<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-------------------------
FORM 10-K
------------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO ________
COMMISSION FILE NUMBER: 000-26496
CYBEX COMPUTER PRODUCTS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
------------------------------------------------------
ALABAMA 63-0801728
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4912 RESEARCH DRIVE, HUNTSVILLE, ALABAMA 35805
(Address of Principal Executive Offices) (Zip Code)
(205)430-4000
(Registrant's Telephone Number, Including Area Code)
-----------------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK
$.001 Par Value
Indicate by check mark whether Cybex Computer Products Corporation (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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
Cybex Computer Products Corporation as of June 19, 1998, was approximately
$140,736,657.
As of June 19, 1998, the number of shares of Cybex Computer Products
Corporation Common Stock outstanding was 8,272,521.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Part III incorporates by reference portions of the Cybex Computer
Products Corporation Proxy Statement for the fiscal year ended March 31, 1998
(to be filed with the Commission on or about July 14, 1998).
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C> <C>
PART I
ITEM 1. BUSINESS..................................................... 3
GENERAL...................................................... 3
RECENT DEVELOPMENTS.......................................... 3
THE INDUSTRY................................................. 5
CYBEX SOLUTIONS.............................................. 5
BUSINESS STRATEGY............................................ 6
PRODUCTS..................................................... 7
RESEARCH AND PRODUCT DEVELOPMENT............................. 8
CUSTOMERS, SALES, AND MARKETING.............................. 9
CUSTOMER SERVICE AND SUPPORT................................. 9
MANUFACTURING................................................ 10
TRADEMARK INFORMATION........................................ 10
COMPETITION.................................................. 10
EMPLOYEES.................................................... 10
RISK FACTORS................................................. 11
ITEM 2. PROPERTIES................................................... 15
ITEM 3. LEGAL PROCEEDINGS............................................ 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......... 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.......................................... 16
ITEM 6. SELECTED FINANCIAL DATA...................................... 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.......................... 18
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK......................................................... 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................. 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.......................... 23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........... 24
ITEM 11. EXECUTIVE COMPENSATION....................................... 24
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................... 24
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............... 24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.................................................. 25
</TABLE>
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PART I
ITEM 1. BUSINESS.
GENERAL
Cybex Computer Products Corporation (the "Company") develops, produces, and
markets keyboard, video monitor and mouse ("KVM") switch and extension products
for use in the computer industry. The Company's KVM switch products ("KVM Switch
Products"), provide up to four users, each with a separate keyboard, video
monitor and mouse, with the capability to control up to 2,160 personal computers
("PCs"), thereby eliminating the need for individual keyboards, video monitors
or mice ("KVM Peripherals") for the controlled PCs. Elimination of separate KVM
Peripherals can provide significant cost reductions including lower initial
investment, reduced utility costs and space savings, as well as more efficient
technical support capabilities. The Company's KVM Switch Products allow users to
control IBM- compatible and Macintosh PCs, and many Sun, Hewlett-Packard, IBM,
DEC and Silicon Graphics workstations functioning either as stand-alone systems
or as file, communications, or print servers ("Servers") operating within a
local area network ("LAN"). The Company's KVM Switch Products are particularly
useful in networking environments where multiple computers are dedicated as
Servers and in situations where multiple computers need to be controlled from
one location to facilitate network management.
The Company's family of KVM extension products ("KVM Extension Products")
(collectively with KVM Switch Products, "KVM Switch and Extension Products"),
allow users to separate the keyboard, video monitor and mouse up to 600 feet
from the PC. In addition, certain KVM Extension Products allow multiple users
shared access to the same PC from different keyboards, video monitors and mice.
KVM Extension Products are particularly useful in congested work areas or where
working conditions may be hazardous to the function of the computer.
The Company's products have benefited from the dramatic growth in the use of
PCs and the accompanying growth in Servers. The Company's products solve many of
the space management, security, and maintenance problems faced by facilities
managers, network administrators, and support personnel responsible for
monitoring and servicing PCs and Servers. All of the Company's KVM Switch and
Extension Products utilize technology developed or enhanced by the Company that
allows the boosting, splitting, switching and converting of KVM signals over
distances greater than allowed by conventional computer hardware and cabling.
Although the Company does not rely exclusively on patent protection, the Company
seeks to protect its technology through patents and nondisclosure agreements.
The Company's goal is to be the market leader in providing KVM Switch and
Extension Products to PC and Server ("PC/Server") users. The Company believes
that it offers a more comprehensive family of KVM Switch and Extension Products
than any of its competitors. The Company intends to build on its position as an
industry leader by continuing its aggressive research and development efforts
aimed at developing new and enhanced products to meet the network management
challenges faced by its customers. In order to concentrate its capital resources
on research and development, product design, marketing, and customer support,
the Company outsources most manufacturing functions.
The Company markets its products to a diversified group of dealers,
distributors, original equipment manufacturers ("OEMs") and end users, primarily
through its inside sales and customer support staff, advertisements in trade
publications, and participation in major industry trade shows. The Company
intends to increase its marketing efforts by (i) expanding existing
relationships and developing new relationships with dealers, major distributors,
end users and OEMs; (ii) expanding domestic and international sales through new
and existing distributors and utilizing its European sales, distribution, and
manufacturing facilities in Shannon, Ireland and Steinhagen, Germany, and its
sales offices in four European countries; (iii) recruiting and training
additional sales personnel; (iv) expanding its direct mail advertising and
telemarketing programs; and (v) increasing e-commerce and management to support
sales via the Internet. From Fiscal 1996 to Fiscal 1997 and from Fiscal 1997 to
Fiscal 1998, the Company's compound annual growth rates in net sales were 38.2%
and 52.0%, respectively. The growth rate in net income from Fiscal 1996 to
Fiscal 1997 was 24.4%. From Fiscal 1997 to Fiscal 1998, the growth rate for net
income was 41.7% excluding a $4.7 million write-off of purchased research and
development costs in connection with the acquisition of the PolyCon Companies,
as hereinafter defined. In Fiscal 1998, 86.1% of net sales was attributable to
KVM Switch Products, and 11.9% was attributable to KVM Extension Products.
RECENT DEVELOPMENTS
The Company is nearing completion of its new, 120,000 square foot corporate
office facility located on an 18 acre tract of land owned by the Company in
Cummings Research Park in Huntsville, Alabama. The new offices will contain the
Company's sales, marketing, research and development, manufacturing,
administration and accounting departments. The Company will occupy the new
offices during the second quarter of Fiscal 1999.
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On March 30, 1998, the Company announced a 3-for-2 stock split, effected as
a 50% stock dividend. The additional new shares were distributed to shareholders
on April 28, 1998.
In March 1998, Kieran MacSweeney, formerly Managing Director of Cybex Europe
Ltd., a wholly owned subsidiary of the Company ("Cybex Europe"), was promoted to
President of Cybex Europe. Mr. MacSweeney is responsible for overall management
of European operations, including manufacturing, distribution, customer service
and support, and sales and marketing.
In December 1997, Cybex Europe acquired for $8.0 million cash Elsner
Computertechnik GmbH ("Elsner"), a German-based manufacturer and marketer of
high-end KVM switch products, and PolyCon Data Systems GmbH, a sales and
marketing company for Elsner products (collectively with Elsner, the "PolyCon
Companies"). With sales of approximately $9.0 million for the 12 months ended
March 31, 1998, the PolyCon Companies sell products to a wide variety of
companies, ranging from medium and large industrial-based companies to some of
the world's largest software and hardware manufacturers, including Microsoft
Corporation, Siemens Nixdorf Informationssysteme AG, Cicso Systems, Inc. and
Dell Computer Corporation. With the acquisition of the PolyCon Companies, the
Company believes that it is now the largest KVM product manufacturing, design
and distribution company in Europe.
In October 1997, the Company announced the introduction of its new
SwitchView(TM) two and four-port KVM switch targeted at the desktop market.
SwitchView(TM) is capable of switching KVM signals between as many as 64
computers with PS/2 style and AT keyboards, VGA/SVGA video, and various types of
mice into a single keyboard, video monitor and mouse. SwitchView is the first
Company designed product to be mass marketed. For Fiscal 1998, Switch View sales
were $1.6 million.
In August 1997, the Company entered into a distribution agreement with Tech
Data Corporation ("Tech Data"), a leading distributor of personal computer
products, to distribute the Company's products to Tech Data's customer base of
over 70,000 value-added resellers and retail dealers. Tech Data offers product
lines in software, networking and communications, mass storage, peripherals and
computer systems and provides extensive pre-sale and post-sale training. The
partnership with Tech Data is expected to expand and enhance the Company's
reseller base.
In July 1997, Gary Johnson, formerly Vice President of Sales Channel
Development, was promoted to Senior Vice President of Sales and Marketing. Mr.
Johnson is responsible for all sales, marketing and product management in the
United States, Asia, the Pacific Rim and the Americas and for providing
marketing support to Cybex Europe.
In July 1997, Christopher Thomas, formerly Vice President of Engineering,
was promoted to Senior Vice President of Engineering. Mr. Thomas is responsible
for the product development organization, including product definition, costing,
scheduling, and staff recruitment and development.
In June 1997, the Company announced the introduction of its new QuickSwitch
Commander(TM), the Company's first product designed specifically for
keyboard/mouse switching. QuickSwitch Commander(TM) is targeted at trading
floors, power users and software developers who need to view multiple video
screens yet would like to use a single keyboard and mouse.
In May 1997, the Company announced next generation versions of its KVM
Switch and Power Control products. The new KVM Switch Product, the AutoView
Pro(TM), includes all of the features of the AutoView(TM) family of KVM Switch
Products and adds support for up to 256 PCs/Servers, password security, and
server power control through use of the Company's Power Commander(TM)
attachment. The Power Commander(TM) was designed specifically to cold-boot
servers and works as a stand-alone product or as an attachment to the AutoView
Pro(TM).
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THE INDUSTRY
The computer industry has experienced dramatic changes during the past 20
years. The personal computer has evolved from stand alone PCs with limited
application into powerful information management tools as part of
enterprise-wide networks. The evolution of computer hardware and software has
allowed PCs in many instances to replace larger and more expensive mainframe
computers as the preferred information management tool for individuals and
organizations of all types and sizes throughout the world.
In the corporate environment, enterprise computing is evolving from large,
centralized mainframe computers to distributed network computing through PCs
interconnected using a client/server design. The typical client/server
installation consists of a LAN with multiple centralized PCs operating as
"servers" dedicated to performing specific functions, such as file servers,
communications servers, and print servers, for multiple "client" PCs connected
to the LAN. Separate LANs within a single facility or in geographically
dispersed locations often are interconnected through a wide area network
("WAN"). Although IBM-compatible systems constitute the majority of the LANs in
operation in the United States, many corporate information systems also include
LANs comprised of Sun, Hewlett-Packard, Silicon Graphics, and Digital Equipment
Corporation workstations and Servers.
The expansion of computer networks in recent years has created several
problems for corporate users. The computer hardware and peripheral devices
required to operate LANs and WANs can consume substantial physical space. Unlike
mainframe computers, which were designed for central configuration and support
of key components, PC-based systems were originally designed to operate as
stand-alone systems where each Server connected to the LAN was required to have
its own central processing unit ("CPU"), keyboard, video monitor and mouse ("KVM
Peripherals"), even though generally only the CPU was necessary for the Server
to perform its designated function within the LAN. There are significant costs
(initial investment and ongoing utilities costs) and space requirements
associated with the KVM Peripherals dedicated to each Server. The multiple KVM
Peripherals required to operate individual Servers consume valuable space and
also make it more difficult for technical staff to support the network.
Currently, many organizations have dealt with the space requirements by housing
network Servers on special racks in dedicated rooms. While this approach has
alleviated part of the problem, the keyboards, video monitors and mice continue
to occupy space and consume energy. Thus, the resulting facility space and
network administration costs required to support LANs and WANs have grown
significantly.
Computer networks have also created additional access, security, and
maintenance problems. Unlike terminal-based mainframe computer systems, PC-based
network systems generally require a separate CPU, keyboard, video monitor and
mouse for each user of the network. The hardware required for each PC causes
problems in space-constrained environments, such as brokerage firm trading
areas, and creates additional equipment replacement and maintenance expenses in
harsh work environments, such as manufacturing plants, where damage to the
PCs/Servers is more likely to occur. In addition, many organizations are
concerned about the security of the system (i.e., unauthorized copying of files
or loading of unauthorized programs into the system).
Finally, increased concurrent use of Macintosh, Sun, and other systems
alongside PC-based LANs compounds the maintenance and efficiency problems faced
by facilities managers and systems administrators. Servers needed to control
separate operating systems also require space in the computer room for separate
CPUs and KVM Peripherals.
CYBEX SOLUTIONS
Cybex develops products designed to solve many of the problems faced by
facilities managers, network administrators, and support personnel responsible
for monitoring and servicing the PCs/Servers comprising network installations.
The Company's high-end AutoBoot Commander 4xP(TM) provides up to four
technicians, each utilizing one keyboard, video monitor and mouse, with the
capability to monitor and control up to 2,160 interconnected PCs and network
Servers, and its high-end PolyCon/XS Matrix Console Switching Hub permits 32
independent consoles to control up to 256 PCs/Servers in a matrix format.
Elimination of KVM Peripherals for each of the connected Servers through use of
the KVM Switch Products provides significant cost reductions including lower
initial investment, reduced utility costs and space savings, as well as more
efficient technical support capabilities. Because the KVM Switch Products
incorporate technology that intelligently manages the boot process
("AutoBoot(TM) Technology"), these products allow support personnel to
automatically boot all connected Servers after a power failure or other problem
without operator intervention. For instance, using the KVM Switch Products, up
to four technicians can simultaneously monitor and diagnose multiple Servers
located in different areas of a facility. With these products, users can
organize, maintain, and support banks of IBM-compatible, Macintosh, and
Unix-based Servers with the same conveniences previously available with
mainframe computers controlled from a single user console.
The Company's KVM Extension Products provide greater systems design
flexibility by allowing customers to locate keyboards, video monitors and mice
up to 600 feet away from a PC/Server. Certain KVM Extension Products also permit
the addition of one or more keyboards, monitors, and mice to a single PC/Server.
These products are particularly useful in providing access to PCs/Servers in
harsh environments such as manufacturing plants where it is not desirable to
locate PCs/Servers on the plant floor. The use of KVM
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Peripherals separated from the PC/Server in this situation decreases the cost of
replacing damaged equipment because the PC/Server can be relocated to a safe
area of the facility. The products also provide advantages in work environments
with limited space, such as brokerage firm trading areas, because the
PCs/Servers can be located outside of the principal work area. In both harsh
work environments and limited space work areas, KVM Extension Products improve
efficiency by allowing maintenance and support functions to be performed from
outside of the main work areas. In addition, these products allow the PC/Server
to be placed in a secure area thereby limiting a user's ability to copy files
onto transportable disks and preventing the insertion of unauthorized programs
into the network.
BUSINESS STRATEGY
The Company's strategy is to be the market leader in developing, producing
and marketing KVM Switch Products, Extension Products and console switching
solutions for the computer industry around the world. The key elements of this
strategy are as follows:
Capitalize on Opportunities Created by Networking Trend. The Company
believes that its KVM Switch and Extension Products address many of the
challenges faced by facilities managers, network administrators, and support
personnel dealing with multiple hardware configurations and operating platforms
as a result of the growth in the PC/Server market in recent years. The
networking trend, in particular, has created various markets for products that
increase space utilization, improve network management and maintenance
functions, lower computer hardware and operating costs, and provide security.
The Company intends to continue to develop products that enhance its customers'
ability to utilize and support standard PC/Server hardware in stand-alone and
network configurations.
Expand Market/Product Position. The Company believes that it offers a more
comprehensive family of KVM Switch and Extension Products than any of its
competitors. The Company intends to build on its position in the KVM Switch and
Extension Products markets by continuing its aggressive research and development
efforts aimed at introducing enhanced and new products ahead of its competitors.
While continuing to introduce enhanced and new products through the various
distribution channels at different price points, the Company plans to expand and
centralize in Europe the development of its high-end switching products and
console switching solutions in order to leverage and integrate its research and
development resources around the world to develop enhanced and new high-end
products in the future. Given the high level of competition in and the
continually evolving nature of its product markets, the Company believes that
the introduction of products ahead of its competitors allows for greater sales
and profit potential and an enhanced reputation in its markets. Many of the
Company's new products have been and will continue to be enhanced versions of
existing KVM Switch and Extension Products, which offer increased application of
existing or additional functions.
Increase Marketing and Sales. The Company intends to continue to emphasize
marketing and sales by (i) expanding existing relationships and developing new
relationships with OEMs, dealers, major distributors and end users; (ii)
expanding domestic and international sales through new and existing
distributors, utilization of its European distribution and manufacturing
facilities in Shannon, Ireland and Steinhagen, Germany, and its sales offices in
four European countries; (iii) recruiting and training additional sales
personnel domestically and abroad; (iv) expanding its direct mail advertising
and telemarketing programs; and (v) increasing e-commerce and management to
support sales via the Internet. By offering multiple products addressing similar
configuration problems at different price points, the Company believes that
opportunities also exist to market its products to discount computer wholesale
and retail outlets. The Company also relies on trade publication advertising,
trade show participation, and repeat business from existing customers to
generate sales.
Continue Customer-Driven R&D. The Company's products and research and
development efforts focus on meeting the challenges encountered by customers
seeking to achieve efficient and cost-effective utilization of computing
resources. The Company intends to continue its customer-driven research and
development efforts, which focus on responding to the needs of its customers by
producing innovative, practical and marketable products that have immediate
applications in their markets. By maintaining extensive contact with customers
throughout the installation and technical support process, the Company
identifies and tests potential design modifications and improvements as well as
new applications of existing products. This process also leads to the
development of entirely new product categories and applications based on
existing technology developed to meet specific customer needs.
Outsource Manufacturing Operations. The Company intends to increase the
degree to which it outsources the manufacturing of its products. Outsourcing of
manufacturing functions enables the Company to avoid the capital investment
required to establish and maintain an in-house manufacturing capability, and
thereby allows the Company to allocate more of its resources to sales and
marketing, research and development, product design, and customer support.
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PRODUCTS
KVM Switch Products. KVM Switch Products provide multiple users, each with a
separate keyboard, video monitor and mouse, with the capability to control up to
2,160 PCs, thereby eliminating the need for individual keyboards, video monitors
and mice for the controlled PCs. The Company's products enable users to control
multiplatform configurations, either as a stand-alone system or as a dedicated
Server operating within a LAN.
A PC/Server network utilizing the Company's products is configured so that
each PC/Server is attached to a specific channel of the KVM switch. The user
simply selects the attached server he wishes to observe or control through push
buttons on the front panel of the switch, a keyboard hot-key sequence or an
optional on-screen menu system. The user's keyboard, video monitor and mouse
operate as though they are attached directly to the selected PC/Server. The KVM
switch emits signals that emulate the existence of a keyboard, video monitor and
mouse, thereby causing the controlled PC/Server to operate just as if the user's
KVM Peripherals were connected directly to the PC/Server whether or not
selected. The Company's major KVM Switch Products include the following:
- The SwitchView(TM) two and four port KVM switch is designed to
switch KVM signals among a maximum of 64 computers. The
SwitchView is the Company's first product designed for mass
marketing.
- The AutoView Commander(TM) adds computer selection through an
optional on-screen menu system and adds hot pluggable
operations to the AutoBoot(TM) Technology. Its higher level of
integration results in a cost reduced design. Both a four-port
and an eight-port model are available.
- The AutoView Pro(TM) adds an AC power control option into the
Auto View(TM) technology utilizing the optional Power
Commander(TM).
- The AutoBoot Commander 4xP(TM) 1xP(TM) adds multimedia,
multiplatform, and multiuser features (in addition to the
basic AutoBoot Commander(TM) features) providing the user with
the capability to configure up to four user consoles
simultaneously managing an array of up to 2,160 PCs/Servers
located a maximum of 500 feet from the control unit. It is
hot-pluggable and can be reconfigured while in operation
without disruption of the operation of the switch or the
attached PCs/Servers.
- The Slimline Commander(TM) and the Magnum Commander(TM)
incorporate AutoBoot(TM) Technology to control 8 or 16
PCs/Servers, respectively, in a housing designed for 19 inch
rack configurations, expandable up to 96 PCs/Servers located
up to 150 feet from the switch unit.
- The AutoBoot Commander(TM) was the industry's first KVM Switch
to incorporate the AutoBoot(TM) technology. It accommodates
two to eight PCs/Servers per unit and is expandable to a
maximum of 96 PCs/Servers located up to 150 feet from the
switch unit.
- The AutoBoot Commander(TM) II utilizes Auto View(TM)
Technology to control two to eight PCs/Servers.
- The Personal Commander(TM) incorporates AutoBoot(TM)
Technology and adds mouse support, controlling two to four
PCs/Servers located up to 150 feet away from the switch unit.
The Personal Commander(TM) II utilizes AutoView(TM) technology
to control two to four IBM compatible PCs/Servers. Both
products are designed for desktop use.
- The PolyCon/S Console Switching Hub is designed to control
eight servers and can be configured to control 32 PCs/Servers
from one console. A "console" is made up of a keyboard, a
monitor and the PolyCon/S Switching Hub.
- The PolyCon/XS Matrix Console Switching hub is designed to
simultaneously and independently control multiple PCs/Servers
from multiple consoles in a matrix format. Available in eight
or 16 ports, the PolyCon/XS product can be configured such
that 256 PCs/Servers can be controlled from 32 independent
consoles. In concert with other PolyCon products, the number
of PCs/Servers can be increased to 1,024.
KVM Switch Products (other than the AutoBoot Commander 4xP(TM)) can be
combined with the Company's KVM Converter products to mix Macintosh and Sun
systems with IBM PC-compatible systems within one configuration. The AutoBoot
Commander 4xP(TM) and 1xP(TM) products support multiple operating platforms
without the need for separate converter devices. Most of the Company's KVM
Switch Products attach to PCs/Servers using the Company's proprietary cable
assemblies and many do not require an external power source.
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KVM Extension Products. KVM Extension Products allow users to separate the
keyboard, video monitor and mouse up to 600 feet from the PC without degrading
the video quality, as compared to six to eight feet allowed by conventional
cables. In addition, certain KVM Extension Products allow multiple users shared
access to the same PC from KVM Peripherals. KVM Extension Products are
particularly useful in work areas where space is constrained, where working
conditions may be hazardous to the function of the computer, or where PC/Server
security is an important consideration.
The Company's KVM Switch and Extension Products utilize the Company's
proprietary technology that allows the boosting, splitting, switching, and
converting of usable video signals over distances greater than allowed by
conventional computer hardware and cabling. The Company's KVM Extension Products
include:
- The PC Extender(TM) SNAP enables a user to separate his PC from the KVM
Peripherals by as much as 600 feet using standard, unshielded twisted
pair, Category 5 cabling commonly installed in Ethernet networks. The
Company enhanced the SNAP product in Fiscal 1997 to provide the same
functionality through a single cable.
- The PC Extender Plus(TM) allows a user to locate the KVM Peripherals up
to 600 feet away from the PC/Server.
- The PC Companion Plus(TM) allows a user to locate the KVM Peripherals
up to 600 feet away from the PC/Server, with the ability to have
separate KVM Peripherals attached to the PC/Server.
- The PC Expander Plus(TM) allows a user to attach one local and from
three to seven remote KVM Peripherals to a single PC/Server located up
to 600 feet from the remote user consoles.
- The KVM Converter products convert data entered through an IBM
PC-compatible keyboard and PS/2 mouse into a format compatible with the
Macintosh computer and Sun workstations. These products can be combined
with the Company's KVM Switch Products to mix Macintosh and Sun systems
with IBM PC-compatible systems within one configuration.
- The PolyCon/RC and the RC+ (Remote Controller) allows the remote
control of the PolyCon/S and the PolyCon/XS configurators with a single
cable.
Other Products. The Company's Remote Activation and Power Control Products,
the PhoneBoot(TM) and the ReBoot(TM), allow PCs/Servers and other AC-powered
devices to be turned on or off by means of a telephone call incorporating
selective password protection. The PhoneBoot(TM) product is designed to power up
a Server for users requiring access outside of regular working hours. When the
user dials the correct phone number and activates the PhoneBoot(TM), the power
to the attached device is turned on and stays on until the modem or other device
is disconnected or goes off-hook. When a user activates the ReBoot(TM) device
through a telephone call, the ReBoot(TM) product turns off the power to the
attached device for forty-five seconds and then turns the power back on. The
ReBoot(TM) product is designed to restart file servers and communications
servers that have locked up due to software problems or telephone line
interference. The Key-View product is designed to provide telephone line access
to keyboard and video signals of PCs/Servers with VGA video resolution. It is
commonly used in conjunction with the Company's KVM Switch Products. The Power
Commander(TM) adds AC power control for controlling one to four PCs/Servers.
RESEARCH AND PRODUCT DEVELOPMENT
The Company believes that the continued, timely development of new products
and enhancements to its existing products is essential to maintaining its
competitive position. The Company's research and development efforts focus on
responding to the needs of its customers by producing innovative, practical and
marketable products that have immediate applications in their markets. By
maintaining extensive contact with customers throughout the installation and
technical support process, the Company is able to identify and test potential
design modifications and improvements as well as new applications and extensions
for existing products. This process also leads to the development of entirely
new product categories and applications based on existing technology developed
to meet specific customer needs. The Company believes that product development
activities directed toward solving the practical needs of its customers provides
a competitive advantage in introducing new and enhanced products ahead of its
competitors. While continuing to introduce enhanced and new products through the
various sales channels at different price points, the Company plans to expand
and centralize in Europe the development of its high-end switching products and
console switching solutions in order to leverage and integrate its research and
development resources around the world to develop enhanced and new high-end
products in the future. In Fiscal 1996, Fiscal 1997 and Fiscal 1998, the
Company's research and development expenditures were $1.7 million, $2.4 million
and $3.3 million (exclusive of the purchased research and development
write-off), respectively (6.7%, 6.9% and 6.3% of net sales, respectively). As of
June 1, 1998, the Company's research and development staff consisted of 41
full-time employees.
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The Company's products utilize components manufactured by third parties that
are generally available to the Company's competitors and potential competitors.
The Company's success in the future will depend in part upon its ability to
continue to apply such commercially available components to the development of
new products and new product categories and enhancement of existing products
designed to meet technological changes and customer needs in a cost-effective
manner. By emphasizing customer-driven research and development, the Company has
been able to develop innovative, practical and marketable products that have had
immediate application and acceptance in its markets. The failure by the Company
to respond timely to technological changes or customer requirements could have a
material adverse effect on the Company's business, financial condition, results
of operations and cash flows.
To meet the challenges of the rapidly changing technology in the computer
industry, the Company expects to continue to increase the level of investment in
research and development in the future. The Company's primary product
development efforts emphasize new or enhanced versions of its KVM Switch and
Extension Products or related products. There can be no assurance that these new
or enhanced versions or any other product development efforts of the Company
will lead to commercially viable products, will be completed on a timely basis,
or will include the features required to achieve market acceptance.
CUSTOMERS, SALES AND MARKETING
The Company's principal customers include a diversified group of dealers and
major distributors (71.0% of net sales in Fiscal 1998), OEMs (18.8% of net sales
in Fiscal 1998) and end users (10.2% of net sales in Fiscal 1998). The Company
believes that its broad range of products sold at different price points offers
the Company the opportunity to market its products to customers of all sizes, in
different industries, and with varying degrees of technical sophistication. In
Fiscal 1997 and Fiscal 1998, no single customer accounted for more than 4.3% and
7.5%, respectively, of the Company's net sales, and the loss of any customer
would not have a material adverse effect on the Company's business, financial
condition, results of operations or cash flows.
The Company markets its products primarily through an internal sales and
customer support staff, advertising in trade publications, and participating in
major industry trade shows. The Company's staff of inside sales and customer
support personnel process written and telephonic orders, service existing
customers, and respond to information inquiries. The Company devotes a
substantial portion of its marketing efforts to developing, monitoring, and
enhancing its relationships with its network of independent dealers,
distributors, OEMs and end users. The sales personnel are supported by the
Company's engineering department and its customer service representatives who
provide "hot line" technical support and advice to customers. While the Company
continues to emphasize its traditional marketing efforts, it has also increased
its sales and customer support personnel staff and increased its direct mail
advertising, telemarketing, publicity programs and enhanced its home page on the
World Wide Web. In addition to enhancing its relationships with its existing
customer base, the Company seeks to establish relationships with additional
distributors, OEMs and systems integrators. As of June 1, 1998, the Company's
total sales and customer support staff consisted of 67 employees.
In August 1997, the Company entered into a distribution agreement with Tech
Data Corporation ("Tech Data"), a leading full-time distributor of personal
computer products, to distribute the Company's products to Tech Data's customer
base of over 70,000 value-added resellers and retail dealers. Tech Data offers
product lines in software, networking and communications, mass storage,
peripherals and computer systems and provides extensive pre-sale and post-sale
training. The partnership with Tech Data is expected to expand and enhance the
Company's reseller base.
The Company's international sales accounted for approximately 21% and 26% of
net sales in Fiscal 1997 and Fiscal 1998, respectively, and are placed primarily
through distributors located in Europe, Canada, and other foreign countries. The
Company plans to expand international sales within the European community, Asia
and the Pacific Rim through the utilization of its facilities in Shannon,
Ireland and Steinhagen, Germany.
CUSTOMER SERVICE AND SUPPORT
The Company emphasizes customer service and support by developing quality
products, encouraging customer feedback through extensive contact with key
customers, maintaining extensive documentation of technical support requests and
customer profiles, and providing a customer hot-line that offers technical
support for the life of its products. Any problems that cannot be solved by the
technical support personnel are referred to the Company's engineering
department. The Company offers a 30-day money-back guarantee for all of its
products and a one year limited warranty on parts and service, and incidental
repairs. The Company seeks to respond quickly to customers' requests for
technical support and service, including overnight exchange of defective parts
or products. The Company also allows additional rights of return for certain of
its customers. The Company has not experienced significant product returns.
9
<PAGE> 10
MANUFACTURING
The Company does not manufacture any of its products in their entirety. In
order to avoid the capital investment required to establish and maintain
in-house manufacturing capabilities, the Company relies on subcontractors for
assembly of printed circuit board assemblies, subassemblies, chassis, and
equipment enclosures. The Company believes that such assembly can typically be
done by subcontractors at a lower cost than if the Company assembled such items
internally. Outsourcing manufacturing operations allows the Company to
concentrate its resources on marketing, research and development, product
design, quality assurance and customer support. The Company does, however,
subject all of the components and products to automated testing, equipment
burn-in procedures, comprehensive quality audits, functional testing and
regulatory screening to assure quality and reliability.
The Company outsources substantially all capital intensive manufacturing
functions and intends to continue to use third-party manufacturers to control
more effectively the unit cost of the Company's products. This reliance on third
party subcontractors for the assembly of its products involves several risks,
including reduced control over product quality, delivery schedules,
manufacturing yields and costs. The Company attempts to diversify and currently
believes that it has diversified its outsourced manufacturing operations and has
an adequate supply of alternative subcontractors.
The Company purchases industry-standard parts and components for the
assembly of its products from multiple vendors and suppliers through a
world-wide sourcing program. Custom molded cables procured from outside sources
have significant delivery times (10 to 12 weeks), and failure to obtain adequate
supplies could adversely affect product deliveries. In the past, the Company has
experienced delays in the receipt of certain of its components, which have
resulted in delays in related product deliveries. The Company attempts to manage
such risks through developing alternative sources and maintaining relationships
and close personal contact with each of its suppliers. There can be no
assurance, however, that delays in component and product deliveries will not
occur in the future. The inability to obtain sufficient components or to develop
alternative sources if and as required in the future, could result in delays or
reductions in product shipments, which, in turn, could have a material adverse
effect on the Company's business, financial condition, results of operations and
cash flows. The Company believes that there are adequate alternative sources for
its components.
A substantial portion of the Company's shipments in any fiscal period relate
to orders received in that period. To meet this demand, the Company maintains a
substantial level of inventory. The Company believes that because a substantial
portion of customer orders are filled within the fiscal quarter of receipt, the
Company's backlog is not a meaningful indicator of actual sales for any
succeeding period.
TRADEMARK INFORMATION
Various trademarks, service marks, and trade names to which reference is
made in this Annual Report on Form 10-K are the property of owners other than
the Company. Such owners have all applicable rights with respect to their
respective trademarks, service marks and trade names.
COMPETITION
The market for the Company's new products is highly competitive, and the
Company expects competition to increase in the future. The Company believes that
its primary competitors are other manufacturers of keyboard, video monitor and
mouse access devices, such as Apex PC Solutions, Inc. ("Apex"), Raritan
Computer, Inc. and Rose Electronics. Large OEM server manufacturers, such as
Hewlett-Packard Company and Compaq Computer Corporation, offer switch products
supplied by the Company's competitors. Some of the Company's competitors have
greater name recognition; more extensive engineering, manufacturing and
marketing capabilities; and significantly greater financial, technological and
personnel resources than the Company. The Company competes for customers on the
basis of performance in relation to price, product features, adherence to
standards, quality, reliability, development capabilities, product availability
and support. The Company's future success will depend to a significant degree
upon its ability to remain competitive in the areas of marketing, research and
development, technology and distribution. As the Company's channels of
distribution expand, the Company expects to experience increased price
competition. Increased competition could result in price reductions and loss of
market share which would adversely affect the Company's business, financial
condition, results of operations and cash flows.
EMPLOYEES
As of June 1, 1998, the Company had 183 full-time employees working in the
United States. Of the Company's domestic full-time employees, 45 were in
marketing, sales, and customer support; 30 were in engineering, research and
development; 87 were in manufacturing and operations; and 21 were in
administration. As of June 1, 1998, there were 53 full-time employees working in
the
10
<PAGE> 11
Shannon, Ireland facility and 47 full-time employees working in the Steinhagen,
Germany facility. None of the Company's employees are represented by a
collective bargaining agreement, nor has the Company ever experienced any work
stoppage. Management believes that the Company's relationship with its employees
is good.
RISK FACTORS
This Annual Report on Form 10-K contains certain forward-looking statements
that are subject to certain risks and uncertainties that could cause actual
results to vary materially from those anticipated in the forward-looking
statements. Factors that might cause a difference include, but are not limited
to the following:
Technological Changes; Need to Continue Developing New Products
The markets for the Company's products are characterized by rapidly changing
technologies, evolving industry standards and continuing improvements. If
technologies used in the Company's products become obsolete or fail to gain
widespread commercial acceptance, the Company's business may be adversely
affected. Moreover, the introduction of products embodying new technologies and
the emergence of new industry standards could adversely affect the Company's
ability to sell its products. While the Company has competed favorably with its
competitors by continually developing a high performance line of products
utilizing leading technologies, competitors have developed products which offer
similar features. Although historically the timing of the introduction of new
products or enhancements to existing products by the Company has not had a
material adverse effect on the business, financial condition, results of
operations or cash flows of the Company, there can be no assurance that these
circumstances will continue in the future. The Company expects that the
continued development of comparable products by competitors will require that it
develop new and/or enhanced products on an ongoing basis to meet the competitive
demands of these markets. The Company's sales and profitability in the past have
resulted to a significant extent from its ability to anticipate or react quickly
to its customers' needs and to develop and introduce new and enhanced products.
The Company's continued ability to adapt to customer needs and technological
change will be a significant factor in maintaining or improving its competitive
position and its prospects for growth. However, the Company's failure to respond
on a timely basis to technological developments, changes in industry standards
or customer requirements, software innovations or any significant delay in
product development or introduction would have a material adverse effect on the
Company's business, financial condition, results of operations, or cash flows.
Potential Fluctuations in Quarterly Results; Product Returns
Most of the Company's sales in each quarter result from orders booked in
that quarter. The Company typically does not have firm commitments for the
purchase of products to be delivered in the future. Furthermore, many purchasers
typically require prompt delivery of products. This results in a limited backlog
of orders for these products and requires the Company to maintain sufficient
inventory levels to satisfy anticipated customer demand. If demand for the
Company's products declines or if significant potential sales in any quarter do
not occur as anticipated, the Company's financial results will be materially
adversely affected. The Company offers a 30-day unconditional money-back
guarantee and a twelve to fifteen month limited warranty for all of its products
and allows additional rights of return to certain of its customers. Although the
Company's historical return experience has not been significant, such returns,
should they occur, would have an adverse effect on sales and on the Company's
net sales. Operating expenses are relatively fixed over the short term, and,
therefore, a shortfall in quarterly revenues could impact the Company's
financial results significantly in a quarter. Furthermore, maintaining
sufficient inventory levels to assure prompt delivery of the Company's products
increases the amount of inventory that may become obsolete and increases the
risk that the obsolescence of such inventory may have a material adverse effect
on the Company's business and operating results. The Company's operating results
may also fluctuate as a result of a number of other factors, including increased
competition, changes in customer order patterns, changes in product mix, and
announcements of new products by the Company or its competitors.
Current Dependence on Limited Product Lines; Technological Obsolescence
A significant percentage of the Company's net sales during the last three
fiscal years has been derived from sales of the Company's KVM Switch and
Extension Products. Sales of these products accounted for approximately 98% of
net sales in Fiscal 1998 and Fiscal 1997 and 96% of net sales in Fiscal 1996.
There can be no assurance that the Company's sales of its KVM Switch and
Extension Products will continue at this level or that new product releases will
be successful. A significant decline in sales of KVM Switch and Extension
Products would have a material adverse effect on the Company's business,
financial condition, results of operations and cash flows. A principal feature
of KVM Switch Products is their ability to emulate a computer's associated
keyboard. Technology exists today that would allow computers to perform various
functions and to be accessed without electronic impulses from an associated
keyboard or keyboard emulation device. To date, this technology has not gained
acceptance, but to the extent that widespread commercial acceptance of this
technology occurred, it would have a material adverse effect on the Company's
business, financial condition, results of operations and cash flows.
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<PAGE> 12
Intense Competition
The markets for the Company's products are highly fragmented and intensely
competitive. The Company's business is becoming increasingly sensitive to new
product introductions, price changes and marketing efforts by its competitors.
Accordingly, the Company's future success will be highly dependent upon timely
completion and introduction of new products and product features at competitive
price and performance levels which address the evolving needs of the Company's
customers. The Company is currently experiencing increased price competition in
the market for KVM Switch and Extension Products and expects that pricing
pressures will increase in the future. Increased competition could result in
price reductions and loss of market share, which would adversely affect the
Company's business, financial condition, results of operations and cash flows.
In the market for KVM Switch Products, the Company competes with independent
third parties such as Apex, Raritan Computer Inc. and Rose Electronics. The
Company may in the future face competition from software providers who are able
to offer a software solution to address many of the problems the Company's
switching systems are designed to address.
The Company's current and potential competitors, many of which have
significantly greater financial, technical, marketing and other resources than
the Company, may be able to respond more quickly to new or emerging technologies
and changes in customer requirements or to devote greater resources to the
development, promotion and sale of their products than the Company. In addition,
current and potential competitors have established or may establish cooperative
relationships among themselves or with third parties that enhance the ability of
their products to address the needs of the Company's prospective customers.
There can be no assurance that the Company will be able to compete successfully
against current and future competitors or that competitive pressure faced by the
Company will not have a material adverse effect on the Company's business,
financial condition, results of operations and cash flows.
Risks Relating to Expansion of International Distribution Network and
International Sales
The Company's strategy contemplates additional development and expansion of
its international distribution network through Cybex Europe in an effort to
increase international sales of its products. There can be no assurance that the
Company will be successful in expanding its international distribution network
or in increasing sales of its products in foreign markets. If the revenues
generated by international sales are not adequate to recover the expense of
establishing, expanding and maintaining an international distribution network,
the Company's business, financial condition, results of operations and cash
flows will be materially adversely affected. If international sales become a
more significant component of the Company's net sales, the Company's business
will become more vulnerable to the risks inherent in doing business on an
international level, including difficulties in managing foreign
distributors,longer payment cycles and problems in collecting accounts
receivable, the effects of seasonal customer demand, changes in regulatory
requirements, risks relating to intellectual property rights, export
restrictions, tariffs and other trade barriers, fluctuations in currency
exchange rates, potentially adverse tax consequences and political instability.
The existence or occurrence of any one of these factors could have a material
adverse effect on the Company's business, financial condition, results of
operations and cash flows.
Dependence on Key Personnel
The Company is dependent in large part upon its ability to retain its key
management and technical personnel, including Stephen F. Thornton, Chairman of
the Board, President and Chief Executive Officer; Remigius G. Shatas, Executive
Vice President - Technology and Acquisitions and Secretary; Doyle C. Weeks,
Senior Vice President - Finance, Chief Financial Officer and Treasurer; Robert
A. Asprey, Senior Vice President, Chief Scientist; R. Byron Driver, Senior Vice
President and Chief Operating Officer and Kieran MacSweeney, President of Cybex
Europe. The future success of the Company will be highly dependent upon the
personal efforts of these individuals and other key management and technical
personnel, and the loss of services of any one of them could have a material
adverse effect on the Company's business, financial condition, results of
operations and cash flows. Messrs. Thornton, Shatas, Weeks, Asprey and Driver
are the only executive officers or employees with whom the Company has entered
into employment agreements, and Messrs. Thornton, Shatas and Asprey are the only
executive officers upon whom the Company maintains "key-man" life insurance. The
Company's success will also be dependent in part upon its ability to attract,
retain and motivate highly skilled employees. Competition for employees with the
skills required by the Company, particularly engineering and other technical
personnel, is intense, and there can be no assurance that the Company will be
able to attract and retain highly skilled employees in sufficient numbers to
sustain its current business or to support future growth.
Management of Growth
In recent periods, the Company has experienced rapid revenue and customer
growth and expansion in the number of its employees, its product offerings and
the scope and complexity of its financial systems. This growth has placed
significant strain on the Company's management, operational and financial
resources and has resulted in new and increased responsibilities for management
personnel. The Company's officers have had limited or no experience in managing
companies larger than the Company. There can be no assurance that the Company's
management, personnel, systems, procedures and controls will be adequate to
support the Company's
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<PAGE> 13
existing and future operations. The Company's ability to effectively manage its
recent growth and any future growth will require the Company to continue to
implement and improve its operational, financial and information systems and
will likely require additional management personnel. In addition, the Company
believes that it must develop greater engineering, marketing, sales and customer
support capabilities in order to develop new products and product enhancements,
secure new customers at a rate necessary to achieve desired growth and
effectively serve the evolving needs of present and future customers. There can
be no assurance that the Company will be successful in strengthening these
capabilities. Without adequate management, engineering, product development,
marketing and sales and customer support capabilities, the Company's ability to
effectively manage its growth, expand and enhance its product line, further
penetrate its existing markets and develop new markets will be significantly
limited. If the Company's management is unable to effectively manage the
Company's growth, the business, financial condition, results of operations and
cash flows of the Company will be materially adversely affected.
Dependence Upon Suppliers and Outsourced Manufacturing
The principal components of the Company's switch products are power
supplies, cable assemblies, line filters, enclosures, printed circuit boards and
electronic components, all of which are purchased from outside vendors. The
Company buys components under purchase orders and generally does not have
long-term agreements with its suppliers. While the Company attempts to maintain
multiple outside sources for all of the materials and components it purchases,
there can be no assurance that the materials or components of any one or more of
those sources could be promptly or adequately replaced. Any termination of or
significant disruption in the Company's relationship with suppliers of its
product components may prevent the Company from filling customer orders in a
timely manner, as the Company generally does not maintain large inventories of
its products or components. The Company purchases a number of the components for
its switch products from sole or a limited number of suppliers. The Company has
occasionally experienced and may in the future experience delays in delivery of
such components. Although alternate suppliers are available for most of the
components and services needed to produce the Company's products, the number of
suppliers of some components is limited, and qualifying a replacement supplier
and receiving components from alternate suppliers could take several months. The
Company depends upon its suppliers to deliver quality components that are cost
competitive and in compliance with the Company's specifications. Disruption in
supply, a significant increase in the cost of one or more components, failure of
a third party supplier to remain competitive in price, or the failure of a
supplier to comply with any of the Company's procurement needs could delay or
interrupt the Company's ability to manufacture and deliver its products to
customers on a timely basis, thereby adversely affecting the Company's business,
financial condition, results of operations and cash flows.
The Company relies on third party manufacturers for subassembly of the
Company's products. These outsourcing arrangements and any future outsourcing
arrangements involve numerous risks, including reduced control over product
quality, delivery schedules, manufacturing yields and costs. Moreover, although
arrangements with such manufacturers may contain provisions for warranty
obligations on the part of such manufacturers, the Company remains primarily
responsible to its customers for warranty obligations.
Reliance on PC/Server Market; Improving Network Reliability and Tools
The Company's business is dependent upon the continued acceptance of the
PC/Server model of network computing. Although distributed network computing
utilizing PC/Server architecture has gained increasing acceptance, there can be
no assurance that use of this networking model will continue to grow or that it
will not be replaced by new technologies for network computing, thereby
rendering the Company's products obsolete. In addition, the market for the
Company's products is driven in part by the inherent unreliability of networks.
As networks continue to proliferate, however, PC/Server manufacturers and
software developers or providers may develop greater reliability and better
tools for managing networks. To the extent that greater reliability and better
network management tools are successfully developed, the Company's products
could be rendered obsolete, which would have a material adverse effect on the
Company's business, financial condition, results of operations and cash flows.
Limited Protection of Proprietary Rights; Risks of Third Party Infringements
The Company's success is highly dependent on proprietary technology. The
Company has been granted some patents and applications for additional patents
are pending. The Company also relies upon copyright, trademark and trade secret
laws to establish its proprietary rights in its products. The laws of certain
foreign countries in which the Company's products are or may be developed,
manufactured or sold may not protect the Company's products or intellectual
property rights to the same extent as do the laws of the United States and thus
increase the likelihood of piracy of the Company's technology and products.
There can be no assurance that the steps taken by the Company to protect its
intellectual property rights will be adequate to prevent misappropriation of its
technology or that the Company's competitors will not independently develop
technologies that are substantially equivalent or superior to the Company's
technology.
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<PAGE> 14
The Company may initiate claims or litigation against third parties for
infringement of the Company's proprietary rights or to establish the
validity of the Company's proprietary rights. The Company may also be subject to
claims or litigation initiated by third parties against the Company. Currently,
the Company is a party to litigation initiated by Apex. Apex contends in a
lawsuit filed in February 1998 against the Company and others in the US District
Court in Seattle, Washington that the Company has infringed Patent No.
5,721,842. Although the outcome of any litigation can never be certain, the
Company does not believe that any of its products are covered by any valid claim
of Apex's patent. As a result, it is the Company's opinion that the outcome of
such contingencies will not materially affect its business, financial condition,
results of operations or cash flows.
Risks Relating to Expansion of Distribution Channels
The Company expects to rely increasingly on major distributors, value-added
resellers, systems integrators, and OEMs for the distribution and sale of its
products, and the Company's strategy contemplates the expansion of its
distribution channels both domestically and internationally. The Company's
future success will depend in part on its ability to expand existing
relationships and develop new relationships in these distribution channels.
There can be no assurance that the Company will be successful in expanding its
distribution channels. The Company will be required to invest significant
additional resources in order to expand its distribution channels, and there can
be no assurance that the cost of the Company's investment in further developing
and expanding these channels will not exceed the revenues generated from such
investment. The Company provides and expects to continue providing discounts and
other special pricing arrangements throughout its distribution channels. As
sales through these distribution channels increase, the Company expects gross
margins on such sales, as a result of discounts and other special pricing
arrangements, to be lower than gross margins on sales made through other
distribution channels. Although the Company's product return arrangements in
these distribution channels do not provide significant rights of return, the
Company expects that as sales through these distribution channels increase, such
arrangements could result in an increased risk of significant product returns.
There can be no assurance that actual returns in the future will not have a
material adverse effect on the Company's business, financial condition, results
of operations or cash flows. (See "Potential Fluctuations in Quarterly Results;
Product Returns") The Company's distribution agreements generally are
nonexclusive and may be terminated on short notice by either party without
cause. Companies in these distribution channels are not within the control of
the Company, are not obligated to purchase products from the Company and
frequently offer products of several different manufacturers, including products
competitive with the Company's products. There can be no assurance that
companies in these distribution channels will not give higher priority to the
sale of such other products. A reduction in sales efforts by the companies in
these distribution channels could lead to reduced sales by the Company and could
materially adversely affect the Company's business, financial condition, results
of operations and cash flows.
Increased Demands on Customer Support Operations
Growth of the Company's sales, should it occur, is likely to be accompanied
by increasing demands on the Company's customer support operations. As a result
of the Company's commitment to a high level of customer support, the Company is
likely to need to invest significant resources in the maintenance and
improvement of its customer support resources. Any failure to maintain adequate
customer support could cause customer dissatisfaction, result in reduced sales
of the Company's products and, accordingly, materially adversely affect the
Company's business, financial condition, results of operations and cash flows.
Control by Certain Shareholders
At June 19, 1998, the executive officers and directors of the Company
beneficially owned or controlled approximately 23.5% of the outstanding shares
of Common Stock. Accordingly, such persons, if they were to act in concert,
would likely control the Company's Board of Directors and, therefore, the
business, policies and affairs of the Company. Furthermore, such control could
preclude any unsolicited acquisition of the Company and, consequently, adversely
affect the market price of the Common Stock.
Possible Volatility of Stock Price
There may be significant volatility in the market price for the Common
Stock. Quarterly operating results of the Company or companies within the same
or similar industry segments, changes in the general conditions of the economy,
the financial markets or the technology industry, adverse press or news
announcements or other developments affecting the Company or its competitors
could cause the market price of the Common Stock to fluctuate substantially.
Furthermore, the stock market may experience significant price and volume
fluctuations which may affect the price of the Company's Common Stock for
reasons unrelated to its operating performance.
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<PAGE> 15
ITEM 2. PROPERTIES.
The Company's headquarters, containing administrative, engineering and
manufacturing facilities, are located in Huntsville, Alabama in two adjacent
leased buildings occupying approximately 54,000 square feet. The leases provide
for annual rent of approximately $288,000.
The Company is nearing completion of its new headquarters, which will
consolidate all of the Company's U.S. operations and will contain the
administrative, sales, marketing, research and development, engineering and
manufacturing functions. The new 120,000 square foot building is located on an
18-acre tract of land owned by the Company in Cummings Research Park in
Huntsville, Alabama. The Company will occupy the new offices beginning in the
second quarter of Fiscal 1999.
In May 1998, Cybex Europe moved into a 35,000 square foot, leased facility
located in the Shannon Free Trade Zone, Shannon, Ireland. This facility conducts
manufacturing, marketing and distribution functions in the European community.
The lease with the Shannon Development Authority is for twenty years and
provides for annual rent of approximately $400,000.
The PolyCon Companies' headquarters, containing administrative, engineering
and manufacturing facilities, are located on leased property in Steinhagen,
Germany. The lease, which provides for annual rent of approximately $87,000,
expires in the year 2000. The PolyCon Companies also have a U.S. distribution
facility in Fort Worth, Texas that occupies 7,300 square feet. The Fort Worth
property is subject to a five-year lease which expires in October 2002. The
lease provides for annual rent of $78,000.
ITEM 3. LEGAL PROCEEDINGS.
The Company has been involved from time to time in litigation in the normal
course of its business. In February 1998, Apex filed a lawsuit in the U.S.
District Court in Seattle, Washington asserting certain patent infringement
claims against the Company. Although the outcome of any litigation can never be
certain, the Company does not believe that any of its products are covered by
any valid claim of Apex's patent and does not believe that the Apex action will
have a material adverse effect on the Company's business, operations, financial
condition or cash flows. The Company is not aware of any other pending or
threatened litigation matters that will have a material adverse effect on the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matters to a vote of its security holders
during the fourth quarter of its fiscal year ended March 31, 1998.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The Company's Common Stock is traded in the over-the-counter market and is
quoted on the NASDAQ National Market System under the symbol CBXC. The
following table sets forth, for the fiscal periods indicated, the reported high
and low sale prices and gives retroactive effect to the stock split discussed
herein:
<TABLE>
<CAPTION>
FISCAL 1997 HIGH LOW
----------- ---- ---
<S> <C> <C>
Quarter ended June 30, 1996.......................... $ 13.83 $ 8.50
Quarter ended September 30, 1996..................... 12.00 8.83
Quarter ended December 31, 1996...................... 11.83 9.33
Quarter ended March 31, 1997......................... 12.67 9.50
FISCAL 1998
-----------
Quarter ended June 30, 1997.......................... $ 12.67 $ 9.50
Quarter ended September 30, 1997..................... 20.33 11.33
Quarter ended December 31, 1997...................... 19.00 13.08
Quarter ended March 31, 1998......................... 23.50 14.83
FISCAL 1999
-----------
Quarter ended June 30, 1998 (through June 19, 1998). $ 25.75 $19.33
</TABLE>
On June 19, 1998, the closing sale price for the Company's Common Stock
was $22.25 per share. At June 19, 1998, there were 211 holders of record of
the Company's Common Stock.
The Company paid no cash dividends to its shareholders during the last two
fiscal years. Future dividends will be dependent upon the Company's earnings,
financial requirements, and other relevant factors.
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ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial data as of and for each of the
fiscal years in the five-year period ended March 31, 1998, has been derived from
the audited financial statements of the Company.
This data should be read in conjunction with the Company's Consolidated
Financial Statements, the notes thereto and Management's Discussion and Analysis
of Results of Operations and Financial Condition included elsewhere in this
document.
<TABLE>
<CAPTION>
Fiscal Years Ended March 31,
----------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net Sales $12,812 $18,182 $25,010 $34,568 $52,564
Cost of Sales 6,039 8,040 11,152 16,408 24,980
Gross Profit 6,773 10,142 13,858 18,160 27,584
Research and development expenses 1,150 1,600 1,686 2,374 3,312
Selling, general and administrative 3,388 4,492 6,096 8,455 13,386
expenses
Acquired research and development
expense -- -- -- -- 4,705
Operating income 2,235 4,050 6,076 7,331 6,181
Interest income (expense), net (13) 52 1,157 1,611 1,626
Other income -- -- 52 291 272
Income before income taxes 2,222 4,102 7,285 9,233 8,079
Provision for income taxes 811 1,402 2,592 3,393 4,508
Net income 1,411 2,700 4,693 5,840 3,571
Net income per common and common equivalent share:
Basic .32 .63 .65 .71 .44
Diluted .29 .55 .61 .70 .42
Weighted average common and common
equivalent shares outstanding:
Basic 4,346 4,307 7,184 8,228 8,173
Diluted 4,840 4,927 7,642 8,390 8,408
<CAPTION>
March 31,
---------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $2,524 $4,580 $39,394 $40,220 $35,432
Total assets 4,475 7,498 47,418 56,527 70,719
Total debt -- -- 5,000 8,000 12,137
Shareholders' equity 3,040 5,720 40,621 44,987 49,435
</TABLE>
17
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
General
The Company develops, produces and markets KVM Switch and Extension
Products for use in the computer industry. The Company's KVM Switch Products
provide up to four users, each with a separate keyboard, video monitor and
mouse, with the capability to control up to 2,160 PCs, thereby eliminating the
need for individual KVM Peripherals for the controlled PCs. Elimination of KVM
Peripherals can provide significant cost reduction (lower initial investment and
ongoing utility costs) and space savings as well as more efficient technical
support capabilities. The Company's KVM Switch Products allow users to control
IBM-compatible and Macintosh PCs and many Sun, Hewlett-Packard, Digital
Equipment Corporation (DEC), IBM and Silicon Graphics workstations functioning
either as stand-alone systems or as file, communications or Servers operating
within a LAN. The Company also has interfaces for its AutoBoot 4xP(TM)/1xP(TM),
which operate with models of IBM RS/6000, Hewlett Packard, DEC's Alpha; and
Silicon Graphic's Indigo workstations. The Company's AutoView Commander(TM),
introduced in mid Fiscal 1997, utilizes a cost reduced architecture, and was the
basis for mid and high range products developed since its introduction. The
Company introduced SwitchView(TM), a two and four port KVM Switch Product, in
mid Fiscal 1998, and is the Company's first product designed to be mass
marketed. As a result of the acquisition of the PolyCon companies discussed
herein, the Company obtained several switching solutions including the
PolyCon/S, a console switching hub, and the PolyCon/XS, a matrix console
switching hub. Certain KVM Switch Products were certified by Novell Corporation
for use with its network software Netware(TM) 4.1. The Company's KVM Switch
Products are particularly useful in networking environments where multiple
computers are dedicated as Servers and in situations where multiple computers
need to be controlled from one location to facilitate network management.
The Company's KVM Extension Products allow users to separate the KVM
Peripherals up to 600 feet from the PC. In addition, certain KVM Extension
Products allow multiple users shared access to the same PC from different KVM
Peripherals. The PC Extender(TM) SNAP, introduced in late Fiscal 1997, utilizes
standard Category 5 UTP cabling , a commonly installed cable in Ethernet
networks, and reduces cabling costs by half. KVM Extension Products are
particularly useful in congested work areas or where working conditions may be
hazardous to the function of the computer.
The Company evaluates its products and its customer needs on an ongoing
basis to advance its competitive position in the marketplace. As part of this
process, the Company seeks expansion not only through internal development but
through strategic acquisition and expansion efforts. Consistent with this
philosophy, the Company completed its acquisition of the PolyCon Companies on
December 31, 1997, discussed later herein. The acquisition of the PolyCon
Companies included intellectual property that the Company plans to leverage and
integrate with its research and development resources worldwide to expand the
Company's high-end console switching products for mid- and large-scale networks.
The acquisition of the PolyCon Companies is consistent with the Company's
strategy to expand its operations in Europe and immediately adds new customer
relationships and expands distribution channels.
The Company's net sales have increased in each fiscal year due primarily to
increases in the number of units sold to both new and existing customers. These
annual net sales increases reflect the Company's strategy of increasing unit
volume and market share through the introduction of new products as well as
increasingly enhanced generations of already accepted products with increased
functionality which are price competitive as compared to prior generations of
the Company's products and to the products of competitors. As a part of this
strategy, the Company seeks to be price competitive and to be the high quality
provider of products in its markets. This strategy has enabled the Company to
sell succeeding generations of products to existing customers as well as to
increase its market share by selling products to new customers.
The Company has broadened its marketing strategy of expanding channels of
distribution by increased penetration in the OEM market and the worldwide
catalog market. In Fiscal 1997, the Company announced its first products
designed specifically for the OEM market. These products are intended to expand
the Company's share of sales in the OEM marketplace. During this same period,
the Company began shipping certain KVM Switch Products to a major worldwide
catalog marketer under private label. During the second quarter of Fiscal 1998,
the Company also began distribution of its branded products with a major
distributor. These relationships have broadened the Company's channels of
distribution of its products and is expected to increase market share.
The Company expanded its marketing strategy to include the retail channel
of distribution with the introduction of SwitchView(TM), which targets the
desktop market. SwitchView(TM) was designed to address the high volume sales
channels and is the Company's first product targeted to the mass market. With
the acquisition of the PolyCon Companies, the Company is the only KVM Switch
Product manufacturer offering products ranging from the entry level PC single
user switch to multi-user, multiplatform switches and console switching
solutions that can control thousands of computers in data centers and server
farms.
18
<PAGE> 19
The Company contracts with third parties to provide completed subassemblies
of its products. The Company outsources entire products (turnkey) for certain
stable high volume products. The Company believes that outsourcing manufacturing
generally enables the Company to control product costs more effectively.
The Company continually evaluates new product opportunities and engages in
substantial research and product development efforts. The Company expenses all
product research and development costs as incurred. Additionally, the Company
also incurs substantial expenses related to advertising, participation in trade
shows and other sales promotions.
Another important part of the Company's strategy is to emphasize customer
service and support. The Company offers a 30-day money-back guarantee for all of
its products, a one year warranty on parts and allows additional rights of
return to certain of its customers. The Company estimates and accrues a
liability for sales and warranty returns. Actual returns have not been
significant to date. The Company also offers sales discounts to its customers
based on the level of sales. Such discounts have historically not had a
significant impact on the Company's results of operations.
The Company believes that increasing its international sales is an
important element in the overall strategy of future revenue growth.
International sales comprised 26%, 21% and 20% of the Company's total sales in
Fiscal 1998, Fiscal 1997 and Fiscal 1996, respectively.
On March 30, 1998, the Company announced a 3-for-2 stock split, effected as
a 50% stock dividend. The additional new shares were distributed to shareholders
on April 28, 1998.
On July 28, 1995, the Company completed an initial public offering of
Common Stock, receiving net proceeds of $32,578,262 from the sale of 2,096,725
shares of Common Stock. The Company has used and expects to continue to use the
net proceeds for working capital and other general corporate purposes, including
(i) product development activities to enhance its existing products and to
develop new products (ii) expansion of sales and marketing activities (iii)
construction of its new manufacturing and administrative facilities in
Huntsville, Alabama (iv) the establishment and expansion of its facility in
Shannon, Ireland and (v) acquisitions.
On July 9, 1996, the Company formally established operations in Shannon,
Ireland, through its newly-formed subsidiary, Cybex Europe. Subsequently, the
Company entered into a month-to-month lease with the Shannon Development
Authority for temporary startup facilities located within the Shannon Free Trade
Zone. The lease for the 12,500 square foot facility expired in May of 1998 when
Cybex Europe moved into its new 35,000 square foot lease facility, also located
in the Shannon Free Trade Zone.
On December 31, 1997, Cybex Europe acquired the PolyCon Companies,
privately held companies located in Steinhagen, Germany, pursuant to the terms
and conditions of a Purchase and Sale Agreement dated December 30, 1997 between
the Company, Cybex Europe and Edgar and Stephanie Elsner, for a combined
purchase price of $8,800,000 including acquisition related expenditures. In
accordance with generally accepted accounting principles, costs allocated to
acquired research and development assets with alternative future uses have been
capitalized, and the remaining $4,705,000 of acquired research and development
costs have been expensed as a one-time charge on December 31, 1997. The
acquisition of the PolyCon Companies was funded by Cybex Europe from its
available cash.
19
<PAGE> 20
Results of Operations
The following table presents selected financial information derived from
the Company's statements of income expressed as a percentage of net sales for
the fiscal years indicated:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31 1996 1997 1998
-------------------- ---- ---- ----
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0%
Cost of sales 44.6 47.5 47.5
----- ----- -----
Gross Profit 55.4 52.5 52.5
Research and development expenses 6.7 6.9 6.3
Selling, general and administrative expenses 24.4 24.4 25.5
Purchased research and development expenses -- -- 8.9
----- ----- -----
Operating income 24.3 21.2 11.8
Other income 4.8 5.5 3.6
----- ----- -----
Income before income taxes 29.1 26.7 15.4
Provision for income taxes 10.3 9.8 8.6
----- ----- -----
Net income 18.8% 16.9% 6.8%
----- ----- -----
</TABLE>
Fiscal 1998 Compared to Fiscal 1997
Net sales increased 52.1% to $52.6 million in Fiscal 1998 from $34.6
million in Fiscal 1997. The increased sales resulted from increased sales of the
Company's KVM Switch Products and Extension Products, as well as additional
revenues provided from the acquisition of the PolyCon Companies in December
1997. Sales of KVM Switch Products increased 57.3% to $45.3 million in Fiscal
1998 from $28.7 million in Fiscal 1997, primarily due to increased sales of the
Company's mid- and high-end KVM Switch Products, as well as the low-end KVM
Switch Products. The mid- to high-end products grew approximately 59% from
Fiscal 1997 to Fiscal 1998, while the low-end product sales increased 259% from
Fiscal 1997 to Fiscal 1998. The SwitchView(TM) product, introduced in mid Fiscal
1998, was a major contributor to the increase in the low-end product sales.
Sales of KVM Extension Products increased 24.6% to $6.2 million in Fiscal 1998
from $5.0 million in Fiscal 1997, primarily due to increased sales of PC
Extender(TM) SNAP, which increased 166% for the period and the PC Plus Line,
which increased 35% for the period. As a percentage of net sales, the Company's
KVM Switch Products increased to 86.1% in Fiscal 1998 from 83.0% in Fiscal 1997
and KVM Extension Products declined to 11.9% in Fiscal 1998 from 14.5% in Fiscal
1997. Management anticipates that sales of KVM Extension Products will continue
to be a substantial portion of the Company's net sales.
The Company's international sales volume continued to increase in Fiscal
1998, causing international sales as a percentage of net sales to increase to
25.9% as compared to 20.6% in Fiscal 1997. International sales increased 89.4%
to $13.5 million in Fiscal 1998 from $7.1 million in Fiscal 1997. European sales
accounted for approximately $8.4 million or 62% of international sales and grew
98.8% from Fiscal 1997 to Fiscal 1998.
Gross profit is affected by many factors: product mix, discounts, price
competition, new product introductions and start-up costs, increasing material
and labor costs and the levels of outsourcing of manufacturing and assembly
services. Gross profit increased 51.0% to $27.6 million in Fiscal 1998 from
$18.2 million in Fiscal 1997. Gross profit as a percentage of net sales remained
constant at 52.5% due to increased volumes in newer products designed for margin
retention while being discounted for volume distributions, cost reductions due
to volume efficiencies and increased outsourcing, and design changes, all of
which were offset by increases in warranty and inventory reserves. The increase
in reserves was the result of the Company's evaluation of the composition of
inventory and the increased level of sales to major distributors and OEMs. The
Company believes its exposure to these risks is adequately reserved.
Selling, general and administrative expenses increased 58.3% to $13.4
million (25.5% of net sales) in Fiscal 1998 from $8.5 million (24.4% of net
sales) in Fiscal 1997. This difference reflects increased expenditures in
administration, sales, customer
20
<PAGE> 21
support, channel development, and marketing activities required to support the
Company's expanded sales base, as well as amounts reserved for legal costs
associated with the defense of a patent infringement claim (see
"Contingencies"). The increase also reflects the added selling, general and
administrative costs of Cybex Europe and the newly acquired PolyCon Companies
for the fourth fiscal quarter. Management anticipates that the amount of
selling, general and administrative expense will continue to increase, however,
the anticipated expanding sales volume should cause the expenses to remain
relatively constant as a percentage of net sales.
For Fiscal 1998, total costs for research and development, exclusive of the
one-time write-off of purchased research and development expenses, were $3.3
million (6.3% of net sales), compared to $2.4 million (6.9% of net sales) in
Fiscal 1997, representing a 39.5% increase. The Company anticipates that
expenses for research and development will continue to increase above the level
in Fiscal 1998.
As a result of the factors discussed above, operating income before the one
time write-off of $4.7 million of purchased research and development expenses
related to the acquisition of the PolyCon Companies, increased 48.6% to $10.9
million (20.7% of net sales) in Fiscal 1998, from $7.3 million (21.2% of net
sales) in Fiscal 1997.
Interest and other income amounted to $1.9 million (3.6% of net sales),
net, in Fiscal 1998, compared to $1.9 million (5.5% of net sales) in Fiscal
1997. Interest and other income includes realized gains on the sale of certain
investments, interest income and expense and the accretion of bond discounts.
As a result of the factors discussed above, net income, before the one-time
write-off related to the acquisition of the PolyCon Companies, increased 41.7%
to $8.3 million (15.7% of net sales, 6.8% after the write-off) in Fiscal 1998,
from $5.8 million (16.9% of net sales) in Fiscal 1997.
Fiscal 1997 Compared to Fiscal 1996
Net sales increased 38.2% to $34.6 million in Fiscal 1997 from $25.0
million in Fiscal 1996. The increased sales resulted from increased sales volume
of the Company's KVM Switch Products and Extension Products. Sales of KVM Switch
Products increased 45.8% to $28.7 million in Fiscal 1997 from $19.7 million in
Fiscal 1996, primarily due to sales of newer, higher end switches; the Slimline
Commander(TM), the Magnum Commander(TM), and the Autoboot Commander 4xP(TM) /
1xP(TM). Also, a portion of the sales increase can be attributed to products
introduced in Fiscal 1997: the AutoView Commander(TM) and other products based
on their cost reduced design. Sales of KVM Extension Products increased 14.2% to
$5.0 million in Fiscal 1997 from $4.4 million in Fiscal 1996 primarily due to
sales of Keyview, PC Extender(TM) SNAP, and Power Control Products, which had
limited sales during Fiscal 1996. As a percentage of net sales, the Company's
KVM Switch Products increased to 83.0% from 78.7% and KVM Extension Products
declined to 14.5% from 17.5% in Fiscal 1997 as compared to Fiscal 1996.
Management anticipates that sales of KVM Extension Products will continue to be
a substantial portion of the Company's net sales.
The Company's international sales volume continued to increase in Fiscal
1997, causing international sales as a percentage of net sales to increase to
20.6% as compared to 20.4% in Fiscal 1996. International sales increased 39.2%
to $7.1 million in Fiscal 1997 from $5.1 million in Fiscal 1996. European sales
accounted for approximately 59% of international sales. Over 88% of fourth
quarter European sales were shipped by Cybex Europe.
Gross profit increased 31.0% to $18.2 million in Fiscal 1997 from $13.9
million in Fiscal 1996. Gross profit as a percentage of net sales declined to
52.5% from 55.4% during the same period. The decline in gross profit was
attributed in part to the startup and incremental costs incurred by Cybex
Europe, and also due to an overall increase in the mix of newer KVM Switch
Products, with overall lower margins.
Selling, general and administrative expenses increased 38.7% to $8.5
million (24.4% of net sales) in Fiscal 1997 from $6.1 million (24.4% of net
sales) in Fiscal 1996. This dollar increase reflects the increased level of
expenditures in administration, sales, customer support, channel development,
and marketing activities required to support the Company's expanded sales base.
The increase also reflects the added selling, general and administrative costs
of Cybex Europe. Management anticipates that the dollar amount of selling,
general and administrative expense will continue to increase.
For Fiscal 1997, total costs for research and development were $2.4 million
(6.9% of net sales), compared to $1.7 million (6.7% of net sales) in Fiscal
1996, representing a 40.7% increase. The Company anticipates that expenses, in
terms of dollars spent, for research and development will continue to increase
above the level in Fiscal 1997.
As a result of the factors discussed above, operating income increased
20.6% to $7.3 million (21.2% of net sales) in Fiscal 1997, from $6.1 million
(24.3% of net sales) in Fiscal 1996.
21
<PAGE> 22
Interest and other income amounted to $1.9 million (5.5% of net sales) in
Fiscal 1997, compared to $1.2 million (4.8% of net sales) in Fiscal 1996. This
increase related primarily to interest income from the investment of cash
reserves and the proceeds from the initial public offering completed July 27,
1995. Realized gains on the sale of certain investments also contributed to the
increase in other income.
As a result of the factors discussed above, net income increased 24.4% to
$5.8 million (16.9% of net sales) in Fiscal 1997, from $4.7 million (18.8% of
net sales) in Fiscal 1996.
Liquidity and Capital Resources
Prior to its initial public offering in July 1995, the Company financed its
operations primarily through cash flow from operations, supplemented with
borrowings under its line of credit as needed. As of March 31, 1998, the Company
and its subsidiaries had an available line of credit of $7.5 million with no
outstanding borrowings. A short term note in the amount of $12.0 million was
outstanding on March 31, 1998. The Company repaid the note during the first week
of April, 1998.
The Company's working capital position declined from $42,416,140 as of
March 31, 1997 to $38,472,549 (adjusted to include $2,196,218 and $3,040,833 of
long term-investments, respectively) as of March 31, 1998. This decline in the
Company's working capital position was due primarily to the increased earnings
during Fiscal 1998 offset by the acquisition of the PolyCon Companies, which is
discussed in Note 3 of the Notes to the Consolidated Financial Statements.
Cash provided from operating activities increased from $4.3 million to $4.4
million for the year ended March 31, 1997, and March 31, 1998, respectively.
This slight increase was caused primarily by a decrease in net income due to the
one-time write-off of $4.7 million of purchased research and development expense
in connection with the acquisition of the PolyCon Companies, offset by increases
in accounts receivable, inventory and accounts payable. The increase in accounts
receivable is attributed to the increase in sales. The increase in inventory is
attributed to the overall anticipated demand for new products introduced in the
products mix, as well as the addition of inventory as a result of the
acquisition of the PolyCon Companies. The Company expects to continue to
increase the level of turnkey manufacturing of products as they mature and
designs stabilize, thereby reducing the level of inventory relative to those
products that the Company must maintain. The increase in accounts payable
relates directly to the increase in inventory.
Capital expenditures totaled $5.1 million in Fiscal 1998, as compared to
$1.7 million in Fiscal 1997. Capital expenditures relating to the construction
of the new corporate facility in Huntsville, Alabama amounted to approximately
$4.2 million. The remaining capital expenditures were used to purchase equipment
for the Company including Cybex Europe.
The Company began construction of its new headquarters facility in
Hunstville, Alabama during the first quarter of Fiscal 1998 on land purchased in
Fiscal 1997. The new facility will contain approximately 120,000 square feet
with space for future expansion. The facility is designed to house the Company's
sales, marketing, research and development, manufacturing and administrative
functions. Occupancy is expected during the second quarter of Fiscal 1999. The
facility is expected to cost approximately $7.5 million.
The Company believes that its current financial position and existing cash
and investments along with earnings and amounts available under its lines of
credit will be sufficient to meet the Company's cash requirements over the next
twelve months.
Financial Accounting Developments
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, which requires the reporting and display of comprehensive
income and its components in an entity's financial statements, and SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information, which
specifies revised guidelines for determining an entity's operating segments and
the type and level of financial information to be required. The Company is
required to adopt these standards in Fiscal 1999, but does not expect the impact
of these pronouncements to be material.
Year 2000 Compliance
The Company is in the process of reviewing current software and hardware to
assess the impact of the year 2000 issue. Initially, the Company has determined
that most of the Company's current business process software and hardware are
year 2000 compliant. The Company expects to complete its year 2000 analysis by
the end of Fiscal 1999 and does not believe that costs associated with bringing
the Company's computer systems into full compliance by the year 2000 will result
in material costs to the Company. The
22
<PAGE> 23
Company's products are year 2000 compliant as well and therefore, the Company
does not believe that they have any material exposure to contingencies related
to the year 2000 issue for products it has sold.
The Company is also in the preliminary stages of assessing the impact of
the year 2000 issue on its major vendors and suppliers to determine the extent
to which the Company is vulnerable to those third parties' failure to remediate
their own year 2000 issue. Based on information presently available, the Company
does not anticipate any material impact on its business, financial condition,
results of operations or cash flows from the effect of the year 2000 issue on
the Company's internal systems or those of its major suppliers and customers.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company would not have a material adverse impact on the
Company.
Contingencies
The Company has certain contingent liabilities resulting from litigation
initiated by Apex. Apex contends in a lawsuit filed in February 1998 against the
Company and others in the US District Court in Seattle, Washington that the
Company has infringed Patent No. 5,721,842. Although the outcome of any
litigation can never be certain, the Company does not believe that any of its
products are covered by any valid claim of Apex's patent. It is the
Company's opinion that the outcome of such contingencies will not materially
affect its business, operations, financial condition or cash flows.
Forward Looking Statements
When used in this Annual Report on Form 10-K, the words "believe,"
"anticipate," "think," "intend," "will be," "plan," and similar expressions
identify forward looking statements. Such statements are subject to certain
risks and uncertainties which could cause actual results to differ materially
from those projected. Readers are cautioned not to place undue reliance on these
forward looking statements which speak only as of the date hereof. Readers are
also urged to carefully review and consider the various disclosures made by the
Company which attempt to advise interested parties of the factors which affect
the Company's business, including the disclosures made in other periodic reports
on Forms 10-K, 10-Q and 8K filed with the Securities and Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to the Financial Statements contained in Part IV hereof
and to the Index to Consolidated Financial Statements on Page 27.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
23
<PAGE> 24
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information with respect to the directors and officers of the
Company set forth under the captions "Nominees" and "Officers" in the Company's
Proxy Statement relating to the Annual Meeting of Shareholders to be held on
August 17, 1998, is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information set forth under the caption "Executive Compensation"
set forth in the Company's Proxy Statement relating to the Annual Meeting of
Shareholders to be held on August 17, 1998, is incorporated herein by reference.
The Compensation Committee Report and the Comparative Performance Graph also
included in the Proxy Statement, are expressly not incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information under the captions "Security Ownership of Certain
Beneficial Owners and Management" set forth in the Company's Proxy Statement
relating to the Annual Meeting of Shareholders to be held on August 17, 1998, is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There were no such transactions in Fiscal 1998.
24
<PAGE> 25
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
(1) FINANCIAL STATEMENTS
The following consolidated financial statements of Cybex Computer
Products Corporation are filed as a part of this Annual Report on Form
10-K:
- Report of Independent Accountants
- Consolidated Balance Sheets as of March 31, 1997 and 1998
- Consolidated Statements of Income for the years ended March 31,
1996, 1997, and 1998
- Consolidated Statements of Changes in Shareholders' Equity for the
years ended March 31, 1996, 1997, and 1998
- Consolidated Statements of Cash Flows for the years ended March 31,
1996, 1997, and 1998
- Notes to Consolidated Financial Statements
(2) SCHEDULES TO FINANCIAL STATEMENTS
- Report of Independent Accountants
- Schedule II - Valuation and Qualifying Accounts
(3) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
2.1 Purchase and Sale Agreement by and between the Company,
Cybex Europe and Edgar and Stephanie Elsner effective
December 31, 1997 incorporated by reference (pursuant to the
provisions of Rule 12(b)-32) to Exhibit No. 2.1 (b) to the
Company's Current Report on Form 8-K filed January 14, 1998.
3.1 Amended and Restated Articles of Incorporation of the
Company, incorporated by reference (pursuant to the
provisions of Rule 12(b)-32) to Exhibit No. 3.1 to Amendment
No. 1 to Registration Statement No. 33-93124.
3.2 Amended and Restated By-Laws of the Company, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to
Exhibit No. 3.2 to Amendment No. 1 to Registration
Statement No. 33-93124.
4.1 Specimen of Common Stock Certificate of the Company,
incorporated by reference (pursuant to the provisions of
Rule 12(b)-32) to Exhibit No. 4 to Amendment No. 1 to
Registration Statement No. 33-93124.
10.1 Revolving Line of Credit Agreement by and between the
Company and First Commercial Bank, incorporated by reference
(pursuant to the provisions of Rule 12(b)-32) to Exhibit No.
10.1 to Registration Statement No. 33-93124.
10.2* Commercial Variable Rate Revolving or Draw Note by and
between the Company and First Commercial Bank and related
Security Agreement dated July 1, 1997 and the related Loan
Modification Agreement dated March 5, 1998.
10.3* Commercial Fixed Rate Promissory Note by and between the
Company and First Commercial Bank and related Security
Agreement dated March 25, 1998.
10.4 Restated 1989 Employee Incentive Stock Option Plan,
incorporated by reference (pursuant to the provisions of
Rule 12(b)-32) to Exhibit No. 10.2 to Registration Statement
No. 33-93124, and Amendment to 1989 Employee Incentive Stock
Option Plan, incorporated by reference (pursuant to the
provisions of Rule 12(b)-32) to Exhibit No. 10.13 to
Amendment No. 1 to Registration Statement No. 33-93124.
10.5 1995 Employee Stock Option Plan, incorporated by reference
(pursuant to the provisions of Rule 12(b)-32) to Exhibit No.
10.3 to Registration Statement No. 33-93124.
10.6 1995 Outside Directors Stock Option Plan, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to
Exhibit No. 10.4 to Registration Statement No. 33-93124.
10.7* 1998 Employee Stock Incentive Plan.
10.8 Smith Barney Shearson Flexible Prototype Nonstandardized
401(k) Plan Adoption Agreement #007 and Smith Barney
Shearson Prototype Defined Contribution Plan Document #005
and Trust Agreement, incorporated by reference (pursuant to
the provisions of Rule 12(b)-32) to Exhibit 10.6 of the
Company's Form 10-K for the fiscal year ended March 31,
1997.
10.9 Employment and Noncompetition Agreement by and between the
Company and Stephen F. Thornton, dated June 1, 1995,
incorporated by reference (pursuant to the provisions of
Rule 12(b)-32) to Exhibit No. 10.7 to Registration Statement
No. 33-93124.
10.10 Employment and Noncompetition Agreement by and between the
Company and Remigius G. Shatas, dated June 1, 1995,
incorporated by reference (pursuant to the provisions of
Rule 12(b)-32) to Exhibit No. 10.8 to Registration Statement
No. 33-93124.
</TABLE>
25
<PAGE> 26
10.11 Employment and Noncompetition Agreement by and between the
Company and Robert R. Asprey, dated June 1, 1995,
incorporated by reference (pursuant to the provisions of
Rule 12(b)-32) to Exhibit No. 10.9 to Registration Statement
No. 33-93124.
10.12 Employment and Noncompetition Agreement by and between the
Company and Doyle C. Weeks, dated June 1, 1995, incorporated
by reference (pursuant to the provisions of Rule 12(b)-32)
to Exhibit No. 10.10 to Registration Statement No. 33-93124.
10.13 Employment and Noncompetition Agreement by and between the
Company and R. Byron Driver, dated June 1, 1995,
incorporated by reference (pursuant to the provisions of
Rule 12(b)-32) to Exhibit No. 10.11 to Registration
Statement No. 33-93124.
13 Cybex Computer Products Corporation Annual Report to
Shareholders for the Fiscal Year Ended March 31, 1998. Such
Annual Report shall not be deemed to be filed with the
Securities and Exchange Commission as a part of this Form
10- K Annual Report or otherwise subject to the liabilities
of Section 18 of the Securities Exchange Act of 1934, as
amended.
21* List of Subsidiaries of the Company.
23.1* Consent of Coopers & Lybrand L.L.P.
27.1-27.8* Financial Data Schedule for current period and restated
Financial Data Schedules for other periods (for SEC use
only).
* As filed herewith.
The Company agrees to furnish to the Securities and Exchange Commission,
upon request, a copy of each instrument defining the rights of holders of the
Company's long-term debt.
THE COMPANY WILL FURNISH TO EACH SHAREHOLDER, UPON WRITTEN REQUEST, COPIES
OF THE EXHIBITS REFERRED TO ABOVE AT A COST OF TEN CENTS PER PAGE. REQUESTS
SHOULD BE ADDRESSED TO: DOYLE C. WEEKS, CHIEF FINANCIAL OFFICER, CYBEX COMPUTER
PRODUCTS CORPORATION, 4912 RESEARCH DRIVE, HUNTSVILLE, ALABAMA 35805.
(b) Current Report on Form 8-K:
The Company filed a Current Report on Form 8-K dated January
14, 1998, under Item 2: Acquisition or Disposition of
Assets, to report the acquisition of the PolyCon Companies.
Copies of the German language version and the English
language version of the Purchase and Sale Agreement were
filed as exhibits.
(c) Exhibits. See Item 14(a)(3) above and the separate Exhibit
Index attached hereto.
(d) Financial Statement Schedules. See Item 14(a)(2) above.
26
<PAGE> 27
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CYBEX COMPUTER PRODUCTS CORPORATION
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Report of Independent Accountants............................................. 28
Consolidated Balance Sheets as of March 31, 1997 and 1998..................... 29
Consolidated Statements of Income for the years ended March 31, 1996, 1997
and 1998..................................................................... 30
Consolidated Statements of Changes in Shareholders' Equity for the years
ended March 31, 1996, 1997 and 1998.......................................... 31
Consolidated Statements of Cash Flows for the years ended March 31,
1996, 1997 and 1998......................................................... 32
Notes to Consolidated Financial Statements.................................... 33
</TABLE>
27
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Cybex Computer Products Corporation
Huntsville, Alabama
We have audited the accompanying consolidated balance sheets of Cybex Computer
Products Corporation (the Company) as of March 31, 1997 and 1998, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the three years in the period ended March 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cybex Computer
Products Corporation as of March 31, 1997 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended March 31, 1998, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
May 1, 1998
28
<PAGE> 29
CYBEX COMPUTER PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,424,385 $ 2,411,085
Short-term investments 38,688,836 34,919,924
Accounts receivable - trade, less allowance for doubtful accounts
of $350,837 and $963,083 in 1997 and 1998, respectively 5,409,706 11,430,990
Inventories 3,835,356 6,046,919
Other current assets 698,163 517,179
Deferred income taxes 623,000 1,144,000
----------- -----------
Total current assets 51,679,446 56,470,097
Investments available for sale, at market 2,196,218 3,040,833
Property and equipment, net of accumulated depreciation 2,422,292 7,251,912
Intangibles, net 103,232 3,821,371
Other assets 125,525 134,691
----------- -----------
$56,526,713 $70,718,904
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable $ 8,000,000 $12,000,000
Accounts payable and accrued expenses 2,151,371 4,697,027
Income taxes payable 158,734 1,313,415
Other current liabilities 1,149,419 3,027,939
----------- -----------
Total current liabilities 11,459,524 21,038,381
Deferred income taxes 80,000 109,000
Note payable 136,719
----------- -----------
Total liabilities 11,539,524 21,284,100
----------- -----------
Commitments and contingencies (Notes 14 and 17)
Shareholders' equity:
Preferred stock, par value $.001 per share; 5,000,000 shares
authorized; no shares issued
Common stock, par value $.001 per share; 25,000,000 shares authorized;
1997 - 9,135,762 shares issued, 8,144,075 shares outstanding
1998 - 9,246,274 shares issued, 8,252,671 shares outstanding 9,136 9,246
Additional paid-in capital 34,116,652 34,714,753
Unrealized (loss) gain on investments (77,669) 230,731
Retained earnings 16,209,614 19,780,627
Treasury stock, at cost; 1997 - 991,687 shares; 1998 - 993,603 shares (5,270,544) (5,300,553)
----------- -----------
Total shareholders' equity 44,987,189 49,434,804
----------- -----------
$56,526,713 $70,718,904
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
29
<PAGE> 30
CYBEX COMPUTER PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
for the years ended March 31, 1996, 1997, and 1998
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
Net sales $25,009,762 $34,568,465 $52,563,507
Cost of sales 11,151,343 16,408,703 24,979,458
----------- ----------- -----------
Gross profit 13,858,419 18,159,762 27,584,049
Research and development expenses 1,686,448 2,374,174 3,311,988
Purchased research and development expenses (Note 3) 4,705,000
Selling, general, and administrative expenses 6,095,891 8,454,735 13,385,924
----------- ----------- -----------
Operating income 6,076,080 7,330,853 6,181,137
Interest income, net 1,156,597 1,611,064 1,625,363
Other income, net 52,232 290,583 272,062
----------- ----------- -----------
Income before provision for income taxes 7,284,909 9,232,500 8,078,562
Provision for income taxes 2,591,624 3,393,000 4,507,549
----------- ----------- -----------
Net income $ 4,693,285 $ 5,839,500 $ 3,571,013
=========== =========== ===========
Net income per common and common equivalent share:
Basic $ .65 $ .71 $ .44
=========== =========== ===========
Diluted $ .61 $ .70 $ .42
=========== =========== ===========
Weighted average common and common equivalent
shares outstanding:
Basic 7,184,066 8,228,408 8,173,440
=========== =========== ===========
Diluted 7,641,689 8,390,286 8,408,025
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
30
<PAGE> 31
CYBEX COMPUTER PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY for the years ended
March 31, 1996, 1997, and 1998
<TABLE>
<CAPTION>
UNREALIZED
COMMON STOCK ADDITIONAL GAIN
----------------------- PAID-IN (LOSS) ON RETAINED TREASURY
SHARES AMOUNT CAPITAL INVESTMENTS EARNINGS STOCK TOTAL
-------- ---------- ------------ -------------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1995 3,290,658 $ 3,291 $ 593,735 $ 5,676,829 $ (554,000) $ 5,719,855
Issuance of common stock 680,625 681 909,819 910,500
Issuance of common stock
through initial public
offering, net of offering
costs 2,096,725 2,097 32,576,165 32,578,262
Purchase of 351,000
shares of treasury stock (3,280,881) (3,280,881)
Net income 4,693,285 4,693,285
--------- --------- ----------- ---------- ----------- ----------- -----------
Balance, March 31, 1996 6,068,008 6,069 34,079,719 10,370,114 (3,834,881) 40,621,021
Issuance of common stock 22,500 22 39,978 40,000
Purchase of 146,250
shares of treasury stock (1,435,663) (1,435,663)
Unrealized loss on
investments $ (77,669) (77,669)
Net income 5,839,500 5,839,500
--------- --------- ----------- ---------- ----------- ----------- -----------
Balance, March 31, 1997 6,090,508 6,091 34,119,697 (77,669) 16,209,614 (5,270,544) 44,987,189
Issuance of common stock 73,675 73 192,596 192,669
Income tax benefit from
exercise of
nonqualified
stock options 405,542 405,542
Purchase of 1,916 shares
of treasury stock (30,009) (30,009)
Unrealized gain on
investments 308,400 308,400
Three-for-two stock split 3,082,091 3,082 (3,082) 0
Net income 3,571,013 3,571,013
--------- --------- ----------- ---------- ----------- ----------- -----------
Balance, March 31, 1998 9,246,274 $ 9,246 $34,714,753 $ 230,731 $19,780,627 $(5,300,553) $49,434,804
========= ========= =========== ========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
31
<PAGE> 32
CYBEX COMPUTER PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended March 31, 1996, 1997, and 1998
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 4,693,285 $ 5,839,500 $ 3,571,013
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 235,138 355,996 574,917
Amortization of intangibles 121,291
Amortization of discount on investments (538,810) (1,149,879) (1,159,415)
Provision for losses on accounts receivable 11,074 416,000 717,722
Loss on disposal of property and equipment 17,345
Purchased research and development expenses 4,705,000
Gain on sale of investments (277,047) (363,000)
Deferred income taxes (9,856) (234,385) (492,000)
Changes in operating assets and liabilities:
Accounts receivable - trade (1,731,352) (1,549,066) (6,105,006)
Inventories (1,450,199) (348,313) (825,563)
Accounts payable and accrued expenses (173,715) 672,778 1,021,656
Other (21,861) 250,469 1,435,338
Income taxes payable/receivable (5,217) 277,385 1,154,681
----------- ----------- -----------
Net cash provided by operating activities 1,008,487 4,253,438 4,373,979
----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (550,763) (1,668,370) (5,106,200)
Purchases of investments available for sale (73,855,402) (67,852,690) (59,040,639)
Purchase of the PolyCon Companies, net of cash acquired (Note 3) (8,663,000)
Purchase of intangible assets (119,403)
Proceeds from dispositions of property, plant, and equipment 41,291
Proceeds from sale of investments 18,973,858 5,551,134 13,513,303
Proceeds from maturities of investments 19,876,000 59,673,658 50,282,448
----------- ----------- -----------
Net cash used in investing activities (35,556,307) (4,296,268) (9,092,200)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from note payable and line of credit 6,100,000 8,000,000 12,136,719
Repayment of note payable and line of credit (1,100,000) (5,000,000) (8,000,000)
Proceeds from initial public offering 32,578,262
Proceeds from issuance of common stock 910,500 40,000 192,669
Income tax benefit from exercise of nonqualified stock options 405,542
Purchase of treasury stock (3,280,881) (1,435,663) (30,009)
----------- ----------- -----------
Net cash provided by financing activities 35,207,881 1,604,337 4,704,921
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 660,061 1,561,507 (13,300)
Cash and cash equivalents, beginning of year 202,817 862,878 2,424,385
----------- ----------- -----------
Cash and cash equivalents, end of year $ 862,878 $ 2,424,385 $ 2,411,085
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 3,579 $ 8,021 $ 21,083
=========== ========== ==========
Cash paid during the year for income taxes, net of refunds
received $ 2,606,693 $3,350,000 $3,857,000
=========== ========== ==========
</TABLE>
Noncash transactions:
During the 1997 and 1998 fiscal year, the Company recorded $(77,669) and
$308,400 of unrealized losses and gains, respectively, related to its
available for sale investments. The unrealized losses and gains were recorded
as non-cash changes of long-term investments and shareholders' equity,
respectively.
The accompanying notes are an integral part of these consolidated financial
statements.
32
<PAGE> 33
CYBEX COMPUTER PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Cybex Computer Products Corporation (the Company) develops, produces
and markets computer keyboard, video monitor and mouse switch and
extension products. The Company sells its products to dealers,
end-users and original equipment manufacturers in the United States,
Canada, and Europe as well as in other foreign markets. The Company has
manufacturing facilities located in Huntsville, Alabama; Shannon,
Ireland; and Steinhagen, Germany (see Note 3). In addition, the Company
has a wholly owned subsidiary, Cybex International Corporation (CIC),
to facilitate sales in certain overseas markets and obtain more
favorable U.S. income tax treatment on those sales. International
sales, principally to customers in European countries, accounted for
approximately 20%, 21%, and 26% of the Company's net sales for the
years ended March 31, 1996, 1997, and 1998, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies of the Company are as follows:
PRINCIPLES OF CONSOLIDATION - The Company's consolidated financial
statements include the Company and its two wholly owned subsidiaries,
CIC and Cybex Europe Ltd. All significant intercompany amounts and
transactions have been eliminated in consolidation.
CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less
to be cash equivalents.
INVENTORIES - Raw materials, work in process, and finished goods are
recorded using the lower of standard cost, which approximates average
cost, or market.
FINANCIAL INSTRUMENTS - The carrying amounts reported in the balance
sheets for cash and cash equivalents, accounts receivable, accounts
payable, and notes payable approximate fair value because of the
immediate or short-term maturity of these financial instruments.
The Company's investments are composed of U.S. treasury bills, U.S.
treasury notes, and common stock. Debt securities that the Company has
the positive intent and ability to hold to maturity are classified as
held-to-maturity securities and reported at amortized cost. Debt and
equity securities that are bought and held principally for the purpose
of selling them in the near term are classified as trading securities
and reported at fair value, with unrealized gains and losses included
in earnings. Debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified as
available-for-sale securities and reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a
separate component of shareholders' equity. All of the Company's
investments at March 31, 1997 and 1998 have been classified as
available for sale (see Note 8).
Realized gains or losses on the Company's investments are computed
using the specific identification method.
PROPERTY AND EQUIPMENT - Property and equipment are carried at cost,
less accumulated depreciation, and include expenditures that
substantially increase the useful lives of existing assets. Maintenance
and repairs are charged to current operations as incurred. Upon sale,
retirement, or other disposition of these assets, the cost and related
accumulated depreciation are removed from the respective accounts, and
any gain or loss on the disposition is included in net income.
Provisions for depreciation are computed using the straight-line method
over the estimated useful lives of the assets which generally range
from 5 to 7 years.
33
<PAGE> 34
INTANGIBLE ASSETS - Intangible assets are being amortized using the following
methods and estimated useful lives:
<TABLE>
<CAPTION>
DESCRIPTION METHOD USEFUL LIFE
----------- ------ -----------
<S> <C> <C>
Trademarks Straight-line 15
Goodwill Straight-line 8
Licenses Straight-line 3
</TABLE>
LONG-LIVED ASSETS - The Company recognizes impairment losses on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by
those assets are less than the assets' carrying values. There were no
such losses recognized during 1996, 1997, or 1998.
LIABILITY FOR SALES AND WARRANTY RETURNS - The Company's sales
generally include a one-month unconditional return policy and a
twelve-month warranty for product defects. The Company also allows
additional rights of return to certain of its distributors. The
liability for sales and warranty returns which totaled approximately
$345,000 and $786,000 at March 31, 1997 and 1998, respectively, is
management's estimate of the Company's liability for such sales returns
(at gross profit foregone) and warranty returns (at cost to repair or
replace products) on sales made by the Company. This liability is
included in other current liabilities in the consolidated balance
sheets.
INCOME TAXES - The Company accounts for income taxes using the asset
and liability method. The Company provides for income taxes currently
payable and, in addition, provides deferred income taxes for temporary
differences between the tax bases of assets and liabilities and their
reported amounts in the financial statements. Temporary differences
relate principally to the allowance for doubtful accounts, liability
for sales and warranty returns, accrued vacation, accumulated
depreciation, and inventory. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
realized.
FOREIGN CURRENCY - The Company records transactions denominated in
foreign currency on a monthly basis, using the average monthly exchange
rate. Bank accounts denominated in foreign currency are translated as
of the ending balance sheet dates using the current exchange rates.
Approximately 65% of all bank accounts are denominated in United States
currency.
REVENUE RECOGNITION - The Company records sales upon shipment of the
related products, net of any discounts and provision for warranty
returns.
GOVERNMENT GRANTS - The Company records government grants received in
connection with its Ireland operations (see Note 3) as reductions of
the corresponding expense in the consolidated statements of income.
Proceeds from the rent reduction grant are recognized as reductions to
rent expense as the related rent expense is incurred. Proceeds from the
employment grant, which are received in multiple installments, are
amortized as reductions of expense over a twelve month period from the
creation of the related job. Grants recognized during fiscal year 1997
and 1998 as a reduction of related expenses totaled approximately
$168,000 and $545,000, respectively. Accounts receivable of $410,500
and $235,000 and deferred revenue of $352,000 and $93,000 related to
the grants were included in the consolidated balance sheets at March
31, 1997 and 1998, respectively.
RESEARCH AND DEVELOPMENT EXPENSE - Research and development expenses
for Company- sponsored projects are expensed as incurred.
ADVERTISING EXPENSE - Advertising costs are expensed as incurred.
Advertising expense totaled approximately $2,239,000, $2,180,000,
$2,865,000 for the years ended March 31, 1996, 1997, and 1998,
respectively.
USE OF ESTIMATES - The preparation of the Company's consolidated
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the
34
<PAGE> 35
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the dates of the financial
statements and reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS - In June 1997, the Financial
Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income,
which requires the reporting and display of comprehensive income and
its components in an entity's financial statements, and SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information,
which specifies revised guidelines for determining an entity's
operating segments and the type and level of financial information to
be required. The Company is required to adopt these standards in fiscal
1999. The Company does not expect the impact of these pronouncements to
be material.
RECLASSIFICATIONS - Certain reclassifications have been made to the
1997 consolidated financial statements in order to conform to the 1998
presentation. These reclassifications had no effect on previously
reported net income, operating cash flows, or total shareholders'
equity.
3. EUROPEAN OPERATIONS
On July 9, 1996, the Company formally established operations in
Shannon, Ireland through its newly-formed subsidiary, Cybex Europe Ltd.
(Cybex Europe).
Cybex Europe executed an agreement with the Shannon Free Airport
Development Company Limited (Shannon Development) under which Cybex
Europe will receive grant monies related to salary and rent expense.
The maximum amount attainable under the agreement is approximately $1.6
million. The grant monies would be repayable, in whole or in part,
should (1) Cybex Europe fail to meet certain business related
objectives established under the agreement which are to be achieved
over a three-year implementation period and/or (2) the Company
discontinues operations in Ireland prior to the termination of the
agreement. The agreement terminates five years from the date the last
claim is made by the Company for grant monies paid by Shannon
Development.
On December 31, 1997, the Company through Cybex Europe acquired Elsner
Computertechnik GmbH and PolyCon Data Systems GmbH (collectively the
PolyCon Companies), both privately held companies in Steinhagen,
Germany, for a combined purchase price of approximately $8.8 million
including acquisition related expenditures. The closing of the
acquisition occurred on December 31, 1997. The acquisition of the
PolyCon Companies was funded by Cybex Europe from its available cash.
The acquisition was accounted for using the purchase method of
accounting and, accordingly, the purchase price has been allocated to
the assets and liabilities of the PolyCon Companies based on their fair
values at the date of acquisition. Operating results of the PolyCon
Companies since December 31, 1997 are included in the Company's
consolidated financial statements.
Costs allocated to research and development assets with alternative
future uses were capitalized and the remaining $4,705,000 of acquired
research and development costs were expensed as a one-time charge on
December 31, 1997.
35
<PAGE> 36
The estimated fair value of assets acquired and liabilities assumed in the
acquisition is as follows:
<TABLE>
<S> <C>
Cash $ 153,000
Accounts receivable 634,000
Inventory 1,386,000
Other assets 37,973
Property and equipment 398,000
Trademarks 806,000
Acquired research and development 4,705,000
Goodwill 2,914,027
Fair value of liabilities assumed:
Accounts payable 1,524,000
Other liabilities 694,000
---------------
Cash paid $ 8,816,000
===============
</TABLE>
The following unaudited pro forma summary combines the results of
operations of the Company with the acquisition of the PolyCon Companies
as if the acquisition had occurred at April 1, 1996. Certain
adjustments have been made to reflect the impact of the purchase
transaction. These pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of what would have
occurred had the acquisition been made at the beginning of the
respective fiscal years, or of results which may occur in the future.
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Net sales (in thousands) $ 39,911 $ 59,514
Net income (in thousands) $ 6,374 $ 4,266
Earnings per share - basic and diluted $ .76 $ .51
</TABLE>
Pro forma earnings per share for the years ended March 31, 1997 and
1998 is calculated by dividing pro forma net income by the weighted
average shares outstanding of 8,390,286 and 8,408,025, respectively.
4. Initial Public Offering
On July 28, 1995, the Company completed an initial public offering
(IPO) of its common stock, receiving net proceeds (after deductions of
underwriting discounts and other offering expenses) of $32,578,262 from
the sale of 2,096,725 shares of common stock at the IPO price of $17
per share. The Company has used and expects to continue to use the
proceeds for working capital and other general corporate purposes,
including product development activities to enhance its existing
products and develop new products, expansion of sales and marketing
activities, expansion of the Company's current facilities and
construction of additional facilities and acquisitions.
5. Stock Split
On March 31, 1998, the Company declared a 3-for-2 stock split. All
capital stock and stock option information included in the consolidated
financial statements and notes thereto gives retroactive effect to the
split except with respect to the consolidated statements of
shareholders' equity prior to the year ended March 31, 1998.
36
<PAGE> 37
6. Stock Repurchase Plan
The Board of Directors approved a stock repurchase plan during December
1995 to purchase up to 750,000 shares of Company stock on the open
market. During the 1996 fiscal year, the Company purchased 351,000
shares of treasury stock at prices ranging from $8.33 to $9.83 per
share. During the 1997 fiscal year, the Company purchased 146,250
shares of treasury stock at prices ranging from $9.59 to $10.09 per
share. The share and per share amounts have been retroactively adjusted
to reflect the effect of the 3-for-2 stock split discussed in Note 5.
7. Inventories
A summary of inventories at March 31, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Raw materials $ 2,358,877 $ 4,060,360
Work in process 888,089 957,288
Finished goods 588,390 1,029,271
--------------- --------------
$ 3,835,356 $ 6,046,919
=============== ==============
</TABLE>
8. Investments
The cost and approximate market values of available-for-sale securities
at March 31, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUES
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997
- ----
U.S. Treasury bills $ 38,688,836 $ 38,688,836
Marketable equity securities 2,227,887 $ 58,327 $ (135,996) 2,150,218
Corporate bonds 46,000 46,000
---------------- ----------- ----------- ------------
$ 40,962,723 $ 58,327 $ (135,996) $ 40,885,054
================ =========== =========== ============
1998
- ----
U.S. Treasury bills $ 32,878,354 $ 32,878,354
U.S. Treasury notes 2,041,570 2,041,570
Marketable equity securities 2,810,102 $ 279,669 $ (48,938) 3,040,833
---------------- ----------- ----------- ------------
$ 37,730,026 $ 279,669 $ (48,938) $ 37,960,757
================ =========== =========== ============
</TABLE>
37
<PAGE> 38
The amortized cost and market values of debt instruments with fixed
maturities at March 31, by expected maturity, are shown as follows:
<TABLE>
<CAPTION>
1997 1998
---------------------------- -----------------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Due in one year or less $38,688,836 $38,688,836 $34,919,924 $34,919,924
Due after one year through
five years 46,000 46,000
----------- ----------- ----------- -----------
$38,734,836 $38,734,836 $34,919,924 $34,919,924
=========== =========== =========== ===========
</TABLE>
Gross realized gains on the sale of investments available for sale were
approximately $492,000 and $705,000 in 1997 and 1998, respectively.
Gross realized losses were approximately $215,000 and $342,000 in 1997
and 1998, respectively. There were no realized gains or losses in 1996.
9. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at March 31, 1997 and
1998:
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Land $ 709,625 $ 709,625
Engineering and testing equipment 168,892 622,982
Production equipment 574,565 772,266
Marketing fixtures and equipment 105,185 140,536
Office furniture and equipment 408,702 513,231
Computer software and equipment 1,260,473 1,604,136
Automotive equipment 17,124 49,727
Leasehold improvements 45,282 170,965
Construction in progress 3,750 4,090,721
----------- -----------
3,293,598 8,674,189
Less accumulated depreciation (871,306) (1,422,277)
----------- -----------
$ 2,422,292 $ 7,251,912
=========== ===========
</TABLE>
10. INTANGIBLES
Intangible assets as of March 31, 1997 and 1998 consist of the
following:
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Trademarks $ 79,077 1,002,523
Goodwill and other 28,446 2,944,430
Total intangible assets 107,523 3,946,953
Less accumulated amortization (4,291) (125,582)
--------- -----------
Intangible assets, net of amortization $ 103,232 $ 3,821,371
========= ===========
</TABLE>
11. SHORT-TERM BORROWINGS
At March 31, 1997 and 1998, the Company had $8,000,000 and $12,000,000,
respectively, outstanding under short-term note payables bearing
interest at the bank's prime rate (8.50% and 8.188% at March 31, 1997
and 1998, respectively). The amounts outstanding at March 31, 1997 and
1998 were repaid on April 3, 1997 and April 2, 1998, respectively.
38
<PAGE> 39
The Company has a bank line of credit which provides for borrowings up
to $5,000,000. Interest on outstanding advances was payable monthly at
the bank's prime rate at March 31, 1997 and LIBOR plus 2.5% at March
31, 1998 (8.50% and 8.19% at March 31, 1997 and 1998, respectively).
The line of credit is collateralized by the Company's accounts
receivable, inventories, and certain intangible assets and is due on
demand. The line of credit expires June 30, 1998. The Company had no
amounts outstanding on the line of credit at March 31, 1997 or 1998.
The Company's newly acquired subsidiary, the PolyCon Companies, has a
bank line of credit which provides for borrowings up to $2,500,000. The
Company had no amounts outstanding on the line of credit at March 31,
1998.
12. INCOME TAXES
The provision (benefit) for income taxes for the years ended March 31,
1996, 1997, and 1998 is comprised of the following:
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
U. S. operations:
Current:
Federal $ 2,377,923 $ 3,263,747 $ 4,326,000
State 223,557 363,638 481,000
----------- ----------- -----------
2,601,480 3,627,385 4,807,000
----------- ----------- -----------
Deferred:
Federal (8,952) (185,747) (468,000)
State (904) (20,638) (52,000)
----------- ----------- -----------
(9,856) (206,385) (520,000)
----------- ----------- -----------
Total U. S. operations tax provision 2,591,624 3,421,000 4,287,000
Total foreign operations tax provision (benefit) (28,000) 220,549
----------- ----------- -----------
Total provision $ 2,591,624 $ 3,393,000 $ 4,507,549
=========== =========== ===========
</TABLE>
The provision for federal income tax differs from the amount computed
by applying the statutory rate to taxable income as follows:
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
Computed "expected" federal income tax expense $ 2,476,869 $ 3,139,050 $ 2,746,711
Add (deduct):
CIC foreign sales corporation income (20,289) (10,821) (22,473)
State income tax deduction (75,702) (116,620) (145,860)
Change in valuation allowance 2,352,500
Tax effect resulting from foreign activities (1,025,935)
Other (11,907) 66,391 (46,943)
----------- ----------- -----------
$ 2,368,971 $ 3,078,000 $ 3,858,000
=========== =========== ===========
</TABLE>
The components of the deferred income tax assets and liabilities at
March 31, 1997 and 1998 are as follows:
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Current deferred income tax asset:
Allowance for doubtful accounts $ 127,500 $ 214,200
Liability for sales and warranty returns 114,800 230,300
Accrued vacation 32,400 27,100
Inventory 348,300 527,300
Other reserves 145,100
----------- -----------
$ 623,000 $ 1,144,000
=========== ===========
Net noncurrent deferred income tax asset (liability):
Accumulated depreciation $ (108,000) $ (109,000)
Foreign subsidiary intangibles and other 28,000 2,352,500
----------- -----------
(80,000) 2,243,500
Less valuation allowance (2,352,500)
----------- -----------
$ (80,000) $ (109,000)
=========== ===========
</TABLE>
As discussed in Note 3, the Company expensed $4,705,000 of acquired
research and development costs during the year ended March 31, 1998 in
connection with the acquisition of the PolyCon Companies. For German
tax purposes, the amount was capitalized as part of goodwill and will
be amortized over 15 years. The Company has a full valuation allowance
recorded against this asset at March 31, 1998. The Company intends to
fully reserve this asset until it is determined that it is more likely
than not that the asset can be realized through future taxable income
from its German operations.
39
<PAGE> 40
13. EARNINGS PER SHARE
A summary of the calculation of basic and diluted earnings per share
for the years ended March 31, 1996, 1997, and 1998 is as follows:
<TABLE>
<CAPTION>
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ---------
<S> <C> <C> <C>
FOR THE YEAR ENDED 1996
- -----------------------
BASIC EPS
Income available to common stockholders $4,693,285 7,184,066 $ 0.65
EFFECT OF DILUTIVE SECURITIES
Stock options 457,623
DILUTED EPS
Income available to common stockholders and $4,693,285 7,641,689 $ 0.61
assumed conversions
FOR THE YEAR ENDED 1997
- -----------------------
BASIC EPS
Income available to common stockholders $5,839,500 8,228,408 $ 0.71
EFFECT OF DILUTIVE SECURITIES
Stock options 161,878
DILUTED EPS
Income available to common stockholders and $5,839,500 8,390,286 $ 0.70
assumed conversions
FOR THE YEAR ENDED 1998
- -----------------------
BASIC EPS
Income available to common stockholders $3,571,013 8,173,440 $ 0.44
EFFECT OF DILUTIVE SECURITIES
Stock options 234,585
DILUTED EPS
Income available to common stockholders and
assumed conversions $3,571,013 8,408,025 $ 0.42
</TABLE>
The following options were outstanding during the respective year
granted, but were not included in the computation of that year's
diluted EPS because the options' exercise price was greater than the
average market price of the common shares in the respective year.
<TABLE>
<CAPTION>
OPTIONS EXERCISE
GRANTED PRICE EXPIRATION
------- ------------- -----------
<S> <C> <C> <C>
FOR THE YEARS ENDED MARCH 31:
1996 39,750 $16.00-$17.42 2000 - 2007
1997 240,188 $10.67.$16.00 2000 - 2007
1998 41,438 $13.33-$16.00 2000 - 2005
</TABLE>
40
<PAGE> 41
14. COMMITMENTS
The Company leases the buildings containing its offices and
manufacturing facilities and certain equipment under various operating
leases. Rent expense under these leases totaled approximately $259,000,
$312,000, and $401,000 for the years ended March 31, 1996, 1997, and
1998, respectively. Minimum future rental payments under the
noncancellable operating leases are approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING MARCH 31:
<S> <C>
1999 $ 737,000
2000 674,000
2001 582,000
2002 552,000
2003 499,000
Thereafter 3,777,000
----------
$6,821,000
==========
</TABLE>
The Company's lease for certain of its offices and manufacturing
facilities expires July 31, 2003, but may be renewed for an additional
five-year term. The Company has the option to purchase the facilities
at any time during the lease term for $1,800,000 less $40,000 per year
for each year that the Company leases the facilities.
15. STOCK OPTIONS
In 1989 the Company adopted an Employee Incentive Stock Option Plan
(the 1989 Plan) whereby the Board of Directors may, from time to time,
grant stock options to officers and key employees of the Company. The
Company set aside 1,181,250 shares of common stock for the 1989 plan.
The options granted under this plan are not exercisable during the
first two year following the grant date and expire five years from the
date of grant. The plan provides that the exercise price be equal to
the fair market value of the common stock, as defined in the plan, the
date of grant, except for options issued to persons who own more than
10% of the Company's outstanding common stock whose exercise price is
equal to 110% of the fair market value of the common stock at the date
of grant. On July 10, 1995, the Company's shareholder approved changes
to the Company's stock option plans whereby the 1989 Plan was terminate
and replaced by the 1995 Employee Stock Option Plan (the 1995 Plan).
Under the 1995 Plan, options vest and are exercisable in twenty percent
increments beginning one year from the date of grant and expire ten
years from the date of grant. The Company set aside 421,875 shares of
common stock for the 1995 Plan. During 1998, the shareholders approved
450,000 additional shares of common stock to be set aside for the 1995
plan.
The Company's stockholders also approved options for 271,688 shares of
common stock for directors who are not employees of the Company under
the Company's Directors= Compensation Equity Program (the Program).
During 1995, the Company's shareholders approved changes to the
Company's stock option plans whereby the Program was terminated and
replaced by the 1995 Outside Directors Stock Option Plan (the 1995
Directors Plan). Under the 1995 Directors Plan, options vest and are
immediately exercisable on date of grant and expire ninety days after
the time the Participant ceases to be a Director if the Director
terminated for cause or three years after the date of termination if
such termination is due to retirement, permanent disability, or death.
The Company has set aside 84,375 shares of common stock for the 1995
Directors Plan.
41
<PAGE> 42
Pertinent information regarding the plans which has been retroactively
restated for the 3-for-2 stock split is as follows:
<TABLE>
<CAPTION>
RANGE OF WEIGHTED
NUMBER OF EXERCISE AVERAGE VESTING
OPTIONS PRICES EXERCISE PRICE PROVISIONS
------------- --------------- -------------- -----------
<S> <C> <C> <C> <C>
Options outstanding, March 31, 1995 1,206,563 $ .45 - $ 1.78 $ .99 Various
Options granted 11,250 $11.33 - $16.00 $12.89 100%/year
Options granted 127,688 $ 9.17 - $13.33 $11.09 20%/year
Options exercised (1,020,938) $ .45 - $ 1.71 $ .89 Various
-------------
Options outstanding, March 31, 1996 324,563 $ 1.19 - $16.00 $ 5.65 Various
Options granted 18,750 $11.00 - $11.33 $11.13 100%/year
Options granted 142,500 $ 8.83 - $12.10 $11.19 20%/year
Options exercised (33,750) $ 1.19 $ 1.19 20%/year
-------------
Options outstanding, March 31, 1997 452,063 $ 1.19 - $16.00 $ 7.96 Various
Options granted 11,250 $14.42 $14.42 100%/year
Options granted 234,750 $ 9.67 - $17.42 $12.41 20%/year
Options exercised (110,513) $ 1.19 - $13.33 $ 1.75 Various
Options forfeited (1,800) $13.33 $13.33 20%/year
-------------
Options outstanding, March 31, 1998 585,750
=============
</TABLE>
The following table summarizes information about stock options
outstanding at March 31, 1998.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- --------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
--------------- --------------- ----------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 1.78 44,063 7.81 $ 1.78 29,813 $ 1.78
$ 8.83 - $11.00 252,000 8.55 $10.27 46,350 $10.12
$11.33 - $12.10 153,000 8.62 $11.55 39,600 $11.43
$12.33 - $15.00 96,937 8.89 $14.16 24,525 $13.83
$16.00 - $17.42 39,750 9.46 $16.45 3,750 $16.00
-------------- -----------
585,750 144,038
============== ===========
</TABLE>
The options above were issued at exercise prices which approximate fair
market value at the date of grant. At March 31, 1998, 411,862 shares
are available for grant under the plans.
The Company applies Accounting Principles Board Opinion 25 and related
Interpretations in accounting for its stock plans. Accordingly, no
compensation cost has been recognized related to stock options. Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under
those plans consistent with the method prescribed in SFAS No. 123,
Accounting for Stock-Based Compensation, the Company's net income and
earnings per share would have been reduced to the pro forma amounts
indicated below:
42
<PAGE> 43
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
Net income - as reported $ 4,693,285 $ 5,839,500 $ 3,571,013
Net income - pro forma $ 4,607,184 $ 5,559,083 $ 3,074,098
Diluted earnings per share - as reported $ .61 $ .70 $ .42
Diluted earnings per share - pro forma $ .60 $ .67 $ .37
</TABLE>
The pro forma amounts reflected above are not representative of the
effects on reported net income in future years because, in general, the
options granted typically do not vest for several years and additional
awards are made each year. The fair value of each option grant is
estimated on the grant date using the Black-Scholes option-pricing
model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
1996 1997 1998
<S> <C> <C> <C>
Dividend yield 0 0 0
Expected life (years) 3 - 5 3 - 5 3 - 5
Expected volatility 45.7% 45.7% 44.2 - 45.7%
Risk-free interest rate (range) 5.77% - 5.88% 6.16% - 6.35% 5.98% - 6.35%
</TABLE>
16. RETIREMENT PLAN
The Company has a 401(k) savings and profit sharing plan, the Cybex
Computer Products Corporation Retirement Plan, covering substantially
all employees. The Company will match 25% of an employee's
contributions up to 6% of the employee's compensation. The Company's
expense for matching contributions totaled approximately $32,000,
$53,000, and $91,000 for the years ended March 31, 1996, 1997, and
1998, respectively. The Company may also elect to make discretionary
contributions as determined by its Board of Directors. The Company did
not make discretionary contributions during the fiscal years ended
March 31, 1996, 1997, or 1998.
17. CONTINGENCIES
The Company has a contingent liability resulting from litigation
enacted by Apex PC Solutions, Inc. (Apex). Apex contends in a lawsuit
filed against the Company in the U.S. District Court in Seattle,
Washington that the Company has infringed Patent No. 5,721,842. After
extensive review of the claims at issue, management does not believe
that any of its products are covered by any valid claim of Apex's
patent. As a result, it is management's opinion that the probable
resolution of such contingencies will not materially affect the
financial position, results of operations, or cash flows of the
Company. The Company has also been involved from time to time in
litigation in the normal course of its business. In the opinion of
management, the Company is not aware of any other pending or threatened
litigation matter that will have a material adverse effect on the
Company's business, operations, financial condition or cash flows.
43
<PAGE> 44
18. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table presents unaudited quarterly operating results for
each of the Company's last eight fiscal quarters. This information has
been prepared on a basis consistent with the Company's audited
financial statements and includes all adjustments, consisting only of
normal recurring adjustments, that the Company considers necessary for
a fair presentation of the data.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------
(In Thousands, Except for Per Share Amounts)
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1996 1996 1996 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 7,428 $ 8,050 $ 8,917 $ 10,173
Gross profit $ 3,941 $ 4,279 $ 4,695 $ 5,245
Operating income $ 1,543 $ 1,840 $ 1,846 $ 2,102
Net income $ 1,231 $ 1,473 $ 1,533 $ 1,603
Net income per share (1):
Basic $ .15 $ .18 $ .19 $ .20
Diluted $ .15 $ .17 $ .18 $ .19
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------
(In Thousands, Except for Per Share Amounts)
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1997 1997 1997 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 10,695 $ 11,267 $ 12,537 $ 18,064
Gross profit $ 5,646 $ 5,923 $ 6,567 $ 9,464
Operating income $ 2,159 $ 2,388 $ (2,019) $ 3,653
Net income $ 1,702 $ 1,937 $ (2,659) $ 2,591
Net income per share (1):
Basic $ .21 $ .24 $ (.33) $ .31
Diluted $ .21 $ .23 $ (.31) $ .31
</TABLE>
(1) The net income per share for each quarter within a fiscal year does not
necessarily equal the total net income per share for that particular fiscal
year due to variations in the estimated value of the Company's common stock
during the year and the effect these variations had on the shares
outstanding calculation.
44
<PAGE> 45
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Cybex Computer Products Corporation
Huntsville, Alabama
Our report on the consolidated financial statements of Cybex Computer Products
Corporation has been included on page 28 of this Form 10-K. In connection with
our audit of such consolidated financial statements, we have also audited the
related financial statement schedule listed in the index on page 25 of this Form
10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
May 1, 1998
45
<PAGE> 46
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
for the years ended March 31, 1996, 1997, and 1998
<TABLE>
<CAPTION>
CHARGED CHARGED
BEGINNING TO TO
BALANCE EXPENSES ACCOUNTS DEDUCTIONS(1) OTHER BALANCE
--------- ---------- -------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1996:
Allowance for doubtful accounts $134,076 $ 11,074 $ -- $ (13,767) $ -- $ 131,383
Allowance for inventory obsolescence $150,000 $ 103,000 $ -- $ -- $ -- $ 253,000
Liability for sales and warranty returns $371,792 $ (171,792) $ -- $ -- $ -- $ 200,000
YEAR ENDED MARCH 31, 1997:
Allowance for doubtful accounts $131,383 $ 416,000 $ -- $ (196,546) $ -- $ 350,837
Allowance for inventory obsolescence $253,000 $ 244,840 $ -- $ -- $ -- $ 497,840
Liability for sales and warranty returns $200,000 $ 144,654 $ -- $ -- $ -- $ 344,654
YEAR ENDED MARCH 31, 1998:
Allowance for doubtful accounts $350,837 $ 717,721 $ -- $ (200,880) $ 95,206 $ 963,083
Allowance for inventory obsolescence $497,840 $ 667,955 $ -- $ -- $199,980 $1,365,775
Liability for sales and warranty returns $344,654 $ 440,966 $ -- $ -- $ -- $ 785,620
Valuation allowance for income taxes $ -- $2,352,500 $ -- $ -- $ -- $2,352,500
</TABLE>
(1) Deductions consist of specific accounts receivable written off against the
allowance for doubtful accounts.
46
<PAGE> 47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Cybex Computer Products Corporation has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
CYBEX COMPUTER PRODUCTS CORPORATION
By: /s/ Stephen F. Thornton
-------------------------------
Stephen F. Thornton, Chairman of
the Board of Directors, President
and Chief Executive Officer
(Principal Executive Officer)
DATED: June 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Cybex
Computer Products Corporation and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stephen F. Thornton
----------------------- Chairman of the Board of June 26, 1998
Stephen F. Thornton Directors, President and Chief
Executive Officer
(Principal Executive Officer)
/s/ Doyle C. Weeks
----------------------- Senior Vice President - Finance, June 26, 1998
Doyle C. Weeks Chief Financial Officer, and
Treasurer (Principal Financial
and Accounting Officer) and
Director
/s/ Remigius G. Shatas
----------------------- Executive Vice President - June 26, 1998
Remigius G. Shatas Technology and Acquisitions,
Secretary and Director
/s/ Oscar L. Pierce
----------------------- Director June 26, 1998
Oscar L. Pierce
/s/ David S. Butler
----------------------- Director June 26, 1998
David S. Butler
/s/ Douglas E. Pritchett
------------------------ Director June 26, 1998
Douglas E. Pritchett
</TABLE>
47
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
2.1 Purchase and Sale Agreement by and between the Company,
Cybex Europe and Edgar and Stephanie Elsner effective
December 31, 1997 incorporated by reference (pursuant to the
provisions of Rule 12(b)-32) to Exhibit No. 2.1 (b) to the
Company's Current Report on Form 8-K filed January 14, 1998.
3.1 Amended and Restated Articles of Incorporation of the
Company, incorporated by reference (pursuant to the
provisions of Rule 12(b)-32) to Exhibit No. 3.1 to Amendment
No. 1 to Registration Statement No. 33-93124.
3.2 Amended and Restated By-Laws of the Company, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to
Exhibit No. 3.2 to Amendment No. 1 to Registration
Statement No. 33-93124.
4.1 Specimen of Common Stock Certificate of the Company,
incorporated by reference (pursuant to the provisions of
Rule 12(b)-32) to Exhibit No. 4 to Amendment No. 1 to
Registration Statement No. 33-93124.
10.1 Revolving Line of Credit Agreement by and between the
Company and First Commercial Bank, incorporated by reference
(pursuant to the provisions of Rule 12(b)-32) to Exhibit No.
10.1 to Registration Statement No. 33-93124.
10.2* Commercial Variable Rate Revolving or Draw Note by and
between the Company and First Commercial Bank and related
Security Agreement dated July 1, 1997 and the related Loan
Modification Agreement dated March 5, 1998.
10.3* Commercial Fixed Rate Promissory Note by and between the
Company and First Commercial Bank and related Security
Agreement dated March 25, 1998.
10.4 Restated 1989 Employee Incentive Stock Option Plan,
incorporated by reference (pursuant to the provisions of
Rule 12(b)-32) to Exhibit No. 10.2 to Registration Statement
No. 33-93124, and Amendment to 1989 Employee Incentive Stock
Option Plan, incorporated by reference (pursuant to the
provisions of Rule 12(b)-32) to Exhibit No. 10.13 to
Amendment No. 1 to Registration Statement No. 33-93124.
10.5 1995 Employee Stock Option Plan, incorporated by reference
(pursuant to the provisions of Rule 12(b)-32) to Exhibit No.
10.3 to Registration Statement No. 33-93124.
10.6 1995 Outside Directors Stock Option Plan, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to
Exhibit No. 10.4 to Registration Statement No. 33-93124.
10.7* 1998 Employee Stock Incentive Plan.
10.8 Smith Barney Shearson Flexible Prototype Nonstandardized
401(k) Plan Adoption Agreement #007 and Smith Barney
Shearson Prototype Defined Contribution Plan Document #005
and Trust Agreement, incorporated by reference (pursuant to
the provisions of Rule 12(b)-32) to Exhibit 10.6 of the
Company's Form 10-K for the fiscal year ended March 31,
1997.
10.9 Employment and Noncompetition Agreement by and between the
Company and Stephen F. Thornton, dated June 1, 1995,
incorporated by reference (pursuant to the provisions of
Rule 12(b)-32) to Exhibit No. 10.7 to Registration Statement
No. 33-93124.
10.10 Employment and Noncompetition Agreement by and between the
Company and Remigius G. Shatas, dated June 1, 1995,
incorporated by reference (pursuant to the provisions of
Rule 12(b)-32) to Exhibit No. 10.8 to Registration Statement
No. 33-93124.
</TABLE>
<PAGE> 49
10.11 Employment and Noncompetition Agreement by and between the
Company and Robert R. Asprey, dated June 1, 1995,
incorporated by reference (pursuant to the provisions of
Rule 12(b)-32) to Exhibit No. 10.9 to Registration Statement
No. 33-93124.
10.12 Employment and Noncompetition Agreement by and between the
Company and Doyle C. Weeks, dated June 1, 1995, incorporated
by reference (pursuant to the provisions of Rule 12(b)-32)
to Exhibit No. 10.10 to Registration Statement No. 33-93124.
10.13 Employment and Noncompetition Agreement by and between the
Company and R. Byron Driver, dated June 1, 1995,
incorporated by reference (pursuant to the provisions of
Rule 12(b)-32) to Exhibit No. 10.11 to Registration
Statement No. 33-93124.
13 Cybex Computer Products Corporation Annual Report to
Shareholders for the Fiscal Year Ended March 31, 1998. Such
Annual Report shall not be deemed to be filed with the
Securities and Exchange Commission as a part of this Form
10- K Annual Report or otherwise subject to the liabilities
of Section 18 of the Securities Exchange Act of 1934, as
amended.
21* List of Subsidiaries of the Company.
23.1* Consent of Coopers & Lybrand L.L.P.
27.1-27.8* Financial Data Schedule for current period and restated
Financial Data Schedules for other periods (for SEC use
only).
* As filed herewith.
<PAGE> 1
EXHIBIT 10.2
[FIRST COMMERCIAL LOGO]
COMMERCIAL
SECURITY
AGREEMENT
First Commercial Bank of Huntsville
301 Washington Street
Huntsville, AL 35801
(205) 551-3300 "LENDER"
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
BORROWER OWNER
<S> <C>
Cyber Computer Products Corporation Cyber Computer Products Corporation
ADDRESS ADDRESS
4912 Research Drive 4912 Research Drive
Huntsville, AL 35806 Huntsville, AL 35806
TELEPHONE NO. IDENTIFICATION NO. TELEPHONE NO. IDENTIFICATION NO.
(202) 430-4000 630801728 (202) 430-4000 630801728
- ---------------------------------------------------------------------------------------------
</TABLE>
1. SECURITY INTEREST. For good and valuable consideration, Owner grants to
Lender identified above a continuing security interest in the Collateral
described below to secure the Obligations described in this Agreement.
2. OBLIGATIONS. The collateral shall secure the payment and performance of
all of Borrower's and Owner's present and future, joint and/or several, direct
and indirect, absolute and contingent, express and implied indebtedness to
Lender under any promissory note or agreement described below, including all
future advances made by Lender to Borrower or Owner and expenditures incurred
by Lender upon the occurrence of an Event of Default (collectively
"Obligations"):
a. this Agreement and/or the following promissory notes and agreements:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
8.188% $12,000,000.00 03/26/98 04/02/98
- --------------------------------------------------------------------------------------
</TABLE>
b. [X] all other presently existing or future, evidence of
indebtedness, obligations, agreements, instruments, guaranties or
otherwise of Borrower or Owner to Lender (WHETHER INCURRED FOR THE
SAME OR DIFFERENT PURPOSES THAN THE FOREGOING); and
c. all renewals, extensions, amendments, modifications, replacements
or substitutions to any of the foregoing.
3. COLLATERAL. All of Owner's rights, title and interest in the following
described property whether now or hereafter existing or now owned or hereafter
acquired by Owner and wherever located shall constitute the "Collateral:"
[ ] All accounts and contract rights including, but not limited to, any
accounts and contract rights described on Schedule A attached hereto
and incorporated herein by this reference;
[ ] All chattel paper including, but not limited to, any chattel paper
described on Schedule A attached hereto and incorporated herein by
this reference;
[ ] All documents including, but not limited to, any documents
described on Schedule A attached hereto and incorporated herein by
this reference;
[ ] All equipment, including, but not limited to, any equipment
described on Schedule A attached hereto and incorporated herein
by this reference;
[ ] All fixtures, including, but not limited to, any fixtures described
on Schedule A and located or to be located on the real property
described on Schedule B attached hereto and incorporated herein by
this reference;
[ ] All general intangibles including, but not limited to, any general
intangibles described on Schedule A attached hereto and
incorporated herein by this reference;
[ ] All instruments including, but not limited to, any instruments
described on Schedule A attached hereto and incorporated herein by
this reference;
[ ] All inventory including, but not limited to, any inventory described
on Schedule A attached hereto and incorporated herein by this
reference;
[ ] All minerals or the like and accounts resulting from sales at the
wellhead or minehead located on or related to the real property
described on Schedule B attached hereto and incorporated herein by
this reference;
[ ] All standing timber which is to be cut and removed under a
conveyance or contract for sale located on the real property
described on Schedule B attached hereto and incorporated herein by
this reference;
[ ] Other;
THE PROPERTY DESCRIBED ON SCHEDULE A;
All monies, instruments, and savings, checking or other accounts of Owner
(excluding IRA, Keogh, trust accounts, and other accounts subject to tax
penalties if so assigned) that are now or in the future in Lender's custody or
control;
All monies or instruments pertaining to the Collateral described above;
All accessions, accessories, additions, amendments, attachments, modifications,
replacements and substitutions to any of the above;
All proceeds and products of any of the above;
All policies of insurance pertaining to any of the above as well as any
proceeds and unearned premiums pertaining to such policies; and
All books and records pertaining to any of the above.
<PAGE> 2
4. OWNER'S TAXPAYER IDENTIFICATION. Owner's social security number or
federal taxpayer identification number is: 630801728.
5. RESIDENCY/LEGAL STATUS. [ ] Owner is an individual and a resident of the
state of: _____________________________________. [ X ] Owner is a Corporation
duly organized, validly existing and in good standing under the laws of the
state of: Alabama.
6. REPRESENTATIONS, WARRANTIES, AND COVENANTS. Owner represents, warrants
and convenants to Lender that:
(a) Owner is and shall remain the sole owner of the Collateral;
(b) Neither Owner, nor, to the best of Owner's knowledge, has any
other party used, generated, released, discharged, stored, or
disposed of any hazardous waste, toxic substance, or hazardous
material or transported any such material across the property
except as allowed by and in accordance with applicable federal,
state and local law and regulation. Owner shall not commit or
permit such actions to be taken in the future. The term
"Hazardous Materials" shall mean any substance, material, or waste
which is or becomes regulated by any governmental authority
including, but not limited to, (i) petroleum; (ii) asbestos; (iii)
polychlorinated biphenyls; (iv) those substances, materials or
wastes designated as a "hazardous substance" pursuant to Section
311 of the Clean Water Act or listed pursuant to Section 307 of
the Clean Water Act or any amendments or replacements of these
statutes; (v) those substances, materials or wastes defined as a
"hazardous waste" pursuant to Section 1004 of the Resource
Conservation and Recovery Act of any amendments or replacements to
that statute; or (vi) those substances, materials or wastes
defined as a "hazardous substance" pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation and Liability
Act, or any amendments or replacements to that statue. Owner is in
compliance in all respects with all applicable federal, state and
local laws and regulations, including, without limitation, those
relating to "Hazardous Materials", as defined herein, and other
environmental matters (the "Environmental Laws") and neither the
federal government nor any other governmental or quasi
governmental entity has filed a lien on the Collateral, nor are
there any pending or threatened governmental, judicial or
administrative actions with respect to environmental matters,
which involve the Collateral;
(c) Owner's chief executive office, principal place of business,
office where its business records relating to the Collateral or
residence is the address identified above. The Collateral is
located and has been located during the four (4) month period
prior to the date hereof, at the address described above or any
address described on Schedule C attached hereto and incorporated
herein by this reference. Owner shall immediately advise Lender
in writing of any change in or addition to the foregoing
addresses;
(d) Owner shall not become a party to any restructuring of its form of
business or participate in any consolidation, merger, liquidation
or dissolution without Lender's prior written consent;
(e) Owner shall notify Lender of the nature of any intended change of
Owner's name, or the use of any trade name, and the effective date
of such change;
(f) The Collateral is and shall at all times remain free of all tax
and other liens, security interests, encumbrances and claims of
any kind except for those belonging to Lender and those described
on Schedule D attached hereto and incorporated herein by this
reference. Without waiving the Event of Default as a result
thereof, Owner shall take any action and execute any document
needed to discharge any liens, security interests, encumbrances
and claims not described on Schedule D;
(g) Owner shall defend the Collateral against all claims and demands
of all persons at any time claiming any interest therein;
(h) All of the goods, fixtures, minerals or the like, and standing
timber constituting the Collateral are and shall be located at
Owner's executive offices, places of business, residence and
domiciles specifically described in this Agreement. Owner shall
not change the location of any Collateral without the prior
written consent of Lender;
(i) Owner shall provide Lender with possession of all chattel paper
and instruments constituting the Collateral, and Owner shall
promptly mark all chattel paper, instruments, and documents
constituting the Collateral to show that the same are subject to
Lender's security interest;
(j) All of Owner's accounts or contract rights; chattel paper;
documents; general intangibles; instruments; and federal, state,
county, and municipal government and other permits and licenses;
trusts, liens, contracts, leases, and agreements constituting the
Collateral are and shall be valid, genuine and legally enforceable
obligations and rights belonging to Owner against one or more
third parties and not subject to any claim, defense, set-off or
counterclaim of any kind;
(k) Owner shall not amend, modify, replace, or substitute any account
or contract right; chattel paper; document; general intangible; or
instrument constituting the Collateral without the prior written
consent of Lender;
(l) Owner has the right and is duly authorized to enter into and
perform its obligations under this Agreement. Owner's execution
and performance of these obligations do not and shall not conflict
with the provisions of any statute, regulation, ordinance, rule of
law, contract or other agreement which may now or hereafter be
binding on Owner;
(m) No action or proceeding is pending against Owner which might
result in any material or adverse change in its business
operations or financial condition or materially affect the
Collateral;
(n) Owner has not violated and shall not violate any applicable
federal, state, county or municipal statute, regulation or
ordinance (including but not limited to those governing Hazardous
Materials) which may materially and adversely affect its business
operations or financial condition of the Collateral;
(o) Owner shall, upon Lender's request, deposit all proceeds of the
Collateral into an account or accounts maintained by Owner or
Lender at Lender's institution;
(p) Owner will, upon receipt, deliver to Lender as additional
Collateral all securities distributed on account of the Collateral
such as stock dividends and securities resulting from stock
splits, reorganizations and recapitalizations;
(q) Owner agrees to the terms of the Obligations and to the terms of
any renewals, extensions, amendments, modifications, replacements
or substitutions of the Obligations; Lender may enter into
agreements in the future with Borrower which, if this Agreement so
provides, will become Obligations secured by the Collateral
described in this Agreement; property other than the Collateral
may also secure the Obligations, that Lender shall have no
obligation to exercise its rights against such property prior to
exercising its rights against the Collateral, that Lender may
accept substitutions or exchanges for any such property, and that
Lender may release its security interest in such property at any
time; parties other than Borrower may be or may become obligated
under the Obligations; and
(r) This Agreement and the obligations described in this Agreement are
executed and incurred for business and not consumer purposes.
7. SALE OF COLLATERAL. Owner shall not assign, convey, lease, sell or
transfer any of the Collateral to any third party without the prior written
consent of Lender except for sales of inventory to buyers in the ordinary
course of business.
8. FINANCING STATEMENTS AND OTHER DOCUMENTS. Owner shall at any time and
from time to time take all actions and execute all documents required by Lender
to attach, perfect and maintain Lender's security interest in the Collateral
and establish and maintain Lender's right to receive the payment of the
proceeds of the Collateral including, but not limited to, executing any
financial statements, fixture filings, continuation statements, notices of
security interest and other documents required by the Uniform Commercial Code
and other applicable law. Owner shall pay the costs of filing such documents
in all offices wherever filing or recording is deemed by Lender to be necessary
or desirable. Lender shall be entitled to perfect its security interest in the
Collateral by filing carbon, photographic or other reproductions of this
Agreement and/or the aforementioned documents with any authority required by
the Uniform Commercial Code or other applicable law. Owner authorizes Lender
to execute and file any financing statements, as well as extensions, renewals
and amendments of financing statements in such form as Lender may require to
perfect and maintain perfection of any security interest granted in this
Agreement.
9. INQUIRIES AND NOTIFICATION TO THIRD PARTIES. Owner hereby authorizes
Lender to contact any third party and make any inquiry pertaining to Owner's
financial condition or the Collateral. In addition, Lender is authorized to
provide oral or written notice of its security interest in the Collateral to any
third party.
10. LOCK BOX, COLLATERAL ACCOUNT. If Lender so requests at any time (whether
or not Owner is in default of this Agreement), Owner will direct each of its
account debtors to make payments due under the relevant account or chattel
paper directly to a special lock box to be under the control of Lender. Owner
hereby authorizes and directs Lender to deposit into a special collateral
account to be established and maintained with Lender all checks, drafts and
cash payments received in the lock box. All deposits in the collateral account
shall constitute proceeds of Collateral and shall not constitute payment of any
Obligation. At its option, Lender may, at any time, apply finally collected
funds on deposit in the collateral account to the payment of the Obligations in
such order of application as Lender may determine, or permit Owner to withdraw
all or any part of the balance on deposit in the collateral account. If a
collateral account is so established, Owner agrees that Owner will promptly
deliver to Lender, for deposit into the collateral account, all payments on
accounts and chattel paper received by Owner. All such payments shall be
delivered to Lender in the form received (except for Owner's endorsement if
necessary). Until so deposited, all payments on accounts and chattel paper
received by Owner shall be held in trust by Owner for and as the property of
Lender and shall not be commingled with any funds or property of Owner.
11. COLLECTION OF INDEBTEDNESS FROM THIRD PARTIES. Lender shall be entitled
to notify, and upon the request of Lender, owner shall notify any account
debtor or third party (including, but not limited to, insurance companies) to
pay any indebtedness or obligation owing to Owner and constituting the
Collateral (collectively "Indebtedness") to Lender whether or not a default
exists under this Agreement. Owner shall diligently collect the Indebtedness
owing to Owner from its account debtors and other third parties until the
giving of such notification. In the event that Owner possesses or receives
possession of any instruments or other remittances with respect to the
<PAGE> 3
Indebtedness following the giving of such notification or if the instruments or
other remittances constitute the prepayment of any Indebtedness or the payment
of any insurance proceeds, Owner shall hold such instruments and other
remittances in trust for Lender apart from its other property, endorse the
instruments and other remittances to Lender, and immediately provide Lender
with possession of the instruments and other remittances. Lender shall be
entitled, but not required, to collect (by legal proceedings or otherwise),
extend the time for payment, compromise, exchange or release any obligor or
collateral, or otherwise settle any of the Indebtedness whether or not an event
of default exists under this Agreement. Lender shall not be liable to Owner
for any action, error, mistake, omission or delay pertaining to the actions
described in this paragraph or any damages resulting therefrom.
12. POWER OF ATTORNEY. Owner hereby appoints Lender as its attorney-in-fact
to endorse Owner's name on all instruments and other remittances payable to
Owner with respect to the Indebtedness, including any items received by Lender
in any lockbox account, or other documents pertaining to Lender's actions in
connection with the Indebtedness. In addition, Lender shall be entitled, but
not required, to perform any action or execute any document required to be
taken or executed by Owner under this Agreement. Lender's performance of such
action or execution of such documents shall not relieve Owner from any
obligation or cure any default under this Agreement. The powers of attorney
described in this paragraph are coupled with an interest and are irrevocable.
13. USE AND MAINTENANCE OF COLLATERAL. Owner shall use the Collateral solely
in the ordinary course of its business, for the usual purposes intended by the
manufacturer (if applicable), with due care, and in compliance with the laws,
ordinances, regulations, requirements and rules of all federal, state, county
and municipal authorities including environmental laws and regulations and
insurance policies. Owner shall not make any alterations, additions or
improvements to the Collateral without the prior written consent of Lender.
Owner shall ensure that Collateral which is not now a fixture does not become a
fixture. Without limiting the foregoing, all alterations, additions and
improvements made to the Collateral shall be subject to the security interest
belonging to Lender, shall not be removed without the prior written consent of
Lender, and shall be made at Owner's sole expense. Owner shall take all
actions and make any repairs or replacements needed to maintain the Collateral
in good condition and working order.
14. LOSS OR DAMAGE. Owner shall bear the entire risk of any loss, theft,
destruction or damage (collectively "Loss or Damage") to all or any part of the
Collateral. In the event of any Loss or Damage, Owner will either restore the
Collateral to its previous condition, replace the Collateral with similar
property acceptable to Lender in its sole discretion, or pay or cause to be
paid to Lender the decrease in the fair market value of the affected Collateral.
15. INSURANCE. If the original amount of the Obligations is $300 or more,
exclusive of the charges for insurance, and the value of the Collateral to be
insured is $300 or more ($500 or more if the collateral is a motor vehicle),
the Collateral will be kept insured for its full value against all loss or
damage caused by fire, collision, theft or other casualty. If the Collateral
consists of a motor vehicle having a retail value of at least $500, Owner will
obtain comprehensive and collision coverage in amounts at least equal to the
actual cash value of the vehicle with deductibles not to exceed $ n/a. OWNER
HAS THE RIGHT TO PROVIDE SUCH INSURANCE THROUGH AN EXISTING POLICY OR A POLICY
INDEPENDENTLY OBTAINED AND PAID FOR BY OWNER, subject to the right of the
Lender to decline the insurance offered by Owner for reasonable cause before
credit is extended. Owner shall assign to Lender all rights to receive
proceeds of insurance not exceeding the amount owed under the obligations
described above, and direct the insurer to pay all proceeds directly to
Lender. The insurance policies shall require the insurance company to provide
Lender with at least n/a days written notice before such policies are altered
or cancelled in any manner. The insurance policies shall name Lender as a loss
payee and provide that no act or omission of Owner or any other person shall
affect the right of Lender to be paid the insurance proceeds pertaining to the
loss or damage of the Collateral. In the event Owner fails to acquire or
maintain insurance, Lender (after providing notice as may be required by law)
may in its discretion procure appropriate insurance coverage upon the
Collateral and charge the insurance cost as an advance of principal under the
promissory note. Owner shall furnish Lender with evidence of insurance
indicating the required coverage. Lender may act as attorney-in-fact for Owner
in making and settling claims under insurance policies, cancelling any policy
or endorsing Owner's name on any draft or negotiable instrument drawn by any
insurer
16. INDEMNIFICATION. Lender shall not assume or be responsible for the
performance of any of Owner's obligations with respect to the Collateral under
any circumstances. Owner shall immediately provide Lender with written notice
of and hereby indemnifies and holds Lender and its shareholders, directors,
officers, employees and agents harmless from all claims, damages, liabilities
(including attorneys' fees and legal expenses), causes of action, actions,
suits and other legal proceedings (collectively "Claims") pertaining to its
business operations or the Collateral including, but not limited to, those
arising from Lender's performance of Owner's obligations with respect to the
Collateral or claims involving Hazardous Materials. Owner, upon the request of
Lender, shall hire legal counsel to defend Lender from such Claims, and pay the
attorneys' fees, legal expenses and other costs to the extent permitted by
applicable law, incurred in connection therewith. In the alternative, Lender
shall be entitled to employ its own legal counsel to defend such Claims at
Owner's cost.
17. TAXES AND ASSESSMENTS. Owner shall execute and file all tax returns and
pay all taxes, licenses, fees and assessments relating to its business
operations and the Collateral (including, but not limited to, income taxes,
personal property taxes, withholding taxes, sales taxes, use taxes, excise
taxes and workers' compensation premiums) in a timely manner.
18. INSPECTION OF COLLATERAL AND BOOKS AND RECORDS. Owner shall allow Lender
or its agents to examine, inspect and make abstracts and copies of the
Collateral and Owner's books and records pertaining to Owner's business
operations and financial condition or the Collateral during normal business
hours. Owner shall provide any assistance required by Lender for these
purposes. All of the signatures and information pertaining to the Collateral
or contained in the books and records shall be genuine, true, accurate and
complete in all respects. Owner shall note the existence of Lender's security
interest in its books and records pertaining to the Collateral.
19. EVENTS OF DEFAULT. An Event of Default will occur under this Agreement in
the event that Owner, Borrower or any guarantor:
(a) fails to make any payment under this Agreement or any other
indebtedness to Lender when due;
(b) fails to perform any obligation or breaches any warranty or covenant
to Lender contained in this Agreement or any other present or future
written agreement regarding this or any other indebtedness to Lender;
(c) provides or causes any false or misleading signature or representation
to be provided to Lender;
(d) sells, conveys, or transfers rights in any Collateral without the
written approval of Lender; destroys, loses or damages such Collateral
in any material respect; or subjects such Collateral to seizure,
confiscation, or condemnation;
(e) seeks to revoke, terminate or otherwise limit its liability under any
continuing guaranty;
(f) has a garnishment, judgment, tax levy, attachment or lien entered or
served against Owner, Borrower, or any guarantor, or any of their
property including the Collateral;
(g) dies, becomes legally incompetent, is dissolved or terminated, ceases
to operate its business, becomes insolvent, makes an assignment for
the benefit of creditors, fails to pay any debts as they become due,
or becomes the subject of any bankruptcy, insolvency or debtor
rehabilitation proceeding;
(h) allows the Collateral to be used by anyone to transport or store
goods, the possession, transportation, or use of which, is illegal;
(i) fails to provide Lender evidence of satisfactory financial condition;
(j) has a majority of its outstanding voting securities sold, transferred
or conveyed to any person or entity other than any person or entity
that has the majority ownership as of the date of the execution of
this Agreement; or
(k) causes Lender to deem itself insecure due to a significant decline in
the value of any of the Collateral or Lender, in good faith, believes
the prospect of payment or performance in impaired.
20. RIGHTS OF LENDER ON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default under this Agreement, Lender shall be entitled to exercise one or more
of the following remedies without notice or demand (except as required by law):
(a) to declare the Obligations immediately due and payable in full, such
acceleration shall be automatic and immediate if the Event of Default
is a filing under the Bankruptcy Code;
(b) to collect the outstanding Obligations with or without resorting to
judicial process;
(c) to change Owner's mailing address, open Owner's mail, and retain any
instruments or other remittances constituting the Collateral contained
therein;
(d) to take possession of any Collateral in any manner permitted by law;
(e) to apply for and obtain, without notice and upon ex parte application,
the appointment of a receiver for the Collateral without regard to
Owner's financial condition or solvency, the adequacy of the
Collateral to secure the payment or performance of the obligations, or
the existence of any waste to the Collateral;
(f) to require Owner to deliver and make available to Lender any
Collateral at a place reasonably convenient to Owner and Lender;
(g) to sell, lease or otherwise dispose of any Collateral and collect any
any deficiency balance with or without resorting to legal process;
(h) to set-off Owner's obligations against any amounts due to Owner
including, but not limited to, monies, instruments, and deposit
accounts maintained with Lender; and
(i) to exercise all other rights available to Lender under any other
written agreement or applicable law.
Lender's rights are cumulative and may be exercised together, separately, and
in any order. Unless the Collateral is perishable, threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender will provide reasonable notification of the time and place of any sale or
intended disposition as required under the Uniform Commercial Code. If the
Collateral consists of securities, Lender shall be entitled to transfer the
securities into the name of Lender or its designee and to vote the securities.
Lender shall be authorized to notify the issuer of the securities to remit any
related dividends, interest and securities resulting from stock splits,
reorganizations and capitalizations directly to Lender or its designee. In the
event that Lender institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of a prejudgment remedy in an action against
Owner, Owner waives the posting of any bond which might otherwise be required.
Upon default, Owner shall segregate all proceeds of Collateral and hold such
proceeds in trust for Lender. Lender's remedies under this paragraph are in
addition to those available at common law, such as offset.
<PAGE> 4
21. APPLICATIONS OF PAYMENTS. Whether or not a default has occurred under this
Agreement, all payments made by or on behalf of Owner and all credits due to
Owner from the disposition of the Collateral or otherwise may be applied against
the amounts paid by Lender (including attorneys' fees and legal expenses) in
connection with the exercise of its rights or remedies described in this
Agreement and any interest thereon and then to the payment of the remaining
Obligations in whatever order Lender chooses.
22. REIMBURSEMENT OF AMOUNTS EXPENDED BY LENDER. Owner shall reimburse Lender
for all amounts (including attorneys' fees and legal expenses) expended by
Lender in the performance of any action required to be taken by Owner or the
exercise of any right or remedy belonging to Lender under this Agreement,
together with interest thereon at the lower of the highest rate described in
any promissory note or credit agreement executed by Borrower or Owner or the
highest rate allowed by law from the date of payment until the date of
reimbursement. These sums shall be included in the definition of Obligations,
shall be secured by the Collateral identified in this Agreement and shall be
payable upon demand. Lender has no duty to take any action to protect the value
of the Collateral or to exercise any rights of the Owner with respect to the
Collateral.
23. ASSIGNMENT. Owner shall not be entitled to assign any of its rights,
remedies or obligations described in this Agreement without the prior written
consent of Lender. Consent may be withheld by Lender in its sole discretion.
Lender shall be entitled to assign some or all of its rights and remedies
described in this Agreement without notice to or the prior consent of Owner in
any manner.
24. MODIFICATION AND WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in a
writing signed by Lender. Lender may perform any of Owner's Obligations or
delay or fail to exercise any of its rights without causing a waiver of those
Obligations or rights. A waiver on one occasion shall not constitute a waiver
on any other occasion. Owner's Obligations under this Agreement shall not be
affected if Lender amends, compromises, exchanges, fails to exercise, impairs
or releases any of the obligations belonging to any Owner or third party or any
of its rights against any Owner, third party, Collateral or any other property
securing the Obligations.
25. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to
the benefit of Owner and Lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
26. NOTICES. Any notice or other communication to be provided under this
Agreement shall be in writing and sent to the parties at the addresses
described in this Agreement or such other address as the parties may designate
in writing from time to time.
27. SEVERABILITY. If any provision of this Agreement violates the law or is
unenforceable, the rest of the Agreement shall remain valid.
28. APPLICABLE LAW. This Agreement shall be governed by the laws of the state
indicated in Lender's address. Unless applicable law provides otherwise, Owner
consents to the jurisdiction of any court located in such state selected by
Lender in the event of any legal proceeding under this Agreement.
29. COLLECTION COSTS. If the original amount of the Obligations exceeds $300,
and if Lender hires an attorney who is not its salaried employee to collect any
amount due under the Obligations or enforce any right or remedy of Lender under
this Agreement, Owner agrees to pay Lender's reasonable expenses and collection
costs, including reasonable attorneys' fees not exceeding 15% of the unpaid
debt after default.
30. MISCELLANEOUS. This Agreement is executed for commercial purposes. Owner
shall supply information regarding Owner's business operations and financial
condition or the Collateral in the form and manner as required by Lender from
time to time. All information furnished by Owner to Lender shall be true,
accurate and complete in all respects. Owner and Lender agree that time is of
the essence. Owner waives presentment, demand for payment, notice of dishonor
and protest except as required by law. All references to Owner in this
Agreement shall include all parties signing below except Lender. This Agreement
shall be binding upon the heirs, successors and assigns of Owner and Lender. If
there is more than one Owner, their obligations under this Agreement shall be
joint and several. This Agreement shall remain in full force and effect until
Lender provides Owner with written notice of termination. This Agreement
represents the complete and integrated understanding between Owner and Lender
regarding the terms hereof.
31. WAIVER OF JURY TRIAL. LENDER AND OWNER HEREBY WAIVE ANY RIGHT TO A TRIAL
BY JURY IN ANY CIVIL ACTION ARISING OUT OF, OR BASED UPON, THIS SECURITY
AGREEMENT.
32. ADDITIONAL TERMS:
OWNER ACKNOWLEDGES THAT OWNER HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT. OWNER ACKNOWLEDGES RECEIPT OF AN EXACT COPY
OF THIS AGREEMENT.
Dated: March 26, 1998
LENDER: First Commercial Banks of Huntsville
By:/s/Louis K. Sisco
-----------------------------------------
Louis K. Sisco
Vice President
OWNER: Cybex Computer Products OWNER:
Corporation
By: /s/ Doyle C. Weeks
--------------------------- --------------------------------------------
Doyle C. Weeks
Chief Financial Officer
OWNER: OWNER:
- ------------------------------ --------------------------------------------
OWNER: OWNER:
- ------------------------------ --------------------------------------------
OWNER: OWNER:
- ------------------------------ --------------------------------------------
Page 4 of 5
--------
<PAGE> 5
SCHEDULE A
US Government Treasury Bill maturing 4-2-98, in the maturity amount of
$12,000,000.00, CUSIP #9127944T8.
SCHEDULE B
Record Owner Name:
SCHEDULE C
SCHEDULE
<PAGE> 6
LOAN MODIFICATION
STATE OF ALABAMA )
COUNTY OF Madison )
This Agreement is by and between First Commercial Bank ("Bank") and Cybex
Computer Products Corporation ("Borrower").
WHEREAS, Borrower is indebted to Bank on a loan("Loan"), as evidenced by a
Promissory Note dated July 1, 1997 ("Note"); and also described as note
#0073700-5603 in the face amount of $5,000,000.00.
WHEREAS, Borrower and Bank desire to modify the terms of said Loan set
forth herein.
NOW, THEREFORE, for and in consideration of the premises, Borrower and
Bank agree that the terms of the Loan are modified as follows: effective this
date, the interest rate shall be changed to a variable rate equal to 250 basis
points (2.50%) per annum) over the Index Rate. The index rate shall be the one
month LIBOR rate as published in the Money Rates section of The Wall Street
journal. Hereafter, this rate will be adjusted once per month on the 1st of
each month.
Except as modified herein, all of the terms and conditions of the Loan,
the Note, and of any and all other instruments executed in connection with said
Loan shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed effected the 5th day of March, 1998.
ATTEST FIRST COMMERCIAL BANK
Its: By: /s/ Janis Sims
------------------------------- --------------------------------
Its: Vice President
----------------------------
WITNESS
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
ATTEST Cybex Computer Products Corporation
Its: By: /s/
------------------------------- --------------------------------
Its: Vice President
----------------------------
STATE OF ALABAMA )
COUNTY OF )
I,____________________________, a Notary Public in and for said County, in said
State, hereby certify that_____________________________________________________
whose name as_________________________________of_______________________________
a_______________________________, is signed to the foregoing conveyance and who
is known to me, acknowledged before me on this day that, being informed of the
contents of such conveyance, _______, as such__________and with full authority,
executed the same voluntarily for and as the act of said__________.
Given under my hand and official seal this ________day of______________,
19______.
My commission expires:____________________ _____________________________________
NOTARY PUBLIC
________________________________________________________________________________
________________________________________________________________________________
STATE OF ALABAMA )
COUNTY OF )
I, Barbara Reeves, a Notary Public in and for said County, in said State,
hereby certify that Doyle Weeks whose name as Vice President of Cybex Computer
Products Corporation an officer, is signed to the foregoing conveyance, and who
is known to me, acknowledged before me on this day that, being informed of the
contents of such conveyance is, as such__________and with full authority,
executed the same voluntarily for and as the act of said_______________.
Given under my hand and official seal this 5th day of March, 1998.
My commission expires: /s/ Barbara Reeves
-------------------- ----------------------------------
NOTARY PUBLIC
<PAGE> 7
<TABLE>
<S> <C> <C>
BORROWER
Cybex Computer Products Corporation
[LOGO] FIRST COMMERCIAL BANK COMMERCIAL
VARIABLE RATE
FIRST COMMERCIAL BANK OF HUNTSVILLE REVOLVING OR
301 WASHINGTON STREET DRAW NOTE
HUNTSVILLE, AL 35801
(205) 551-3300 "LENDER" ADDRESS
4912 Research Drive
Huntsville, AL 35806
TELEPHONE NO. IDENTIFICATION NO.
(205) 430-4000 63-0801728
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
OFFICER INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
IDENTIFICATION RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
<S> <C> <C> <C> <C> <C> <C>
LKS VARIABLE $5,000,000.00 07/01/97 DEMAND
- -------------------------------------------------------------------------------------------------------
GENERAL CORPORATE PURPOSES
- -------------------------------------------------------------------------------------------------------
</TABLE>
PROMISE TO PAY: For value received, Borrower promises to pay to the order of
Lender the principal amount of FIVE MILLION AND NO/100 ($5,000,000.00)
or, if less, the aggregate unpaid principal amount of all loans or advances
made by the Lender to the Borrower under this Note, plus interest on the unpaid
principal balance at the rate and in the manner described below, until all
amounts owing under this Note are paid in full. All amounts received by Lender
shall be applied first to accrued unpaid interest, then to unpaid principal and
then to unpaid late charges and expenses, or in any other order as determined
by Lender, in Lender's sole discretion, as permitted by law.
REVOLVING OR DRAW FEATURE: [X] This Note possesses a revolving feature. Upon
satisfaction of the conditions set forth in this Note, Borrower shall be
entitled to borrow up to the full principal amount of the Note and to repay and
reborrow from time to time during the term of this Note. [ ] This Note
possesses a draw feature. Upon satisfaction of the conditions set forth in this
Note, Borrower shall be entitled to draw one or more times under this Note. Any
repayment may not be reborrowed. The aggregate amount of such draws shall not
exceed the full principal amount of this Note.
Information with regard to any loans or advances under this Note shall be
recorded and maintained by Lender in its internal records and such records
shall be conclusive of the principal and interest owed by Borrower under this
Note unless there is a material error in such records. The Lender's failure to
record the date and amount of any loan or advance shall not limit or otherwise
affect the obligations of the Borrower under this Note to repay the principal
amount of the loans or advances together with all interest accruing thereon.
Borrower shall be entitled to inspect or obtain a copy of the records during
Lender's business hours.
CONDITIONS FOR ADVANCES: If no Event of Default has occurred under this Note,
Borrower shall be entitled to borrow monies under this Note (subject to the
limitations described above) under the following conditions:
INTEREST RATE: This Note has a variable rate feature. The interest rate on this
Note may change from time to time if the Index Rate identified below changes.
Interest shall be computed on the basis of the actual number of days over 360
days per year. Interest on this Note shall be calculated and payable at a
variable rate equal to 0.000% per annum OVER the Index Rate. The initial
interest rate on this Note shall be 8.500% per annum. Any change in the
interest rate resulting from a change in the Index Rate will be effective on:
The Date The Index Rate Changes.
RATE LIMITATIONS: Subject to applicable law, the minimum interest rate on this
Note shall be N/A % per annum. The maximum interest rate on this Note shall
exceed N/A % per annum, or if less, or if a maximum rate is not indicated, the
maximum interest rate Lender is permitted to charge by law. The maximum rate
increase at any one time will be N/A %. The maximum rate decrease at any one
time will be N/A %.
INDEX RATE: The Index Rate for this Note shall be:
Lender's Prime Rate, Which Is The Base Rate Used By Lender To Fix
Interest Rates At Which Loans Are Made To Various Customers, Which
Loans May Be Made By Lender At, Above Or Below Said Prime Rate.
If the Index Rate is redefined or becomes unavailable, then Lender may select
another index which is substantially similar.
DEFAULT RATE: If there is an Event of Default under this Note, the Lender may,
in its discretion, increase the interest rate on this Note to: pre-maturity
rate continues to apply post-maturity, or the maximum interest rate Lender is
permitted to charge by law, whichever is less.
PAYMENT SCHEDULE: Borrower shall pay the principal and interest according to
the following schedule:
ON DEMAND, BUT IF NO DEMAND IS MADE THEN:
11 INTEREST ONLY PAYMENTS BEGINNING AUGUST 5, 1997 AND CONTINUING AT MONTHLY
TIME INTERVALS THEREAFTER. A FINAL PAYMENT OF THE UNPAID PRINCIPAL BALANCE PLUS
ACCRUED INTEREST IS DUE AND PAYABLE ON JULY 5, 1998.
INTEREST SURCHARGE: Borrower agrees to pay an interest surcharge of $ N/A . The
interest surcharge is earned by Lender when paid and is not subject to refund;
however, if this Note is prepaid in full within 90 days after the date of this
Note, Borrower will receive a pro rata portion of the interest surcharge,
subject to Lender's right to retain a minimum surcharge of $4.00.
PREPAYMENT: This Note may be prepaid in part or in full on or before its
maturity date without penalty. If this Note contains more than one installment,
any partial prepayment will not affect the due date or the amount of any
subsequent installment, unless agreed to, in writing, by Borrower and Lender.
LATE CHARGE: If a payment is in default 10 days or more, Borrower will be
charged a late charge of: [ ]_____________% of the unpaid payment; [X] $0.50
or 5.00% of the unpaid payment, whichever is [X] greater, but not to exceed
$100.00; [ ] less.
SECURITY: To secure the payment and performance of obligations incurred under
this Note, Borrower grants Lender a security interest in all of Borrower's
right, title, and interest in all monies, instruments, savings, checking and
other accounts of Borrower (excluding IRA, Keogh, trust accounts and other
accounts subject to tax penalties if so assigned) that are now or in the future
in Lender's custody or control. [X] If checked, the obligations under this Note
are also secured by the collateral described in any security instrument(s)
executed in connection with this Note, and any collateral described in any
other security instrument(s) securing this Note or all of Borrower's
obligations.
RENEWAL: [ ] If checked, this Note is a renewal, but not a satisfaction, of
Loan Number __________________.
- --------------------------------------------------------------------------------
THE PERSONS SIGNING BELOW ACKNOWLEDGE THAT THEY HAVE READ, UNDERSTAND, AND
AGREE TO THE TERMS AND CONDITIONS OF THIS NOTE, INCLUDING THE PROVISIONS ON THE
REVERSE SIDE, AND FURTHER ACKNOWLEDGE RECEIPT OF AN EXACT COPY OF THIS NOTE.
Dated: JULY 01, 1997
CAUTION - IT IS IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT
BEFORE YOU SIGN IT.
<TABLE>
<S> <C>
BORROWER: CYBEX COMPUTER PRODUCTS CORPORATION BORROWER:
BY: /s/ Doyle C. Weeks
- -------------------------------------------------- --------------------------------------------------
DOYLE C. WEEKS
SVP, CFO, & Treasurer
BORROWER: BORROWER:
- -------------------------------------------------- --------------------------------------------------
BORROWER: BORROWER:
- -------------------------------------------------- --------------------------------------------------
BORROWER: BORROWER:
- -------------------------------------------------- --------------------------------------------------
</TABLE>
<PAGE> 8
TERMS AND CONDITIONS
1. EVENTS OF DEFAULT. An Event of Default will occur under this Note in the
event that Borrower, any guarantor or any other third party pledging collateral
to secure this Note:
(a) fails to make any payment on this Note or any other indebtedness to
Lender when due;
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Note, any security instrument,
or any other present or future written agreement regarding this or
any other indebtedness of Borrower to Lender;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) sells, conveys, or transfers rights in any collateral securing this
Note without the written approval of Lender; or destroys, loses or
damages such collateral in any material respect; or subjects such
collateral to seizure, confiscation or condemnation;
(e) has a garnishment, judgment, tax levy, attachment or lien entered
or served against Borrower, any guarantor, or any third party
pledging collateral to secure this Note or any of their property;
(f) dies, becomes legally incompetent, is dissolved or terminated,
ceases to operate its business, becomes insolvent, makes an
assignment for the benefit of creditors, fails to pay debts as they
become due, or becomes the subject of any bankruptcy, insolvency
or debtor rehabilitation proceeding;
(g) fails to provide Lender evidence of satisfactory financial
condition;
(h) has a majority of its outstanding voting securities sold,
transferred or conveyed to any person or entity other than any
person or entity that has the majority ownership as of the date of
this execution of this Note; or
(i) causes Lender to deem itself insecure due to a significant decline
in the value of any real or personal property securing payment of
this Note, or Lender in good faith, believes the prospect of
payment or performance is impaired.
2. RIGHTS OF LENDER ON DEFAULT. If there is an Event of Default under this
Note, Lender will be entitled to exercise one or more of the following remedies
without notice or demand (except as required by law):
(a) to declare the principal amount plus accrued interest under this
Note and all other present and future obligations of Borrower
immediately due and payable in full, such acceleration to be
automatic and immediate if the Event of Default is a filing under
the Bankruptcy Code;
(b) to collect the outstanding obligations of Borrower with or without
resorting to judicial process;
(c) to cease making advances under this Note or any other agreement
between Borrower and Lender;
(d) to take possession of any collateral in any manner permitted by law;
(e) to require Borrower to deliver and make available to Lender any
collateral at a place reasonably convenient to Borrower and Lender;
(f) to sell, lease or otherwise dispose of any collateral and collect
any deficiency balance with or without resorting to legal process;
(g) to set-off Borrower's obligations against any amounts due to
Borrower including, but not limited to, monies, instruments, and
deposit accounts maintained with Lender; and
(h) to exercise all other rights available to Lender under any other
written agreement or applicable law.
Lenders's rights are cumulative and may be exercised together, separately, and
in any order. Lender's remedies under this paragraph are in addition to those
available at common law, including, but not limited to, the right of set-off.
3. DEMAND FEATURE. [X] If checked, this Note contains a demand feature.
Lender's right to demand payment, at any time, and from time to time, shall be
in Lender's sole and absolute discretion, whether or not any default has
occurred.
4. FINANCIAL INFORMATION. Borrower will at all times keep proper books and
account in which full, true and correct entries shall be made in accordance
with generally accepted accounting principles and will deliver to Lender,
within ninety (90) days after the end of each fiscal year of Borrower, a copy
of the annual financial statements of Borrower relating to such fiscal year,
such statements to include (i) the balance sheet of Borrower as at the end of
such fiscal year and (ii) the related income statement, statement of retained
earnings and statement of cash flow of Borrower for such fiscal year, prepared
by such certified public accountants as may be reasonably satisfactory to
Lender. Borrower also agrees to deliver to Lender within fifteen (15) days
after filing same, a copy of Borrower's income tax returns and also, from time
to time, such other financial information with respect to Borrower as Lender
may request.
5. MODIFICATION AND WAIVER. The modification or waiver of any of Borrower's
obligations or Lender's rights under this Note must be contained in a writing
signed by Lender. Lender may perform any of Borrower's obligations or delay or
fail to exercise any of its rights without causing a waiver of those
obligations or rights. A waiver on one occasion will not constitute a waiver
on any other occasion. Borrower's obligations under this Note shall not be
affected if Lender amends, compromises, exchanges, fails to exercise, impairs
or releases any of the obligations belonging to any co-borrower or guarantor or
any of its rights against any co-borrower, guarantor, the collateral or any
other property securing the obligations.
6. SEVERABILITY. If any provision of this Note is invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
7. ASSIGNMENT. Borrower agrees not to assign any of Borrower's rights,
remedies or obligations described in this Note without the prior written
consent of Lender, which consent may be withheld by Lender in its sole
discretion. Borrower agrees that Lender is entitled to assign some or all of
its rights and remedies described in this Note without notice to or the prior
consent of Borrower.
8. NOTICE. Any notice or other communication to be provided to Borrower or
Lender under this Note shall be in writing and sent to the parties at the
addresses described in this Note or such other address as the parties may
designate in writing from time to time.
9. APPLICABLE LAW. This Note shall be governed by the laws of the state
indicated in Lender's address. Unless applicable law provides otherwise,
Borrower consents to the jurisdiction of any court located in such state
selected by Lender, in its discretion, in the event of any legal proceeding
under this Note.
10. COLLECTION COSTS. If the original principal amount of this Note exceeds
$300, and if Lender hires an attorney who is not its salaried employee to
collect any amount due under this Note or enforce any right or remedy of
Lender, Borrower agrees to pay Lender's reasonable expenses and collection
costs, including reasonable attorneys' fees not exceeding 15% of the unpaid
debt after default.
11. MISCELLANEOUS. This Note is being executed primarily for commercial,
agricultural, or business purposes. Borrower and Lender agree that time is of
the essence. Borrower agrees to make all payments to Lender at any address
designated by Lender and in lawful United States currency. Borrower and any
person who endorses this Note waives presentment, demand for payment, notice of
dishonor and protest and further waives any right to require Lender to proceed
against anyone else before proceeding against Borrower or said person. All
references to Borrower in this Note shall include all of the parties signing
this Note, and this Note shall be binding upon the heirs, successors and
assigns of Borrower and Lender. If there is more than one Borrower their
obligations under this Note shall be joint and several. This Note represents
the complete and integrated understanding between Borrower and Lender regarding
the terms hereof.
12. JURY TRIAL WAIVER. BORROWER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY CIVIL ACTION ARISING OUT OF, OR BASED UPON, THIS NOTE OR THE COLLATERAL
SECURING THIS NOTE.
13. ADDITIONAL TERMS.
<PAGE> 9
BORROWER
Cybex Computer Products Corporation
[FIRST COMMERCIAL BANK LOGO]
SCHEDULE OF FEES
CHARGES OR
DISBURSEMENTS
First Commercial Bank of Huntsville
301 Washington Street
Huntsvillle, AL 35801
(205) 551-3300 "LENDER"
ADDRESS
4912 Research Drive
Huntsville, AL 35806
Telephone No. Identification No.
(205) 430-4000 63-0801728
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
OFFICER INTEREST MATURITY CUSTOMER LOAN
IDENTIFICATION RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LKS VARIABLE $5,000,000.00 07/01/97 DEMAND
- -----------------------------------------------------------------------------------------------------------------------
Borrower has borrowed money from Lender indicated above pursuant to the above referenced Promissory Note or Agrement.
Borrower acknowledges that the following fees, charges and disbursements have been made or assessed in connection with
the Note or Agreement.
LINE OF CREDIT AMOUNT: $ 5,000,000.00
-----------------
AMOUNT DISBURSED TO BORROWER FROM LINE OF CREDIT: $ N/A
-----------------
AMOUNT DRAWN TO PAY OR CREDIT TO BORROWER'S ACCOUNTS WITH LENDER:
ACCOUNT NUMBER CREDITED: $
-----------------
ACCOUNT NUMBER CREDITED:
-----------------
ACCOUNT NUMBER CREDITED:
-----------------
ACCOUNT NUMBER CREDITED:
-----------------
ACCOUNT NUMBER CREDITED:
-----------------
AMOUNT OF LOAN PROCEEDS PAID TO OTHERS ON THE BORROWER'S BEHALF:
PAYEE: $
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
TOTAL PROCEEDS DISBURSED: $ N/A
-----------------
<CAPTION>
PAID IN CASH DEDUCTED FROM LINE
<S> <C> <C>
AMOUNT PAID TO PUBLIC OFFICIALS: $ $
------------- -----------------
AMOUNT PAID TO INSURANCE COMPANIES:
------------- -----------------
AMOUNT PAID TO APPRAISERS:
------------- -----------------
AMOUNT PAID TO CREDIT REPORTING AGENCIES:
------------- -----------------
TITLE EXAMINATION:
------------- -----------------
SETTLEMENT/CLOSING FEE:
------------- -----------------
TITLE INSURANCE BINDER:
------------- -----------------
ATTORNEY:
------------- -----------------
DOCUMENT PREPARATION FEE:
------------- -----------------
NOTARY:
------------- -----------------
SURVEYOR:
------------- -----------------
PEST INSPECTOR:
------------- -----------------
ABSTRACT/TITLE SEARCH:
------------- -----------------
TITLE INSURER:
------------- -----------------
CITY/COUNTY TAX DEED/MORTGAGE:
------------- -----------------
STATE TAX DEED/MORTGAGE:
------------- -----------------
HAZARD INSURANCE PREMIUM:
------------- -----------------
FLOOD INSURANCE PREMIUM:
------------- -----------------
------------- -----------------
------------- -----------------
------------- -----------------
------------- -----------------
------------- -----------------
Loan Origination Fee
------------- -----------------
Points/Discount
------------- -----------------
Lender's Inspection Fee
------------- -----------------
Assumption Fee
------------- -----------------
------------- -----------------
Loan Processing Fee 50.00
------------- -----------------
TOTAL PREPAID FINANCE CHARGE AND FEES PAID IN CASH: $ 50.00
------------- -----------------
TOTAL PREPAID FINANCE CHARGES AND FEES DEDUCTED FROM LINE: $ N/A
-----------------
BALANCE REMAINING TO BE DRAWN ON LINE: $ 5,000,000.00
-----------------
- --------------------------------------------------------------------------------------------------
Dated: July 01, 1997
BORROWER: Cybex Computer Products Corporation BORROWER:
By: /S/ Doyle C. Weeks
- ---------------------------------------------- ---------------------------------------------
Doyle C. Weeks
SVP, CFO, & Treasurer
BORROWER: BORROWER:
- ---------------------------------------------- ---------------------------------------------
BORROWER: BORROWER:
- ---------------------------------------------- ---------------------------------------------
BORROWER: BORROWER:
- ---------------------------------------------- ---------------------------------------------
</TABLE>
<PAGE> 10
[FIRST COMMERCIAL LOGO]
COMMERCIAL
SECURITY
AGREEMENT
First Commercial Bank of Huntsville
301 Washington Street
Huntsville, AL 35801
(205) 551-3300 "LENDER"
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
BORROWER OWNER
<S> <C>
Cyber Computer Products Corporation Cyber Computer Products Corporation
ADDRESS ADDRESS
4912 Research Drive 4912 Research Drive
Huntsville, AL 35806 Huntsville, AL 35806
TELEPHONE NO. IDENTIFICATION NO. TELEPHONE NO. IDENTIFICATION NO.
(202) 430-4000 63-0801728 (202) 430-4000 63-0801728
- ---------------------------------------------------------------------------------------------
</TABLE>
1. SECURITY INTEREST. For good and valuable consideration, Owner grants to
Lender identified above a continuing security interest in the Collateral
described below to secure the Obligations described in this Agreement.
2. OBLIGATIONS. The collateral shall secure the payment and performance of
all of Borrower's and Owner's present and future, joint and/or several, direct
and indirect, absolute and contingent, express and implied indebtedness to
Lender under any promissory note or agreement described below, including all
future advances made by Lender to Borrower or Owner and expenditures incurred
by Lender upon the occurrence of an Event of Default (collectively
"Obligations"):
a. this Agreement and/or the following promissory notes and agreements:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
INTEREST PRINCIPAL AMOUNT/ FUNDING/ MATURITY CUSTOMER LOAN
RATE CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VARIABLE $ 5,000,000.00 07/01/97 DEMAND
- --------------------------------------------------------------------------------------
</TABLE>
b. [X] all other presently existing or future, evidence of
indebtedness, obligations, agreements, instruments, guaranties or
otherwise of Borrower or Owner to Lender (WHETHER INCURRED FOR THE
SAME OR DIFFERENT PURPOSES THAN THE FOREGOING); and
c. all renewals, extensions, amendments, modifications, replacements
or substitutions to any of the foregoing.
3. COLLATERAL. All of Owner's rights, title and interest in the following
described property whether now or hereafter existing or now owned or hereafter
acquired by Owner and wherever located shall constitute the "Collateral:"
[X] All accounts and contract rights including, but not limited to, any
accounts and contract rights described on Schedule A attached hereto
and incorporated herein by this reference;
[ ] All chattel paper including, but not limited to, any chattel paper
described on Schedule A attached hereto and incorporated herein by
this reference;
[ ] All documents including, but not limited to, any documents
described on Schedule A attached hereto and incorporated herein by
this reference;
[ ] All equipment, including, but not limited to, any equipment
described on Schedule A attached hereto and incorproated herein
by this reference;
[ ] All fixtures, including, but not limited to, any fixtures described
on Schedule A and located or to be located on the real property
described on Schedule B attached hereto and incorporated herein by
this reference;
[ ] All general intangibles including, but not limited to, any general
intangibles described on Schedule A attached hereto and
incorporated herein by this reference;
[ ] All instruments including, but not limited to, any instruments
described on Schedule A attached hereto and incorporated herein by
this reference;
[X] All inventory including, but not limited to, any inventory described
on Schedule A attached hereto and incorporated herein by this
reference;
[ ] All minerals or the like and accounts resulting from sales at the
wellhead or minehead located on or related to the real property
described on Schedule B attached hereto and incorporated herein by
this reference;
[ ] All standing timber which is to be cut and removed under a
conveyance or contract for sale located on the real property
described on Schedule B attached hereto and incorporated herein by
this reference;
[ ] Other;
THE PROPERTY DESCRIBED ON SCHEDULE A;
All monies, instruments, and savings, checking or other accounts of Owner
(excluding IRA, Keogh, trust accounts, and other accounts subject to tax
penalties if so assigned) that are now or in the future in Lender's custody or
control;
All monies or instruments pertaining to the Collateral described above;
All accessions, accessories, additions, amendments, attachments, modifications,
replacements and substitutions to any of the above;
All proceeds and products of any of the above;
All policies of insurance pertaining to any of the above as well as any
proceeds and unearned premiums pertaining to such policies; and
All books and records pertaining to any of the above.
<PAGE> 11
4. OWNER'S TAXPAYER IDENTIFICATION. Owner's social security number or
federal taxpayer identification number is: 630801728.
5. RESIDENCY/LEGAL STATUS. [ ] Owner is an individual and a resident of the
state of: _____________________________________. [ X ] Owner is a Corporation
duly organized, validly existing and in good standing under the laws of the
state of: Alabama.
6. REPRESENTATIONS, WARRANTIES, AND COVENANTS. Owner represents, warrants
and convenants to Lender that:
(a) Owner is and shall remain the sole owner of the Collateral;
(b) Neither Owner, nor, to the best of Owner's knowledge, has any other
party used, generated, released, discharged, stored, or disposed of
any hazardous waste, toxic substance, or hazardous material or
transported any such material across the property except as allowed by
and in accordance with applicable federal, state and local law and
regulation. Owner shall not commit or permit such actions to be taken
in the future. The term "Hazardous Materials" shall mean any
substance, material, or waste which is or becomes regulated by any
governmental authority including, but not limited to, (i) petroleum;
(ii) asbestos; (iii) polychlorinated biphenyls; (iv) those substances,
materials or wastes designated as a "hazardous substance" pursuant to
Section 311 of the Clean Water Act or listed pursuant to Section 307
of the Clean Water Act or any amendments or replacements of these
statutes; (v) those substances, materials or wastes defined as a
"hazardous waste" pursuant to Section 1004 of the Resource
Conservation and Recovery Act of any amendments or replacements to
that statute; (vi) those substances, materials or wastes defined as
a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liabiity Act, or any
amendments or replacements to that statute. Owner is in compliance in
all respects with all applicable federal, state and local laws and
regulations, including, without limitation, those relating to
"Hazardous Materials", as defined herein, and other environmental
matters (the "Environmental Laws") and neither the federal government
nor any other governmental or quasi governmental entity has filed a
lien on the Collateral, nor are there any pending or threatened
governmental, judicial or administrative actions with respect to
environmental matters, which involve the Collateral;
(c) Owner's chief executive office, principal place of business, office
where its business records relating to the Collateral or residence is
the address identified above. The Collateral is located and has been
located during the four (4) month period prior to the date hereof, at
the address described above or any address described on Schedule C
attached hereto and incorporated herein by this reference. Owner
shall immediately advise Lender in writing of any change in or
addition to the foregoing addresses;
(d) Owner shall not become a party to any restructuring of its form of
business or participate in any consolidation, merger, liquidation or
dissolution without Lender's prior written consent;
(e) Owner shall notify Lender of the nature of any intended change of
Owner's name, or the use of any trade name, and the effective date of
such change;
(f) The Collateral is and shall at all times remain free of all tax and
other liens, security interests, encumbrances and claims of any kind
except for those belonging to Lender and those described on Schedule D
attached hereto and incorporated herein by this reference. Without
waiving the Event of Default as a result thereof, Owner shall take any
action and execute any document needed to discharge any liens,
security interests, encumbrances and claims not described on Schedule
D;
(g) Owner shall defend the Collateral against all claims and demands of
all persons at any time claiming any interest therein;
(h) All of the goods, fixtures, minerals or the like, and standing timber
constituting the Collateral are and shall be located at Owner's
executive offices, places of business, residence and domiciles
specifically described in this Agreement. Owner shall not change the
location of any Collateral without the prior written consent of
Lender;
(i) Owner shall provide Lender with possession of all chattel paper and
instruments constituting the Collateral, and Owner shall promptly mark
all chattel paper, instruments, and documents constituting the
Collateral to show that the same are subject to Lender's security
interest;
(j) All of Owner's accounts or contract rights; chattel paper; documents;
general intangibles; instruments; and federal, state, county, and
municipal government and other permits and licenses; trusts, liens,
contracts, leases, and agreements constituting the Collateral are and
shall be valid, genuine and legally enforceable obligations and rights
belonging to Owner against one or more third parties and not subject
to any claim, defense, set-off or counterclaim of any kind;
(k) Owner shall not amend, modify, replace, or substitute any account or
contract right; chattel paper; document; general intangible; or
instrument constituting the Collateral without the prior written
consent of Lender;
(l) Owner has the right and is duly authorized to enter into and perform
its obligations under this Agreement. Owner's execution and
performance of these obligations do not and shall not conflict with
the provisions of any statute, regulation, ordinance, rule of law,
contract or other agreement which may now or hereafter be binding on
Owner;
(m) No action or proceeding is pending against Owner which might result
in any material or adverse change in its business operations or
financial condition or materially affect the Collateral;
(n) Owner has not violated and shall not violate any applicable federal,
state, county or municipal statute, regulation or ordinance (including
but not limited to those governing Hazardous Materials) which may
materially and adversely affect its business operations or financial
condition of the Collateral;
(o) Owner shall, upon Lender's request, deposit all proceeds of the
Collateral into an account or accounts maintained by Owner or Lender
at Lender's institution;
(p) Owner will, upon receipt, deliver to Lender as additional Collateral
all securities distributed on account of the Collateral such as stock
dividends and securities resulting from stock splits, reorganizations
and recapitalizations;
(q) Owner agrees to the terms of the Obligations and to the terms of any
renewals, extensions, amendments, modifications, replacements or
substitutions of the Obligations; Lender may enter into agreements in
the future with Borrower which, if this Agreement so provides, will
become Obligations secured by the Collateral described in this
Agreement; property other than the Collateral may also secure the
Obligations, that Lender shall have no obligation to exercise its
rights against such property prior to exercising its rights against
the Collateral, that Lender may accept substitutions or exchanges for
any such property, and that Lender may release its security interest
in such property at any time; parties other than Borrower may be or
may become obligated under the Obligations; and
(r) This Agreement and the obligations described in this Agreement are
executed and incurred for business and not consumer purposes.
7. SALE OF COLLATERAL. Owner shall not assign, convey, lease, sell or
transfer any of the Collateral to any third party without the prior written
consent of Lender except for sales of inventory to buyers in the ordinary
course of business.
8. FINANCING STATEMENTS AND OTHER DOCUMENTS. Owner shall at any time and
from time to time take all actions and execute all documents required by Lender
to attach, perfect and maintain Lender's security interest in the Collateral
and establish and maintain Lender's right to receive the payment of the
proceeds of the Collateral including, but not limited to, executing any
financial statements, fixture filings, continuation statements, notices of
security interest and other documents required by the Uniform Commercial Code
and other applicable law. Owner shall pay the costs of filing such documents
in all offices wherever filing or recording is deemed by Lender to be necessary
or desirable. Lender shall be entitled to perfect its security interest in the
Collateral by filing carbon, photographic or other reproductions of this
Agreement and/or the aforementioned documents with any authority required by
the Uniform Commercial Code or other applicable law. Owner authorizes Lender
to execute and file any financing statements, as well as extensions, renewals
and amendments of financing statements in such form as Lender may require to
perfect and maintain perfection of any security interest granted in this
Agreement.
9. INQUIRIES AND NOTIFICATION TO THIRD PARTIES. Owner hereby authorizes
Lender to contact any third party and make any inquiry pertaining to Owner's
financial condition or the Collateral. In addition, Lender is authorized to
provide oral or written notice of its security interest in the Collateral to
any third party.
10. LOCK BOX, COLLATERAL ACCOUNT. If Lender so requests at any time (whether
or not Owner is in default of this Agreement), Owner will direct each of its
account debtors to make payments due under the relevant account or chattel
paper directly to a special lock box to be under the control of Lender. Owner
hereby authorizes and directs Lender to deposit into a special collateral
account to be established and maintained with Lender all checks, drafts and
cash payments received in the lock box. All deposits in the collateral account
shall constitute proceeds of Collateral and shall not constitute payment of any
Obligation. At its option, Lender may, at any time, apply finally collected
funds on deposit in the collateral account to the payment of the Obligations in
such order of application as Lender may determine, or permit Owner to withdraw
all or any part of the balance on deposit in the collateral account. If a
collateral account is so established, Owner agrees that Owner will promptly
deliver to Lender, for deposit into the collateral account, all payments on
accounts and chattel paper received by Owner. All such payments shall be
delivered to Lender in the form received (except for Owner's endorsement if
necessary). Until so deposited, all payments on accounts and chattel paper
received by Owner shall be held in trust by Owner for and as the property of
Lender and shall not be commingled with any funds or property of Owner.
11. COLLECTION OF INDEBTEDNESS FROM THIRD PARTIES. Lender shall be entitled
to notify, and upon the request of Lender, owner shall notify any account
debtor or third party (including, but not limited to, insurance companies) to
pay any indebtedness or obligation owing to Owner and constituting the
Collateral (collectively "Indebtedness") to Lender whether or not a default
exists under this Agreement. Owner shall diligently collect the Indebtedness
owing to Owner from its account debtors and other third parties until the
giving of such notification. In the event that Owner possesses or receives
possession of any instruments or other remittances with respect to the
<PAGE> 12
Indebtedness following the giving of such notification or if the instruments or
other remittances constitute the prepayment of any Indebtedness or the payment
of any insurance proceeds, Owner shall hold such instruments and other
remittances in trust for Lender apart from its other property, endorse the
instruments and other remittances to Lender, and immediately provide Lender
with possession of the instruments and other remittances. Lender shall be
entitled, but not required, to collect (by legal proceedings or otherwise),
extend the time for payment, compromise, exchange or release any obligor or
collateral, or otherwise settle any of the Indebtedness whether or not an event
of default exists under this Agreement. Lender shall not be liable to Owner
for any action, error, mistake, omission or delay pertaining to the actions
described in this paragraph or any damages resulting therefrom.
12. POWER OF ATTORNEY. Owner hereby appoints Lender as its attorney-in-fact
to endorse Owner's name on all instruments and other remittances payable to
Owner with respect to the Indebtedness, including any items received by Lender
in any lockbox account, or other documents pertaining to Lender's actions in
connection with the Indebtedness. In addition, Lender shall be entitled, but
not required, to perform any action or execute any document required to be
taken or executed by Owner under this Agreement. Lender's performance of such
action or execution of such documents shall not relieve Owner from any
obligation or cure any default under this Agreement. The powers of attorney
described in this paragraph are coupled with an interest and are irrevocable.
13. USE AND MAINTENANCE OF COLLATERAL. Owner shall use the Collateral solely
in the ordinary course of its business, for the usual purposes intended by the
manufacturer (if applicable), with due care, and in compliance with the laws,
ordinances, regulations, requirements and rules of all federal, state, county
and municipal authorities including environmental laws and regulations and
insurance policies. Owner shall not make any alterations, additions or
improvements to the Collateral without the prior written consent of Lender.
Owner shall ensure that Collateral which is not now a fixture does not become a
fixture. Without limiting the foregoing, all alterations, additions and
improvements made to the Collateral shall be subject to the security interest
belonging to Lender, shall not be removed without the prior written consent of
Lender, and shall be made at Owner's sole expense. Owner shall take all
actions and make any repairs or replacements needed to maintain the Collateral
in good condition and working order.
14. LOSS OR DAMAGE. Owner shall bear the entire risk of any loss, theft,
destruction or damage (collectively "Loss or Damage") to all or any part of the
Collateral. In the event of any Loss or Damage, owner will either restore the
Collateral to its previous condition, replace the Collateral with similar
property acceptable to Lender in its sole discretion, or pay or cause to be
paid to Lender the decrease in the fair market value of the affected Collateral.
15. INSURANCE. If the original amount of the Obligations is $300 or more,
exclusive of the charges for insurance, and the value of the Collateral to be
insured is $300 or more ($500 or more if the collateral is a motor vehicle),
the Collateral will be kept insured for its full value against all loss or
damage caused by fire, collision, theft or other casualty. If the Collateral
consists of a motor vehicle having a retail value of at least $500, Owner will
obtain comprehensive and collision coverage in amounts at least equal to the
actual cash value of the vehicle with deductibles not to exceed $ n/a. OWNER
HAS THE RIGHT TO PROVIDE SUCH INSURANCE THROUGH AN EXISTING POLICY OR A POLICY
INDEPENDENTLY OBTAINED AND PAID FOR BY OWNER, subject to the right of the
Lender to decline the insurance offered by Owner for reasonable cause before
credit is extended. Owner shall assign to Lender all its rights to receive
proceeds of insurance not exceeding the amount owed under the obligations
described above, and direct the insurer to pay all proceeds directly to
Lender. The insurance policies shall require the insurance company to provide
Lender with at least 10 days written notice before such policies are altered
or cancelled in any manner. The insurance policies shall name Lender as a loss
payee and provide that no act or omission of Owner or any other person shall
affect the right of Lender to be paid the insurance proceeds pertaining to the
loss or damage of the Collateral. In the event Owner fails to acquire or
maintain insurance, Lender (after providing notice as may be required by law)
may in its discretion procure appropriate insurance coverage upon the
Collateral and charge the insurance cost as an advance of principal under the
promissory note. Owner shall furnish Lender with evidence of insurance
indicating the required coverage. Lender may act as attorney-in-fact for Owner
in making and settling claims under insurance policies, cancelling any policy
or endorsing Owner's name on any draft or negotiable instrument drawn by any
insurer
16. INDEMNIFICATION. Lender shall not assume or be responsible for the
performance of any of Owner's obligations with respect to the Collateral under
any circumstances. Owner shall immediately provide Lender with written notice
of and hereby indemnifies and holds Lender and its shareholders, directors,
officers, employees and agents harmless from all claims, damages, liabilities
(including attorneys' fees and legal expenses), causes of action, actions,
suits and other legal proceedings (collectively "Claims") pertaining to its
business operations or the Collateral including, but not limited to, those
arising from Lender's performance of Owner's obligations with respect to the
Collateral or claims involving Hazardous Materials. Owner, upon the request of
Lender, shall hire legal counsel to defend Lender from such Claims, and pay the
attorneys' fees, legal expenses and other costs to the extent permitted by
applicable law, incurred in connection therewith. In the alternative, Lender
shall be entitled to employ its own legal counsel to defend such Claims at
Owner's cost.
17. TAXES AND ASSESSMENTS. Owner shall execute and file all tax returns and
pay all taxes, licenses, fees and assessments relating to its business
operations and the Collateral (including, but not limited to, income taxes,
personal property taxes, withholding taxes, sales taxes, use taxes, excise
taxes and workers' compensation premiums) in a timely manner.
18. INSPECTION OF COLLATERAL AND BOOKS AND RECORDS. Owner shall allow Lender
or its agents to examine, inspect and make abstracts and copies of the
Collateral and Owner's books and records pertaining to Owner's business
operations and financial condition or the Collateral during normal business
hours. Owner shall provide any assistance required by Lender for these
purposes. All of the signatures and information pertaining to the Collateral
or contained in the books and records shall be genuine, true, accurate and
complete in all respects. Owner shall note the existence of Lender's security
interest in its books and records pertaining to the Collateral.
19. EVENTS OF DEFAULT. An Event of Default will occur under this Agreement in
the event that Owner, Borrower or any guarantor:
(a) fails to make any payment under this Agreement or any other
indebtedness to Lender when due;
(b) fails to perform any obligation or breaches any warranty or covenant
to Lender contained in this Agreement or any other present or future
written agreement regarding this or any other indebtedness to Lender;
(c) provides or causes any false or misleading signature or representation
to be provided to Lender;
(d) sells, conveys, or transfers rights in any Collateral without the
written approval of Lender; destroys, loses or damages such Collateral
in any material respect; or subjects such Collateral to seizure,
confiscation, or condemnation;
(e) seeks to revoke, terminate or otherwise limit its liability under any
continuing guaranty;
(f) has a garnishment, judgment, tax levy, attachment or lien entered or
served against Owner, Borrower, or any guarantor, or any of their
property including the Collateral;
(g) dies, becomes legally incompetent, is dissolved or terminated, ceases
to operate its business, becomes insolvent, makes an assignment for
the benefit of creditors, fails to pay any debts as they become due,
or becomes the subject of any bankruptcy, insolvency or debtor
rehabilitation proceeding;
(h) allows the Collateral to be used by anyone to transport or store
goods, the possession, transportation, or use of which, is illegal;
(i) fails to provide Lender evidence of satisfactory financial condition;
(j) has a majority of its outstanding voting securities sold, transferred
or conveyed to any person or entity other than any person or entity
that has the majority ownership as of the date of the execution of
this Agreement; or
(k) causes Lender to deem itself insecure due to a significant decline in
the value of any of the Collateral or Lender, in good faith, believes
the prospect of payment or performance in impaired.
20. RIGHTS OF LENDER ON EVENT OF DEFAULT. Upon the occurrence of an Event of
Default under this Agreement, Lender shall be entitled to exercise one or more
of the following remedies without notice or demand (except as required by law):
(a) to declare the Obligations immediately due and payable in full, such
acceleration shall be automatic and immediate if the Event of Default
is a filing under the Bankruptcy Code;
(b) to collect the outstanding Obligations with or without resorting to
judicial process;
(c) to change Owner's mailing address, open Owner's mail, and retain any
instruments or other remittances constituting the Collateral contained
therein;
(d) to take possession of any Collateral in any manner permitted by law;
(e) to apply for and obtain, without notice and upon ex parte application,
the appointment of a receiver for the Collateral without regard to
Owner's financial condition or solvency, the adequacy of the
Collateral to secure the payment or performance of the obligations, or
the existence of any waste to the Collateral;
(f) to require Owner to deliver and make available to Lender any
Collateral at a place reasonably convenient to Owner and Lender;
(g) to sell, lease or otherwise dispose of any Collateral and collect any
any deficiency balance with or without resorting to legal process;
(h) to set-off Owner's obligations against any amounts due to Owner
including, but not limited to, monies, instruments, and deposit
accounts maintained with Lender; and
(i) to exercise all other rights available to Lender under any other
written agreement or applicable law.
Lender's rights are cumulative and may be exercised together, separately, and
in any order. Unless the Collateral is perishable, threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender will provide reasonable notification of the time and place of any sale or
intended disposition as required under the Uniform Commercial Code. If the
Collateral consists of securities, Lender shall be entitled to transfer the
securities into the name of Lender or its designee and to vote the securities.
Lender shall be authorized to notify the issuer of the securities to remit any
related dividends, interest and securities resulting from stock splits,
reorganizations and capitalizations directly to Lender or its designee. In the
event that Lender institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of a prejudgment remedy in an action against
Owner, Owner waives the posting of any bond which might otherwise be required.
Upon default, Owner shall segregate all proceeds of Collateral and hold such
proceeds in trust for Lender. Lender's remedies under this paragraph are in
addition to those available at common law, such as offset.
<PAGE> 13
21. APPLICATIONS OF PAYMENTS. Whether or not a default has occurred under this
Agreement, all payments made by or on behalf of Owner and all credits due to
Owner from the disposition of the Collateral or otherwise may be applied against
the amounts paid by Lender (including attorneys' fees and legal expenses) in
connection with the exercise of its rights or remedies described in this
Agreement and any interest thereon and then to the payment of the remaining
Obligations in whatever order Lender chooses.
22. REIMBURSEMENT OF AMOUNTS EXPENDED BY LENDER. Owner shall reimburse Lender
for all amounts (including attorneys' fees and legal expenses) expended by
Lender in the performance of any action required to be taken by Owner or the
exercise of any right or remedy belonging to Lender under this Agreement,
together with interest thereon at the lower of the highest rate described in
any promissory note or credit agreement executed by Borrower or Owner or the
highest rate allowed by law from the date of payment until the date of
reimbursement. These sums shall be included in the definition of Obligations,
shall be secured by the Collateral identified in this Agreement and shall be
payable upon demand. Lender has no duty to take any action to protect the value
of the Collateral or to exercise any rights of the Owner with respect to the
Collateral.
23. ASSIGNMENT. Owner shall not be entitled to assign any of its rights,
remedies or obligations described in this Agreement without the prior written
consent of Lender. Consent may be withheld by Lender in its sole discretion.
Lender shall be entitled to assign some or all of its rights and remedies
described in this Agreement without notice to or the prior consent of Owner in
any manner.
24. MODIFICATION AND WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in a
writing signed by Lender. Lender may perform any of Owner's Obligations or
delay or fail to exercise any of its rights without causing a waiver of those
Obligations or rights. A waiver on one occasion shall not constitute a waiver
on any other occasion. Owner's Obligations under this Agreement shall not be
affected if Lender amends, compromises, exchanges, fails to exercise, impairs
or releases any of the obligations belonging to any Owner or third party or any
of its rights against any Owner, third party, Collateral or any other property
securing the Obligations.
25. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to
the benefit of Owner and Lender and their respective successors, assigns,
trustees, receivers, administrators, personal representatives, legatees, and
devisees.
26. NOTICES. Any notice or other communication to be provided under this
Agreement shall be in writing and sent to the parties at the addresses
described in this Agreement or such other address as the parties may designate
in writing from time to time.
27. SEVERABILITY. If any provision of this Agreement violates the law or is
unenforceable, the rest of the Agreement shall remain valid.
28. APPLICABLE LAW. This Agreement shall be governed by the laws of the state
indicated in Lender's address. Unless applicable law provides otherwise, Owner
consents to the jurisdiction of any court located in such state selected by
Lender in the event of any legal proceeding under this Agreement.
29. COLLECTION COSTS. If the original amount of the Obligations exceeds $300,
and if Lender hires an attorney who is not its salaried employee to collect any
amount due under the Obligations or enforce any right or remedy of Lender under
this Agreement, Owner agrees to pay Lender's reasonable expenses and collection
costs, including reasonable attorneys' fees not exceeding 15% of the unpaid
debt after default.
30. MISCELLANEOUS. This Agreement is executed for commercial purposes. Owner
shall supply information regarding Owner's business operations and financial
condition or the Collateral in the form and manner as required by Lender from
time to time. All information furnished by Owner to Lender shall be true,
accurate and complete in all respects. Owner and Lender agree that time is of
the essence. Owner waives presentment, demand for payment, notice of dishonor
and protest except as required by law. All references to Owner in this
Agreement shall include all parties signing below except Lender. This Agreement
shall be binding upon the heirs, successors and assigns of Owner and Lender. If
there is more than one Owner, their obligations under this Agreement shall be
joint and several. This Agreement shall remain in full force and effect until
Lender provides Owner with written notice of termination. This Agreement
represents the complete and integrated understanding between Owner and Lender
regarding the terms hereof.
31. WAIVER OF JURY TRIAL. LENDER AND OWNER HEREBY WAIVE ANY RIGHT TO A TRIAL
BY JURY IN ANY CIVIL ACTION ARISING OUT OF, OR BASED UPON, THIS SECURITY
AGREEMENT.
32. ADDITIONAL TERMS:
OWNER ACKNOWLEDGES THAT OWNER HAS READ, UNDERSTANDS, AND AGREES TO THE TERMS
AND CONDITIONS OF THIS AGREEMENT. OWNER ACKNOWLEDGES RECEIPT OF AN EXACT COPY
OF THIS AGREEMENT.
Dated: July 01, 1988
LENDER: First Commercial Bank of Huntsville
By:/s/Louis K. Sisco
-----------------------------------------
Louis K. Sisco
Vice President
OWNER: Cybex Computer Products OWNER:
Corporation
By: /s/ Doyle C. Weeks
--------------------------- --------------------------------------------
Doyle C. Weeks
Chief Financial Officer
OWNER: OWNER:
- ------------------------------ --------------------------------------------
OWNER: OWNER:
- ------------------------------ --------------------------------------------
OWNER: OWNER:
- ------------------------------ --------------------------------------------
Page 4 of 5
--------
<PAGE> 14
SCHEDULE A
SCHEDULE B
Record Owner Name:
SCHEDULE C
SCHEDULE D
<PAGE> 1
EXHIBIT 10.3
<TABLE>
<S> <C> <C>
BORROWER
Cybex Computer Products Corporation
[LOGO] FIRST COMMERCIAL BANK COMMERCIAL
FIXED RATE
FIRST COMMERCIAL BANK OF HUNTSVILLE PROMISSORY
301 WASHINGTON STREET NOTE
HUNTSVILLE, AL 35801
(205) 551-3300 "LENDER" ADDRESS
4912 Research Drive
Huntsville, AL 35806
TELEPHONE NO. IDENTIFICATION NO.
(205) 430-4000 630801728
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
OFFICER INTEREST PRINCIPAL FUNDING MATURITY CUSTOMER LOAN
IDENTIFICATION RATE AMOUNT DATE DATE NUMBER NUMBER
<S> <C> <C> <C> <C> <C> <C>
LKS 8.188% $12,000,000.00 03/26/98 04/02/98
- -------------------------------------------------------------------------------------------------------
GENERAL CORPORATE PURPOSES
- -------------------------------------------------------------------------------------------------------
</TABLE>
PROMISE TO PAY: For value received, Borrower promises to pay to the order of
Lender the principal amount of TWELVE MILLION AND NO/100 Dollars
($12,000,000.00) plus interest on the unpaid principal balance at the rate and
in the manner described below, until all amounts owing under this Note are paid
in full. All amounts received by Lender shall be applied first to accrued,
unpaid interest, then to unpaid principal, and then to any late charges and
expenses, or in any other order as determined by Lender, in Lender's sole
discretion, as permitted by law.
INTEREST RATE: Interest shall be computed on the basis of THE ACTUAL NUMBER OF
DAYS OVER 360 DAYS per year. Interest on this Note shall be calculated and
payable at the fixed rate of 8.188% per annum.
DEFAULT RATE: If there is an Event of Default under this Note, the Lender may,
in its discretion, increase the interest rate on this Note to: PRE-MATURITY
RATE CONTINUES TO APPLY POST-MATURITY, or the maximum interest rate Lender is
permitted to charge by law, whichever is less.
PAYMENT SCHEDULE: Borrower shall pay the principal and interest according to
the following schedule:
A SINGLE PAYMENT OF THE UNPAID PRINCIPAL BALANCE PLUS ACCRUED INTEREST IS DUE
AND PAYABLE ON APRIL 02, 1998.
INTEREST SURCHARGE: Borrower agrees to pay an interest surcharge of $ N/A . The
interest surcharge is earned by Lender when paid and is not subject to refund;
however, if this Note is prepaid in full within 90 days after the date of this
Note, Borrower will receive a credit of a pro rata portion of the interest
surcharge, subject to Lender's right to retain a minimum surcharge of $25.00.
PREPAYMENT: This Note may be prepaid in part or in full on or before its
maturity date. If this Note contains more than one installment, any partial
prepayment will not affect the due date or the amount of any subsequent
installment, unless agreed to, in writing, by Borrower and Lender. If this Note
is prepaid in full, there will be: [X] No prepayment penalty. [ ] A prepayment
penalty of:
LATE CHARGE: If a payment is in default 10 days or more, Borrower will be
charged a late charge of: [ ]_____________% of the unpaid payment; [X] $10.00
or 5.00% of the unpaid payment, whichever is [X] greater, but not to exceed
$100.00; [ ] less.
SECURITY: To secure the payment and performance of obligations incurred under
this Note, Borrower grants Lender a security interest in all of Borrower's
right, title, and interest in all monies, instruments, savings, checking and
other accounts of Borrower (excluding IRA, Keogh, trust accounts and other
accounts subject to tax penalties if so assigned) that are now or in the future
in Lender's custody or control. [X] If checked, the obligations under this Note
are also secured by the collateral described in any security instrument(s)
executed in connection with this Note, and any collateral described in any
other security instrument(s) securing this Note or all of Borrower's
obligations.
US GOVERNMENT TREASURY BILL MATURITY 4-2-98 IN THE MATURITY AMOUNT OF
$12,000,000.00, CUSIP #9127944T8.
RENEWAL: [ ] If checked, this Note is a renewal, but not a satisfaction, of
Loan Number __________________.
- --------------------------------------------------------------------------------
THE PERSONS SIGNING BELOW ACKNOWLEDGE THAT THEY HAVE READ, UNDERSTAND, AND
AGREE TO THE TERMS AND CONDITIONS OF THIS NOTE, INCLUDING THE PROVISIONS ON THE
REVERSE SIDE, AND FURTHER ACKNOWLEDGE RECEIPT OF AN EXACT COPY OF THIS NOTE.
Dated: MARCH 26, 1998
CAUTION - IT IS IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT
BEFORE YOU SIGN IT.
<TABLE>
<S> <C>
BORROWER: CYBEX COMPUTER PRODUCTS CORPORATION BORROWER:
BY: /s/ Doyle C. Weeks
- -------------------------------------------------- --------------------------------------------------
DOYLE C. WEEKS
CHIEF FINANCIAL OFFICER
BORROWER: BORROWER:
- -------------------------------------------------- --------------------------------------------------
BORROWER: BORROWER:
- -------------------------------------------------- --------------------------------------------------
BORROWER: BORROWER:
- -------------------------------------------------- --------------------------------------------------
</TABLE>
<PAGE> 2
TERMS AND CONDITIONS
1. EVENTS OF DEFAULT. An Event of Default will occur under this Note in the
event that Borrower, any guarantor or any other third party pledging collateral
to secure this Note:
(a) fails to make any payment on this Note or any other indebtedness to
Lender when due;
(b) fails to perform any obligation or breaches any warranty or
covenant to Lender contained in this Note, any security instrument,
or any other present or future written agreement regarding this or
any other indebtedness of Borrower to Lender;
(c) provides or causes any false or misleading signature or
representation to be provided to Lender;
(d) sells, conveys, or transfers rights in any collateral securing this
Note without the written approval of Lender; or destroys, loses or
damages such collateral in any material respect; or subjects such
collateral to seizure, confiscation or condemnation;
(e) has a garnishment, judgment, tax levy, attachment or lien entered
or served against Borrower, any guarantor, or any third party
pledging collateral to secure this Note or any of their property;
(f) dies, becomes legally incompetent, is dissolved or terminated,
ceases to operate its business, becomes insolvent, makes an
assignment for the benefit of creditors, fails to pay debts as they
become due, or becomes the subject of any bankruptcy, insolvency
or debtor rehabilitation proceeding;
(g) fails to provide Lender evidence of satisfactory financial
condition;
(h) has a majority of its outstanding voting securities sold,
transferred or conveyed to any person or entity other than any
person or entity that has the majority ownership as of the date of
this execution of this Note; or
(i) causes Lender to deem itself insecure due to a significant decline
in the value of any real or personal property securing payment of
this Note, or Lender in good faith, believes the prospect of
payment or performance is impaired.
2. RIGHTS OF LENDER ON DEFAULT. If there is an Event of Default under this
Note, Lender will be entitled to exercise one or more of the following remedies
without notice or demand (except as required by law):
(a) to declare the principal amount plus accrued interest under this
Note and all other present and future obligations of Borrower
immediately due and payable in full, such acceleration to be
automatic and immediate if the Event of Default is a filing under
the Bankruptcy Code;
(b) to collect the outstanding obligations of Borrower with or without
resorting to judicial process;
(c) to cease making advances under this Note or any other agreement
between Borrower and Lender;
(d) to take possession of any collateral in any manner permitted by law;
(e) to require Borrower to deliver and make available to Lender any
collateral at a place reasonably convenient to Borrower and Lender;
(f) to sell, lease or otherwise dispose of any collateral and collect
any deficiency balance with or without resorting to legal process;
(g) to set-off Borrower's obligations against any amounts due to
Borrower including, but not limited to, monies, instruments, and
deposit accounts maintained with Lender; and
(h) to exercise all other rights available to Lender under any other
written agreement or applicable law.
Lenders's rights are cumulative and may be exercised together, separately, and
in any order. Lender's remedies under this paragraph are in addition to those
available at common law, including, but not limited to, the right of set-off.
3. DEMAND FEATURE. [ ] If checked, this Note contains a demand feature.
Lender's right to demand payment, at any time, and from time to time, shall be
in Lender's sole and absolute discretion, whether or not any default has
occurred.
4. FINANCIAL INFORMATION. Borrower will at all times keep proper books and
account in which full, true and correct entries shall be made in accordance
with generally accepted accounting principles and will deliver to Lender,
within ninety (90) days after the end of each fiscal year of Borrower, a copy
of the annual financial statements of Borrower relating to such fiscal year,
such statements to include (i) the balance sheet of Borrower as at the end of
such fiscal year and (ii) the related income statement, statement of retained
earnings and statement of cash flow of Borrower for such fiscal year, prepared
by such certified public accountants as may be reasonably satisfactory to
Lender. Borrower also agrees to deliver to Lender within fifteen (15) days
after filing same, a copy of Borrower's income tax returns and also, from time
to time, such other financial information with respect to Borrower as Lender
may request.
5. MODIFICATION AND WAIVER. The modification or waiver of any of Borrower's
obligations or Lender's rights under this Note must be contained in a writing
signed by Lender. Lender may perform any of Borrower's obligations or delay or
fail to exercise any of its rights without causing a waiver of those
obligations or rights. A waiver on one occasion will not constitute a waiver
on any other occasion. Borrower's obligations under this Note shall not be
affected if Lender amends, compromises, exchanges, fails to exercise, impairs
or releases any of the obligations belonging to any co-borrower or guarantor or
any of its rights against any co-borrower, guarantor, the collateral or any
other property securing the obligations.
6. SEVERABILITY. If any provision of this Note is invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
7. ASSIGNMENT. Borrower agrees not to assign any of Borrower's rights,
remedies or obligations described in this Note without the prior written
consent of Lender, which consent may be withheld by Lender in its sole
discretion. Borrower agrees that Lender is entitled to assign some or all of
its rights and remedies described in this Note without notice to or the prior
consent of Borrower.
8. NOTICE. Any notice or other communication to be provided to Borrower or
Lender under this Note shall be in writing and sent to the parties at the
addresses described in this Note or such other address as the parties may
designate in writing from time to time.
9. APPLICABLE LAW. This Note shall be governed by the laws of the state
indicated in Lender's address. Unless applicable law provides otherwise,
Borrower consents to the jurisdiction of any court located in such state
selected by Lender, in its discretion, in the event of any legal proceeding
under this Note.
10. COLLECTION COSTS. If the original principal amount of this Note exceeds
$300, and if Lender hires an attorney who is not its salaried employee to
collect any amount due under this Note or enforce any right or remedy of
Lender, Borrower agrees to pay Lender's reasonable expenses and collection
costs, including reasonable attorneys' fees not exceeding 15% of the unpaid
debt after default.
11. MISCELLANEOUS. This Note is being executed primarily for commercial,
agricultural, or business purposes. Borrower and Lender agree that time is of
the essence. Borrower agrees to make all payments to Lender at any address
designated by Lender and in lawful United States currency. Borrower and any
person who endorses this Note waives presentment, demand for payment, notice of
dishonor and protest and further waives any right to require Lender to proceed
against anyone else before proceeding against Borrower or said person. All
references to Borrower in this Note shall include all of the parties signing
this Note, and this Note shall be binding upon the heirs, successors and
assigns of Borrower and Lender. If there is more than one Borrower their
obligations under this Note shall be joint and several. This Note represents
the complete and integrated understanding between Borrower and Lender regarding
the terms hereof.
12. JURY TRIAL WAIVER. BORROWER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY CIVIL ACTION ARISING OUT OF, OR BASED UPON, THIS NOTE OR THE COLLATERAL
SECURING THIS NOTE.
13. ADDITIONAL TERMS.
<PAGE> 3
BORROWER
Cybex Computer Products Corporation
[FIRST COMMERCIAL BANK LOGO]
DISBURSEMENT
INSTRUCTIONS
First Commercial Bank of Huntsville
301 Washington Street
Huntsvillle, AL 35801
(205) 551-3300 "LENDER"
ADDRESS
4912 Research Drive
Huntsville, AL 35806
Telephone No. Identification No.
(205) 430-4000 630801728
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
OFFICER INTEREST FUNDING DATE/ MATURITY CUSTOMER LOAN
IDENTIFICATION RATE PRINCIPAL AMOUNT/CREDIT LIMIT AGREEMENT DATE DATE NUMBER NUMBER
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LKS 8.188% $12,000,000.00 03/26/98 04/02/98
- ------------------------------------------------------------------------------------------------------------------------
Borrower has borrowed money from Lender indicated above pursuant to a Promissory Note/Credit Agreement dated
March 26, 1998 and Borrower instructs Lender to disburse the proceeds in the following manner:
AMOUNT DISBURSED TO BORROWER: $ 0.00
-----------------
AMOUNT DRAWN TO PAY OR CREDIT TO BORROWER'S ACCOUNTS WITH LENDER: $
-----------------
ACCOUNT NUMBER CREDITED:
-----------------
ACCOUNT NUMBER CREDITED:
-----------------
ACCOUNT NUMBER CREDITED:
-----------------
ACCOUNT NUMBER CREDITED:
-----------------
ACCOUNT NUMBER CREDITED:
-----------------
AMOUNT OF LOAN PROCEEDS PAID TO OTHERS ON THE BORROWER'S BEHALF: $ 12,000,000.00
-----------------
PAYEE: First Commercial Bank-Birmingham
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAYEE:
-----------------
PAID IN CASH ADDED TO LOAN AMOUNT
AMOUNT PAID TO PUBLIC OFFICIALS: $ $
------------- -----------------
AMOUNT PAID TO INSURANCE COMPANIES:
------------- -----------------
AMOUNT PAID TO APPRAISERS:
------------- -----------------
AMOUNT PAID TO CREDIT REPORTING AGENCIES:
------------- -----------------
TITLE EXAMINATION:
------------- -----------------
SETTLEMENT/CLOSING FEE:
------------- -----------------
TITLE INSURANCE BINDER:
------------- -----------------
ATTORNEY:
------------- -----------------
DOCUMENT PREPARATION FEE:
------------- -----------------
NOTARY:
------------- -----------------
SURVEYOR:
------------- -----------------
PEST INSPECTOR:
------------- -----------------
ABSTRACT/TITLE SEARCH:
------------- -----------------
TITLE INSURER:
------------- -----------------
CITY/COUNTY TAX DEED/MORTGAGE:
------------- -----------------
STATE TAX DEED/MORTGAGE:
------------- -----------------
HAZARD INSURANCE PREMIUM:
------------- -----------------
FLOOD INSURANCE PREMIUM:
------------- -----------------
------------- -----------------
------------- -----------------
------------- -----------------
------------- -----------------
------------- -----------------
Loan Origination Fee
------------- -----------------
Points/Discount
------------- -----------------
Lender's Inspection Fee
------------- -----------------
Assumption Fee
------------- -----------------
------------- -----------------
Loan Processing Fee
------------- -----------------
TOTAL FEES PAID IN CASH: 50.00
------------- -----------------
TOTAL FEES FINANCED WITH LOAN: $ 50.00
------------- -----------------
$ N/A
-----------------
- --------------------------------------------------------------------------------------------------
Dated: March 26, 1998
BORROWER: Cybex Computer Products Corporation BORROWER:
By: /S/ Doyle C. Weeks
- ---------------------------------------------- ---------------------------------------------
Doyle C. Weeks
Chief Financial Officer
BORROWER: BORROWER:
- ---------------------------------------------- ---------------------------------------------
BORROWER: BORROWER:
- ---------------------------------------------- ---------------------------------------------
BORROWER: BORROWER:
- ---------------------------------------------- ---------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 10.7
CYBEX COMPUTER PRODUCTS CORPORATION
1998 EMPLOYEE STOCK INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The purpose of the 1998 Stock Incentive Plan of Cybex Computer Products
Corporation (the "Company") is to:
(a) promote the interests of the Company and its stockholders by
strengthening the Company's ability to attract, motivate and retain employees of
training, experience and ability;
(b) furnish incentives to individuals chosen to receive options because
they are considered capable of responding by improving operations and increasing
profits or otherwise add value to the Company;
(c) provide a means to encourage stock ownership and proprietary
interest in the Company to valued employees of the Company upon whose judgment,
initiative, and efforts the continued financial success and growth of the
business of the Company largely depend.
2. DEFINITIONS.
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Compensation Committee of the Board as shall
be appointed by the Board from time to time. The Committee shall consist of
three or more members of the Board, at least two of whom shall not be Employees
of the Company.
(d) "Common Stock" means the $.001 par value Common Stock of the
Company.
(e) "Company" means Cybex Computer Products Corporation.
(f) "Eligible Person" means any employee of the Company or of any of
its present or future Subsidiaries.
(g) "Fair Market Value" means the closing price of a share of Common
Stock on the Nasdaq Stock Market or, if the Common Stock is not then listed on
the Nasdaq Stock Market, on any stock exchange on which the Common Stock is then
listed on the date as of which fair market value is to be determined or, if the
Common Stock is not then listed on any stock exchange a price on which the
Committee and Participant can agree upon.
<PAGE> 2
(h) "Incentive Award" means an Option, Incentive Stock Award, or cash
bonus award granted under the Plan.
(i) "Incentive Stock Award" means a right to the grant or purchase, at
a price determined by the Committee, of Common Stock of the Company which is
nontransferable and subject to substantial risk or forfeiture until specific
conditions are met. Conditions may be based on continuing employment or
achievement of preestablished financial objectives or both.
(j) "Option" means any nonqualified or nonstatutory stock option and
any incentive stock option granted pursuant to Section 422 of the Code.
(k) "Participant" means any Eligible Person selected to participate in
an Incentive Award pursuant to Section 5.
(l) "Plan" means the 1998 Stock Incentive Plan as set forth herein,
which may be further amended from time to time.
(m) "Subsidiary" means any corporation, partnership, joint venture or
other entity during any period in which at least a fifty percent voting or
profits interest is owned, directly or indirectly, by the Company, or an entity
that is a successor to the Company.
3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
(a) Number of Shares. Subject to the provisions of Section 3.(c) and
Section 12 of the Plan, the aggregate number of shares of Common Stock that may
be issued or transferred or exercised pursuant to Incentive Awards under the
Plan will not exceed seven hundred fifty thousand (750,000) shares of Common
Stock.
(b) Issued or Unissued Shares. The shares of Common Stock to be
delivered under the Plan will be made available, at the discretion of the Board
or the Committee, either from authorized but unissued shares of Common Stock or
from previously issued shares of Common Stock reacquired by the Company,
including shares purchased on the open market.
(c) Forfeited Awards. If any Incentive Award is forfeited or expires
before exercise or delivery of the shares of Common Stock for any reason, such
Incentive Award will no longer be charged against the limitations provided for
in Section 3.(a) and may again be made subject to Incentive Awards.
4. ADMINISTRATION OF THE PLAN.
(a) Committee. The authority to control and manage the operation and
administration of the Plan shall be vested in the Committee. The Committee has
and may exercise such powers
2
<PAGE> 3
and authority of the Board as may be necessary or appropriate for the Committee
to carry out its functions as described in the Plan.
(b) Powers of Committee. The authority to manage and control the
operation and administration of the Plan shall be vested in the Committee,
subject to the following:
(i) The Committee has the authority and discretion to select from
among the Eligible Employees those persons who shall receive Incentive Awards,
to determine the time or times of receipt, to determine the types of Incentive
Awards and the number of shares covered by the Incentive Awards, to establish
the terms, conditions, performance criteria, restrictions, and other provisions
of such Incentive Awards.
(ii) Subject to the provisions of the Plan, the Committee will
have the authority and discretion to determine the extent to which Incentive
Awards under the Plan will be structured to conform to the requirements
applicable to performance-based compensation as described in Section 162(m) of
the Code, and to take such action, establish such procedures and impose such
restrictions at the time such Incentive Awards are granted as the Committee
determines to be necessary or appropriate to conform to such requirements.
(iii) The Committee will have the authority and discretion to
establish terms and conditions of Incentive Awards as the Committee determines
to be necessary or appropriate to conform to applicable requirements or
practices of jurisdictions outside of the United States.
(iv) The Committee has authority to interpret the Plan, and to
determine the terms and provisions of the respective Incentive Awards agreements
and to make all other determinations necessary or advisable for Plan
administration.
(v) The Committee has authority to prescribe, amend, and rescind
rules and regulations relating to the Plan.
(vi) All interpretations, determinations, and actions by the
Committee will be final, conclusive, and binding upon all parties.
(c) No Liability. No member of the Board or the Committee will be
liable for any action or determination made in good faith by the Board or the
Committee with respect to the Plan or any Incentive Award under it.
5. ELIGIBILITY.
All employees of the Company or any Subsidiary shall be Eligible
Persons under the Plan. The Committee has authority, in its sole discretion, to
determine and designate from time to time those Eligible Persons who are to be
granted Incentive Awards, and the type and amount of Incentive Award to be
granted. Each Incentive Award will be evidenced by a written instrument
3
<PAGE> 4
and may include any other terms and conditions consistent with the Plan, as the
Committee may determine.
6. WRITTEN AGREEMENT; EFFECT.
Each Option shall be evidenced by a written agreement (the "Option
Agreement"), in form satisfactory to the Committee, executed by the Company and
by the person to whom such Option is granted. The Option Agreement shall specify
whether each Option it evidences is a nonqualified stock option ("NQO") or an
incentive stock option ("ISO"). Failure of the grantee to execute an Option
Agreement shall not void or invalidate the grant of an Option; but the Option
may not be exercised, however, until the Option Agreement is executed.
7. ANNUAL $100,000 LIMITATION IN ISOS.
To the extent required by Section 422(d) of the Code, the aggregate
fair market value of shares of the Common Stock with respect to which ISOs are
exercisable for the first time by any individual during any calendar year shall
not exceed $100,000. For this purpose, fair market value shall be the fair
market value of the shares covered by the ISOs when the ISOs were granted. To
the extent that the aggregate Fair Market Value of the Common Stock with respect
to which ISOs are exercisable for the first time by the Participant during any
calendar year (under all plans of the Company) exceeds $100,000, such Options
shall be treated as NQOs, to the extent required by Section 422 of the Code. If
by their terms, such ISOs taken together would first become exercisable at a
faster rate, this $100,000 limitation shall be applied by deferring the
exercisability of those ISOs or portions of ISOs which have the highest per
share exercise prices. The ISOs or portions of ISOs, the exercisability of which
are so deferred, shall become exercisable on the first day of the first
subsequent calendar year during which they may be exercised, as determined by
applying these same principles of this Section and all other provisions of this
Section and all other provisions of this Plan, including those relating to the
expiration and termination of ISOs.
8. ADVANCE APPROVALS.
The Board may approve the grant of Options to persons who are expected
to become Eligible Persons, but are not Eligible Persons at the date of
approval. In such cases, the Option shall be deemed granted, without further
approval, on the date the grantee becomes an Eligible Person, and must satisfy
all requirements of this Plan for Options granted on that date.
9. TERMS AND CONDITIONS OF STOCK OPTIONS.
(a) Designation. Each Option shall be designated as an ISO or a NQO and
shall be subject to the terms and conditions set forth in this Section 9. ISOs
shall also be subject to the terms and conditions set forth in Section 10.
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<PAGE> 5
(b) Grant Date. Each Option Agreement shall specify the date as of
which it shall be effective, which date shall be the Grant Date (determined
pursuant to Section 8 in the case of advance approvals).
(c) Exercise Price. Except as provided in Section 10 hereof, the
exercise price of Common Stock under each Option will be determined by the
Committee, and may not be less than eighty-five percent (85%) of the Fair Market
Value of the Common Stock on the date of the grant.
(d) Exercise. Options granted hereunder may be exercised as determined
by the Committee, provided, however, that notwithstanding any other provision to
the contrary contained in the Plan, each Option granted under this Plan will
expire not later than ten (10) years from the Date of Grant.
(e) Payment of Exercise Price. Except as set forth below, upon the
exercise of an Option, the purchase price will be payable in full in cash, or,
in the discretion of the Committee, by the assignment and delivery to the
Company of shares of Common Stock owned by the Participant. Any shares so
assigned and delivered to the Company in payment or partial payment of the
exercise price will be valued at their Fair Market Value on the exercise date.
The Committee may, in its discretion and upon the request of the Participant,
permit the Participant to elect to pay the exercise price upon the exercise of
an Option by authorizing a third party to sell shares of Common Stock (or a
sufficient portion of the shares) acquired upon exercise of the Option and remit
to the Company a sufficient portion of the sale proceeds to pay the entire
exercise price and any tax withholding resulting from such exercise. No payment
by an assignment of shares, or by the sale by a third party as described above,
will be allowed unless such payments are allowed under applicable requirements
of Federal and state tax, securities and other laws, rules and regulations and
by any regulatory authority having jurisdiction.
(f) No Fractional Shares. No fractional shares will be issued pursuant
to the exercise of an Option nor will any cash payment be made in lieu of
fractional shares.
(g) Other Provisions of the Option Agreement. Each Option Agreement may
contain such other terms, provisions, and conditions not inconsistent with this
Plan, including rights of repurchase, as may be determined by the Committee, and
each ISO granted under this Plan shall include such provisions and conditions as
are necessary to qualify such option as an "incentive stock option" within the
meaning of Section 422 of the Code.
(h) Tax Withholding. If requested by the Company, at the time of
exercise of an Option, the optionee shall remit to the Company in cash all
applicable federal and state withholding and employment taxes. If and to the
extent authorized and approved by the Committee in its sole discretion, a
Participant may elect, by means of a form of election to be prescribed by the
Committee, to have shares which are acquired upon exercise of an Option withheld
by the Company or tender other shares of Common Stock or other securities of the
5
<PAGE> 6
Company owned by the Participant to the Company at the time the amount of such
taxes is determined in order to pay the amount of such tax obligations.
Any Common Stock or other securities so withheld or tendered will be valued by
the Company as of the date they are withheld or tendered. Unless the Committee
otherwise determines, the Participant shall pay to the Company in cash, promptly
when the amount of such obligations become determinable, all applicable federal
and state withholding taxes resulting from the lapse of restrictions imposed on
exercise of an Option, from a transfer or other disposition of shares acquired
upon exercise of an Option or otherwise related to the Option or the shares
acquired upon exercise of the Option.
(i) Cash Award. At the time a Participant exercises an Option, the
Committee may grant a cash bonus award in such amount as the Committee may
determine. The Committee may make such a determination at the time of grant or
exercise. The cash bonus award may be subject to any condition imposed by the
Committee, including a reservation of the right to revoke a cash bonus award at
any time before it is paid.
10. TERMS AND CONDITIONS TO WHICH ONLY ISOS ARE SUBJECT.
Options granted under this Plan which are designated as ISOs shall be
subject to the following terms and conditions:
(a) Exercise Price. The exercise price of an ISO shall be determined in
accordance with the applicable provisions of the Code and shall in no event be
less than the Fair Market Value of the stock covered by the ISO at the Grant
Date; provided, however, that the exercise price of an ISO granted to any person
who owns, directly or indirectly (or is treated as owning by reason of
attribution rules, currently set forth in Code Section 424), stock of the
Company constituting more than ten percent of the total combined voting power of
all classes of outstanding stock of the Company or of any affiliate of the
Company, shall in no event be less than 110 percent of such fair market value.
(b) Option Term. Unless an earlier expiration date is specified by the
Committee at the Grant Date in the Option Agreement, each ISO shall expire ten
(10) years from its Grant Date; except that an ISO granted to any person who
owns, directly or indirectly (or is treated as owning by reason of applicable
attribution rules currently set forth in Section 424 of the Code) stock of the
Company constituting more than ten percent of the total combined voting power of
the Company's outstanding stock, or the stock of any affiliate of the Company,
shall expire five years from its Grant Date.
(c) Disqualifying Dispositions. If Common Stock acquired by exercise of
an ISO is disposed of within two years from the Grant Date or within one year
after the transfer of the Common Stock to the Participant, the holder of the
Common Stock immediately prior to the disposition shall promptly notify the
Company in writing of the date and terms of the disposition
6
<PAGE> 7
and shall provide such other information regarding the disposition as the
Company may reasonably require. The Company may instruct its stock transfer
agent by appropriate means, including placement of legends on stock
certificates, not to transfer stock acquired by exercise of an ISO unless it has
been advised by the Company that the requirements of this Section have been
satisfied.
11. TERMS AND CONDITIONS OF INCENTIVE STOCK AWARDS.
(a) General Conditions. All shares of Incentive Stock Awards granted or
sold pursuant to the Plan will be subject to the following conditions:
(i) The shares may not be sold, transferred or otherwise
alienated or hypothecated until the restrictions are removed or expire.
(ii) The Committee may require the Participant to enter into an
agreement providing that the certificates representing Incentive Stock Awards
granted or sold pursuant to the Plan will remain in the physical custody of the
Company until all restrictions are removed or expire.
(iii) Each certificate representing Incentive Stock Awards granted
pursuant to the Plan will bear a legend making appropriate reference to the
restrictions imposed.
(iv) The Committee may impose other conditions on any shares
granted or sold pursuant to the Plan as it may deem advisable, including,
without limitations, restrictions under the Securities Act of 1933, as amended,
under the requirements of any stock exchange upon which such shares or shares of
the same class are then listed and under any blue sky or other securities laws
applicable to such shares.
(b) Lapse of Restrictions. The restrictions imposed under subparagraph
(a) above upon Incentive Stock Awards will lapse in accordance with a schedule
or other conditions as determined by the Committee, subject to the provisions of
Section 14.(e) hereof.
(c) Rights as a Stockholder. Subject to the provisions of subparagraph
(a) above and Section 11(c) hereof, the holder will have all rights of a
stockholder with respect to the Incentive Stock Awards granted or sold,
including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto.
(d) Payment for Incentive Stock Awards. Except as set forth below, the
purchase price (if any) for shares of Incentive Stock Awards will be payable in
full in cash; or by the assignment and delivery to the Company of shares of
Common Stock owned by the holder of the Incentive Stock Awards. Any shares so
assigned and delivered to the Company in payment or partial payment of the
purchase price will be valued at their Fair Market Value on the purchase date.
The Committee may, in its discretion and upon request of the holder, permit the
holder to elect to pay
7
<PAGE> 8
the exercise price of the Incentive Stock Award by authorizing a third party to
sell shares of Common Stock (or a sufficient portion of the shares) acquired
upon exercise of the Incentive Stock Award and remit to the Company a sufficient
portion of the sale proceeds to pay the entire exercise price and any tax
withholding resulting from such exercise. No payment by an assignment of shares
or by the sale by a third party as described above, will be allowed unless such
payments are allowed under applicable requirements of Federal and state tax,
securities and other laws, rules and regulations and by any regulatory authority
having jurisdiction.
12. ADJUSTMENT PROVISIONS.
(a) Adjustments. Subject to Section 12.(b) hereof, if the outstanding
shares of Common Stock of the Company are increased, decreased, or exchanged for
a different number or kind of shares or other securities, or if additional
shares or new or different shares or other securities are distributed with
respect to such shares of Common Stock or other securities, through merger,
consolidation, sale of all or substantially all of the property of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other distribution with respect to such shares of Common
Stock, or other securities an appropriate and proportionate adjustment may be
made in (i) the maximum number and kind of shares provided in Section 3, (ii)
the number and kind of shares or other securities subject to the then
outstanding Incentive Awards, and (iii) the price for each share or other unit
of any other securities subject to then outstanding Incentive Awards without
change in the aggregate purchase price or value as to which such Incentive
Awards remain exercisable or subject to restrictions.
(b) Merger, Etc. Despite the provisions of Section 12.(a), upon
dissolution or liquidation of the Company or upon a reorganization, merger, or
consolidation of the Company with one or more corporations as a result of which
the Company is not the surviving Corporation, or upon the sale of all or
substantially all of the property of the Company, all Incentive Awards then
outstanding under the Plan will be fully vested and exercisable and all
restrictions will immediately cease, unless provisions are made in connection
with such transaction for the continuance of the Plan and assumption or the
substitution for such Incentive Awards of new incentive awards covering the
stock of a successor employer corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and prices.
(c) Decisions by Committee. Adjustments under Sections 12.(a) and
12.(b) will be made by the Committee, whose determination as to what adjustments
will be made and the extent thereof will be final, binding, and conclusive. No
fractional interest will be issued under the Plan on account of any such
adjustments.
(d) Takeover Bids. In the event of pending or threatened takeover bid
or tender offer and pursuant to which 10% or more of the outstanding securities
of the Company is acquired, whether or not deemed a tender offer under
applicable state or Federal laws, or in the event that any person makes any
filing under section 13(d) or 14(d) of the Securities Exchange Act of 1934 with
respect to the Company, the Committee may in its sole discretion, without
obtaining
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<PAGE> 9
stockholder approval, at the time of any one or more of the following actions to
the extent permitted in Section 14 with respect to all Eligible Persons and
Participants:
(i) Accelerate the exercise dates of any outstanding Option, or
make all outstanding Options fully vested and exercisable;
(ii) Determine all or any portion of conditions associated with an
Incentive Stock Award have been met;
(iii) Grant a cash bonus award to any of the holders of outstanding
Options;
(iv) Pay cash to any or all Option holders in exchange for the
cancellation of their outstanding Options;
(v) Make any other adjustments or amendments to the plan and
outstanding Incentive Awards and substitute new Incentive Awards.
13. GENERAL PROVISIONS.
(a) Limitation on Implied Rights. Nothing in the Plan or in any
instrument executed pursuant to the Plan will confer upon any Participant any
right to continue as an employee or any of its Subsidiaries or affect the right
of the Company to terminate the employment of any Participant at any time with
or without cause. No Participant and no beneficiary or other person claiming
under or through such Participant will have any right, title or interest in or
to any shares of Common Stock allocated or reserved under the Plan or subject to
any Incentive Award, except as to such shares of Common Stock, if any, that have
been issued or transferred to such Participant.
(b) Compliance with Security Laws. No shares of Common Stock will be
issued or transferred pursuant to an Incentive Award unless and until all
then-applicable requirements imposed by Federal and state securities laws, rules
and regulations and by any regulatory agencies having jurisdiction, and by any
stock exchanges upon which the Common Stock may be listed have been fully met.
As a condition precedent to the issuance of shares pursuant to the grant or
exercise of an Incentive Award, the Company may require the Participant to take
any reasonable action to meet such requirements.
(c) Power to Withhold Taxes. The Company may make such provisions as it
deems appropriate to withhold any taxes the Company determines it is required to
withhold in connection with any Incentive Award.
(d) No Assignment. No Incentive Award and no right under the Plan,
contingent or otherwise, will be assignable or subject to any encumbrance,
pledge or charge of any nature except that, under such rules and regulations as
the Company may establish pursuant to the terms
9
<PAGE> 10
of the Plan, a beneficiary may be designated with respect to an Incentive Award
in the event of death of a Participant. If such beneficiary is the executor or
administrator of the estate of the Participant, any rights with respect to such
Incentive Award may be transferred to the person or persons or entity (including
a trust) entitled thereto under the will of the holder of such Incentive Award.
(e) Participant Loans. The Company may make a loan to a Participant who
is a full-time employee in connection with (i) the exercise of an Option in an
amount not to exceed the aggregate exercise price of the Option being exercised
and the grossed up amount of any Federal and state taxes payable in connection
with such exercise for the purpose of assisting such Participant to exercise
such Option, and (ii) the vesting of an Incentive Stock Award in an amount equal
to the grossed up amount of any Federal and state taxes payable as a result of
such vesting. Any such loan may be secured by shares of Common Stock or other
collateral deemed adequate by the Committee and will comply in all respects with
all applicable laws and regulations. The Committee may adopt policies regarding
eligibility for such loans, the maximum amounts thereof and any terms and
conditions not specified in the Plan upon which such loans will be made. In no
event will the interest rate be less than the minimum rate established by the
Internal Revenue Service for the purpose of the purchase and sale of property.
(f) Substitution of New Options. The Committee may cancel, with the
consent of the Participant, all or a portion of any Option granted under the
Plan to be conditioned upon the granting to the Participant a new Option for the
same or a different number of shares as the Option surrendered, or may require
such voluntary surrender as a condition to a grant of a new Option to such
Participant. Such Option shall be exercisable at the price, during the period,
and in accordance with any other terms or conditions specified by the Committee
at the time the new Option is granted, all determined in accordance with the
provisions of the Plan without regard to the price, period of exercise, or any
other terms or conditions of the Option surrendered.
(g) Cancellation of Options. The forms of Options granted under the
Plan may contain such other provisions as the Committee may deem advisable.
Without limiting the foregoing and if so authorized by the Committee, the
Company may, with the consent of the Participant, and at any time or from time
to time, cancel all or a portion of any Option granted under the Plan then
subject to exercise and discharge its obligation in respect of the Option either
by payment to the Participant of an amount of cash equal to the excess, if any,
of the Fair Market Value, at such time, of the shares subject to the portion of
the Option so canceled over the aggregate purchase price specified in the Option
covering such shares, or by issuance or transfer to the Participant of shares of
Common Stock with a Fair Market Value, at such time, equal to any such excess,
or by a combination of cash and shares. Upon any such payment of cash or
issuance of shares, (i) there shall be charged against the aggregate limitations
set forth in Section 3(a) a number of shares equal to the number of shares so
issued plus the number of shares purchasable with the amount of any cash paid to
the Participant on the basis of the Fair Market Value as of the date of payment,
and (ii) the number of shares subject to the portion of the Option so canceled,
less the number of shares so charged against such limitations, shall thereafter
be available for other grants.
10
<PAGE> 11
14. AMENDMENT AND TERMINATION.
(a) General. The Committee will have the power, in its discretion, to
amend, suspend or terminate the Plan at any time. No such amendment will,
without approval of the stockholders of the Company, except as provided in
Section 12 of the Plan:
(i) Change the class of persons eligible to receive Incentive
Awards under the Plan;
(ii) Materially increase the benefits accruing to Eligible Persons
under the Plan;
(iii) Increase the number of shares of Common Stock subject to the
Plan; or
(iv) Transfer the administration of the Plan to any person who is
not a disinterested person under the Securities Exchange Act of 1934.
(b) Modifications. The Committee may, with the consent of a
Participant, make such modifications in the terms and conditions of an Incentive
Award agreement as it deems advisable.
(c) Consent of Participant Required. No amendment, suspension or
termination of the Plan will, without the consent of the Participant, alter,
terminate impair or adversely affect any right or obligation under any Incentive
Award previously granted under the Plan.
(d) Termination of Incentive Award. An Incentive Award held by a person
who was an Eligible Person at the time such Option was granted will expire
immediately if and when the Participant ceases to be an Eligible Person, except
as follows:
(i) If the employment of a Participant is terminated by the
Company or any Subsidiary other than for cause, for which the Company will be
the sole judge, the Options will expire eight months thereafter unless by their
terms they expire sooner. During said period, the Options may be exercised in
accordance with their terms, but only to the extent exercisable on the date of
termination of employment.
(ii) If a Participant retires at normal retirement age or retires
with the consent of the Company or any Subsidiary at an earlier date, the
Options of the Participant will expire, subject to the provisions of Section
9.(d) hereof, three years thereafter unless by their terms they expire sooner.
During said period, the Options may be exercised in accordance with their terms,
but only to the extent exercisable on the date of retirement.
(iii) If the Participant dies or becomes permanently and totally
disabled while employed by the Company, the Options of the Participant will
expire, subject to the provision of Section 9.(d) hereof, three years after the
date of death or permanent and total disability unless by their terms they
expire sooner. If the Participant dies or becomes permanently and totally
11
<PAGE> 12
disabled within the eight months referred to in paragraph (i) above, the Options
will expire, subject to the provision of Section 9.(d) hereof, one year after
the date of death or permanent and total disability, unless by their terms they
expire sooner. If the Participant dies or becomes permanently and totally
disabled within the three-year period referred to in subparagraph (ii) above,
the Options will expire, subject to the provisions of Section 9.(d) hereof, upon
the later of three years after retirement or one year after the date of death or
permanent and total disability, unless by their terms they expire sooner.
(e) Leave of Absence. The Committee may in its sole discretion
determine, (i) with respect to an Incentive Award, that any Participant who is
on leave of absence for any reason will be considered as still in the employ of
the Company, provided that rights to such Incentive Award during a leave of
absence will be limited to the extent to which such right was earned or vested
at the commencement of such leave of absence, or (ii) with respect to any
Options of any Participant who is retiring at normal retirement age or with the
consent of the Company or any subsidiary thereof at an earlier age, that the
Options of such Participant will accelerate and become fully exercisable on a
date specified by the Committee which is not later than the effective date of
such retirement.
15. EFFECTIVE DATE OF PLAN AND DURATION OF PLAN.
This Plan will become effective upon adoption by the Board and the
holders of a majority of the outstanding shares at a meeting of stockholders of
the Company. Unless previously terminated, the Plan will terminate on April 27,
2008.
12
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
OF
CYBEX COMPUTER PRODUCTS CORPORATION
<TABLE>
<S> <C>
Name of Subsidiary State or Country of Organization
------------------ --------------------------------
Cybex Europe, Ltd. Ireland
Cybex International Corporation Barbados
Cybex Computertechnik, GmbH Germany
Elsner Computertechnik, GmbH Germany
PolyCon Data Systems, GmbH Germany
PolyCon Investments, Inc.
d/b/a Elsner Technologies Texas
</TABLE>
<PAGE> 1
EXHIBIT 23.1
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Cybex Computer Products Corporation on Form S-8 (File No. 333-10989) of our
reports dated May 1, 1998, on our audits of the consolidated financial
statements and financial statement schedule of Cybex Computer Products
Corporation as of March 31, 1997 and 1998, and for each of the three years in
the period ended March 31, 1998.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
June 26, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CYBEX COMPUTER PRODUCTS CORPORATION FOR THE THREE MONTHS
ENDED JUN-30-1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000946360
<NAME> CYBEX COMPUTER PRODUCTS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 8,331
<SECURITIES> 26,057
<RECEIVABLES> 4,571
<ALLOWANCES> 137
<INVENTORY> 2,933
<CURRENT-ASSETS> 41,143
<PP&E> 2,366
<DEPRECIATION> 600
<TOTAL-ASSETS> 44,240
<CURRENT-LIABILITIES> 2,303
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 45,677
<TOTAL-LIABILITY-AND-EQUITY> 44,240
<SALES> 7,428
<TOTAL-REVENUES> 7,428
<CGS> 3,487
<TOTAL-COSTS> 3,487
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 1,930
<INCOME-TAX> 700
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,230
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
<FN>
WE HAVE CALCULATED EARNINGS PER SHARE AMOUNTS IN ACCORDANCE WITH FAS 128
"EARNINGS PER SHARE." WE HAVE ENTERED BASIC AND DILUTED AMOUNTS IN PLACE OF
PRIMARY AND FULLY DILUTED, RESPECTIVELY, AND REFLECT THE THREE-FOR-TWO STOCK
DIVIDEND EFFECTIVE APRIL 10, 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CYBEX COMPUTER PRODUCTS CORPORATION FOR THE SIX MONTHS
ENDED SEP-30-1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000946360
<NAME> CYBEX COMPUTER PRODUCTS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,597
<SECURITIES> 30,683
<RECEIVABLES> 5,513
<ALLOWANCES> 165
<INVENTORY> 3,155
<CURRENT-ASSETS> 41,315
<PP&E> 2,461
<DEPRECIATION> 679
<TOTAL-ASSETS> 45,412
<CURRENT-LIABILITIES> 2,003
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 47,150
<TOTAL-LIABILITY-AND-EQUITY> 45,412
<SALES> 15,478
<TOTAL-REVENUES> 15,478
<CGS> 7,258
<TOTAL-COSTS> 7,258
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 34
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 4,240
<INCOME-TAX> 1,537
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,703
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
<FN>
WE HAVE CALCULATED EARNINGS PER SHARE AMOUNTS IN ACCORDANCE WITH FAS 128
"EARNINGS PER SHARE." WE HAVE ENTERED BASIC AND DILUTED AMOUNTS IN PLACE OF
PRIMARY AND FULLY DILUTED, RESPECTIVELY, AND REFLECT THE THREE-FOR-TWO STOCK
DIVIDEND EFFECTIVE APRIL 10, 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CYBEX COMPUTER PRODUCTS CORPORATION FOR THE NINE MONTHS
ENDED DEC-31-1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000946360
<NAME> CYBEX COMPUTER PRODUCTS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 4,215
<SECURITIES> 31,112
<RECEIVABLES> 5,088
<ALLOWANCES> 302
<INVENTORY> 3,569
<CURRENT-ASSETS> 42,144
<PP&E> 2,893
<DEPRECIATION> 768
<TOTAL-ASSETS> 46,632
<CURRENT-LIABILITIES> 2,454
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 48,683
<TOTAL-LIABILITY-AND-EQUITY> 46,632
<SALES> 24,395
<TOTAL-REVENUES> 24,395
<CGS> 11,480
<TOTAL-COSTS> 11,480
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 171
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 6,647
<INCOME-TAX> 2,410
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,237
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.51
<FN>
WE HAVE CALCULATED EARNINGS PER SHARE AMOUNTS IN ACCORDANCE WITH FAS 128
"EARNINGS PER SHARE." WE HAVE ENTERED BASIC AND DILUTED AMOUNTS IN PLACE OF
PRIMARY AND FULLY DILUTED, RESPECTIVELY, AND REFLECT THE THREE-FOR-TWO STOCK
DIVIDEND EFFECTIVE APRIL 10, 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CYBEX COMPUTER PRODUCTS CORPORATION FOR THE YEAR
ENDED MAR-31-1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000946360
<NAME> CYBEX COMPUTER PRODUCTS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,424
<SECURITIES> 40,885
<RECEIVABLES> 5,761
<ALLOWANCES> 350
<INVENTORY> 3,835
<CURRENT-ASSETS> 51,719
<PP&E> 3,294
<DEPRECIATION> 871
<TOTAL-ASSETS> 56,567
<CURRENT-LIABILITIES> 11,227
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 50,249
<TOTAL-LIABILITY-AND-EQUITY> 56,567
<SALES> 34,568
<TOTAL-REVENUES> 34,568
<CGS> 16,409
<TOTAL-COSTS> 16,409
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 219
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 9,233
<INCOME-TAX> 3,393
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,940
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.70
<FN>
WE HAVE CALCULATED EARNINGS PER SHARE AMOUNTS IN ACCORDANCE WITH FAS 128
"EARNINGS PER SHARE." WE HAVE ENTERED BASIC AND DILUTED AMOUNTS IN PLACE OF
PRIMARY AND FULLY DILUTED, RESPECTIVELY, AND REFLECT THE THREE-FOR-TWO STOCK
DIVIDEND EFFECTIVE APRIL 10, 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CYBEX COMPUTER PRODUCTS CORPORATION FOR THE THREE MONTHS
ENDED JUN-30-1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000946360
<NAME> CYBEX COMPUTER PRODUCTS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 9,237
<SECURITIES> 27,251
<RECEIVABLES> 6,554
<ALLOWANCES> 341
<INVENTORY> 4,470
<CURRENT-ASSETS> 46,372
<PP&E> 3,583
<DEPRECIATION> 988
<TOTAL-ASSETS> 51,511
<CURRENT-LIABILITIES> 4,623
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 52,042
<TOTAL-LIABILITY-AND-EQUITY> 51,511
<SALES> 10,695
<TOTAL-REVENUES> 10,695
<CGS> 5,049
<TOTAL-COSTS> 5,049
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 104
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 2,644
<INCOME-TAX> 942
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,702
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
<FN>
WE HAVE CALCULATED EARNINGS PER SHARE AMOUNTS IN ACCORDANCE WITH FAS 128
"EARNINGS PER SHARE." WE HAVE ENTERED BASIC AND DILUTED AMOUNTS IN PLACE OF
PRIMARY AND FULLY DILUTED, RESPECTIVELY, AND REFLECT THE THREE-FOR-TWO STOCK
DIVIDEND EFFECTIVE APRIL 10, 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CYBEX COMPUTER PRODUCTS CORPORATION FOR THE SIX MONTHS
ENDED SEP-30-1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000946360
<NAME> CYBEX COMPUTER PRODUCTS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 8,666
<SECURITIES> 28,270
<RECEIVABLES> 7,497
<ALLOWANCES> 461
<INVENTORY> 4,638
<CURRENT-ASSETS> 47,364
<PP&E> 6,338
<DEPRECIATION> 1,260
<TOTAL-ASSETS> 52,982
<CURRENT-LIABILITIES> 4,151
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 54,012
<TOTAL-LIABILITY-AND-EQUITY> 52,982
<SALES> 21,962
<TOTAL-REVENUES> 21,962
<CGS> 10,393
<TOTAL-COSTS> 10,393
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 226
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 5,631
<INCOME-TAX> 1,992
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,639
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.43
<FN>
WE HAVE CALCULATED EARNINGS PER SHARE AMOUNTS IN ACCORDANCE WITH FAS 128
"EARNINGS PER SHARE." WE HAVE ENTERED BASIC AND DILUTED AMOUNTS IN PLACE OF
PRIMARY AND FULLY DILUTED, RESPECTIVELY, AND REFLECT THE THREE-FOR-TWO STOCK
DIVIDEND EFFECTIVE APRIL 10, 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CYBEX COMPUTER PRODUCTS CORPORATION FOR THE NINE MONTHS
ENDED DEC-31-1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000946360
<NAME> CYBEX COMPUTER PRODUCTS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 11,571
<SECURITIES> 17,148
<RECEIVABLES> 9,310
<ALLOWANCES> 578
<INVENTORY> 6,503
<CURRENT-ASSETS> 42,583
<PP&E> 6,338
<DEPRECIATION> 1,260
<TOTAL-ASSETS> 54,398
<CURRENT-LIABILITIES> 8,226
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 51,353
<TOTAL-LIABILITY-AND-EQUITY> 54,398
<SALES> 34,499
<TOTAL-REVENUES> 34,499
<CGS> 16,363
<TOTAL-COSTS> 16,363
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 353
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 4,052
<INCOME-TAX> 3,072
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 980
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.12
<FN>
WE HAVE CALCULATED EARNINGS PER SHARE AMOUNTS IN ACCORDANCE WITH FAS 128
"EARNINGS PER SHARE." WE HAVE ENTERED BASIC AND DILUTED AMOUNTS IN PLACE OF
PRIMARY AND FULLY DILUTED, RESPECTIVELY, AND REFLECT THE THREE-FOR-TWO STOCK
DIVIDEND EFFECTIVE APRIL 10, 1998.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CYBEX COMPUTER PRODUCTS CORPORATION FOR THE YEAR
ENDED MAR-31-1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 2,411
<SECURITIES> 37,961
<RECEIVABLES> 12,394
<ALLOWANCES> 963
<INVENTORY> 6,047
<CURRENT-ASSETS> 56,470
<PP&E> 8,674
<DEPRECIATION> 1,422
<TOTAL-ASSETS> 70,719
<CURRENT-LIABILITIES> 21,038
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 54,726
<TOTAL-LIABILITY-AND-EQUITY> 70,719
<SALES> 52,564
<TOTAL-REVENUES> 52,564
<CGS> 24,979
<TOTAL-COSTS> 24,979
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 718
<INTEREST-EXPENSE> 21
<INCOME-PRETAX> 8,079
<INCOME-TAX> 4,508
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,571
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.42
</TABLE>
