Page 8
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Corporate
Computer Aerospace European and un-
Group Group Group allocated (1) Other (2) Total
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED DECEMBER 31
Gross Sales 1999 $ 39,833,183 15,022,919 7,309,456 -- -- 62,165,558
Intersegment sales (225,687) (169,147) (1,318,003) -- -- (1,712,837)
------------ ------------ ------------ ------------ ----------- ------------
Sales to external customers 39,607,496 14,853,772 5,991,453 -- -- 60,452,721
Gross Sales 1998 $ 29,587,876 16,690,344 6,771,010 -- -- 53,049,230
Intersegment sales (200,199) (73,750) (1,280,361) -- -- (1,554,310)
------------ ------------ ------------ ------------ ----------- ------------
Sales to external customers 29,387,677 16,616,594 5,490,649 -- -- 51,494,920
Segment profit (Income
before 1999 8,562,409 4,377,259 1,880,267 (3,994,662) -- 10,825,273
taxes and minority interest) 1998 5,694,290 6,125,858 1,907,241 (3,569,200) (527,514) 9,630,675
THREE MONTHS ENDED DECEMBER 31
Gross Sales 1999 22,147,079 6,777,898 4,413,903 -- -- 33,338,880
Intersegment sales (134,813) (57,693) (716,775) -- -- (909,281)
------------ ------------ ------------ ------------ ----------- ------------
Sales to external customers 22,012,266 6,720,205 3,697,128 -- -- 32,429,599
Gross Sales 1998 16,661,500 7,528,336 3,956,075 -- -- 28,145,911
Intersegment sales (200,199) (73,750) (929,915) -- -- (1,203,864)
------------ ------------ ------------ ------------ ----------- ------------
Sales to external customers 16,461,301 7,454,586 3,026,160 -- -- 26,942,047
Segment profit (Income
before 1999 5,010,895 1,574,178 1,390,933 (2,127,645) -- 5,848,361
taxes and minority
interest) 1998 3,343,109 2,361,743 1,045,715 (1,848,885) -- 4,901,682
DECEMBER 31
Total assets 1999 31,871,880 10,707,633 8,083,726 47,850,227 -- 98,513,466
1998 22,363,770 12,133,197 8,333,620 50,850,058 -- 93,680,645
------------------------------------------------------------------------------------------------
</TABLE>
(1) Corporate and unallocated includes corporate overhead, substantially all
interest expense, interest income, and amortization expense associated with
goodwill and intangibles not considered in assessing segment profit.
Corporate assets primarily include cash and cash equivalents, deferred and
current income tax assets and intangible assets.
(2) Acquired in-process research and development associated with purchase
business combinations that management does not consider in assessing
segment profits.
Page 9
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
COMPANY'S FINANCIAL STATEMENTS AND NOTES THERETO. INFORMATION DISCUSSED
HEREIN, OTHER THAN STATEMENTS OF HISTORICAL FACT, THAT ADDRESSES ACTIVITIES,
EVENTS OR DEVELOPMENTS THAT THE COMPANY OR MANAGEMENT INTENDS, EXPECTS,
PROJECTS, BELIEVES OR ANTICIPATES WILL OR MAY OCCUR IN THE FUTURE ARE
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE BASED UPON CERTAIN
ASSUMPTIONS AND ASSESSMENTS MADE BY MANAGEMENT OF THE COMPANY IN LIGHT OF ITS
EXPERIENCE AND ITS PERCEPTION OF HISTORICAL TRENDS, CURRENT CONDITIONS,
EXPECTED FUTURE DEVELOPMENTS AND OTHER FACTORS IT BELIEVES TO BE APPROPRIATE.
THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-Q ARE ALSO SUBJECT TO
A NUMBER OF RISKS AND UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO ECONOMIC,
COMPETITIVE, GOVERNMENTAL AND TECHNOLOGICAL FACTORS AFFECTING THE COMPANY'S
OPERATIONS, MARKETS, PRODUCTS, SERVICES, PRICES, AND OTHER RISK FACTORS
LISTED IN THE COMPANY'S FORM 10-K FOR THE YEAR ENDED JUNE 30, 1999. THESE
FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND
ACTUAL RESULTS; DEVELOPMENTS AND BUSINESS DECISIONS MAY DIFFER FROM THOSE
EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS.
RESULTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1999 COMPARED TO SIX MONTHS ENDED
DECEMBER 31, 1998
SALES. For the six-month period ended December 31, 1999, sales increased
17.4%, or $9.0 million, from $51.5 million for the six-month period ended
December 31, 1998, to $60.5 million. Of this 17.4% increase, sales
contributed by SciTech, Inc. comprised 1.7%, and 15.7% was attributable to
the Company's other product lines. Unit shipments increased within the
Computer Group segment, primarily due to an increase in sales of the Group's
computer processor products and industrial computer systems and enclosures
products, partially offset by pricing pressure, experienced primarily by the
Group's computer processor and industrial computer systems and enclosures
product lines. Unit shipments declined within the Aerospace Group compared to
the six-month period ended December 31, 1998, primarily due to a decrease in
sales of the Company's telemetry products, which have been impacted in recent
months by a decline in large project bookings, and declines in the commercial
satellite and military markets which Telemetry serves. European Group volume
increased compared to the six-month period ended December 31, 1998, but sales
were negatively affected by changes in exchange rates.
GROSS PROFIT. For the six-month period ended December 31, 1999, gross profit
increased 7.9%, or $2.4 million from $30.3 million for the six-month period
ended December 31, 1998, to $32.7 million. As expected, for the six-month
period ended December 31, 1999, gross profit as a percentage of sales
decreased to 54.1% from 58.9% for the six-month period ended December 31,
1998, primarily due to a higher percentage of sales of the Company's Computer
Group products, which generally yield lower margins than the Company's other
products, and lower margins experienced by the Aerospace Group and European
Group. Gross margins as a percentage of sales are expected to continue to
decrease slightly, as the Company's lower margin production and systems
business continues to be a larger portion of total sales mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. For the six-month period ended
December 31, 1999, selling, general and administrative (SG&A) expense
increased 3.8%, or $449,000, from $11.8 million for the six-month period
ended December 31, 1998, to $12.3 million. This increase was primarily due to
the acquisition of SciTech, Inc., and to the formation of SBS Technologies
Inc. Europe GmbH, which markets and distributes Computer Group products. For
the six-month period ended December 31, 1999, SG&A expense as a percentage of
sales decreased to 20.3% from 22.9% in the six-month period ended December
31, 1998, as the increase in sales volume more than offset the increase in
expense.
RESEARCH AND DEVELOPMENT EXPENSE. For the six-month period ended December 31,
1999, research and development expense (R&D) increased 10.0%, or $683,000,
from $6.9 million for the six-month period ended December 31, 1998, to $7.5
million. This increase resulted from the acquisition of SciTech, Inc., and
increased investment in product development in the Company's other product
areas. For the six-month period ended December 31, 1999, R&D expense as a
percentage of sales decreased to 12.5% from 13.3% in the six-month period
ended December 31, 1998, as the increase in sales volume more than offset the
increase in expense.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT CHARGE. For the six-month period
ended December 31, 1998, in connection with the acquisition of the majority
interest in OR Industrial Computers GmbH ("OR") completed on July 1, 1998,
the Company recorded a $0.5 million earnings charge based on an assessment by
the Company, in conjunction with an independent valuation
Page 10
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
(Continued)
firm, of purchased technology of OR. The assessment determined that $0.5
million of OR's purchase price represented technology that did not meet the
accounting definitions of completed technology, and thus should be charged to
earnings under generally accepted accounting principles. This assessment
analyzed certain VME, CompactPCI, and PC Compact products that were under
development at the time of acquisition. These programs were in various stages
of completion ranging from initial development to 90% of completion, with
estimated completion dates ranging from September 1998 through April 1999.
The fair value of these development programs was determined in accordance
with views expressed by the staff of the Securities and Exchange Commission.
AMORTIZATION OF INTANGIBLE ASSETS. For the six-month period ended December
31, 1999, amortization of intangible assets increased 30.5%, or $520,000,
from $1.7 million for the six-month period ended December 31, 1998, to $2.2
million. This increase was the result of the amortization of goodwill
associated with the acquisition of SBS Technologies, Inc., Communications
Products (formerly SBS Technologies, Inc., Embedded PPC Products) and the
acquisition of the minority interest in OR and ORTEC Electronic Assembly GmbH
("ORTEC") in December of 1998.
INTEREST INCOME, NET OF INTEREST EXPENSE. For the six-month period ended
December 31, 1999, interest income, net of interest expense increased 13.6%,
or $21,000, from $154,000 for the six-month period ended December 31, 1998,
to $175,000. This increase was primarily due to an increase in interest
income associated with amendments of prior years' tax returns for research
and experimental tax credits, offset by an increase in interest expense
associated with borrowings under the Company's line of credit.
FOREIGN EXCHANGE GAINS (LOSSES). For the six-month period ended December 31,
1999, the $30,000 foreign exchange loss was primarily attributable to the
change in exchange rates in the quarter ended December 31, 1999 relating to
interest payable on debt between the Company and its foreign subsidiary. For
the six-month period ended December 31, 1998, the $57,000 foreign exchange
gain was primarily attributable to the change in exchange rates between
December 9, 1998 and December 31, 1998, relating to the note payable entered
into on December 9, 1998 for DM 17.2 million paid on February 28, 1999 for
the remaining interest in OR and ORTEC.
INCOME TAXES. For the six-month period ended December 31, 1999 and the
six-month period ended December 31, 1998, income taxes represented an
effective income tax rate of 34.6% and 38.0%, respectively. The decrease in
the effective income tax rate was due to U.S. tax planning strategies
implemented by the Company, including minimization of the Company's tax
liability related to debt between the Company and its foreign subsidiaries
and increased use of the Company's foreign sales corporation, as well as an
expected increase in the research and experimental tax credit for fiscal 2000.
EARNINGS PER SHARE. For the six-month period ended December 31, 1999, net
income per common share was $1.18 compared to $0.95 for the six-month period
ended December 31, 1998. For the six-month period ended December 31, 1999,
net income per common share assuming dilution was $1.09 compared to $0.90 for
the six-month period ended December 31, 1998.
REVIEW OF BUSINESS SEGMENTS
The Company is managed and operates through three operating segments: the
Computer Group, the Aerospace Group and the European Group. The following is
a discussion of sales to external customers and segment profit for each
reportable segment. The Company does not allocate to these segments costs
associated with its corporate headquarters, substantially all of the
amortization expense associated with acquisitions, substantially all interest
income earned on cash balances, interest expense associated with Company
borrowing facilities, and acquired in-process research and development
charges. This measure of segment profit described above is referred to herein
as "Segment Profit."
Page 11
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
(Continued)
COMPUTER GROUP
For the six-month period ended December 31, 1999, Computer Group sales to
external customers increased 34.8%, or $10.2 million, from $29.4 million for
the six-month period ended December 31, 1998 to $39.6 million. Of this 34.8%
increase, sales contributed from the acquisition of SciTech, Inc. accounted
for 3.0% of the increase. The balance of the increase, 31.8%, was
attributable to organic growth primarily resulting from an increase in sales
of the Group's computer processor products and industrial computer systems
and enclosures products, partially offset by pricing pressure, experienced
primarily by the Group's computer processor and industrial computer systems
and enclosures product lines.
For the six-month period ended December 31, 1999, Computer Group segment
profit increased 50.4%, or $2.9 million, from $5.7 million for the six-month
period ended December 31, 1998, to $8.6 million, primarily due to the net
margin contribution from the increase in sales from the Group's computer
processor products and industrial computer systems and enclosures products.
Segment profit as a percentage of sales increased from 19.4% for the
six-month period ended December 31, 1998 to 21.6% for the same period in
1999. This increase was primarily due to a decline in SG&A and R&D costs as a
percentage of sales, as the Group's overhead infrastructure was adequate to
handle the increase in sales, partially offset by a shift in sales mix to
lower margin products.
AEROSPACE GROUP
For the six-month period ended December 31, 1999, Aerospace Group sales to
external customers decreased 10.6%, or $1.7 million, from $16.6 million for
the six-month period ended December 31, 1998 to $14.9 million, primarily due
to a decrease in sales of the Group's telemetry products, which have been
impacted in recent months by a decline in large project bookings, and by
declines in the commercial satellite and military markets which Telemetry
serves.
For the six-month period ended December 31, 1999, Aerospace Group segment
profit decreased 28.5%, or $1.7 million, from $6.1 million for the six-month
period ended December 31, 1998 to $4.4 million. This decrease was primarily
due to lower sales of the Group's telemetry products, and a shift in sales
mix to lower margin products across the Group's product lines. For the same
reasons, segment profit as a percentage of sales decreased from 36.9% for the
six-month period ended December 31, 1998 to 29.5% for the same period in 1999.
EUROPEAN GROUP
For the six-month period ended December 31, 1999, European Group sales to
external customers increased 9.1%, or $501,000, from $5.5 million for the
six-month period ended December 31, 1998 to $6.0 million. This increase was
primarily due to increases in European orders outside of Germany, partially
offset by the negative impact of changes in exchange rates on sales.
For the six-month period ended December 31, 1999, European Group segment
profit decreased 1.4%, or $27,000, compared to the six-month period ended
December 31, 1998. The decrease was primarily due to a shift in sales mix to
lower gross margin products in the quarter ended September 30, 1999 and
increases in SG&A costs associated with the growth of the segment.
THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1998
SALES. For the three-month period ended December 31, 1999, sales increased
20.4%, or $5.5 million, from $26.9 million for the three-month period ended
December 31, 1998, to $32.4 million. Of this 20.4% increase, sales
contributed by SciTech, Inc. comprised 3.3%, and 17.1% was attributable to
the Company's other product lines. Unit shipments increased within the
Computer Group segment and European Group segment. This increase in volume
was partially offset by pricing pressure, experienced primarily by the
Computer Group's computer processor and industrial computer systems and
enclosures product lines. Unit shipments declined within the Aerospace Group
compared to the three-month period ended December 31, 1998, primarily due to
a decrease in sales of the Company's telemetry products, which have been
impacted in recent months by declines in the commercial satellite and
military markets which Telemetry serves.
Page 12
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
(Continued)
GROSS PROFIT. For the three-month period ended December 31, 1999, gross
profit increased 11.2%, or $1.7 million from $15.4 million for the
three-month period ended December 31, 1998, to $17.1 million. As expected,
for the three-month period ended December 31, 1999, gross profit as a
percentage of sales decreased to 52.8% from 57.2% for the three-month period
ended December 31, 1998, primarily due to a higher percentage of sales of the
Company's Computer Group products, which generally yield lower margins than
the Company's other products, and lower margins experienced by the Aerospace
Group. Gross margins as a percentage of sales are expected to continue to
decrease slightly, as the Company's lower margin production and systems
business continues to be a larger portion of total sales mix.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. For the three-month period ended
December 31, 1999, selling, general and administrative (SG&A) expense
increased 5.4%, or $323,000, from $6.0 million for the three-month period
ended December 31, 1998, to $6.4 million. This increase was primarily due to
the acquisition of SciTech, Inc., and to the formation of SBS Technologies
Inc. Europe GmbH, which markets and distributes Computer Group products. For
the three-month period ended December 31, 1999, SG&A expense as a percentage
of sales decreased to 19.6% from 22.4% in the three-month period ended
December 31, 1998, as the increase in sales volume more than offset the
increase in expense.
RESEARCH AND DEVELOPMENT EXPENSE. For the three-month period ended December
31, 1999, research and development expense (R&D) increased 4.6%, or $171,000,
from $3.7 million for the three-month period ended December 31, 1998, to $3.9
million. This increase resulted from the added expenditures due to the
acquisition of SciTech Inc., and increased investment in product development
in the Company's other product areas. For the three-month period ended
December 31, 1999, R&D expense as a percentage of sales decreased to 11.9%
from 13.7% in the three-month period ended December 31, 1998, as the increase
in sales volume more than offset the increase in expense.
AMORTIZATION OF INTANGIBLE ASSETS. For the three-month period ended December
31, 1999, amortization of intangible assets increased 25.7%, or $227,000,
from $882,000 for the three-month period ended December 31, 1998, to $1.1
million. This increase was the result of the acquisition of the minority
interest in OR and ORTEC in December of 1998.
INTEREST INCOME, NET OF INTEREST EXPENSE. For the three-month period ended
December 31, 1999, interest income, net of interest expense increased 114.7%,
or $47,000, from $41,000 for the three-month period ended December 31, 1998,
to $88,000. This increase was primarily due to interest income associated
with amendments to prior years' tax returns for research and experimental tax
credits.
FOREIGN EXCHANGE GAINS (LOSSES). For the three-month period ended December
31, 1999, the $42,000 foreign exchange loss was primarily attributable to the
change in exchange rates in the quarter ended December 31, 1999 relating to
interest payable on debt between the Company and its foreign subsidiary. For
the three-month period ended December 31, 1998, the $57,000 foreign exchange
gain was primarily attributable to the change in exchange rates between
December 9, 1998 and December 31, 1998, relating to the note payable entered
into on December 9, 1998 for DM 17.2 paid on February 28, 1999 for the
remaining interest in OR and ORTEC.
INCOME TAXES. For the three-month period ended December 31, 1999 and the
three-month period ended December 31, 1998, income taxes represented an
effective income tax rate of 32.6% and 37.6%, respectively. The decrease in
the effective income tax rate was due to U.S. tax planning strategies
implemented by the Company, including minimization of the Company's tax
liability related to debt between the Company and its foreign subsidiaries
and increased use of the Company's foreign sales corporation, as well as the
reinstatement through legislation of the research and experimental tax credit
in the quarter ended December 31, 1999, which resulted in a year-to-date tax
rate adjustment in the quarter ended December 31, 1999.
EARNINGS PER SHARE. For the three-month period ended December 31, 1999, net
income per common share was $0.64 compared to $0.49 for the three-month
period ended December 31, 1998. For the three-month period ended December 31,
1999, net income per common share assuming dilution was $0.59 compared to
$0.47 for the three-month period ended December 31, 1998. Included in net
income per common share and net income per common share assuming dilution for
the three-month period ended December 31, 1999 is $0.04 related to the
year-to-date tax rate adjustment resulting from the reinstatement through
legislation of the research and experimental tax credit.
Page 13
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
(Continued)
REVIEW OF BUSINESS SEGMENTS
The Company is managed and operates through three operating segments: the
Computer Group, the Aerospace Group and the European Group. The following is
a discussion of sales to external customers and segment profit for each
reportable segment. The Company does not allocate to these segments costs
associated with its corporate headquarters, substantially all of the
amortization expense associated with acquisitions, substantially all interest
income earned on cash balances, interest expense associated with Company
borrowing facilities, and acquired in-process research and development
charges. This measure of segment profit described above is referred to herein
as "Segment Profit."
COMPUTER GROUP
For the three-month period ended December 31, 1999, Computer Group sales to
external customers increased 33.7%, or $5.5 million, from $16.5 million for
the three-month period ended December 31, 1998 to $22.0 million. Of this
33.7% increase, sales contributed by the acquisition of SciTech, Inc.
accounted for 5.4% of the increase. The balance of the increase, 28.3%, was
attributable to organic growth primarily resulting from an increase in sales
of the Group's computer processor products and industrial computer systems
and enclosure products, partially offset by pricing pressure, experienced
primarily by the Group's computer processor products and industrial computer
systems and enclosures products.
For the three-month period ended December 31, 1999, Computer Group segment
profit increased 49.9%, or $1.7 million, from $3.3 million for the
three-month period ended December 31, 1998, to $5.0 million, primarily due to
the net margin contribution from the increase in sales from the Group's
computer processor products and industrial computer systems and enclosure
products and the acquisition of SciTech, Inc. Segment profit as a percentage
of sales increased from 20.3% for the three-month period ended December 31,
1998 to 22.7% for the same period in 1999. This increase was primarily due to
a decline in SG&A and R&D costs as a percentage of sales, as the Group's
overhead infrastructure was adequate to handle the increase in sales,
partially offset by a shift in sales mix to lower margin products.
AEROSPACE GROUP
For the three-month period ended December 31, 1999, Aerospace Group sales to
external customers decreased 9.9%, or $734,000, from $7.5 million for the
three-month period ended December 31, 1998 to $6.7 million, primarily the
result of a decrease in sales of the Group's telemetry products, which have
been impacted by declines in the commercial satellite and military markets
which Telemetry serves.
For the three-month period ended December 31, 1999, Aerospace Group segment
profit decreased 33.3%, or $788,000, from $2.4 million for the three-month
period ended December 31, 1998 to $1.6 million. This decrease was primarily
due to lower sales of the Group's telemetry products, and shift in sales mix
to lower margin products across the Group's product lines. For the same
reasons, segment profit as a percentage of sales decreased from 31.7% for the
three-month period ended December 31, 1998 to 23.4% for the same period in
1999.
EUROPEAN GROUP
For the three-month period ended December 31, 1999, European Group sales to
external customers increased 22.2%, or $671,000, from $3.0 million for the
three-month period ended December 31, 1998 to $3.7 million. This increase was
primarily due to increases in European orders outside of Germany, partially
offset by the negative impact of changes in exchange rates on sales.
For the three-month period ended December 31, 1999, European Group segment
profit increased 33.0%, or $345,000, from $1.0 million for the three-month
period ended December 31, 1998 to $1.4 million. This increase is primarily
due to additional gross margin associated with the increase in sales, offset
by increases in SG&A costs associated with the growth of the segment. For the
same reasons, European Group segment profit as a percentage of sales
increased from 34.6% for the three-month period ended December 31, 1998 to
37.6% for the same period in 1999.
Page 14
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
(Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company uses a combination of the sale of equity securities, internally
generated funds and bank borrowings to finance its acquisitions, working
capital requirements, capital expenditures and operations.
Cash totaled $6.7 million at December 31, 1999, an increase of $3.2 million
from June 30, 1999. This increase was the result of $5.8 million of cash flow
from operations and $3.0 million from the exercise of stock options and
warrants, offset by $1.1 million of expenditures for capital equipment, $4.0
million of payments on the Company's line of credit, $1.4 million of payments
to the former shareholder of OR, and $0.4 million of dividends paid to the
former shareholders of SciTech, Inc. The Company's growth during the
six-month period ended December 31, 1999 caused the Company to increase
accounts receivable and inventory. Liabilities were in line with the current
level of business. The exercise of stock options reduced the Company's tax
liability.
On December 1, 1998, the Company entered into a $15.0 million Credit
Agreement ("Agreement") with Bank of America, N.A. ("Lender"), formerly
NationsBank, N.A. The Agreement expired on November 30, 1999, but was
modified to extend the expiration date to January 31, 2000. Effective January
31, 2000, the agreement was renewed and modified, allowing for $25.0 million
of borrowings with an expiration date of November 30, 2001. As of December
31, 1999, there were no borrowings drawn on the Agreement and the Company was
in compliance with all of the covenants of the agreement. Management believes
that its financial resources, including its internally generated funds and
debt capacity, will be sufficient to finance the Company's current operations
and capital expenditures, excluding acquisitions, for the next twelve months.
At December 31, 1999, there were no material outstanding commitments for
capital expenditures.
For the six-month period ended December 31, 1999, there was no significant
impact from inflation or changing prices on the Company's sales or income
from operations.
YEAR 2000 ISSUE
The Year 2000 ("Y2K") issue refers to the inability of certain date-sensitive
computer chips, software, and systems to recognize a two-digit date field as
belonging to the year 2000 and beyond. Mistaking "00" for 1900 or any other
incorrect year could result in a system failure or miscalculations, causing
disruptions to operations, including manufacturing, a temporary inability to
process transactions, send invoices, or engage in other normal business
activities. This issue could have far-reaching implications, some of which
cannot be anticipated or predicted with any degree of certainty.
The Company has experienced no significant difficulties as a result of the
Y2K issue. Its internal business and engineering purchased software packages
were unaffected by the change from 1999 to 2000. The Company's operations
have not been materially adversely affected by any Y2K problems of its the
major suppliers, who are component parts distributors and contract
manufacturers. None of the Company's seven facilities has experienced any Y2K
related disruptions in electricity, water, sewer, telephone, or other needed
services.
Before the end of 1999, the Company had assessed the capability of all of its
existing and legacy products to handle the year 2000 and had provided
information to its customers about what steps needed to be taken to ensure
Y2K readiness, or the need for replacement of a product. To the Company's
knowledge, none of its customers has experienced any significant Y2K
difficulty with any of the Company's products. The Company's operations have
not been materially affected by the failure of any customer to purchase goods
or services from the Company due to non-Y2K readiness.
To date, the cost of the Company's Y2K assessment, including both incremental
spending and reallocated resources, has not been, and is not expected to be,
material and has been absorbed, or is expected to be absorbed, within the
normal capital equipment and operating expenditures of the Company. To date,
costs incurred and included in the Company's reported financial results were
approximately $385,000 and were limited to the cost of existing employees
assigned to a Y2K task force established by the Company, or outside
consultants hired on a temporary basis. Of this $385,000, $100,000 was
included in the financial results for the six months ended December 31, 1999
and $285,000 was included in prior years' financial results.
Page 15
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DECEMBER 31, 1999
(Continued)
The Company has not received any claims resulting from the Y2K transition.
However, because there is no uniform definition of "Y2K readiness" and
because all customer situations cannot be anticipated, particularly those
involving third party products, the Company may encounter Y2K transition
claims. These claims, if successful, could have a material adverse impact on
future results.
While the Company has not experienced any material adverse Y2K related
effects, the Y2K issue may still create unforeseen risks to the Company from
its internal computer systems, as well as from computer systems of third
parties with which it deals. Failures of the Company's or third parties'
computer systems could have a material adverse impact on the Company's
ability to conduct its business.
EURO CONVERSION
On January 1, 1999 eleven of the fifteen member countries of the European
Union adopted the euro as their common legal currency and established fixed
conversion rates between their existing sovereign currencies and the euro.
The legacy currencies of the participating European Union members will remain
legal tender in the participating countries for the transition period from
January 1, 1999 to January 1, 2002. Beginning January 1, 2002, the
participating countries will issue new euro-denominated bills and coins for
use in cash transactions. Legacy currencies will no longer be legal tender
for any transactions beginning July 1, 2002, making conversion to the euro
complete. The Company has begun to assess its need to adapt information
technology and other systems to accommodate euro-denominated transactions,
any potential impact on terms and enforceability of legacy denominated
contracts, and potential tax consequences of currency conversion. This
assessment is being conducted to determine whether the euro conversion will
have a material adverse effect on the Company's financial position, results
of operations, or liquidity.
NEW ACCOUNTING STANDARDS
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", was
issued in June 1998. This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
provisions of SFAS 133, as amended, are effective for financial statements
for fiscal years beginning after June 15, 2000, although early adoption is
permitted. The Company has not determined the financial impact of adopting
SFAS 133 to date.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the information on this risk that was
provided in the Company's Form 10-K for the year ended June 30, 1999.
Page 16
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities
On December 20, 1999, the Company issued a total of 174,863 shares of
common stock to two individuals in Exchange for all of the outstanding
shares of SciTech, Inc., in connection with a pooling of interests
between SciTech, Inc. and the Company. The shares were issued pursuant
to Section 4(2) of the Securities Act of 1933 and bear a restrictive
legend. Both individuals were given copies of the Company's Form 10-K,
all subsequent filings, and any other information about the Company
that they requested. Both executed a Subscription and Representation
Letter acknowledging their ability to assume the risk of the investment
in the shares, their understanding of the restricted nature of the
shares, and that they were sophisticated investors.
Item 3. Defaults by the Company upon its Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
The following items were submitted to a vote and approved at the Annual
Meeting of Stockholders held on November 11, 1999:
<TABLE>
<CAPTION>
TABULATION OF VOTES
---------------------------------------------------------- ------------- ------------- ---------------------
Against or Abstentions and
Item Voted For Withheld Broker Non-Votes
---------------------------------------------------------- ------------- ------------- ---------------------
<S> <C> <C> <C>
Election of Directors:
Scott A. Alexander 5,297,256 1,100 3,075
Warren W. Andrews 5,297,256 1,100 3,075
Christopher J. Amenson 5,297,256 1,100 3,075
William J. Becker 5,297,256 1,100 3,075
Lawrence A. Bennigson 5,297,256 1,100 3,075
James E. Dixon, Jr. 5,297,256 1,100 3,075
Louis C. Golm 5,297,256 1,100 3,075
Alan F. White 5,297,256 1,100 3,075
---------------------------------------------------------- ------------- ------------- ---------------------
Ratification of KPMG LLP as the Company's independent
auditor for fiscal year
ending June 30, 2000. 5,292,880 5,751 2,800
---------------------------------------------------------- ------------- ------------- ---------------------
</TABLE>
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits (exhibit reference numbers refer to Item 601 of
Regulation S-K)
03.i (1) Articles of Incorporation, as amended.
03.ii (1) Bylaws, as amended.
10.ap (1) Pooling Agreement between SciTech, Inc.,
Robert Scidmore and David Scidmore, and SBS
Technologies, Inc., and its wholly-owned
Subsidiary, SBS Technologies, Inc.,
Communications Products, dated December 20,
1999.
Page 17
<PAGE>
10.aq (1) Modification of Credit Agreement, Guaranty
Agreements and Related Loan Documents,
between SBS Technologies, Inc., and Bank of
America, N.A., formerly NationsBank, N.A.,
dated January 31, 2000.
10.ar (1) Amended and Restated Revolving Promissory
Note, between SBS Technologies, Inc., and
Bank of America, N.A., formerly NationsBank,
N.A., dated January 31, 2000.
27. Financial Data Schedule
(b) Reports on Form 8-K - None
(1) See Exhibit Index on Page 20
Page 18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SBS TECHNOLOGIES, INC.
Date: February 11, 2000 /s/ Christopher J. Amenson
----------------------------
Chairman of the Board,
Chief Executive Officer
and President
Date: February 11, 2000 /s/ James E. Dixon, Jr.
-------------------------
Vice President,
Finance and Administration;
Chief Financial Officer and
Treasurer
Page 19
<PAGE>
SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Method of Filing
- --------------- ----------- -------------------------------
<S> <C> <C>
03.i (1) Articles of Incorporation, as amended. --
03.ii (2) Bylaws, as amended. --
10.ap Pooling Agreement between SciTech, Inc., Robert Scidmore
and David Scidmore, and SBS Technologies, Inc., and its
wholly-owned subsidiary, SBS Technologies, Inc.,
Communications Products, dated December 20, 1999. Filed herewith electronically
10.aq Modification of Credit Agreement, Guaranty Agreements and
Related Loan Documents, between SBS Technologies, Inc.,
and Bank of America, N.A., formerly NationsBank, N.A.,
dated January 31, 2000. Filed herewith electronically
10.ar Amended and Restated Revolving Promissory Note,
between SBS Technologies, Inc. and Bank of America, N.A.,
dated January 31, 2000. Filed herewith electronically
27. Financial Data Schedule Filed herewith electronically
</TABLE>
(1) Incorporated by reference to Exhibit 3.i, of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1997.
(2) Incorporated by reference to Exhibit 3.ii, of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1995.
Page 20
<PAGE>
EXHIBIT 10.ap
POOLING AGREEMENT
SciTech inc. ("SciTech") a Wisconsin corporation, Robert Scidmore and
David Scidmore (together, "Sellers") and SBS Technologies, Inc., a New Mexico
Corporation ("Buyer".) and its wholly-owned subsidiary, SBS Technologies, Inc.
Communications Products, a California corporation ("Company"), agree:
I. RECITALS.
A. OWNERSHIP. Sellers are the owners of all of the outstanding
common stock ("SciTech Shares") of SciTech and wish to exchange
the SciTech Shares for common stock of Buyer.
B. RECEIPT OF SHARES. Buyer wishes to receive the SciTech Shares
under the terms and conditions of this Agreement.
C. POOLING OF INTEREST. The parties intend that the Transactions (as
later defined) be accounted for as a pooling of interests in
accordance with generally accepted accounting principles.
D. EMPLOYMENT ARRANGEMENTS AND OPTIONS. Upon receipt of the SciTech
Shares, Buyer wishes to employ Seller Robert Scidmore, who is an
employee of SciTech. The Seller Robert Scidmore wishes to be
employed by Buyer. A form of employment agreement is attached as
Exhibit I-D. In connection with his employment, Buyer will also
issue to Seller Robert Scidmore options for Buyer Common Stock. A
form of option agreement is attached as Exhibit I-D1 ("Option
Agreement").
E. COVENANT NOT TO COMPETE. In connection with the acquisition of
the SciTech Shares, Seller Robert Scidmore agrees to enter into a
non-compete agreement in substantially the form attached as
Exhibit I-E to this Pooling Agreement ("Covenant") for the
consideration specified in the Covenant.
F. TAX-FREE REORGANIZATION. The parties intend that the Transactions
be a tax-free reorganization under the Internal Revenue Code of
1986, as amended.
II. MERGER.
A. MERGER ACTION. Subject to the terms and conditions of this
Pooling Agreement, SciTech will merge with and into Company
("Merger"); at the time the Merger is effective under all
applicable state laws ("Effective Time") Company will be the
surviving company ("Surviving Company"). The form of Plan of
Merger is attached as Exhibit II-A.
1
<PAGE>
B. EFFECT OF MERGER.
1. The Merger will become effective at the Effective Time, with the
effect set forth in applicable New Mexico and Wisconsin Business
Corporation Laws. The Surviving Company may, at any time after
the Effective Time, take any action (including executing and
delivering any document) in the name and on behalf of either
SciTech or Company in order to carry out and effectuate the
transactions, including the Merger, contemplated by this Pooling
Agreement ("Transactions").
2. Buyer will designate such directors and officers as it may
determine to be in the best interest of the Surviving Company.
Nothing in this paragraph shall entitle any director or officer
to maintain that position if not thereafter duly elected or
appointed to it.
3. At and as of the Effective Time, and subject to adjustment as
provided below, each of the 1,000 issued and outstanding SciTech
Shares shall be converted into the right to receive shares of
the no par value common stock of Buyer as set forth below. No
fractional shares will be issued, the number of SBS common shares
a shareholder receives will be rounded down to the nearest whole
number, and no payment for fractional shares made. All shares of
the common stock of Buyer received pursuant to this subparagraph
II.B.3 are the "Buyer Shares," and the ratio of Buyer Shares to
each SciTech Share is the "Conversion Ratio". The Conversion
Ratio will be adjusted equitably if there should occur any stock
split, stock dividend, reverse stock split, or other change in
the number of SciTech Shares outstanding. The total number of
Buyer Shares to be issued will equal $6,400,000 divided by the
average of the closing price on the NASDAQ National Market System
of SBS common stock for the five trading days preceding Closing.
No SciTech Share shall be deemed to be outstanding or to have any
rights other than those set forth in this subparagraph after the
Effective Time.
4. At and as of the Effective Time, each share of the no par value
common stock of Company then outstanding ("Company Share") will
remain outstanding as the common stock of the Surviving Company.
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5. After Closing, transfers of SciTech Shares outstanding before the
Effective Time shall not be made on the stock transfer books of
the Surviving Company.
III. POOLING CONDITION.
Each of Buyer, and Sellers and SciTech hereby covenant and agree to take
all steps reasonably necessary in order to obtain a favorable determination from
the Securities and Exchange Commission ("SEC") that the Transactions may be
accounted for as a pooling of interests in accordance with generally accepted
accounting principles ("Pooling Condition"). If Buyer determines, based on good
faith advice of its accountants, that consummation of the Transactions would be
accounted for as a pooling of interests in accordance with generally accepted
accounting principles, then, subject to the terms and conditions of this
Agreement, the Transactions will be consummated. If the Pooling Condition is
not satisfied, Buyer has the right to terminate this Agreement at any time
before Closing, without liability for any damages arising out of the
termination, by giving express written notice of that intent to Sellers before
Closing. Sellers must receive that notice before Closing.
IV. REGISTRATION RIGHTS.
The Buyer Shares delivered to Sellers at Closing will not be
registered under the Securities Act of 1933 (the "1933 Act") or any state
securities laws, will be issued pursuant to exemptions from those laws, and will
be "restricted securities" as that term is defined under Rule 144 under the
Securities Exchange Act of 1934. Sellers will sign a Subscription Agreement and
Representation Letter in the form attached as Exhibit IV. Sellers will have the
registration rights described below.
A. DEMAND RIGHT. If, at any time after the filing with the SEC of
Buyer's Form 10-Q for the second quarter of its 2000 fiscal year,
Buyer receives a written request from the holders of a majority
of the Buyer Shares to register the sales of all or part of the
Buyer Shares, Buyer will, as promptly as practicable, but in any
event within six months after the date of that request, use its
best efforts to prepare and file with the SEC a registration
statement sufficient to permit the public offering and sale of
the Buyer Shares, provided that Buyer is eligible to use Form S-3
for that registration. Buyer will be obligated to file only one
such registration statement and will pay all expenses (other than
fees for selling holders, counsel and underwriting discounts
applicable to the Buyer Shares sold) in connection with the
offering. If, at the time of the request, Buyer expects to
undertake, or is in the process of undertaking, the registration
of an offering of Common Stock in which the Buyer Shares may be
included, Buyer may, at its option, include the Buyer Shares in
that registration instead of filing a separate registration for
them.
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B. PIGGYBACK RIGHT. If, at any time during the two-year period
commencing on the date of Closing, Buyer files a registration
statement (other than on Form S-4, Form S-8 or other form not
permitting "piggyback" of shares, and any successor forms) with
the SEC while any Buyer Shares are held by Seller under this
Pooling Agreement, Buyer will give all of the then holders of
Buyer Shares ("Eligible Holders") at least 20 days' prior written
notice of the filing of the registration statement. If
requested in writing by Eligible Holders holding not less than a
majority of the Buyer Shares within 10 days after receipt of such
a notice, Buyer will, one time only, at Buyer' sole expense
(other than the fees of legal counsel to the Eligible Holders and
underwriting discounts applicable to any Buyer Shares sold),
register or qualify all or, at each Eligible Holder's option, any
portion, of the Buyer Shares requested by an Eligible Holder with
the registration of the other Buyer securities being registered.
However, if the underwriter of such an offering determines that
inclusion of the Buyer Shares or any part of them in the proposed
offering is materially detrimental to the offering and so advises
the Eligible Holders, the Buyer Shares will not be registered and
the Eligible Holders will be deemed not to have been given notice
under this paragraph.
C. COOPERATION. In any registration of Buyer Shares, the current
shareholders and employees of SciTech and the selling holders
will cooperate fully with Buyer to facilitate the registration.
D. NOTICE. If Buyer receives a request from a holder of Buyer Shares
to register Buyer Shares under this Section, Buyer will notify
all other holders of Buyer Shares and include such of their Buyer
Shares as they may request to be registered in any registration
statement, if the request is received within 10 days of the date
of the notice.
E. EFFECTIVE PERIOD. Buyer will use its best efforts to cause to
become effective and to keep effective for a period not to exceed
90 days any registration filed under this Section and from time
to time will amend or supplement the registration statement as
necessary.
F. DELAY AND SUSPENSION OF SALES. Notwithstanding the foregoing
provisions, Buyer may delay filing a registration statement for
not longer than six months from the date Buyer would have been
required to register under paragraph A of this Section and may
withhold efforts to cause the registration statement to become
effective, if Buyer determines in good faith that (a) such a
registration (i) might interfere with or adversely affect the
negotiation or completion of any transaction that is being
contemplated by Buyer (whether or not a final decision has been
made to undertake that transaction) at the time the right to
delay is exercised, (ii) might involve initial or continuing
disclosure obligations that might not be in the best interest of
the Company's stockholders, or (iii) will require preparation of
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audited financial information for Buyer as of a date or for a
period which would not otherwise be required, or (b) any material
circumstance of Buyer renders the effecting of such a
registration statement inappropriate at the time. If, after a
registration statement becomes effective, Buyer advises the
holders of registered shares that Buyer considers it appropriate
for the registration statement to be amended, the holders of
those shares shall suspend any further sales of their registered
shares until Buyer advises them that the registration statement
has been amended. The 90-day time period referred to in this
Section during which the registration statement must be kept
current after its effective date shall be extended for an
additional number of business days equal to the number of
business days during which the right to sell shares was suspended
pursuant to the preceding sentence, but in no event will Buyer be
required to update the registration statement after the first
anniversary of Closing.
G. POOLING SALES RESTRICTIONS. Except for de minimis sales, no
affiliate of either Buyer or SciTech shall sell any shares of
Buyer during the period beginning 30 days before Closing and
ending on the publication date of financial results covering at
least 30 days of post-merger operations, as provided by SEC
Accounting Series Release Number 130.
H. DOCUMENTS. Buyer will furnish to each selling shareholder a
number of copies of the registration statement, preliminary
prospectus and prospectus and amendments and supplements to them
as the selling shareholder may reasonably request to facilitate
the disposition of the Buyer Shares in the registration.
V. SELLERS' REPRESENTATIONS AND WARRANTIES.
Sellers and SciTech, 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 SciTech Disclosure Schedule designated as
Exhibit V to this Agreement. Any listed exceptions must be reasonably acceptable
to Buyer.
A. ORGANIZATION AND STANDING OF SCITECH. SciTech is a corporation
validly existing under the laws of the State of Wisconsin, 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. SciTech is duly licensed or qualified to
transact business as a foreign corporation, and is in good
standing, in each jurisdiction in which the nature of the
business transacted by it or the character of properties owned or
leased by it requires that licensing or qualification, except
where the failure to be so licensed or qualified would not have a
material adverse effect on its business, operations or financial
condition.
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B. CAPITALIZATION. SciTech is authorized to issue 9,000 shares of
no par value common stock and only 1,000 shares, constituting the
SciTech Shares, are issued and outstanding. As of the date of
Closing, a total of 1,000 SciTech shares are issued and
outstanding, of which Rob Scidmore holds 920 shares and Dave
Scidmore holds 80 shares. SciTech holds no shares of SciTech
stock as treasury shares. The SciTech 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 SciTech
are outstanding.
C. STOCK OWNERSHIP. Sellers have good and marketable title to the
SciTech Shares held by them, free from encumbrance or any
contractual or other restriction on their transfer or
encumbrance, and have full power, right and authority to
surrender the SciTech Shares pursuant to this Pooling Agreement.
Sellers own and have all right and title to their respective
SciTech Shares as of August 1999.
D. APPROVAL. The Board of Directors and shareholders of SciTech
have approved this Agreement and have authorized their officers
to take all action and to execute, acknowledge and deliver all
documents appropriate to consummate the Transactions. No other
approval is necessary to consummate the Transactions contemplated
by this Pooling Agreement. This Pooling Agreement constitutes
the legal, valid and binding obligation of Sellers and SciTech,
enforceable in accordance with its terms (subject, as to
enforcement of remedies, to the discretion of courts in awarding
equitable relief and to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the rights of
creditors generally).
E. FINANCIAL STATEMENTS. The Closing Balance Sheet (Exhibit
V-E), the Closing Year to Date Income Statement (from January
1,1999 to Closing) (Exhibit V-E1), the Closing Income
Statement (from October 1, 1999 to Closing), (Exhibit V-E2),
and their supporting information, when delivered by Sellers
and SciTech to Buyer, will be, and the books and records on
which they are based are and will be, correct in all material
respects, and fairly represent the financial condition of
SciTech as of their dates. The Year-End Financial Statements
(Exhibit V-E3), the Six-Month Financial Statements (Exhibit
V-E4), the Third Quarter Financial Statements (Exhibit V-E5),
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 SciTech as of SciTech's most
recent year end and the end of SciTech's most recent third
quarter, respectively. The Closing Balance Sheet (and any
other financial statements provided to Buyer) may be audited
by Buyer's public accounting firm at its expense.
F. OWNERSHIP OF SCITECH. As of the date of Closing, except for this
Pooling Agreement, there will not be any outstanding or
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authorized warrants, calls, rights, commitments or other
agreements of any nature to which SciTech is a party, or may be
bound by, requiring it to issue, transfer, sell, purchase, redeem
or acquire any shares of capital stock or any securities or
rights convertible into, exchangeable for, or evidencing the
right to subscribe for or acquire any shares of capital stock of
SciTech.
G. ABSENCE OF CERTAIN CHANGES. Since the end of the most recent
SciTech fiscal year ("Most Recent SciTech Year End"), there have
not been (i) any material changes in SciTech's financial
condition, assets, liabilities, or, to Sellers' best knowledge,
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 SciTech's properties or
business or the assets; (iii) any labor trouble or any event or
condition of any character materially and adversely affecting
SciTech's business; (iv) any indebtedness incurred by SciTech for
borrowed money or any commitment to borrow money entered into or
any guarantee given by SciTech, 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 SciTech'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 SciTech to any officer, director or
key employee of SciTech, except for normal distributions to
shareholders.
H. TITLE TO PROPERTIES. SciTech owns, free and clear of any liens,
encumbrances, claims, charges, contractual or other restrictions
on transfer, equities, security interests, options or other
restrictions, and has good title to its assets, subject to any
lien for current taxes or assessments not yet delinquent.
I. CONTRACTS. There are no contracts, agreements, leases, or
commitments not terminable at will, which would prevent Buyer
from continuing the business as it is now conducted by SciTech,
including without limitation, those with purveyors or suppliers
of items used in the conduct of SciTech's business. To Sellers'
best knowledge, SciTech has materially performed all its
contracts, to the extent performance is due, and has cured all
defaults.
J. ACTIONS. To the best knowledge of Sellers, there are no
judgments, actions, suits, claims, proceedings, investigations,
bankruptcy or insolvency proceedings or receiverships
(collectively, "Actions") pending or threatened against or
relating to SciTech, its assets or business, in any court, or
before any governmental department or agency, nor is SciTech or
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any of its assets subject to any unsatisfied judgment, order or
award as a result of any such Actions. Sellers and SciTech do
not know of any basis for any such Actions.
K. TAX MATTERS. As of the date of this Agreement, to the best
knowledge of Sellers and SciTech, the representations concerning
tax matters contained in the financial statements are true and
correct in all material respects. All tax returns required to be
filed with respect to SciTech or its operations by SciTech or
Sellers with any taxing authority as of Closing have been filed
or, as to the short period from January 1, 1999 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 for the payment
thereof have been established. SciTech is not delinquent in the
payment of any tax, assessment or governmental charge. Sellers
will be responsible for the payment of all personal taxes imposed
on them with respect to the S corporation earnings of SciTech or
distributions and dividends paid to them by SciTech before
Closing, as well as any other personal taxes resulting from the
Transactions and any taxes on built-in gain imposed on SciTech or
Sellers because of SciTech's election to be treated as an S
corporation. SciTech's S corporation election under the IRC was
properly filed and has, since made, been in effect and
unchallenged.
L. DISCLOSURE. Sellers have not made any untrue statement of a
material fact or omitted to state a material fact, in written
information provided by Seller Robert Scidmore and in this
Pooling Agreement, necessary in order to make the statements
made, in light of the circumstances under which they were made,
not misleading.
M. NO VIOLATION OF CORPORATION INSTRUMENTS OR OTHER AGREEMENTS.
Except as set forth on Exhibit V-M, the execution and delivery of
this Pooling Agreement does not, and the consummation of the
Transactions will not: (i) violate any provision of the Articles
of Incorporation, Bylaws, Stock Certificates, Stock Records or
Minute Book of SciTech; (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 SciTech
and Sellers are bound; (iii) require any consent, approval or
authorization of any governmental or regulatory authority; (iv)
violate any order, writ, injunction, judgment, decree, statute,
rule or regulation applicable to SciTech or Sellers or SciTech's
business or any of SciTech'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.
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N. BROKERAGE. No brokerage fees are payable in connection with the
Transactions resulting from any brokerage agreements entered into
by Sellers or SciTech.
O. 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 combinations 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 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 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. SciTech 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 SciTech.
Each material item of intellectual property owned or
used by SciTech immediately before the Closing will be
owned or available for use by the Company on identical
terms and conditions immediately after the Closing.
SciTech has taken reasonable action to maintain and
protect as a trade secret each material item of
intellectual property that it owns or uses.
2. To SciTech's and Sellers' best knowledge, none of the
products manufactured by SciTech infringes upon any
intellectual property rights of third parties, and
neither SciTech nor any of the Sellers has received
any written charge, complaint, claim, demand, or
notice alleging any such infringement (including any
claim that SciTech must license or refrain from using
any intellectual property rights of any third party).
3. SciTech owns the patents, trademarks and tradenames
listed on Exhibit V-O3. SciTech has not granted to any
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third party any license with respect to any of its
intellectual property to manufacture or produce any
product.
4. The SciTech Disclosure Schedule identifies each item
of intellectual property that any third party owns and
that SciTech embodies or incorporates in SciTech's
products, pursuant to license, sublicense, agreement,
or permission. The Sellers and SciTech 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
SciTech Disclosure Schedule, the license, sublicense,
agreement, or permission covering the item is, to the
Sellers' best knowledge, the legal, valid and binding
obligation of SciTech, enforceable in accordance with
its terms, and in full force and effect, and will stay
in effect following the Closing.
P. PERMITS, LICENSES AND FRANCHISES. To the best of Sellers'
knowledge, (i) SciTech 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) SciTech and Sellers have
not engaged in any activity which would cause revocation or
suspension of any such permit, license, franchise or
authorization which would result-in a material adverse effect on
SciTech or the operation of the business, and (iii) neither
SciTech nor Sellers (or either of them) has knowledge of any
action, threat or proceeding looking to or contemplating the
revocation or suspension of any thereof.
Q. EMPLOYEES. To the best of Sellers' knowledge, no third party has
claimed that any person employed or affiliated with SciTech has
violated or may be violating any of the terms and conditions of
that person's employment, non-competition or nondisclosure
agreement with that third party, or disclosed or may be
disclosing or utilized or may be utilizing any trade secret or
proprietary information or. documentation of that third party or
interfered or may be interfering in the employment relationship
between that third party and any of its present or former
employees. Sellers have no knowledge that any key employee of
SciTech intends to leave or is leaving the employ of SciTech in
order to take part, as an employee or otherwise, in any business
in competition with SciTech.
R. ENVIRONMENTAL, HEALTH AND SAFETY. To the best of Sellers'
knowledge, (i) SciTech has complied with all environmental,
health and safety laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has
been filed or commenced against it alleging any failure so to
comply; (ii) without limiting the generality of the preceding,
each of SciTech and its predecessors and affiliates has obtained
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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 SciTech, its predecessors and affiliates has any
liability for damage to any site, location, or body of water
(surface or subsurface), for any illness of or personal injury to
any employee or other individual or for any reason under any
environmental, health or safety law. To the best of Sellers',
and SciTech's knowledge, all properties and equipment used in
SciTech's and its predecessors, and affiliates, business have
been free of asbestos, PCE'S, methylene chloride,
1,2-trans-dichloroethylene, dioxins, dibenzofurans, and extremely
hazardous substances.
S. PRODUCT LIABILITY. To the best of Sellers' knowledge, SciTech has
no material liability (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 SciTech.
T. CONTINUITY OF BUSINESS ENTERPRISE. Before the Effective Time
of the Merger, SciTech has historically operated and engaged in
the business enterprise of designing, marketing and manufacturing
communications products, and historically has utilized its
business assets in such business enterprise, as contemplated by
Treas. Reg. section 1.368-1(d).
U. SHAREHOLDER INTERESTS AND AGREEMENT. Sellers represent and
warrant that they hold all of the issued and outstanding shares
of capital stock of SciTech, that of those outstanding shares Rob
Scidmore owns 920 and Dave Scidmore owns 80 of the issued SciTech
Shares and that they agree on those percentages, and that no
disputes of any nature, whether claims, lawsuits or other
disagreements formally filed or informally pursued exist between
them or on their behalf with respect to that share, no such
disputes have been threatened and each has fully and finally
agreed to waive any right to dispute, change or affect that
ownership and their respective percentages of ownership.
V. LIABILITIES IN THE ORDINARY COURSE OF BUSINESS. The liabilities
of SciTech assumed by Company and the liabilities to which the
transferred assets of SciTech are subject, were incurred by
SciTech in the ordinary course of business
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W. INVESTMENT COMPANY. SciTech is not an investment company within
the meaning of that term as used. in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
X. EQUITY TRANSACTIONS. There have been no transactions in SciTech
common stock since September 30, 1999, and no options, warrants,
rights or other equity instruments other than the previously
issued common stock were outstanding-during that period.
Y. INTERCORPORATE DEBT. There is no intercorporate debt existing
between Buyer and SciTech or between Company and SciTech that was
issued, acquired, settled or will be settled at a discount.
Z. REDUCTION IN EQUITY AND DISTRIBUTIONS. SciTech's shareholders'
equity has not been reduced since the date of and as set forth in
its Third Quarter Financial Statements, except as to which Buyer
has given its prior written approval, and any such approved
distribution has been and is in accordance with restrictions on
distributions specified in the accounting and SEC regulations
related to a pooling of interests. Before Closing, Scitech has
distributed to Sellers its 1998 earnings and, to satisfy Sellers'
1999 tax liability, 50% of 1999 estimated earnings in accordance
with an estimate approved in advance by Buyer, to be adjusted
after closing to actual amounts needed to pay income taxes.
VI. BUYER'S WARRANTIES AND REPRESENTATIONS.
Buyer represents and warrants to SciTech and Sellers that the following
are true as of the date of this Agreement and will be true at Closing except as
disclosed on the Buyer Disclosure Schedule designated as Exhibit VI to this
Agreement. Any listed exceptions must be reasonably acceptable to Sellers.
A. ORGANIZATION AND STANDING OF BUYER. Each of Buyer and
Company is a corporation validly existing and in good
standing under the laws of the State of New Mexico and
California, respectively, 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 is duly licensed or qualified to
transact business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the
business transacted by it or the character of the properties
owned or leased by it requires that licensing or
qualification, except where the failure to be so licensed or
qualified would not have a material adverse effect on the
business, operations or financial condition of Buyer.
B. CAPITALIZATION. Buyer is authorized to issue 100,000,000
shares of common stock and, as of November 30, 1999,
6,019,891 of its shares are issued and outstanding. Buyer
holds no treasury shares. Buyer's shares have been validly
issued and are fully paid and nonassessable. No
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outstanding subscriptions, options, warrants, calls,
commitments or agreements relating to the authorized or
issued shares of Buyer are outstanding except (i)
pursuant to Buyer's employee and director stock option
and stock purchase plans and its acquisition of
GreenSpring Computers, Inc., (ii) as disclosed in its
Form 10-K for the 1999 fiscal year and subsequent
periodic filings filed with the SEC, and (iii) as
required to be issued under this Agreement.
C. NO VIOLATION OF CORPORATE INSTRUMENTS OR OTHER AGREEMENTS.
Except as set forth on Exhibit VI-C, the execution and
delivery of this Pooling Agreement does not, and the
consummation of the Transactions will not (i) violate any
provision of the Articles of Incorporation, Bylaws, Stock
Certificates, Stock Records or Minute Book of Buyer; (ii)
result in any material breach or result in the acceleration
of any material obligation under any instrument, indenture,
note, lien, bond, agreement, contract, mortgage, lease,
license or commitment under which Buyer is bound; (iii)
require any consent, approval or authorization of any
governmental or regulatory authority, (iv) violate any
order, writ, injunction, judgment, decree, statute, rule or
regulation applicable to Buyer, Buyer's business or any of
Buyer's assets, or (v) result in the creation or imposition
of any lien, charge, restriction, claim or encumbrance of
any nature upon the assets or business.
D. APPROVAL. Buyer's Board of Directors has, and as of
Closing, Company's shareholder will have, approved, by all
necessary corporate action by Buyer, the execution, delivery
and performance of this Pooling Agreement and consummation
of the Transactions and has authorized its officers to take
all action and to execute, acknowledge and deliver all
documents appropriate to consummate the Transactions. This
approval constitutes all and the only actions required by
law, the Articles of Incorporation or Bylaws of Buyer or
Company, as the case may be, or otherwise to authorize the
execution and delivery of this Pooling Agreement and the
consummation of the Transactions. This Pooling Agreement
constitutes the legal, valid and binding obligation of Buyer
and Company, enforceable in accordance with its terms
(subject as to enforcement of remedies, to the discretion of
courts in awarding equitable relief and to applicable
bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the rights of creditors generally).
E. BROKERAGE. No brokerage fees are payable by Buyer in
connection with the Transactions.
F. SHARES. The issuance, sale and delivery of the Buyer Shares
have been duly authorized by all required corporate action;
the Buyer Shares issued at Closing will be validly issued,
fully paid and nonassessable, free and clear of all liens,
charges, restrictions, claims and encumbrances imposed
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by or through Buyer except as imposed by securities laws.
The issuance, sale or delivery of the Buyer Shares is
not subject to any preemptive right of stockholders of
Articles of Incorporation or Bylaws of Buyer, each as
amended, or to any contractual right of first refusal or
other right in favor of any person.
G. FINANCIAL STATEMENTS. Buyer has filed a Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 1999
("Most Recent Fiscal Quarter End"), and an Annual Report on
Form 10-K for the fiscal year ended June 30, 1999 (together,
the "Public Reports"). The financial statements included in
or incorporated by reference into these Public Reports
(including the related notes and schedules) have been
prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered by them and present
fairly the financial condition of Buyer as of the indicated
dates and the results of operations of Buyer for the
indicated periods. However, the interim statements are
subject to normal year-end adjustments. Since the Most
Recent Fiscal Quarter End, there has not been any material
adverse change in the financial condition, assets,
liabilities, or, to the best of Buyer's knowledge, business
of Buyer and its subsidiaries taken as a whole.
H. FILINGS WITH SEC. Buyer has made all filings with the
Securities and Exchange Commission ("SEC") that it has been
required to make within the past 12 months under the
Securities Act and the Securities Exchange Act. The Public
Reports, a correct and complete copy of each of which was
delivered by Buyer to Sellers, complied with the Securities
Act and the Securities Exchange Act in all material
respects. Each of the Public Reports, as of its date, did
not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the
statements made in it, in light of the circumstances under
which they were made, not misleading.
I. CONTROL OF COMPANY. Before the Merger, Buyer will be in
control of Company within the meaning of Section 368(c) of
the Internal Revenue Code.
J. REDEMPTION OF SHARES. Buyer has no plan or intention to
redeem or otherwise reacquire any of the Buyer Shares to be
issued in the Merger.
K. BUYER'S INTENTION. Buyer has no plan or intention to
liquidate Company, to merge Company with and into another
corporation not a subsidiary of Buyer, to sell or otherwise
dispose of the stock of Company, or to cause Company to sell
or otherwise dispose of any of the assets of SciTech
acquired in the Merger, except for dispositions made in the
ordinary course of business, transfers described in Section
368(a)(2)(C) of the Internal Revenue Code, or transfers to a
subsidiary of Buyer.
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L. CONTINUATION OF HISTORIC BUSINESS AND USE OF ASSETS.
Following the Effective Time, of the Merger, the Company will
continue to operate and engage in SciTech's historic business
enterprise of designing, marketing and manufacturing
communications products, and will continue to utilize
SciTech's business assets in that business enterprise, as
contemplated by Treas. Reg. section 1.368-1(d).
M. INTERCORPORATE DEBT. There is no intercorporate debt
existing between Buyer and SciTech or between Company and
SciTech that was issued, acquired, settled or will be
settled at a discount.
N. INVESTMENT COMPANY. Buyer and Company are not investment
companies within the meaning of such term as used in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code.
VII. BUYER'S CONDITIONS PRECEDENT.
All obligations of Buyer under this Pooling Agreement to close the
Transactions are subject to the fulfillment before Closing, of each of the
following conditions:
A. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Sellers'
representations and warranties contained in this Agreement are
true at the time of Closing.
B. PERFORMANCE. Sellers have performed and complied with all
agreements and conditions required by this Pooling Agreement to
be performed or complied with by Sellers at Closing.
C. CONSENTS. Any consents necessary to allow the Transactions to
occur have been obtained in writing, in form satisfactory to
Buyer.
D. SCITECH BANKRUPTCY. SciTech is not in a bankruptcy,
reorganization or insolvency proceeding, nor is any such
proceeding contemplated.
E. ADVERSE PROCEEDINGS. No action, suit or proceeding is pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator as to which an unfavorable judgment,
injunction, order, decree, ruling or charge ("Decision") would
(i) prevent consummation of the Transactions, (ii) cause any of
the Transactions to be rescinded following consummation, or (iii)
adversely affect the right of the Company to own the former
assets, and to operate the former business, and no such Decision
is in effect.
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<PAGE>
F. CERTIFICATE OF SATISFACTION OF CONDITIONS. SciTech and Sellers
have delivered to Buyer certificates to the effect that each of
the conditions specified in VIIA, B, C, D and E is satisfied in
all respects.
G. SATISFACTORY DUE DILIGENCE. Buyer has completed, to its
satisfaction, its due diligence review of SciTech and the
Sellers, including without limitation, SciTech's books, records,
operating assets, earnings potential, contracts, customer and
revenue base, employees, and compliance with environmental and
other laws, and background checks of senior management, and such
other due diligence as it has deemed necessary or appropriate.
H. POOLING OF INTERESTS OPINION. Buyer will have received from its
accountants an opinion, satisfactory in form and substance to it,
to the effect that the Transactions will be treated by Buyer as a
"pooling of interests" for accounting purposes.
I. ATTORNEY OPINION. Buyer will have received from SciTech's and
Sellers' attorney an opinion of counsel with respect to the
Transactions in substantially the form attached as Exhibit VII-I.
J. CERTIFIED RESOLUTIONS. Sellers have furnished to Buyer a
certified copy of resolutions duly adopted by the Board of
Directors and the shareholders of SciTech authorizing and
approving the execution and delivery of this Agreement and
authorizing the consummation of the Transactions.
The Buyer may waive any condition specified in this Section if it
executes a writing so stating at or before Closing.
VIII. SELLERS' CONDITIONS PRECEDENT.
All obligations of Sellers under this Pooling Agreement to close the
Transactions are subject to the fulfillment by Closing of each of the following
conditions:
A. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Buyer's
representations and warranties contained in this Pooling
Agreement are true at the time of Closing.
B. PERFORMANCE. Buyer has performed and complied with all
agreements and conditions required by this Pooling Agreement to
be performed or complied with by Buyer before or at Closing.
C. CONSENTS. Any consents to be obtained by Buyer necessary to
allow the Transactions to occur have been obtained in writing, in
form satisfactory to SciTech and Sellers.
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<PAGE>
D. BUYER BANKRUPTCY. Buyer is not in a bankruptcy, reorganization or
insolvency proceeding, nor is any such proceeding contemplated.
E. ADVERSE PROCEEDINGS. No action, suit or proceeding is pending or
threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator as to which an unfavorable judgment,
injunction, order, decree, ruling or charge ("Decision") would
(i) prevent consummation of the Transactions, (ii) cause any of
the Transactions to be rescinded following consummation, or (iii)
adversely affect the right of the Company to own the former
assets, and to operate the former business, and no such Decision
is in effect.
F. CERTIFICATE OF SATISFACTION OF CONDITIONS. Buyer has delivered
to SciTech and Sellers certificates to the effect that each of
the conditions specified in VIIIA, B, C, D and E is satisfied in
all respects.
G. BUYER PUBLIC REPORTS. Buyer has delivered to Sellers the Public
Reports and any additional information reasonably requested by
Sellers which Buyer can obtain without undue expense so that
Sellers are making an informed investment decision with respect
to the Transactions.
H. ATTORNEY OPINION. Sellers will have received from Buyer's
attorney an opinion of counsel with respect to the Transactions
in substantially the form attached as Exhibit VIII-H.
I. CERTIFIED RESOLUTIONS. Buyer has furnished to Sellers a certified
copy of resolutions duly adopted by the Board of Directors of
Buyer authorizing and approving the execution and delivery of
this Agreement and authorizing the consummation of the
Transactions.
The Sellers may waive any condition specified in this Section if they
execute a writing so stating at or before Closing.
IX. CLOSING.
Closing will be held as soon as practicable, but in any event not later
than December 20, 1999. If Sellers', and Buyer's conditions precedent have been
performed or waived. the Transactions will be closed. If those conditions
precedent have not been performed or waived, the Transactions will not be
closed, and the rights, duties and obligations between the parties will be
terminated without further liability.
A. SELLERS' DUTIES. Sellers and SciTech, as appropriate, will
deliver to Buyer at Closing:
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1. The SciTech Shares, properly endorsed for transfer;
2. A certified copy of the resolutions of directors and
shareholders of SciTech authorizing the Transactions;
3. Executed resignation letters of officers and directors of
SciTech;
4. Executed Employment Agreement of Seller Robert Scidmore with
Buyer;
5. Executed Covenant Not To Compete of Seller Robert Scidmore
with Buyer;
6. Executed Articles of Merger;
7. Executed Subscription Agreement and Representation Letters
of Sellers;
8. Affidavit of Sellers with respect to Stock ownership;
9. Executed Option Agreements from Buyer to Sellers;
10. UCC-3 Termination Statement from Firststar Bank, N.A.; and
11. Any and all other documents required by this Pooling
Agreement to be delivered to Buyer at Closing.
B. BUYER'S DUTIES. Buyer will deliver to Sellers at Closing:
1. The Buyer Shares (to be furnished as soon as practicable
after Closing);
2. Executed Option Agreement from Buyer to Seller Robert
Scidmore;
3. Executed Employment Agreement of Seller Robert Scidmore with
Buyer;
4 Executed Covenant Not to Compete with Buyer;
5 Executed Articles of Merger;
6 Certified copy of resolutions of Buyer's Board of Directors
authorizing the Transactions and the issuance of the Buyer
Shares and Buyer Options; and
7 Any and all other documents required by this Pooling
Agreement to be delivered to Sellers at Closing.
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<PAGE>
C. JOINT DUTIES. Buyer and Sellers will execute any further
documents and do all things necessary to consummate the
Transactions contemplated by this Pooling Agreement, including
executing and filing the Articles of Merger required to be filed
under applicable state law.
X. PERSONAL GUARANTEES.
As soon as reasonably practical after Closing, but in no event later
than sixty (60) days following Closing, Buyer and the Company shall cause
Sellers to be removed from personal guarantees as may exist on obligations and
indebtedness of SciTech existing at the time of Closing, and which are disclosed
on Exhibit X.
XI. PROPRIETARY INFORMATION.
Sellers each agree, represent and warrant that, unless each of them has
obtained Buyer's prior written consent, each of Sellers will not, at any time
after Closing, use for the benefit of other than Buyer, directly or indirectly,
on behalf of Sellers or either of them or any other person or business entity,
any trade secrets or confidential information (i) concerning the business of
SciTech or any proprietary information relating to the business, including the
composition, plans or technology of the products produced by SciTech and the
method of their manufacture, and SciTech financial data and related information
or (ii) provided by Buyer to Sellers in connection with this Agreement.
Confidential information does not include information generally known in the
industry in which SciTech and Buyer engage. Sellers each agree that release of
Confidential Information will cause irreparable harm to Buyer and. that, upon
any breach or threatened breach of this Section, Buyer may seek, without
limitation of other actions and remedies which might be available, equitable
injunctive relief.
XII. REMEDY FOR BREACH OF WARRANTY.
If any warranty or representation in this Agreement is found within
twelve months of Closing, or by the date of the issuance of the first audited
annual consolidated financial statements of the combined entities following
Closing, whichever is earlier, to be untrue or inaccurate, the party desiring to
make a claim for damages resulting from such breach may do so by delivering to
the breaching party express written notice of the details of such breach and the
intent to make a claim, such notice to be received by the breaching party no
later than twelve months following the date of Closing. Time is of the essence
for the purpose of this paragraph. The party to whom such a representation has
been made shall request an arbitration conducted under the rules of the American
Arbitration Association (each party to select one arbitrator and the- third
arbitrator to be selected by the other two). The results of the arbitration
shall be binding upon all parties. The prevailing party in such arbitration
shall be entitled to recover its costs, including reasonable attorneys' fees,
incurred in the arbitration proceeding, from the non-prevailing party, and an
award of such costs and expenses shall be included in the final judgment
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<PAGE>
entered in the arbitration. Unless the cumulative total of all damages being
sought for all claims has exceeded $100,000, 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 $100,000 limit is exceeded, the liable
party shall be liable for the full amount of the breach. The maximum
liability of a party for breach of a representation or warranty hereunder, if
the arbitrators determine that the party against whom a liability is asserted
did not know that the representation or warranty was untrue, is limited to a
cumulative amount of $500,000 for all such liabilities, which in the case of
the Sellers, shall apply to their combined liabilities under this Agreement.
Sellers may pay for amounts owed for breaches of warranties and
representations by them by returning to Buyer that number of Buyer Shares
(valued at the average closing price determined under Article II-B3 above for
purposes of Closing) equal to the amount of the claim (including costs and
expenses). Buyer agrees to keep in effect for the duration of Sellers'
representation and warranty regarding product liability the amount of product
liability insurance currently held by SciTech.
XIII. COOPERATION.
A. OTHER DOCUMENTS AND ACTIONS. Sellers and SciTech, and Buyer will
cooperate to effectuate the purposes of this Agreement. Sellers
and SciTech, and Buyer will, without additional consideration,
execute any other documents and take any other action reasonably
necessary to carry out the purposes of this Pooling Agreement.
Until Closing, no news release about the Transactions will be
released by Buyer, Sellers, or either of them, or SciTech to the
public through any media without prior approval of the other
parties, except as may be required by law, in which case, the
other parties will have a reasonable opportunity for review of
and comment on a proposed news release.
B. ACTIONS. Sellers and SciTech will cooperate with Buyer in
connection with any actions, proceedings, arrangements or
disputes involving SciTech's business or based upon the
consummation of the Transactions or upon contracts, arrangements
or acts of Sellers or SciTech which were in effect or occurred on
or before the Closing date.
C. FINANCIAL AND OTHER INFORMATION. Sellers and SciTech will
cooperate, as reasonably required by Buyer, in the preparation in
a form satisfactory to Buyer and Buyer's accountants, of all
financial and other information (including information relating
to Sellers' operation of the business before SciTech's
incorporation), needed by Buyer to comply with reporting and
filing requirements imposed on Buyer by federal and state
regulatory authorities.
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<PAGE>
XIV. NATURE AND SURVIVAL OF WARRANTIES AND REPRESENTATIONS.
Unless otherwise provided, all representations and warranties will
survive the consummation of the Transactions for a period of twelve months from
the date of Closing, or, until the date of issuance of the first audited annual
consolidated financial statements of the combined entities following Closing,
whichever is earlier.
XV. TERMINATION OF AGREEMENT. In addition to a termination of this
Pooling Agreement pursuant to Paragraph III above, this Pooling Agreement may
be terminated by the action of the Board of Directors of Buyer at any time
before Closing if: (i) Sellers or SciTech fail to comply in any material
respect with the Pooling Condition; or (ii) it is determined that any
representation or warranty of Sellers or SciTech is not true in all material
respects when made, causing this Transaction not to be characterized as a
pooling of interest or a tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended. Sellers may terminate this
Pooling Agreement at any time before Closing if (i) the accountant's opinion
to SciTech and Sellers provided in this Pooling Agreement concludes that the
Transactions will not be a tax-free reorganization under the terms of the
Internal Revenue Code; or (ii) it is determined that any representation or
warranty of Buyer is not true in all material respects when made, causing
this Transaction not to be characterized as a pooling of interest or a
tax-free reorganization Under Section 368(a) of the Internal Revenue Code of
1986, as amended. Terminations made pursuant to this Paragraph shall be
without liability for any damages arising out of the termination. The party
terminating this Pooling Agreement pursuant to this Paragraph shall give
express written notice of such intent to the non-terminating party before
Closing, which notice must be received by the non-terminating party before
Closing.
XVI. MISCELLANEOUS.
This Pooling Agreement binds and benefits the parties, their
successors, assigns and transferees. This Pooling Agreement is
specifically enforceable and is governed by New Mexico law. Any suits
brought by the parties arising under this Pooling Agreement shall be
brought in the United States District Court for the Second District of
New Mexico, and the parties expressly acknowledge that such court
shall have jurisdiction over the matter and parties, and that venue
shall be proper in such court. In any proceeding or action brought to
enforce the provisions of this Pooling Agreement or to settle disputes
between the parties arising under this Pooling Agreement, the
prevailing party shall be awarded its costs, including reasonable
attorneys' fees, incurred in such proceeding or action, against the
non-prevailing party. This Pooling Agreement, the Employment
Agreements and the Covenants constitute the entire agreement and
understanding of the parties and supersede all prior oral or written
agreements and understandings and may be modified only in writing.
This Pooling Agreement may be executed in multiple counterparts, each
of which shall be deemed an original, but all of which taken together
will constitute one and the same instrument. Captions and titles have
been inserted in this Pooling Agreement for the benefit of the parties
in referring to this Pooling Agreement, but will not be construed or
interpreted as part of this Pooling Agreement. Each of Sellers and
SciTech, and Buyer will pay its
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expenses, including without limitation attorneys' fees, arising out of
the Transactions and the agreements embodying them.
XVII. NOTICES.
Any notice or other communication required under this Pooling
Agreement or desired to be given by any of the parties to this Pooling
Agreement to any other party shall be deemed to be duly given when
personally delivered or five (5) business days after being mailed by
certified or registered United States mail, return receipt requested,
postage prepaid, to the other party, or delivered pre-paid for over-night
delivery to an expedited delivery service, addressed as follows:
BUYER:
SBS Technologies, Inc.
Attn: Christopher J. Amenson, President and CEO
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 & Daly
P.O. Box 90640
Albuquerque, New Mexico 87199
Telephone:(505) 872-0800
Facsimile: (505) 872-0900
SELLERS:
Mr. Robert Scidmore
7109 Gladstone
Madison, Wisconsin 53719
Telephone: (608) 274-0953
Facsimile: (608) 274-9211
Mr. Dave Scidmore
4918 Paul Ave.
Madison, Wisconsin 53711
Telephone: (608) 273-6054
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<PAGE>
Copy to: John Robison, Esquire
Boardman, Suhr, Curry & Field LLP
Fourth Floor
One South Pinckney St.
P.O. Box 927
Madison, WI 53701-0927
Telephone: (608) 283-1745
Facsimile: (608) 283-1709
Or to such other address which may be furnished in writing.
DATED: December 1999
BUYER: SELLERS:
SBS TECHNOLOGIES, INC. SCITECH INC.
By: /s/ C.J. Amenson By: /s/ Robert Scidmore
----------------------- --------------------------
Its: C.E.O. Its: President
---------------------- -------------------------
SBS TECHNOLOGIES, INC. COMMUNICATIONS PRODUCTS ROBERT SCIDMORE
By: /s/ C.J. Amenson /s/ Robert Scidmore
----------------------- ------------------------
Its: C.E.O.
---------------------- DAVID SCIDMORE
/s/ David Scidmore
------------------------
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EXHIBIT I-D
FORM OF EMPLOYMENT AGREEMENT
24
<PAGE>
EMPLOYMENT AGREEMENT
SBS TECHNOLOGIES, INC. ("Company") and Robert S. Scidmore agree:
1. EMPLOYMENT. Company employs Employee for the period beginning on the
date of this Employment Agreement and ending upon discharge or
resignation of Employee (the "Employment Period"). During the
Employment Period, Employee will serve in the capacities 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. REIMBURSEMENT OF EXPENSES. Company recognizes that Employee in
performing Employee's duties hereunder, may be required to spend sums
of money in connection with those duties for the benefit of Company.
Employee may present to Company an itemized voucher listing expenses
paid by Employee in the performance of Employee's duties on behalf of
Company, and on presentation of such itemized voucher, Company will
reimburse Employee for all reasonable expenses itemized thereon,
including, but not limited to, travel, meals, lodging, entertainment,
and promotion with respect to all activities approved in advance by the
Company. Employee may receive advances from Company for anticipated
expenses. Employee agrees that the amount by which an advance exceeds
actual expenses ("Amount") will be promptly refunded to Company upon
determination by Company that it is due, that the Amount may be
deducted from any payments of any nature (including without limitation
salary) owed by Company to employee, and that the Amount will
constitute a debt from Employee to Company, enforceable by Company in
all respects as if Employee had executed a promissory note or other
instrument acknowledging the debt, bearing interest at a rate of 10%
per year from the date repayment is due and payable in full on demand
without set-off or deduction.
3. SICK LEAVE AND DISABILITY. Employee will be entitled to sick leave for
the number of days determined by Company ("Sick Leave"). Employee will
be considered to be disabled during any period in excess of Sick Leave
during which Employee is unable to work because of illness or
incapacity ("Disability Period"). Employee will be entitled to receive
Employee's full salary during Sick Leave and will be deemed to be on
leave, without pay, during the Disability Period. If Employee is unable
to work for a period in excess of 180 days, the Employee, at the
discretion of the Board of Directors of Company, will be considered to
have resigned. In no event will Employee be entitled to payment or
other compensation for unused Sick Leave or Disability Period, unless
required by law or otherwise provided in a policy or employment manual
adopted by the Board of Directors of Company.
4. RESTRICTIONS. Employee may not during the Employment Period, directly
or indirectly, own, manage, operate, invest in, control, be employed
by, participate in, be a financial sponsor of, or be connected in any
manner with the ownership, management, operation or control of any
business which competes with a business conducted by Company at any
time during the Employment Period or a business which Employee knows,
during the Employment Period, that Company intends to conduct. The
ownership restriction applies, however, only in the Employee owns a
beneficial interest of 5% or more the capital or profits of the
business.
5. RESIGNATION AND DISCHARGE. Employee may resign by giving two weeks'
written notice to Company before resigning. Employee's death will
constitute a voluntary resignation. Company
EMPLOYMENT AGREEMENT - PAGE 1
<PAGE>
may discharge Employee without cause upon two weeks' notice. If the
Employment Period is terminated by resignation or discharge without
cause, Employee will be paid Employee's salary on a pro-rata basis
through the effective date of resignation or discharge ("Effective
Date"), and if requested by Company, employee will continue to render
Employee's services through the Effective Date. If Employee refuses,
upon Company's requests, or fails to render services competently and in
good faith to the Company's benefit through the Effective Date, Company
may deem the Effective Date to be the date of refusal or failure, as
the case may be. If during the Employment Period, Employee violates any
provision or restriction or fails to perform any obligation contained
in this Employment Agreement or in any Company policy or Company
employment manual or practice, or, unless otherwise provided by Company
policy or Company employment manual, (a) is reasonably believed by
Company (i) to have failed to comply with any employment or
nondiscrimination or similar law, regulation or policy, (ii) to abuse,
as determined by the Company, alcohol or to use drugs, (other than as
prescribed by Employee's physician), or (b) refuses to submit to
testing for alcohol or drugs, or (c) is reasonably believed by Company
to have committed or is charged with any felony or misdemeanor (except
minor traffic violations and similar offenses), Company may immediately
discharge Employee without liability for salary after the date of the
discharge and without any other liability to Employee. In no event will
Employee be entitled, upon resignation or discharge with or without
cause, to payment for sick leave or similar benefits of any kind unless
required by law or otherwise provided in a policy or employment manual
adopted by the Board of Directors of Company.
6. CONFIDENTIAL INFORMATION. Employee acknowledges and recognizes that
Employee is, or will be, employed by Company in a confidential
relationship and may receive and have access to the confidential
business information, customer names, contracts and other customer
data, business methods, techniques and trade secrets of Company
("Confidential Information"). Employee may develop ideas, conceptions,
inventions, processes, methods, products and improvements; and Employee
may receive disclosures of ideas, conceptions, inventions, processes,
methods, products and improvements made by other employees of Company
("Company Inventions"). Employee may participate with Company in
improving and developing Confidential Information and Company
Inventions. Confidential Information and Company Inventions developed
on behalf of Company are neither commonly known nor readily accessible
to others and are used by Company in its business to obtain a
competitive advantage over Company's competitors who do not know or use
the Confidential Information or Company Inventions. Protection of the
Confidential Information and Company Inventions against unauthorized
disclosure and use is of critical importance to Company in maintaining
its competitive position. Employee agrees that Employee will not, at
any time, during or after the Employment Period, make any independent
use of, or disclose to any other person or organization, except as
authorized by Company in writing, any Confidential Information or
Company Inventions. Upon termination of the Employment Period for any
reason, Employee shall promptly deliver to Company all drawings,
manuals, letters, notes, notebooks, reports, customer lists, customer
data, mailing lists, and all other materials and records of any kind,
and all copies thereof, that may be in the possession of, or under the
control of, Employee pertaining to Company's business including any
that contain any Confidential Information or Company Inventions.
7. PERSONNEL POLICIES. Company's personnel policies apply to all of
Company's employees including Employee and describe additional terms
and conditions of employment of Employee. Those terms and conditions,
as they may be revised from time to time by Company, are incorporated
by reference into this Employment Agreement. Company reserves the right
to revise the personnel policies from time to time, as Company deems
necessary. If any personnel policy provision conflicts with a provision
of this Employment Agreement, the terms of this Employment Agreement
shall govern.
EMPLOYMENT AGREEMENT - PAGE 2
<PAGE>
8. 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.
9. BINDING EFFECT. This Employment Agreement constitutes the entire
understanding of the parties, may be modified only in writing, is
governed by laws of New Mexico, and will bind and inure to the benefit
of Employee and Employee's personal representative and Company and
Company's successors and assigns.
10. ANNUAL PAY. The base annual pay for employee will be $120,000, and will
be reviewed on an annual basis on July 1 of each calendar year.
11. INCENTIVE. Employee shall be eligible to participate in the Company's
Management Incentive Plan on par with management of equal reporting
level and responsibility, subject to the terms of that Plan.
12. STOCK OPTIONS. Employee shall receive a grant of options for 25,000
shares of SBS common stock on the date of first employment, subject to
the terms of the Option Agreement.
DATED: December 20, 1999
COMPANY:
SBS TECHNOLOGIES, INC.
By:
---------------------------------
EMPLOYEE:
------------------------------------
Robert S. Scidmore
EMPLOYMENT AGREEMENT - PAGE 3
<PAGE>
EXHIBIT I-D1
OPTION AGREEMENT
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1998 LONG-TERM EQUITY INCENTIVE AGREEMENT
SBS TECHNOLOGIES, INC., a New Mexico corporation, ("Company") and
Robert S. Scidmore ("Employee") agree:
I. Recitals
A. Company has adopted the 1998 Long-Term Equity
Incentive 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 Equity
Incentive 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.
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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 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. Employee understands that rules governing this grant
provide that no more than $100,000 worth of incentive stock options based on the
market value of the stock at the time of grant can become exercisable for the
first time in one calendar year and still be treated as incentive stock options.
The net result is that options or portions of options will be nonqualified to
the extent they become exercisable in a given year for the shares in excess of
the $100,000 limit. The ratio of qualified options to nonqualified options, that
which exceeds $100,000 based on the market price of the Company's stock at the
time of grant, will be used to determine the portion of each individual exercise
that will be considered nonqualified. Employee further understands that any
Option not held for two years from the date of grant and one year from the date
of exercise will lose the most beneficial capital gain treatment of those
Options under current tax law. In order to qualify for the lowest capital gain
tax rates, Employee must hold the stock after exercise for at least 12 months.
Any portion of this option that is considered nonqualified will be subject to
applicable withholding taxes.
For more information, Employee may refer to Section 422 of the Internal Revenue
Code and the regulations under it.
2
<PAGE>
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,
assuming the same proportion of qualified options to nonqualified options as
described in IV.A. 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.
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 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 of 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.
3
<PAGE>
G. 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).
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.
4
<PAGE>
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:
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. 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.
5
<PAGE>
XI. 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: December 20, 1999
-------------------------------------------------
SBS Technologies, Inc.
By:
-------------------------------------
Its President
------------------------------
Employee
---------------------------------
Robert S. Scidmore
6
<PAGE>
APPENDIX A
II D. The Date of Grant is December 20, 1999.
II I. The aggregate number of Option shares is 25,000
II K. The Purchase Price is $ 34.4375 per share.
IV A. The exercise schedule is:
These Options will vest in accordance with the following
schedule:
<TABLE>
<CAPTION>
Amount Vesting Date
<S> <C>
8,333 12/15/00
8,334 12/15/01
8,333 12/15/02
</TABLE>
However notwithstanding the above exercise schedule, this
option becomes exercisable as to all option shares seven years from its
date of grant.
This Option is intended to be non-compensatory in nature.
IX. The Employee's address for notice purposes is:
Robert S. Scidmore
7109 Gladstone
Madison, Wisconsin 53719
---------------------------------------------------
Social Security Number
7
<PAGE>
EXHIBIT I-E
FORM OF COVENANT NOT TO COMPETE
26
<PAGE>
COVENANT NOT TO COMPETE
Robert Scidmore ("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 ("Pooling Agreement") under which
SBS's wholly owned subsidiary, SBS Technologies, Inc. Communications Products, a
California corporation ("Company"), is merging with SciTech inc., a Wisconsin
corporation ("SCI"), and will exchange all the outstanding stock of SCI for
common stock of SBS.
B. SBS wishes to assure that Seller will refrain from competing with
SBS in the areas of Company's or SCI'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, servicing or sale of any telecommunications, LAN,
WAN, network interface products which are in competition with or the same as or
similar in operation, function or construction (should that construction be
unique in the industry) to, those products now or previously offered for sale by
SCI, currently under design by SCI, or which will be designed by Company either
(i) during the term of Seller's employment and six months after his employment
or (ii) during the term of this Covenant, whichever is less, (together the "SCI
and Company Products"); 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 SCI and Company 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 SCI and Company
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 the later of three years from the
date of this Covenant ("Term").
<PAGE>
IV. TERRITORY
The territory covered by this Covenant is the world ("Territory").
V. CONSIDERATION
The consideration for the Covenant is the Pooling Agreement and an
undivided amount of the Purchase Price paid to Seller or Seller's benefit under
the Pooling 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 the SCI and Company Products, the close
relationships Seller has with SCI customers and SBS's intent to utilize and
exploit the SCI and Company Products and expand Company'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 successors, assigns
and transferees, is specifically enforceable, constitutes (together with the
Pooling 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
COVENANT NOT TO COMPETE
PAGE 2
<PAGE>
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 District of New Mexico, and the parties
expressly acknowledge that such court shall have jurisdiction over the matter
and parties, and that venue shall be proper in such court.
X. NOTICES
Any notice or other communication required under this Covenant or
desired to be given by any of the parties to this Covenant to any other party
shall be deemed to be duly given when personally delivered or when mailed by
certified or registered mail, return receipt requested, postage prepaid, or when
delivered prepaid 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 Finance and
Administration
2400 Louisiana Blvd. NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
Copy to:
Alison K. Schuler, Esquire
4300 San Mateo Blvd. NE, Suite B-380
Albuquerque, New Mexico 87110
SELLER:
David Scidmore
**
Any party may change its address for notice by giving written notice of
the change pursuant to this Section.
COVENANT NOT TO COMPETE
PAGE 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: December 20, 1999
SELLER: SBS TECHNOLOGIES, INC.
By:
- ---------------------- --------------------------------------
David Scidmore
Its:
---------------------------------
COVENANT NOT TO COMPETE
PAGE 4
<PAGE>
EXHIBIT II-A
PLAN OF MERGER
1. RECITALS. SBS Technologies, Inc., a New Mexico corporation ("SBS")
intends to acquire SciTech, Inc., a Wisconsin corporation ("SciTech"),
pursuant to the terms of a Pooling Agreement among the parties, of which this
Plan of Merger is a part. To accomplish the acquisition, SciTech will be
merged with and into SBS Technologies, Inc. Communications Products, a
California corporation, a wholly-owned subsidiary of SBS (the "Company"),
which shall be the surviving corporation in the merger. This Plan of Merger
shall be filed with the appropriate state agencies of California and Wisconsin
as required by law.
2. MERGER. On the Effective Date (as defined below), SciTech shall
be merged with and into the Company, which shall be the surviving corporation
of the merger (the "Surviving Corporation"). As of the Effective Date, the
corporate existence, identity, purpose, powers, objects, franchises, rights
and immunities of the Company shall continue unaffected and unimpaired by the
merger, and the corporate identity, existence, purposes, powers, objects,
franchises, rights and immunities of SciTech shall be wholly merged in the
Surviving Corporation. Accordingly, on the Effective Date the separate
existence of SciTech shall cease, except insofar as continued by statute.
3. ARTICLES OF INCORPORATION. The Articles of Incorporation of the
Company, as in effect immediately prior to the Effective Date, shall continue
in full force and effect as the Articles of Incorporation of the Surviving
Corporation.
4. BYLAWS. From and after the Effective Date, the Bylaws of the
Company shall be and become the Bylaws of the Surviving Corporation until
they shall be altered, amended, or repealed, or until new Bylaws shall be
adopted in accordance with the provisions of the Bylaws and the Articles of
Incorporation of the Surviving Corporation.
5. DIRECTORS AND OFFICERS. The duly qualified and acting directors
and officers of the Company immediately prior to the Effective Date shall be
the directors and officers of the Surviving Corporation, each such director
or officer to hold office until the term for which he or she has previously
been elected shall expire and until his or her successor has been elected and
qualified.
6. CONVERSION OF COMMON STOCK. At and as of the Effective Time, and
subject to adjustment as provided below, each of the 1,000 issued and
outstanding shares of SciTech common stock shall be converted into the right
to receive shares of the no par value common stock of SBS. No fractional
shares will be issued, the number of SBS common shares a shareholder receives
will be rounded down to the nearest whole number, and no payment for fractional
shares shall be made. The total number of SBS shares to be issued will equal
$6,400,000 divided by the average of the closing price on the NASDAQ National
Market System of SBS common stock for the
1
<PAGE>
five trading days preceding Closing. No SciTech Share shall be deemed to be
outstanding or to have any rights other than those set forth in this Plan of
Merger after the Effective Date.
7. ASSETS AND LIABILITIES. On the Effective Date, all property,
real, personal and mixed, and all debts due to SciTech or the Company on
whatever account, and all and every other interest of or belonging to SciTech
or the Company shall be taken by and deemed to be transferred to and vested
in the Surviving Corporation without any further act or deed; and all
property and every other interest shall be thereafter as effectively the
property of the Surviving Corporation as it was of SciTech or the Company.
8. RIGHTS OF CREDITORS. All rights of creditors and all liens upon
the property of SciTech or the Company shall be preserved and unimpaired, and
all debts, liabilities, obligations and duties of SciTech or the Company
shall thenceforth attach to the Surviving Corporation, and may be enforced
against it to the same extent as if such debts, liabilities, obligations and
duties had been incurred or contracted by it.
9. POWER OF ATTORNEY. SciTech hereby grants to the Surviving
Corporation an irrevocable proxy, coupled with an interest, to execute and
deliver, in the name of SciTech, all bills of sale and instruments, and to take
or cause to be taken all such further or other action as the Surviving
Corporation may deem necessary or desirable in order to vest in and confirm
to the Surviving Corporation or its successors and assigns the title to and
possession of all the aforesaid property and rights and otherwise carry out
the intent and purposes of this Agreement.
10. REGISTERED OFFICE AND REGISTERED AGENT. The registered agent and
office of the Surviving Corporation in the State of California will, as of
the Effective Date, be CT Corporation, 818 West 7th Street, Los Angeles, CA
90017, and in the State of Wisconsin will, as of the Effective Date, be
Robert S. Scidmore, 7878 Big Sky Drive, Suite A, Madison, WI 53719.
11. INCOME TAXES AND ACCOUNTING. The parties intend that the merger
constitute a tax-free "forward triangular merger" under Section 368(a)(2)(D)
of the Internal Revenue Code. The parties also intend that the merger be
accounted for as a "pooling of interests" under generally accepted accounting
principles, as further described in the Pooling Agreement.
12. EFFECTIVE DATE. The merger shall be effective as of 12:01 a.m.,
P.S.T., on December 20, 1999, or as soon thereafter as permitted by the laws
of the States of Wisconsin and California upon the filings of Articles of
Merger with the Wisconsin Department of Financial Institutions and the
California Secretary of State, Corporations Division.
2
<PAGE>
EXHIBIT IV
FORM OF SUBSCRIPTION AND REPRESENTATION LETTER
28
<PAGE>
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
SBS Technologies, Inc.
2400 Louisiana Boulevard NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
Ladies and Gentlemen:
I (that term referring to both prospective purchasers if the purchase
of the interest is being made with community funds) understand and agree as
follows:
1. RECEIPT OF INFORMATION. I acknowledge receipt of such information
about SBS Technologies, Inc., ("SBS") as I have requested, including the SBS
Form 10K for the fiscal year ended June 30, 1999, the Form 10Q for the quarter
ended September 30, 1999, and the 1999 Annual Report and 1999 Annual Meeting
Proxy Statement ("Information"). I have read the Information, and have had the
opportunity to ask questions of the management of SBS concerning the business of
SBS, and have received answers from management, as I have deemed necessary.
2. SALE OF STOCK. Subject to the terms and conditions of this
Subscription Agreement and Representation Letter (the "Letter"), and pursuant to
the provisions of the Pooling Agreement dated December 15, 1999 ("Pooling
Agreement"), I will exchange my shares of SciTech inc. for a total of 13,989
shares of the common stock of SBS ("Shares"). At closing, SBS will deliver to me
a properly executed Certificate representing the Shares. SBS's obligation to
close this transaction is conditioned upon my warranties and representations
herein being true at Closing.
3. WARRANTIES AND REPRESENTATIONS OF PURCHASER. I represent and warrant
to SBS that:
A. I am aware that no United States federal or state agency
has made any finding or determination as to the fairness for public investment,
nor any recommendation or endorsement, of the Shares and the Shares will not be
registered under the Securities Act of 1933 (the "1933 Act"), the New Mexico
Securities Act of 1986, the Wisconsin Securities Act, or the securities laws of
any other state.
B. I understand that in order to ensure that the offer and
sale of the Shares to me is exempt from registration under the 1933 Act by
reason of Sections 4(2) or 3(b) of the 1933 Act and the securities laws of any
other state, SBS is required to have reasonable grounds to believe, and must
actually believe, after making reasonable inquiry and before making any
issuance, that I am purchasing the Shares for investment only. I, either alone
or with my purchaser representative, am able to evaluate the risks involved in
any investment in the Shares, and I have sufficient knowledge and experience in
financial and business matters in general, and investments in particular, to be
fully capable of evaluating the merits and risks of an investment by me in the
Shares. I have been furnished, have read, and understand the Information. I have
no questions concerning SBS, the Shares or the business of SBS which have not
been answered and have obtained all the information concerning these matters
which I desire. My financial condition is such that I have adequate means of
providing for my current and possible personal contingencies
<PAGE>
and I am under no present or contemplated need to liquidate any portion of the
Shares to satisfy any existing or contemplated undertaking, need or
indebtedness; and I am able to bear the economic risk of any investment in the
Shares, including the possible complete loss of the investment and possible
inability to sell or transfer the Shares for an indefinite period of time.
C. My (and my spouse's full names(s), date(s) of birth, tax
identification number(s), and primary residence address are:
- ------------------------------ ---------------------------------
My Name My Date of Birth
- ------------------------------ ---------------------------------
My Spouse's Name Spouse's Date of Birth
- ------------------------------ ---------------------------------
My Tax Identification\ My Spouse's Tax Identification\
Social Security Number Social Security Number
- ------------------------------
- ------------------------------
My (Our) Residence Address
If there is no name set forth for my Spouse, it means that I am not at
present married, or no person has any community property interest in the assets
I am using to make this investment.
D. My occupation is ;
---------------------------------
E. My business address is:
--------------------------------
--------------------------------
F. I am acquiring the Shares for my own account for investment
only and not with a view to, or for sale in connection with, the distribution or
transfer thereof, and I am not participating directly or indirectly in a
distribution or transfer of Shares, or in the underwriting of any such
distribution or transfer of the Shares, nor will I act in any way that would
constitute me an underwriter, within the meaning of the 1933 Act, of the Shares.
I understand that in order for the Shares to be qualified for an exemption from
registration, I must represent and warrant that I will not transfer or sell the
Shares in the absence of registration under the 1933 Act or an exemption
therefrom. I will, before any proposed sale, pledge, gift or other transfer, for
value or otherwise, of any or all of the Shares or any interest or interests
therein (a "Transfer"), give written notice to SBS
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 2
<PAGE>
expressing my desire to effect the Transfer and describing the Transfer in
detail, accompanied by an opinion of qualified counsel to the effect that the
proposed Transfer will be exempt from the registration provisions under
applicable federal and state securities laws and otherwise will be in compliance
with such laws, and will not violate or jeopardize exemptions upon which SBS has
relied in issuing the Shares to me. For purposes of this paragraph, "qualified
counsel" shall mean an attorney licensed to practice law in one or more
jurisdictions connected with the proposed Transfer, who devotes a significant
portion of such attorney's practice to the area of federal and state securities
law, and which attorney is rated "AV" by Martindale Hubbell Law Directory. I
understand SBS will make, or will advise the transfer agent of the Shares to
make, stop transfer notations on its records relating to the Shares and the
certificate representing the Shares will have the following legend imprinted or
typed on the face of the Certificate:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or any state
securities laws. No transfer or other disposition of the
Securities can be made except in compliance with the
restrictions contained in a Subscription Agreement and
Representation Letter between the Corporation and the
person(s) whose name(s) appear(s) on this certificate as
registered holder, a copy of which is on file at the office of
the Corporation."
G. I am checking the box or boxes below which describe me.
: : Any bank as defined in section 3(a)(2) of the Act, or
any savings and loan association or other institution as
defined in section 3(a)(5)(A) of the Act whether acting in its
individual or fiduciary capacity; any broker or dealer
registered pursuant to section 15 of the Securities Exchange
Act of 1934; any insurance company as defined in section 2(13)
of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that Act; Small
Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the
Small Business Investment Act of 1958; any plan established
and maintained by a state, its political subdivisions or any
agency or instrumentality of a state or its political
subdivisions for the benefit of its employees, if such plan
has total assets in excess of $5,000,000; employee benefit
plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a
plan fiduciary, as defined in Section 3(21) of such Act, which
is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by
persons that are accredited investors.
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 3
<PAGE>
: : Any private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of 1940;
: : Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific
purpose of acquiring the securities offered, with total assets
in excess of $5,000,000.
: : The undersigned is a director or executive officer of
SBS.
: : The undersigned is a natural person whose individual
net worth as of the date hereof (including the net worth of
the undersigned's spouse if the undersigned is married)
exceeds $1,000,000.
: : The undersigned is a natural person who had an
individual income that exceeded $200,000 or joint income with
his or her spouse in excess of $300,000 in each of the two
most recent years and who reasonably expects that in the
current year his or her or their income will reach the same
level. For purposes of this document, the term "income" shall
mean adjusted gross income reported or to be reported on a
federal income tax return, increased by (i) any deductions for
long term capital gains (under Section 1202 of the Internal
Revenue Code (the "Code"), (ii) any deductions for depletion
(pursuant to Section 601 ET SEQ. of the Code), (iii) any
exclusions of interest (pursuant to Section 103 of the Code)
and (iv) any losses of a partnership allocated to the
undersigned as an individual limited partner (as reported in
Schedule E of Form 1040).
: : Any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person as described in Section 230.506
(b)(2)(ii); and
: : Any entity in which all of the equity owners are
accredited investors.
: : None of the boxes above accurately describes the
undersigned.
H. I am aware that I will not be able to dispose readily of
the Shares in view of the fact that the Shares will not be registered under the
1933 Act and that SBS has not, except solely as provided in Paragraph IV of the
Pooling Agreement, agreed with me to register the Shares for distribution
pursuant to the 1933 Act. I am aware that any sales under Rule 144 may not be
made until (i) one year from the date of purchase and then only in amounts and
in the manner permitted by Rule 144, or (ii) two years from the date of purchase
without regard to the volume, manner and notice requirements of Rule 144, but in
compliance with other requirements of Rule 144, assuming I am not an affiliate
of SBS at that time. I understand that, in the absence of any available
exemption, I may have to hold the Shares indefinitely unless and until the
Shares are subsequently registered under the 1933 Act and applicable state
securities laws.
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 4
<PAGE>
I. I am acquainted with the requirements of Section 13(d) of
the Securities Exchange Act of 1934 and the rules and regulations issued
thereunder. I understand that, as a result of my acquisition of Shares, and in
order to comply with Section 13(d) and the rules and regulations issued
thereunder, I may be required to file a Schedule 13D and I agree to file if that
Schedule is required.
J. The information contained in this Letter is true and
correct.
DATED: December 20, 1999
PURCHASER:
--------------------------------------------
DAVID SCIDMORE
RECEIVED AND ACCEPTED BY:
SBS TECHNOLOGIES, INC.
By:
----------------------------------
Its:
---------------------------------
DATED:
-------------------------------
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 5
<PAGE>
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
SBS Technologies, Inc.
2400 Louisiana Boulevard NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
Ladies and Gentlemen:
I (that term referring to both prospective purchasers if the purchase
of the interest is being made with community funds) understand and agree as
follows:
1. RECEIPT OF INFORMATION. I acknowledge receipt of such information
about SBS Technologies, Inc., ("SBS") as I have requested, including the SBS
Form 10K for the fiscal year ended June 30, 1999, the Form 10Q for the quarter
ended September 30, 1999, and the 1999 Annual Report and 1999 Annual Meeting
Proxy Statement ("Information"). I have read the Information, and have had the
opportunity to ask questions of the management of SBS concerning the business of
SBS, and have received answers from management, as I have deemed necessary.
2. SALE OF STOCK. Subject to the terms and conditions of this
Subscription Agreement and Representation Letter (the "Letter"), and pursuant to
the provisions of the Pooling Agreement dated December 15, 1999 ("Pooling
Agreement"), I will exchange my shares of SciTech inc. for a total of 13,989
shares of the common stock of SBS ("Shares"). At closing, SBS will deliver to me
a properly executed Certificate representing the Shares. SBS's obligation to
close this transaction is conditioned upon my warranties and representations
herein being true at Closing.
3. WARRANTIES AND REPRESENTATIONS OF PURCHASER. I represent and warrant
to SBS that:
A. I am aware that no United States federal or state agency
has made any finding or determination as to the fairness for public investment,
nor any recommendation or endorsement, of the Shares and the Shares will not be
registered under the Securities Act of 1933 (the "1933 Act"), the New Mexico
Securities Act of 1986, the Wisconsin Securities Act, or the securities laws of
any other state.
B. I understand that in order to ensure that the offer and
sale of the Shares to me is exempt from registration under the 1933 Act by
reason of Sections 4(2) or 3(b) of the 1933 Act and the securities laws of any
other state, SBS is required to have reasonable grounds to believe, and must
actually believe, after making reasonable inquiry and before making any
issuance, that I am purchasing the Shares for investment only. I, either alone
or with my purchaser representative, am able to evaluate the risks involved in
any investment in the Shares, and I have sufficient knowledge and experience in
financial and business matters in general, and investments in particular, to be
fully capable of evaluating the merits and risks of an investment by me in the
Shares. I have been furnished, have read, and understand the Information. I have
no questions concerning SBS, the Shares or the business of SBS which have not
been answered and have obtained all the information concerning these matters
which I desire. My financial condition is such that I have adequate means of
providing for my current and possible personal contingencies
<PAGE>
and I am under no present or contemplated need to liquidate any portion of the
Shares to satisfy any existing or contemplated undertaking, need or
indebtedness; and I am able to bear the economic risk of any investment in the
Shares, including the possible complete loss of the investment and possible
inability to sell or transfer the Shares for an indefinite period of time.
C. My (and my spouse's full names(s), date(s) of birth, tax
identification number(s), and primary residence address are:
- ------------------------------ ---------------------------------
My Name My Date of Birth
- ------------------------------ ---------------------------------
My Spouse's Name Spouse's Date of Birth
- ------------------------------ ---------------------------------
My Tax Identification\ My Spouse's Tax Identification\
Social Security Number Social Security Number
- ------------------------------
- ------------------------------
My (Our) Residence Address
If there is no name set forth for my Spouse, it means that I am not at
present married, or no person has any community property interest in the assets
I am using to make this investment.
D. My occupation is ;
---------------------------------
E. My business address is:
--------------------------------
--------------------------------
F. I am acquiring the Shares for my own account for investment
only and not with a view to, or for sale in connection with, the distribution or
transfer thereof, and I am not participating directly or indirectly in a
distribution or transfer of Shares, or in the underwriting of any such
distribution or transfer of the Shares, nor will I act in any way that would
constitute me an underwriter, within the meaning of the 1933 Act, of the Shares.
I understand that in order for the Shares to be qualified for an exemption from
registration, I must represent and warrant that I will not transfer or sell the
Shares in the absence of registration under the 1933 Act or an exemption
therefrom. I will, before any proposed sale, pledge, gift or other transfer, for
value or otherwise, of any or all of the Shares or any interest or interests
therein (a "Transfer"), give written notice to SBS
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 2
<PAGE>
expressing my desire to effect the Transfer and describing the Transfer in
detail, accompanied by an opinion of qualified counsel to the effect that the
proposed Transfer will be exempt from the registration provisions under
applicable federal and state securities laws and otherwise will be in compliance
with such laws, and will not violate or jeopardize exemptions upon which SBS has
relied in issuing the Shares to me. For purposes of this paragraph, "qualified
counsel" shall mean an attorney licensed to practice law in one or more
jurisdictions connected with the proposed Transfer, who devotes a significant
portion of such attorney's practice to the area of federal and state securities
law, and which attorney is rated "AV" by Martindale Hubbell Law Directory. I
understand SBS will make, or will advise the transfer agent of the Shares to
make, stop transfer notations on its records relating to the Shares and the
certificate representing the Shares will have the following legend imprinted or
typed on the face of the Certificate:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 or any state
securities laws. No transfer or other disposition of the
Securities can be made except in compliance with the
restrictions contained in a Subscription Agreement and
Representation Letter between the Corporation and the
person(s) whose name(s) appear(s) on this certificate as
registered holder, a copy of which is on file at the office of
the Corporation."
G. I am checking the box or boxes below which describe me.
: : Any bank as defined in section 3(a)(2) of the Act, or
any savings and loan association or other institution as
defined in section 3(a)(5)(A) of the Act whether acting in its
individual or fiduciary capacity; any broker or dealer
registered pursuant to section 15 of the Securities Exchange
Act of 1934; any insurance company as defined in section 2(13)
of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development
company as defined in section 2(a)(48) of that Act; Small
Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the
Small Business Investment Act of 1958; any plan established
and maintained by a state, its political subdivisions or any
agency or instrumentality of a state or its political
subdivisions for the benefit of its employees, if such plan
has total assets in excess of $5,000,000; employee benefit
plan within the meaning of the Employee Retirement Income
Security Act of 1974 if the investment decision is made by a
plan fiduciary, as defined in Section 3(21) of such Act, which
is either a bank, savings and loan association, insurance
company, or registered investment adviser, or if the employee
benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by
persons that are accredited investors.
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 3
<PAGE>
: : Any private business development company as defined in
section 202(a)(22) of the Investment Advisers Act of 1940;
: : Any organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific
purpose of acquiring the securities offered, with total assets
in excess of $5,000,000.
: : The undersigned is a director or executive officer of
SBS.
: : The undersigned is a natural person whose individual
net worth as of the date hereof (including the net worth of
the undersigned's spouse if the undersigned is married)
exceeds $1,000,000.
: : The undersigned is a natural person who had an
individual income that exceeded $200,000 or joint income with
his or her spouse in excess of $300,000 in each of the two
most recent years and who reasonably expects that in the
current year his or her or their income will reach the same
level. For purposes of this document, the term "income" shall
mean adjusted gross income reported or to be reported on a
federal income tax return, increased by (i) any deductions for
long term capital gains (under Section 1202 of the Internal
Revenue Code (the "Code"), (ii) any deductions for depletion
(pursuant to Section 601 ET SEQ. of the Code), (iii) any
exclusions of interest (pursuant to Section 103 of the Code)
and (iv) any losses of a partnership allocated to the
undersigned as an individual limited partner (as reported in
Schedule E of Form 1040).
: : Any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the
securities offered, whose purchase is directed by a
sophisticated person as described in Section 230.506
(b)(2)(ii); and
: : Any entity in which all of the equity owners are
accredited investors.
: : None of the boxes above accurately describes the
undersigned.
H. I am aware that I will not be able to dispose readily of
the Shares in view of the fact that the Shares will not be registered under the
1933 Act and that SBS has not, except solely as provided in Paragraph IV of the
Pooling Agreement, agreed with me to register the Shares for distribution
pursuant to the 1933 Act. I am aware that any sales under Rule 144 may not be
made until (i) one year from the date of purchase and then only in amounts and
in the manner permitted by Rule 144, or (ii) two years from the date of purchase
without regard to the volume, manner and notice requirements of Rule 144, but in
compliance with other requirements of Rule 144, assuming I am not an affiliate
of SBS at that time. I understand that, in the absence of any available
exemption, I may have to hold the Shares indefinitely unless and until the
Shares are subsequently registered under the 1933 Act and applicable state
securities laws.
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 4
<PAGE>
I. I am acquainted with the requirements of Section 13(d) of
the Securities Exchange Act of 1934 and the rules and regulations issued
thereunder. I understand that, as a result of my acquisition of Shares, and in
order to comply with Section 13(d) and the rules and regulations issued
thereunder, I may be required to file a Schedule 13D and I agree to file if that
Schedule is required.
J. The information contained in this Letter is true and
correct.
DATED: December 20, 1999
PURCHASER:
--------------------------------------------
ROBERT SCIDMORE
RECEIVED AND ACCEPTED BY:
SBS TECHNOLOGIES, INC.
By:
----------------------------------
Its:
---------------------------------
DATED:
-------------------------------
SUBSCRIPTION AGREEMENT AND REPRESENTATION LETTER
PAGE 5
<PAGE>
MODIFICATION OF CREDIT AGREEMENT,
GUARANTY AGREEMENTS AND RELATED LOAN DOCUMENTS
THIS MODIFICATION OF CREDIT AGREEMENT, GUARANTY AGREEMENTS AND RELATED
LOAN DOCUMENTS (this "MODIFICATION AGREEMENT") is entered into as of January 31,
2000, by and between SBS TECHNOLOGIES, INC., a New Mexico corporation
("BORROWER"), BANK OF AMERICA, N.A., formerly NationsBank, N.A., a national
banking association ("LENDER"), and the Subsidiaries of Borrower listed as
Guarantors on the signature pages hereof (the "GUARANTORS").
R E C I T A L S:
WHEREAS, Borrower and Lender (under its prior name, NationsBank, N.A.)
have previously executed that certain Credit Agreement (as amended, the "CREDIT
AGREEMENT") dated as of December 1, 1998, pursuant to which Lender has made
available to Borrower a revolving credit loan facility in an amount not to
exceed Fifteen Million and No/100 Dollars ($15,000,000.00), which Credit
Agreement has been amended by that certain Note Modification Agreement (herein
so called) dated as of November 30, 1999 (any capitalized term used but not
otherwise defined herein shall have the meaning set forth in the Credit
Agreement); and
WHEREAS, the indebtedness under the Credit Agreement is evidenced by
that certain Revolving Promissory Note (the "NOTE") dated December 1, 1998, in
the principal face amount of $15,000,000, executed by Borrower and payable to
the order of Lender, which Note was modified by the Note Modification Agreement
to extend the maturity date thereof to January 31, 2000; and
WHEREAS, Borrower and the Guarantors have requested an increase in the
revolving credit facility to $25,000,000, an extension of the facility, and
certain other modifications to the Credit Agreement, the Guaranty Agreements and
the other Loan Documents, and Lender has agreed to such modifications, subject
to and upon the terms and conditions contained herein.
A G R E E M E N T:
NOW, THEREFORE, KNOW ALL MEN BY THESE PRESENTS, that for and in
consideration of the terms, conditions and agreements contained herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Lender, Borrower and the Guarantors agree as follows:
1. INCREASE IN AVAILABLE COMMITMENT. From and after the effective date
hereof, the maximum amount of the revolving credit facility under the Credit
Agreement shall be increased from $15,000,000.00, to $25,000,000.00.
Accordingly, the definition of "AVAILABLE COMMITMENT" set forth in Section 1.1
of the Credit Agreement shall be amended to read in its entirety as follows:
Page 1
<PAGE>
"AVAILABLE COMMITMENT" means the maximum amount available to
be advanced under the Credit Facility, being $15,000,000.00 as of the
Closing Date through January 30, 2000, and $25,000,000.00 from and
after January 31, 2000, subject to reduction as provided in SECTION
3.6(c)."
2. RESTATED NOTE. To evidence the increased Available Commitment,
Borrower shall execute and deliver to Lender contemporaneously with this
Modification Agreement, an Amended and Restated Revolving Promissory Note (the
"RESTATED NOTE") dated the date hereof, in the original principal face amount of
$25,000,000.00, payable to the order of Lender, in substantially the same form
as the Note, which Restated Note shall be in renewal, extension, amendment,
restatement and replacement of the Note. From and after the date hereof, all
references to the term "Note" in the Credit Agreement, each Guaranty Agreement,
and all other Loan Documents shall mean and refer to the Restated Note.
Accordingly, the definition of "Note' in the Credit Agreement is hereby amended
to read in its entirety as follows:
"NOTE" means the Revolving Promissory Note dated the date
hereof, in the maximum principal amount of $15,000,000.00, executed by
Borrower and payable to the order of Lender, in the form of EXHIBIT A
attached hereto, as amended, extended, restated and replaced by the
Amended and Restated Revolving Promissory Note dated January 31, 2000,
in the maximum principal amount of $25,000,000.00, and any and all
renewals, supplements, extensions, modifications, amendments,
restatements and replacements thereof."
The original of the Note held by Lender shall be legended to show that
it has been amended, restated and replaced by the Restated Note, and then
returned to Borrower.
3. TERMINATION DATE. The revolving credit facility is extended until
November 30, 2001, subject to the terms and conditions set forth in the Credit
Agreement. Accordingly, clause (i) of the definition of "Termination Date" in
Section 1.1 of the Credit Agreement is amended to insert the date "November 30,
2001", in place of "November 30, 1999." Any reference to the "Termination Date"
in the Credit Agreement, the Restated Note, the Guaranty Agreements or any other
Loan Document shall mean and refer to such extended Termination Date.
4. DEFINITION OF DOCUMENTS. All references to the Credit Agreement
therein and in the other Loan Documents shall mean the Credit Agreement as
amended hereby. The definition of "Loan Documents", as defined in and as used in
the Credit Agreement, each Guaranty Agreement and all other Loan Documents,
shall be, and is hereby, modified to include this Modification Agreement and any
and all documents executed in connection herewith, including without limitation
the Restated Note.
5. NAME AND NOTICE ADDRESS FOR LENDER. Lender's name is now Bank of
America, N.A., and the definition of "Lender" in Section 1.1 of the Credit
Agreement and as defined in the Guaranty Agreements and all other Loan
Documents, and all references to "Lender" therein, shall mean Bank of America,
N.A. Lender's address for notice, as set forth in Section 9.2(b)(ii) of the
Credit Agreement and referred to in all other Loan Documents shall be as
follows:
Page 2
<PAGE>
Bank of America, N.A.
P. O. Box 25500
Albuquerque, NM 87125
or
303 Roma NW
Albuquerque, NM 87102
Telephone No.: 505/282-4777
Telecopier No.: 505/282-4712
Attention: John A. Sanchez
6. GUARANTY AGREEMENTS. Each of the undersigned Guarantors expressly
acknowledges and agrees to the increase in the Available Commitment to
$25,000,000, and the extension of the Termination Date to November 30, 2001, and
agrees that its respective Guaranty Agreement, and all indebtedness and
obligations and agreements thereunder, are and shall remain in full force and
effect with respect to the increased Available Commitment and all amounts that
may at any time be outstanding thereunder. The reference to the $15,000,000
Promissory Note in Preliminary Statement (3) of each Guarantor's respective
Guaranty Agreement is hereby amended to specifically reflect the Restated Note,
in the principal face amount of $25,000,000.00, as a note given in substitution,
modification, renewal and extension of the Note therein described. All
references to the "Note" in each Guaranty Agreement shall, from and after the
date hereof, mean and refer to the Restated Note. Each Guarantor expressly
acknowledges and consents to the terms of this Modification Agreement and agrees
that pursuant to its respective Guaranty Agreement, such Guarantor continues to
guarantee the Restated Note and all of the Obligations under and as defined in
the Credit Agreement, as modified, extended and increased hereby, jointly and
severally with all other Guarantors.
7. GUARANTOR NAMES. The names of each Guarantor as stated in the
Credit Agreement has changed. Accordingly, the following definitions in
Section 1.1 of the Credit Agreement are hereby amended in their entirety to
read as follows:
"BERG" means SBS Technologies, Inc. Telemetry and Communications
Products, f/k/a SBS Berg Telemetry Systems, Inc., a California corporation.
"BIT 3" means SBS Technologies, Inc. Connectivity Products, f/k/a SBS
Bit 3 Operations, Inc., a Minnesota corporation.
"EMBEDDED COMPUTERS" means SBS Technologies Inc. Embedded Computers,
f/k/a SBS Embedded Computers, Inc., a New Mexico corporation.
"GREENSPRING" means SBS Technologies, Inc. Modular/IO, f/k/a SBS
Greenspring Modular I/O, Inc., a California corporation.
"MICRO" means SBS Technologies Inc. Industrial Computers, f/k/a SBS
Micro Alliance, Inc., a California corporation.
Page 3
<PAGE>
"VI COMPUTER" means SBS Technologies Inc. Communication Products, f/k/a
VI Computer, a California corporation.
Additionally, or Computers has merged into Embedded Computers and is no
longer in existence. Accordingly, that entity is not joining in the execution
hereof.
8. GOVERNING LAW. The parties hereby elect that the Credit Agreement,
the Note, the Guaranty Agreements and all of the other Loan Documents shall be
governed by, and construed in accordance with, the laws of the State of New
Mexico, rather than Texas law, and that the Note is payable in Albuquerque, New
Mexico. Accordingly:
(a) Section 9.8 of the Credit Agreement is amended such that the bold
faced definition of the term "Applicable Law" in the penultimate sentence
thereof shall read as follows: "THE TERM `APPLICABLE LAW' AS USED HEREIN SHALL
MEAN THE LAWS OF THE STATE OF NEW MEXICO (OR APPLICABLE UNITED STATES FEDERAL
LAW TO THE EXTENT THAT IT PERMITS THE LENDERS TO CONTRACT FOR, CHARGE, TAKE,
RESERVE OR RECEIVE A GREATER AMOUNT OF INTEREST THAN UNDER NEW MEXICO LAW),"
(b) Section 9.17 of the Credit Agreement is amended to read in its
entirety as follows:
"9.17 GOVERNING LAW. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS SHALL
BE DEEMED CONTRACTS MADE UNDER THE LAWS OF NEW MEXICO AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF NEW MEXICO, EXCEPT TO
THE EXTENT FEDERAL LAW GOVERNS PURSUANT TO SECTION 9.8 HEREOF. WITHOUT EXCLUDING
ANY OTHER JURISDICTION, BORROWER AND EACH SUBSIDIARY AGREES THAT THE COURTS OF
NEW MEXICO WILL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION HEREWITH";
(c) The definition of "Applicable Law" in Section 1.1 of the Credit
Agreement is amended to read in its entirety as follows: "APPLICABLE LAW" means
the Laws of the United States of America applicable to contracts made or
performed in the State of New Mexico, including without limitation, 12 USC
Sections 85 and 86, as amended to the date hereof and as the same may be amended
at any time and from time to time hereafter, and any other statute of the United
States of America now or at any time hereafter prescribing maximum rates of
interest on loans and extensions of credit, and the Laws of the State of New
Mexico, now or at any time hereafter prescribing maximum rates of interest on
loans and extensions of credit."
(d) The definitions of "FDIC Percentage" and of "UCC" in Section 1.1 of
the Credit Agreement, and all other references to "Texas", or to "Dallas, Texas"
in the Credit Agreement or the Guaranty Agreements are amended to instead refer
to "New Mexico" or "Albuquerque, New Mexico", as applicable.
(e) Section 9 of each of the Guaranty Agreements is amended to reflect
that the governing law is the Laws of the State of New Mexico and that
non-exclusive jurisdiction is in
Page 4
<PAGE>
Albuquerque, New Mexico, and each reference therein to "Texas" or to "Dallas,
Texas," is amended to read "New Mexico," or "Albuquerque, New Mexico," as
applicable. Additionally, the references to Texas statutes in Section 3(a) of
each Guaranty Agreement are modified to refer to comparable provisions of New
Mexico Laws, if any; and all references to the Texas Business and Commerce Code
and the Uniform Commercial Code (including in Sections 4(a)(vii) or 4(d)(iii)
(if applicable)) shall mean and refer to the Uniform Commercial Code as adopted
and in effect from time to time in the State of New Mexico.
9. CONDITIONS PRECEDENT TO THIS MODIFICATION AGREEMENT. As conditions
precedent to this Modification Agreement and the agreements herein and
modifications to the Credit Agreement pursuant hereto, all of the following
shall have been satisfied:
(a) Borrower and the Guarantors shall have executed and delivered to
Lender this Modification Agreement;
(b) Borrower shall have executed and delivered to Lender the original
Restated Note;
(c) Each of the Guarantors shall have delivered to Lender copies of all
appropriate corporate documents, including any amendments to their respective
articles or certificates of incorporation, to reflect the Merger of or Computers
into Embedded Computers and the change of name of each of the other Guarantors.
(d) Borrower shall have delivered, or cause to be delivered, to Lender
all corporate resolutions, consents, certificates or documents as Lender may
request relating to (i) the existence of Borrower and the Guarantors, and (ii)
the corporate authority for the execution, enforceability and validity of the
Restated Note and this Modification Agreement, together with all other
documents, instruments and agreements and any other matters relevant hereto or
thereto, all in form and content satisfactory to Lender;
(e) Borrower shall have paid to Lender the $5,000.00 commitment fee for
the increase and extension of the Available Commitment as agreed to between
Borrower and Lender, the reasonable attorneys' fees and expenses of Lender's
counsel, and any other fees as agreed in connection with this Modification
Agreement; and
(f) No Default of Event of Default shall exist.
10. REAFFIRMATION OF OBLIGATIONS. Borrower and the Guarantors
acknowledge and agree that they are well and truly indebted to Lender pursuant
to the Credit Agreement, the respective Guaranty Agreements, the Restated Note
and the other Loan Documents, as modified hereby. Except as expressly modified
hereby, all terms, provisions, representations, warranties, covenants and
agreements of Borrower and each Guarantor contained in the Credit Agreement,
each Guaranty Agreement, and the other Loan Documents shall remain unchanged are
hereby ratified and confirmed by Borrower and the Guarantors, and all such
agreements shall be and shall remain in full force and effect, enforceable in
accordance with their terms.
Page 5
<PAGE>
11. NO IMPLIED WAIVERS. None of the amendments or modifications
provided for herein shall be deemed a consent to or waiver of any breach of the
same or any other covenant, condition or duty. Borrower and the Guarantors
acknowledge and understand that Lender has no obligation to further amend or
modify the Credit Agreement, the Note, the Restated Note or any of the other
Loan Documents, or any of the terms, provisions or covenants thereof, and that
Lender has made no representations regarding any such amendments or
modifications. No failure or delay on the part of Lender in exercising, and no
course of dealing with respect to, any right, power or privilege under this
Modification Agreement, the Credit Agreement, the Guaranty Agreements, or any
other Loan Document shall operate as a waiver thereof or of the exercise of any
other right, power or privilege.
12. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Lender that (a) the execution, delivery, and performance by the
Borrower and the Guarantors of this Modification Agreement and compliance with
the terms and provisions hereof (i) have been duly authorized by all requisite
action on the part of each such Person and (ii) do not, and will not violate or
conflict with, or result in a breach of, or require any consent under (A) the
articles of incorporation, certificate of incorporation, bylaws, partnership
agreement or other organizational documents of any such Person, (B) any
applicable law, rule, or regulation or any order, writ, injunction, or decree of
any Tribunal or arbitrator, or (C) any material agreement or instrument to which
any such Person is a party or by which any of them or any of their property is
bound or subject; (b) the signatories below have been duly authorized by all
necessary corporate action to make and enter this Modification Agreement as the
duly authorized action and deed of Borrower and the Guarantors; (c) the
representations and warranties contained in the Credit Agreement, as amended
hereby, and the other Loan Documents are true and correct in all material
respects on and as of the date hereof as though made on and as of the date
hereof; and (d) upon execution and effectiveness hereof, no Default or Event of
Default has occurred and is continuing.
13. RATIFICATION. Except as otherwise expressly modified by this
Modification Agreement and the Restated Note, all terms and provisions of the
Credit Agreement, the Guaranty Agreements and the other Loan Documents shall
remain unchanged and are ratified and confirmed and shall be and shall remain in
full force and effect, enforceable in accordance with their terms.
14. FURTHER ASSURANCES. Borrower shall execute and deliver to Lender
such other documents as may be necessary or as may be required, in the opinion
of Lender and/or counsel to Lender to effect the transactions contemplated
hereby and to create and evidence the rights and remedies of the Lender under
the Loan Documents.
15. INCONSISTENT PROVISIONS. This Modification Agreement shall control
in the case of any inconsistency between the terms and provisions hereof and
those contained in the other Loan Documents.
16. BINDING AGREEMENT. This Modification Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
legal representatives, successors and assigns.
Page 6
<PAGE>
17. GOVERNING LAW. THIS MODIFICATION AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW MEXICO, EXCEPT TO
THE EXTENT THAT UNITED STATES FEDERAL LAW APPLIES.
18. COUNTERPARTS; TELECOPIES. This Modification Agreement may be
executed in multiple counterparts, each of which shall be deemed an original for
all purposes, and all of which, collectively, shall constitute one agreement. In
addition, due execution of this Modification Agreement by any party may be
evidenced by a telecopy reflecting such party's signature. Any party to this
Modification Agreement shall be entitled to receive upon request, from any other
party that has previously forwarded an executed counterpart of any such document
by telecopy, a duplicate of such document bearing such other party's ink
original signature.
19. ENTIRE AGREEMENT. This Modification Agreement, the Credit
Agreement, the Restated Note and the Guaranty Agreements together with the other
Loan Documents, contain the entire agreement between the parties relating to the
subject matter hereof and thereof.
THIS MODIFICATION AGREEMENT, TOGETHER WITH THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
[Remainder of Page Intentionally Left Bank -- Signatures to Follow]
Page 7
<PAGE>
IN WITNESS WHEREOF, this Modification Agreement is executed effective
as of the date first above written.
BORROWER:
SBS TECHNOLOGIES, INC.,
a New Mexico corporation
By: /s/ J.E. Dixon
-------------------------------------------
James E. Dixon, Jr.
Vice President, Finance and Administration
LENDER:
BANK OF AMERICA, N.A., formerly NationsBank, N.A.,
a national banking association
By: /s/
---------------------------------
Name: John A. Sanchez
-------------------------------
Title: Senior Vice President
------------------------------
GUARANTORS:
SBS TECHNOLOGIES INC. CONNECTIVITY PRODUCTS,
f/k/a SBS Bit 3 Operations, Inc.
By: /s/ J.E. Dixon
---------------------------------
Name: J.E. Dixon
-------------------------------
Title: Secretary
------------------------------
SBS TECHNOLOGIES, INC. TELEMETRY AND COMMUNICATIONS
PRODUCTS, f/k/a SBS Berg Telemetry Systems, Inc.
By: /s/ J.E. Dixon
---------------------------------
Name: J.E. Dixon
-------------------------------
Title: Secretary
------------------------------
Page 8
<PAGE>
SBS TECHNOLOGIES, INC. MODULAR I/O, f/k/a SBS
Greenspring Modular I/O, Inc.
By: /s/ J.E. Dixon
---------------------------------
Name: J.E. Dixon
-------------------------------
Title: Secretary
------------------------------
SBS TECHNOLOGIES INC. EMBEDDED COMPUTERS, f/k/a SBS
Embedded Computers, Inc.
By: /s/ J.E. Dixon
---------------------------------
Name: J.E. Dixon
-------------------------------
Title: Secretary
------------------------------
SBS TECHNOLOGIES INC. INDUSTRIAL COMPUTERS, f/k/a
SBS Micro Alliance, Inc.
By: /s/ J.E. Dixon
---------------------------------
Name: J.E. Dixon
-------------------------------
Title: Secretary
------------------------------
SBS TECHNOLOGIES INC. COMMUNICATIONS PRODUCTS,
f/k/a VI Computer
By: /s/ J.E. Dixon
---------------------------------
Name: J.E. Dixon
-------------------------------
Title: Secretary
------------------------------
Page 9
<PAGE>
AMENDED AND RESTATED
REVOLVING PROMISSORY NOTE
$25,000,000.00 Albuquerque, New Mexico January 31, 2000
SBS TECHNOLOGIES, INC., a New Mexico corporation, having its principal
office located at 2400 Louisiana Blvd., NE, AFC Building 5, Suite 600,
Albuquerque, NM, 87110 ("BORROWER"), for value received, hereby promises to pay
to the order of BANK OF AMERICA, N.A., formerly NationsBank, N.A., a national
banking association ("LENDER"), at its Albuquerque, New Mexico office at 303
Roma, NW, Albuquerque, New Mexico 87102, or at such other address given to
Borrower by Lender, in immediately available funds and in lawful money of the
United States of America, the principal sum of TWENTY-FIVE MILLION AND NO/100
DOLLARS ($25,000,000.00), or so much thereof as may be advanced and outstanding,
on November 30, 2001, or sooner as provided in the Credit Agreement (as defined
herein), together with interest on the unpaid principal balance of this Note
from time to time outstanding at the applicable interest rate. Unless prohibited
by Applicable Law and subject to the terms hereof and the Credit Agreement
limiting interest to the Maximum Lawful Rate, interest on this Note shall be
calculated on the basis of actual days elapsed, but as if each year consisted of
360 days.
This Note is executed pursuant to that certain Modification of Credit
Agreement, Guaranty Agreements and Related Loan Documents (the "MODIFICATION
AGREEMENT") of even date herewith executed by and among Lender, Borrower and the
Guarantors, pertaining to that certain Credit Agreement dated as of December 1,
1998, executed by and between Lender and Borrower, as previously modified by
Note Modification Agreement dated as of November 30, 1999 (such Credit
Agreement, as amended by such Note Modification Agreement and the Modification
Agreement, and as it may hereafter be amended, supplemented, renewed, extended,
or restated or replaced from time to time, the "CREDIT AGREEMENT"), and this
Note is the "Restated Note" defined and described in the Modification Agreement
and the "Note" under and as defined in the Credit Agreement, the terms and
provisions of the Credit Agreement and the Modification Agreement related to
this Note being incorporated herein by reference for all purposes. Each
capitalized term used but not expressly defined herein shall have the meaning
given to such term in the Credit Agreement as modified by the Modification
Agreement. Reference is hereby expressly made to the Credit Agreement for a
statement of the rights and obligations of Lender and the duties and obligations
of Borrower in relation thereto; but neither this reference to the Credit
Agreement nor any provision thereof shall affect or impair the absolute and
unconditional obligation of Borrower to pay unpaid principal of and interest on
this Note when due.
Payment of this Note is guaranteed by the Guaranty Agreements. Any
holder hereof shall be entitled to all benefits of and remedies set forth in the
Credit Agreement and all the other Loan Documents.
Page 1
<PAGE>
This Note is given in modification, renewal, restatement and
replacement, but not in novation or extinguishment, of the Revolving Promissory
Note dated December 1, 1998, evidencing the Advances under the Available
Commitment pursuant to the Credit Agreement. All rights and interests of Lender
under the Credit Agreement and such prior note are renewed and extended hereby.
Lender may disburse the principal of this Note to Borrower in one or
more advances from time to time, subject to and upon the terms and conditions
set forth in the Credit Agreement with respect to the Available Commitment, so
long as the outstanding principal balance hereof never exceeds the then
applicable amount of the Available Commitment, less any Letter of Credit
Exposure. Subject to and upon the terms and conditions of the Credit Agreement,
Borrower shall be entitled to prepay the principal of this Note from time to
time, in whole or in part, without premium or penalty, except for any prepayment
fee due upon prepayment of a LIBOR Rate Portion prior to the expiration of the
applicable Interest Period as provided in Section 3.5(g) of the Credit
Agreement, and thereafter, prior to the maturity date hereof (and provided that
no Default has occurred and is in existence), to request additional advances
hereunder, subject to and in accordance with the terms and conditions of the
Credit Agreement.
1. INTEREST AND PAYMENT.
(a) MATURITY. The entire principal balance of this Note,
and all accrued but unpaid interest hereon, shall be due and payable in full on
the Termination Date.
(b) ACCRUAL OF INTEREST. Subject to Paragraph 1(f) below,
interest on this Note shall accrue at a rate per annum equal to the lesser of
(i) at Borrower's option exercised in accordance with the terms of the Credit
Agreement, the Variable Rate or the LIBOR Rate with respect to the Variable Rate
Portions and the LIBOR Rate Portions outstanding hereunder from time to time,
subject, however, to the provisions of the Credit Agreement, or (ii) the Maximum
Lawful Rate; provided, however, that as to any portion of the outstanding
principal balance hereof that is not subject to an effective election of or
conversion to the LIBOR Rate in accordance with the terms of the Credit
Agreement, interest on such portion of this Note shall accrue interest at the
lesser of (i) the Variable Rate or (ii) the Maximum Lawful Rate. Interest on
this Note shall be calculated at a daily rate equal to 1/360 of the annual
percentage rate which this Note bears, subject to the provisions hereof limiting
interest to the Maximum Lawful Rate. Without notice to Borrower or any other
Person, the Variable Rate and the Maximum Lawful Rate shall each automatically
fluctuate upward and downward as and in the amount by which the Base Rate and
the Maximum Lawful Rate, respectively, fluctuate, subject always to limitations
contained in this Note and the Credit Agreement.
(c) AGREEMENTS CONCERNING PRICING ELECTION. Reference
should be made to the provisions of SECTION 3.5 of the Credit Agreement
concerning the terms, manner and agreements related to the interest rate
elections available to Borrower under this Note.
Page 2
<PAGE>
(d) PRINCIPAL AND INTEREST PAYMENTS. Principal and interest
hereon shall be due and payable as is provided in ARTICLE III of the Credit
Agreement, which provides, in part, for payments of accrued, unpaid interest on
the first (1st) day of each calendar quarter and, with respect to any LIBOR Rate
Portion, on the last day of the applicable Interest Period.
(e) COSTS DUE TO REGULATORY CHANGES. Borrower shall
indemnify Lender against and reimburse Lender for increased costs to Lender, as
a result of any Regulatory Change, in the maintaining of any LIBOR Rate Portion.
All payments made pursuant to this paragraph shall be made free and clear,
without reduction for, or account of, any present or future taxes or other
levies of any nature, excluding net income and franchise taxes.
(f) DEFAULT RATE. After maturity of this Note or the
occurrence of an Event of Default, the outstanding principal balance of this
Note shall, at the option of Lender, bear interest at the Default Rate. Any past
due principal and, to the extent permitted by law, past due interest on the Loan
shall bear interest, payable as it accrues on demand, for each day until paid at
the Default Rate. Such interest shall continue to accrue at the Default Rate
notwithstanding the entry of a judgment with respect to any of the Obligation or
the foreclosure of any of Lender's Liens.
(g) MAXIMUM LAWFUL RATE ADJUSTMENTS. If at any time a
change in the Variable Rate or the LIBOR Rate shall cause the rate of interest
on this Note to be limited to the Maximum Lawful Rate, any subsequent reductions
in the Variable Rate or the LIBOR Rate, as applicable, shall not reduce the rate
of interest on this Note below the Maximum Lawful Rate until the total amount of
interest accrued equals the amount of interest which would have accrued if the
Variable Rate or the LIBOR Rate, as applicable, had at all times been in effect.
In the event that at maturity (stated or by acceleration), or at the final
payment of the Loan, the total amount of interest paid or accrued on the Loan is
less than the amount of interest which would have accrued if the Variable Rate
or the LIBOR Rate, as applicable, had at all times been in effect with respect
thereto, then at such time, to the extent permitted by law, Borrower shall pay
to Lender an amount equal to the difference between (a) the lesser of the amount
of interest which would have accrued if the Variable Rate or the LIBOR Rate, as
applicable, had at all times been in effect and the amount of interest which
would have accrued if the Maximum Lawful Rate had at all times been in effect,
and (b) the amount of interest actually paid on the Loan.
2. DEFAULT. The occurrence of a Default or an Event of Default, under
and as defined in the Credit Agreement, shall constitute, respectively, a
Default or an Event of Default under this Note.
3. REMEDIES.
(a) ALL REMEDIES AVAILABLE. Upon the occurrence of an Event of
Default, the holder hereof shall have the right to declare the entire unpaid
principal balance of, and all accrued unpaid interest on, this Note at once due
and payable (and upon such declaration, the same shall be at once due and
payable), to foreclose any and all liens and security interests securing payment
hereof, to offset against this Note any sum or sums owed by it to Borrower, and
to exercise any of
Page 3
<PAGE>
its other rights, powers and remedies under this Note, under the Credit
Agreement or any other Loan Document, or at law or in equity.
(b) NO WAIVER. Neither the failure by the holder hereof to
exercise, nor delay by the holder hereof in exercising, the right to accelerate
the maturity of this Note or any other right, power or remedy upon any Default
or Event of Default shall be construed as a waiver of such Default or Event of
Default or as a waiver of the right to exercise any such right, power or remedy
at any time. No single or partial exercise by the holder hereof of any right,
power or remedy shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right, power or remedy may be exercised at any
time and from time to time. All rights and remedies provided for in this Note
and in any other Loan Document are cumulative of each other and of any and all
other rights and remedies existing at law or in equity, and the holder hereof
shall, in addition to the rights and remedies provided herein or in any other
Loan Document, be entitled to avail itself of all such other rights and remedies
as may now or hereafter exist at law or in equity for the collection of the
indebtedness owing hereunder, and the resort to any right or remedy provided for
hereunder or under any such other Loan Document or provided for by law or in
equity shall not prevent the concurrent or subsequent employment of any other
appropriate rights or remedies. Without limiting the generality of the foregoing
provisions, the acceptance by the holder hereof from time to time of any payment
under this Note which is past due or which is less than the payment in full of
all amounts due and payable at the time of such payment, shall not (i)
constitute a waiver of or impair or extinguish the rights of the holder hereof
to accelerate the maturity of this Note or to exercise any other right, power or
remedy at the time or at any subsequent time, or nullify any prior exercise of
any such right, power or remedy, or (ii) constitute a waiver of the requirement
of punctual payment and performance, or a novation in any respect.
4. USURY SAVINGS PROVISIONS.
(a) GENERAL LIMITATION. Notwithstanding anything herein or
in any other Loan Documents, expressed or implied, to the contrary, in no event
shall any interest rate charged hereunder or under any of the other Loan
Documents, or any interest contracted for, collected or received by Lender or
any holder hereof, exceed the Maximum Lawful Rate.
(b) INTENT OF PARTIES. It is expressly stipulated and
agreed to be the intent of Borrower and Lender at all times to comply with the
applicable law governing the maximum rate or amount of interest payable on or in
connection with this Note. If the applicable law is ever judicially interpreted
so as to render usurious any amount called for under this Note or under any of
the other Loan Documents, or contracted for, charged, taken, reserved or
received with respect to this Note, or if acceleration of the maturity of this
Note, any prepayment by Borrower, or any other circumstance whatsoever, results
in Lender having been paid any interest in excess of that permitted by
applicable law, then it is the express intent of Borrower and Lender that all
excess amounts theretofore collected by Lender be credited on the principal
balance of this Note (or, if this Note has been or would thereby be paid in
full, refunded to Borrower), and the provisions of this Note and the other
applicable Loan Documents immediately be deemed reformed and the amounts
thereafter collectible hereunder and thereunder reduced, without the necessity
of the execution of any new
Page 4
<PAGE>
document, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder and thereunder.
The right to accelerate the maturity of this Note does not include the right to
accelerate any interest which has not otherwise accrued on the date of such
acceleration, and Lender does not intend to collect any unearned interest in the
event of acceleration. All sums paid or agreed to be paid to Lender for the use,
forbearance or detention of the indebtedness evidenced hereby or by any other
Loan Document shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed the Maximum Lawful Rate. The term "APPLICABLE LAW"
as used herein shall mean the laws of the State of New Mexico, or any applicable
United States federal law to the extent that it permits Lender to contract for,
charge, take, reserve or receive a greater amount of interest than under New
Mexico law. The provisions of this paragraph shall control all agreements
between Borrower and Lender.
5. GENERAL PROVISIONS.
(a) BUSINESS DAY. Whenever any payment shall be due under
this Note on a day which is not a Business Day, the date on which such payment
is due shall be extended to the next succeeding Business Day, and such extension
of time shall be included in the computation of the amount of interest then
payable.
(b) MANNER OF PAYMENT. The manner in which payments are to
be made on this Note shall be governed by the provisions hereof and the Credit
Agreement, including, without limitation, SECTION 3.10 of the Credit Agreement.
(c) PREPAYMENTS. Prepayments may be made on this Note
subject to and in accordance with SECTIONS 3.5(g) and 3.6 of the Credit
Agreement.
(d) APPLICATION OF PAYMENTS. All payments made on this Note
shall be applied in accordance with SECTIONS 3.11 and 8.8 of the Credit
Agreement, as applicable. Nothing herein shall limit or impair any rights of any
holder hereof to apply as provided in the Loan Documents any past due payments,
any proceeds from the disposition of any collateral by foreclosure or other
collections after default. Except to the extent specific provisions are set
forth in this Note or another Loan Document with respect to application of
payments, all payments received by the holder hereof shall be applied, to the
extent thereof, to the indebtedness owing by Borrower to the holder hereof in
such order and manner as the holder hereof shall deem appropriate, any
instructions from Borrower or anyone else to the contrary notwithstanding.
(e) COSTS OF COLLECTION. If any holder of this Note retains
an attorney in connection with any default or at maturity or to collect, enforce
or defend this Note or any other Loan Document in any lawsuit or in any probate,
reorganization, bankruptcy or other proceeding, or if Borrower sues any holder
of this Note in connection with this Note or any other Loan Document and does
not prevail, then Borrower agrees to pay to each such holder, in addition to
principal and
Page 5
<PAGE>
interest, all costs and expenses incurred by such holder in trying to collect
this Note or in any such suit or proceeding, including reasonable attorneys'
fees.
(f) WAIVERS AND ACKNOWLEDGMENTS. Borrower and all sureties,
endorsers, guarantors and any other party now or hereafter liable for the
payment of this Note in whole or in part, hereby severally (i) waive demand,
presentment for payment, notice of dishonor and of nonpayment, protest, notice
of protest, notice of intent to accelerate, notice of acceleration and all other
notice (except only for any notice that is specifically required by the terms of
the Credit Agreement or any other Loan Document), filing of suit and diligence
in collecting this Note or enforcing any of the security herefor; (ii) agree to
any substitution, subordination, exchange or release of any such security or the
release of any party primarily or secondarily liable hereon; (iii) agree that
the holder hereof shall not be required first to institute suit or exhaust its
remedies against Borrower or others liable or to become liable hereon or to
enforce its rights against them or any security herefor; (iv) consent to any
extension or postponement of time of payment of this Note for any period or
periods of time and to any partial payments, before or after maturity, and to
any other indulgences with respect hereto, without notice thereof to any of
them; and (v) submit (and waive all rights to object) to personal jurisdiction
in the State of Texas, and venue in Dallas County, Texas, for the enforcement of
any and all obligations under the Loan Documents.
(g) AMENDMENTS IN WRITING. This Note may not be changed,
amended or modified except in a writing expressly intended for such purpose and
executed by the party against whom enforcement of the change, amendment or
modification is sought.
(h) PURPOSE OF PROCEEDS. The proceeds of this Note will be
used solely for business purposes and not for personal, family, household or
agricultural purposes.
(i) NOTICES. Any notice required or which any party desires
to give under this Note shall be given and effective as provided in SECTION 9.2
of the Credit Agreement.
(j) ASSIGNMENTS/PARTICIPATIONS. Holder acknowledges and
agrees that the holder of this Note may, at any time and from time to time,
assign all or a portion of its interest in the Credit Facility or transfer to
any Person a participation interest in the Credit Facility.
(k) SUCCESSORS AND ASSIGNS. All of the covenants,
stipulations, promises and agreements contained in this Note by or on behalf of
Borrower shall bind its successors and assigns and shall be for the benefit of
Lender and any holder hereof, and their successors and assigns, whether so
expressed or not.
(l) TIME OF THE ESSENCE. Time shall be of the essence in
this Note with respect to all of Borrower's obligations hereunder.
(m) JURY TRIAL WAIVER. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
EACH OF BORROWER AND LENDER HEREBY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL
BY JURY OF ANY DISPUTE (WHETHER A
Page 6
<PAGE>
CLAIM IN TORT, CONTRACT, EQUITY OR OTHERWISE) ARISING UNDER OR RELATING TO
THIS NOTE, THE OTHER LOAN DOCUMENTS OR ANY RELATED MATTERS, AND AGREES THAT ANY
SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
(n) GOVERNING LAW. THIS NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY NEW MEXICO LAW, EXCEPT TO THE EXTENT THAT UNITED
STATES FEDERAL LAW APPLIES PURSUANT TO SECTION 9.8 OF THE CREDIT AGREEMENT OR
OTHERWISE. THE BOOKS AND RECORDS OF LENDER SHALL CONSTITUTE PRIMA FACIE EVIDENCE
OF ALL SUMS DUE LENDER HEREUNDER.
(o) INTEGRATION. THIS NOTE AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN LENDER AND BORROWER AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF LENDER AND BORROWER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, Borrower has duly executed this Note as of the date
first above written.
BORROWER:
SBS TECHNOLOGIES, INC., a New Mexico corporation
By: /s/ J. E. Dixon
------------------------------------------------
James E. Dixon, Jr.
Vice President, Finance and Administration
Page 7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND IN
THE COMPANY'S 10-Q, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 6,681,294
<SECURITIES> 0
<RECEIVABLES> 24,140,081
<ALLOWANCES> 708,584
<INVENTORY> 19,207,312
<CURRENT-ASSETS> 53,243,796
<PP&E> 11,886,877
<DEPRECIATION> 4,431,188
<TOTAL-ASSETS> 98,513,466
<CURRENT-LIABILITIES> 10,623,318
<BONDS> 0
0
0
<COMMON> 54,838,979
<OTHER-SE> 33,051,169
<TOTAL-LIABILITY-AND-EQUITY> 98,513,466
<SALES> 60,452,721
<TOTAL-REVENUES> 60,452,721
<CGS> 27,750,177
<TOTAL-COSTS> 49,772,253
<OTHER-EXPENSES> 29,982
<LOSS-PROVISION> (17,413)
<INTEREST-EXPENSE> 77,842
<INCOME-PRETAX> 10,825,273
<INCOME-TAX> 3,750,293
<INCOME-CONTINUING> 7,074,980
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,074,980
<EPS-BASIC> 1.18
<EPS-DILUTED> 1.09
</TABLE>
