10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2002
	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 1-10981

SBS TECHNOLOGIES, INC.

New Mexico
(State or other jurisdiction of
incorporation or organization) 85-0359415
(IRS Employer Identification Number)

2400 Louisiana Blvd. NE
AFC Building 5, Suite 600
Albuquerque, New Mexico 87110
(505) 875-0600

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.

YES      NO  

As of April 30, 2002, the Registrant had 14,582,295 shares of its common stock outstanding.

TABLE OF CONTENTS

		Consolidated Balance Sheets
		Consolidated Statements of Operations
		Consolidated Statement of Changes in Stockholders’ Equity
		Consolidated Statements of Cash Flows
		Notes to Condensed Consolidated Financial Statements
	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Quantitative and Qualitative Disclosures about Market Risk
PART II – OTHER INFORMATION
SIGNATURES
EXHIBIT INDEX
EX-10.bn - Asset Purchase Agreement
EX-10.bo - Separation Agreement
EX-10.bp - Employment Agreements
EX-10.bq - Employment Agreement

SBS Technologies, Inc. and Subsidiaries
Form 10-Q for the Quarter Ended March 31, 2002
Table of Contents

			Page
PART I – FINANCIAL INFORMATION
	Item 1 – Unaudited Condensed Financial Statements
		Consolidated Balance Sheets at March 31, 2002 and June 30, 2001		2
		Consolidated Statements of Operations, Nine and Three Months Ended March 31, 2002 and 2001		3
		Consolidated Statement of Changes in Stockholders’ Equity, Nine Months Ended March 31, 2002		4
		Consolidated Statements of Cash Flows, Nine Months Ended March 31, 2002 and 2001		5
		Notes to Unaudited Condensed Consolidated Financial Statements as of March 31, 2002		7
	Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations			12
	Item 3 – Quantitative and Qualitative Disclosures about Market Risk			20
PART II – OTHER INFORMATION				21
SIGNATURES				22
EXHIBIT INDEX				23

SBS Technologies, Inc. and Subsidiaries
Consolidated Balance Sheets
Thousands (except share amounts)
(Unaudited)

			March 31,			June 30,
			2002			2001
Assets
Current assets:
	Cash and cash equivalents		$	21,048			9,734
	Receivables, net			25,191			27,287
	Inventories			22,079			40,752
	Deferred income taxes			11,222			5,080
	Income tax receivable			2,714			3,417
	Prepaid expenses			1,729			1,125
	Other current assets			996			802
		Total current assets		84,979			88,197
Property and equipment, net				12,049			11,475
Goodwill, net				23,698			29,266
Intangible assets, net				13,775			15,841
Deferred income taxes				309			—
Other assets				1,204			2,393
		Total assets	$	136,014			147,172
Liabilities and Stockholders’ Equity
Current liabilities:
	Notes payable		$	—			2,500
	Accounts payable			4,295			3,771
	Accrued representative commissions			505			821
	Accrued compensation			3,155			4,071
	Other current liabilities			3,808			1,753
		Total current liabilities		11,763			12,916
Long-term liabilities:
	Deferred income taxes			—			461
	Other liabilities			36			—
		Total long-term liabilities		36			461
		Total liabilities		11,799			13,377
Stockholders’ equity:
	Common stock, no par value; 200,000,000 shares authorized, 14,612,157 issued and outstanding at March 31, 2002, 14,522,080 issued and outstanding at June 30, 2001			86,546			85,476
	Unearned compensation			(415	)		(478	)
	Accumulated other comprehensive loss			(5,572	)		(5,983	)
	Retained earnings			43,656			54,780
		Total stockholders’ equity		124,215			133,795
		Total liabilities and stockholders’ equity	$	136,014			147,172

See accompanying notes to unaudited condensed consolidated financial statements

Page 2

SBS Technologies, Inc. and Subsidiaries
Consolidated Statements of Operations
Thousands (except per share amounts)
(Unaudited)

		Nine Months Ended March 31						Three Months Ended March 31
		2002			2001			2002			2001
Sales		$	90,475			141,285			29,694			48,490
Cost of sales			58,043			74,172			14,466			25,863
	Gross profit		32,432			67,113			15,228			22,627
Selling, general and administrative expense			28,650			24,302			9,965			8,262
Research and development expense			13,396			15,006			4,621			5,078
Restructuring charge			572			—			251			—
Impairment of intangible assets			2,682			—			—			—
Amortization of intangible assets			5,658			5,832			1,805			1,936
	Operating income (loss)		(18,526	)		21,973			(1,414	)		7,351
Interest and other income (expense), net			421			(653	)		144			(109	)
Foreign exchange gains (losses)			24			(140	)		(1	)		(77	)
			445			(793	)		143			(186	)
Income (loss) before income taxes			(18,081	)		21,180			(1,271	)		7,165
Income tax expense (benefit)			(6,957	)		7,532			(885	)		2,792
Net income (loss)		$	(11,124	)		13,648			(386	)		4,373
Net income (loss) per common share		$	(0.76	)		0.99			(0.03	)		0.31
Net income (loss) per common share - assuming dilution		$	(0.76	)		0.90			(0.03	)		0.29

See accompanying notes to unaudited condensed consolidated financial statements

Page 3

SBS Technologies, Inc. and Subsidiaries
Consolidated Statement of Changes in Stockholders’ Equity and Comprehensive Income (Loss)
Thousands (except share amounts)
(Unaudited)

		Common									Accumulated						Total
		stock									other						stock-
								Unearned			comprehensive			Retained			holders'
		Shares			Amount			compensation			loss			earnings			equity
Balance at June 30, 2001			14,522,080		$	85,476		$	(478	)	$	(5,983	)	$	54,780		$	133,795
Exercise of stock options and warrants			132,577			1,394			—			—			—			1,394
Stock repurchased and retired			(42,500	)		(488	)		—			—			—			(488	)
Stock-based compensation			—			21			63			—			—			84
Income tax benefit from stock options exercised			—			143			—			—			—			143
Net loss			—			—			—			—			(11,124	)		(11,124	)
Other comprehensive income:
	Foreign currency translation adjustments		—			—			—			411			—			411
Balance at March 31, 2002			14,612,157		$	86,546		$	(415	)	$	(5,572	)	$	43,656		$	124,215

See accompanying notes to unaudited condensed consolidated financial statements

Page 4

SBS Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Thousands
(Unaudited)

					Nine months ended
					March 31,
					2002			2001
Cash flows from operating activities:
	Net income (loss)				$	(11,124	)		13,648
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation				2,778			1,784
		Amortization of intangible assets				5,658			5,832
		Impairment of intangible assets				2,682			—
		Bad debt expense				362			527
		Deferred income taxes				(6,673	)		(367	)
		Income tax benefit of stock options exercised				143			5,262
		(Gain) loss on disposition of assets				(7	)		14
		Foreign exchange (gains) losses				(24	)		140
		Stock-based compensation				84			28
		Changes in assets and liabilities:
			Receivables			1,871			(4,511	)
			Inventories			19,476			(17,885	)
			Prepaids and other assets			407			(466	)
			Accounts payable			458			904
			Accrued representative commissions			(324	)		44
			Accrued compensation			(1,029	)		6
			Income taxes			484			(716	)
			Other current liabilities			1,569			36
				Net cash provided by operating activities		16,791			4,280
Cash flows from investing activities:
	Business acquisition					(1,034	)		—
	Acquisition of property and equipment					(2,839	)		(4,769	)
	Other					—			396
				Net cash used by investing activities		(3,873	)		(4,373	)
Cash flows from financing activities:
	Payments on notes payable					(2,500	)		(10,500	)
	Repurchase and retirement of common stock					(488	)		—
	Proceeds from exercise of stock options and warrants					1,394			9,514
				Net cash used by financing activities		(1,594	)		(986	)
Effect of exchange rate changes on cash						(10	)		45
Net change in cash and cash equivalents						11,314			(1,034	)
Cash and cash equivalents at beginning of period						9,734			3,595
Cash and cash equivalents at end of period					$	21,048			2,561
Supplemental disclosure of cash flow information:
	Interest paid				$	15			1,294
	Income taxes (received) paid, net				$	(910	)		3,258

See accompanying notes to unaudited condensed consolidated financial statements

Page 5

SBS Technologies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Thousands
(Unaudited)

		Nine months ended
		March 31,
		2002			2001
Summary of assets acquired and liabilities assumed through acquisition:
	Inventories		681			—
	Prepaids and other assets		17			—
	Property and equipment		472			—
	Deferred income taxes		224			—
	Identifiable intangible assets		215			—
	Accrued expenses		(149	)		—
	Deferred revenue		(426	)		—

See accompanying notes to unaudited condensed consolidated financial statements

Page 6

SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2002
(Unaudited)

1)	Summary of Significant Accounting Policies
	The accounting policies as set forth in SBS Technologies, Inc.’s (“SBS”) Annual Report on Form 10-K for the year ended June 30, 2001 have been adhered to in preparing the accompanying interim condensed consolidated financial statements. These statements are unaudited but include all adjustments, consisting of normal recurring adjustments, that SBS considers necessary for a fair presentation of the financial position, results of operations, and cash flows for such interim periods. Results for such interim periods are not necessarily indicative of results for a full year.
2)	Receivables, net
	Receivables, net consist of the following:

	March 31,			June 30,
Thousands	2002			2001
Accounts receivable		26,396			28,267
Less allowance for doubtful accounts		(1,205	)		(980	)
		25,191			27,287

3)	Inventories
	Inventories consist of the following:

	March 31,		June 30,
Thousands	2002		2001
Raw materials		11,139		22,743
Work in process		5,586		6,873
Finished goods		5,354		9,892
Inventory consigned to others		—		1,244
		22,079		40,752

4)

Intangible Assets

On December 26, 2001, the SBS Board of Directors approved SBS’ plan to exit its legacy PCI Chassis product line. This product line was associated with SBS’ acquisition of SBS Technologies, Inc. Industrial Computers (formerly Micro Alliance) in November, 1997. In conjunction with the acquisition, SBS recorded approximately $4.5 million of goodwill, of which $2.7 million was unamortized at December 26, 2001. Based on SBS’ decision to exit the PCI Chassis product line, the remaining unamortized goodwill was determined to be impaired and was written off in the quarter ended December 31, 2001, as the fair value of projected future cash flows was zero.

Page 7

SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2002
(Unaudited)

5)	Business Acquisitions
	On March 4, 2002, SBS completed the acquisition of certain assets and assumed certain liabilities of Essential Communications, a division of publicly held Intrusion Inc., for approximately $1.0 million. Founded in 1992, Essential develops and delivers early stage InfiniBand® products. SBS plans to utilize Essential’s InfiniBand product expertise and industry relationships to build on its current InfiniBand efforts in the enterprise server and storage markets. As required under the purchase method of accounting, Essential’s results of operations have been combined with SBS’ since the date of acquisition. The purchase price has been allocated to the underlying assets acquired and liabilities assumed based on their estimated fair values. In conjunction with the purchase price allocation, SBS recorded approximately $215,000 of identifiable intangibles which will be amortized over a two year period. Proforma results of operations are not presented as Essential’s results of operations in fiscal 2002 and 2001 were not considered material to SBS’ consolidated results of operations.
6)	Earnings Per Share
	Net income (loss) per common share is based on weighted average shares outstanding. Net income (loss) per common share – assuming dilution includes the dilutive effects of potential common shares outstanding during the period. A reconciliation of the numerator and denominator of the per share and per share – assuming dilution calculations follow:

	Nine months ended					Three months ended
Thousands except per share amounts	March 31,					March 31,
	2002			2001		2002			2001
Net Income (Loss) Per Common Share
Net income (loss)	$	(11,124	)		13,648	$	(386	)		4,373
Weighted-average common shares outstanding used in earnings per share computations		14,545			13,776		14,584			14,071
Net income (loss) per common share	$	(0.76	)		0.99	$	(0.03	)		0.31
Net Income (Loss) Per Common Share – Assuming Dilution
Net income (loss)	$	(11,124	)		13,648	$	(386	)		4,373
Weighted-average common shares outstanding used in earnings per share computations		14,545			15,170		14,584			15,340
Net income (loss) per common share – assuming dilution	$	(0.76	)		0.90	$	(0.03	)		0.29
Shares Used in per Share Computations
Average outstanding common shares		14,545			13,776		14,584			14,071
Incremental shares from assumed conversions – potential common shares		—			1,394		—			1,269
Shares used in net income (loss) per common share – assuming dilution computations		14,545			15,170		14,584			15,340

Page 8

SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2002
(Unaudited)

	Due to the reported net loss for the nine and three months ended March 31, 2002, 281,304 and 240,348 potential common shares, respectively, were not included in the computation of net loss per common share - assuming dilution because the effect would be anti-dilutive. For the nine and three months ended March 31, 2001, options to purchase 259,629 and 749,697 shares of common stock, respectively, were outstanding but were not included in the computation of net income per common share - assuming dilution because the options’ exercise prices were greater than the average market price of the common shares.
7)	Comprehensive Income (Loss)
	Comprehensive loss for the nine and three months ended March 31, 2002 was ($10.7) million and ($0.7) million, respectively. Comprehensive income for the nine and three months ended March 31, 2001 was $12.2 million and $3.1 million, respectively. The difference between comprehensive income (loss) and net income (loss) was related to foreign currency translation adjustments.
8)	Segment Financial Data
	In July 2001, SBS’ segment structure was redefined in conjunction with management’s realignment of operations and market development efforts. SBS operates through three operating segments: the Communications Group, the Commercial Group, and the Government Group. The Communications Group consists of SBS Technologies, Inc., Communications Products and SDL Communications Inc. The Commercial Group consists of SBS Technologies, Inc., Connectivity Products and SBS Technologies, Inc., Modular I/O. The Government Group consists of SBS’ avionics and telemetry division, SBS Technologies, Inc., Embedded Computers, and SBS’ German operations. These segments are based primarily on the markets and customers that are served and have managers who report directly to the chief operating decision-maker. SBS Technologies, Inc., Industrial Computers (“Industrial Computers”) focuses on SBS’ system sales, a portion of which are included in each Group’s sales, a result of SBS’ decision in the quarter ended December 31, 2001 to report its systems business by end market, in order to better address customer focus. For the quarter ended September 30, 2001, SBS’ systems business was reported as a separate segment. Reportable segments for all periods presented have been restated to conform to the current segment reporting structure.
	SBS measures its segments’ results of operations based on income before income taxes and before allocation of corporate overhead expenses other than sales and marketing costs, amortization and impairment of goodwill and intangibles from acquisitions, corporate interest income and expense, and acquired in-process research and development charges associated with purchase business combinations. Beginning July 1, 2001, for consistency with prior periods, corporate sales and marketing costs have been allocated among segments. These allocations were pro-rata based on sales for each SBS subsidiary receiving benefit. Industrial Computer’s operating assets and operating costs have also been allocated in a similar manner, including the write-down of certain inventory associated with the decision to exit the legacy PCI chassis product line. The accounting policies used to measure segment results of operations are the same as those referred to in Note 1.

Page 9

SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2002 (Continued)
(Unaudited)

											Corporate
		Communications			Commercial			Government			and un-
Thousands		Group			Group			Group			Allocated(1)			Total
Nine-month period ended March 31,
Gross Sales	2002		23,256			29,927			38,461			—			91,644
Inter-segment sales			(184	)		(788	)		(197	)		—			(1,169	)
Sales to external customers			23,072			29,139			38,264			—			90,475
Gross Sales	2001		66,021			41,580			37,099			—			144,700
Inter-segment sales			(915	)		(1,707	)		(793	)		—			(3,415	)
Sales to external customers			65,106			39,873			36,306			—			141,285
Segment profit (loss)	2002		(6,722	)		(2,736	)		9,002			(17,625	)		(18,081	)
(Income before taxes)	2001		18,391			6,789			7,900			(11,900	)		21,180
Three-month period ended March 31,
Gross Sales	2002		8,122			9,198			12,977			—			30,297
Inter-segment sales			(76	)		(449	)		(78	)		—			(603	)
Sales to external customers			8,046			8,749			12,899			—			29,694
Gross Sales	2001		21,616			15,237			13,458			—			50,311
Inter-segment sales			(336	)		(1,076	)		(409	)		—			(1,821	)
Sales to external customers			21,280			14,161			13,049			—			48,490
Segment profit (loss)	2002		(492	)		189			3,994			(4,962	)		(1,271	)
(Income before taxes)	2001		6,139			2,049			2,976			(3,999	)		7,165
As of March 31,
Total Assets	2002		16,331			18,697			22,884			78,102			136,014
	2001		40,857			23,450			25,201			60,443			149,951

(1) The corporate and unallocated column includes amounts for corporate items. With regard to results of operations, corporate and unallocated includes corporate overhead expenses other than corporate sales and marketing costs, substantially all interest expense, interest income, and amortization and impairment of intangible assets from acquisitions. Corporate assets primarily include cash and cash equivalents, related party notes receivable, deferred and current income tax assets, corporate property and equipment, and intangible assets.

Page 10

SBS Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
March 31, 2002 (Continued)
(Unaudited)

9)	Related Party Transactions
	Effective March 9, 2001, Grahame E. Rance was appointed to the positions of President and Chief Executive Officer of SBS and member of the Board of Directors. Mr. Rance succeeded Christopher J. Amenson, who remained as Chairman of the Board of Directors of SBS until November 8, 2001, at which time Mr. Rance was appointed as Chairman. As part of his compensation package, Mr. Rance received a $1,893,750 interest free loan from SBS, paid in cash on April 4, 2001. Forgiveness of the loan was to occur ratably over six annual anniversaries of Mr. Rance’s employment with SBS. At March 31, 2002, the balance on the loan was $1,596,742. Additionally, Mr. Rance received a $570,000 interest free loan from SBS that was repaid upon the sale of his former home during the quarter ended December 31, 2001.
	On April 26, 2002, at its regularly schedule Board meeting, Mr. Christopher J. Amenson was elected Chairman of the Board of Directors and Chief Executive Officer and Mr. David H. Greig was elected President and Chief Operating Officer. Former Chairman and Chief Executive Officer, Grahame E. Rance, resigned to pursue other opportunities. As part of the Separation Agreement between Mr. Rance and SBS, the unamortized portion of the loan to Mr. Rance was forgiven, Mr. Rance will receive 8 months base pay, he will return 30,000 restricted shares of SBS common stock, 5,000 of which are vested and 25,000 of which are unvested. This will result in a compensation charge of approximately $2.0 million in the quarter ending June 30, 2002.
10)	Restructuring Charges
	On December 26, 2001, as a result of continued unfavorable economic and market conditions, the decision to exit the legacy PCI Chassis product line, and continued manufacturing consolidation efforts, the SBS Board of Directors approved a restructuring plan. The restructuring plan allowed for a 10% workforce reduction, to be completed through March 31, 2002. During the quarters ended December 31, 2001 and March 31, 2002, 54 employees were notified that their jobs would be eliminated as part of this restructuring plan, and as a result, SBS recorded approximately $150,000 and $258,000, respectively, in restructuring costs, consisting of severance and employee related costs. As of March 31, 2002, cash payments of approximately $281,000 had been made; the remaining $127,000 will be paid through the quarter ending September 30, 2002.
	With respect to the restructuring plan approved on July 18, 2001, total cash payments of $164,000 were made through March 31, 2002; $21,000 of the original restructuring charge was reversed as a result of the decision not to terminate certain originally notified employees. There will be no further payments related to the July restructuring plan.

Page 11

SBS Technologies, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002

The following discussion and analysis should be read in conjunction with SBS’ Financial Statements and Notes thereto. Information discussed herein, other than statements of historical fact, that addresses future financial performance, activities, events or developments that SBS or management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements include expected sales, gross margin and earnings-per-share results for the quarter ending June 30, 2002, expectations of internally-generated cash flows, expectations of completion of the proposed amendment to SBS’ credit facility, and expectations of SG&A cost reductions. These statements are based upon certain assumptions and assessments made by management of SBS in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes to be appropriate. These assumptions and assessments include the volume and product mix of sales, estimates of costs and inventory and receivable levels based on preliminary information, and other items. The forward-looking statements included in this Form 10-Q are also subject to a number of risks, uncertainties, and other factors which could cause the actual results to differ materially from those contained in the forward-looking statements. These include but are not limited to economic, competitive, supply and demand, governmental and technological factors affecting SBS’ operations, markets, products, services, prices, a high degree of uncertainty and rapid change in the markets addressed by SBS’ products, customer demand for SBS’ products, subjectivity and discretion of bank management regarding the proposed amendment to SBS’ bank facility, successful completion of cost reduction plans, and other risk factors listed in the Company’s Form 10-K for the year ended June 30, 2001. These forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ materially from those expressed or implied by these forward-looking statements.

Results of Operations

Nine Months Ended March 31, 2002 Compared To Nine Months Ended March 31, 2001

Sales. For the nine-month period ended March 31, 2002, sales decreased 36.0%, or $50.8 million, from $141.3 million for the nine-month period ended March 31, 2001, to $90.5 million. Unit shipments increased within the Government Group segment, except for shipments of the Group’s system products, which declined slightly. Unit shipments declined within the Communications Group, primarily due to depressed market and economic conditions and continued delays of shipment dates by several of the Group’s telecommunications infrastructure customers. Current unfavorable economic and market conditions combined with delays from several customers resulted in a decline of unit shipments within the Commercial Group. However, Commercial Group sales were favorably impacted by approximately $700,000 of sales related to the products acquired from the Essential Communications asset acquisition completed on March 4, 2002. SBS expects fiscal 2003 sales from Essential to be between $4.0 and $5.0 million. SBS expects that consolidated sales for the quarter ending June 30, 2002 will be consistent with the quarter ended March 31, 2002. Actual results may vary materially.

Gross Profit. For the nine-month period ended March 31, 2002, gross profit decreased 51.7%, or $34.7 million, from $67.1 million for the nine-month period ended March 31, 2001, to $32.4 million. This decrease was primarily due to the decrease in sales combined with $185,000 of expenditures associated with the SBS’ manufacturing consolidation and cost reduction efforts and a $12.4 million inventory write-down recorded during the second quarter of fiscal 2002. The write-down consisted of inventory associated with programs that are not anticipated to come back to their previous forecasts, inventory associated with SBS’ decision to exit its legacy PCI chassis product line, and inventory associated with SBS products that will no longer be marketed. Additionally, the implementation of a new inventory management methodology associated with the consolidation of SBS’ manufacturing operations contributed to the inventory write-down. The consolidation efforts included a reduction in the number of material handling employees and inventory specialists, a reduction in the amount of floor space for the storage of inventory, and the adoption of a purchasing methodology based on projected component part demand to achieve manufacturing and material handling efficiencies. This new methodology calculates the maximum level of inventory to be maintained by comparing historical usage over a fixed period of time to forecasted future demand. The consolidation efforts and new inventory methodology resulted in a reduction in required inventory levels. Excluding the $12.6 million of charges noted above, for the nine-month period ended March 31, 2002, gross profit as a percentage of sales would have been 49.7%, compared to 47.5% for the nine-month period ended March 31, 2001. This favorable gross margin resulted primarily from the change in sales mix to higher margin products in the nine-month period ended March 31, 2002. Based on management’s expectations of sales projections for the fourth quarter of fiscal 2002, gross profit as a percentage of sales is expected to be slightly lower than the 49.7% experienced during the nine-month period ended March 31, 2002, excluding the $12.6 million of charges. Actual results may vary materially.

Page 12

SBS Technologies, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(continued)

Selling, General and Administrative Expense. For the nine-month period ended March 31, 2002, selling, general and administrative (SG&A) expense increased 17.9%, or $4.3 million from $24.3 million for the nine-month period ended March 31, 2001, to $28.6 million. This increase was primarily due to an increase in SBS’ sales personnel associated with the realignment of its business, the addition of a corporate business development department and a corporate business planning and process department, increases in executive compensation, relocation expenses for recently hired employees, additional information technology department personnel, depreciation and consulting expenses associated with the implementation of SBS’ customer relationship management system, and costs associated with the termination of SBS’ proposed acquisition of Interactive Circuit Systems (“ICS”) in the quarter ended December 31, 2001. This increase, combined with the decrease in sales, resulted in an increase in SG&A expense as a percentage of sales to 31.7% in the nine month period ended March 31, 2002 from 17.2% in the nine-month period ended March 31, 2001.

Research and Development Expense. For the nine-month period ended March 31, 2002, research and development (R&D) expense decreased 10.7%, or $1.6 million from $15.0 million for the nine-month period ended March 31, 2001, to $13.4 million. This decrease was primarily due to the Government Group’s reduction in material and consulting costs associated with development programs that were completed in fiscal 2001, combined with the Communications Group’s R&D expenditure reduction resulting from depressed business conditions. For the nine-month period ended March 31, 2002, R&D expense as a percentage of sales increased to 14.8% from 10.6% in the nine-month period ended March 31, 2001, primarily due to the decrease in sales volume.

Impairment of Assets. For the nine-month period ended March 31, 2002, the $2.7 million asset impairment charge represented the write-off of the remaining goodwill recorded in connection with the acquisition of Industrial Computers (formerly Micro Alliance) in November 1997. This write-off was the result of SBS’ decision in the quarter ended December 31, 2001 to exit the PCI chassis business.

Interest and Other Income (Expense), Net. For the nine-month period ended March 31, 2002, net interest and other income of $421,000 consisted primarily of a recovery from insurance of $307,000, and interest income associated with surplus cash, partially offset by the fiscal 2002 second quarter $323,000 write-down related to an other-than-temporary decline in the fair value of SBS’ investment in a software company. The investment in the software company is currently valued at approximately $177,000. For the nine-month period ended March 31, 2001, net interest expense of $653,000 consisted primarily of interest expense associated with borrowings used to fund the acquisition of SDL, partially offset by interest income associated with surplus cash.

Income Tax Expense (Benefit). For the nine-month periods ended March 31, 2002 and 2001, income tax expense (benefit) represented effective rates of (38.5)% and 35.6%, respectively. A tax benefit related to the net loss was recorded in fiscal 2002 primarily due to SBS’ ability to realize the benefit through tax loss carrybacks to prior periods. The benefit recorded for the nine-month period ended March 31, 2002 includes approximately $475,000 of amounts realized from tax planning strategies in excess of previous estimates.

Earnings Per Share. For the nine-month period ended March 31, 2002, net loss per common share was $(0.76) compared to net income per share of $0.99 for the nine-month period ended March 31, 2001. For the nine-month period ended March 31, 2002, net loss per common share-assuming dilution was $(0.76) compared to net income per common share-assuming dilution of $0.90 for the nine-month period ended March 31, 2001. Excluding the $12.4 million inventory write-down, the $2.7 million asset impairment charge, the $185,000 of expenditures associated with SBS’ manufacturing consolidation and cost reduction efforts, and the $572,000 of restructuring charges, which total approximately $15.8 million ($10.3 million after tax, excluding the amounts realized from income tax planning strategies in excess of previous estimates, recorded in the quarter ended March 31, 2002), net loss per common share and net loss per common share – assuming dilution for the nine-month period ended March 31, 2002 would have been approximately $0.06.

Page 13

SBS Technologies, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(continued)

Review of Business Segments

SBS is managed and operates through three operating segments: the Communications Group, the Commercial Group, and the Government Group.

The following is a discussion of sales to external customers and segment profit for each reportable segment. SBS does not allocate to these segments substantially all of the amortization expense associated with acquisitions, asset impairment charges, substantially all interest income earned on cash balances, interest expense associated with SBS borrowing facilities, acquired in-process research and development charges, and corporate overhead other than corporate sales and marketing costs. This measure of segment profit described above is referred to in this review as “Segment Profit.”

Communications Group

For the nine-month period ended March 31, 2002, Communications Group sales to external customers decreased 64.6%, or $42.0 million, from $65.1 million for the nine-month period ended March 31, 2001 to $23.1 million. This decrease was primarily due to depressed market and economic conditions and continued delays of shipment dates by several of the Group’s telecommunications infrastructure customers. SBS expects that the Group’s sales in the quarter ending June 30, 2002 will be significantly lower than sales in the quarter ended March 31, 2002, primarily due to continued depressed market conditions. Actual results may vary materially.

For the nine-month period ended March 31, 2002, Communications Group Segment Loss was ($6.7) million, compared to Segment Profit of $18.4 million for the nine-month period ended March 31, 2001. This decrease was primarily due to the decrease in sales, restructuring charges and a $7.6 million inventory write-down. The inventory write-down was associated with programs that are not anticipated to come back to their previous forecasts and with SBS’ decision to exit its legacy PCI chassis product line. This was partially offset by a reduction of SG&A expense, primarily due to lower sales and marketing costs attributable to SBS’ pro-rata allocation of certain corporate SG&A expenses among segments, based on sales, and a reduction in R&D expenditures resulting from depressed business conditions.

Commercial Group

For the nine-month period ended March 31, 2002, Commercial Group sales to external customers decreased 26.9%, or $10.8 million from $39.9 million for the nine-month period ended March 31, 2001 to $29.1 million. Sales of the Group’s general purpose I/O products and computer connectivity and expansion unit products decreased 33.5%, primarily as a result of unfavorable economic and market conditions and several customer delays of shipments. Sales of the Group’s system products were consistent with the nine-month period ended March 31, 2001. The Group’s results were favorably impacted by approximately $700,000 in sales of product acquired in connection with the asset acquisition of Essential Communications. SBS expects fiscal 2003 sales from Essential to be between $4.0 and $5.0 million. SBS expects that the Group’s sales in the quarter ending June 30, 2002 will be higher than sales in the quarter ended March 31, 2002, primarily due to an increase in sales to semiconductor manufacturers. Actual results may vary materially.

For the nine-month period ended March 31, 2002, Commercial Group Segment Loss was ($2.7) million, compared to Segment Profit of $6.8 million for the nine-month period ended March 31, 2001. This decrease was primarily due to the decrease in sales, $185,000 of expenditures associated with SBS’ manufacturing consolidation and cost reduction efforts, restructuring charges, additional R&D expense due to the Essential Communications asset acquisition and a $3.8 million inventory write-down. The inventory write-down consisted of inventory associated with SBS’ decision to exit its legacy PCI chassis product line and inventory associated with products that will no longer be marketed. Additionally, the implementation of the new inventory management methodology associated with the consolidation of manufacturing operations contributed to the inventory write-down. The impact of the decrease in sales was partially offset by higher margins in the quarter ended March 31, 2002, as the Group began to realize benefits from its manufacturing consolidation efforts.

Page 14

SBS Technologies, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(continued)

Government Group

For the nine-month period ended March 31, 2002, Government Group sales to external customers increased 5.4%, or $2.0 million, from $36.3 million for the nine-month period ended March 31, 2001 to $38.3 million. Sales of the Group’s avionics and telemetry products increased 9.1%, primarily due to the release of the conduction-cooled PMC design, an increase in sales of the PMC2 board, and an increase in sales of integrated avionics and telemetry products. Unit shipments of the Group’s computer processor products increased 3.1%, primarily due to the focus on high volume production business in the quarter ended September 30, 2001, partially offset by weak demand in the quarters ended December 31, 2001 and March 31, 2002. The increase in volume was partially offset by the negative impact of changes in exchange rates of approximately $126,000. SBS expects that Government Group sales in the quarter ending June 30, 2002 will be slightly higher than the quarter ended March 31, 2002. Actual results may vary materially.

For the nine-month period ended March 31, 2002, Government Group Segment Profit increased 13.9%, or $1.1 million from $7.9 million for the nine-month period ended March 31, 2001 to $9.0 million. This increase was primarily due to the gross profit contribution from the increase in sales, favorable gross margins in the quarter ended March 31, 2002 as the Group shipped several high margin orders, and the reduction in R&D material and consulting costs associated with avionics and telemetry development programs that were completed during fiscal 2001. This increase was partially offset by a $1.0 million inventory write-down, restructuring charges, and an increase in SG&A expense. The majority of the inventory write-down was based on the implementation of the new inventory management methodology associated with the consolidation of SBS’ manufacturing operations. The increase in SG&A expense was primarily due to an increase in sales and marketing costs due to SBS’ pro-rata allocation of certain corporate SG&A expenses among segments, based on sales.

Three Months Ended March 31, 2002 Compared To Three Months Ended March 31, 2001

Sales. For the three-month period ended March 31, 2002, sales decreased 38.8%, or $18.8 million, from $48.5 million for the three-month period ended March 31, 2001, to $29.7 million. Unit shipments increased within the Government Group’s avionics and telemetry product line but declined in the computer processor product line due to weak demand. Unit shipments declined within the Communications Group and the Commercial Group due to continued depressed market and economic conditions and customer delays of shipment dates. However, Commercial Group sales were favorably impacted by approximately $700,000 of sales related to the products acquired from the Essential Communications asset acquisition completed on March 4, 2002. SBS expects fiscal 2003 sales from Essential to be between $4.0 and $5.0 million. SBS expects that consolidated sales in the quarter ending June 30, 2002 will be consistent with the quarter ended March 31, 2002. Actual results may vary materially.

Gross Profit. For the three-month period ended March 31, 2002, gross profit decreased 32.7%, or $7.4 million, from $22.6 million for the three-month period ended March 31, 2001, to $15.2 million. Gross profit as a percentage of sales increased to 51.3% from 46.7% in the three-month period ended March 31, 2001, primarily due to the decline in Communications and Commercial Group product sales, which historically had lower margins than Government Group sales. Additionally, the Government Group shipped several orders with higher than normal profit margins during the three-month period ended March 31, 2002. Based on management’s expectations of sales for the fourth quarter of fiscal 2002, gross profit as a percentage of sales is expected to be slightly lower than the third quarter of fiscal 2002. Actual results may vary materially.

Page 15

SBS Technologies, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(continued)

Selling, General and Administrative Expense. For the three-month period ended March 31, 2002, selling, general and administrative (SG&A) expense increased 20.6%, or $1.7 million from $8.3 million for the three-month period ended March 31, 2001, to $10.0 million. This increase is primarily due to an increase in SBS’ sales personnel associated with the realignment of its business, the addition of a corporate business development department and a corporate business planning and process department, increases in executive compensation, additional information technology department personnel, and depreciation and consulting expenses associated with the implementation of SBS’ customer relationship management system. This increase, combined with the decrease in sales, resulted in an increase in SG&A expense as a percentage of sales to 33.6% in the three month period ended March 31, 2002 from 17.0% in the three-month period ended March 31, 2001.

Research and Development Expense. For the three-month period ended March 31, 2002, research and development (R&D) expense decreased 9.0%, or $457,000 from $5.1 million for the three-month period ended March 31, 2001, to $4.6 million. This decrease was primarily due to a decrease in R&D expenditures within the Communications Group resulting from depressed business conditions, partially offset by an increase in R&D resulting from programs associated with the asset acquisition of Essential Communications. For the three-month period ended March 31, 2002, R&D expense as a percentage of sales increased to 15.6% from 10.5% in the three-month period ended March 31, 2001, primarily due to the decrease in sales volume.

Interest and Other Income (Expense), Net. For the three-month period ended March 31, 2002, net interest and other income of $144,000 consisted primarily of interest income associated with surplus cash. For the three-month period ended March 31, 2001, net interest and other expense of ($109,000) consisted primarily of interest expense associated with borrowings used to fund the acquisition of SDL, partially offset by interest income associated with surplus cash.

Income Tax Expense (Benefit). For the three-month periods ended March 31, 2002 and 2001, income tax expense (benefit) represented effective rates of (69.6)% and 39.0% respectively. A tax benefit related to the net loss was recorded in fiscal 2002 primarily due to SBS’ ability to realize the benefit through tax loss carrybacks to prior periods. The benefit recorded in the three-month period ended March 31, 2002 includes amounts realized from tax planning strategies in excess of previous estimates of approximately $475,000.

Earnings Per Share. For the three-month period ended March 31, 2002, net loss per common share was $(0.03) compared to net income per common share of $0.31 for the three-month period ended March 31, 2001. For the three-month period ended March 31, 2002, net loss per common share-assuming dilution was $(0.03) compared to net income per common share – assuming dilution of $0.29 for the three-month period ended March 31, 2001. For the three-month period ended March 31, 2002, net loss per common share and net loss per common share - assuming dilution, includes a benefit of $0.03 per share due to amounts realized from tax planning strategies in excess of previous estimates.

Review of Business Segments

SBS is managed and operates through three operating segments: the Communications Group, the Commercial Group, and the Government Group.

The following is a discussion of sales to external customers and segment profit for each reportable segment. SBS does not allocate to these segments substantially all of the amortization expense associated with acquisitions, asset impairment charges, substantially all interest income earned on cash balances, interest expense associated with SBS borrowing facilities, acquired in-process research and development charges, and corporate overhead other than corporate sales and marketing costs, This measure of segment profit described above is referred to in this review as “Segment Profit.”

Page 16

SBS Technologies, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(continued)

Communications Group

For the three-month period ended March 31, 2002, Communications Group sales to external customers decreased 62.2%, or $13.3 million, from $21.3 million for the three-month period ended March 31, 2001 to $8.0 million. This decrease was primarily due to the continued effect of depressed market and economic conditions as well as customer delays of shipment dates. SBS expects that sales in the quarter ending June 30, 2002 will be significantly lower than sales the quarter ended March 31, 2002, primarily due to continued depressed market conditions. Actual results may vary materially.

For the three-month period ended March 31, 2002, Communications Group Segment Loss was ($492,000), compared to Segment Profit of $6.1 million for the three-month period ended March 31, 2001. This decrease was primarily due to the decrease in sales, partially offset by a reduction in R&D expenditures resulting from depressed business conditions, as well as a reduction in SG&A expense, resulting primarily from a reduction in sales and marketing costs due to SBS’ pro-rata allocation of certain corporate SG&A expenses, based on sales.

Commercial Group

For the three-month period ended March 31, 2002, Commercial Group sales to external customers decreased 38.2%, or $5.5 million from $14.2 million for the three-month period ended March 31, 2001 to $8.7 million. Sales of the Group’s general purpose I/O products and computer connectivity and expansion unit products decreased 46.3% and sales of the Group’s system products decreased 27.4%. These decreases were primarily a result of current unfavorable economic and market conditions and several customer delays of shipment dates. The Group’s results were favorably impacted by approximately $700,000 of sales associated with products acquired in connection with the Essential Communications asset acquisition. SBS expects fiscal 2003 sales from Essential to be between $4.0 and $5.0 million. SBS expects that the Group’s sales in the quarter ending June 30, 2002 will be higher than sales in quarter ended March 31, 2002, primarily due to an increase in sales to semiconductor manufacturers. Actual results may vary materially.

For the three-month period ended March 31, 2002, Commercial Group Segment Profit was $189,000, compared to Segment Profit of $2.0 million for the three-month period ended March 31, 2001. This decrease was primarily due to the decrease in sales and additional R&D expense resulting from programs associated with the Essential Communications asset acquisition, partially offset by higher margins, as the Group began to realize benefits from its manufacturing consolidation efforts.

Government Group

For the three-month period ended March 31, 2002, Government Group sales to external customers decreased 1.1%, or $150,000, from $13.0 million for the three-month period ended March 31, 2001 to $12.9 million. Sales of the Group’s avionics and telemetry products increased 7.6%, primarily due to an increase in sales of the PMC2 board and an increase in sales of integrated avionics and telemetry products. Unit shipments of the Group’s computer processor products decreased 6.8%, resulting from weak demand. Sales of computer processor products were also negatively impacted by the effect of changes in exchange rates of approximately $160,000. SBS expects Government Group sales in the quarter ending June 30, 2002 to be slightly higher with the quarter ended March 31, 2002. Actual results may vary materially.

For the three-month period ended March 31, 2002, Government Group Segment Profit increased 34.2%, or $1.0 million from $3.0 million for the three-month period ended March 31, 2001 to $4.0 million. This increase was primarily due to favorable gross margins, as the Group shipped several orders with higher than normal gross margins in the quarter ended March 31, 2002. This was partially offset by an increase in SG&A expense, primarily attributable to an increase in sales and marketing costs due to SBS’ pro-rata allocation of certain corporate SG&A expenses among segments, based on sales.

Page 17

SBS Technologies, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(continued)

Liquidity and Capital Resources

SBS uses a combination of the sale of equity securities, internally generated funds and bank borrowings to finance its acquisitions, working capital requirements, capital expenditures and operations.

Cash totaled $21.0 million at March 31, 2002, an increase of $11.3 million from June 30, 2001. This increase was the result of $16.8 million of cash flow from operations and $1.4 million of proceeds from the exercise of stock options, partially offset by $2.8 million of expenditures for capital equipment, $2.5 million of payments on SBS’ line of credit, $1.0 million expended for the Essential Communications asset purchase, and $0.5 million paid to repurchase shares of SBS’ common stock pursuant to a repurchase plan adopted by the Board of Directors on September 14, 2001 and implemented from September 20 to September 26, 2001. During the nine-month period ended March 31, 2002, accounts receivable declined, consistent with the decline in sales. Inventory declined $18.7 million, $12.4 million of which was due to an inventory write-down (see “Gross Profit” above). The remaining decline was consistent with the decline in sales volume. Liabilities were in line with the current level of business.

As of March 31, 2002, there were no borrowings drawn on SBS’ $30.0 million Credit Agreement (“Agreement”) with Bank of America, N.A. (“the Bank”). At March 31, 2002, SBS was out of compliance with the fixed charge coverage ratio covenant of the Agreement, but obtained a waiver from the Bank, commencing on March 31, 2002 and ending on the earlier of May 31, 2002 or the date of execution of an amendment to the Agreement acceptable to the Bank which modifies the fixed charge coverage ratio. SBS and the Bank are currently negotiating this amendment to the Agreement. Management expects to complete the amendment by May 31, 2002, but cannot assure that it will be completed then. Although there were no borrowings under the Agreement at March 31, 2002, the calculation of EBITDA indicates that under the senior funded debt to EBITDA ratio requirement of 1.25 to 1, SBS is currently unable to borrow under the Agreement. If SBS does not obtain an amendment, it will be precluded from borrowing under the agreement for the foreseeable future, or the Agreement may be terminated by the Bank, resulting in substantial limitations on growth by acquisition.

Management believes that SBS’ internally generated funds will be sufficient to finance its current operations and capital expenditures, excluding acquisitions, for at least the next twelve months. Because long-term cash flow cannot be predicted with certainty, it is possible that SBS could require external financing in the future, and that that financing may not be available on terms acceptable to SBS or at all.

For the nine-month period ended March 31, 2002, there was no significant impact from inflation.

Page 18

SBS Technologies, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(Continued)

New Accounting Standards

In October, 2001, the FASB issued SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144 supersedes SFAS 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” but retains many of the fundamental provisions of SFAS 121. SFAS 144 also supersedes APB Opinion No. 30, “Reporting the Results of Operations, Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” SFAS 144 retains the requirement in Opinion 30 to report separately discontinued operations and extends that reporting to a component of an entity that either has been disposed of or is classified as held for sale. SFAS 144 is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. Early application is permitted. SBS does not expect the adoption of SFAS 144 to have a material impact on its financial statements or results of operations.

In June, 2001, the FASB issued SFAS 143 “Accounting for Asset Retirement Obligations,” which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal use of the asset. SFAS 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, SBS will recognize a gain or loss on settlement. SBS is required to adopt the provisions of SFAS 143 for the quarter ending September 30, 2002. SBS does not expect the adoption of SFAS 143 to have a material impact on its financial statements or results of operations.

In July 2001, the FASB issued SFAS 141, “Business Combinations,” and SFAS 142, “Goodwill and Other Intangible Assets.” SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. SFAS 141 also specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. Any purchase price allocable to an assembled workforce may not be accounted for separately. SFAS 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead be tested for impairment at least annually in accordance with the provisions of SFAS 142. SFAS 142 will also require that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, if any, and reviewed for impairment in accordance with SFAS 144, which supersedes SFAS 121.

SBS is required to adopt the provisions of SFAS 141 on July 1, 2002. Before the adoption of SFAS 142, goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized and tested for impairment in accordance with the appropriate pre-SFAS 142 accounting requirements.

SFAS 141 will require, upon adoption of SFAS 142, that SBS evaluate its existing intangible assets and goodwill that were acquired in prior purchase business combinations, and make any necessary reclassifications in order to conform with the new criteria in Statement 141 for recognition apart from goodwill. Upon adoption of SFAS 142, SBS will be required to reassess the useful lives and residual values of all intangible assets acquired, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, SBS will be required to test the intangible asset for impairment in accordance with the provisions of SFAS 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period.

Page 19

SBS Technologies, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
March 31, 2002
(Continued)

In connection with SFAS 142’s transitional goodwill impairment evaluation, SBS will be required to perform an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. To accomplish this, SBS must identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. SBS will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit’s carrying amount. To the extent a reporting unit’s carrying amount exceeds its fair value, an indication exists that the reporting unit’s goodwill may be impaired and SBS must perform the second step of the transitional impairment test. In the second step, SBS must compare the implied fair value of the reporting unit’s goodwill, determined by allocating the reporting unit’s fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with SFAS 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in SBS’ statement of earnings.

Because of the extensive effort needed to comply with adopting SFAS 141 and SFAS 142, it is not practicable to reasonably estimate the impact of adopting these standards on SBS’ financial statements at the date of this report, including whether it will be required to recognize any transitional impairment losses as the cumulative effect of a change in accounting principle. At March 31, 2002, the amount of unamortized goodwill was approximately $23.7 million. Goodwill amortization for the nine and three months ended March 31, 2002 was $3.4 million and $1.0 million, respectively. Goodwill amortization for the nine and three months ended March 31, 2001 was $3.5 million and $1.2 million, respectively.

Business Outlook

On April 28, 2002 SBS issued a press release announcing a change in senior management and plans for significant SG&A cost reductions, with a goal of returning SBS to profitability as soon as possible. As a result of the senior management change, and in accordance with the Separation Agreement between Grahame E. Rance, former CEO and Chairman of the Board, SBS expects to record a compensation charge of approximately $2.0 million in the quarter ending June 30, 2002. The specifics of the cost reduction plan will be communicated as final decisions are reached over the next few weeks.

Consistent with SBS’ press release dated April 16, 2002, SBS management expects sales for the fourth quarter to be similar to the third quarter. Earnings per share are expected to be similar to the third quarter, excluding the $2.0 million compensation charge, costs associated with SG&A reductions, and the $0.03 per-share benefit from tax planning strategies recognized in the third quarter.

Quantitative and Qualitative Disclosures about Market Risk

SBS’ liquid investment is cash invested in either money market accounts or in overnight repurchase agreements. Due to the nature of these investments, SBS believes that the market risk related to these investments is minimal. SBS’ revolving credit facility provides for interest on borrowings based on the prime rate or LIBOR in accordance with the LIBOR margin defined in the Agreement. There are no outstanding borrowings under the facility at the date of this report.

SBS, as a result of its German operating and financing activities, is exposed to market risk from changes in foreign currency exchange rates. To date, SBS has not entered into any foreign exchange forward contracts to reduce its exposure to changes in foreign currency exchange rates.

Page 20

PART II – OTHER INFORMATION

Item 1.		Legal Proceedings – None
Item 2.		Changes in Securities – None
Item 3.		Defaults by the Company upon its Senior Securities – None
Item 4.		Submission of Matters to a Vote of Security Holders – None
Item 5.		Other Information – None
Item 6.		Exhibits and Reports on Form 8-K.
	(a)	Exhibits (exhibit reference numbers refer to Item 601 of Regulation S-K)

03.i	(1)	Restated Articles of Incorporation
03.ii	(1)	Restated and Amended Bylaws
04.a	(1)	Article VI of the Restated Articles of Incorporation, as included in the Restated Articles of Incorporation of SBS Technologies, Inc.
04.b	(1)	Articles I and II of the Restated and Amended Bylaws of SBS Technologies, Inc.
04.c	(1)	Form of certificate evidencing Common Stock
04.1	(1)	Rights Agreement dated September 15, 1997 between SBS Technologies, Inc. and First Security Bank (now Wells Fargo), National Association, as Rights Agent, which includes the form of Right Certificate as Exhibit A and the Summary of Rights to Purchase Common Stock as Exhibit B.2 and Agreement to Serve as Rights Agent; on January 21, 1998, pursuant to Section 21 of the Shareholder Rights Agreement dated September 15, 1997, SBS appointed Norwest Bank Minnesota N.A. (now Wells Fargo) as Successor Rights Agent
10.bn	(1)	Asset Purchase Agreement dated as of March 4, 2002, by and among SBS Technologies, Inc. Connectivity Products, SBS Technologies, Inc. and Intrusion Inc. with respect to certain assets of its Essential Communications Division
10.bo	(1)	Separation Agreement between Grahame Rance and SBS Technologies, Inc., effective April 26, 2002, dated April 28, 2002
10.bp	(1)	Employment agreements between David Greig and SBS Technologies, Inc., Clarence Peckham and SBS Technologies, Inc., and James E. Dixon, Jr. and SBS Technologies, Inc., effective April 26, 2002, dated May 9, 2002
10.bq	(1)	Employment agreement between Christopher J. Amenson and SBS Technologies, Inc., effective April 26, 2002, dated April 26, 2002

(b)	Reports on Form 8-K – On April 30, 2002, SBS filed Form 8-K, relating to changes in senior management, effective April 26, 2002.
(1)	See Exhibit Index

Page 21

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SBS TECHNOLOGIES, INC.
Date: May 15, 2002	/s/ Christopher J. Amenson
	Chief Executive Officer and Chairman of the Board
Date: May 15, 2002	/s/ James E. Dixon, Jr.
	Vice President, Finance and Administration; Chief Financial Officer, Secretary and Treasurer

Page 22

SBS TECHNOLOGIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX

Exhibit Number		Description	Method of Filing
03.i	(1)	Restated Articles of Incorporation	—
03.ii	(2)	Restated and Amended Bylaws	—
04.a	(1)	Article VI of the Restated Articles of Incorporation, as included in the Restated Articles of Incorporation of SBS Technologies, Inc.	—
04.b	(2)	Articles I and II of the Restated and Amended Bylaws of SBS Technologies, Inc.	—
04.c	(3)	Form of certificate evidencing Common stock	—
04.1	(4)	Rights Agreement dated September 15, 1997 between SBS Technologies, Inc. and First Security Bank (now Wells Fargo), National Association, as Rights Agent, which includes the form of Right Certificate as Exhibit A and the Summary of Rights to Purchase Common Stock as Exhibit B.2, and Agreement to Serve as Rights Agent; on January 21, 1998, pursuant to Section 21 of the Shareholder Rights Agreement dated September 15, 1997, SBS appointed Norwest Bank Minnesota N.A. (now Wells Fargo) as Successor Rights Agent	—
10.bn		Asset Purchase Agreement dated as of March 4, 2002, by and among SBS Technologies, Inc. Connectivity Products, SBS Technologies, Inc. and Intrusion Inc. with respect to certain assets of its Essential Communications Division	filed electronically herewith
10.bo		Separation Agreement between Grahame Rance and SBS Technologies, Inc. effective April 26, 2002	filed electronically herewith
10.bp		Employment Agreements between David Greig and SBS Technologies, Inc., Clarence Peckham and SBS Technologies, Inc., and James E. Dixon, Jr. and SBS Technologies, Inc., effective April 26, 2002, dated May 9, 2002	filed electronically herewith
10.bq		Employment Agreement between Christopher J. Amenson and SBS Technologies, Inc., effective April 26, 2002, dated April 26, 2002.	filed electronically herewith

(1)	Incorporated by reference to Exhibit 3.i, of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
(2)	Incorporated by reference to Exhibit 3.ii, of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000.
(3)	Incorporated by reference to Exhibit 4.c, of the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
(4)	Incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed September 23, 1997, and to Exhibit 99.1a of the Registrant’s Quarterly Report on Form 10Q for quarter ended March 31, 1998.

Page 23

EX-10.BN 3 d96685ex10-bn.htm EX-10.BN - ASSET PURCHASE AGREEMENT

EXHIBIT 10.bn

ASSET PURCHASE AGREEMENT

dated as of March 4, 2002

by and among

SBS TECHNOLOGIES, INC., CONNECTIVITY PRODUCTS,

SBS TECHNOLOGIES, INC.

and

INTRUSION INC.

with respect to certain assets of its Essential Communications Division

TABLE OF CONTENTS

               This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience only.

		Page No.
ARTICLE I SALE OF ASSETS AND CLOSING			1
	Section 1.1 Assets		1
	Section 1.2 Excluded Assets		3
	Section 1.3 Assumed Liabilities		4
	Section 1.4 Excluded Liabilities		5
	Section 1.5 Purchase Price		5
	Section 1.6 Allocation of Purchase Price		5
	Section 1.7 Closing		6
	Section 1.8 Further Assurances; Post-Closing Cooperation		6
	Section 1.9 Third-Party Consents		7
	Section 1.10 Insurance Proceeds		8
	Section 1.11 Bulk Sales Act		8
	Section 1.12 Sale and Transfer Taxes		8
	Section 1.13 Tax Returns		8
	Section 1.14 Reimbursement of Lease Obligations		9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER			9
	Section 2.1 Corporate Existence of Seller		9
	Section 2.2 Authority		9
	Section 2.3 No Conflicts		10
	Section 2.4 Governmental Approvals and Filings		10
	Section 2.5 Financial Statements and Condition		10
	Section 2.6 Taxes		11
	Section 2.7 Legal Proceedings		11
	Section 2.8 Compliance With Laws and Orders		11
	Section 2.9 Title and Condition of Tangible Assets		12
	Section 2.10 Intellectual Property		12
	Section 2.11 Contracts		12
	Section 2.12 Licenses		12
	Section 2.13 Insurance		13
	Section 2.14 Affiliate Transactions		13
	Section 2.15 Brokers		13
	Section 2.16 No Fraudulent Conveyance		13
	Section 2.17 No Bankruptcy or Insolvency Filing		13
	Section 2.18 Inventory		14
	Section 2.19 Backlog		14
	Section 2.20 Division Lease Payments		14
	Section 2.21 Title Retention Agreements		14

i

TABLE OF CONTENTS (CONTINUED)

		Page No.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT			14
	Section 3.1 Corporate Existence		14
	Section 3.2 Authority		14
	Section 3.3 No Conflict		14
	Section 3.4 Governmental Approvals and Filings		15
	Section 3.5 Legal Proceeding		15
	Section 3.6 Brokers		15
	Section 3.7 Available Funds		16
ARTICLE IV COVENANTS OF SELLER			16
	Section 4.1 Regulatory and Other Approvals		16
	Section 4.2 Investigation by Purchaser		16
	Section 4.3 No Solicitations		17
	Section 4.4 Conduct of Business		17
	Section 4.5 Certain Restrictions		17
	Section 4.6 Noncompetition		18
	Section 4.7 Payment of Division Lease Obligations		19
	Section 4.8 Consent to Employment		19
	Section 4.9 Fulfillment of Conditions		19
ARTICLE V COVENANTS OF PURCHASER AND PARENT			19
	Section 5.1 Regulatory and Other Approvals		19
	Section 5.2 Retained Employees		20
	Section 5.3 Fulfillment of Conditions		20
ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER AND PARENT			20
	Section 6.1 Representations and Warranties		20
	Section 6.2 Performance		20
	Section 6.3 Officer’s Certificate		20
	Section 6.4 Orders and Laws		20
	Section 6.5 Regulatory Consents and Approvals		21
	Section 6.6 Third Party Consents		21
	Section 6.7 Estimate of Certain Obligations		21
	Section 6.8 Deliveries		21
	Section 6.9 Certified Resolutions		21
	Section 6.10 Transfers of Business Licenses		21
	Section 6.11 Release of Liens		21
ARTICLE VII CONDITIONS TO OBLIGATIONS OF SELLER			21
	Section 7.1 Representations and Warranties		21

ii

TABLE OF CONTENTS (CONTINUED)

		Page No.
	Section 7.2 Performance		22
	Section 7.3 Officer’s Certificate		22
	Section 7.4 Orders and Laws		22
	Section 7.5 Regulatory Consents and Approvals		22
	Section 7.6 Third Party Consents		22
	Section 7.7 Deliveries		22
	Section 7.8 Certified Resolutions		22
ARTICLE VIII SURVIVAL; LIMITATION OF WARRANTIES			22
	Section 8.1 Survival of Representations, Warranties, Covenants and Agreements		22
ARTICLE IX INDEMNIFICATION			23
	Section 9.1 Indemnification		23
	Section 9.2 Method of Asserting Claims		25
	Section 9.3 Method of Calculating Losses		29
	Section 9.4 Exclusivity		29
ARTICLE X TERMINATION			29
	Section 10.1 Termination		29
	Section 10.2 Effect of Termination		29
ARTICLE XI MISCELLANEOUS			30
	Section 11.1 Notices		30
	Section 11.2 Entire Agreement		31
	Section 11.3 Expenses		31
	Section 11.4 Public Announcements		31
	Section 11.5 Confidentiality		31
	Section 11.6 Waiver		32
	Section 11.7 Amendment		33
	Section 11.8 No Third Party Beneficiary		33
	Section 11.9 No Assignment; Binding Effect		33
	Section 11.10 Headings		33
	Section 11.11 Invalid Provisions		33
	Section 11.12 Governing Law		33
	Section 11.13 Counterparts		33

iii

ANNEXES
	Annex A	Definitions and Rules of Incorporation
EXHIBITS
	Exhibit A	General Assignment and Bill of Sale
	Exhibit B	Intellectual Property Bill of Sale
	Exhibit C	Assumption Agreement
SELLER DISCLOSURE SCHEDULE
	Schedule 1.1(a)	Inventory
	Schedule 1.1(b)	Equipment
	Schedule 1.1(c)	Contracts
	Schedule 1.1(e)	Intellectual Property
	Schedule 1.1(f)	Business Licenses
	Schedule 2.3	No Conflicts
	Schedule 2.4	Governmental Approvals and Filings
	Schedule 2.5(a)	Division Financial Statements
	Schedule 2.5(b)	No Material Adverse Effect
	Schedule 2.5(c)	No Material Liabilities
	Schedule 2.7	Legal Proceedings
	Schedule 2.8	Compliance with Laws and Orders
	Schedule 2.10	Intellectual Property
	Schedule 2.11	Contracts
	Schedule 2.12	Licenses
	Schedule 2.14	Affiliate Transactions
	Schedule 7.6	Third Party Consents
PURCHASER DISCLOSURE SCHEDULES
	Schedule 3.3	No Conflicts
	Schedule 3.4	Governmental Approvals and Filings
	Schedule 5.2	Retained Employees
	Schedule 6.6	Third Party Consents

iv

ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT (this “Agreement”) dated as of March 4, 2002 is made and entered into by and between SBS Technologies, Inc., Connectivity Products, a Minnesota corporation (“Purchaser”), SBS Technologies, Inc., a New Mexico corporation (“Parent”), and Intrusion Inc., a Delaware corporation (“Seller”).

PRELIMINARY STATEMENTS

     A.     Seller, through its Essential Communications Division (the “Division”), is engaged in the business of designing, developing, manufacturing, marketing and distributing high-performance network solutions products and services (the “Business”).

     B.     Seller desires to sell, transfer and assign to Purchaser, and Purchaser desires to purchase and acquire from Seller, certain assets of Seller relating to the operation of the Business, and in connection therewith, Purchaser has agreed to assume certain specific liabilities of Seller relating to the Business, all on the terms set forth herein.

     C.     Capitalized terms used in this Agreement are defined or indexed in Annex A for the convenience of the reader and in order to eliminate the need for cross reference. Annex A is incorporated herein by this reference.

STATEMENT OF AGREEMENT

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I
SALE OF ASSETS AND CLOSING

     Section 1.1 Assets. On the terms and subject to the conditions set forth in this Agreement, Seller hereby agrees to sell, transfer, convey, assign and deliver (or cause to be sold, transferred, conveyed, assigned and delivered) to Purchaser, and Purchaser hereby agrees to purchase free and clear of all Liens other than Permitted Liens, all of Seller’s right, title and interest in, to and under the following Assets and Properties owned, held or used by Seller solely in connection with the Business, except to the extent such Assets and Properties constitute Excluded Assets, as the same shall exist on the Closing Date (collectively, the “Acquired Assets”):

     (a)  Inventory. All inventories of raw materials, work-in-process, finished goods, supplies, parts and other accessories listed in Section 1.1(a) of the Seller Disclosure Schedule (collectively, the “Inventory”);

     (b)  Equipment. All furniture, fixtures, equipment, machinery and other tangible personal property (other than Inventory) listed in Section 1.1(b) of the Seller Disclosure Schedule (collectively, the “Equipment”);

     (c)  Business Contracts. To the extent their transfer is permitted under the terms thereof, all Contracts listed in Section 1.1(c) of the Seller Disclosure Schedule (collectively, the “Business Contracts”);

     (d)  Prepaid Expenses. All prepaid expense deposits and retentions held by third parties relating solely to the conduct of the Business, other than security deposits deposited by Seller under real property leases;

     (e)  Proprietary Rights. All Intellectual Property listed in Section 1.1(e) of the Seller Disclosure Schedule, works of authorship, inventions (whether patentable or not), invention disclosures, industrial models, industrial designs, utility models and certificates of invention, designs (including, without limitation, graphics and label and artistic designs), names for the Business, trade secrets, technical information, franchises, franchise rights, suppliers, subcontractors and customer lists together with the goodwill associated therewith, pricing and cost information, business and marketing plans and proposals, product designs, product packaging, business and product names, logos, rights of publicity, improvements, processes, techniques, formulae, compositions, specifications, technology, methodologies, computer software (including all source code and object code), firmware, flow charts, annotations, any other confidential and proprietary right or information, whether or not subject to statutory registration, and all related technical, manufacturing and engineering information, specifications, technical drawings, research and development, know-how, the right to sue for past infringement, if any, in connection with any of the foregoing, all documents, disks, records, files and other media on which any of the foregoing is stored, and other proprietary rights used solely in the conduct of the Business or allocated to Purchaser pursuant to Section 1.1(f) (collectively, the “Proprietary Rights”);

     (f)  Licenses. To the extent their transfer is permitted under the terms thereof or under applicable Laws, all Licenses utilized solely in the conduct of the Business and listed in Section 1.1(f) of the Seller Disclosure Schedule (the “Business Licenses”);

     (g)  Books and Records. All Books and Records used solely in the conduct of the Business or otherwise relating solely to the Acquired Assets, other than the minute books, stock transfer books and corporate seal of Seller (the “Business Books and Records”); provided, that to the extent any of the Business Books and Records are items susceptible to duplication and are either (x) used in connection with any of Seller’s businesses other than the Business or (y) are required by Law to be retained by Seller, Seller may deliver photostatic copies or other reproductions from which, in the case of Business Books and Records referred to in clause (x), information solely concerning Seller’s businesses other than the Business has been deleted.

     (h)  All rights under express or implied warranties from suppliers or manufacturers of the Inventory or Equipment.

     (i)  All of Seller’s causes of action, judgments, and claims or demands of whatever kind or description arising out of or relating solely to the Acquired Assets.

     (j) All goodwill associated solely with the Acquired Assets.

2

     (k)  All Nondisclosure Agreements related to the Business (including without limitation those related to the proposed sale of the Business or its Assets and Properties).

     Section 1.2 Excluded Assets. Notwithstanding anything in this Agreement to the contrary, the following Assets and Properties of Seller (the “Excluded Assets”) shall be excluded from and shall not constitute Acquired Assets:

     (a)  Cash and Cash Equivalents. Cash, commercial paper, securities, investments, money market, savings and checking accounts, certificates of deposit and other bank deposits or accounts with other financial institutions, treasury bills and other cash equivalents;

     (b)  Insurance. All insurance policies relating to the operation of the Business or the Acquired Assets, or the directors, officers or employees of Seller;

     (c)  Employee Benefit Plans. All Benefit Plans and assets owned or held thereby;

     (d)  Accounts Receivable. All trade accounts receivable and all notes, bonds and other evidences of Indebtedness of and rights to receive payments arising out of sales occurring in the conduct of Seller’s business, including the Business, and any security agreements or collateral securing repayment or other satisfaction of such accounts receivable, notes, bonds or other evidences of Indebtedness, including any rights of Seller with respect to any third party collection procedures or any other Actions or Proceedings which have been commenced in connection therewith;

     (e)  Tax Refunds. All refunds or credits, if any, of Taxes due to or from Seller;

     (f)  Real Property. Any real property owned, leased or used by Seller;

     (g)  Corporate Records. The minute books, stock transfer books and corporate seal of Seller;

     (h)  Litigation Claims. Any rights (including indemnification), claims and recoveries under litigation of Seller against third parties arising out of or relating to events prior to the Closing Date;

     (i)  Excluded Obligations. The rights of Seller in, to and under all Contracts of any nature, the obligations of Seller under which expressly are not assumed by Purchaser pursuant to Section 1.3;

     (j)  Third Party Assets. Assets and Properties owned by third parties (other than Assets and Properties underlying Business Licenses, subject to the terms and conditions thereof);

     (k) VIEO Contract. Seller’s Contract dated August 7, 2000 with Power Micro Research, Inc., d/b/a VIEO, and all of Seller’s rights and benefits thereunder.

3

     (l)  Excluded Proprietary Rights. All Proprietary Rights of Seller not used solely in connection with the conduct of the Business as currently conducted by Seller, including, without limitation, any right to use or exploit the names, trademarks (including any service marks) or trade names “Intrusion”, “SecureCom,” “SecureNet PRO,” “KANE,” “ODS Networks,” “Perimeter Defense System (PDS),” “SecurityAnalyst,” “SecureEnterprise,” “SecureNet Gig,” “SecureNet Provider” or any derivation thereof or the Intrusion logo, any derivation thereof, or any goodwill associated with any of the foregoing in any jurisdiction of the world; provided that to the extent any Proprietary Rights are used by or for the benefit of Seller’s business other than the Business, the parties shall negotiate and promptly allocate such Proprietary Rights between the Business and such other businesses in a fair and equitable manner that is reasonably acceptable to the parties and (i) those allocated to the Business shall be transferred to Purchaser as Acquired Assets and Seller shall receive a perpetual, royalty—free, transferable, irrevocable, indefeasible and non-exclusive license that is reasonably satisfactory to the parties allowing Seller to continue to use such Proprietary Rights in the conduct of such other businesses, and (ii) with respect to those allocated to Seller, Purchaser shall receive a perpetual, royalty-free, transferable, irrevocable, indefeasible and non-exclusive license that is reasonably satisfactory to the parties allowing Purchaser to use such Proprietary Rights in the conduct of the Business;

     (m)  Other Seller Assets. All other Assets and Properties owned, held or used by Seller not used solely in the conduct of the Business or not specifically included in the definition of Acquired Assets, including, without limitation, Assets and Properties (including Inventory, Equipment and Proprietary Rights) used by Seller (whether in whole or in part) (i) for the design, development, manufacture, marketing or distribution of its intrusion detection and security products and services; (ii) to fulfil orders from customers placed with Seller prior to the Closing Date; and (iii) to provide maintenance and support to Seller’s maintenance customers to the extent the agreements governing the same are not assumed by Purchaser; and

     (n)  Seller’s Rights. Seller’s rights under this Agreement.

     Section 1.3 Assumed Liabilities. In connection with the sale, transfer, conveyance, assignment and delivery of the Acquired Assets pursuant to this Agreement, on the terms and subject to the conditions set forth in this Agreement, Purchaser hereby agrees to assume, pay, perform and discharge, and Parent hereby agrees to guarantee such assumption, payment, performance and discharge by Purchaser, when due those Liabilities of Seller arising out of, related to, or in connection with the ownership, operation, utilization or maintenance of the Acquired Assets (the “Assumed Liabilities”), listed below:

     (a)  Obligations under Contracts and Licenses. All Liabilities of Seller under the Business Contracts and Business Licenses arising and to be performed on or after the Closing Date, but excluding any such Liabilities arising or to be performed prior to the Closing Date;

     (b)  Returned Goods. (i) Up to an aggregate of $50,000 of Seller’s Liabilities for replacement of, or refund for, damaged, defective or returned goods incurred within 12 months of the date any such good was sold by Seller, and (ii) all of such Liabilities

4

thereafter, in each case to the extent such goods are subject to full return privileges from the supplier thereof;

     (c)  Product Liabilities. All Liabilities arising out of claims of third parties for damage or injury suffered as the result of defective products sold by Purchaser after the Closing Date, except that the Purchaser assumes no liability for claims arising out of the negligent or intentional acts of Seller or its employees or agents or for products that do not relate to the Acquired Assets;

     (d)  Taxes. All Taxes relating to the ownership, operation, utilization or maintenance of the Acquired Assets accruing from and after the Closing Date;

     (e)  Deferred Revenue Obligations. All of Seller’s deferred revenue obligations associated with the Business Contracts (the “Deferred Revenue Obligations”); and

     (f)  Trade Payables. All trade payables arising out of or related to the operation of the Business or the ownership, operation, utilization or maintenance of the Acquired Assets which accrue on or after the Closing Date, but excluding such trade payables that were otherwise due and payable or accrued by Seller prior to the Closing Date.

     Section 1.4 Excluded Liabilities. Except for the Assumed Liabilities, Purchaser shall not assume, Parent shall not guarantee, and neither Purchaser nor any Affiliate of Purchaser shall be deemed to have assumed or guaranteed, any other Liabilities of Seller or any of its Affiliates, including, without limitation, any Liabilities arising out of or related to the ownership, operation, utilization or maintenance of the Acquired Assets prior to the Closing Date and any liabilities of Seller under, associated with or arising out of the Contract specified in Section 1.2(k), any refunds due to customers who do not agree to assignment of Business Contracts and terminate such Business Contracts, and any Liabilities for employment compensation, claims, or benefits for employees or contractors of the Division before Closing other than the Accrued Vacation Obligations of the Retained Employees (collectively the “Excluded Liabilities”).

     Section 1.5 Purchase Price. The aggregate purchase price for the Acquired Assets and the covenant of Seller contained in Section 4.6 is $1,000,000 (the “Purchase Price”), payable in immediately available United States funds at the Closing in the manner provided in Section 1.7, and the assumption of the Assumed Liabilities.

     Section 1.6 Allocation of Purchase Price. As soon as practicable after the Closing Date, Purchaser or Parent shall determine the allocation of the Purchase Price and the Assumed Liabilities among the Acquired Assets and the covenants of Seller set forth in Section 4.6, which such allocation shall be reasonably acceptable to Seller. Each party hereto agrees (i) that any such allocation shall be consistent with the requirements of Section 1060 of the Code and the regulations thereunder, (ii) to prepare and file Form 8594 with its Federal income Tax Return, if any, consistent with such allocation for the tax year in which the Closing Date occurs and (iii) that no party will take a position on any income, transfer or gains Tax Return, before any Governmental or Regulatory Authority charged with the collection of any such Tax or in any Action or Proceeding, that is in any manner inconsistent with the terms of any such allocation without the consent of the other party.

5

     Section 1.7 Closing. The Closing will take place at the offices of Parent at 2400 Louisiana Boulevard NE, AFC Building 5, Albuquerque, New Mexico 87110 or at such other place as the parties mutually agree, at 10:00 A.M. local time, on the Closing Date. At the Closing, Purchaser or Parent will pay the Purchase Price by wire transfer of immediately available funds in United States dollars to the account(s) designated by Seller. Simultaneously, (a) Seller will assign and transfer to Purchaser good and valid title in and to the Acquired Assets (free and clear of all Liens, other than Permitted Liens) as evidenced by the delivery of (i) a General Assignment and Bill of Sale substantially in the form attached hereto as Exhibit A (the “Bill of Sale”), (ii) an Intellectual Property Bill of Sale substantially in the form attached hereto as Exhibit B (the “IP Bill of Sale”), together with executed forms and applications as required by the U.S. Patent and Trademark Office, to effect and document the transfer of title to the Intellectual Property described in Section 1.1(e) of the Seller Disclosure Schedule to Purchaser (except to the extent identified as “abandoned” on such schedule), and (iii) such other good and sufficient instruments of conveyance, assignment and transfer, in form and substance reasonably acceptable to Purchaser’s counsel, as shall be effective to vest in Purchaser good title to the Acquired Assets; and (b) Purchaser will assume from Seller the due payment, performance and discharge of the Assumed Liabilities, and Parent shall guarantee such payment, performance and discharge, as evidenced by delivery of (i) an Assumption Agreement substantially in the form attached hereto as Exhibit C (the “Assumption Agreement,” and together with the Bill of Sale and IP Bill of Sale, the “Operative Documents”) and (ii) such other good and sufficient instruments of assumption or guarantee, in form and substance reasonably acceptable to Seller’s counsel, as shall be effective to cause Purchaser to assume the Assumed Liabilities and Parent to guarantee such assumption. At the Closing, there shall also be delivered to Seller and Purchaser the certificates and other contracts, documents and instruments required to be delivered under Articles VI and VII.

     Section 1.8 Further Assurances; Post-Closing Cooperation.

     (a)  Subject to the terms and conditions of this Agreement, at any time and from time to time after the Closing, at Purchaser’s or Parent’s request and without further consideration, Seller shall execute and deliver to Purchaser or Parent, as applicable, such other instruments of sale, transfer, conveyance, assignment and confirmation, provide such materials and information and take such other actions as Purchaser or Parent, as applicable, may reasonably deem necessary or desirable in order more effectively to transfer, convey and assign to Purchaser, and to confirm Purchaser’s title to, all of the Acquired Assets, and, to the full extent permitted by Law, to put Purchaser in actual possession and operating control of the Acquired Assets and to assist Purchaser or Parent, as applicable, in exercising all rights with respect thereto, and otherwise to cause Seller to fulfill its obligations under this Agreement.

     (b)  Subject to the terms and conditions of this Agreement, at any time and from time to time after the Closing, at Seller’s request and without further consideration, Purchaser and Parent shall execute and deliver to Seller such other instruments of transfer, assumption, guarantee and confirmation, provide such materials and information and take such other action as Seller may reasonably deem necessary or desirable for Purchaser to assume all of the Assumed Liabilities from the Seller and Parent to guarantee such assumption and otherwise to cause Purchaser and Parent to fulfill their respective obligations under this Agreement.

6

     (c)  Following the Closing, each party will afford the other party, its counsel and its accountants, during normal business hours, reasonable access to the Books and Records relating to the Acquired Assets and the Business in its possession with respect to periods prior to the Closing Date and the right to make copies and extracts therefrom, to the extent that such access may be reasonably required by the requesting party in connection with (i) the preparation of Tax Returns; (ii) the determination or enforcement of rights and obligations under this Agreement; (iii) compliance with the requirements of any Governmental or Regulatory Authority; (iv) the determination or enforcement of the rights and obligations of any Indemnified Party; or (v) in connection with any actual or threatened Action or Proceeding. Further, each party agrees for a period extending six (6) years after the Closing Date not to destroy or otherwise dispose of any such Books and Records unless such party shall first offer in writing to surrender such Books and Records to the other party and such other party shall not agree in writing to take possession thereof during the thirty (30) day period after such offer is made.

     (d)  If, in order properly to prepare its Tax Returns, other documents or reports required to be filed with Governmental or Regulatory Authorities or its financial statements or to fulfill its obligations hereunder, it is necessary that a party be furnished with additional information, documents or records relating to the Acquired Assets not referred to in paragraph (c) above, and such information, documents or records are in the possession or control of the other party, such other party shall use commercially reasonable efforts to furnish or make available such information, documents or records (or copies thereof) at the recipient’s request, cost and expense. Any information obtained by such party in accordance with this paragraph shall be held confidential by such party in accordance with Section 11.5.

     (e)  Notwithstanding anything to the contrary contained in this Section 1.8, if the parties are in an adversarial relationship in any Action or Proceeding, the furnishing of information, documents or records in accordance paragraph (c) of this Section shall be subject to applicable rules relating to discovery.

     (f)  Purchaser and Seller shall cooperate in convincing each of the Retained Employees to accept employment with Purchaser effective as of the Closing.

     (g)  Purchaser shall deliver or pay over to Seller any monies or payments Purchaser receives from customers in payment of invoices or maintenance contracts that are reflected in the accounts receivable of Seller retained by Seller pursuant to Section 1.2(d) on the Closing Date and any other deposits or monies relating to the Excluded Assets, within 15 business days after receipt of such payments by Purchaser, and Parent hereby guarantees such payment and delivery by Purchaser. Seller shall deliver or pay over to Purchaser any other monies or payments received by Seller relating to the ownership, operation, utilization, maintenance or management of the Business or the Acquired Assets not covered by the foregoing sentence, within 15 business days after receipt of such payments by Seller.

     Section 1.9 Third-Party Consents. To the extent that any Business Contract or Business License is not assignable without the consent of another party, this Agreement shall not constitute an assignment or an attempted assignment thereof if such assignment or attempted assignment would constitute a breach thereof. Seller, Purchaser and Parent shall use commercially reasonable efforts to obtain the consent of such other party to the assignment of

7

any such Business Contract or Business License to Purchaser in all cases in which such consent is or may be required for such assignment. If any such consent shall not be obtained, Seller shall cooperate with Purchaser and Parent in any reasonable arrangement designed to provide to Purchaser the benefits intended to be assigned to Purchaser under the relevant Business Contract or Business License, including enforcement at the cost and for the account of Purchaser and Parent of any and all rights of Seller against the other party thereto arising out of the breach or cancellation thereof by such other party or otherwise. If and to the extent that such arrangement cannot be made, Purchaser shall have no obligation pursuant to Section 1.3 or otherwise with respect to any such Business Contract or Business License. The provisions of this Section 1.9 shall not affect the right of Purchaser not to consummate the transactions contemplated by this Agreement if the condition to its obligations hereunder contained in Section 6 has not been fulfilled.

     Section 1.10 Insurance Proceeds. If any of the Acquired Assets is destroyed or damaged or taken in condemnation, the insurance proceeds or condemnation award with respect thereto shall be an Acquired Asset. At the Closing, Seller shall pay or credit to Purchaser any such insurance proceeds or condemnation awards received by it on or prior to the Closing and shall assign to or assert for the benefit of Purchaser all of its rights against any insurance companies, Governmental or Regulatory Authorities and others with respect to such damage, destruction or condemnation. As and to the extent that there is available insurance under policies maintained by Seller and its Affiliates, predecessors and successors in respect of any Assumed Liabilities, except for any such insurance proceeds with respect to which the insured is directly or indirectly self-insured or has agreed to indemnify the insurer, Seller shall cause such insurance to be applied toward the payment of such Assumed Liabilities. The provisions of this Section 1.10 shall not affect the right of Purchaser and Parent not to consummate the transactions contemplated by this Agreement if the condition to its obligations hereunder contained in Section 6 has not been fulfilled or if Purchaser deems, in its sole discretion, that the destroyed or damaged Acquired Asset was significant to its benefit of the bargain under this Agreement.

     Section 1.11 Bulk Sales Act. The parties agree not to comply with the bulk transfer provisions of any jurisdiction in which any of the Acquired Assets are located.

     Section 1.12 Sale and Transfer Taxes. Except for the Assumed Liabilities or as provided in Section 1.13, neither Purchaser nor Parent shall have any liability or obligation to Seller or Seller’s creditors or to others, growing out of or arising from the sale by Seller of the Acquired Assets to Purchaser under the provisions of this Agreement or any Tax liabilities (including title transfer fees) attributable to the sale of the Acquired Assets. Any Taxes and any transfer, recording or similar fees and charges arising out of or in connection with the transfer of the Acquired Assets shall be borne by Seller. Notwithstanding the foregoing, Purchaser and Parent (if applicable) shall be liable for the payment of any sales Taxes attributable to the resale of the Acquired Assets by Purchaser or Parent and any income or franchise taxes owed by Purchaser or Parent.

     Section 1.13 Tax Returns. Seller shall properly file Tax Returns that Seller is required by any applicable Law of the United States to file with respect to Taxes relating to the Acquired Assets arising in or related to periods through the Closing and shall pay all such Taxes when due. Purchaser and Parent shall properly file Tax Returns that Purchaser and Parent are required to

8

file under any applicable Law with respect to Taxes relating to the Acquired Assets accruing in periods after the Closing Date and shall pay all such Taxes when due.

     Section 1.14 Reimbursement of Lease Obligations. In addition to the payment of the Purchase Price, and notwithstanding Section 1.2(f), within fifteen (15) days after receiving an invoice from Seller for such amounts, Purchaser will pay Seller the fixed sum of $700 per day as reimbursement for Seller’s rental payments and payments for utilities, maintenance, taxes or other expenses (other than expenses due to Seller’s default thereunder) incurred by Seller under or in connection with its real property lease relating to the real property (and its occupation thereof) commonly referred to as 1551 Mercantile Avenue N.E., Suite A, Albuquerque, New Mexico 87107 where Seller currently conducts the Business (the “Division Lease”) and maintains the Acquired Assets, for a period ending on the earlier to occur of (i) the date two (2) months following the Closing Date and (ii) the date Purchaser vacates such facility (the “Transition Lease Period”), and Parent hereby guarantees such payments by Purchaser. Subject to applicable Laws and the terms and conditions of the Division Lease, Seller shall give Purchaser and its representatives access to such facilities to operate the Business during the Transition Lease Period.

ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller hereby represents and warrants to Purchaser and Parent that the following are true at the date of this Agreement, except if and solely to the extent disclosed on the Seller Disclosure Schedule, as follows:

     Section 2.1 Corporate Existence of Seller. Seller is a corporation validly existing and in good standing under the Laws of the State of Delaware and has full corporate power and authority to conduct the Business as and to the extent now conducted and to own, use and lease the Acquired Assets.

     Section 2.2 Authority. Seller has full corporate power and authority to execute and deliver this Agreement and each of the Operative Documents to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby, including without limitation to sell and transfer the Acquired Assets pursuant to this Agreement and the Operative Documents. The execution and delivery by Seller of this Agreement and each of the Operative Documents to which it is a party, and the performance by Seller of its obligations hereunder and thereunder, have been duly and validly authorized by the Board of Directors of Seller, no other corporate action on the part of Seller or its stockholders being necessary. This Agreement has been duly and validly executed and delivered by Seller and constitutes, and upon the execution and delivery by Seller of the Operative Documents to which it is a party, such Operative Documents will constitute, legal, valid and binding obligations of Seller enforceable against Seller in accordance with their respective terms, except as may be limited by (a) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally or (b) the effect of rules of law governing the availability of equitable remedies.

9

     Section 2.3 No Conflicts. The execution and delivery by Seller of this Agreement and the Operative Documents to which it is a party do not, and the performance by Seller of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby will not:

     (a)  conflict with or result in a violation or breach of any of the terms, conditions or provisions of the certificate of incorporation or bylaws of Seller;

     (b)  subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 2.3 of the Seller Disclosure Schedule, conflict with or result in a violation or breach of any term or provision of any Law or Order applicable to Seller or any of its Assets and Properties (other than such conflicts, violations or breaches (i) which could not in the aggregate reasonably be expected to adversely affect the validity or enforceability of this Agreement or any of such Operative Documents or to have a Material Adverse Effect on the Condition of the Business or (ii) as would occur solely as a result of the legal or regulatory status of Purchaser or any of its Affiliates); or

     (c)  except as disclosed in Section 2.3 of the Seller Disclosure Schedule or as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Condition of the Business or to adversely affect the ability of Seller to consummate the transactions contemplated hereby or by any such Operative Documents or to perform its obligations hereunder or thereunder, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, (iii) require Seller to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, or (iv) result in the creation or imposition of any Lien upon, any of the Acquired Assets, any Business Contract or Business License or any Contract by which any of the Acquired Assets is bound.

     Section 2.4 Governmental Approvals and Filings. Except as disclosed in Section 2.4 of the Seller Disclosure Schedule, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority in the United States on the part of Seller is required in connection with the execution, delivery and performance of this Agreement or any of the Operative Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby, except (i) where the failure to obtain any such consent, approval or action, to make any such filing or to give any such notice could not reasonably be expected to adversely affect the ability of Seller to consummate the transactions contemplated by this Agreement or any of such Operative Documents or to perform its obligations hereunder or thereunder, or to have a Material Adverse Effect on the Condition of the Business, and (ii) those as would be required solely as a result of the identity or the legal or regulatory status of Purchaser or any of its Affiliates.

     Section 2.5 Financial Statements and Condition.

     (a)  The audited consolidated financial statements and unaudited consolidated financial statements of Seller (including any related notes or schedules thereto) included (or incorporated by reference) in any registration statement, report, schedule, definitive proxy statement or other document which Seller was required to file with the SEC since

10

January 1, 2000 (the “Seller Financial Statements”) were complete and correct in all material respects as of their respective dates, complied as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto as of the respective dates, and have been prepared in accordance with GAAP (except as may be indicated in the notes thereto or, in the case of unaudited statements included in Quarterly Reports on Form 10-Qs, as permitted by Form 10-Q of the SEC). The Seller Financial Statements fairly present in all material respects the consolidated financial condition and operating results of Seller and its subsidiaries at the dates and during the periods indicated therein (subject, in the case of unaudited statements, to normal, recurring year-end adjustments). The unaudited balance sheets and statements of income and cash flows of the Division for the immediately past two calendar years, attached as Section 2.5(a) of the Seller Disclosure Schedule (the “Division Financial Statements”), were prepared in accordance with GAAP, other than the absence of footnotes, applied on a consistent basis throughout the periods covered thereby, and present fairly, in all material respects, the financial condition of the Division as of their respective dates and the results of operations for those respective periods.

     (b)  Except for the execution and delivery of this Agreement and the transactions to take place pursuant hereto on or prior to the Closing Date, since September 30, 2001, there has not been any Material Adverse Effect on the Condition of the Business, other than those disclosed in Section 2.5(b) of the Seller Disclosure Schedule.

     (c)  Since September 30, 2001, except as disclosed in Section 2.5(c) of the Seller Disclosure Schedule or any other Section of the Seller Disclosure Schedule, Seller has not incurred any Liabilities which in the aggregate are material to the Condition of the Business, other than Liabilities incurred in the ordinary course of business.

     Section 2.6 Taxes. The Acquired Assets are not subject to any Liens for Taxes, except Liens for current Taxes not yet due and payable.

     Section 2.7 Legal Proceedings. Except as disclosed in Section 2.7 of the Seller Disclosure Schedule (with paragraph references corresponding to those set forth below):

     (a)  there are no Actions or Proceedings pending or, to the Knowledge of Seller, threatened against, relating to or affecting Seller with respect to the Business or any of the Acquired Assets which could reasonably be expected (i) to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or any of the Operative Documents or (ii) individually or in the aggregate with other such Actions or Proceedings, to have a Material Adverse Effect on the Condition of the Business; and

     (b)  there are no Orders outstanding against Seller which, individually or in the aggregate with other such Orders, could reasonably be expected to have a Material Adverse Effect on the Condition of the Business.

     Section 2.8 Compliance With Laws and Orders. To the Knowledge of Seller, except as disclosed in Section 2.8 of the Seller Disclosure Schedule, Seller is not in violation of or in default under any Law or Order applicable to the Business or the Acquired Assets the effect of

11

which, individually or in the aggregate with other such violations and defaults, could reasonably be expected to have a Material Adverse Effect on the Condition of the Business.

     Section 2.9 Title and Condition of Tangible Assets. Seller is in possession of and has good title to, or has valid leasehold interests in or valid rights under Contract to use, all the Acquired Assets free and clear of all Liens, other than Permitted Liens. To the Knowledge of Seller, all of the tangible Acquired Assets are, in all material respects, in good working order and condition, ordinary wear and tear excepted.

     Section 2.10 Intellectual Property. To the knowledge of Seller, Seller owns, or is validly licensed or otherwise has the right to use (or in the case of applications pertaining to the Intellectual Property, has applied for the right to use) any and all Proprietary Rights. To the knowledge of Seller (without any special investigation or patent search), except as disclosed in Section 2.10 of the Seller Disclosure Schedule, (i) there are no restrictions on the direct or indirect transfer of any Business Contract, or any interest therein, held by Seller in respect of such Proprietary Rights, (ii) Seller is not, nor (without regard to the foregoing “Knowledge of Seller” qualifier) has it received any written notice that it is, in default (or with the giving of notice or lapse of time or both, would be in default) in any material respect under any Contract to use such Proprietary Rights and (iii) such Proprietary Rights are not being infringed by any other Person. Seller has not received written notice that Seller is infringing any Proprietary Rights of any other Person in connection with the conduct of the Business, and, to the Knowledge of Seller, no claim is pending or has been made to such effect that has not been resolved and no basis exists for any such claim. Other than “off-the-shelf” or “shrink wrap” licenses, the software licenses listed on Schedule 2.10 of the Seller Disclosure Schedule are the only software licenses material to the operation of the Business as currently conducted by Seller.

     Section 2.11 Contracts. Each Business Contract is in full force and effect and constitutes a legal, valid and binding agreement, enforceable in accordance with its terms, of the Seller and, to the Knowledge of Seller, of each other party thereto. Except as disclosed in Section 2.11 of the Seller Disclosure Schedule, neither Seller nor, to the Knowledge of Seller, any other party to such Contract is in violation or breach of or default under any such Contract (or with notice or lapse of time or both, would be in violation or breach of or default under any such Contract).

     Section 2.12 Licenses. Section 1.1(f) of the Seller Disclosure Schedule contains a true and complete list of all of the Business Licenses, setting forth the grantor, the grantee, the function and the expiration and renewal date of each. Prior to the execution of this Agreement, Seller has made available to Purchaser true and complete copies of all such Business Licenses. Except as disclosed in Section 2.12 of the Seller Disclosure Schedule:

(i)	Seller owns or validly holds all such Business Licenses;
(ii)	each such Business License is valid, binding and in full force and effect; and

12

(iii) to the Knowledge of Seller, Seller is not in default (or with the giving of notice or lapse of time or both, would be in default) under any such Business License.

     Section 2.13 Insurance. Seller has policies of insurance and bonds insuring the Acquired Assets against the risks involved in the conduct of the Business and the ownership of the Acquired Assets which, to the Knowledge of Seller, are of the types and in the amounts customarily carried by Persons similar in size to Seller conducting the Business or owning assets similar to the Acquired Assets. There is no material claim pending under any such policies or bonds relating to the Business or the Acquired Assets as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. Each such insurance policy is valid and binding and in full force and effect, no premiums due thereunder have not been paid and Seller has not received any written notice of cancellation or termination in respect of any such policy and is not in default thereunder in any material respect; provided, that nothing in this Section 2.13 shall require Seller to maintain any insurance with respect to the Business or the Acquired Assets after the Closing.

     Section 2.14 Affiliate Transactions. Except as disclosed in Section 2.14 of the Seller Disclosure Schedule, no officer, director, Affiliate or Associate of Seller or any Associate of any such officer, director or Affiliate provides or causes to be provided any assets, services or facilities used in connection with the Business which are individually or in the aggregate material to the Condition of the Business. Except as disclosed in Section 2.14 of the Seller Disclosure Schedule, each of the transactions listed in Section 2.14 of the Seller Disclosure Schedule is engaged in on an arm’s-length basis.

     Section 2.15 Brokers. All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by Seller directly with Purchaser without the intervention of any Person on behalf of Seller in such manner as to give rise to any valid claim by any Person against Purchaser for a finder’s fee, brokerage commission or similar payment.

     Section 2.16 No Fraudulent Conveyance. The making by Seller of the transfers and the incurring by Seller of the obligations contemplated by this Agreement (i) are not being made or incurred with the intent to hinder, delay or defraud any creditor of Seller, (ii) are not being made or incurred without receiving from Purchaser a reasonably equivalent value in exchange for the sale of the Acquired Assets, (iii) are not being made or incurred while Seller is engaged in or about to engage in a business or transaction for which its remaining assets are unreasonably small in relation to the business or transaction, (iv) are not being made or incurred while Seller intends to incur, or believes that it may incur, debts beyond its ability to pay as they become due, (v) will not result in the debts of Seller becoming greater than all of its respective assets at fair valuation, and (vi) will not result in Seller becoming unable to pay its respective debts as they become due.

     Section 2.17 No Bankruptcy or Insolvency Filing. Seller has not filed or brought, and does not contemplate bringing or filing, any petition or action seeking relief from creditors, or its own reorganization, dissolution, bankruptcy or insolvency, and no other person or entity has filed, or to the Knowledge of Seller, threatened to file or bring any such petition or action against Seller.

13

     Section 2.18 Inventory. The Inventory as carried on the Division’s Financial Statements (net of the reserves for obsolescence) is current and in good and merchantable condition.

     Section 2.19 Backlog. At Closing, the Business will have a backlog of orders of not less than $100,000 and, during the immediately preceding two months, no orders have been accelerated or shipped except as required by the applicable purchase order.

     Section 2.20 Division Lease Payments. Seller is current in its payment of rent and all other obligations due or payable under the Division Lease.

     Section 2.21 Title Retention Agreements. To the Knowledge of Seller, Seller is not in default under any retention of title agreements with suppliers of the Division.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND PARENT

     Purchaser and Parent, jointly and severally, hereby represents and warrants to Seller that the following are true at the date of this Agreement, except if and solely to the extent disclosed on the Purchaser Disclosure Schedule, as follows:

     Section 3.1 Corporate Existence. Purchaser is a corporation validly existing and in good standing under the State of Minnesota and has full corporate power and authority and to conduct its business as and to the extent now conducted and to own, use and lease its Assets and Properties. Parent is a corporation validly existing and in good standing under the State of New Mexico and has full corporate power and authority and to conduct its business as and to the extent now conducted and to own, use and lease its Assets and Properties.

     Section 3.2 Authority. Each of Purchaser and Parent has full corporate power and authority to enter into this Agreement and each of the Operative Documents to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby, including, without limitation, to purchase the Acquired Assets and assume or guarantee, as applicable, the Assumed Liabilities pursuant to this Agreement and the Operative Documents. The execution and delivery by Purchaser and Parent of this Agreement and each of the Operative Documents to which each is a party and the performance by Purchaser and Parent of their respective obligations hereunder and thereunder have been duly and validly authorized by their respective Board of Directors, no other corporate action on the part of Purchaser, Parent or their respective stockholders being necessary. This Agreement has been duly and validly executed and delivered by Purchaser and Parent and constitutes, and upon execution and delivery of the Operative Documents to which each is a party, such Operative Documents will constitute, legal, valid and binding obligations of Purchaser and Parent enforceable against Purchaser and Parent in accordance with their respective terms, except as may be limited by (a) applicable bankruptcy, insolvency, reorganization or other laws of general application relating to or affecting the enforcement of creditors rights generally or (b) the effect of rules of law governing the availability of equitable remedies.

     Section 3.3 No Conflict. The execution and delivery by Purchaser and Parent of this Agreement and each of the Operative Documents to which each is a party do not, the

14

performance by Purchaser and Parent of their respective obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby will not:

     (a)  conflict with or result in a violation or breach of any of the terms, conditions or provisions of their respective certificate of incorporation or bylaws;

     (b)  subject to obtaining the consents, approvals and actions, making the filings and giving the notices disclosed in Section 3.3 to the Purchaser Disclosure Schedule, conflict with or result in a violation or breach of any term or provision of any Law or Order applicable to Purchaser or Parent or any of their respective Assets and Properties (other than such conflicts, violations or breaches which could not in the aggregate reasonably be expected to adversely affect the validity or enforceability of this Agreement or any of such Operative Documents); or

     (c)  except as disclosed in Section 3.3 to the Purchaser Disclosure Schedule, or as could not, individually or in the aggregate, reasonably be expected to adversely affect the ability of Purchaser or Parent to consummate the transactions contemplated hereby or by any of such Operative Documents or to perform their respective obligations hereunder or thereunder, (i) conflict with or result in a violation or breach of, (ii) constitute (with or without notice or lapse of time or both) a default under, or (iii) require Purchaser or Parent to obtain any consent, approval or action of, make any filing with or give any notice to any Person as a result or under the terms of, any Contract or License to which Purchaser is a party or by which any of its Assets and Properties is bound.

     Section 3.4 Governmental Approvals and Filings Except as disclosed in Section 3.4 of the Purchaser Disclosure Schedule, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority on the part of Purchaser or Parent is required in connection with the execution, delivery and performance of this Agreement or any of the Operative Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby, except where the failure to obtain any such consent, approval or action, to make any such filing or to give any such notice could not reasonably be expected to adversely affect the ability of Purchaser or Parent to consummate the transactions contemplated by this Agreement or any of such Operative Documents or to perform its obligations hereunder or thereunder.

     Section 3.5 Legal Proceeding. There are no Actions or Proceedings pending or, to the knowledge of Purchaser or Parent, threatened against, relating to or affecting Purchaser or Parent or any of their respective Assets and Properties which could reasonably be expected to result in the issuance of an Order restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or any of the Operative Documents.

     Section 3.6 Brokers. All negotiations relative to this Agreement and the transactions contemplated hereby have been carried out by Purchaser and Parent directly with Seller without the intervention of any Person on behalf of Purchaser or Parent in such manner as to give rise to any valid claim by any Person against Seller for a finder’s fee, brokerage commission or similar payment.

15

     Section 3.7 Available Funds. Purchaser and/or Parent has sufficient cash and/or credit facilities (and has provided Seller with evidence thereof), to pay the Purchase Price and to make all other necessary payments of fees and expenses in connection with the transactions contemplated by this Agreement and the Operative Documents.

ARTICLE IV
COVENANTS OF SELLER

     Seller covenants and agrees with Purchaser and Parent that, at all times from and after the date hereof until the Closing and in the case of Section 4.6 for the period specified therein, Seller will comply with all covenants and provisions of this Article IV, except to the extent Purchaser or Parent may otherwise consent in writing.

     Section 4.1 Regulatory and Other Approvals. Seller will (a) take all commercially reasonable steps necessary or desirable, and proceed diligently and in good faith and use all commercially reasonable efforts, as promptly as practicable to obtain all consents, approvals or actions of, to make all filings with and to give all notices to Governmental or Regulatory Authorities or any other Person required of Seller to consummate the transactions contemplated hereby, including without limitation those described in Sections 2.3 and 2.4 of the Seller Disclosure Schedule, (b) provide such other information and communications to such Governmental or Regulatory Authorities or other Persons as such Governmental or Regulatory Authorities or other Persons may reasonably request in connection therewith and (c) provide reasonable cooperation to Purchaser and Parent in obtaining all consents, approvals or actions of, making all filings with and giving all notices to Governmental or Regulatory Authorities or other Persons required of Purchaser or Parent to consummate the transactions contemplated hereby. Seller will provide prompt notification to Purchaser and Parent when any such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise Purchaser of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated by this Agreement.

     Section 4.2 Investigation by Purchaser. Seller will (a) provide Purchaser, Parent and their respective officers, employees, counsel, accountants, financial advisors, consultants and other representatives with full access, upon reasonable prior notice and during normal business hours, to the officers and employees of Seller who have any responsibility for the conduct of the Business, to Seller’s accountants and to the Acquired Assets, but only to the extent that such access does not unreasonably interfere with the Business or any other business conducted by Seller and (b) furnish Purchaser, Parent and such other Persons with all such information and data (including without limitation copies of the Business Contracts, Business Licenses and other Business Books and Records) concerning the Business, the Acquired Assets and the Assumed Liabilities as Purchaser, Parent or any of such other Persons reasonably may request in connection with such investigation, except to the extent that furnishing any such information or data would violate any Law, Order, Contract or License applicable to Seller or by which any of its Assets and Properties is bound (in which case Seller will use commercially reasonable efforts to obtain permission for disclosure to Purchaser or Parent, as applicable).

16

     Section 4.3 No Solicitations. Subject to the duties imposed by applicable Law, Seller will not take, nor will it permit any Affiliate of Seller (or authorize or permit any investment banker, financial advisor, attorney, accountant or other Person retained by or acting for or on behalf of Seller or any such Affiliate) to take, directly or indirectly, any action to solicit, encourage, receive, negotiate, assist or otherwise facilitate (including by furnishing confidential information with respect to the Business or permitting access to the Acquired Assets or Business Books and Records) any offer or inquiry from any Person concerning the direct or indirect acquisition of the Acquired Assets other than (i) Purchaser or its Affiliates or (ii) any other Person who has proposed any Business Combination to which Seller or any Affiliate of Seller is a party and which indirectly involves the Acquired Assets, provided that the Person making the proposal expressly recognizes the rights of Purchaser hereunder in a written instrument reasonably satisfactory to Purchaser.

     Section 4.4 Conduct of Business. Seller will operate the Business only in the ordinary course consistent with past practice. Without limiting the generality of the foregoing, Seller will use commercially reasonable efforts, to the extent the officers of Seller believe such action to be in Seller’s best interest or the best interest of the Business, to (a) maintain the Acquired Assets in their current condition, ordinary wear and tear excepted and (b) maintain their relationships with key suppliers, customers, distributors, licensors, licensees and other Persons in connection with the Business. Notwithstanding the foregoing, Seller may inform its suppliers, customers, distributors, licensors, licensees and other Persons that it is no longer actively engaged in the Business.

     Section 4.5 Certain Restrictions. Seller will refrain from:

     (a)  other than transfers (including, acquisitions and dispositions of Inventory and Equipment and nonexclusive licenses of Proprietary Rights included in Inventory and Equipment) on commercially reasonable terms in the ordinary course of business, acquiring or disposing of, or incurring any Lien (other than a Permitted Lien) on, any Acquired Assets;

     (b)  entering into, amending, modifying, terminating (partially or completely), granting any waiver under or giving any consent with respect to any Business Contract or any Business License;

     (c)  engaging with any Person in any Business Combination which directly involves the Acquired Assets, unless such Person agrees in a written instrument to adopt and comply with the terms and conditions of this Agreement as though such Person was an original signatory hereto;

     (d)  engaging in any transaction individually or in the aggregate with other such transactions material to the Condition of the Business with any officer, director, Affiliate or Associate of Seller, or any Associate of any such officer, director or Affiliate, outside the ordinary course of business other than on an arm’s-length basis;

     (e)  except as contemplated by Section 4.8, hiring or terminating any Retained Employees or entering into or revising any employment agreements with Retained Employees;

17

     (f)  shipping product before the usual and ordinary time; and

     (g)  entering into any Contract to do or engage in any of the foregoing.

     Section 4.6 Noncompetition.

     (a)  Seller will, for a period of three (3) years from the Closing Date, refrain from, either alone or in conjunction with any other Person, or directly or indirectly through its present or future Affiliates:

(i)	causing or attempting to cause (A) any client, customer or supplier of the Business to terminate, discontinue or reduce its business with Purchaser or any of its Affiliates (provided that nothing in this clause (i)(A) shall expand Seller’s obligations in Section 4.4) or (B) any officer, employee or consultant of Purchaser or any of its Affiliates engaged in the Business to resign or sever a relationship with Purchaser or any of its Affiliates, other than actions taken by Seller as a result of such Person’s (1) affirmative response to a general recruitment effort carried out through public solicitation or a general solicitation or (2) own initiative;
(ii)	disclosing (unless compelled by judicial or administrative process) or using any confidential or secret information relating to the Business or any client, customer or supplier of the Business; or
(iii)	participating or engaging in, or otherwise lending assistance (financial or otherwise) to any Person participating or engaged in, a business substantially similar to or directly competing with the Business other than Seller’s (A) design, development, manufacture, marketing and distribution of products and services involving (directly or indirectly) Excluded Assets (B) ownership of five percent (5%) or less of any class of securities of a Person engaged in the Business which are registered under the Securities Act of 1933, as amended; (C) design, development, manufacture, marketing and distribution of intrusion detection and other security products and services; and (D) sales of Excluded Assets.

     (b)  The parties hereto recognize that the Laws and public policies of the various states of the United States may differ as to the validity and enforceability of covenants similar to those set forth in this Section. It is the intention of the parties that the provisions of this Section be enforced to the fullest extent permissible under the Laws and policies of each jurisdiction in which enforcement may be sought, and that the unenforceability (or the modification to conform to such Laws or policies) of any provisions of this Section shall not render unenforceable, or impair, the remainder of the provisions of this Section. Accordingly, if any provision of this Section shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall be deemed to apply only with respect to the operation of

18

such provision in the particular jurisdiction in which such determination is made and not with respect to any other provision or jurisdiction.

     (c)  The parties hereto acknowledge and agree that any remedy at Law for any breach of the provisions of this Section would be inadequate, and Seller hereby consents to the granting by any court of an injunction or other equitable relief, without the necessity of actual monetary loss being proved, in order that the breach or threatened breach of such provisions may be effectively restrained.

     Section 4.7 Payment of Division Lease Obligations. Seller shall pay when due all rental payments and other payment obligations under the Division Lease during the Transition Lease Period.

     Section 4.8 Consent to Employment. As and to the extent necessary to permit the Retained Employees and Henry Casias and each of them to accept employment with Parent, to engage in the Business and to exploit the Acquired Assets for commercial purposes, Seller, for itself and its Affiliates, hereby waives such rights as it may have under or by virtue of any employment agreement, offer letter or other arrangement with such Persons.

     Section 4.9 Fulfillment of Conditions. Seller will execute and deliver at the Closing each Operative Document that Seller is required hereby to execute and deliver as a condition to the Closing, will take all commercially reasonable steps necessary or desirable and proceed diligently and in good faith to satisfy each other condition to the obligations of Purchaser contained in this Agreement and will not take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any such condition.

ARTICLE V
COVENANTS OF PURCHASER AND PARENT

     Purchaser and Parent, jointly and severally, covenant and agree with Seller that, at all times from and after the date hereof until the Closing, Purchaser and Parent (if applicable) will comply with all covenants and provisions of this Article V, except to the extent Seller may otherwise consent in writing.

     Section 5.1 Regulatory and Other Approvals. Purchaser and Parent will (a) take all commercially reasonable steps necessary or desirable, and proceed diligently and in good faith and use all commercially reasonable efforts, as promptly as practicable to obtain all consents, approvals or actions of, to make all filings with and to give all notices to Governmental or Regulatory Authorities or any other Person required of Purchaser or Parent to consummate the transactions contemplated hereby, including without limitation those described in Sections 3.3 and 3.4 to the Purchase Disclosure Schedule, (b) provide such other information and communications to such Governmental or Regulatory Authorities or other Persons as such Governmental or Regulatory Authorities or other Persons may reasonably request in connection therewith and (c) provide reasonable cooperation to Seller in obtaining all consents, approvals or actions of, making all filings with and giving all notices to Governmental or Regulatory Authorities or other Persons required of Seller to consummate the transactions contemplated hereby. Purchaser or Parent, as applicable, will provide prompt notification to Seller when any

19

such consent, approval, action, filing or notice referred to in clause (a) above is obtained, taken, made or given, as applicable, and will advise Seller of any communications (and, unless precluded by Law, provide copies of any such communications that are in writing) with any Governmental or Regulatory Authority or other Person regarding any of the transactions contemplated by this Agreement.

     Section 5.2 Retained Employees. Effective as of the Closing Date, Parent shall offer those employees of the Seller engaged in the Business identified on Section 5.2 of the Purchaser Disclosure Schedule (collectively, the “Retained Employees”) employment with Parent on such terms, including position and salary, as Parent may deem acceptable; provided, however, that nothing in this Section 5.2 or elsewhere in this Agreement shall obligate Parent to hire any employees of Seller. Parent shall offer Retained Employees vacation time approximately equal to the Accrued Vacation Obligations.

     Section 5.3 Fulfillment of Conditions. Purchaser and Parent will execute and deliver at the Closing each Operative Document that each is hereby required to execute and deliver as a condition to the Closing, will take all commercially reasonable steps necessary or desirable and proceed diligently and in good faith to satisfy each other condition to the obligations of Seller contained in this Agreement and will not take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any such condition.

ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER AND PARENT

     The obligations of Purchaser and Parent hereunder to purchase the Acquired Assets and to assume and pay, perform and discharge the Assumed Liabilities (or guarantee such payment, performance and discharge, as applicable) are subject to the fulfillment, at or before the Closing, of each of the following conditions (all or any of which may be waived in whole or in part by Parent in its sole discretion):

     Section 6.1 Representations and Warranties. The representations and warranties made by Seller in this Agreement, taken as a whole, shall be true and correct, in all respects material to the validity and enforceability of this Agreement and to the Condition of the Business, on and as of the Closing Date as though made on and as of the Closing Date or, in the case of representations and warranties made as of a specified date earlier than the Closing Date, on and as of such earlier date.

     Section 6.2 Performance. Seller shall have performed and complied with, in all material respects, the agreements, covenants and obligations required by this Agreement to be so performed or complied with by Seller at or before the Closing.

     Section 6.3 Officer’s Certificate. Seller shall have delivered to Parent a certificate, dated the Closing Date and executed by the Chairman of the Board, the President or any Vice President of Seller confirming the satisfaction of the conditions in Sections 6.1, 6.2 and 6.6.

     Section 6.4 Orders and Laws. There shall not be in effect on the Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or any of the Operative Documents.

20

     Section 6.5 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit Purchaser, Parent and Seller to perform their obligations under this Agreement and the Operative Documents and to consummate the transactions contemplated hereby and thereby shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement and the Operative Documents shall have occurred.

     Section 6.6 Third Party Consents. The consents (or in lieu thereof waivers) listed in Section 6.6 of the Purchaser Disclosure Schedule and Section 7.6 of the Seller Disclosure Schedule shall have been obtained and shall be in full force and effect.

     Section 6.7 Estimate of Certain Obligations. Seller shall have delivered to Parent a certificate dated the Closing Date and executed by the Chief Financial Officer, Treasurer, Controller or other appropriate officer of the Corporation of Seller certifying Seller’s estimates of the Accrued Vacation Obligations and Deferred Revenue Obligations.

     Section 6.8 Deliveries. Seller shall have delivered to Parent the Operative Documents to which it is a party and any other instruments or documents required to be delivered by it on or prior to the Closing.

     Section 6.9 Certified Resolutions. Seller shall have furnished to Parent a certified copy of resolutions duly adopted by its Board of Directors, authorizing and approving the execution and delivery of this Agreement and authorizing the consummation of the transactions contemplated by it.

     Section 6.10 Transfers of Business Licenses. Subject to Section 1.9, Seller shall have executed and delivered to Parent, in forms acceptable to Parent, assignments, consents or other instruments reasonably necessary and sufficient to transfer to Purchaser all Business Licenses reasonably necessary and sufficient to permit Purchaser, in its own name and for its own benefit, to make immediate use of the Acquired Assets in the manner that each has been used in the Business.

     Section 6.11 Release of Liens. Each Person holding a Lien (other than Permitted Liens) on the Acquired Assets or any of them shall have delivered to Purchaser a release of that Lien, in form and substance acceptable to Parent.

ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLER

     The obligations of Seller hereunder to sell the Acquired Assets are subject to the fulfillment, at or before the Closing, of each of the following conditions (all or any of which may be waived in whole or in part by Seller in its sole discretion):

     Section 7.1 Representations and Warranties. The representations and warranties made by Purchaser and Parent in this Agreement, taken as a whole, shall be true and correct in all material respects on and as of the Closing Date as though made on and as of the Closing Date.

21

     Section 7.2 Performance. Purchaser and Parent shall have performed and complied with, in all material respects, the agreements, covenants and obligations required by this Agreement to be so performed or complied with by each of them at or before the Closing.

     Section 7.3 Officer’s Certificate. Each of Purchaser and Parent shall have delivered to Seller a certificate, dated the Closing Date and executed by the Chairman of the Board, the President or any Vice President or any other authorized officer of Purchaser or Parent, as applicable, confirming the satisfaction of the conditions in Sections 7.1, 7.2 and 7.6.

     Section 7.4 Orders and Laws. There shall not be in effect on the Closing Date any Order or Law restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or any of the Operative Documents.

     Section 7.5 Regulatory Consents and Approvals. All consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority necessary to permit Seller, Purchaser and Parent to perform their obligations under this Agreement and the Operative Documents and to consummate the transactions contemplated hereby and thereby shall have been duly obtained, made or given and shall be in full force and effect, and all terminations or expirations of waiting periods imposed by any Governmental or Regulatory Authority necessary for the consummation of the transactions contemplated by this Agreement and the Operative Documents shall have occurred.

     Section 7.6 Third Party Consents. The consents (or in lieu thereof waivers) listed in Section 7.6 of the Seller Disclosure Schedule and Section 6.6 of the Purchaser Disclosure Schedule shall have been obtained and shall be in full force and effect.

     Section 7.7 Deliveries. Purchaser and Parent shall have delivered to Seller the Operative Documents to which each is a party and any other instruments or documents required to be delivered by it on or prior to the Closing.

     Section 7.8 Certified Resolutions. Purchaser and Parent each shall have furnished to Seller a certified copy of resolutions duly adopted by its Board of Directors, authorizing and approving the execution and delivery of this Agreement and authorizing the consummation of the transactions contemplated by it.

ARTICLE VIII
SURVIVAL; LIMITATION OF WARRANTIES

     Section 8.1 Survival of Representations, Warranties, Covenants and Agreements. The representations, warranties, covenants and agreements of Seller, Purchaser and Parent contained in this Agreement will survive the Closing until the date eighteen months following the Closing Date, except that (a) the representations and warranties in Sections 2.2, 2.9, 2.15, 3.2 and 3.6 and the covenants and agreements contained in Sections 1.8, 11.3 and 11.5 will survive indefinitely, and (b) the representations and warranties in Sections 2.6, 2.17 and 2.18 and the covenants and agreements in Sections 1.12 and 1.13 (to the extent such covenants and agreements relate to the payment of Taxes or other expenses or the filing of Tax Returns) will survive until the expiration of all applicable statutes of limitation (including all periods of extension, whether automatic or

22

permissive); provided, however, that any representation, warranty, covenant or agreement that would otherwise terminate in accordance with this Section 11.1 will continue to survive if a Claim Notice or Indemnity Notice (as applicable) shall have been timely given in good faith based on facts reasonably expected to establish a valid claim under Article IX on or prior to such termination date, until the related claim for indemnification has been satisfied or otherwise resolved as provided in Article IX. Nothing in the foregoing sentence shall preclude either party from bringin t involving the entire transaction provided for in this Agreement. Furthermore, this Section shall not limit in any way the survival and enforceability of any covenant or agreement of the parties hereto which by its terms contemplates performance after the Closing Date, which shall survive for the respective periods set forth herein.

ARTICLE IX
INDEMNIFICATION

     Section 9.1 Indemnification.

     (a)  Subject to paragraph (c) of this Section and the other Sections of this Article IX, Seller shall indemnify the Purchaser Indemnified Parties in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to (i) any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Seller contained in this Agreement or any of the Operative Documents; (ii) the ownership, operation, utilization, maintenance or management of, or interest in the Acquired Assets prior to the Closing Date; or (iii) any Excluded Liabilities.

     (b)  Subject to paragraph (c) of this Section and the other Sections of this Article IX, Purchaser and Parent, jointly and severally, shall indemnify the Seller Indemnified Parties in respect of, and hold each of them harmless from and against, any and all Losses suffered, incurred or sustained by any of them or to which any of them becomes subject, resulting from, arising out of or relating to (i) any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of Purchaser or Parent contained in this Agreement or any of the Operative Documents; (ii) the ownership, operation, utilization, maintenance or management of, or interest in, the Acquired Assets from and after the Closing Date; or (iii) any Assumed Liabilities.

     (c)  Notwithstanding anything to the contrary contained in this Agreement, no amounts of indemnity shall be payable as a result of any claim in respect of a Loss arising under paragraph (a) or (b) of this Section 9.1:

(i) in the case of a claim by a Purchaser Indemnified Party, unless, until and then only to the extent that the Purchaser Indemnified Parties have suffered, incurred, sustained or become subject to Losses referred to in such paragraphs in excess of $50,000 in the aggregate;

23

(ii)	in the case of a claim by a Purchaser Indemnified Party, for any Losses to the extent that the Purchaser Indemnified Parties have received aggregate payments in respect of claims made under such paragraphs equal to or in excess of the Purchase Price;
(iii)	with respect to any claim for indemnification thereunder, unless the Indemnified Party has given the Indemnifying Party a Claim Notice or Indemnity Notice, as applicable, with respect to such claim, setting forth in reasonable detail the specific facts and circumstances pertaining thereto, (A) as soon as practical following the time at which the Indemnified Party discovered or reasonably should have discovered such claim (except to the extent the Indemnifying Party is not prejudiced by any delay in the delivery of such notice) and (B) in any event prior to the applicable Cut-off Date;
(iv)	with respect to any Loss resulting from a misrepresentation, breach of warranty or nonfulfillment or failure to be performed of a covenant or agreement that is either (A) disclosed in a written notice, setting forth in reasonable detail the specific facts and circumstances pertaining thereto, delivered by the Indemnifying Party to the Indemnified Party after the date of this Agreement and at or prior to the Closing or (B) otherwise actually known to the Indemnified Party prior to the Closing, if the Indemnified Party nevertheless elects to close (regardless of whether the Indemnified Party waives such misrepresentation, breach, nonfulfillment or failure in writing or otherwise);
(v)	with respect to any Loss, to the extent that the Indemnified Party had a reasonable opportunity, but failed, in good faith to mitigate the Loss, including but not limited to the failure to use commercially reasonable efforts to recover under a policy of insurance or under a contractual right of set-off or indemnity; or
(vi)	with respect to any Loss suffered, incurred or sustained by any Purchaser Indemnified Party or to which any of them becomes subject to the extent such loss arises from or was caused by actions taken or failed to be taken by Purchaser or any of its Affiliates after the Closing;

provided that the limitations contained in clauses (i) and (ii) shall not apply to Losses arising from breach of (x) the representations contained in Sections 2.2, 2.6, 2.9, 2.15, 2.16, 2.17 and 3.6 or the agreements contained in Sections 1.8(g), 1.12, 1.13, 1.14, 4.6, or 11.5 or the payment of expenses under Sections 9.2 and 11.3 and (y) Purchaser’s and Seller’s respective obligations hereunder with respect to Assumed Liabilities and Excluded Liabilities or Losses incurred as a result of fraud.

24

     Section 9.2 Method of Asserting Claims. All claims for indemnification by any Indemnified Party under Section 9.1 will be asserted and resolved as follows:

     (a)  In the event any claim or demand in respect of which an Indemnified Party might seek indemnity under Section 9.1 is asserted against or sought to be collected from such Indemnified Party by a Person other than Seller, Purchaser or any Affiliate of Seller or Purchaser (a “Third Party Claim”), the Indemnified Party shall deliver a Claim Notice with reasonable promptness to the Indemnifying Party. The Indemnifying Party will notify the Indemnified Party as soon as practicable within the Dispute Period whether the Indemnifying Party disputes its liability to the Indemnified Party under Section 9.1 and whether the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim.

(i) If the Indemnifying Party notifies the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this Section 9.2(a), then the Indemnifying Party will have the right to defend, at the sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate proceedings, which proceedings will be vigorously and diligently prosecuted by the Indemnifying Party or will be settled at the discretion of the Indemnifying Party with the consent of the Indemnified Party (which shall not be unreasonably withheld) in the event of a settlement by Seller in excess of the limitation set forth in Section 9.1(c)(ii) or as to which the Indemnified Party must make any admission or as to which any equitable or injunctive relief is agreed to. The Indemnifying Party will have full control of such defense and proceedings, including (except as provided in the immediately preceding sentence) any settlement thereof; provided, however, that the Indemnified Party may, at the sole cost and expense of the Indemnified Party, at any time prior to the Indemnifying Party’s delivery of the notice referred to in the first sentence of this Section 9.2(a)(i), file any motion, answer or other pleadings or take any other action that the Indemnified Party reasonably believes to be necessary or appropriate to protect its interests and not prejudicial to the Indemnifying Party (it being understood and agreed that, except as provided in clause (ii) below, if an Indemnified Party takes any such action that is prejudicial and causes a final adjudication that is adverse to the Indemnifying Party, the Indemnifying Party will be relieved of its obligations hereunder with respect to the portion of such Third Party Claim prejudiced by the Indemnified Party’s action); and provided further, that if requested by the Indemnifying Party, the Indemnified Party will, at the sole cost and expense of the Indemnifying Party, cooperate with the Indemnifying Party and its counsel in contesting any Third Party Claim that the Indemnifying Party elects to contest, or, if appropriate and related to the Third

25

Party Claim in question, in making any counterclaim against the Person asserting the Third Party Claim, or any cross-complaint against any Person (other than the Indemnified Party or any of its Affiliates). The Indemnified Party may participate in, but not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this Section 9.2(a)(i), and except as provided in the preceding sentence, the Indemnified Party will bear its own costs and expenses with respect to such participation. Notwithstanding the foregoing, the Indemnified Party may take over the control of the defense or settlement of a Third Party Claim at any time if it irrevocably waives its right to indemnity under Section 9.1 with respect to such Third Party Claim.

(ii)

If the Indemnifying Party fails to notify the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Third Party Claim pursuant to Section 9.2(a), or if the Indemnifying Party gives such notice but fails to prosecute vigorously and diligently or settle the Third Party Claim, or if the Indemnifying Party fails to give any notice whatsoever within the Dispute Period, then the Indemnified Party will have the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings will be vigorously and diligently prosecuted by the Indemnified Party to a final conclusion or will be settled at the discretion of the Indemnified Party with the consent of the Indemnifying Party (which consent will not be unreasonably withheld). The Indemnified Party will have full control of such defense and proceedings, including (except as provided in the immediately preceding sentence) any settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying Party will, at the sole cost and expense of the Indemnifying Party, cooperate with the Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting, or, if appropriate and related to the Third Party Claim in question, in making any counterclaim against the Person asserting the Third Party Claim, or any cross-complaint against any Person (other than the Indemnified Party or any of its Affiliates). Notwithstanding the foregoing provisions of this Section 9.2(a)(ii), if the Indemnifying Party has notified the Indemnified Party within the Dispute Period that the Indemnifying Party disputes its liability hereunder to the Indemnified Party with respect to such Third Party Claim and if such dispute is resolved in favor of the Indemnifying Party in the manner provided in clause (iii) below, the Indemnifying Party will not be required to bear the costs and expenses of the Indemnified Party’s defense pursuant to this Section 9.2(a)(ii) or of the Indemnifying Party’s participation

26

therein at the Indemnified Party’s request, and the Indemnified Party will reimburse the Indemnifying Party in full for all reasonable costs and expenses incurred by the Indemnifying Party in connection with such litigation. The Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this Section 9.2(a)(ii), and the Indemnifying Party will bear its own costs and expenses with respect to such participation.

(iii)

If the Indemnifying Party notifies the Indemnified Party that it does not dispute its liability to the Indemnified Party with respect to the Third Party Claim under Section 9.1 or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes its liability to the Indemnified Party with respect to such Third Party Claim, the Loss in the amount specified in the Claim Notice will be conclusively deemed a liability of the Indemnifying Party under Section 9.1 and the Indemnifying Party shall pay the amount of such Loss (subject to the limitations herein) to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within the Resolution Period, such dispute shall be resolved by arbitration in accordance with Section 9.2(d).

     (b)  In the event any Indemnified Party should have a claim under Section 9.1 against any Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with reasonable promptness to the Indemnifying Party. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim described in such Indemnity Notice, the Loss in the amount specified in the Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 9.1 and the Indemnifying Party shall pay the amount of such Loss (subject to the limitations herein) to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability with respect to such claim, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within the Resolution Period, such dispute shall be resolved by arbitration in accordance with Section 9.2(d).

     (c)  In the event of any Loss resulting from a misrepresentation, breach of warranty or nonfulfillment or failure to be performed of any covenant or agreement contained in this Agreement as to which an Indemnified Party would be entitled to claim indemnity under Section 9.1 but for the provisions of Section 9.1(c)(i), such Indemnified Party may nevertheless deliver a written notice to the Indemnifying Party containing the information that would be required in a Claim Notice or an Indemnity Notice, as applicable, with respect to such Loss. In the case of a Claim Notice, the provisions of Section 9.2(a)(i) will be applicable. If the

27

Indemnifying Party notifies the Indemnified Party that it does not dispute the claim described therein or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim described in such Claim Notice or Indemnity Notice, as the case may be, the Loss specified in the notice will be conclusively deemed to have been incurred by the Indemnified Party for purposes of making the determination set forth in Section 9.1(c)(i). If the Indemnifying Party has timely disputed the claim described in such Claim Notice or Indemnity Notice, as the case may be, the Indemnifying Party and the Indemnified Party will proceed in good faith to negotiate a resolution of such dispute, and if not resolved through negotiations within the Resolution Period, such dispute shall be resolved by arbitration in accordance with Section 9.2(d).

     (d)  Any dispute submitted to arbitration pursuant to this Section 9.2 shall be finally and conclusively determined by the decision of a board of arbitration consisting of three (3) members (hereinafter sometimes called the “Board of Arbitration”) selected as hereinafter provided. Each of the Indemnified Party and the Indemnifying Party shall select one (1) member and the third member shall be selected by mutual agreement of the other members, or if the other members fail to reach agreement on a third member within twenty (20) days after their selection, such third member shall thereafter be selected by the American Arbitration Association upon application made to it for such purpose by the Indemnified Party. The Board of Arbitration shall meet at the offices of the American Arbitration Association in Albuquerque, New Mexico or such other place as may be mutually agreed by the parties, and shall reach and render a decision in writing (concurred in by a majority of the members of the Board of Arbitration) with respect to the amount, if any, which the Indemnifying Party is required to pay to the Indemnified Party in respect of a claim filed by the Indemnified Party. In connection with rendering its decisions, the Board of Arbitration shall adopt and follow the commercial rules of the American Arbitration Association as then in effect and such other rules and procedures as a majority of the members of the Board of Arbitration deems necessary or appropriate. To the extent practical, decisions of the Board of Arbitration shall be rendered no more than thirty (30) days following commencement of proceedings with respect thereto. The Board of Arbitration shall cause its written decision to be delivered to the Indemnified Party and the Indemnifying Party. Any decision made by the Board of Arbitration (either prior to or after the expiration of such thirty (30) day period) shall be final, binding and conclusive on the Indemnified Party and the Indemnifying Party and entitled to be enforced to the fullest extent permitted by law and entered in any court of competent jurisdiction. Each party to any arbitration shall bear its own expense in relation thereto, including but not limited to such party’s attorneys’ fees, if any, and the expenses and fees of the Board of Arbitration shall be divided between the Indemnifying Party and the Indemnified Party in the same proportion as the portion of the related claim determined by the Board of Arbitration to be payable to the Indemnified Party bears to the portion of such claim determined not to be so payable.

     (e)  In the event of any claim for indemnity under Section 9.1(a), Purchaser agrees to give Seller and its officers, employees, counsel, accountants, financial advisors, consultants and other representatives reasonable access to the Business Books and Records and its officers and employees engaged in the Business in connection with the matters for which indemnification is sought to the extent Seller reasonably deems necessary in connection with its rights and obligations under this Article IX and Seller agrees that all such information will be Confidential Information subject to Section 11.5.

28

     Section 9.3 Method of Calculating Losses. For purposes of this Article IX,

     (a)  Losses shall not include any consequential, incidental, punitive, exemplary or special damages (including, without limitation, lost profits or loss of business) unless such Losses arise as a result of fraud or willful misconduct.

     (b)  The amount of any Losses or indemnification payable pursuant to this Article IX will be net of any insurance proceeds actually received by the Indemnified Party in connection with the circumstances giving rise to the claim. The calculation of net insurance proceeds will give effect to all costs incurred by the Indemnified Party for such insurance recovery, including all costs associated with retrospective premium adjustments, experienced-based premium adjustments, and indemnification obligations. Nothing in this Section will be construed or interpreted as a guaranty of any level or amount of insurance recovery with respect to any Loss hereunder.

     Section 9.4 Exclusivity. After the Closing, to the extent permitted by Law and except as provided in Section 4.6 and 11.5 and except for injunctive action, the indemnities set forth in this Article IX shall be the exclusive remedies of Purchaser and Seller and their respective officers, directors, employees, agents and Affiliates for any misrepresentation, breach of warranty or nonfulfillment or failure to be performed of any covenant or agreement contained in this Agreement, and the parties shall not be entitled to a rescission of this Agreement or to any further indemnification rights or claims of any nature whatsoever in respect thereof, all of which the parties hereto hereby waive.

ARTICLE X
TERMINATION

     Section 10.1 Termination. This Agreement may be terminated, and the transactions contemplated hereby may be abandoned:

     (a)  at any time before the Closing, by mutual written agreement of Seller and Parent;

     (b)  at any time before the Closing, by Seller or Parent, in the event that any Order or Law becomes effective restraining, enjoining, or otherwise prohibiting or making illegal the consummation of any of the transactions contemplated by this Agreement or any of the Operative Documents, upon notification of the non-terminating party by the terminating party; or

     (c)  at any time after March 31, 2002 by Seller or Parent upon notification of the non-terminating party by the terminating party if the Closing shall not have occurred on or before such date and such failure to consummate is not caused by a breach of this Agreement by the terminating party.

     Section 10.2 Effect of Termination. If this Agreement is validly terminated pursuant to Section 10.1, this Agreement will forthwith become null and void, and there will be no liability or obligation on the part of Seller or Purchaser (or any of their respective officers, directors, employees, agents or other representatives or Affiliates), except as provided in the next

29

succeeding sentence and except that the provisions with respect to expenses in Sections 1.14, 9.2(d) and 11.3 and confidentiality in Section 11.5 will continue to apply following any such termination. Notwithstanding any other provision in this Agreement to the contrary, upon termination of this Agreement pursuant to Section 10.1(b) or (c), Seller will remain liable to Purchaser for any breach of Section 4.9 of this Agreement by Seller existing at the time of such termination, and Purchaser will remain liable to Seller for any breach of Section 5.3 of this Agreement by Purchaser existing at the time of such termination, and Seller or Purchaser may seek such remedies, including damages and fees of attorneys, against the other with respect to any such breach as are provided in this Agreement or as are otherwise available at Law or in equity.

ARTICLE XI
MISCELLANEOUS

     Section 11.1 Notices. All notices, requests and other communications hereunder will be deemed to have been duly given only if delivered personally or by facsimile transmission or by an established express delivery company such as UPS or Federal Express or mailed (U.S. certified mail postage prepaid) to the parties at the following addresses or facsimile numbers:

If to Purchaser or Parent, to:

SBS Technologies, Inc.

2400 Louisiana Blvd. NE

AFC Building 5, Suite 600

Albuquerque, New Mexico 87110

Facsimile No.: 505-875-0404

Attn: James E. Dixon, Jr., Vice President

with a copy to:

Schuler, Messersmith, Daly & Lansdowne

P. O. Box 90640

Albuquerque, NM 87199

Facsimile No.: 505-872-0900

Attn: Alison K. Schuler, Esq

If to Seller, to:

Intrusion Inc.

1101 E. Arapaho Road

Richardson, Texas 75081

Facsimile No.: (972) 301-3892

Attn: Jay Widdig

30

with a copy to:

Brobeck, Phleger & Harrison LLP

300 Crescent Court, Suite 1400

Dallas, Texas 75201

Facsimile No.: (214) 468-3704

Attn: Thomas R. Nelson, P.C

All such notices, requests and other communications will (i) if delivered personally or by express delivery to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section, be deemed given upon written confirmation of receipt of such transmittal, and (iii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given upon actual receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice, request or other communication is to be delivered pursuant to this Section). Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other party hereto.

     Section 11.2 Entire Agreement. This Agreement supersedes all prior discussions and agreements between the parties with respect to the subject matter hereof and thereof and contains the sole and entire agreement between the parties hereto with respect to the subject matter hereof and thereof.

     Section 11.3 Expenses. Except as otherwise expressly provided in this Agreement (including without limitation as provided in Sections 1.12, 1.13, 1.14, 9.2(d) and 10.2), whether or not the transactions contemplated hereby are consummated, each party will pay its own costs and expenses incurred in connection with the negotiation, execution and closing of this Agreement and the transactions contemplated hereby.

     Section 11.4 Public Announcements. At all times at or before the Closing, no party will issue or make any reports, statements or releases to the public with respect to this Agreement or the transactions contemplated hereby without the consent of the other parties, which consent shall not be unreasonably withheld, except as may be required by Law or by obligation pursuant to any listing agreement with any national securities exchange or Nasdaq or with the National Association of Securities Dealers. If any party is unable to obtain the approval of its public report, statement or release from the other party and such report, statement or release is, in the opinion of legal counsel to such party, required by Law in order to discharge such party’s disclosure obligations, then such party may make or issue the legally required report, statement or release and promptly furnish the other party with a copy thereof. Each party will also obtain the other parties’ prior approval of any press release to be issued immediately following the Closing announcing the consummation of the transactions contemplated by this Agreement.

     Section 11.5 Confidentiality. In connection with this Agreement, each of the parties has disclosed and may continue to disclose to the other party information that relates to the disclosing party’s business operations, financial condition, customers, products, services or

31

technical knowledge. Except as otherwise specifically agreed in writing by the parties, “Confidential Information” means all information concerning a party which is furnished by such party or an Affiliate or any of its respective directors, officers, employees or agents, in oral, written, visual, magnetic, electronic or other format to the other party or any of the receiving party’s Affiliates or any of its respective directors, officers, employees or agents, and which is clearly identified by the disclosing party at the time of disclosure as confidential or proprietary information, or which would reasonably be deemed to be of a confidential or proprietary nature. The terms and conditions of this Agreement and all correspondence, information and other materials disclosed during the negotiation of this Agreement will be deemed Confidential Information. Each party’s Confidential Information will remain the property of that party except as otherwise expressly provided in this Agreement, and nothing in this Agreement will be construed as granting to or conferring on a party, any rights or license to the Confidential Information of the other party. Each of the parties shall use at least the same degree of care to safeguard and to prevent disclosing to third parties the Confidential Information of the other as it employs to avoid unauthorized disclosure or publication of its own information of a similar nature, but in no event using less than reasonable care. Each party may disclose relevant aspects of the other party’s Confidential Information to its employees, Affiliates, subcontractors and agents to the extent such disclosure is reasonably necessary for the performance of its obligations under this Agreement; provided, however, that such party shall use reasonable efforts to ensure that such employees, Affiliates, subcontractors or agents comply with these confidentiality provisions. Each party wil1 be responsible for any improper disclosure of Confidential Information by such party’s employees, Affiliates, subcontractors or agents. Neither party shall (i) make any use of the Confidential Information of the other except as contemplated by this Agreement; (ii) acquire any right in or assert any lien against the Confidential Information of the other; (iii) copy the Confidential Information of the other except as contemplated by this Agreement; or (iv) sell, assign, lease or otherwise commercially exploit the Confidential Information (or any derivative works thereof) of the other party except as contemplated by this Agreement. This Section 11.5 will not apply to any particular information that (i) was, at the time of disclosure to it, in the public domain; (ii) after disclosure to it, is published or otherwise becomes part of the public domain through no fault of the receiving party; (iii) was in the possession of the receiving party at the time of disclosure to it and was not the subject of a pre-existing confidentiality obligation; (iv) was received after disclosure to it from a third-party who had a lawful right to disclose such information to it; or (v) was independently developed by the receiving party without use of the Confidential Information of the disclosing party. In addition, a party will not be considered to have breached its obligations under this Section 11.5 for disclosing Confidential Information of the other party to the extent required to satisfy any legal requirement of a competent governmental authority. The parties agree that in the event of a breach or threatened breach of confidentiality, the disclosing party shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach or anticipated breach without the necessity of posting a bond. Any such relief shall be in addition to and not in lieu of any appropriate relief in the way of monetary damages.

     Section 11.6 Waiver. Any term or condition of this Agreement may be waived at any time by the party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party waiving such term or condition; provided that a waiver executed by Parent shall be effective against Purchaser. No waiver by any party of any term or condition of this Agreement, in any one or more

32

instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. All remedies, either under this Agreement or by Law or otherwise afforded, will be cumulative and not alternative.

     Section 11.7 Amendment. This Agreement may be amended, supplemented or modified only by a written instrument duly executed by or on behalf of each party hereto.

     Section 11.8 No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person other than any Person entitled to indemnity under Article IX.

     Section 11.9 No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other party hereto and any attempt to do so will be void, except (a) for assignments and transfers by operation of Law and (b) that Purchaser may assign any or all of its rights, interests and obligations hereunder to a wholly-owned subsidiary of itself or Parent, provided that any such subsidiary agrees in writing to be bound by all of the terms, conditions and provisions contained herein, but no such assignment referred to in clause (b) shall relieve Purchaser of its obligations hereunder. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns.

     Section 11.10 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define or limit the provisions hereof.

     Section 11.11 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance here from and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

     Section 11.12 Governing Law. This Agreement shall be governed by and construed in accordance with the Laws of the United States and the State of New Mexico applicable to a contract executed and performed in the State of New Mexico, without giving effect to the conflicts of laws principles of such State.

     Section 11.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

33

     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officer of each party as of the date first above written.

SBS TECHNOLOGIES, INC., CONNECTIVITY PRODUCTS
By:	/s/ James E. Dixon
	Name:	James E. Dixon
	Title:	Secretary

SBS TECHNOLOGIES, INC.
By:	/s/ James E. Dixon
	Name:	James E. Dixon
	Title:	CFO

INTRUSION INC.
By:	/s/ Jay R. Widdig
	Jay Widdig Vice President and Chief Financial Officer

[Signature Page to Asset Purchase Agreement]

ANNEX A
DEFINITIONS AND RULES OF INTERPRETATION

     Definitions. Unless the context otherwise requires, the terms defined in this Annex A have the meanings specified below for all purposes of this Agreement.

     (a)  "Accrued Vacation Obligations” means Seller’s accrued vacation obligations to the Retained Employees.

     (b)  "Acquired Assets” has the meaning ascribed to it in Section 1.1.

     (c)  "Actions or Proceedings” means any action, suit, proceeding, arbitration or Governmental or Regulatory Authority investigation.

     (d)  "Affiliate” means any Person that directly, or indirectly through one of more intermediaries, controls or is controlled by or is under common control with the Person specified. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by Contract or otherwise and, in any event and without limitation of the previous sentence, any Person owning ten percent (10%) or more of the voting securities of another Person shall be deemed to control that Person, including, with respect to Purchaser, Parent.

     (e)  "Agreement” has the meaning ascribed to it in the introductory paragraph of this Agreement.

     (f)  "Assets and Properties” of any Person means all assets and properties of every kind, nature, character and description (whether real, personal or mixed, whether tangible or intangible and wherever situated), including the goodwill related thereto, operated, owned or leased by such Person.

     (g)  "Associate” means, with respect to any Person, any corporation or other business organization of which such Person is an officer or partner or is the beneficial owner, directly or indirectly, of ten percent (10%) or more of any class of equity securities, any trust or estate in which such Person has a substantial beneficial interest or as to which such Person serves as a trustee or in a similar capacity and any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person.

     (h)  "Assumed Liabilities” has the meaning ascribed to it in Section 1.3.

     (i)  "Benefit Plan” means any Plan established by Seller, or any predecessor or Affiliate of Seller, existing at the Closing Date or at any time within the five (5) year period prior thereto, to which Seller contributes or has contributed on behalf of any current or former employee or director, or under which any employee, former employee or director of Seller or any beneficiary thereof is covered, is eligible for coverage or has benefit rights.

     (j) “Board of Arbitration” has the meaning ascribed to it in Section 9.2(d).

     (k)  "Books and Records” of any Person means all files, documents, instruments, papers, books and records relating to the business, operations, condition of (financial or other), results of operations and Assets and Properties of such Person, including without limitation financial statements, Tax Returns and related work papers and letters from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title policies, minute books, stock certificates and books, stock transfer ledgers, Contracts, Licenses, customer lists, computer files and programs, retrieval programs, operating data and plans and environmental studies and plans.

     (l)  "Business” has the meaning ascribed to it in Preliminary Statement A.

     (m)  "Business Books and Records” has the meaning ascribed to it in Section 1.1(g).

     (n)  "Business Combination” means with respect to any Person, any merger, consolidation or combination to which such Person is a party, any sale, dividend, split or other disposition of capital stock or other equity interests of such Person or any sale, dividend or other disposition of all or substantially all of the Assets and Properties of such Person.

     (o)  "Business Contracts” has the meaning ascribed to it in Section 1.1(c).

     (p)  "Business Day” means a day other than Saturday, Sunday or any day on which banks located in Dallas, Texas are authorized or obligated to close.

     (q)  "Business Licenses” has the meaning ascribed to it in Section 1.1(f).

     (r)  "Claim Notice” means written notification pursuant to Section 9.2(a) of a Third Party Claim as to which indemnity under Section 9.1 is sought by an Indemnified Party, enclosing a copy of all papers served, if any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party’s claim against the Indemnifying Party under Section 9.1, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such Third Party Claim.

     (s)  "Closing” means the closing of the transactions contemplated by Section 1.7.

     (t)  "Closing Date” means (a) the day on which all of the conditions set forth in Articles VI and VII have been satisfied or waived, or (b) such other date as the parties mutually agree upon in writing.

     (u)  "Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

     (v) “Condition of the Business” means the business, financial condition, results of operations and Assets and Properties (to the extent such Assets and Properties constitute Acquired Assets) of the Business.

E-2

     (w)  "Contract” means any agreement, lease, license, evidence of Indebtedness, mortgage, indenture, security agreement, purchaser order or other contract.

     (x)  "Cut-off Date” means, with respect to any representation, warranty, covenant or agreement contained in this Agreement, the date on which such representation, warranty, covenant or agreement ceases to survive as provided Section 9.1.

     (y)  "Deferred Revenue Obligations” has the meaning ascribed to it in Section 1.1(e).

     (z)  "Dispute Period” means the period ending thirty (30) days following receipt by an Indemnifying Party of either a Claim Notice or an Indemnity Notice.

     (aa)  "Division” has the meaning ascribed to it in Preliminary Statement A.

     (bb)  "Division Financial Statements” has the meaning ascribed to it in Section 2.5(a).

     (cc)  "Division Lease” has the meaning ascribed to it in Section 1.14.

     (dd)  "Equipment” has the meaning ascribed to it in Section 1.1(b).

     (ee)  "ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

     (ff)  "Excluded Assets” has the meaning ascribed to it in Section 1.2.

     (gg)  "Excluded Liabilities” has the meaning ascribed to it in Section 1.4.

     (hh)  "GAAP” means generally accepted accounting principles as adopted in the United States, consistently applied throughout the specified period and in the immediately prior comparable period.

     (ii)  "Governmental or Regulatory Authority” means any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision.

     (jj)  "Indebtedness” of any Person means all obligations of such Person (i) for borrowed money, (ii) evidenced by notes, bonds, debentures or similar instruments, (iii) for the deferred purchase price of goods or services (other than trade payables or accruals incurred in the ordinary course of business), (iv) under capital leases and (v) in the nature of guarantees of the obligations described in clauses (i) through (iv) above of any other Person.

     (kk) “Indemnified Party” means any Person claiming indemnification under any provision of Article IX, including without limitation a Person asserting a claim pursuant to Section 9.2(c).

E-3

     (ll)  "Indemnifying Party” means any Person against whom a claim for indemnification is being asserted under any provision of Article IX, including without limitation a Person against whom a claim is asserted pursuant to Section 9.2(c).

     (mm)  "Indemnity Notice” means written notification pursuant to Section 9.2(b) of a claim for indemnity under Article IX by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such claim.

     (nn)  "Intellectual Property” means all patents and patent rights, trademarks and trademark rights, together with all reissuances, continuations, continuations in part, revisions, extensions, and examinations thereof, trade names and trade name rights, service marks and service mark rights, service names and service name rights, and copyrights and copyright rights and all related renewals, all mask works and related renewals, and all pending applications for and registrations of patents, trademarks, service marks, mask works, and copyrights.

     (oo)  "Inventory” has the meaning ascribed to it in Section 1.1(a).

     (pp)  "Key Employees” means Joseph Bradley, David Gaskill and Bradley Allen.

     (qq)  "Knowledge of Seller” means (i) the actual knowledge of any officer or director of Seller, Key Employees or other individual having control over or significant operational responsibilities of the Division; or (ii) the knowledge that should have come to the attention of any of the Key Employees in the course of discharging his duties in a reasonable and prudent manner consistent with sound business practice.

     (rr)  "Laws” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or of any Governmental or Regulatory Authority.

     (ss)  "Liabilities” means all Indebtedness, obligations and other liabilities of a Person (whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due).

     (tt)  "Licenses” means all licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises and similar consents granted or issued by any Governmental or Regulatory Authority.

     (uu)  "Liens” means any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or any conditional sale Contract, title retention Contract or other Contract to give any of the foregoing.

     (vv) “Loss” means any and all damages, fines, penalties, deficiencies, fees. losses and expenses (including without limitation interest, court costs, reasonable fees of attorneys, accountants and other experts or other reasonable expenses of litigation or other proceedings or of any claim, default or assessment).

E-4

     (ww)  "Material Adverse Effect” with respect to any person means a material adverse effect on the business, financial condition or results of operations of such person and any subsidiaries of such person taken as a whole, and with respect to the Condition of the Business means a material adverse effect on the Condition of the Business, but shall not include any of the following, either alone or in combination: (i) any effect or change occurring as a result of (A) general economic or financial conditions or (B) other developments which are not unique to the Business but also affect other persons who participate or are engaged in similar lines of business; (ii) any change or effect on the Condition of the Business following the date of this Agreement resulting from a delay of, reduction in or cancellation or change in the terms of purchases from or other transactions with the Business attributable to the announcement of this Agreement or the transactions contemplated hereby; and (iii) failure of the results of operations of the Business to meet any internal or external predictions, projections, estimates or expectations.

     (xx)  "Operative Documents” has the meaning ascribed to it in Section 1.7.

     (yy)  "Order” means any writ, judgment, decree, injunction or similar order of any Governmental or Regulatory Authority (in each such case whether preliminary or final).

     (zz)  "Parent” has the meaning ascribed to it in the introductory paragraph of this Agreement.

     (aaa) “Permitted Lien” means (i) any Lien for Taxes not yet due; (ii) any statutory Lien or contractual landlord’s Lien or other Lien created by operation of Law arising in the ordinary course of business with respect to a Liability that is not yet due; and (iii) retention of title agreements with suppliers entered into in the ordinary course of business.

     (bbb) “Person” means any natural person, corporation, general partnership, limited partnership, joint venture, limited liability company proprietorship, other business organization, trust, union, association or Governmental or Regulatory Authority.

     (ccc)  "Plan” means any bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, workmen’s compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, including, but not limited to, any “employee benefit plan” within the meaning of Section 3(3) of ERISA.

     (ddd) “Proprietary Rights” has the meaning ascribed to it in Section 1.1(e).

     (eee) “Purchase Price” has the meaning ascribed to it in Section 1.5.

     (fff) “Purchaser” has the meaning ascribed to it in the introductory paragraph of this Agreement.

E-5

     (ggg) “Purchaser Disclosure Schedule” means the record delivered to Seller by Purchaser herewith and dated as of the date hereof, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein by Purchaser pursuant to this Agreement.

     (hhh) “Purchaser Indemnified Parties” means Purchaser and its officers, directors, employees, agents and Affiliates.

     (iii)  "Resolution Period” means the period ending thirty (30) days following receipt by an Indemnified Party of a written notice from an Indemnifying Party stating that it disputes all or any portion of a claim set forth in a Claim Notice or an Indemnity Notice.

     (jjj) “Retained Employees” has the meaning ascribed to it in Section 5.2.

     (kkk) “SEC” means the U.S. Securities and Exchange Commission.

     (lll) “Seller” has the meaning ascribed to it in the introductory paragraph of this Agreement.

     (mmm) “Seller Disclosure Schedule” means the record delivered to Purchaser by Seller herewith and dated as of the date hereof, containing all lists, descriptions, exceptions and other information and materials as are required to be included therein by Seller pursuant to this Agreement.

     (nnn) “Seller Financial Statements” has the meaning ascribed to it in Section 2.5(a).

     (ooo) “Seller Indemnified Parties” means Seller and its officers, directors, employees, agents and Affiliates.

     (ppp) “Tax Return” shall mean any return, statement, report or form, including, without limitation, estimated Tax Returns and reports, withholding Tax Returns and reports and information reports and returns required to be filed with respect to Taxes.

     (qqq) “Taxes” (and, with correlative meaning “Taxes” and “Taxable”) means (i) any net income, alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, environmental or windfall profit tax, custom, duty or other tax governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or any penalty, addition to tax or additional amount imposed by any Governmental or Regulatory Authority responsible for the imposition of any such tax (domestic or foreign); (ii) any liability for the payment of any amounts of the type described in clause (i) of this sentence as a result of being a member of an affiliated, consolidated, combined or unitary group for any Taxable period; and (iii) any liability for the payment of any amounts of the type described in clauses (i) or (ii) of this sentence as a result of any express or implied obligation to indemnify any other Person or as a result of being a successor in interest to any Person.

E-6

     (rrr) “Third Party Claim” has the meaning ascribed to it in Section 9.2(a).

     (sss) “Transition Lease Period” has the meaning ascribed to it in Section 1.14.

     Construction of Certain Terms and Phrases. Unless the context of this Agreement otherwise requires, (i) words of any gender include each other gender; (ii) words using the singular or plural number also include the plural or singular number, respectively; (iii) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to this entire Agreement; (iv) the terms “Article” or “Section” refer to the specified Article or Section of this Agreement; (v) the phrase “ordinary course of business” refers to the business of Seller in connection with the Business; and (vi) the term “party” refers to Seller, on the one hand, and, collectively, Purchaser and Parent, on the other hand. Whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified. All accounting terms used herein and not expressly defined herein shall have the meanings given to them under GAAP. Any representation or warranty contained herein as to the enforceability of a Contract shall be subject to the effect of any bankruptcy, insolvency, reorganization, moratorium or other similar law affecting the enforcement of creditors’ rights generally and to general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at Law).

E-7 EX-10.BO 4 d96685ex10-bo.htm EX-10.BO - SEPARATION AGREEMENT

EXHIBIT 10.bo

SEPARATION AGREEMENT

     Grahame Rance (“Rance”) and SBS Technologies, Inc. (“SBS”), enter into this Separation Agreement (“Separation Agreement”), effective April 26, 2002 (the “Effective Date”) for the purpose of completely resolving any and all issues, disputes and claims related to Rance’s employment with SBS, Rance’s resignation from SBS, the March 9, 2001 Employment Agreement between Rance and SBS (the “Employment Agreement”), all other agreements, written or oral, between Rance and SBS, and all other matters related in any way to the relationship between Rance and SBS.

     1.     Resignation. As of the Effective Date, Rance resigns all employment, offices and board of directors positions with SBS and any affiliated entities.

     2.     Payments. SBS will pay Rance a total of eight (8) months’ base pay (three hundred thirty-three thousand, three hundred thirty-four dollars [$333,334] gross, less usual deductions for taxes, FICA, etc.) (the “Separation Amount”), in eight (8) equal monthly installments. The first installment of the Separation Amount will be paid within five (5) days of the Effective Date. The remaining seven (7) installments of the Separation Amount will be paid monthly beginning one (1) month after the Effective Date. Rance authorizes SBS to withhold from the Separation Amount, in addition to usual deductions and withholdings, any and all federal and state tax withholdings required as the result of the Loan forgiveness described in paragraph 3 of this Agreement or as the result of any of the other terms of Rance’s compensation or benefits described in this Agreement.

     3.     Restricted Stock, Options and Loan Forgiveness. Rance will immediately and irrevocably return to SBS thirty thousand (30,000) shares of SBS common stock (five thousand [5,000] for which the restrictions lapsed on March 9, 2002 and twenty-five thousand [25,000] for which the restrictions still exist). Rance hereby waives and releases all rights and interest in such 30,000 shares and further agrees to immediately return the certificates evidencing such shares and to execute and deliver such stock powers and other documents as may be reasonably required by SBS to effect such conveyance. All unvested stock options, as well as vested but unexercised stock options, will terminate and be forfeited at midnight on the ninetieth (90th) day following the Effective Date. There will be no acceleration of vesting of any stock options. Except to the extent specifically addressed herein, the SBS Technologies, Inc. 2000 Long-Term Equity Incentive Plan and the SBS Technologies, Inc. 1993 Director and Officer Stock Option Plan will continue to govern any vested options held by Rance as of the Effective Date. Rance acknowledges and agrees that the one million, eight hundred ninety-three thousand, seven hundred fifty dollar ($1,893,750) loan (“Loan”) that he has previously received from SBS is hereby forgiven as of the Effective Date.

     4.     Benefits. During the seven-month period of the Separation Amount installment payments, Rance will continue to be eligible, at his election, for SBS medical (excluding long term disability), dental and eye care benefits (“Specified Benefits”) on the same basis as if he were still employed during said seven-month term. All SBS benefits other than the Specified Benefits will cease immediately on the Effective Date.

     5.     Club Membership. Rance agrees to resign immediately from any and all club memberships that SBS has provided for him and authorizes SBS to make any communications

and take any and all steps reasonably necessary to ensure that such resignations have occurred and that SBS will not be liable for future club dues, initiation fees or other fees or costs.

     6.     Release. In return for the payments and other consideration described herein, Rance, for himself, his heirs and assigns, hereby releases and waives all claims and causes of action of any and every sort against SBS and its parents, subsidiaries, affiliates, partners, limited partners, successors, shareholders, directors, officers, employees, agents, attorneys and assigns, which he has, has had or may have in the future, arising in any way from any event, act or omission which occurred at any time from the beginning of time to the Effective Date, including, but not limited to, claims and causes of action arising from or related to his employment with SBS and the termination of his employment with SBS. This release includes, but is not limited to, claims in tort, contract, under statute, in equity or otherwise, and claims for compensation, severance, bonuses, stock, stock options, restricted stock benefits, loan forgiveness, expense reimbursements of any sort, injuries, or any other sort of damages or relief whatsoever. This release also includes, but is not limited to, claims under the Americans With Disabilities Act, Age Discrimination in Employment Act, Family and Medical Leave Act, Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act, the California Fair Employment and Housing Act and any other federal, state or local act or ordinance pertaining to employment. This release also specifically includes but is not limited to all claims arising from or relating to the Employment Agreement, SBS Technologies, Inc. 2000 Long Term Equity Incentive Plan, and SBS Technologies, Inc. 1993 Director and Officer Stock Option Plan as well as any agreements regarding restricted stock and any loan agreements. The intent of Rance and SBS is that this release given by Rance to SBS will be interpreted in as broad a fashion as possible and that it is intended to be a total and complete release of all claims of any sort whatsoever against SBS.

     7.     Knowing and Voluntary Waiver. Rance hereby expressly waives and relinquishes all rights and benefits afforded him by Section 1542 of the Civil Code of the State of California, and does so understanding and acknowledging the significance of such specific waiver of Section 1542. Section 1542 of the Civil Code of the State of California states as follows:

A general release does not extend to claims, which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.

     Thus, notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release and discharge of SBS, Rance expressly acknowledges that this Separation Agreement is intended to include in its effect, without limitation, all Claims against SBS which Rance does not know of or suspect to exist in his favor at the time of execution hereof, and that this Separation Agreement contemplates the extinguishment of any such Claim or Claims.

     8.     Surviving Employment Agreement Obligations. Rance and SBS agree that the provisions of paragraphs 6A (Competition Restrictions), 6B (Confidential Information), 6C (Business Relationships), 6D (Non-Solicitation of Employees), 6E (Remedies) and 7 (Invalidity)

2

of the Employment Agreement will remain in full force and effect in accordance with their terms. All other terms of the Employment Agreement are terminated as of the Effective Date.

     9.     Agreement regarding Additional Confidential Information. In addition to Rance’s continuing obligations to SBS regarding confidentiality as set forth in paragraph 6B of the Employment Agreement and paragraph 7 of this Separation Agreement), Rance agrees not to disclose to any person or entity any Additional Confidential Information of SBS. “Additional Confidential Information” is information of tangible or intangible value that is not generally known or available to SBS competitors including, but not limited to (a) financial and accounting statements, data and forecasts; business plans and projections; operating and capital costs and performance; computer programs; price lists and pricing information; and the terms of all contracts and agreements proposed, negotiated or executed by SBS; (b) information regarding SBS customers, suppliers, manufacturers, and distributors; (c) information regarding any offer by any person or entity to acquire SBS or its assets or to merge with SBS or any offer by SBS to acquire any entity or assets or to merge with any entity; and (d) the terms of this Separation Agreement. The only exception to Rance’s obligation not to disclose Additional Confidential Information is that he may disclose the terms of this Separation Agreement to his spouse, legal advisors and tax advisors.

     10.     Non-disparagement/public announcement. Rance and SBS agree not to make negative or disparaging remarks of any sort regarding one another. SBS agrees to announce to the public that Rance resigned to pursue other business interests.

     11.     Return of Property. No later than 72 hours after the Effective Date, Rance will return to SBS all property of any sort belonging to SBS, including but not limited to keys, computers, computer passwords, equipment, originals and all copies of computer discs, files or other stored information, documents and voice, video or data recordings of any sort that are within his possession or control.

     12.     Governing law. This Separation Agreement is made under, and will be construed in accordance with, the laws of the State of California.

PLEASE READ CAREFULLY.
THIS SEPARATION AGREEMENT AND GENERAL RELEASE
INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

SBS TECHNOLOGIES, INC.			GRAHAME RANCE
By:	/s/ C.J. Amenson		/s/ G.E.R.
	Its:	CEO	Date:	4-28-02
		4-28-02

3 EX-10.BP 5 d96685ex10-bp.htm EX-10.BP - EMPLOYMENT AGREEMENTS

EXHIBIT 10.bp

EMPLOYMENT AGREEMENT

     SBS Technologies, Inc. (“Company”) and David H. Greig (“Employee”) agree, effective April 26, 2002:

1.	Employment. Company employs Employee for the period beginning on the date of this Employment Agreement as set forth below, and ending three years from its date or upon discharge or resignation of Employee in accordance with the terms of this Agreement (the “Employment Period”). During the Employment Period, Employee will serve in the position of President and Chief Operating Officer of Company, or other management position as determined by the Company. Employee will devote sufficient time and energies to the business of Company to accomplish the duties assigned, will perform to the best of Employee’s ability all duties assigned to Employee by Company and will devote Employee’s best efforts to advance the interests of Company. Employee will have the power and authority determined by Company.
2.	Compensation. For all services performed by Employee for Company during the Employment Period, Company will pay Employee the salary and benefits set forth on Appendix “A”. Employee will be entitled to participate in employee benefit programs established by Company and applicable to all full-time employees. Employee will be entitled to vacation, national holidays and paid sick leave in accordance with Company policy and Appendix A. During vacation, national holidays, and paid sick leave, Employee will receive Employee’s usual compensation.
3.	Reimbursement of Expenses. Company recognizes that Employee, in performing Employee’s duties hereunder, may be required to spend sums of money in connection with those duties for the benefit of Company. Employee may present to Company an itemized voucher listing expenses paid by Employee in the performance of Employee’s duties on behalf of Company, and on presentation of the itemized voucher, Company will reimburse Employee for all reasonable expenses itemized, including but not limited to, travel, meals, lodging, entertainment, and promotion with respect to all activities approved in advance by Company. Employee may receive advances from Company for anticipated expenses. Employee agrees that the amount by which an advance exceeds actual expenses (“Amount”) will be promptly refunded to Company upon determination by Company that it is due, that the Amount may be deducted from any payments of any nature (including without limitation salary) owed by Company to employee, and that the Amount will constitute a debt from Employee to Company, enforceable by Company in all respects as if

Employment Agreement
Page 1

	Employee had executed a promissory note or other instrument acknowledging the debt, bearing interest at a rate of 10% per year from the date repayment is due, and payable in full on demand without set-off or deduction.
4.	Sick Leave and Disability. Employee will be entitled to sick leave for the number of days determined by Company (“Sick Leave”). Employee will be considered to be disabled during any period in excess of Sick Leave during which Employee is unable to work because of illness or incapacity (“Disability Period”).Employee will be entitled to receive Employee’s full salary during Sick Leave and will be deemed to be on leave, without pay, during the Disability Period. If Employee is unable to work for a period in excess of 90 days, Employee, at the discretion of the Board of Directors of company, will be considered to have resigned. In no event will Employee be entitled to payment or other compensation for unused Sick Leave or Disability Period, unless required by law or otherwise provided in a policy or employment manual adopted by Company.
5.	Resignation and Discharge. Employee may resign or be discharged pursuant to the terms of this paragraph. If Employee (i) resigns, Employee must give 30 days’ notice to Company; (ii) is discharged for cause (as later defined), Company may discharge Employee immediately, without notice; or (iii) is discharged not for cause from his responsibilities, Company must give 30 days’ notice to Employee. If Employee is discharged not for cause, Employee will be paid severance pay equal to six month’s base pay in effect at the time of termination payable in monthly installments.
	For purposes of this paragraph, “for cause” means that during the Employment Period, Employee, unless otherwise provided by Company policy or Company employment manual, (a) is reasonably believed by Company (i) to have failed to comply with any law, regulation or policy, including without limitation securities or employment or non-discrimination or similar laws, regulations or policies, and that failure causes a significant financial, regulatory, operational or public perception detriment to Company, (ii) to abuse, as determined by the Company, alcohol or to use drugs, (other than as prescribed by Employee’s physician), or (b) refuses to submit to testing for alcohol or drugs, or (c) is reasonably believed by Company to have committed or is charged with any felony or misdemeanor involving moral turpitude, or (d) through willful neglect, gross negligence, or malfeasance causes a significant financial, regulatory, operational or public perception detriment to Company. A determination by the Board of Directors that Employee has

Employment Agreement
Page 2

	failed to perform Employee’s responsibilities to the satisfaction of the Board of Directors, without one or more of the other elements set out in this paragraph, is not “for cause”.
6.	Competition and Confidential Information Restrictions.

A.

Competition Restrictions. Employee may not during the Employment Period, and for a period of two years following the termination of the Employment Period, anywhere in the United States, directly or indirectly, own, manage, operate, invest in, control, be employed by, participate in, be a financial sponsor of, or be connected in any manner with the ownership, management, operation or control of any business that competes with a business conducted by Company at any time during the Employment Period or which Employee knows, during the Employment Period, that Company intends to conduct. Employee acknowledges that this restriction is necessary for Company’s welfare and protection in light of the responsibilities assigned to Employee and Employee’s status in Company, that Employee is fully and adequately compensated for this restriction.

B.

Confidential Information. Employee acknowledges and recognizes that Employee is, or will be, employed by Company in a confidential relationship and may receive and have access to the confidential business information, customer names, contracts and other customer data, business methods, techniques and trade secrets of Company (“Confidential Information”). Employee may develop ideas, conceptions, inventions, processes, methods, products and improvements; and Employee may receive disclosures of ideas, conceptions, inventions, processes, methods, products and improvements made by other employees of Company (“Company Inventions”). Employee may participate with Company in improving and developing Confidential Information and Company Inventions. Confidential Information and Company Inventions developed on behalf of Company are neither commonly known nor readily accessible to others and are used by Company in its business to obtain a competitive advantage over Company’s competitors who do not know or use the Confidential Information or Company Inventions. Protection of the Confidential Information and Company Inventions against unauthorized disclosure and use is of critical importance to Company in maintaining its competitive position. Employee agrees that Employee will not, at any time, during or after the Employment Period, make any independent use of, or disclose to any other

Employment Agreement
Page 3

	person or organization, except as authorized by Company in writing, any Confidential Information or Company Inventions. Upon termination of the Employment Period for any reason, Employee shall promptly deliver to Company all drawings, manuals, letters, notes, notebooks, reports, customer lists, customer data, mailing lists, and all other materials and records of any kinds, and all copies thereof, that may be in the possession of, or under the control of, Employee pertaining to Company’s business including any that contain any Confidential Information or Company Invention.
C.	Business Relationships. Employee acknowledges Company’s efforts to establish valuable business relationships with its clients, customers and suppliers. Employee recognizes that Company has invested resources in the training and the professional development of Employee, and Employee further recognizes Employee’s responsibility to the Company when Company entrusts Employee with Confidential Information. In view of Company’s efforts, Employee agrees that unless Company authorizes Employee to do so in writing, Employee will not, for a period of one year after termination of employment with Company, solicit the purchase of products or services directly competing with products and services of Company from any person, corporation, business organization or enterprise which: (i) has made any purchase of products or services from Company within the two years immediately preceding termination of former Employee’s employment (“Customer”); or (ii) has been contacted by Employee during the last 12 months of Employee’s employment for the purpose of securing the purchase of products or services from Company (“Prospective Customer”).
D.	Non-Solicitation of Employees. Employee is aware that Company has a significant investment in its employees. For a period of twelve months after termination for any reason of Employee’s employment, neither Employee nor any person or entity by whom Employee may be employed or of which Employee may be an officer, director, partner, trustee or control person, will directly or indirectly employ or solicit to employ, or otherwise retain or solicit to retain, any person employed by Company as of the date of Employee’s termination of employment or during the twelve month period thereafter, unless that person has been terminated by Company without cause (as determined in good faith by Company) before the time of the solicitation, employment or retention.

Employment Agreement
Page 4

E. Remedies. Employee and Company recognize that irreparable injury may result to Company in the event of breach or threatened breach of this paragraph of this Agreement by Employee. If Employee commits a breach or threatens to commit a breach of any of the provisions of this paragraph, Company shall have the right and remedy, in addition to any others that may be available, at law or in equity, to have the provisions of this paragraph specifically enforced by any court having equity jurisdiction, together with an accounting therefor, Employee having specifically acknowledged that any such breach or threatened breach will cause irreparable injury to Company and that money damages will not provide an adequate remedy to Company.

7.	Invalidity. If any provision of this Employment Agreement is later construed to be unenforceable or invalid, the remaining provisions shall not be affected but shall continue in full effect. If any term of this Employment Agreement is found to be unenforceable or invalid by any court having jurisdiction, that court shall have the power to reduce or revise the term and the paragraph(s) shall then be fully enforceable.
8.	Assignment. Employee acknowledges that Employee’s services are unique and personal. Accordingly, Employee may not assign Employee’s rights or delegate Employee’s duties or obligations under this Agreement. The Employer’s rights and obligations shall inure to the benefit of and shall be binding upon Employer’s successor and assigns.
9.	Personnel Policies. Company’s written personnel policies apply to all of Company’s employees, including Employee, and describe additional terms and conditions of employment of Employee. Those terms and conditions, as Company may revise from time to time, are incorporated by reference into this Employment Agreement. Company reserves the right to revise the personnel policies from time to time, as Company deems necessary. If any personnel policy provision conflicts with a provision of this Employment Agreement, the terms of this Employment Agreement shall govern.
10.	Alcohol and Drug Testing. Employee agrees to comply with and submit to any Company program or policy for testing for alcohol abuse or use of drugs and, in the absence of such a program or policy, to submit to such testing as may be required by Company and administered in accordance with applicable law and regulations.
11.	Binding Effect. This Employment Agreement constitutes the entire understanding of the parties, may be modified only in writing, is governed

Employment Agreement
Page 5

by laws of the state of New Mexico, and will bind and inure to the benefit of Employee and Employee’s personal representative and Company and Company’s successors and assigns.

Employment Agreement
Page 6

DATED: May 9, 2002.
		COMPANY:
		SBS Technologies, Inc.
	By:	/s/ Christopher J. Amenson
	Its:	CEO
		EMPLOYEE:
		/s/ David H. Greig
		David H. Greig

Employment Agreement
Page 7

Appendix A
to
Employment Agreement

David H. Greig
Employee

Position: President and Chief Operating Officer of Company, reporting directly to the Chief Executive.

Compensation: $275,000 base annual salary.

Benefits:
Standard Employee
Benefits:	Medical insurance
	Dental insurance
	Life Insurance
	Long and short-term disability insurance
	Ten holidays per year
	Sick leave
Optional Benefits:	401(k) Plan
	Flexible Spending Account Program
	Supplemental Life Insurance

All Standard and Optional Benefits will be as provided by Company to employees generally, and are subject to modification from time to time by Company.

Additional Benefits:	Four weeks paid vacation per year
	Immediate, full vesting under any employee plans in effect at signing that require vesting

Stock Option Grant: Nonqualified stock options for 100,000 shares of common stock, with exercise, termination and other terms as provided in an Option Agreement (“Option Agreement”) and the 1993 Director and Stock Option Plan under which it is issued, including the following:

     The Options will vest in four installments, vesting as follows:

25,000	April 25, 2003
25,000	April 25, 2004
25,000	April 25, 2005
25,000	April 25, 2006

Employment Agreement
Page 8

All options granted as of this date which have not yet vested will vest immediately prior to a change of control of the company. The Options will terminate ten years from the date of grant, and the exercise price for the options will be the Nasdaq closing price on April 25, 2002.

Moving Expenses: The Company will pay moving expenses in accordance with its current moving policy for Employee’s to move from Employee’s current residence in Minnesota to Albuquerque, New Mexico, and Employee agrees to complete this move as expeditiously as possible

Employment Agreement
Page 9

EMPLOYMENT AGREEMENT

     SBS Technologies, Inc. (“Company”) and Clarence W. Peckham (“Employee”) agree, effective April 26, 2002:

1.	Employment. Company employs Employee for the period beginning on the date of this Employment Agreement as set forth below, and ending three years from its date or upon discharge or resignation of Employee in accordance with the terms of this Agreement (the “Employment Period”). During the Employment Period, Employee will serve in the position of Executive Vice President and Member of Executive Committee of the Company, or other management position as determined by the Company. Employee will devote sufficient time and energies to the business of Company to accomplish the duties assigned, will perform to the best of Employee’s ability all duties assigned to Employee by Company and will devote Employee’s best efforts to advance the interests of Company. Employee will have the power and authority determined by Company.
2.	Compensation. For all services performed by Employee for Company during the Employment Period, Company will pay Employee the salary and benefits set forth on Appendix “A”. Employee will be entitled to participate in employee benefit programs established by Company and applicable to all full-time employees. Employee will be entitled to vacation, national holidays and paid sick leave in accordance with Company policy and Appendix A. During vacation, national holidays, and paid sick leave, Employee will receive Employee’s usual compensation.
3.	Reimbursement of Expenses. Company recognizes that Employee, in performing Employee’s duties hereunder, may be required to spend sums of money in connection with those duties for the benefit of Company. Employee may present to Company an itemized voucher listing expenses paid by Employee in the performance of Employee’s duties on behalf of Company, and on presentation of the itemized voucher, Company will reimburse Employee for all reasonable expenses itemized, including but not limited to, travel, meals, lodging, entertainment, and promotion with respect to all activities approved in advance by Company. Employee may receive advances from Company for anticipated expenses. Employee agrees that the amount by which an advance exceeds actual expenses (“Amount”) will be promptly refunded to Company upon determination by Company that it is due, that the Amount may be deducted from any payments of any nature (including without limitation salary) owed by Company to employee, and that the Amount will constitute a debt from Employee to Company, enforceable by Company in all respects as if

Employment Agreement
Page 1

	Employee had executed a promissory note or other instrument acknowledging the debt, bearing interest at a rate of 10% per year from the date repayment is due, and payable in full on demand without set-off or deduction.
4.	Sick Leave and Disability. Employee will be entitled to sick leave for the number of days determined by Company (“Sick Leave”). Employee will be considered to be disabled during any period in excess of Sick Leave during which Employee is unable to work because of illness or incapacity (“Disability Period”).Employee will be entitled to receive Employee’s full salary during Sick Leave and will be deemed to be on leave, without pay, during the Disability Period. If Employee is unable to work for a period in excess of 90 days, Employee, at the discretion of the Board of Directors of company, will be considered to have resigned. In no event will Employee be entitled to payment or other compensation for unused Sick Leave or Disability Period, unless required by law or otherwise provided in a policy or employment manual adopted by Company.
5.	Resignation and Discharge. Employee may resign or be discharged pursuant to the terms of this paragraph. If Employee (i) resigns, Employee must give 30 days’ notice to Company; (ii) is discharged for cause (as later defined), Company may discharge Employee immediately, without notice; or (iii) is discharged not for cause from his responsibilities, Company must give 30 days’ notice to Employee. If Employee is discharged not for cause, Employee will be paid severance pay equal to six month’s base pay in effect at the time of termination payable in monthly installments.
	For purposes of this paragraph, “for cause” means that during the Employment Period, Employee, unless otherwise provided by Company policy or Company employment manual, (a) is reasonably believed by Company (i) to have failed to comply with any law, regulation or policy, including without limitation securities or employment or non-discrimination or similar laws, regulations or policies, and that failure causes a significant financial, regulatory, operational or public perception detriment to Company, (ii) to abuse, as determined by the Company, alcohol or to use drugs, (other than as prescribed by Employee’s physician), or (b) refuses to submit to testing for alcohol or drugs, or (c) is reasonably believed by Company to have committed or is charged with any felony or misdemeanor involving moral turpitude, or (d) through willful neglect, gross negligence, or malfeasance causes a significant financial, regulatory, operational or public perception detriment to Company. A determination by the Board of Directors that Employee has

Employment Agreement
Page 2

	failed to perform Employee’s responsibilities to the satisfaction of the Board of Directors, without one or more of the other elements set out in this paragraph, is not “for cause”.
6.	Competition and Confidential Information Restrictions.

A.

Competition Restrictions. Employee may not during the Employment Period, and for a period of two years following the termination of the Employment Period, anywhere in the United States, directly or indirectly, own, manage, operate, invest in, control, be employed by, participate in, be a financial sponsor of, or be connected in any manner with the ownership, management, operation or control of any business that competes with a business conducted by Company at any time during the Employment Period or which Employee knows, during the Employment Period, that Company intends to conduct. Employee acknowledges that this restriction is necessary for Company’s welfare and protection in light of the responsibilities assigned to Employee and Employee’s status in Company, that Employee is fully and adequately compensated for this restriction.

B.

Confidential Information. Employee acknowledges and recognizes that Employee is, or will be, employed by Company in a confidential relationship and may receive and have access to the confidential business information, customer names, contracts and other customer data, business methods, techniques and trade secrets of Company (“Confidential Information”). Employee may develop ideas, conceptions, inventions, processes, methods, products and improvements; and Employee may receive disclosures of ideas, conceptions, inventions, processes, methods, products and improvements made by other employees of Company (“Company Inventions”). Employee may participate with Company in improving and developing Confidential Information and Company Inventions. Confidential Information and Company Inventions developed on behalf of Company are neither commonly known nor readily accessible to others and are used by Company in its business to obtain a competitive advantage over Company’s competitors who do not know or use the Confidential Information or Company Inventions. Protection of the Confidential Information and Company Inventions against unauthorized disclosure and use is of critical importance to Company in maintaining its competitive position. Employee agrees that Employee will not, at any time, during or after the Employment Period, make any independent use of, or disclose to any other

Employment Agreement
Page 3

	person or organization, except as authorized by Company in writing, any Confidential Information or Company Inventions. Upon termination of the Employment Period for any reason, Employee shall promptly deliver to Company all drawings, manuals, letters, notes, notebooks, reports, customer lists, customer data, mailing lists, and all other materials and records of any kinds, and all copies thereof, that may be in the possession of, or under the control of, Employee pertaining to Company’s business including any that contain any Confidential Information or Company Invention.
C.	Business Relationships. Employee acknowledges Company’s efforts to establish valuable business relationships with its clients, customers and suppliers. Employee recognizes that Company has invested resources in the training and the professional development of Employee, and Employee further recognizes Employee’s responsibility to the Company when Company entrusts Employee with Confidential Information. In view of Company’s efforts, Employee agrees that unless Company authorizes Employee to do so in writing, Employee will not, for a period of one year after termination of employment with Company, solicit the purchase of products or services directly competing with products and services of Company from any person, corporation, business organization or enterprise which: (i) has made any purchase of products or services from Company within the two years immediately preceding termination of former Employee’s employment (“Customer”); or (ii) has been contacted by Employee during the last 12 months of Employee’s employment for the purpose of securing the purchase of products or services from Company (“Prospective Customer”).
D.	Non-Solicitation of Employees. Employee is aware that Company has a significant investment in its employees. For a period of twelve months after termination for any reason of Employee’s employment, neither Employee nor any person or entity by whom Employee may be employed or of which Employee may be an officer, director, partner, trustee or control person, will directly or indirectly employ or solicit to employ, or otherwise retain or solicit to retain, any person employed by Company as of the date of Employee’s termination of employment or during the twelve month period thereafter, unless that person has been terminated by Company without cause (as determined in good faith by Company) before the time of the solicitation, employment or retention.

Employment Agreement
Page 4

E. Remedies. Employee and Company recognize that irreparable injury may result to Company in the event of breach or threatened breach of this paragraph of this Agreement by Employee. If Employee commits a breach or threatens to commit a breach of any of the provisions of this paragraph, Company shall have the right and remedy, in addition to any others that may be available, at law or in equity, to have the provisions of this paragraph specifically enforced by any court having equity jurisdiction, together with an accounting therefor, Employee having specifically acknowledged that any such breach or threatened breach will cause irreparable injury to Company and that money damages will not provide an adequate remedy to Company.

7.	Invalidity. If any provision of this Employment Agreement is later construed to be unenforceable or invalid, the remaining provisions shall not be affected but shall continue in full effect. If any term of this Employment Agreement is found to be unenforceable or invalid by any court having jurisdiction, that court shall have the power to reduce or revise the term and the paragraph(s) shall then be fully enforceable.
8.	Assignment. Employee acknowledges that Employee’s services are unique and personal. Accordingly, Employee may not assign Employee’s rights or delegate Employee’s duties or obligations under this Agreement. The Employer’s rights and obligations shall inure to the benefit of and shall be binding upon Employer’s successor and assigns.
9.	Personnel Policies. Company’s written personnel policies apply to all of Company’s employees, including Employee, and describe additional terms and conditions of employment of Employee. Those terms and conditions, as Company may revise from time to time, are incorporated by reference into this Employment Agreement. Company reserves the right to revise the personnel policies from time to time, as Company deems necessary. If any personnel policy provision conflicts with a provision of this Employment Agreement, the terms of this Employment Agreement shall govern.
10.	Alcohol and Drug Testing. Employee agrees to comply with and submit to any Company program or policy for testing for alcohol abuse or use of drugs and, in the absence of such a program or policy, to submit to such testing as may be required by Company and administered in accordance with applicable law and regulations.
11.	Binding Effect. This Employment Agreement constitutes the entire understanding of the parties, may be modified only in writing, is governed

Employment Agreement
Page 5

by laws of the state of New Mexico, and will bind and inure to the benefit of Employee and Employee’s personal representative and Company and Company’s successors and assigns.

Employment Agreement
Page 6

DATED: May 9, 2002.
		COMPANY:
		SBS Technologies, Inc.
	By:	/s/ Christopher J. Amenson
	Its:	CEO
		EMPLOYEE:
		/s/ Clarence W. Peckham
		Clarence W. Peckham

Employment Agreement
Page 7

Appendix A
to
Employment Agreement

Clarence W. Peckham
Employee

Position: Executive Vice President, President of the Commercial and Government Group and Member of the Executive Committee of the Company, reporting directly to the President and Chief Operating Officer.

Compensation: $250,000 base annual salary.

Benefits:
Standard Employee
Benefits:	Medical insurance
	Dental insurance
	Life Insurance
	Long and short-term disability insurance
	Ten holidays per year
	Sick leave
Optional Benefits:	401(k) Plan
	Flexible Spending Account Program
	Supplemental Life Insurance

All Standard and Optional Benefits will be as provided by Company to employees generally, and are subject to modification from time to time by Company.

Additional Benefits:	Four weeks paid vacation per year
	Immediate, full vesting under any employee plans in effect at signing that require vesting

Stock Option Grant: Nonqualified stock options for 50,000 shares of common stock, with exercise, termination and other terms as provided in an Option Agreement (“Option Agreement”) and the 1993 Director and Stock Option Plan under which it is issued, including the following:

     The Options will vest in four installments, vesting as follows:

12,500	April 25, 2003
12,500	April 25, 2004
12,500	April 25, 2005
12,500	April 25, 2006

Employment Agreement
Page 8

All options granted as of this date which have not yet vested will vest immediately prior to a change of control of the company. The Options will terminate ten years from the date of grant, and the exercise price for the options will be the Nasdaq closing price on April 25, 2002.

Moving Expenses: The Company will pay moving expenses in accordance with its current moving policy for Employee’s to move from Employee’s current residence in North Carolina to Albuquerque, New Mexico, and Employee agrees to complete this move as expeditiously as possible

Employment Agreement
Page 9

EMPLOYMENT AGREEMENT

     SBS Technologies, Inc. (“Company”) and James E. Dixon (“Employee”) agree, effective April 26, 2002:

1.	Employment. Company employs Employee for the period beginning on the date of this Employment Agreement as set forth below, and ending three years from its date or upon discharge or resignation of Employee in accordance with the terms of this Agreement (the “Employment Period”). During the Employment Period, Employee will serve in the position of Executive Vice President, Chief Financial Officer, and Member of Executive Committee of the Company, or other management position as determined by the Company. Employee will devote sufficient time and energies to the business of Company to accomplish the duties assigned, will perform to the best of Employee’s ability all duties assigned to Employee by Company and will devote Employee’s best efforts to advance the interests of Company. Employee will have the power and authority determined by Company.
2.	Compensation. For all services performed by Employee for Company during the Employment Period, Company will pay Employee the salary and benefits set forth on Appendix “A”. Employee will be entitled to participate in employee benefit programs established by Company and applicable to all full-time employees. Employee will be entitled to vacation, national holidays and paid sick leave in accordance with Company policy and Appendix A. During vacation, national holidays, and paid sick leave, Employee will receive Employee’s usual compensation.
3.	Reimbursement of Expenses. Company recognizes that Employee, in performing Employee’s duties hereunder, may be required to spend sums of money in connection with those duties for the benefit of Company. Employee may present to Company an itemized voucher listing expenses paid by Employee in the performance of Employee’s duties on behalf of Company, and on presentation of the itemized voucher, Company will reimburse Employee for all reasonable expenses itemized, including but not limited to, travel, meals, lodging, entertainment, and promotion with respect to all activities approved in advance by Company. Employee may receive advances from Company for anticipated expenses. Employee agrees that the amount by which an advance exceeds actual expenses (“Amount”) will be promptly refunded to Company upon determination by Company that it is due, that the Amount may be deducted from any payments of any nature (including without limitation salary) owed by Company to employee, and that the Amount will constitute a debt from

Employment Agreement
Page 1

	Employee to Company, enforceable by Company in all respects as if Employee had executed a promissory note or other instrument acknowledging the debt, bearing interest at a rate of 10% per year from the date repayment is due, and payable in full on demand without set-off or deduction.
4.	Sick Leave and Disability. Employee will be entitled to sick leave for the number of days determined by Company (“Sick Leave”). Employee will be considered to be disabled during any period in excess of Sick Leave during which Employee is unable to work because of illness or incapacity (“Disability Period”).Employee will be entitled to receive Employee’s full salary during Sick Leave and will be deemed to be on leave, without pay, during the Disability Period. If Employee is unable to work for a period in excess of 90 days, Employee, at the discretion of the Board of Directors of company, will be considered to have resigned. In no event will Employee be entitled to payment or other compensation for unused Sick Leave or Disability Period, unless required by law or otherwise provided in a policy or employment manual adopted by Company.
5.	Resignation and Discharge. Employee may resign or be discharged pursuant to the terms of this paragraph. If Employee (i) resigns, Employee must give 30 days’ notice to Company; (ii) is discharged for cause (as later defined), Company may discharge Employee immediately, without notice; or (iii) is discharged not for cause from his responsibilities, Company must give 30 days’ notice to Employee. If Employee is discharged not for cause, Employee will be paid severance pay equal to six month’s base pay in effect at the time of termination payable in monthly installments.
	For purposes of this paragraph, “for cause” means that during the Employment Period, Employee, unless otherwise provided by Company policy or Company employment manual, (a) is reasonably believed by Company (i) to have failed to comply with any law, regulation or policy, including without limitation securities or employment or non-discrimination or similar laws, regulations or policies, and that failure causes a significant financial, regulatory, operational or public perception detriment to Company, (ii) to abuse, as determined by the Company, alcohol or to use drugs, (other than as prescribed by Employee’s physician), or (b) refuses to submit to testing for alcohol or drugs, or (c) is reasonably believed by Company to have committed or is charged with any felony or misdemeanor involving moral turpitude, or (d) through willful neglect, gross negligence, or malfeasance causes a significant financial, regulatory, operational or public perception detriment to

Employment Agreement
Page 2

	Company. A determination by the Board of Directors that Employee has failed to perform Employee’s responsibilities to the satisfaction of the Board of Directors, without one or more of the other elements set out in this paragraph, is not “for cause”.
6.	Competition and Confidential Information Restrictions.

A.

Competition Restrictions. Employee may not during the Employment Period, and for a period of two years following the termination of the Employment Period, anywhere in the United States, directly or indirectly, own, manage, operate, invest in, control, be employed by, participate in, be a financial sponsor of, or be connected in any manner with the ownership, management, operation or control of any business that competes with a business conducted by Company at any time during the Employment Period or which Employee knows, during the Employment Period, that Company intends to conduct. Employee acknowledges that this restriction is necessary for Company’s welfare and protection in light of the responsibilities assigned to Employee and Employee’s status in Company, that Employee is fully and adequately compensated for this restriction.

B.

Confidential Information. Employee acknowledges and recognizes that Employee is, or will be, employed by Company in a confidential relationship and may receive and have access to the confidential business information, customer names, contracts and other customer data, business methods, techniques and trade secrets of Company (“Confidential Information”). Employee may develop ideas, conceptions, inventions, processes, methods, products and improvements; and Employee may receive disclosures of ideas, conceptions, inventions, processes, methods, products and improvements made by other employees of Company (“Company Inventions”). Employee may participate with Company in improving and developing Confidential Information and Company Inventions. Confidential Information and Company Inventions developed on behalf of Company are neither commonly known nor readily accessible to others and are used by Company in its business to obtain a competitive advantage over Company’s competitors who do not know or use the Confidential Information or Company Inventions. Protection of the Confidential Information and Company Inventions against unauthorized disclosure and use is of critical importance to Company in maintaining its competitive position. Employee agrees that Employee will not, at any time, during or after the Employment

Employment Agreement
Page 3

	Period, make any independent use of, or disclose to any other person or organization, except as authorized by Company in writing, any Confidential Information or Company Inventions. Upon termination of the Employment Period for any reason, Employee shall promptly deliver to Company all drawings, manuals, letters, notes, notebooks, reports, customer lists, customer data, mailing lists, and all other materials and records of any kinds, and all copies thereof, that may be in the possession of, or under the control of, Employee pertaining to Company’s business including any that contain any Confidential Information or Company Invention.
C.	Business Relationships. Employee acknowledges Company’s efforts to establish valuable business relationships with its clients, customers and suppliers. Employee recognizes that Company has invested resources in the training and the professional development of Employee, and Employee further recognizes Employee’s responsibility to the Company when Company entrusts Employee with Confidential Information. In view of Company’s efforts, Employee agrees that unless Company authorizes Employee to do so in writing, Employee will not, for a period of one year after termination of employment with Company, solicit the purchase of products or services directly competing with products and services of Company from any person, corporation, business organization or enterprise which: (i) has made any purchase of products or services from Company within the two years immediately preceding termination of former Employee’s employment (“Customer”); or (ii) has been contacted by Employee during the last 12 months of Employee’s employment for the purpose of securing the purchase of products or services from Company (“Prospective Customer”).
D.	Non-Solicitation of Employees. Employee is aware that Company has a significant investment in its employees. For a period of twelve months after termination for any reason of Employee’s employment, neither Employee nor any person or entity by whom Employee may be employed or of which Employee may be an officer, director, partner, trustee or control person, will directly or indirectly employ or solicit to employ, or otherwise retain or solicit to retain, any person employed by Company as of the date of Employee’s termination of employment or during the twelve month period thereafter, unless that person has been terminated by Company without cause (as determined in good faith by Company) before the time of the solicitation, employment or retention.

Employment Agreement
Page 4

E. Remedies. Employee and Company recognize that irreparable injury may result to Company in the event of breach or threatened breach of this paragraph of this Agreement by Employee. If Employee commits a breach or threatens to commit a breach of any of the provisions of this paragraph, Company shall have the right and remedy, in addition to any others that may be available, at law or in equity, to have the provisions of this paragraph specifically enforced by any court having equity jurisdiction, together with an accounting therefor, Employee having specifically acknowledged that any such breach or threatened breach will cause irreparable injury to Company and that money damages will not provide an adequate remedy to Company.

7.	Invalidity. If any provision of this Employment Agreement is later construed to be unenforceable or invalid, the remaining provisions shall not be affected but shall continue in full effect. If any term of this Employment Agreement is found to be unenforceable or invalid by any court having jurisdiction, that court shall have the power to reduce or revise the term and the paragraph(s) shall then be fully enforceable.
8.	Assignment. Employee acknowledges that Employee’s services are unique and personal. Accordingly, Employee may not assign Employee’s rights or delegate Employee’s duties or obligations under this Agreement. The Employer’s rights and obligations shall inure to the benefit of and shall be binding upon Employer’s successor and assigns.
9.	Personnel Policies. Company’s written personnel policies apply to all of Company’s employees, including Employee, and describe additional terms and conditions of employment of Employee. Those terms and conditions, as Company may revise from time to time, are incorporated by reference into this Employment Agreement. Company reserves the right to revise the personnel policies from time to time, as Company deems necessary. If any personnel policy provision conflicts with a provision of this Employment Agreement, the terms of this Employment Agreement shall govern.
10.	Alcohol and Drug Testing. Employee agrees to comply with and submit to any Company program or policy for testing for alcohol abuse or use of drugs and, in the absence of such a program or policy, to submit to such testing as may be required by Company and administered in accordance with applicable law and regulations.

Employment Agreement
Page 5

11. Binding Effect. This Employment Agreement constitutes the entire understanding of the parties, may be modified only in writing, is governed by laws of the state of New Mexico, and will bind and inure to the benefit of Employee and Employee’s personal representative and Company and Company’s successors and assigns.

Employment Agreement
Page 6

DATED: May 9, 2002.
		COMPANY:
		SBS Technologies, Inc.
	By:	/s/ Christopher J. Amenson
	Its:	CEO
		EMPLOYEE:
		/s/ James E. Dixon
		James E. Dixon

Employment Agreement
Page 7

Appendix A
to
Employment Agreement

James E. Dixon
Employee

Position: Executive Vice President, Chief Financial Officer and Member of the Executive Committee of the Company, reporting directly to the Chief Executive Officer.

Compensation: $275,000 base annual salary.

Benefits:
Standard Employee
Benefits:	Medical insurance
	Dental insurance
	Life Insurance
	Long and short-term disability insurance
	Ten holidays per year
	Sick leave
Optional Benefits:	401(k) Plan
	Flexible Spending Account Program
	Supplemental Life Insurance

All Standard and Optional Benefits will be as provided by Company to employees generally, and are subject to modification from time to time by Company.

Additional Benefits:	Four weeks paid vacation per year
	Immediate, full vesting under any employee plans in effect at signing that require vesting

Stock Option Grant: Nonqualified stock options for 50,000 shares of common stock, with exercise, termination and other terms as provided in an Option Agreement (“Option Agreement”) and the 1993 Director and Stock Option Plan under which it is issued, including the following:

     The Options will vest in four installments, vesting as follows:

12,500	April 25, 2003
12,500	April 25, 2004
12,500	April 25, 2005
12,500	April 25, 2006

Employment Agreement
Page 8

All options granted as of this date which have not yet vested will vest immediately prior to a change of control of the company. The Options will terminate ten years from the date of grant, and the exercise price for the options will be the Nasdaq closing price on April 25, 2002.

Employment Agreement
Page 9

EX-10.BQ 6 d96685ex10-bq.htm EX-10.BQ - EMPLOYMENT AGREEMENT

EXHIBIT 10.bq

EMPLOYMENT AGREEMENT

     SBS Technologies, Inc. (“Company”) and Christopher J. Amenson (“Employee”) agree, effective April 26, 2002:

1.	Employment. Company employs Employee for the period beginning on the date of this Employment Agreement as set forth below, and ending three years from its date or upon discharge or resignation of Employee in accordance with the terms of this Agreement (the “Employment Period”). During the Employment Period, Employee will serve in the position of Chief Executive Officer of Company, or other management position as determined by the Company. Employee will devote sufficient time and energies to the business of Company to accomplish the duties assigned, will perform to the best of Employee’s ability all duties assigned to Employee by Company and will devote Employee’s best efforts to advance the interests of Company. Employee will have the power and authority determined by Company.
2.	Compensation. For all services performed by Employee for Company during the Employment Period, Company will pay Employee the salary and benefits set forth on Appendix “A”. Employee will be entitled to participate in employee benefit programs established by Company and applicable to all full-time employees. Employee will be entitled to vacation, national holidays and paid sick leave in accordance with Company policy and Appendix A. During vacation, national holidays, and paid sick leave, Employee will receive Employee’s usual compensation.
3.	Reimbursement of Expenses. Company recognizes that Employee, in performing Employee’s duties hereunder, may be required to spend sums of money in connection with those duties for the benefit of Company. Employee may present to Company an itemized voucher listing expenses paid by Employee in the performance of Employee’s duties on behalf of Company, and on presentation of the itemized voucher, Company will reimburse Employee for all reasonable expenses itemized, including but not limited to, travel, meals, lodging, entertainment, and promotion with respect to all activities approved in advance by Company. Employee may receive advances from Company for anticipated expenses. Employee agrees that the amount by which an advance exceeds actual expenses (“Amount”) will be promptly refunded to Company upon determination by Company that it is due, that the Amount may be deducted from any payments of any nature (including without limitation salary) owed by Company to employee, and that the Amount will constitute a debt from Employee to Company, enforceable by Company in all respects as if

Employment Agreement
Page 1

	Employee had executed a promissory note or other instrument acknowledging the debt, bearing interest at a rate of 10% per year from the date repayment is due, and payable in full on demand without set-off or deduction.
4.	Sick Leave and Disability. Employee will be entitled to sick leave for the number of days determined by Company (“Sick Leave”). Employee will be considered to be disabled during any period in excess of Sick Leave during which Employee is unable to work because of illness or incapacity (“Disability Period”). Employee will be entitled to receive Employee’s full salary during Sick Leave and will be deemed to be on leave, without pay, during the Disability Period. If Employee is unable to work for a period in excess of 90 days, Employee, at the discretion of the Board of Directors of company, will be considered to have resigned. In no event will Employee be entitled to payment or other compensation for unused Sick Leave or Disability Period, unless required by law or otherwise provided in a policy or employment manual adopted by Company.
5.	Resignation and Discharge. Employee may resign or be discharged pursuant to the terms of this paragraph. If Employee (i) resigns, Employee must give 30 days’ notice to Company; (ii) is discharged for cause (as later defined), Company may discharge Employee immediately, without notice; or (iii) is discharged not for cause from his responsibilities as Chief Executive Officer, Company must give 30 days’ notice to Employee. If Employee is discharged from his position as Chief Executive Officer not for cause, Employee will be paid severance pay equal to six month’s base pay in effect at the time of termination payable in monthly installments. For two years following the termination period from the position of Chief Executive Officer, whether voluntary or involuntary termination has occurred, the Company agrees to continue to employ the Employee as an advisor to the Board of Directors at an annual rate of pay of $40,000.
	For purposes of this paragraph, “for cause” means that during the Employment Period, Employee, unless otherwise provided by Company policy or Company employment manual, (a) is reasonably believed by Company (i) to have failed to comply with any law, regulation or policy, including without limitation securities or employment or non-discrimination or similar laws, regulations or policies, and that failure causes a significant financial, regulatory, operational or public perception detriment to Company, (ii) to abuse, as determined by the Company, alcohol or to use drugs, (other than as prescribed by Employee’s physician), or (b) refuses to submit to testing for alcohol or drugs, or (c) is reasonably believed by Company to have committed or is charged with

Employment Agreement
Page 2

any felony or misdemeanor involving moral turpitude, or (d) through willful neglect, gross negligence, or malfeasance causes a significant financial, regulatory, operational or public perception detriment to Company. A determination by the Board of Directors that Employee has failed to perform Employee’s responsibilities to the satisfaction of the Board of Directors, without one or more of the other elements set out in this paragraph, is not “for cause”.

6.

Competition and Confidential Information Restrictions.

A.

Competition Restrictions. Employee may not during the Employment Period, and for a period of two years following the termination of the Employment Period, anywhere in the United States, directly or indirectly, own, manage, operate, invest in, control, be employed by, participate in, be a financial sponsor of, or be connected in any manner with the ownership, management, operation or control of any business that competes with a business conducted by Company at any time during the Employment Period or which Employee knows, during the Employment Period, that Company intends to conduct. Employee acknowledges that this restriction is necessary for Company’s welfare and protection in light of the responsibilities assigned to Employee and Employee’s status in Company, that Employee is fully and adequately compensated for this restriction.

B.

Confidential Information. Employee acknowledges and recognizes that Employee is, or will be, employed by Company in a confidential relationship and may receive and have access to the confidential business information, customer names, contracts and other customer data, business methods, techniques and trade secrets of Company (“Confidential Information”). Employee may develop ideas, conceptions, inventions, processes, methods, products and improvements; and Employee may receive disclosures of ideas, conceptions, inventions, processes, methods, products and improvements made by other employees of Company (“Company Inventions”). Employee may participate with Company in improving and developing Confidential Information and Company Inventions. Confidential Information and Company Inventions developed on behalf of Company are neither commonly known nor readily accessible to others and are used by Company in its business to obtain a competitive advantage over Company’s competitors who do not know or use the Confidential Information or Company Inventions. Protection of the Confidential Information and Company Inventions against unauthorized

Employment Agreement
Page 3

	disclosure and use is of critical importance to Company in maintaining its competitive position. Employee agrees that Employee will not, at any time, during or after the Employment Period, make any independent use of, or disclose to any other person or organization, except as authorized by Company in writing, any Confidential Information or Company Inventions. Upon termination of the Employment Period for any reason, Employee shall promptly deliver to Company all drawings, manuals, letters, notes, notebooks, reports, customer lists, customer data, mailing lists, and all other materials and records of any kinds, and all copies thereof, that may be in the possession of, or under the control of, Employee pertaining to Company’s business including any that contain any Confidential Information or Company Invention.
C.	Business Relationships. Employee acknowledges Company’s efforts to establish valuable business relationships with its clients, customers and suppliers. Employee recognizes that Company has invested resources in the training and the professional development of Employee, and Employee further recognizes Employee’s responsibility to the Company when Company entrusts Employee with Confidential Information. In view of Company’s efforts, Employee agrees that unless Company authorizes Employee to do so in writing, Employee will not, for a period of one year after termination of employment with Company, solicit the purchase of products or services directly competing with products and services of Company from any person, corporation, business organization or enterprise which: (i) has made any purchase of products or services from Company within the two years immediately preceding termination of former Employee’s employment (“Customer”); or (ii) has been contacted by Employee during the last 12 months of Employee’s employment for the purpose of securing the purchase of products or services from Company (“Prospective Customer”).
D.	Non-Solicitation of Employees. Employee is aware that Company has a significant investment in its employees. For a period of twelve months after termination for any reason of Employee’s employment, neither Employee nor any person or entity by whom Employee may be employed or of which Employee may be an officer, director, partner, trustee or control person, will directly or indirectly employ or solicit to employ, or otherwise retain or solicit to retain, any person employed by Company as of the date of Employee’s termination of employment or during the twelve month period thereafter, unless that person

Employment Agreement
Page 4

has been terminated by Company without cause (as determined in good faith by Company) before the time of the solicitation, employment or retention.

E.

Remedies. Employee and Company recognize that irreparable injury may result to Company in the event of breach or threatened breach of this paragraph of this Agreement by Employee. If Employee commits a breach or threatens to commit a breach of any of the provisions of this paragraph, Company shall have the right and remedy, in addition to any others that may be available, at law or in equity, to have the provisions of this paragraph specifically enforced by any court having equity jurisdiction, together with an accounting therefor, Employee having specifically acknowledged that any such breach or threatened breach will cause irreparable injury to Company and that money damages will not provide an adequate remedy to Company.

7.	Invalidity. If any provision of this Employment Agreement is later construed to be unenforceable or invalid, the remaining provisions shall not be affected but shall continue in full effect. If any term of this Employment Agreement is found to be unenforceable or invalid by any court having jurisdiction, that court shall have the power to reduce or revise the term and the paragraph(s) shall then be fully enforceable.
8.	Assignment. Employee acknowledges that Employee’s services are unique and personal. Accordingly, Employee may not assign Employee’s rights or delegate Employee’s duties or obligations under this Agreement. The Employer’s rights and obligations shall inure to the benefit of and shall be binding upon Employer’s successor and assigns.
9.	Personnel Policies. Company’s written personnel policies apply to all of Company’s employees, including Employee, and describe additional terms and conditions of employment of Employee. Those terms and conditions, as Company may be revise them from time to time, are incorporated by reference into this Employment Agreement. Company reserves the right to revise the personnel policies from time to time, as Company deems necessary. If any personnel policy provision conflicts with a provision of this Employment Agreement, the terms of this Employment Agreement shall govern.
10.	Alcohol and Drug Testing. Employee agrees to comply with and submit to any Company program or policy for testing for alcohol abuse or use of drugs and, in the absence of such a program or policy, to submit to such testing as may be required by Company and administered in accordance with applicable law and regulations.

Employment Agreement
Page 5

11. Binding Effect. This Employment Agreement constitutes the entire understanding of the parties, may be modified only in writing, is governed by laws of the state of New Mexico, and will bind and inure to the benefit of Employee and Employee’s personal representative and Company and Company’s successors and assigns.

Employment Agreement
Page 6

DATED: April 26, 2002.
		COMPANY:
		SBS Technologies, Inc.
	By:	/s/ Larry A. Bennigson
		Its: Chairman, Management Development & Compensation Committee of the Board
		EMPLOYEE:
		/s/ Christopher J. Amenson
		Christopher J. Amenson

Employment Agreement
Page 7

Appendix A
to
Employment Agreement

Christopher J. Amenson
Employee

Position: Chief Executive Officer of Company, reporting directly to the Board of Directors.

Compensation: $200,000 base annual salary.

Benefits:
Standard Employee
Benefits:	Medical insurance
	Dental insurance
	Life Insurance
	Long and short-term disability insurance
	Ten holidays per year
	Sick leave
Optional Benefits:	401(k) Plan
	Flexible Spending Account Program
	Supplemental Life Insurance

All Standard and Optional Benefits will be as provided by Company to employees generally, and are subject to modification from time to time by Company.

Additional Benefits:	Four weeks paid vacation per year
	Immediate, full vesting under any employee plans in effect at signing that require vesting

Stock Option Grant: Nonqualified stock options for 120,000 shares of common stock, with exercise, termination and other terms as provided in an Option Agreement (“Option Agreement”) and the 1993 Director and Stock Option Plan under which it is issued, including the following:

     The Options will vest in three installments, vesting as follows:

50,000	April 25, 2003
40,000	April 25, 2004
30,000	April 25, 2005

Employment Agreement
Page 8

All options will vest immediately prior to a change of control of the company. In the event the position of the employee is changed from Chief Executive Officer, or employee is discharged not-for-cause from the position of Chief Executive Officer, all options not yet vested as of the effective date will vest as of the effective date of change of position from the position of Chief Executive Officer.

The Options will terminate ten years from the date of grant, and the exercise price for the options will be the Nasdaq closing price on April 25, 2002.

Employment Agreement
Page 9

GRAPHIC 7 d96685xbox.gif GRAPHIC begin 644 d96685xbox.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!PA>`/]%8T:PH,%_ M&0`H7,@0(3UF_R)&C*8N`T)P"O1(1"4@F$6+UB@0^H=*P2V$*/]94\!$P$F4 J%B/^`1!%XL>('#-EC'BSY,F0(S]& GRAPHIC 8 d96685box.gif GRAPHIC begin 644 d96685box.gif M1TE&.#EA#``,`/?^``````$!`0("`@,#`P0$!`4%!08&!@<'!P@("`D)"0H* M"@L+"PP,#`T-#0X.#@\/#Q`0$!$1$1(2$A,3$Q04%!45%186%A<7%Q@8&!D9 M&1H:&AL;&QP<'!T='1X>'A\?'R`@("$A(2(B(B,C(R0D)"4E)28F)B7IZ>GM[>WQ\?'U]?7Y^?G]_?X"`@(&!@8*" M@H.#@X2$A(6%A8:&AH>'AXB(B(F)B8J*BHN+BXR,C(V-C8Z.CH^/CY"0D)&1 MD9*2DI.3DY24E)65E9:6EI>7EYB8F)F9F9J:FIN;FYRGI^?GZ"@ MH*&AH:*BHJ.CHZ2DI*6EI::FIJ>GIZBHJ*FIJ:JJJJNKJZRLK*VMK:ZNKJ^O MK["PL+&QL;*RLK.SL[2TM+6UM;:VMK>WM[BXN+FYN;JZNKN[N[R\O+V]O;Z^ MOK^_O\#`P,'!P<+"PL/#P\3$Q,7%Q<;&QL?'Q\C(R,G)RWM_?W^#@X.'AX>+BXN/CX^3DY.7EY>;FYN?GY^CHZ.GIZ>KJZNOK MZ^SL[.WM[>[N[N_O[_#P\/'Q\?+R\O/S\_3T]/7U]?;V]O?W]_CX^/GY^?KZ M^OO[^_S\_/W]_?[^_O___R'Y!`$``/X`+``````,``P`!P@Z`/\)'$APX)L? M"!,J_/<#F;B'$!\:8"BNX,`#%"T*Q/BCHD:.'BV"U/AOY,>,)SN2Y&C@@,N7 &+@$$!``[ ` end -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.BN

EX-10.bn - Asset Purchase Agreement

EX-10.BO

EX-10.bo - Separation Agreement

EX-10.BP

EX-10.bp - Employment Agreements

EX-10.BQ

EX-10.bq - Employment Agreement