CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this "Agreement") is entered into as of March 30, 2005,
by and between SBS Technologies, Inc., a New Mexico corporation ("Borrower"),
and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

 

RECITALS

Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower hereby agree as follows:

 

ARTICLE I

CREDIT TERMS

SECTION 1.1. LINE OF CREDIT.

(a) Line of Credit. Subject to the terms and conditions of this Agreement, Bank
hereby agrees to make advances to Borrower from time to time up to, but not
including, the first anniversary of the date of this Agreement, not to exceed at
any time the aggregate principal amount of Twenty Million and No/100 Dollars
($20,000,000.00) ("Line of Credit"), the proceeds of which shall be used for
working capital and general corporate purposes of Borrower and its U.S.
subsidiaries. Provided, however, any use of proceeds of more than $5,000,000.00
to fund an acquisition shall be subject to Bank's prior approval, which shall
not be unreasonably withheld. Borrower's obligation to repay advances under the
Line of Credit shall be evidenced by a promissory note dated the same date as
this Agreement ("Line of Credit Note"), all terms of which are incorporated
herein by this reference.

(b) Limitation on Borrowings. Outstanding borrowings under the Line of Credit,
to a maximum of the principal amount set forth above, shall not at any time
exceed an aggregate of Twenty Million and No/100 Dollars ($20,000,000.00).

(c) Letter of Credit Subfeature. As a subfeature under the Line of Credit, Bank
agrees from time to time during the term thereof to issue or cause an affiliate
to issue standby and commercial letters of credit for the account of Borrower
for purposes approved by Bank (each, a "Letter of Credit" and collectively,
"Letters of Credit"). The form and substance of each Letter of Credit shall be
subject to approval by Bank, in its sole discretion. Each Standby Letter of
Credit shall be issued for a term not to exceed three hundred sixty-five (365)
days, as designated by Borrower; each commercial Letter of Credit shall be
issued for a term agreed upon by Bank and Borrower provided however, that no
Letter of Credit shall have an expiration date subsequent to the maturity date
of the Line of Credit. The undrawn amount of all Letters of Credit shall be
reserved under the Line of Credit and shall not be available for borrowings
thereunder. Each Letter of Credit shall be subject to the additional terms and
conditions of the Letter of Credit agreements, applications and any related
documents required by Bank in connection with the issuance thereof. Each drawing
paid under a Letter of Credit shall be deemed an advance under the Line of
Credit and shall be repaid by Borrower in accordance with the terms and
conditions of this Agreement applicable to such advances; provided however, that
if advances under the Line of Credit are not available, for any reason, at the
time any drawing is paid, then Borrower shall immediately pay to Bank the full
amount drawn, together with interest thereon from the date such drawing is paid
to the date such amount is fully repaid by Borrower, at the rate of interest
applicable to advances under the Line of Credit. In such event Borrower agrees
that Bank, in its sole discretion, may debit any account maintained by Borrower
with Bank for the amount of any such drawing.

(d) Borrowing and Repayment. Borrower may from time to time during the term of
the Line of Credit borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions contained
herein or in the Line of Credit Note; provided however, that the total
outstanding borrowings under the Line of Credit shall not at any time exceed the
maximum principal amount available thereunder, as set forth above.

SECTION 1.2. INTEREST/FEES.

(a) Interest. The outstanding principal balance of the Line of Credit shall bear
interest, and the amount of each drawing paid under any Letter of Credit shall
bear interest from the date such drawing is paid to the date such amount is
fully repaid by Borrower, at the rate of interest set forth in each promissory
note or other instrument or document executed in connection therewith.

Prime Rate

. The term "Prime Rate" shall mean at any time the rate of interest most
recently announced within Bank at its principal office as its Prime Rate, with
the understanding that the Prime Rate is one of Bank's base rates and serves as
the basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof in such
internal publication or publications as Bank may designate. Each change in the
rate of interest shall become effective on the date each Prime Rate change is
announced within Bank.

LIBOR.

"LIBOR" means the rate per annum (rounded upward, if necessary, to the nearest
whole 1/16 of 1%) and determined pursuant to the following formula:

LIBOR =

Base LIBOR

   

100% - LIBOR Reserve Percentage

 

(i) "Base LIBOR" means the rate per annum for United States dollar deposits
quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding
that such rate is quoted by Bank for the purpose of calculating effective rates
of interest for loans making reference thereto, on the first day of a Fixed Rate
Term for delivery of funds on said date for a period of time approximately equal
to the number of days in such Fixed Rate Term and in an amount approximately
equal to the principal amount to which such Fixed Rate Term applies. Borrower
understands and agrees that Bank may base its quotation of the Inter-Bank Market
Offered Rate upon such offers or other market indicators of the Inter-Bank
Market as Bank in its discretion deems appropriate including, but not limited
to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.

(ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.

Computation and Payment

. Interest shall be computed on the basis of a 360-day year, actual days
elapsed. Interest shall be payable at the times and place set forth in each
promissory note or other instrument or document required hereby.

Letter of Credit Fees

. Borrower shall pay to Bank fees upon the issuance of each Letter of Credit,
upon the payment or negotiation of each drawing under any Letter of Credit and
upon the occurrence of any other activity with respect to any Letter of Credit
(including without limitation, the transfer, amendment or cancellation of any
Letter of Credit) determined in accordance with Bank's standard fees and charges
then in effect for such activity.

SECTION 1.3. COLLATERAL.

As security for all indebtedness of Borrower to Bank subject hereto, Borrower
hereby grants to Bank security interests of first priority (except for purchase
money security interest arising in the ordinary course of business securing
amounts less than $250,000 per annum) in all Borrower's personal property
assets.

The foregoing shall be evidenced by and subject to the terms of such security
agreements, financing statements, and other documents as Bank shall reasonably
require, all in form and substance satisfactory to Bank. Borrower shall
reimburse Bank immediately upon demand for all costs and expenses incurred by
Bank in connection with any of the foregoing security, including without
limitation, filing and recording fees and costs of appraisals, audits and title
insurance.

SECTION 1.4. ADDITIONAL COLLATERAL. Borrower shall either maintain Borrower's
primary operating accounts with Bank, or Borrower shall maintain a twenty
million and no/100 Dollars ($20,000,000.00) cash balance with Bank.

SECTION 1.5. GUARANTIES. All indebtedness of Borrower to Bank subject hereto
shall be guaranteed jointly and severally by all Borrower's U.S. subsidiaries
(including any subsidiaries hereafter formed or acquired), as evidenced by and
subject to the terms of guaranties in form and substance satisfactory to Bank.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.

SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of New Mexico, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.

SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each promissory
note, contract, instrument and other document required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.

SECTION 2.3. NO VIOLATION. The execution, delivery and performance by Borrower
of each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.

SECTION 2.4. LITIGATION. There are no pending, or to the best of Borrower's
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing
prior to the date hereof.

SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of
Borrower dated December 31, 2004, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower, (B)&NBSP;discloses all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.

SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower's obligations
subject to this Agreement to any other obligation of Borrower.

SECTION 2.8. PERMITS, FRANCHISES. To the best of Borrower's knowledge, Borrower
possesses, and will hereafter possess, all permits, consents, approvals,
franchises and licenses required and rights to all trademarks, trade names,
patents, and fictitious names, if any, necessary to enable it to conduct the
business in which it is now engaged in compliance with applicable law.

SECTION 2.9. ERISA. To best of Borrower's knowledge, Borrower is in compliance
in all material respects with all applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended or recodified from time to
time ("ERISA"); Borrower has not violated any provision of any defined employee
pension benefit plan (as defined in ERISA) maintained or contributed to by
Borrower (each, a "Plan"); no Reportable Event as defined in ERISA has occurred
and is continuing with respect to any Plan initiated by Borrower; Borrower has
met its minimum funding requirements under ERISA with respect to each Plan; and
each Plan will be able to fulfill its benefit obligations as they come due in
accordance with the Plan documents and under generally accepted accounting
principles.

SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any obligation
for borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.

SECTION 2.11. ENVIRONMENTAL MATTERS. To best of Borrower's knowledge, except as
disclosed by Borrower to Bank in writing prior to the date hereof, Borrower is
in compliance in all material respects with all applicable federal or state
environmental, hazardous waste, health and safety statutes, and any rules or
regulations adopted pursuant thereto, which govern or affect any of Borrower's
operations and/or properties, including without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Superfund
Amendments and Reauthorization Act of 1986, the Federal Resource Conservation
and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any
of the same may be amended, modified or supplemented from time to time. None of
the operations of Borrower is the subject of any federal or state investigation
evaluating whether any remedial action involving a material expenditure is
needed to respond to a release of any toxic or hazardous waste or substance into
the environment. Borrower has no material contingent liability in connection
with any release of any toxic or hazardous waste or substance into the
environment.

ARTICLE III

CONDITIONS

SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank
to extend any credit contemplated by this Agreement is subject to the
fulfillment to Bank's satisfaction of all of the following conditions:

(a) Approval of Bank Counsel. All legal matters incidental to the extension of
credit by Bank shall be satisfactory to Bank's counsel.

(b) Documentation. Bank shall have received, in form and substance satisfactory
to Bank, each of the following, duly executed:

This Agreement and each promissory note or other instrument or document required
hereby.

Security Agreement.

Continuing Guaranty of Borrower's U.S. Subsidiaries.

General Pledge Agreement.

Such other documents as Bank may require under any other Section of this
Agreement.

Financial Condition

. There shall have been no material adverse change, as determined by Bank, in
the financial condition or business of Borrower, nor any material decline, as
determined by Bank, in the market value of any collateral required hereunder or
a substantial or material portion of the assets of Borrower or any such
guarantor.

Insurance

. Borrower shall have delivered to Bank evidence of insurance coverage on all
Borrower's property, in form, substance, amounts, covering risks and issued by
companies reasonably satisfactory to Bank, and where required by Bank, with loss
payable endorsements in favor of Bank.

Cash

. Borrower's balance sheet for the month immediately preceding the month in
which this Agreement is signed

shall reflect that Borrower has Twenty-Five Million ($25,000,000) in cash or
cash equivalents.

SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to
make each extension of credit requested by Borrower hereunder shall be subject
to the fulfillment to Bank's satisfaction of each of the following conditions:

(a) Compliance. The representations and warranties contained herein and in each
of the other Loan Documents shall be true on and as of the date of the signing
of this Agreement and on the date of each extension of credit by Bank pursuant
hereto, with the same effect as though such representations and warranties had
been made on and as of each such date, and on each such date, no Event of
Default as defined herein, and no condition, event or act which with the giving
of notice or the passage of time or both would constitute such an Event of
Default, shall have occurred and be continuing or shall exist.

(b) Documentation. Bank shall have received all additional documents which may
be required in connection with such extension of credit.

ARTICLE IV

AFFIRMATIVE COVENANTS

Borrower covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein , and immediately upon demand by Bank, the
amount by which the outstanding principal balance of any credit subject hereto
at any time exceeds any limitation on borrowings applicable thereto.

SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, upon one (1)
business day prior notice and without undue disruption of Borrower's operations,
to inspect, audit and examine such books and records, to make copies of the
same, and to inspect the properties of Borrower.

SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in form
and detail satisfactory to Bank:

not later than 90 days after and as of the end of each fiscal year, consolidated
financial statement of Borrower, prepared by Borrower and audited by a
recognized independent accounting firm, to include consolidated balance sheets,
statements of income, retained earning and cash flow, together with an
unqualified opinion and calculations showing Borrower's compliance with all
financial covenants;

not later than 45 days after and as of the end of each quarter, a consolidated
financial statement of Borrower, prepared by Borrower, to include consolidated
balance sheets, statements of income, retained earnings and cash flow, prepared
in accordance with generally accepted accounting principals, together with
calculations confirming Borrower's compliance with all financial covenants;

 

contemporaneously with each annual and quarterly financial statement of Borrower
required hereby, a certificate of a senior financial officer of Borrower that
said financial statements are accurate and that there exists no Event of Default
nor any condition, act or event which with the giving of notice or the passage
of time or both would constitute an Event of Default;

from time to time such other information as Bank may reasonably request.

SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.

SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types and in
amounts customarily carried in lines of business similar to that of Borrower,
including but not limited to fire, extended coverage, public liability, flood,
property damage and workers' compensation, with all such insurance carried with
companies and in amounts reasonably satisfactory to Bank, and deliver to Bank
from time to time at Bank's request schedules setting forth all insurance then
in effect.

SECTION 4.6. FACILITIES. Keep all properties useful or necessary to Borrower's
business in good repair and condition, and from time to time make necessary
repairs, renewals and replacements thereto so that such properties shall be
fully and efficiently preserved and maintained.

SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.

SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower with a claim in excess of
$1,000,000.00.

SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower's financial condition as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices (except to the extent modified by the
definitions herein):

Tangible Net Worth not less than $116,766,000 plus 50% of quarterly net income
(excluding any quarters with negative net income) beginning with the third
quarter of fiscal year 2005 and plus 100% of all equity offerings after the date
hereof, less intangible assets associated with any acquisition funded by such
equity; as used herein "Tangible Net Worth" means the aggregate of total
stockholders equity less the aggregate of any intangible assets, any treasury
stock and any obligations due from stockholders, employees and/or affiliates.

Total Liabilities divided by Tangible Net Worth not greater than 0.5 to 1.0,
with "Total Liabilities" defined as the aggregate of current liabilities and
non-current liabilities less subordinated debt, and with "Tangible Net Worth" as
defined above.

Quick Ratio not less than 1.75 to 1.00, with "Quick Ratio" defined as total
current assets, excluding inventory, divided by total current liabilities.

Accounts Receivable Days Outstanding of no more than 90 days. Calculated as
[Average net trade receivables divided by Net Sales for the period year to date]
multiplied by the number of days in the reporting period (number of quarters
multiplied by 90). Net Sales is defined as total sales less discounts, exchanges
and other such reductions. "Average Net Trade Receivables" is the sum of
Accounts Receivable net of an allowance for doubtful accounts ("Net Accounts
Receivable") at the end of the prior fiscal year end, plus Net Accounts
Receivable at the end of the period, divided by two. An example, using SBS
financial data as of June 30, 2004: Net Accounts Receivable at June 30, 2003 of
$24,000,000 plus Net Accounts Receivable at June 30, 2004 equals $48,335,000,
divided by 2 equals $24,167,500 divided by Net Sales of $133,874,000 equals
0.1805. Number of quarters in reporting period of 4 multiplied by 90 equals 360
days. 0.1805 multiplied by 360 days equals Accounts Receivable Days Outstanding
of 65.

Borrower shall not sustain a net loss in any two (2) consecutive quarters or for
any fiscal year as a whole.

SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five (5) days
after the occurrence of each such event or matter) give written notice to Bank
in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (B)&NBSP;any change in the name or
the organizational structure of Borrower; (C)&NBSP;the occurrence and nature of
any Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property in
excess of an aggregate of $1,000,000.00.

ARTICLE V

NEGATIVE COVENANTS

Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent, which will not be unreasonably withheld:

SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.

SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in fixed
assets in any fiscal year in excess of an aggregate of $7,000,000.00.

SECTION 5.3. LEASE EXPENDITURES. Incur operating lease expense in any fiscal
year in excess of an aggregate of $4,000,000.00.

SECTION 5.4. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Bank, (b) any other
liabilities of Borrower existing as of, and disclosed to Bank prior to, the date
hereof, (c) purchase money obligations arising in the ordinary course of
business and financing lease obligations for office equipment, furniture and
furnishings, aggregating less than $250,000 per annum, and (d) financing lease
obligations not exceeding $2,000,000 for office equipment, furniture and
furnishings for the new facility in Albuquerque, NM.

SECTION 5.5. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity; nor sell, lease, transfer
or otherwise dispose of all or a substantial or material portion of Borrower's
assets except in the ordinary course of its business.

SECTION 5.6. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank except as guarantor of contracts for a subsidiary in
the ordinary course of business.

SECTION 5.7. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in any person or entity, except any of the foregoing existing as of,
and disclosed to Bank prior to, the date hereof, and additional loans or
advances to or investments in, entities which are not controlled by Borrower in
amounts not to exceed an aggregate of $1,000,000.00 outstanding at any one time,
and additional loans or advances to or investments in foreign subsidiaries in
amounts not to exceed an aggregate of $3,500,000 in any fiscal year.

SECTION 5.8. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding.

SECTION 5.9. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower's assets now
owned or hereafter acquired, except any of the foregoing in favor of Bank or
which is existing as of, and disclosed to Bank in writing prior to, the date
hereof or which are purchase money security interests incurred in the ordinary
course of business securing amounts aggregating less than $250,000 per annum.

SECTION 5.10. ACQUISITIONS. Acquire or agree to acquire another company for
consideration in excess of the lesser of $25,000,000 or 50% of Borrower's net
cash balance located in the United States without Bank's prior approval, which
will not be unreasonably withheld or delayed.

ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.1. The occurrence of any of the following shall constitute an "Event
of Default" under this Agreement:

(a) Borrower shall fail to pay when due any principal, interest, fees or other
amounts payable under any of the Loan Documents and such failure shall continue
unremedied for a period of five (5) days after telephonic or written notice;
provided, however, no notice shall be required for an Event of Default after
Lender shall have given notice two times in any calendar year.

(b) Any financial statement or certificate furnished to Bank in connection with,
or any representation or warranty made by Borrower or any other party under this
Agreement or any other Loan Document shall prove to be incorrect, false or
misleading in any material respect when furnished or made.

(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of thirty (30) days after telephonic or written notice.

(d) Any default after any applicable grace or cure period in the payment or
performance of any obligation, or any defined event of default, under the terms
of any contract or instrument (other than any of the Loan Documents) pursuant to
which Borrower, any guarantor hereunder or any general partner or joint venturer
in any Borrower which is a partnership or joint venture (with each such
guarantor, general partner and/or joint venturer referred to herein as a "Third
Party Obligor") has incurred any debt or other liability to any person or
entity, including Bank.

(e) The filing of a notice of judgment lien against Borrower or any Third Party
Obligor which is not released within thirty (30) days; or the recording of any
abstract of judgment against Borrower or any Third Party Obligor in any county
in which Borrower or such Third Party Obligor has an interest in real property
which is not released within thirty (30) days; or the service of a notice of
levy and/or of a writ of attachment or execution, or other like process, against
the assets of Borrower or any Third Party Obligor which is not released within
thirty (30) days; or the entry of a final, non appealable judgment against
Borrower or any Third Party Obligor which remains unpaid for thirty (30) days.

(f) Borrower or any Third Party Obligor shall become insolvent, or shall suffer
or consent to or apply for the appointment of a receiver, trustee, custodian or
liquidator of itself or any of its property, or shall generally fail to pay its
debts as they become due, or shall make a general assignment for the benefit of
creditors; Borrower or any Third Party Obligor shall file a voluntary petition
in bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform Act,
Title 11 of the United States Code, as amended or recodified from time to time
("Bankruptcy Code"), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower or any Third Party Obligor, or Borrower
or any Third Party Obligor shall file an answer admitting the jurisdiction of
the court and the material allegations of any involuntary petition; or Borrower
or any Third Party Obligor shall be adjudicated a bankrupt, or an order for
relief shall be entered against Borrower or any Third Party Obligor by any court
of competent jurisdiction under the Bankruptcy Code or any other applicable
state or federal law relating to bankruptcy, reorganization or other relief for
debtors.

(g) The dissolution or liquidation of any Borrower or Third Party Obligor which
is a corporation, partnership, joint venture or other type of entity; or
Borrower or any such Third Party Obligor, or any of its directors, stockholders
or members, shall take action seeking to effect the dissolution or liquidation
of such Borrower or Third Party Obligor.

Any change of control of Borrower. As used herein, "change of control" means the
occurrence of any of the following: (a) any "person" or "group" (as such terms
are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but
excluding any employee benefit plan of such person or its subsidiaries, and any
person or entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a
person or group shall be deemed to have "beneficial ownership" of all capital
stock that such person or group has the right to acquire (such right, an "option
right"), whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of twenty-five (25%) of the capital stock of
the Borrower entitled to vote for members of the board of directors or
equivalent governing body of the Borrower on a fully diluted basis (and taking
into account all such securities that such person or group has the right to
acquire pursuant to any option right); (b) during any period of 24 consecutive
months, a majority of the members of the board of directors or other equivalent
governing body of the Borrower cease to be composed of individuals (i) who were
members of that board or equivalent governing body on the first day of such
period, (ii) whose election or nomination to that board or equivalent governing
body was approved by individuals referred to in clause (i) above constituting at
the time of such election or nomination at least a majority of that board or
equivalent governing body or (iii) whose election or nomination to that board or
other equivalent governing body was approved by individuals referred to in
clauses (i) and (ii) above constituting at the time of such election or
nomination at least a majority of that board or equivalent governing body
(excluding, in the case of both clause (ii) and (iii), any individual whose
initial nomination for, or assumption of office as, a member of that board or
equivalent governing body occurs as a result of an actual or threatened
solicitation of proxies or consents for the election or removal of one or more
directors by any person or group other than a solicitation for the election of
one or more directors by or on behalf of the board of directors); or (c) any
person or two or more persons acting in concert shall have acquired by contract
or otherwise, or shall have entered into a contract or arrangement that, upon
consummation thereof, will result in its or their acquisition of the power to
exercise, directly or indirectly, a controlling influence over the management or
policies of the Borrower, or control over the voting stock of the Borrower on a
fully-diluted basis (and taking into account all such voting stock that such
person or group has the right to acquire pursuant to any option right)
representing twenty-five (25%) or more of the combined voting power of such
voting stock.

A material adverse change in the condition (financial or otherwise), operations,
business, performance, properties or assets of the Borrower and its
subsidiaries, taken as a whole.

A material adverse effect upon (a) the business, assets, liabilities (actual or
contingent), operations, condition (financial or otherwise) or prospects of
Borrower and its subsidiaries, taken as a whole (b) the ability of such Borrower
or any of its subsidiaries to perform its obligations under this Credit
Agreement or any of the other Credit Documents or (c) the legality, validity or
enforceability of this Credit Agreement or any of the other Credit Documents or
the rights and remedies of the Lender hereunder and thereunder.

SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank's option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by each Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.

 

ARTICLE VII

MISCELLANEOUS

SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.

SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

BORROWER: SBS Technologies, Inc.

2400 Louisiana Blvd., N.E., #5-600

Albuquerque, New Mexico 87110

Attn: James E. Dixon, Chief Financial Officer

BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION

200 Lomas Blvd. N.W., MAC Q2129-103

Albuquerque, New Mexico 87102

Attn: Daniel A. Conklin, Vice President

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt; and (c)&NBSP;if sent by telecopy,
upon receipt.

SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable and customary attorneys' fees (to
include outside counsel fees), expended or incurred by Bank in connection with
(a) the negotiation and preparation of this Agreement and the other Loan
Documents, Bank's continued administration hereof and thereof, and the
preparation of any amendments and waivers hereto and thereto, (b) the
enforcement of Bank's rights and/or the collection of any amounts which become
due to Bank under any of the Loan Documents, and (c)&NBSP;the prosecution or
defense of any action in any way related to any of the Loan Documents, including
without limitation, any action for declaratory relief, whether incurred at the
trial or appellate level, in an arbitration proceeding or otherwise, and
including any of the foregoing incurred in connection with any bankruptcy
proceeding (including without limitation, any adversary proceeding, contested
matter or motion brought by Bank or any other person) relating to any Borrower
or any other person or entity.

SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or its business, any
guarantor hereunder or the business of such guarantor, or any collateral
required hereunder. Provided no Event of Default has occurred and is continuing
hereunder, all assignments or participations by Bank shall be subject to
Borrower's approval, which shall not be unreasonably withheld or delayed.

SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.

SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

SECTION 7.7. TIME. Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.

SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.

SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Mexico.

SECTION 7.11. ARBITRATION.

(a) Arbitration. The parties hereto agree, upon demand by any party, to submit
to binding arbitration all claims, disputes and controversies between or among
them (and their respective employees, officers, directors, attorneys, and other
agents), whether in tort, contract or otherwise arising out of or relating to in
any way (i) the loan and related Loan Documents which are the subject of this
Agreement and its negotiation, execution, collateralization, administration,
repayment, modification, extension, substitution, formation, inducement,
enforcement, default or termination; or (ii) requests for additional credit.

(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location
in New Mexico selected by the American Arbitration Association ("AAA"); (ii) be
governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA's commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA's optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the "Rules"). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. 91 or any
similar applicable state law.

(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which
the amount in controversy is $5,000,000.00 or less will be decided by a single
arbitrator selected according to the Rules, and who shall not render an award of
greater than $5,000,000.00. Any dispute in which the amount in controversy
exceeds $5,000,000.00 shall be decided by majority vote of a panel of three
arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of New Mexico or a neutral retired judge of the
state or federal judiciary of New Mexico, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of New Mexico and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the New Mexico Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.

(e) Discovery. In any arbitration proceeding discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters
directly relevant to the dispute being arbitrated and must be completed no later
than 20 days before the hearing date and within 180 days of the filing of the
dispute with the AAA. Any requests for an extension of the discovery periods, or
any discovery disputes, will be subject to final determination by the arbitrator
upon a showing that the request for discovery is essential for the party's
presentation and that no alternative means for obtaining information is
available.

(f) Class Proceedings and Consolidations. The resolution of any dispute arising
pursuant to the terms of this Agreement shall be determined by a separate
arbitration proceeding and such dispute shall not be consolidated with other
disputes or included in any class proceeding.

(g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs
and expenses of the arbitration proceeding.

(h) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators
and the parties shall take all action required to conclude any arbitration
proceeding within 180 days of the filing of the dispute with the AAA. No
arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.

BORROWER ACKNOWLEDGES THAT IT IS AWARE OF THE PROVISIONS OF 58-6-5 OF THE NEW
MEXICO STATUTES WHICH PROVIDES THAT A CONTRACT, PROMISE OR COMMITMENT TO LOAN
MONEY OR TO GRANT, EXTEND OR RENEW CREDIT OR ANY MODIFICATION THEREOF, IN AN
AMOUNT GREATER THAN $25,000, NOT PRIMARILY FOR PERSONAL, FAMILY OR HOUSEHOLD
PURPOSES, MADE BY A FINANCIAL INSTITUTION SHALL NOT BE ENFORCEABLE UNLESS IN
WRITING AND SIGNED BY THE PARTY TO BE CHARGED OR THAT PARTY'S AUTHORIZED
REPRESENTATIVE.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.

SBS TECHNOLOGIES, INC., WELLS FARGO BANK,

A New Mexico corporation NATIONAL ASSOCIATION

By: /S/ James E. Dixon By: /S/ Daniel A. Conklin

Name: James E. Dixon Name: Daniel A. Conklin

Title: Executive Vice President and CFO Title: Vice President