SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
{x} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File Number: 0-27932
PRAEGITZER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
OREGON 93-0790158
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1270 S.E. Monmouth Cut-Off Road
Dallas, Oregon 97338-9532
(503) 623-1000
(Address, including zip code, and telephone number, including area code,
of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the last 90 days.
Yes {x} No { }
Number of shares of Common Stock outstanding as of February 8, 1999: 12,907,442
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PRAEGITZER INDUSTRIES, INC.
Table of Contents
Page No.
Part I Financial Information
Condensed Consolidated Balance Sheet-
December 31, 1998 and June 30, 1998 ...............................3
Condensed Consolidated Statement of Operations-
Three months and six months ended
December 31, 1998 and 1997 ........................................4
Condensed Consolidated Statement of Cash Flows-
Six months ended December 31, 1998 and 1997 .......................5
Notes to Condensed Consolidated
Financial Statements ..........................................6
Management's Discussion and Analysis of Financial Condition
and Results of Operations .........................................8
Part II Other Information
Item 4 Submission of Matters to a Vote of Security Holders ......12
Item 6 Exhibits and Reports on Form 8-K .........................12
Signatures.................................................................13
2
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<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In Thousands)
ASSETS
December 31, June 30,
1998 1998
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 220 $ 1,170
Accounts receivable, net 32,929 28,562
Inventories 18,120 16,491
Prepaid expenses 4,088 2,913
------------ ------------
Total current assets 55,357 49,136
Property, plant and equipment 126,258 124,801
Less: Accumulated depreciation and amortization (40,772) (35,975)
------------ ------------
85,486 88,826
Other assets 15,310 13,532
------------ ------------
$ 156,153 $ 151,494
============ ============
LIABILITIES
CURRENT LIABILITIES
Bank overdraft 8,010 3,709
Accounts payable 16,549 13,930
Accrued payroll and related expenses 4,168 3,955
Other current liabilities 3,988 1,852
Current portion of long-term obligations 6,364 6,394
------------ ------------
Total current liabilities 39,079 29,840
Long-term obligations 54,951 73,413
Deferred tax liability 5,353 4,197
Other liabilities 49 64
Convertible subordinated notes 10,000 -
Common stock 43,173 42,325
Accumulated other comprehensive income 68 -
Retained Earnings 3,480 1,655
------------ ------------
Total shareholders' equity 46,721 43,980
------------ ------------
$ 156,153 $ 151,494
============ ============
The accompanying notes are an integral part of these condensed
financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
December 31, December 31,
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 55,293 $ 46,032 $ 110,689 $ 88,626
Cost of sales 45,476 35,998 91,678 70,582
------------ ------------ ------------ ------------
Gross profit 9,817 10,034 19,011 18,044
Selling, general and
administrative expenses 7,105 6,015 14,117 11,779
------------ ------------ ------------ ------------
Income from operations 2,712 4,019 4,894 6,265
Interest expense 1,167 725 2,634 1,451
Other income 426 85 634 166
------------ ------------ ------------ ------------
Income before income taxes 1,971 3,379 2,894 4,980
Income taxes 739 1,110 1,069 1,604
------------ ------------ ------------ ------------
Net income $ 1,232 $ 2,269 $ 1,825 $ 3,376
============ ============ ============ ============
Basic net income per share $ 0.10 $ 0.18 $ 0.14 $ 0.27
============ ============ ============ ============
Diluted net income per share $ 0.10 $ 0.18 $ 0.14 $ 0.26
============ ============ ============ ============
The accompanying notes are an integral part
of these condensed financial statements.
</TABLE>
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<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
(In Thousands)
Six Months
Ended December 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net cash provided by operating activities $ 9,984 $ 6,982
Cash Flows from Investing Activities:
Capital expenditures (28,696) (11,245)
Proceeds from sale of property, plant and equipment 22,361 832
Business acquisitions - (477)
Other (828) (171)
------------ ------------
Net cash used in investing activities (7,163) (11,061)
------------ ------------
Cash Flows from Financing Activities:
(Decrease) increase in short-term borrowings (13,433) 1,449
Issuance of convertible subordinated notes 10,000 -
Borrowings of long-term debt 395 4,581
Payments on long-term debt and capital leases (5,325) (1,855)
Increase (decrease) in bank overdrafts 4,300 (596)
Issuances of common stock 328 295
------------ ------------
Net cash (used in) provided by financing activities (3,735) 3,874
------------ ------------
Effect of foreign currency (36) -
------------ ------------
Decrease in Cash and Cash Equivalents $ (950) $ (205)
Cash and Cash Equivalents at Beginning of Period 1,170 442
------------ ------------
Cash and Cash Equivalents at End of Period $ 220 $ 237
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the respective periods for:
Interest $ 3,284 $ 1,419
Income Taxes 140 1,629
The accompanying notes are an integral part
of these condensed financial statements.
</TABLE>
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PRAEGITZER INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements of Praegitzer Industries, Inc. (the "Company")
contain all adjustments necessary to present fairly the financial position of
the Company as of December 31, 1998, and the results of operations for the three
months ended December 31, 1998 and 1997 and the results of operations and cash
flows for the six months ended December 31, 1998 and 1997. The results of
operations for the three and six months ended December 31, 1998 are not
necessarily indicative of the results expected for the entire fiscal year ending
June 30, 1999.
These financial statements have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such regulations, although the Company believes
the disclosures provided are adequate to prevent the information presented from
being misleading.
This report on Form 10-Q for the quarter ended December 31, 1998, should be
read in conjunction with the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1998. Portions of the accompanying financial statements are
derived from the audited year-end financial statements of the Company dated June
30, 1998.
Note 2: Earnings per share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, Earnings per Share, which
specifies new standards for computing and disclosing earnings per share and is
effective for periods ending after December 15, 1997. The Company has adopted
this standard. The basic EPS has been computed by dividing net income by the
weighted average number of shares outstanding during each period. Diluted EPS
has been computed by dividing net income by the weighted average common and
common equivalent shares outstanding during each period using the treasury stock
method, if the common equivalent shares were not anti-dilutive. The difference
between the basic and diluted weighted average shares is due to common stock
equivalent shares resulting from outstanding stock options and warrants. Net
income for the calculation of both basic and diluted EPS is the same for all
periods presented. The calculation of the weighted average outstanding shares is
as follows:
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<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended Six Months Ended
December 31, December 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average shares outstanding-basic 12,808,529 12,663,088 12,793,678 12,655,449
Common stock equivalents 23,185 242,615 20,573 263,339
------------ ------------ ------------ ------------
Weighted average shares outstanding-diluted 12,831,714 12,905,703 12,814,251 12,918,788
============ ============ ============ ============
</TABLE>
Note 3: Inventories
Inventories are stated at the lower of cost (determined on a first-in,
first-out basis) or market and consist of the following: (in thousands)
December 31, June 30,
1998 1998
----------- -----------
Raw materials and supplies $ 7,253 $ 6,430
Work-in-progress 10,867 10,061
----------- -----------
Total inventory $ 18,120 $ 16,491
=========== ===========
Note 4: Comprehensive Income
The Company has adopted SFAS No. 130, Reporting Comprehensive Income, in
the first quarter of fiscal year 1999. SFAS No. 130 establishes new rules for
the reporting of comprehensive income and its components, but has no impact on
the Company's net earnings or total shareholders' equity.
Comprehensive income and its components, net of tax, are as follows: (in
thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1998 1997 1998 1997
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income $ 1,232 $ 2,269 $ 1,825 $ 3,376
Other comprehensive income:
Currency translation adjustment 68 - 68 -
------------ ------------ ------------ ------------
Total comprehensive income $ 1,300 $ 2,269 $ 1,893 $ 3,376
============ ============ ============ ============
</TABLE>
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Note 5: Convertible Subordinated Notes
On December 29, 1998 the Company completed an offering of $10.0 million
principal amount of convertible subordinated notes ("Notes"). Interest on the
Notes accrues at a rate of 9% and is payable semi-annually, commencing July 15,
1999. The Notes are convertible into shares of Common Stock at the conversion
price of $8.325 per share. The holders have the option to covert the Notes any
time on or before the close of business on the last trading day prior to
maturity, unless previously redeemed. The Notes mature on December 29, 2008.
Note 6: Future Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information. SFAS No. 131 establishes standards for
disclosure about operating segments in annual financial statements and selected
information in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. The new standard becomes effective for the Company's fiscal year
ending June 30, 1999. Adoption of this statement may result in additional
disclosures but will have no material impact on the Company's results of
operations or financial position.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. The new statement will require recognition
of all derivatives as either assets or liabilities on the balance sheet at fair
value. The new statement becomes effective for the first quarter of the fiscal
year ending June 30, 2000. Management has not completed an evaluation of the
effects this standard will have on the Company's financial position or results
of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
- --------
The Company is a leader in providing electronics OEMs and contract
manufacturers with a full range of printed circuit board ("PCB") and
interconnect solutions, including schematic capture and design,
quick-turnaround, prototyping and pre-production, and large volume production.
The Company's design division provides schematic capture and design services.
The Fremont facility specializes in quick-turnaround prototype production, the
Redmond facility specializes in high technology and low volume production, the
Huntsville facility specializes in low volume production and quick-turnaround
prototype production, the Malaysia facility specializes in low technology and
medium to high volume production, the White City facility specializes in medium
volume production and the Dallas facility specializes in medium to high volume
production.
This discussion and analysis is designed to be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations set forth in the Company's Form 10-K for the fiscal year ended June
30, 1998.
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Results of Operations
- ---------------------
Three Months Ended December 31, 1998 Compared to Three Months
Ended December 31, 1997
Revenue for the three months ended December 31, 1998 was $55.3 million, an
increase of $9.3 million, or 20%, from the three months ended December 31, 1997.
The increase in revenue resulted from several factors including record sales
volumes in the White City facility, in part due to the new fully automated Inner
Layer Line, acquisitions of the Malaysian and Huntsville facilities and better
performing sales and operations groups.
The cost of goods sold includes direct labor, materials and manufacturing
overhead costs. The costs of goods sold for the three months ended December 31,
1998 was $45.5 million, or 82.2% of revenue, compared to $36.0 million, or 78.2%
of revenue for the three months ended December 31, 1997. This increase was due
primarily to increased costs at the Malaysia and Huntsville facilities.
Gross profit for the three months ended December 31, 1998 was $9.8 million
or 17.8% of revenue, compared to $10.0 million or 21.8% of revenue for the three
months ended December 31, 1997. The decrease in margin was the result of pricing
pressures related to diminishing market demand and increased offshore
competition.
Selling, general and administrative expense for the three months ended
December 31, 1998 was $7.1 million or 12.8% of revenue, compared to $6.0 million
or 13.1% of revenue for the three months ended December 31, 1997. The increase
in expenses was due to the increased personnel and fixed costs associated with
the acquisitions of the Huntsville and Malaysian operations, as well as the
expansion of the Company's corporate sales force required to support the
Company's growth.
Interest expense for the three months ended December 31, 1998 increased to
$1.2 million, or 2.1% of revenue, from $725,000 in the prior year. The increase
was the result of increased borrowings to finance recent acquisitions, equipment
purchases and working capital needs.
The effective income tax rate for the quarter ended December 31, 1998 was
37.5%, compared to a 32.8% effective rate for the quarter ended December 31,
1997. This increase was a result of losses at the Malaysia facility, which do
not result in a tax benefit to the Company.
Net income for the three months ended December 31, 1998 was $1.2 million, a
decrease of $1.0 million from net income of $2.3 million for the three months
ended December 31, 1997. This decrease was primarily due to higher costs
associated with acquisitions and expansions as well as lower margins resulting
from weaker customer demand and increased offshore competition.
Six Months Ended December 31, 1998 Compared to Six Months Ended
December 31, 1997
Revenue for the six months ended December 31, 1998 increased 24.9% to
$110.7 million from $88.6 million for the six months ended December 31, 1997.
The revenue growth was a result of several factors, including record sales at
various facilities, acquisitions of the Malaysian and Huntsville facilities,
increased capacity and improved technological capabilities.
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The costs of goods sold for the six months ended December 31, 1998 was
$91.7 million, or 82.8% of revenue, compared to $70.6 million, or 79.6% of
revenue for the six months ended December 31, 1997. This increase was due
primarily to increased costs associated with the Malaysia and Huntsville
acquisitions.
Gross profit for the six months ended December 31, 1998 was $19.0 million
or 17.2% of revenue, compared to $18.0 million or 20.4% of revenue for the six
months ended December 31, 1997. This decrease was due primarily to reduced
demand caused by market pressures and offshore competition, and changes in the
production mix in the Huntsville facility.
Selling, general and administrative expense for the six months ended
December 31, 1998 was $14.1 million or 12.8% of revenue, compared to $11.8
million or 13.3% of revenue for the six months ended December 31, 1997. The
increase in expenses was due to the increased personnel and fixed costs
associated with the acquisitions of the Huntsville and Malaysian operations, as
well as the expansion of the Company's corporate sales force required to support
the Company's growth.
Interest expense for the six months ended December 31, 1998 increased to
$2.6 million, or 2.4% of revenue, from $1.2 million, or 1.6% of revenue for the
six months ended December 31, 1997. The increase was the result of increased
borrowings to finance recent acquisitions, equipment purchases and working
capital needs.
Income taxes for the six months ended December 31, 1998 were $1.1 million
compared to an income tax provision of $1.6 million for the six months ended
December 31, 1997. The effective income tax rates were 36.9% and 32.2%
respectively. This effective income tax rate increase was a result of losses at
the Malaysia facility, which does not result in a tax benefit to the Company.
Net income for the six months ended December 31, 1998 was $1.8 million, a
decrease of $1.6 million from net income of $3.4 million for the six months
ended December 31, 1997. This decrease was primarily due to higher costs
associated with acquisitions and expansions as well as lower margins resulting
from weaker customer demand and increased offshore competition.
Liquidity and Capital Resources
- -------------------------------
As of December 31, 1998, the Company had cash of $220,000, compared to $1.2
million as of June 30, 1998, and working capital of $16.3 million at December
31, 1998, compared to $19.3 million at June 30, 1998. Principal sources of
liquidity in the first six months of fiscal 1999 were cash from operations, the
issuance of $10.0 million principal amount of 9% convertible subordinated notes
due 2008, and the sale of assets to leasing companies. Principal uses of
liquidity during the six months ended December 31, 1998 were property, plant and
equipment expenditures of $28.7 million related to expansions and capacity
improvements of the Company's manufacturing operations and the paydown of the
Company's bank line of credit.
At December 31, 1998 borrowings of $24.1 million were outstanding on the
Company's $40 million bank line of credit and $8.2 million was available for
borrowing based on eligible receivables and inventory. Amounts outstanding under
the line of credit bear interest at the bank's prime rate (8.5% per annum at
December 31, 1998). Under the line of credit, the
10
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Company must maintain certain financial ratios and other covenants. As of
December 31, 1998 the Company was in compliance with all loan covenants.
As of December 31, 1998 the Company had $32.2 million of outstanding notes
payable to Heller Financial bearing interest at annual rates ranging from 7.8%
to 9.8125% and secured by real property and miscellaneous equipment at the
Company's Dallas and White City, Oregon and Huntsville, Alabama facilities.
Although the Company has no commitments in material amounts, it expects
total capital expenditures for the fiscal year to range from 8% to 12% of
revenue for facilites expansion and equipment.
The Company believes that its existing cash and cash equivalents, funds
generated from operations, and funds available under its credit facility with
the bank and equipment financings will be sufficient to fund its operations for
the remainder of the fiscal year. To enhance its ability to fund its operations,
the Company is actively exploring additional and alternative sources of
financing to supplement or replace its existing credit agreements.
Year 2000 Compliance
Certain computer hardware and software use two-digit data fields to store
and recognize years, assuming the first two digits of the year are "19" (e.g.,
the number "98" is recognized as "1998"). This and certain similar protocols
give rise to possible problems related to the recognition of dates in years
after 1999--so-called "Year 2000" issues. The Company continues to assess and
address the business risks associated with Year 2000 issues. Some of the
Company's systems include hardware and packaged software recently purchased from
vendors who have represented that these systems are Year 2000 compliant.
Other hardware and software used by the Company has been identified by the
Company as not being Year 2000 compliant. The Company expects that Year 2000
upgrades to the software used in its manufacturing systems and replacement
components for certain older hardware used in these systems will soon be
available from vendors. The cost of these upgrades and replacements is not
expected to be material.
The Company relies on a number of vendors and suppliers, including banks,
telecommunication providers, and other providers of goods and services. The
inability of these third parties to conduct their business for a significant
period of time due to the Year 2000 issue could have a material adverse impact
on the Company's operations. The Company has not determined whether all of its
vendors and suppliers are Year 2000 compliant. The Company's reliance on single
vendor source suppliers, however, is minimal, and the Company seeks to limit
sole source supply relationships. The Company is continuing to assess potential
Year 2000 issues and is developing contingency plans. At this time, the Company
believes costs incurred in responding to other parties' Year 2000 computer
system deficiencies, together with the cost of any required modifications to the
Company's systems, will not have a material impact on the Company's results of
operations or financial condition. This analysis may be modified as the
Company's assessment of potential Year 2000 issues progresses.
11
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PART II - OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders
On November 6, 1998, at the Annual Meeting of Sahreholders, the holders of
the Company's outstanding Common Stock took the actions described below. On
September 10, 1998 there were 12,807,442 shares of Common Stock issued and
outstanding.
The shareholders elected Robert L. Praegitzer, Matthew J. Bergeron, Daniel
J. Barnett, Theodore L. Stebbins, General Merrill A. McPeak and Gordon B.
Kuenster to the Company's Board of Directors, by the votes indicated below, to
serve for the ensuing year.
11,119,373 shares in favor
397,407 shares against or withheld
0 abstentions
0 broker nonvotes
The shareholders approved the amendment of the Company's 1995 Stock
Incentive Plan (the "Plan") (i) to increase the total number of shares of the
Company's Common Stock (the "Shares") reserved for issuance under the Plan from
1,500,000 Shares to 2,700,000 Shares, and (ii) to eliminate certain restrictions
in the Plan that are no longer necessary or appropriate based on recent changes
to the rules under Section 16 of the Securities Exchange Act of 1934, by the
votes indicated below.
7,705,646 shares in favor
445,243 shares against or withheld
9,645 abstentions
0 broker nonvotes
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
10 - Stock Purchase Agreement between the Company and Matthew J.
Bergeron dated December 22, 1998
27 - Financial Data Schedule
(b) Reports on Form 8-K
During the three month period ending December 31, 1998, there were no
reports on Form 8-K filed.
12
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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.
PRAEGITZER INDUSTRIES, INC
Date: February 15, 1999 MATTHEW J. BERGERON
-----------------------------------------
(Matthew J. Bergeron, President)
(Duly Authorized Officer)
WILLIAM J. THALE
-----------------------------------------
(William J. Thale)
(Principal Financial Officer)
13
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is between MATTHEW BERGERON
("Buyer") and PRAEGITZER INDUSTRIES, INC., an Oregon corporation ("Seller").
Seller is prepared to issue 100,000 shares of its common stock (the
"Shares"). Buyer desires to purchase from Seller and Seller desires to sell to
Buyer the Shares on the terms and subject to the conditions set forth herein.
The transactions contemplated in this Agreement are herein referred to as the
"Purchase."
SECTION 1. PURCHASE OF SHARES AND RELATED MATTERS
1.1 Purchase of Shares. Effective December 22, 1998, and subject to the
terms and conditions set forth herein, at the Closing (as defined below) Seller
will sell all of the Shares to Buyer and Buyer will purchase all of the Shares
from Seller.
1.2 Purchase Price. Buyer will pay to Seller the fair market value for the
Shares. Because of the restrictions on transfer of the shares, the parties have
determined that a 25% discount from the public trading price is the fair market
value. The closing price on December 22, 1998 was $6.9375 per share.
Accordingly, the Purchase Price is $520,312.50.
1.3 Payment of Purchase Price. The entire Purchase Price, without interest,
shall be paid to Seller on or before January 1, 2006.
1.4 Indemnity. As long as Buyer is employed by Seller, Seller shall pay
Buyer an amount equal any federal or state income tax liability for which Buyer
is liable on account of interest imputed because of the deferral of payment of
the Purchase Price. Such sum shall be paid within 30 days of written request to
Seller by Buyer, furnishing such evidence of liability as may reasonably be
required by Seller.
1.5 Repurchase of Shares. During January 2006 Buyer may demand of Seller
that it repurchase the Shares from Buyer for $420,312.50. Upon receipt of such
written demand, within 30 days Seller shall tender the repurchase price to Buyer
who shall simultaneously deliver such certificates and other instruments as may
reasonably be required by Seller to effectuate the transfer of the Shares, free
and clear of any lien or encumbrance to Seller.
PAGE 1 STOCK PURCHASE AGREEMENT
<PAGE>
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Buyer to enter into this Agreement and purchase
the Shares, Seller represents and warrants that:
2.1 Organization and Corporate Power. Seller is a corporation duly
incorporated, validly existing, and in good standing under the laws of the state
of Oregon.
2.2 Authorization; No Breach. The execution, delivery, and performance of
this Agreement and all other agreements contemplated hereby to which Seller is a
party have been duly authorized by Seller. This Agreement and each other
agreement contemplated hereby, when executed and delivered by the parties
thereto, will constitute the legal, valid, and binding obligation of Seller,
enforceable against Seller, in accordance with its terms except as the
enforceability thereof may be limited by the application of bankruptcy,
insolvency, moratorium, or similar laws affecting the rights of creditors
generally or judicial limits on the right of specific performance.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to Seller to enter into this Agreement and sell
the Shares, Buyer hereby represents and warrants to Seller as follows:
3.1 Investment Representations
3.1.1 Buyer is acquiring the Shares for his own account with the
present intention of holding such securities for purposes of investment, and
Buyer has no intention of selling such securities in a public distribution in
violation of the United States securities laws or any applicable state
securities laws. During the course of the negotiation of this Agreement, Buyer
has reviewed all information provided to it by Seller and has had the
opportunity to ask questions of and receive answers from representatives of
Seller concerning Seller, the securities offered and sold hereby, and the
Purchase, and to obtain certain additional information requested by Buyer.
3.1.2 Buyer understands that the Shares cannot be resold in a
transaction to which the Securities Act applies unless subsequently registered
under the Securities Act or an exemption from such registration is available.
Buyer is aware of the provisions of Rule 144 promulgated under the Securities
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions.
3.1.3 Buyer understands that the certificates for the Shares will bear
the following legend:
PAGE 2 STOCK PURCHASE AGREEMENT
<PAGE>
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISPOSITION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE SELLER THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
3.2 Brokerage. There are no claims for brokerage commissions, finders'
fees, or similar compensation in connection with the Purchase based on any
arrangement or agreement entered into by Buyer and binding upon Seller.
SECTION 4. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
Each and every obligation of Seller under this Agreement is subject to the
satisfaction, at or before the Closing, of each of the following conditions:
4.1 Representations and Warranties; Performance. Each of the
representations and warranties made by Buyer herein will be true and correct in
all material respects as of the Closing with the same effect as though made at
that time except for changes contemplated, permitted, or required by this
Agreement; Buyer will have performed and complied with all agreements,
covenants, and conditions required by this Agreement to be performed and
complied with by it prior to the Closing.
4.2 No Proceeding or Litigation. No action, suit, or proceeding before any
court or any governmental or regulatory authority will have been commenced and
be continuing, and no investigation by any governmental or regulatory authority
will have been commenced and be continuing, and no action, investigation, suit,
or proceeding will be threatened at the time of Closing, against Seller or Buyer
or any of their affiliates, associates, officers, or directors, seeking to
restrain, prevent, or change the Purchase, questioning the validity or legality
of the Purchase, or seeking damages in connection with the Purchase.
SECTION 5. CLOSING
5.1 Time, Place, and Manner of Closing. Unless this Agreement has been
terminated and the Purchase has been abandoned pursuant to the provisions of
this Agreement, the closing (the "Closing") will be held at the offices of
Greene & Markley, P.C. in Portland, Oregon, or such other place as the parties
may agree, on February 18, 1999, or as soon as practicable after the
satisfaction of the various conditions precedent to the Closing set forth
herein. At the Closing the parties to this Agreement will exchange certificates
and other instruments and documents in order to determine whether the terms and
conditions of this
PAGE 3 STOCK PURCHASE AGREEMENT
<PAGE>
Agreement have been satisfied. Upon the determination of each party that its
conditions to consummate the Purchase have been satisfied or waived, Seller
shall deliver to Buyer the certificates evidencing the Shares or a memorandum
thereof, in a manner to be agreed upon by the parties. From time to time after
the Closing, Seller will execute, deliver, and acknowledge all such further
instruments of transfer and conveyance and will perform all such other acts as
Buyer may reasonably request to more effectively transfer the Shares.
5.2 Consummation of Closing. All acts, deliveries, and confirmations
comprising the Closing regardless of chronological sequence shall be deemed to
occur contemporaneously and simultaneously upon the occurrence of the last act,
delivery, or confirmation of the Closing and none of such acts, deliveries, or
confirmations shall be effective unless and until the last of the same shall
have occurred.
SECTION 6. TERMINATION
6.1 Termination for Cause. If, pursuant to the provisions of this
Agreement, Seller or Buyer is not obligated at the Closing to consummate this
Agreement, then the party who is not so obligated may terminate this Agreement.
6.2 Termination Without Cause. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and abandoned at any time
without further obligation or liability on the part of any party in favor of any
other by mutual consent of Buyer and Seller.
6.3 Termination Procedure. Any party having the right to terminate this
Agreement may terminate this Agreement by delivering to the other party written
notice of termination, and thereupon, this Agreement will be terminated without
obligation or liability of any party in favor of any other party.
SECTION 7. MISCELLANEOUS PROVISIONS
7.1 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified, or supplemented only by a written agreement signed by
Buyer and Seller.
7.2 Waiver of Compliance; Consents
7.2.1 Any failure of any party to comply with any obligation,
covenant, agreement, or condition herein may be waived by the party entitled to
the performance of such obligation, covenant, or agreement or who has the
benefit of such condition, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement, or
PAGE 4 STOCK PURCHASE AGREEMENT
<PAGE>
condition will not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
7.2.2 Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent will be given in a manner consistent
with the requirements for a waiver of compliance as set forth above.
7.3 Assignment. This Agreement will not be assigned by a party hereto
without the prior written consent of the other parties hereto. No permitted
assignment will release the assignor from its obligations hereunder. Subject to
the foregoing, this Agreement and all of the provisions hereof will be binding
upon and inure to the benefit of the parties hereto and their respective
successors, assigns, heirs, executors, and personal representatives. Nothing in
the Agreement, express or implied, is intended to confer on any person other
than the parties hereto, or their respective successors, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement.
7.4 Governing Law. All matters with respect to this Agreement, including
but not limited to matters of validity, construction, effect, and performance,
will be governed by the laws of the State of Oregon applicable to contracts made
and to be performed therein between residents thereof, regardless of the laws
that might be applicable under principles of conflicts of law.
7.5 Counterparts. This Agreement may be executed in two or more fully or
partially executed counterparts, each of which will be deemed an original
binding the signer thereof against the other signing parties, but all
counterparts together will constitute one and the same instrument.
7.6 Certain Rules of Construction. The provisions of this Agreement have
been examined, negotiated, and revised by counsel for each party, and no
implication will be drawn against any party hereto by virtue of the drafting of
this Agreement.
7.7 Entire Agreement. This Agreement and any other document to be furnished
pursuant to the provisions hereof embody the entire agreement and understanding
of the parties hereto as to the subject matter contained herein. There are no
restrictions, promises, representations, warranties, covenants, or undertakings
other than those expressly set forth or referred to in such documents. This
Agreement and such documents supersede all prior agreements and understandings
among the parties with respect to the subject matter hereof.
7.8 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any jurisdiction will, as to
PAGE 5 STOCK PURCHASE AGREEMENT
<PAGE>
such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement, or affecting the validity or enforceability of
any of the terms or provisions of this Agreement.
7.9 Attorney Fees. If any action is brought by any party to this Agreement
to enforce or interpret its terms or provisions, the prevailing party will be
entitled to reasonable attorney fees and costs incurred in connection with such
action prior to and at trial and on any appeal therefrom.
7.10 Payment of Fees and Expenses. Each party to this Agreement will be
responsible for, and will pay, all of its own fees and expenses, including those
of its counsel and accountants, incurred in the negotiation, preparation, and
consummation of the Agreement and the Purchase.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PRAEGITZER INDUSTRIES, INC.
By ROBERT SCHMELZER DATE:
------------------------------- -------------------------------
ROBERT SCHMELZER
SENIOR VICE PRESIDENT
MATTHEW BERGERON DATE:
------------------------------- -------------------------------
MATTHEW BERGERON
PAGE 6 STOCK PURCHASE AGREEMENT
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