-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WOUwz8rTDprNMisdi1F8vn2MZXM0db5o9zVqhi59ussX9ARfCde0xPiw+ek4Xswj t4uCmvOX9XjxwpCv6Hmzrw== 0000087050-01-500005.txt : 20010613 0000087050-01-500005.hdr.sgml : 20010613 ACCESSION NUMBER: 0000087050-01-500005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010430 FILED AS OF DATE: 20010612 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SBE INC CENTRAL INDEX KEY: 0000087050 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 941517641 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08419 FILM NUMBER: 1659292 BUSINESS ADDRESS: STREET 1: 4550 NORRIS CANYON ROAD CITY: SAN RAMON STATE: CA ZIP: 94583 BUSINESS PHONE: 5103552000 MAIL ADDRESS: STREET 1: 4550 NORRIS CANYON RD CITY: SAN RAMON STATE: CA ZIP: 94583 10-Q 1 sbe_q201.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2001 [ ] Transition report pursuant to section 13 or 15(d) of the Securities and Exchange Act of 1934 For the transition period from _______ to ________ Commission file number 0-8419 ------ SBE, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 94-1517641 ----------------------------------- -------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4550 Norris Canyon Road, San Ramon, California 94583 ----------------------------------------------------- (Address of principal executive offices and zip code) (925) 355-2000 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether 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 (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of Registrant's Common Stock outstanding as of May 31, 2001 was 3,515,222. 1 SBE, INC. INDEX TO APRIL 30, 2001 FORM 10-Q PART I FINANCIAL INFORMATION ITEM 1 Financial Statements Condensed Consolidated Balance Sheets as of April 30, 2001 and October 31, 2000 3 Condensed Consolidated Statements of Operations for the three and six months ended April 30, 2001 and 2000 4 Condensed Consolidated Statements of Cash Flows for the six months ended April 30, 2001 and 2000 5 Notes to Condensed Consolidated Financial Statements 6 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 ITEM 3 Quantitative and Qualitative Disclosures about Market Risk 13 PART II OTHER INFORMATION ITEM 4 Submission of Matters to a Vote of Security Holders 13 ITEM 6 Exhibits and Reports on Form 8-K 14 SIGNATURES 15 EXHIBITS 16 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
SBE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) April 30, October 31, 2001 2000 ----------- ------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 6,869 $ 5,311 Trade accounts receivable, net 1,713 4,296 Inventories, net 5,090 4,918 Other 339 427 ----------- ------------- Total current assets 14,011 14,952 Property, plant and equipment, net 1,913 2,143 Capitalized software costs, net 194 293 Other 71 39 ----------- ------------- Total assets $ 16,189 $ 17,427 =========== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 684 $ 1,094 Accrued payroll and employee benefits 275 1,304 Accrued product warranties 144 145 Accrued rent 383 -- Other accrued expenses 155 767 ----------- ------------- Total current liabilities 1,641 3,310 Refundable Deposit 4,870 -- Deferred rent and other 256 288 ----------- ------------- Total liabilities 6,767 3,598 ----------- ------------- Stockholders' equity: Common stock 13,850 13,855 Deferred stock compensation (41) (164) Treasury stock (409) (409) Note receivable from stockholder (744) (744) Retained earnings (accumulated deficit) (3,234) 1,291 ----------- ------------- Total stockholders' equity 9,422 13,829 ----------- ------------- Total liabilities and stockholders' equity $ 16,189 $ 17,427 =========== =============
See notes to condensed consolidated financial statements. 3
SBE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three months ended Six months ended April 30, April 30, 2001 2000 2001 2000 -------- ------ -------- ------- Net sales $ 1,813 $8,944 $ 5,231 $15,913 Cost of sales 1,523 3,110 2,902 5,333 -------- ------ -------- ------- Gross profit 290 5,834 2,329 10,580 Product research and development 1,585 1,214 3,219 2,717 Sales and marketing 768 1,245 1,572 2,450 General and administrative 815 1,372 1,799 2,442 Restructuring costs 384 -- 384 -- -------- ------ -------- ------- Total operating expenses 3,552 3,831 6,974 7,609 -------- ------ -------- ------- Operating income (loss) (3,262) 2,003 (4,645) 2,971 Interest and other income, net 50 34 120 67 -------- ------ -------- ------- Income (loss) before income taxes (3,212) 2,037 (4,525) 3,038 Provision for income taxes --- 53 --- 94 -------- ------ -------- ------- Net income (loss) $(3,212) $1,984 $(4,525) $ 2,944 ======== ====== ======== ======= Basic earnings (loss) per share $ (0.95) $ 0.64 $ (1.35) $ 0.95 ======== ====== ======== ======= Diluted earnings (loss) per share $ (0.95) $ 0.53 $ (1.35) $ 0.83 ======== ====== ======== ======= Basic - Shares used in per share computations 3,368 3,116 3,349 3,099 ======== ====== ======== ======= Diluted - Shares used in per share computations 3,368 3,717 3,349 3,547 ======== ====== ======== =======
See notes to condensed consolidated financial statements. 4
SBE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six months ended April 30, ---------- 2001 2000 -------- -------- Cash flows from operating activities: Net income (loss) $(4,525) $ 2,944 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Amortization of deferred stock compensation 14 -- Depreciation and amortization: Property and equipment 436 418 Software 109 119 Changes in operating assets and liabilities: (Increase) decrease in trade accounts receivable 2,583 (3,496) Increase in inventories (172) (1,748) Increase (decrease) in other assets 56 (71) Increase (decrease) in trade accounts payable (410) 1,093 Increase (decrease) in other current liabilities (1,259) 1,179 Increase (decrease) in non current liabilities 4,838 (31) -------- -------- Net cash provided by operating activities 1,670 407 -------- -------- Cash flows from investing activities: Purchases of property and equipment (206) (569) Capitalized software costs (10) (96) -------- -------- Net cash used in investing activities (216) (665) -------- -------- Cash flows from financing activities: Purchase of treasury stock -- (51) Proceeds from stock plans 104 302 -------- -------- Net cash provided by financing activities 104 251 -------- -------- Net increase (decrease) in cash and cash equivalents 1,558 (7) Cash and cash equivalents at beginning of period 5,311 3,385 -------- -------- Cash and cash equivalents at end of period $ 6,869 $ 3,378 ======== ========
See notes to condensed consolidated financial statements. 5 SBE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. INTERIM PERIOD REPORTING: These condensed consolidated financial statements of SBE, Inc. (the "Company") are unaudited and include all adjustments, consisting of normal recurring adjustments, that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations and cash flows for the interim periods. The condensed consolidated financial statements of the Company include the financial position and results of operation of LAN Media Corporation, which the Company acquired on July 14, 2000. The merger was accounted for as a pooling of interests, and accordingly, financial statements presented for all periods have been restated to reflect combined operations and financial position. The results of operations for the six months ended April 30, 2001 are not necessarily indicative of expected results for the full 2001 fiscal year. Certain information and footnote disclosures normally contained in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes contained in the Company's Annual Report on Form 10-K for the year ended October 31, 2000. MANAGEMENT ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates and judgments made by management of the Company include matters such as collectibility of accounts receivable, realizability of inventories and recoverability of capitalized software and deferred tax assets. 2. INVENTORIES: Inventories comprise the following (in thousands): April 30, October 31, 2001 2000 ------ ------ Finished goods $ 2,476 $ 2,144 Parts and materials 2,614 2,774 ------ ------ $ 5,090 $ 4,918 ====== ====== 6 3. REFUNDABLE DEPOSIT A refundable deposit associated with a multi-year supply agreement with Compaq Computer Corporation of $4.9 million was received in April 2001. This deposit is refundable as the Company delivers certain quantities of products to Compaq over the next four years. The entire deposit has been classified as non current as the first refund is not expected to be made within the next twelve months. 4. NET EARNINGS (LOSS) PER SHARE: Basic earnings per common share for the six months ended April 30, 2001 and 2000 were computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings per common share for the six months ended April 30, 2000 were computed by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding. The following table sets forth the computation of basic and diluted net income (loss) per share for the periods indicated (in thousands, except per share data):
Three months ended Six months ended April 30, April 30, 2001 2000 2001 2000 -------- ------ -------- ------ Basic: Numerator - --------- Net income (loss) $(3,212) $1,984 $(4,525) $2,944 Denominator - ----------- Weighted average shares 3,368 3,116 3,349 3,099 -------- ------ -------- ------ Basic net income (loss) per share (.95) .64 (1.35) .95 -------- ------ -------- ------ Diluted: Numerator - --------- Net income (loss) (3,212) 1,984 (4,525) 2,944 Denominator - ----------- Weighted average shares 3,368 3,116 3,349 3,547 Shares issuable under stock options --- 601 --- 448 -------- ------ -------- ------ Diluted shares 3,368 3,717 3,349 3,547 Diluted net income (loss) per share (.95) .53 (1.35) .83 -------- ------ -------- ------
7 Diluted net loss per share for the three and six month periods ended April 30, 2001 does not include the effect of 55,654 and 80,486 shares, respectively, of common stock issuable under stock options as such common stock equivalents have an antidilutive effect. 5. RESTRUCTURING COSTS: During the second fiscal quarter of 2001, the Company recorded a pre-tax restructuring charge of $384,000 in connection with the Company's consolidation and subleasing of facilities. The charge represents the estimated costs associated with the unoccupied space, net of estimated sublease revenues. The Company expects future cash expenditures related to this restructuring activity to be approximately $384,000, of which $310,000 is anticipated to be paid within the next twelve months. No cash payments were made during the quarter ended April 30, 2001 in connection with this matter. 6. CONCENTRATION OF RISK: In the three and six months ending April 30, fiscal 2001 and 2000, most of the Company's sales were attributable to sales of wireless communications products and were derived from a limited number of OEM customers. Sales to Compaq Computer Corporation accounted for 49 percent and 73 percent of net sales during the second quarter of fiscal 2001 and 2000, respectively, and 40 percent and 75 percent of the Company's net sales in the first six months of fiscal 2001 and 2000, respectively. The only other customer with sales of 10 percent or more was Lucent Technologies, with sales of 10 percent and four percent for the first six months of fiscal 2001 and 2000, respectively. Also, Compaq accounted for 46 percent and 82 percent of the Company's accounts receivable as of April 30, 2001 and April 30, 2000, respectively. The Company expects that sales to Compaq will continue to constitute a substantial portion of the Company's net sales in the remainder of fiscal 2001. A significant reduction in orders from any of the Company's OEM customers, particularly Compaq, could have a material adverse effect on the Company's business, operating results and financial condition. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Such forward-looking statements may be deemed to include information that is not historical, including without limitation, the Company's expectations regarding sales to Compaq Computer in fiscal 2001, the belief that the market for client server networking products is growing, the adequacy of anticipated sources of cash, planned capital expenditures, the effect of interest rate increases and trends or expectations regarding the Company's operations. Words such as "believes," "anticipates," "expects," "intends" and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Readers are cautioned that the forward-looking statements reflect management's analysis only as of the date hereof, and the Company assumes no obligation to update these statements. Actual events or results may differ materially from the results discussed in or implied by the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those risks and uncertainties discussed below under "Factors Affecting Operating Results" and elsewhere in this Quarterly Report on Form 10-Q, as well as other risks set forth under the caption "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2000. The following discussion should be read in conjunction with the Financial Statements and the Notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and in the Company's Form 10-K for the fiscal year ended October 31, 2000. 8 SBE, Inc. designs, markets, sells and supports high-speed intelligent communications controller products for use in telecommunications systems worldwide. Our products enable both traditional and emerging telecommunications service providers to deliver advanced communications equipment and services, which we believe help these providers compete more effectively in today's highly competitive telecommunications service market. Our products include WAN interface adapters and high performance communications controllers that are used principally in workstations, media gateways, routers, internet access devices, home location registers and data messaging applications. Our business is characterized by a concentration of sales to a small number of OEM customers and consequently the timing of significant orders from major customers and their product cycles causes fluctuation in our operating results. Sales to Compaq Computer Corporation, our largest customer, represented 67 percent of our net sales in fiscal 2000. If any of our major customers, especially Compaq, reduces orders for our products, we could lose revenues, whereby our business, operating results and financial condition would suffer. Sales to Compaq accounted for 40 percent of our net sales in the six months ended April 30, 2001 and 75 percent for the first six months of fiscal 2000. Orders by our OEM customers are affected by factors such as new product introductions, product life cycles, inventory levels, manufacturing strategy, contract awards, competitive conditions and general economic conditions. We are attempting to diversify our sales with the introduction of new products that are targeted at large growing markets within the telecommunications industry. Our Highwire products are focused on the telecommunications applications market. We believe the growth in this market is driven by the convergence of traditional telephony applications with the Internet. We cannot assure you that we will be able to succeed in penetrating this market and diversifying our sales. RESULTS OF OPERATIONS The following table sets forth, as a percentage of net sales, consolidated statements of operations data for the three and six months ended April 30, 2001 and 2000. These operating results are not necessarily indicative of our operating results for any future period. 9
THREE MONTHS ENDED SIX MONTHS ENDED -------------------- ------------------ APRIL 30, APRIL 30, ---------- ---------- 2001 2000 2001 2000 ------ ----- ----- ----- Net sales 100% 100% 100% 100% Cost of sales 84 35 55 34 ------ ----- ----- ----- Gross profit 16 65 45 66 ------ ----- ----- ----- Product research and development 87 14 62 17 Sales and marketing 42 14 30 17 General and administrative 45 15 34 15 Restructuring costs 21 -- 7 -- ------ ----- ----- ----- Total operating expenses 196 43 133 48 ------ ----- ----- ----- Operating income (loss) (180) 22 (89) 19 Interest and other income, net 3 1 2 0 ------ ----- ----- ----- Income (loss) before income taxes (177) 23 (87) 19 Provision for income taxes -- 1 -- 0 ------ ----- ----- ----- Net income (loss) (177)% 22% (87)% 19% ====== ===== ===== =====
NET SALES Net sales for the second quarter of fiscal 2001 were $1.8 million, an 80 percent decrease from the second quarter of fiscal 2000. For the first six months of fiscal 2001 net sales were $5.2 million, which represented a 67 percent decrease from the same period in fiscal 2000. This decrease was primarily attributable to lower sales to Compaq of $5.7 million in the second quarter of fiscal 2001 and $9.9 million for the first six months of fiscal 2001, respectively, compared to fiscal 2000. This was in addition to a $1.4 million decrease in sales of all other product lines combined for the second quarter of fiscal 2001, and an $800,000 decrease in sales of all other product lines for the first six months of fiscal 2001, compared to fiscal 2000. Market and economic uncertainty as well as product design delays at several of our large customers also contributed to the decrease as product development cycles were pushed back to later quarters of the year. Sales to Compaq, primarily of VMEBus products, represented 49 percent of sales for the second quarter and 40 percent of sales for the first six months of fiscal 2001, while sales to Lucent Technologies represented six percent of net sales during the second quarter and 10 percent of sales for the first six months of fiscal 2001. No other customer accounted for over 10 percent of sales in the three or six month periods. We expect to continue to experience fluctuation in product sales as large customers' needs change. GROSS PROFIT Gross profit as a percentage of sales in the second quarter of fiscal 2001 was 16 percent, as compared to 65 percent during the second quarter of fiscal 2000. For the first six months of fiscal 2001 the gross profit percentage was 45 percent, as compared to 66 percent during the same period of fiscal 2000. The decrease from fiscal 2000 to fiscal 2001 was primarily attributable to higher material costs and a less favorable product mix in the fiscal 2001 period. 10 PRODUCT RESEARCH AND DEVELOPMENT Product research and development expenses were $1.6 million in the second quarter of fiscal 2001, an increase of 31 percent from $1.2 million in the second quarter of fiscal 2000, but virtually unchanged from the first quarter of fiscal 2001. For the first six months of fiscal 2001, research and development expenses were $3.2 million, an 18 percent increase from $2.7 million for the first six months of fiscal 2000. The increase in research and development spending from the fiscal 2000 period to the fiscal 2001 period was a result of accelerated spending for development of our HighWire and other new telecommunications products. We expect research and development spending to remain equal to or slightly below current levels, as additional new products are developed and as we continue to expand our product lines to meet the demands of the telecommunications marketplace. SALES AND MARKETING Sales and marketing expenses for the second quarter of fiscal 2001 were $768,000, a decrease of 38 percent from $1.2 million in the second quarter of fiscal 2000. The sales and marketing expenses for the first six months of fiscal 2001 were $1.6 million, a 36 percent decrease from $2.5 million in fiscal 2000. The decrease for fiscal 2001 was primarily due to lower marketing program spending for products already introduced during previous quarters, but not yet fully available in volume. Expenditures were closely monitored in light of current market conditions, and less than expected revenue year to date. Overall, we expect sales and marketing expenses will increase slightly from the fiscal 2000 level during fiscal 2001, as additional new products are introduced and as marketing and sales programs are expanded and/or introduced to give even greater exposure to our newer products. GENERAL AND ADMINISTRATIVE General and administrative expenses were $815,000 for the second quarter of fiscal 2001, a decrease of 41 percent from $1.4 million in the second quarter of fiscal 2000. For the first six months of fiscal 2001 general and administrative expenses were $1.4 million, a decrease of 42 percent from $2.4 million for the first six months of fiscal 2000. This decrease was due to carefully maintaining or reducing spending levels in response to lower income levels during the second quarter of fiscal 2001. In future periods, we expect that general and administrative expenses may continue to decrease from current expenditure levels as overhead levels are reduced. RESTRUCTURING COSTS Restructuring costs of $384,000 were recorded during the second fiscal quarter of 2001 related to the Company's consolidation and subleasing of facilities. The charge represented the estimated costs of facilities leases net of estimated sublease revenues. INTEREST AND OTHER INCOME, NET Net interest and other income increased to $50,000 in the second quarter of fiscal 2001 from $34,000 in the same period in fiscal 2000, an increase of 47 percent. Also, for the first six months of fiscal 2001 net interest and other income was $120,000, an increase of 79 percent from $67,000 in fiscal 2000. This increase was due to higher average cash balances and decreased debt. INCOME TAXES We did not record any benefit for taxes in the second quarter of fiscal 2001 or during the first six months of fiscal 2001 due to the uncertainty in realizing the benefit derived from our net operating losses and unused tax credits in future periods. Therefore the tax benefits related to the net operating losses and tax credits were fully reserved against. We recorded a provision for taxes in the second quarter of fiscal 2000 of $53,000. For the first six months of fiscal 2000, we recorded a provision of $94,000. In the event of future taxable income, our effective income tax rate in future periods could be lower than the statutory rate as operating loss and tax credit carryforwards are recognized. 11 NET INCOME (LOSS) As a result of the factors discussed above, we recorded a net loss of $3.2 million in the second quarter of fiscal 2001, as compared to net income of $2.0 million in the second quarter of fiscal 2000. For the first six months of fiscal 2001, the loss was $4.5 million, compared to a net income of $2.9 million for the first six months of fiscal 2000. LIQUIDITY AND CAPITAL RESOURCES At April 30, 2001, we had cash and cash equivalents of $6.9 million, as compared to $5.3 million at October 31, 2000. In the first six months of fiscal 2001, $1.7 million of cash was provided through operating activities, primarily as a result of a $2.6 million decrease in accounts receivable and a $4.8 million increase in non current liabilities, partially offset by a $4.5 million net loss, a $172,000 increase in inventories, a $410,000 decrease in trade accounts payable and a $1.3 million decrease in other current liabilities. The accounts receivable decrease was primarily a result of decreased sales. The increase in non current liabilities was the result of a $4.9 million deposit from Compaq which was part of a four-year end-of-life supply agreement that was initiated during the second quarter of fiscal 2001. Inventory increased as a result of purchases of certain end-of-life components to be used in future production of VME and LMC adapter products, offset by obsolete inventory that was written off. We believe that we have acquired sufficient components to meet backlog and forecasted customer demand, to meet near term requirements, and are actively working with the applicable customers to help them transition to new product platforms. The decrease in trade accounts payable is the result of controlled spending during the current period of decreased sales. The decrease in other current liabilities was a result of the payment of accrued sales commissions, bonuses, and company profit sharing earned in the previous fiscal year. Working capital at April 30, 2001 was $12.4 million, as compared to $11.6 million at October 31, 2000. In the first six months of fiscal 2001, the Company purchased $206,000 of fixed assets, consisting primarily of computer and engineering equipment. Software costs amounting to $10,000 were capitalized during the first six months of 2001. We expect capital expenditures will remain at current levels for the remainder of fiscal 2001. We received $104,000 in the first six months of fiscal 2001 from payments related to employee stock option exercises and purchases made by employees pursuant to our employee stock purchase plan. Based on the current operating plan, we anticipate that our current cash balances and anticipated cash flows or usage from operations will allow for us to meet our working capital needs over the next 12 months. However, in the event additional financing is required, we may not be able to raise new funds on acceptable terms, or at all. 12 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our cash and cash equivalents are subject to interest rate risk. We invest primarily on a short-term basis. Our financial instrument holdings at April 30, 2001 were analyzed to determine their sensitivity to interest rate changes. The fair values of these instruments were determined by net present values. In our sensitivity analysis, the same change in interest rate was used for all maturities and all other factors were held constant. If interest rates increased by 10 percent, the expected effect on net income related to our financial instruments would be immaterial. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The annual meeting of stockholders of the Company was held on Tuesday, March 20, 2001, at the Company's corporate offices located at 4550 Norris Canyon Road, San Ramon, California. The stockholders approved the following four items: (i) The election of two directors to hold office until the 2004 Annual Meeting of Stockholders: For Against --------- ------- Raimon L. Conlisk 2,734,472 311,381 Randall L-W Caudill 2,736,257 309,596 (ii) The Company's 1996 Stock Option Plan, as amended to increase the number of of shares reserved for issuance under such plan by 150,000 shares. (For-- 722,904; Against--506,921; Abstain--3,183; Non-votes--1,812,845) (iii) Approved the Company's Non-Employee Directors' Plan (the "Directors' Plan"), as amended to change the amount of the initial discretionary grant for non-employee directors, the term and vesting schedule of options granted under the Directors' Plan and other provisions as more fully described in the proxy statement for the 2001 Annual Meeting of Stockholders. (For--807,240; Against--422,520; Abstain--3,248; Non-votes--1,812,845) (iv) The ratification of the selection of PricewaterhouseCoopers LLP as the Company's independent auditors for the fiscal year ending October 31, 2001. (For--3,041,287; Against--3,728; Abstain--838) 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) List of Exhibits: 10.1* Amendment No. S/M018-4 dated April 3, 2001, to the Purchase Agreement dated May 6, 1991, between SBE, Inc. and Compaq Computer Corporation. 11.1 Statements of Computation of Net Income (Loss) per Share. (b) Reports on Form 8-K: No report on Form 8-K was filed by the Company during the quarter ended April 30, 2001. * Certain portions have been deleted pursuant to a confidential treatment request. 14 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, on June 12, 2001. SBE, INC. ---------- Registrant /s/Timothy J. Repp ------------------------------------------ Timothy J. Repp Chief Financial Officer, Vice President of Finance and Secretary (Principal Financial and Accounting Officer) 15 EXHIBIT INDEX Exhibit Description Page - ------- ----------- ---- 10.1* Amendment No. S/M018-4 dated April 3, 2001 to the 17 Purchase Agreement Dated May 6, 1991, between SBE, Inc. and Compaq Computer Corporation. 11.1 Statements of Computation of Net Income (Loss) 32 per share. * Certain portions have been deleted pursuant to a confidential treatment request. 16 EX-10.1 2 doc2.txt EXHIBIT 10.1 *** Text Omitted and Filed Seperately Confidential Treatment Requested Under 17 C.F.R. 200.80(b)(4), 200.83 and 240.24b-2 AMENDMENT NO. S/M018-4 TO THE PURCHASE AGREEMENT BETWEEN SBE INC. AND COMPAQ DATED MAY 6, 1991 AGREEMENT NO. S/M018-0 & PURCHASING AMENDMENT NO. S/M018-3 THIS AMENDMENT No. S/M018-4 to the Purchase Agreement No. S/M018-0 and Purchasing Amendment No. S/M018-3 is entered into as of this 3rd day of April, 2001 (the "Effective Date"), by and between SBE, INC., a Delaware corporation with its principal place of business at 4550 Norris Canyon Road, San Ramon, CA 94583-1369 ("Seller"), and COMPAQ COMPUTER CORPORATION, a Delaware corporation with its principal place of business at 901 Page Avenue, Fremont, California, 94538 ("Customer"). RECITALS A. Seller manufactures and distributes certain hardware components; B. Customer wants to buy Seller's hardware components from Seller. WHEREAS, Buyer and Seller have entered into the Corporate Purchase Agreement effective as of May 6, 1991 ("Agreement") as amended by the Purchase Amendment with an effective date of May 6, 1996. NOW, THEREFORE, Seller and Customer agree as follows: AGREEMENT 1. DEFINITIONS 1.1. "Confidential Information" means any confidential or proprietary information of either party, including without limitation any designs, schematics, plans or any other information relating to any research project, work in process, future development, scientific, engineering, manufacturing, marketing or business plan, or financial or personnel matter relating to such party, its present or future products, sales, suppliers, customers, employees, investors or business, and identified as propriety or confidential, whether in oral form, or in written, graphic or electronic form." 1.2. "Intellectual Property Rights" means all current and future worldwide patents and other patent rights (such as continuations, continuations-in-part and reissues), utility models, copyrights, mask work rights, trade secrets and all other intellectual property rights, including without limitation all applications and registrations with respect thereto, including trademarks, service marks, trademarks, trade names and other product, service and company identifiers. 17 1.3. "Products" means the Seller-proprietary hardware products described on Exhibit A attached hereto. 1.4. "Source Control Documents" (SCD) The SCD is a non-disclosure statement specifying the information provided will not be freely disclosed to unauthorized end users. The SCD also outlines the procedures and process required for handling source code information. The SCD contains information considered confidential; examples would be blue prints, operating software for controlled products, software that allows the automatic generation of source codes, software that performs proof/validation. 2. PURCHASE OF PRODUCTS. 2.1. Purchase Orders. Customer's purchase orders for Products shall contain the quantity of each item to be purchased, the delivery destinations, the requested delivery dates, any special shipping or delivery instructions, billing instructions and any other special information required by this Agreement. All purchase orders hereunder must be received by Seller prior to April 30, 2005 and must specify a delivery date prior to July 31, 2005. All purchase orders shall be issued at least sixty (60) days but no more than one hundred eighty (180) days before the requested delivery date. Notwithstanding the preceding sentence, by agreeing to pay a premium/expedite fee of [ *** ] of the original order price (in addition to original order price) Customer may issue a purchase order less than sixty (60) days before the requested delivery date. Seller will endeavor to meet such requests by Customer for expedited delivery insofar as it is practicable and consistent with Seller's production schedules to do so, but Seller shall have the right to reject any request for expedited delivery. The terms and conditions of this Agreement with respect to Product purchases shall be incorporated into and made a part of each Customer purchase order. Seller reserves the right to reject any purchase order that is not consistent with the terms of this Agreement. The terms and conditions of this Agreement shall supersede any terms set forth in any purchase order or other Customer document delivered in connection with Customer's purchases under this Agreement, and any terms and conditions appearing in any purchase order that are inconsistent with or in addition to the terms and conditions of this Agreement shall be of no force and effect and are hereby rejected. Performance under a purchase order shall not constitute acceptance of terms that are inconsistent or in addition to the terms and conditions of this Agreement. 2.2. Minimum Product Purchases. During the Term, Customer agrees to Purchase and Seller agrees to supply up to 13,350 units of the Products at the purchase price per unit set forth in Exhibit A. Such purchase shall consist of up to [ *** ] VCOM-33 controller boards (Part No. U40567-A01) and up to [ *** ] VCOM-34 controller boards (Part Nos. U32887-002 and U25022-A04). Customer agrees to convert all orders for Products outstanding as of the Effective Date to purchase orders under this Agreement no later than April 3, 2001. All such orders not converted as of April 5, 2001 will be cancelled. *** CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 18 2.3. Minimum Order, Minimum Delivery. Seller shall not be obligated to accept any order from Customer of fewer than [ *** ] units of each part number listed on Exhibit A. Seller shall not be obligated to make any delivery of fewer than [ *** ] units of each part number listed on Exhibit A. 2.4. Retention of Rights to Change Product Design. Either party reserves the right to make changes and modifications in specification, construction, or design of any Product or product component at any time and from time to time and any component so modified shall be accepted by both parties in fulfillment of existing orders. Either party will notify Customer in writing of any proposed design changes to the Products, which affect form, fit, function, safety, reliability or electrical or mechanical interfaces. Such notices will be delivered at least ninety (90) days prior to such date change is expected to be incorporated into the Product. 2.5. No Cancellation. Customer may not cancel purchase orders once accepted by Seller, except for the ability to reschedule as referred to in Section 2.6 2.6. Reschedule. For no charge or fee, Customer may request rescheduled delivery for Products subject to an outstanding purchase order; provided that (i) the date of such request is at least 60 days in advance of the requested rescheduled delivery date and (ii) the requested rescheduled delivery date is less than 180 days from the original order date. By agreeing to pay a premium/expedite fee of [ *** ] of the original order price (in addition to original order price) Customer may request that delivery for Products subject to an outstanding purchase order be rescheduled to a date less than [ *** ] days from the date of such request. All requests for rescheduled delivery are subject to acceptance by Seller. All rescheduled deliveries are subject to the minimum order provision of Section 2.3. 3. SHIPPING TERMS. 3.1. ORDER FULFILLMENT. Upon receipt of a purchase order, Seller will notify Customer of acceptance or rejection of such purchase order, and if accepted, the proposed delivery date. Seller will endeavor to fill all Customer orders for Products insofar as it is practicable and consistent with its production schedules to do so, but in the event of its failure to fill all or any material part of any accepted order within 10 days of committed delivery Seller shall be liable or responsible as follows. For delivery later than 10 days but prior to 30 days from committed delivery date, Seller will reduce the price of the Products by [ *** ]. For failure to deliver within [ *** ] days from committed delivery date Customer may give notice of termination as per Section 10.4. No Customer purchase order will become fixed and binding on Seller unless and until accepted by Seller. 3.2. TITLE, RISK OF LOSS AND SHIPPING COSTS. Delivery of all Products shall be made ex works "per Chamber of Commerce INCOTERMS, 1990 addition" Seller's facilities. Customer must take delivery of all Products no later than 180 days from the order date. Customer shall be responsible for paying all freight; handling, shipping and insurance charges and such charges will be separately listed in the applicable invoice and are not included in the list price for the Products. Title, risk of loss or damage to the Products shall pass to Customer upon shipment from Seller's facility. *** CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 19 3.3. CARRIER. Seller will select a carrier for delivery unless Customer has designated a particular carrier acceptable to Seller. In no event shall Seller have any liability in connection with shipment, nor shall the carrier be deemed to be an agent of Seller. Seller shall not be liable for damage or penalty for delay in delivery or for failure to give notice of any delay. Customer will be deemed to have accepted all Products upon delivery. 4. PURCHASE PRICE AND PAYMENT. 4.1. PURCHASE PRICE. Customer shall pay to Seller the purchase price for the Products as set forth on EXHIBIT A. Customer acknowledges that separate fees may be charged under a separate services agreement for related services, and that any such separate fees will be as stated in such agreement or an exhibit thereto. [ *** ] 4.2. PAYMENT SCHEDULE. Customer shall pay all invoices issued under this Agreement within [ *** ] from the date of invoice. Seller may at any time decline to make any shipments or deliveries or perform any work except upon receipt of payment or upon terms and conditions or security satisfactory to Seller. 4.3. TAXES. All stated prices are exclusive of any taxes, fees, duties and levies, however designated or imposed, and including without limitation, value added and withholding taxes which are levied or based upon the amounts paid hereunder (collectively, "Taxes"). Any Taxes related to Products purchased pursuant to this Agreement shall be paid by Customer (excluding taxes based on Seller's net income), unless Customer presents an exemption certificate acceptable to Seller and the applicable taxing authorities. Applicable Taxes shall be billed as a separate item on the invoice to the extent possible. 4.4. LATE CHARGES. Seller reserves the right to charge Customer a late payment fee on any past due amounts at the rate of one and a half percent (1.5%) per month or the maximum amount permitted by law, whichever is less. 4.5. DEPOSIT. On the Effective Date, Customer will pay to Seller a deposit in the amount of four million eight hundred seventy thousand dollars (US$4,870,000.00) (the "Deposit"). The Deposit will be refunded to Customer according to the following schedule: (a) Seller will refund to Customer [ *** ] when a total of [ *** ] units of the Products have been shipped to Customer under this Agreement; *** CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 20 (b) Seller will refund to Customer [ *** ] when a total of [ *** ] units of the Products have been shipped to Customer under this Agreement; (c) Seller will refund to Customer [ *** ] when a total of [ *** ] units of the Products have been shipped to Customer under this Agreement; (d) Seller will refund to Customer [ *** ] when a total of [ *** ] units of the Products have been shipped to Customer under this Agreement; (e) Seller will refund to Customer [ *** ] when a total of [ *** ] units of the Products have been shipped to Customer under this Agreement; (f) Seller will refund to Customer the remaining [ *** ] of the Deposit when a total of [ *** ] units of the Products have been shipped to Customer; If Customer chooses to terminate the agreement pursuant to Section 10.2 or 10.3 prior to reaching any of the payback milestones listed in (a) through (f) above, Seller will refund to Customer upon such termination [ *** ] per every unit of the Products purchased by Customer since the previous payment milestone reached by Customer. Upon such termination, Customer will forfeit any remainder of the Deposit not refunded pursuant to the terms of this Section 4.5. 5. LIMITED WARRANTIES. 5.1. LIMITED WARRANTY. The Products supplied to Customer by Seller under this Agreement are subject to the Seller's Product Limited Warranty attached as EXHIBIT B hereto. The warranty period for each of the Products supplied hereunder will begin on the date such Products are shipped to Customer and shall terminate as specified in the Product Limited Warranty. 5.2. WARRANTY DISCLAIMER. EXCEPT FOR THE EXPRESS WARRANTY IN THIS SECTION 5, SELLER MAKES NO WARRANTIES, WHETHER EXPRESS, IMPLIED, OR STATUTORY, AND HEREBY EXPRESSLY DISCLAIMS ANY AND ALL SUCH WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE OR NONINFRINGEMENT, WITH RESPECT TO THE PRODUCTS SUPPLIED TO CUSTOMER HEREUNDER. Customer acknowledges that it has not relied on any representations or warranties regarding the Products, other than those in this Section 5. 5.3. End-User Warranties. Customer shall indemnify, defend and hold harmless Seller for and against any end-user warranty claim offered by Customer that is outside the warranties of this Agreement, including, but not limited to, valid consumer warranty claims arising outside the applicable warranty period. *** CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 21 5.4. Out of Warranty Repair Seller shall repair and or refurbish any Product which is out of warranty and which is not beyond practical reparability for thirty percent (30%) of the price stated in exhibit A. Seller warrants that any Products repaired or refurbished by Seller will be in conformance with the Product Specifications and free from defects in materials and workmanship for ninety days (90) from the date of shipment. 6. INDEMNITY Seller shall indemnify, defend and hold harmless Buyer and its affiliates and their respective directors, officers, shareholders, employees and agents (collectively, the "Buyer Indemnified Parties") from and against any and all claims, demands, suits, actions, judgments, costs and liabilities (including attorneys' fees) (each, an "Indemnified Loss") relating to or arising out of any allegation that Products furnished under this Agreement infringe or violate any patent, copyright, trade secret, trade name, trade dress, mask work, mask rights, trademark or any other proprietary right and shall pay all costs and damages awarded;provided, the foregoing indemnity shall not apply to the extent any such claim is attributable solely to design specifications furnished by Buyer to Seller. Buyer shall notify Seller of such claim and permit Seller to defend and compromise such claim; provided, Buyer's failure to so notify Seller shall not diminish Seller's indemnity obligations hereunder except to the extent any Buyer's delay in notifying Seller materially prejudices Seller's defense of such matter. If an injunction or exclusion order preventing the use of the Products results from such a claim (or, if Buyer reasonably believes such an injunction is likely) Seller shall, at its expense, and at Buyer's request, use commercially reasonable efforts to obtain for Buyer the right to continue using the Product. In the event that Seller cannot obtain such right for Buyer, Seller shall be deemed to have breached its warranty set forth in the Warranty Section above and thereupon Seller shall repurchase all such Products from Buyer at the purchase price, and Buyer shall be entitled to such additional remedies as may be available at law or in equity. Seller shall indemnify, defend and hold harmless the Buyer Indemnified Parties from and against any Indemnified Loss relating to or arising out of any personal injury or death resulting from (i) the use of any Product or (ii) Seller's acts or omissions; provided, the foregoing indemnity shall not apply to the extent any such claim is attributable solely to design specifications furnished by Buyer to Seller. 22 7. LIMITATION OF LIABILITY. IN NO EVENT SHALL SELLER BE LIABLE TO CUSTOMER OR ANYONE CLAIMING THROUGH OR UNDER CUSTOMER, FOR ANY LOST PROFITS, LOST SAVINGS, PRODUCTS DOWNTIME OR LOST DATA OR FOR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL OR INDIRECT DAMAGES OF ANY KIND, INCLUDING, BUT NOT LIMITED TO, ARISING FROM OR RELATING TO THE PRODUCTS OR THIS AGREEMENT, EVEN IF SELLER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. NOTWITHSTANDING THE FAILURE OF ANY LIMITED REMEDY OF ITS ESSENTIAL PURPOSE, THE TOTAL CUMULATIVE LIABILITY OF SELLER TO CUSTOMER FOR ANY CLAIMS OR CAUSES OF ACTION ARISING FROM OR RELATING TO THE PRODUCTS OR THIS AGREEMENT, WHETHER IN CONTRACT, IN TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL NOT EXCEED THE LESSER OF ONE THOUSAND DOLLARS ( $1,000) OR THE AGGREGATE AMOUNT PAID TO SELLER DURING THE TWELVE (12) MONTHS PRECEEDING THE CLAIM. Customer acknowledges and agrees that Seller's pricing and the other terms of this Agreement are predicated on the limitations of Seller's liability set forth in above and acknowledges that Seller would not enter into this Agreement without such limitations. 8. CONFIDENTIALITY. 8.1. Confidentiality. During the Term and for five (5) years thereafter, each party (the "Receiving Party") shall maintain in confidence all Confidential Information disclosed to it by the other party (the "Disclosing Party") hereunder. The Receiving Party shall not use, disclose or grant use of the Disclosing Party's Confidential Information except as expressly authorized by this Agreement. To the extent that disclosure is authorized by this Agreement, the Receiving Party will obtain prior agreement from its employees, agents or consultants to whom disclosure is to be made to hold in confidence and not make use of such information for any purpose other than those permitted by this Agreement. The Receiving Party will use at least the same standard of care as it uses to protect its own most confidential information to ensure that such employees, agents or consultants do not disclose or make any unauthorized use of such Confidential Information. The Receiving Party will promptly notify the Disclosing Party upon discovery of any unauthorized use or disclosure of the Confidential Information. 9. INTELLECTUAL PROPERTY RIGHTS. Except for the right to possess and use the Products contemplated by this Agreement, the delivery and sale of the Products to Customer (a) does not convey to Customer or any third party any Intellectual Property Rights in or related to the Products, and (b) does not grant to Customer or any third party any license under any patents or patent applications of Seller except for the right to possess and use the Product in accordance with this Agreement. Customer shall not, and shall not permit any third party to, disassemble or analyze the physical construction of any Products (or any component thereof) for any purpose. 10. TERM AND TERMINATION. 10.1. TERM. This Agreement shall become effective as of the Effective Date and, unless terminated earlier pursuant to this Section 10, shall terminate on July 31, 2005 (the "Term"). 10.2. TERMINATION BY CUSTOMER. Customer may terminate this Agreement for any reason at any time by giving notice of termination to Seller. Upon termination by Customer under this Section 10.2, (i) Customer will forfeit any unrefunded portion of the Deposit according to the terms of Section 4.5; and (ii) all purchase orders issued prior to termination for delivery within 150 days will remain valid and in full effect. 23 10.3. TERMINATION BY EITHER PARTY. Either party may terminate this Agreement on thirty (30) days notice if Customer has not taken delivery of any units of the Products for a period six (6) months prior to such notice date. In the event of any termination under this Section 10.3, all purchase orders issued prior to such termination will remain valid and in full effect. In the event of any termination under this Section 10.3, Customer will forfeit any unrefunded portion of the Deposit according to the terms of Section 4.5. 10.4. Termination on Default. Either party may terminate this Agreement if the other party fails to perform any material obligation under this Agreement and such failure is not cured within thirty (30) days following written notice of such failure to the defaulting party. Upon termination by either party under this Section 10.4, all purchase orders issued under this Agreement shall immediately terminate. In event of any termination under this Section 10.4 by Customer for default by Seller, Seller shall immediately refund to Customer any unrefunded portion of the Deposit paid by Customer under Section 4.5. Upon Default by Seller, the parties hereby agree that Seller shall reimburse Customer for any premium cost ("cover cost") reasonably incurred by Customer to remedy Seller's Default. Reimbursement should not exceed 15% sale price per unit of all undeliverable units remaining. Customer shall be entitled to such additional remedies as may be available at law or in equity that are consistent with the terms of this Agreement. In the event of any termination under this Section 10.4 by Seller for default by Customer, Customer will forfeit any unrefunded portion of the Deposit according to the terms of Section 4.5. For default by Seller, Buyer shall have the right to manufacture or have manufactured the products at its discretion. To the extent that Buyer does not own the rights to the product hardware and software, Seller hereby grants to Buyer all rights necessary for Buyer to produce, manufacture and/or have manufactured quantities of such product for distribution by Buyer. Seller shall provide Buyer access to and use of all items that are necessary and/or useful in the manufacture of the products, including but not limited to, Seller's drawings, software download images, bills of materials processes, tools, and vendor list. Buyer reserves the right, with advance notification, to facilities and resources until seller is once again able to support the product adequately. Seller shall bear all costs associated with the implementation of Buyer's management team, including, but not limited to, travel, lodging, and salary for each team member. In addition, Seller shall bear all costs associated with Buyer's support requested by Seller. 10.5. EFFECTS OF TERMINATION. Upon termination or expiration of this Agreement for any reason: (a) All amounts due hereunder shall become immediately due and payable; (b) Except for obligations arising under purchase orders that survive termination of the Agreement, Seller shall have no further obligation to deliver any Products to Customer. 24 (c) Each party shall return or destroy all Confidential Information and any copies thereof, disclosed by the other party during the Term. (d) Sections 4 (as to accrued but unpaid amounts), 5, 6, 7, 8, 10.5, 10, and 11 shall survive any expiration or termination of this Agreement for any reason. All terms and conditions of this Agreement shall survive as to purchase orders remaining in effect beyond the date of termination. 11. COMPLIANCE WITH LAWS; EXPORT RESTRICTIONS. Customer shall obtain all licenses, permits and approvals required by any jurisdiction and shall comply with all applicable laws, rules, policies and procedures of the applicable government and any other regulatory agency that Seller notes are available for export. Customer will indemnify and hold Seller harmless from and against any liability, loss and expense (including without limitation attorneys' fees) attributable to any violation or alleged violation by Customer of such laws, rules, policies or procedures. Customer shall not transmit, export or re-export, directly or indirectly, separately or as part of any system, the Product or any technical data (including processes and services) received from Seller, without first obtaining any license required by the applicable government, including without limitation, the U.S. Government and/or any other applicable competent authority. By accepting delivery, Customer agrees that none of the Products or technical data supplied by Seller under this Agreement will be sold or otherwise transferred to any US-embargoed destination, any entity subject to a US denial order, or made available for use by or for, any military end-user. Customer also certifies that none of the products or technical data supplied by Seller under this Agreement will be sold or otherwise transferred to, or made available for use by or for, any entity that is engaged in the design, development, production or use of nuclear, biological or chemical weapons or missile technology. 12. General Provisions. 12.1. ASSIGNMENT. Customer nor Seller may not assign this Agreement or any right under this Agreement, nor delegate any obligation under this Agreement, without Customer or Seller's prior written consent. Any attempted assignment or delegation in contravention of this Section 11.1 shall be void. 12.2. NON-WAIVER; SEVERABILITY. Any delay or failure by either party to exercise any right or remedy under this Agreement shall not constitute a waiver of such right or remedy thereafter or of any other right or remedy. If any provision of this Agreement is determined to be unenforceable, the remaining provisions shall remain in full force and effect. 12.3. NOTICES. All notices and other communications provided for hereunder shall be in writing and shall be mailed by first-class, registered or certified mail, postage paid, or delivered personally, by overnight delivery service or by facsimile, computer mail or other electronic means, with confirmation of receipt, addressed as follows: 25 If to Seller: SBE, Inc. 4550 Norris Canyon Road San Ramon, CA 94583-1389 Attn: CFO Fax No. (925) 355-2033 If to Customer: Compaq Computer Corporation 901 Page Avenue Fremont, CA 94538 Attn: CFO Fax No: (510) 354-4538 Either party may by like notice specify or change an address to which notices and communications shall thereafter be sent. Notices sent by facsimile, computer mail or other electronic means shall be effective upon confirmation of receipt, notices sent by mail or overnight delivery service shall be effective upon receipt or upon refusal of delivery, and notices given personally shall be effective when delivered or when delivery is refused. 12.4 Publicity. Seller and Customer agree that neither party shall originate any press release nor other public announcement related to this Agreement, written or oral, without the prior written consent of the other party, except as required by law or a court order. 12.5 Force Majeure. Seller will not be liable for damages caused by failure to ship, or delay in shipment, resulting from events beyond Seller's control, such as governmental order or regulation, war, war-like situations, threat of war, hostilities, impossibility of acquisition of components by Seller through no fault of Seller, mobilization, blockage, embargo, revolution, riot, general strike, fire, flood, earthquake, tsunami, tornado, etc. Once the above causes of delay in performance are removed, Seller must make every reasonable effort to allocate production capacity to meet the schedules established in all Customer purchase order(s). 12.6 Governing Law and Venue. The laws of the State of California shall govern this Agreement, as those laws are applied to contracts entered into and to be performed entirely in California-by-California residents. Recipient shall submit all claims it may desire to bring arising out of or related to this Agreement or any breach hereof to a court of applicable jurisdiction in San Francisco County, California, and Recipient hereby consents to the jurisdiction and venue of such court if Seller brings a claim in such court. 12.7 Injunctive Relief. The parties agree that any unauthorized duplication, distribution or disclosure of any of the other party's Confidential Information will actually and materially damage the Disclosing Party and such damages are difficult to calculate. Seller and Customer agree to comply with the Source Control Documents as agreed to by the parties. 26 12.8 Entire Agreement; Modifications. This Agreement, together with the exhibits attached hereto, supersedes all prior oral or written negotiations and agreements between the parties with respect to the subject matter hereof. No modification, variation or amendment of this Agreement shall be effective unless made in writing and signed by the parties. Any additional or different terms stated in any purchase order or other document delivered to Seller by Customer in connection with this Agreement shall have no effect. Any Master Agreement shall not supersede the terms and conditions of this Agreement. In Witness Whereof, Seller and Customer have each caused this Agreement to be executed by their duly authorized representatives as of the Effective Date. SBE, INC. COMPAQ COMPUTER CORPORATION ("SELLER") ("CUSTOMER") By: /s/ Timothy J. Repp By: /s/ Robert M. Murden ---------------------- ----------------------- Name: Timothy J. Repp Name: Robert M. Murden ------------------- ------------------ Title: Chief Financial Officer, Title: Fremont Site Director Vice President BCSG Supply Chain Management Compaq Computers 27 EXHIBIT A PRICE LIST ITEM PRICE PER UNIT (US DOLLARS) - ---- ------------------------------- VCOM-33 Controller Board (U40567-A01) [ *** ] VCOM-34 Controller Board (U32887-002) [ *** ] VCOM-34 Controller Board (U25022-A04) [ *** ] PRODUCT DESCRIPTIONS VCOM-34 The VCOM-34 is a high performance, 68030-based, multiprotocol serial communications controller for VME systems requiring a serial interface to links transmitting at speeds up to E1 (2.048Mbps). Four full-duplex, independently programmable serial channels support asynchronous, X.25-compatible HDLC, and bisynchronous protocols. The Zilog Z16C30 Universal Serial Controller (USC) coupled with a custom DMA Controller supports multiple lines at speeds up T1 (1.544Mbps) or E1. The 25MHz 68030 with built-in memory management unit, 1 or 4Mbytes of parity-protected DRAM, and up to 1 Mbyte of EPROM provide the ideal communications controller for high-performance front-end processor applications. The VCOM-34 is an excellent serial communications controller for minicomputers, workstations, or data networking systems that require a powerful, high-speed serial interface for high-speed data transmission. VCOM-33 The VCOM-33 is a high-speed, 6U VMEbus interface to 4 or 16Mbps (selectable) IEEE 802.5 Token Ring LANs. Featuring a 25MHz 68030 microprocessor, the Texas Instruments TMS380C16 Compressor and 1 or 4 Mbytes of DRAM, the VCOM-33 supports the network and transport layers of communications protocols such as TCP/IP. The Commprocessor executes MAC/LLC software (Type 1 & 2) to provide data link level functionality. An optional mezzanine board, the VMM-34, can be added to provide four ports of high-speed, multiprotocol serial I/O in one VME slot. Suitable for a wide range of applications, the VCOM-33 can act as a high-performance Token Ring interface for mini or super minicomputers or, with the optional source routing accelerator, as a controller in internetworking products. *** CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. 28 EXHIBIT B PRODUCT LIMITED WARRANTY SBE, Inc., is a California corporation doing business at 4550 Norris Canyon Road, San Ramon, California U.S.A. 94583-1369, (800) 214-4SBE (herein referred to as "SBE") and is the Warrantor of SBE's Product. DEFINITION OF TERMS Product - Any board level or system product that was manufactured or sold by SBE to Customer. Original Shipping Configuration - The configuration in which Product is originally shipped from SBE. LIMITED WARRANTY PERIOD Product is warranted for a period of twelve (12) months from the date of original shipment from SBE to Customer ("Limited Warranty Period"). When Product is purchased from SBE for resale to Customer's customer, the Limited Warranty shall be valid for the remainder of the original Limited Warranty Period. However, SBE will repair the Product or, at its option, replace Product with a product of like kind under this Limited Warranty for Customer only. Any software product is covered by warranties specified in its individual license agreement. COVERED ITEMS The Limited Warranty shall cover defects in workmanship or material and shall conform to SBE's then-current Product Specification for the Limited Warranty Period. LIMITED WARRANTY CONDITIONS This Limited Warranty is subject to the following conditions: 1. This Limited Warranty shall cover only Product that is sold by SBE to Customer. 2. Product must be eligible for this Limited Warranty. 3. SBE shall deem Product ineligible for this Limited Warranty if it: has been physically and/or electrically abused; has been altered by cutting the board, changing components to devices other than the device type originally supplied, changing the wiring, or any other alterations that substantially changes the characteristics of Product such that it cannot be tested with normal testing procedures used by SBE; or has been damaged due to Electrostatic Discharge (ESD). 29 In the event Customer requires repair of Product and Product is ineligible for warranty repair, SBE shall provide a repair quotation to Customer and await written instructions from Customer to either authorize the repair or return Product without repair. 4. Changing jumper configurations and adding normal Product options supplied by SBE are considered normal usage, and are not a condition of ineligibility. Any change made to Product by Customer, including implementing SBE-approved Revision Change Notices (RCN), must be performed competently to avoid being a condition of ineligibility. 5. To return a Product for repair under this Limited Warranty, Customer must contact SBE and obtain a Return Material Authorization (RMA) number, and instructions for returning the defective Product. The RMA number MUST be contained in the shipping documents on the outside of the Product's packaging when returned to SBE. SBE shall, as Customer's sole and exclusive remedy and SBE's sole and exclusive obligation for breach of this limited warranty and at SBE's option, either repair Product or replace Product with a product of like kind at no charge, and ship it back to Customer within thirty (30) days, subject to availability of Product or repair parts. SBE will notify Customer if the repairs will take longer than thirty (30) days. Any replaced or repaired Product shall be warranted for ninety (90) days or for the duration of the initial Limited Warranty Period, whichever is longer. 6. Product should be restored to its Original Shipping Configuration by Customer for testing and repair. If Product is sent to SBE in a configuration other than the Original Shipping Configuration, SBE will restore Product to the Original Shipping Configuration to facilitate testing and repair. Any components removed from Product to restore it to its Original Shipping Configuration will be returned to Customer with Product, whenever possible. SBE will not be liable for loss of such components. Product will be returned to Customer in the Original Shipping Configuration after repair and testing. 7. Upon request from the Customer, any Customer approved RCN's shall be added to repaired Product. Customer shall notify SBE upon receipt of an RMA number. 8. For Product covered under this Limited Warranty, Customer shall pay shipping charges to send Product to SBE for repair. After repair, SBE shall pay shipping charges to return Product to Customer using the same method as used by Customer. Unless mutually agreed by both parties, SBE shall not pay (a) excess shipping charges if shipping method specified by Customer is different than Customer used to send Product to SBE; or (b) any costs associated with import/export fees. 9. SBE reserves the right to invoice Customer for all costs (including transportation both ways, expenses associated with import/export, labor, and parts) if Product returned for repair under this Limited Warranty was not defective or otherwise not covered under this Limited Warranty. 30 10. SBE shall not be liable for damage sustained during shipment. IN NO EVENT WILL SBE BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES THAT RESULT FROM THE USE OR FAILURE OF ANY SBE PRODUCT, EVEN IF SBE HAS BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH HEREIN, NO OTHER WARRANTIES OR CONDITIONS (EXPRESS OR IMPLIED, ARISING BY STATUTE OR OTHERWISE IN LAW OR FROM A COURSE OF DEALING OR USAGE OF TRADE) ARE MADE OR GIVEN. IN PARTICULAR, SBE SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY, MERCHANTABLE QUALITY, OR FITNESS FOR ANY PURPOSE, PARTICULAR, SPECIFIC OR OTHERWISE. 31 EX-11.1 3 doc3.txt EXHIBIT 11.1
SBE, INC. STATEMENTS OF COMPUTATION OF NET INCOME (LOSS) PER SHARE FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2001 AND 2000 (In thousands, except per share amounts) (Unaudited) Three months ended Six months ended April 30, April 30, ---------- ---------- 2001 2000 2001 2000 -------- ------ -------- ------ BASIC Weighted average number of common shares outstanding 3,368 3,116 3,349 3,099 -------- ------ -------- ------ Number of shares for computation of net income (loss) per share 3,368 3,116 3,349 3,099 ======== ====== ======== ====== Net income (loss) $(3,212) $1,984 $(4,525) $2,944 ======== ====== ======== ====== Net income (loss) per share $ (0.95) $ .64 $ (1.35) $ 0.95 ======== ====== ======== ====== DILUTED Weighted average number of common shares outstanding 3,368 3,116 3,349 3,099 Shares issuable pursuant to options granted under stock option plans, less assumed repurchase at the average fair market value for the period (a) 601 (a) 448 -------- ------ -------- ------ Number of shares for computation of net income (loss) per share 3,368 3,717 3,349 3,547 ======== ====== ======== ====== Net income (loss) $(3,212) $1,984 $(4,525) $2,944 ======== ====== ======== ====== Net income (loss) per share $ (0.95) $ 0.53 $ (1.35) $ 0.83 ======== ====== ======== ====== (a) In loss periods, common share equivalents would have an antidilutive effect on loss per share and therefore have been excluded.
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