SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 29, 1999
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SMTEK INTERNATIONAL, INC.
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(Exact name of Registrant as Specified in Charter)
Delaware 1-8101 33-0213512
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
2151 Anchor Court, Thousand Oaks, California 91320
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (805) 376-2595
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Not applicable
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 29, 1999, SMTEK International, Inc. (the "Company")
acquired substantially all of the issued and outstanding capital stock
of Technetics, Inc., a California corporation ("Technetics"), pursuant
to a Stock Purchase Agreement (the "Agreement") between the Company and
the shareholders of Technetics (the "Sellers"). In exchange for their
Technetics stock, the Sellers received cash of $275,000 and secured
promissory notes in the aggregate principal amount of $150,000, subject
to adjustment pursuant to Section 1.4 of the Agreement. The amount of
the purchase consideration paid by the Company was determined on the
basis of Technetics as a going concern including its customer base and
business backlog, by a comparison with the valuations placed upon other
companies in the industry in recent business combinations, and by
strategic considerations.
Technetics will continue its present operations as a subsidiary of
the Company. Technetics is a provider of electronics manufacturing
services, including turnkey electronic assembly and manufacturing
management services, to original equipment manufacturers in the
electronics industry. Technetics' electronics manufacturing services
consist primarily of the manufacture of complex printed circuit board
assemblies using both surface mount through-hole interconnection
technologies.
For additional information concerning the transaction, reference
is made to the Agreement attached hereto as Exhibit 99.1 and to a press
release issued on February 3, 1999 attached hereto as Exhibit 99.2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired. It is impractical
to provide the required financial statements for Technetics at the time
of filing this report on Form 8-K. Such required financial statements
will be filed as an amendment to this report on Form 8-K on or before
April 14, 1999.
(b) Pro Forma Financial Information. It is impractical to provide
the required pro forma financial information for the Company at the
time of filing this report on Form 8-K. Such pro forma financial
information will be filed as an amendment to this report on Form 8-K on
or before April 14, 1999.
(c) Exhibits.
Exhibit Number Description
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99.1 Stock Purchase Agreement dated January 24,
1999 between SMTEK International, Inc. and
the shareholders of Technetics, Inc.
99.2 Press Release dated February 3, 1999
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 hereunto duly authorized.
SMTEK INTERNATIONAL, INC.
Date: February 12, 1999 By: /s/ Richard K. Vitelle
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Richard K. Vitelle
Vice President - Finance
(Principal Financial Officer)
EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into
this 24th day of January 1999 by and among SMTEK INTERNATIONAL, INC., a
Delaware corporation, ("Buyer") and the shareholders of Technetics,
Inc., a California corporation, ("Technetics") whose names appear on the
signature page hereto (each referred to herein as a "Seller" and
collectively called "Sellers"):
WHEREAS, Sellers collectively own more than 98% of the issued and
outstanding shares of capital stock of Technetics; and
WHEREAS, Buyer wishes to acquire such issued and outstanding shares
of the capital stock of Technetics (the "Shares"), together with all of
the voting rights pertaining thereto, and Sellers desire to sell same to
Buyer (such transaction referred to as the "Acquisition"), subject to
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and covenants set forth herein, the parties
hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
1.1 Purchase of the Shares from the Sellers. On the terms and
subject to the conditions set forth herein, at the Closing (as that term
is defined in Section 1.3 hereof), the Sellers shall sell, transfer,
convey, assign and deliver to the Buyer, and the Buyer shall purchase,
acquire and accept from the Sellers, all of the Shares of Technetics
owned by the Sellers. At the Closing, the Buyer shall deliver to the
Sellers the Cash Purchase Consideration (as that term is defined in
Section 1.2 hereof) and shall deliver to Sellers' agent, Carol
Jergenson, the Secured Notes (as that term is defined in Section 1.2
hereof), to be held in escrow pending possible adjustment pursuant to
Section 1.4 hereof, and the Sellers shall deliver to the Buyer
certificates evidencing the Shares owned by the Sellers duly endorsed
for transfer or accompanied by stock powers endorsed in blank.
1.2 Purchase Price. The purchase price to be paid by the Buyer for
the Shares, together with all other shares of Technetics outstanding, shall
consist of cash of $275,000, subject to adjustment as described below (the
"Cash Purchase Consideration"), and $150,000 aggregate principal amount of
secured promissory notes in the form attached hereto as Exhibit 1.2 (the
"Secured Notes" and, collectively with the Cash Purchase Consideration, the
"Purchase Consideration"), subject to adjustment pursuant to Section 1.4
hereof. The Stock Pledge Agreement in the form of Exhibit 1.2A shall
secure the Secured Notes and the Adjusted Secured Notes (as that term is
defined in Section 1.4(e) hereof). The Secured Notes and the Adjusted
Secured Notes shall provide for payments which will amortize the
principal and interest in twelve equal quarterly payments beginning on
that date which is nine months after the Closing Date and ending on
that date which is three and one-half years after the Closing Date. The
Cash Purchase Consideration of $275,000 will be reduced by $2.78 per share
for each share owned by non-party shareholders which Sellers are unable to
deliver to Buyers at Closing pursuant to Section 7.1.
1.3 Closing. The closing of the Acquisition ("the Closing") shall
take place at the offices of Sellers' counsel, Marshall Lewis, Esq., of
the firm of Lewis, Hoxie & Spear, A.P.L.C., 4330 La Jolla Village Drive,
#330, San Diego, California 92122, or at such alternate location as may
be mutually agreed upon by the parties, at 10:00 a.m. Pacific time on
January 27, 1999, or as soon as practicable thereafter on any date
mutually agreed upon by the parties (the "Closing Date").
1.4 Post-Closing Adjustment of Secured Notes.
(a) Within 30 days after the Closing Date, or as soon as
practicable thereafter, the Sellers and Buyer shall cause Technetics'
December 31, 1998 balance sheet (the "Year-End Balance Sheet") to be
prepared and audited at the expense of Technetics by an independent
public accounting firm selected by the Sellers and approved by the
Buyer, approval not to be unreasonably withheld (hereinafter referred to
as "Technetics' Independent Accountants)". Also within 30 days of the
Closing Date, Sellers and Buyer will cause Technetics' balance sheet as
of the Closing Date (the "Closing Balance Sheet") to be prepared by
Technetics' controller. The Closing Balance Sheet will be subject to
the reasonable review of Sellers and Buyer as each may deem necessary,
with the cost of any review to be borne by the reviewing party.
Following completion of the audit of the Year-End Balance Sheet and the
preparation and review of the Closing Balance Sheet, the aggregate
principal amount of the Secured Notes will be increased or decreased, as
the case may be, by the following amounts:
(i) decreased by the amount that Technetics' total
shareholders' equity in the Closing Balance Sheet is less than $150,000
or increased by the amount that Technetics' total shareholders' equity
in the Closing Balance Sheet is greater than $150,000; and
(ii) decreased by the amount of any inventory with ascribed
value in the Closing Balance Sheet, whether in the form of raw
materials, work in process or finished goods, which is not covered by
firm, binding purchase orders from customers as of the Closing Date, net
of any income tax benefit recordable in the income statement of
Technetics under generally accepted accounting principles as a direct
result of writing off or reserving for such inventory, except that this
adjustment shall not apply to certain inventory parts with a cost basis
of approximately $57,000 which will be reserved 50% in the Closing
Balance Sheet and finished goods inventory not in excess of $40,000.
(b) Six months after the Closing Date, the aggregate principal
amount of the Secured Notes will be decreased by an amount, if any,
equal to the dollar amount of all accounts receivable outstanding as of
the Closing Date which, after taking reasonable and prudent steps to
collect, remain uncollected six months after the Closing Date, to the
extent such uncollected accounts receivable exceed the allowance for bad
debts balance as reflected in the Year-End Balance Sheet. Upon such
adjustment, Technetics shall assign such uncollected accounts to
Sellers, who shall be given full power to collect the same as part of
the assignment. Buyer shall cause Technetics to provide full
cooperation in such collection efforts.
(c) At or prior to Closing, the Sellers will cause Technetics to
deliver to Buyer a costed list of excess inventory parts procured for
Lambda Electronics, Inc. ("Lambda"), a customer, which have been
physically segregated by Technetics and for which a full reserve was
established as of December 31, 1998 or as of the Closing Date (the
"Lambda Parts" and collectively, the "Lambda Parts Pool"). Buyer shall
cause Technetics to establish controls and procedures to help ensure
that Technetics does not purchase new parts from suppliers in any
instance where the same parts or comparable parts are being held by
Technetics in the Lambda Parts Pool. For a period of three years from
the Closing Date, to the extent that Technetics uses or sells any of the
Lambda Parts, purchases new parts when the same or comparable parts
were being held in the Lambda Parts Pool, or receives reimbursements
from suppliers for the cost of any defective parts held in the Lambda
Parts Pool, then the aggregate principal amount of the Secured Notes
will be increased by the lesser of: (i) the actual selling price of such
Lambda Parts in the ordinary course of business; (ii) the reimbursement
amount from suppliers for the cost of defective Lambda Parts; or (iii)
the carrying amount of such Lambda Parts prior to establishing the
reserve, in any case net of the applicable income tax benefit
pertaining to the Lambda Parts which was recorded or recordable in the
income statement of Technetics under generally accepted accounting
principles at the time the reserve on the Lambda Parts was established.
Such adjustments to the Secured Notes, if any, will be made on a
semiannual basis during the three year period which begins on the
Closing Date, except that at the Buyer's option any adjustment amount
may be paid in cash to the Sellers at such semiannual date in lieu of
increasing the principal amount on the Secured Notes. Buyer will cause
Technetics to use reasonable efforts during the three years subsequent
to the Closing Date to resolve existing disputes with Lambda in order to
realize appropriate monetary recovery for Lambda Parts on behalf of
Sellers. Sellers shall have reasonable rights subsequent to Closing to
examine and inspect Technetics' books, journals, records and documents
to obtain satisfaction with the adjustment amounts. At the end of the
three-year period, Buyer shall cause Technetics to provide a list of
Lambda Parts then on hand to the Sellers or Sellers' designated agent,
whereupon Sellers or Sellers agent, as the case may be, will have the
option, exercisable for 30 days, to take possession and ownership of the
Lambda Parts without further consideration. If this option is elected,
the cost of transporting the Lambda Parts from Technetics' facility will
be borne by Sellers.
(d) The adjustments to the aggregate principal amount of the
Secured Notes pursuant to 1.4(a), (b) and (c) will be made on a pro rata
basis to all of the individual Secured Notes.
(e) The Secured Notes as so adjusted are referred to as the
"Adjusted Secured Notes". Upon adjustment of the Secured Notes pursuant
to this Section 1.4, the Adjusted Secured Notes will be issued to the
Sellers, and the Secured Notes will be returned by Sellers' agent to
the Buyer for cancellation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to and for the benefit of the
Sellers as follows:
2.1 Organization and Corporate Authority. The Buyer is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all requisite corporate power
and authority to enter into this Agreement and to consummate the
transaction contemplated hereby. This Agreement and all other
agreements herein contemplated to be executed by the Buyer in connection
herewith have been duly executed and delivered by the Buyer, have been
effectively authorized by all necessary action, corporate or otherwise,
and constitute legal, valid and binding obligations of the Buyer.
2.2 Agreement Not in Breach of Other Instruments. Neither the
execution and delivery of this Agreement by the Buyer, nor the
consummation by the Buyer of the transactions contemplated hereby nor
compliance by the Buyer with any of the provisions hereof, will conflict
with or result in a breach or violation of, or default (or give rise to
any right of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of (i) any material note, bond,
mortgage, indenture, license, agreement or other instrument or
obligation to which the Buyer is a party or by which the Buyer or any of
its assets or properties are bound, (ii) the Buyer's charter documents
or bylaws, or (iii) any judgment, order, injunction, decree, statute,
rule or regulation applicable to the Buyer or any of its properties or
assets.
2.3 No Brokerage Fees. No person or entity is entitled to any
brokerage commission, finder's fee or like payment from the Buyer in
connection with the Acquisition.
2.4 Investment Representation. The Buyer is acquiring the Shares
from the Sellers for its own account, for investment purposes only, and
not with a view to the distribution thereof.
2.5 Consents and Approvals. No authorization, consent or approval
of any governmental body, authority or any third party is necessary for
the consummation by the Buyer of the transactions contemplated by this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS REGARDING THE SHARES
Except as set forth in the Disclosure Schedule attached hereto,
which sets forth exceptions to the Sellers' representations and
warranties, the Sellers represent and warrant to and for the benefit of
the Buyer as follows:
3.1 Title to the Shares. The Sellers are the owners, beneficially
and of record, of and have good title to a total of 198,200 shares of
the common stock of Technetics, which are to be transferred and conveyed
to the Buyer pursuant hereto, free and clear of any and all covenants,
conditions, restrictions, security agreements, encumbrances, judgments,
liens, options and adverse claims or rights whatsoever.
3.2 Treasury Stock. In addition to the 202,228.334 outstanding
shares of common stock, there are 61,549 shares of treasury common stock
registered in the name of Technetics that are pledged as security for
notes payable to two former shareholders of Technetics under stock
repurchase agreements (the "Collateral Treasury Shares"). For the
purposes of this Agreement, the parties agree that the 61,549 shares of
Technetics registered in the name of Technetics and constituting
collateral to secure payment for their redemption to Thomas J. Owen and
Jennie Lea Elliott are not deemed to be outstanding, but remain issued.
The stock certificates evidencing the Collateral Treasury Shares are in
the physical custody of such former shareholders.
3.3 Authority. The Sellers have the full right, power and
authority to enter into this Agreement and to transfer, convey and sell
to Buyer at the Closing the Shares to be sold to the Buyer by the
Sellers hereunder.
3.4 No Legal Bar. None of the Sellers are a party to, subject to
or bound by any agreement or judgment, order, writ, prohibition,
injunction or decree of any court or other governmental body which would
prevent, prohibit, condition or limit the execution or delivery of this
Agreement by the Sellers to the Buyer or the transfer, conveyance and
sale of the Shares to be sold by the Sellers to the Buyer pursuant
hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS REGARDING TECHNETICS
Except as set forth in the Disclosure Schedule attached hereto,
which sets forth exceptions to the Sellers' representations and
warranties, the Sellers' represent and warrant to and for the benefit of
the Buyer as follows:
4.1 Organization, Good Standing and Compliance with Law.
Technetics is a corporation duly organized, validly existing and in good
standing under the laws of the State of California. Technetics is duly
qualified and entitled to carry on its business in each other
jurisdiction where the failure to so qualify would have a material
adverse effect on Technetics. Technetics has complied in all material
respects with all laws, regulations, rules, ordinances and orders
applicable to it or any of its properties, assets, operations or
business, of each federal, state, county or municipal government or
governmental department, agency, commission, board, bureau or
instrumentality, domestic or foreign, or any other regulatory body.
4.2 Capitalization. The authorized capital of Technetics consists
of 1,000,000 shares of common stock, no par value, of which 202,228.334
shares are issued and outstanding. All of the issued and outstanding
shares are validly issued, fully paid and nonassessable, and such shares
have been issued in compliance with all federal and state securities
laws. There are no outstanding subscriptions, options, rights,
warrants, convertible securities or other agreements or commitments
obligating Technetics to issue or to transfer from treasury any
additional shares of its capital stock of any class, with the exception
of the 61,549 Collateral Treasury Shares which are pledged as security
under notes payable to two former shareholders of Technetics.
4.3 No Subsidiaries. Technetics does not own, either directly or
indirectly, any interest or investment (whether debt or equity) in any
corporation, partnership, joint venture, trust or other entity.
4.4 Financial Statements and Information. The following financial
statements have heretofore been furnished to the Buyer:
(a) the unaudited balance sheet of Technetics as of December
31, 1996, and the related unaudited statements of operations and cash
flows for the year then ended;
(b) the audited balance sheet of Technetics as of December
31, 1997, and the related audited statements of operations and cash
flows for the year then ended.
(c) the unaudited balance sheet of Technetics as of November
30, 1998, and the related unaudited statement of operations for the
eleven months then ended;
The financial statements of Technetics described in Sections
4.4(a), (b) and (c) above, and Technetics' unaudited December 1998
financial statements to be delivered to the Buyer pursuant to Section
6.2 of this Agreement, are collectively referred to hereinafter as the
"Pre-Closing Financial Statements".
The Pre-Closing Financial Statements are in agreement with the
books and records of Technetics and, except for the fact that the
unaudited financial statements referred to above were not accompanied by
footnote disclosures, have, to the Sellers' best knowledge, been
prepared in accordance with generally accepted accounting principles
consistently applied. All of Technetics' liabilities and other
obligations which existed at the respective balance sheet dates for the
balance sheets included in the Pre-Closing Financial Statements are
included in such balance sheets and are not understated, except as
Sellers have disclosed to Buyer or as corrected in subsequent balance
sheets.
4.5 Taxes. The Sellers or Technetics, as the case may be, have
filed all federal, state and local income and other tax returns, reports
and declarations, including customs declarations, which are required by
applicable law to be filed by the Sellers or Technetics, as the case may
be, and the Sellers or Technetics, as the case may be, have paid, or
provision for payment has been made for, all federal, state, local and
foreign income and other taxes including payroll taxes, which have
become due for the periods covered by such returns, reports and
declarations, except such taxes, if any, that are adequately reserved
for in Technetics' financial statements or such taxes the failure of
which to pay would not have a material adverse effect on the financial
condition or operations of Technetics taken as a whole. Technetics has
withheld amounts from its employees to the extent required by law, and
with respect to such employees, has filed all payroll tax returns with
respect to employee income tax withholding and social security, Medicare
and unemployment taxes in compliance with the tax withholding provisions
of the Code and other applicable federal, state or local laws. The
Sellers, jointly and severally, shall indemnify and hold the Buyer
harmless for any federal, state and local income tax liabilities and
payroll liabilities incurred by Technetics prior December 31, 1998 which
are not appropriately reflected on the Year-End Balance Sheet as
audited, or incurred by Technetics after December 31, 1998 and prior to
the Closing Date which are not appropriately reflected on the Closing
Balance Sheet.
4.6 Title to Assets. To the Sellers' best knowledge, Technetics
has good and marketable title to all of its assets free and clear of all
mortgages, liens, pledges, charges, encumbrances or security interests.
4.7 Adequacy of Assets. The assets of Technetics and the
facilities, assets and services to which Technetics has a contractual
right of use include all rights, properties, assets, facilities and
services necessary for the carrying on of the Business in the manner in
which it is currently being, and has over the immediately preceding
twelve (12) months been, carried on, Technetics does not depend in any
material respect upon the use of assets owned by, or facilities or
services provided by, Seller or any Affiliate of Seller.
4.8 Inventories. The inventories of raw materials, work in
progress and finished goods (collectively, the "Inventories") to be
shown in the Year-End Balance Sheet and the Closing Balance Sheet will
consist of items that are usable and salable in the ordinary course of
business by Technetics, and will not include any obsolete, discontinued
or surplus items, except to the extent of the reserves therefor
reflected in the Year-End Balance Sheet and the Closing Balance Sheet.
No items of Inventories are subject to security interests, except for
liens arising by operation of law which do not have a materially adverse
effect on Technetics. Inventories are valued at the lower of cost or
market, with cost determined on a moving average basis. The Sellers
shall provide the Buyer a complete list of consignment inventory and a
complete list of all items available to Technetics contained in any
bonded warehouse as of the Closing Date as soon as available.
4.9 Accounts Receivable. The Sellers shall provide the Buyer a
complete and accurate aged list of the accounts receivable of Technetics
as of the Closing Date as soon as available. Such accounts receivable
arose from sales in the ordinary course of business.
4.10 Real Property and Leaseholds. Technetics does not own any
real property. The Sellers have furnished or made available to the
Buyer copies of all real property leases to which Technetics is a party.
4.11 Intangible Personal Property. The Disclosure Schedule hereto
sets forth a list of any and all interests in any United States or
foreign patent, patent application, invention disclosure, trademark,
trademark registration, trade name, copyright registration or
application and any design drawings, Underwriters Laboratories (UL)
approvals, and UL applications for any of the foregoing owned or held by
Technetics. To the Sellers' best knowledge, Technetics' ownership or
right to use any of the foregoing does not infringe upon the rights of
any third party. Also, to the Sellers' best knowledge, Technetics'
ownership or right to use any of the foregoing has not been challenged
by any third party.
4.12 Progress Payments. Technetics has received no progress
payments or prepayments from customers for work or products not
heretofore completed and delivered, other than those progress payments
reflected as liabilities on the Year-end Balance Sheet.
4.13 Liabilities. As of the date hereof and as of the Closing,
Technetics has not had and will not have any liabilities of any nature,
whether accrued, absolute, contingent or otherwise, asserted or
unasserted, known or unknown (including without limitation, liabilities
as guarantor or otherwise with respect to obligations of others, or
liabilities for taxes due or then accrued or to become due or contingent
or potential liabilities relating to activities of Technetics or the
conduct of Technetics prior to the date hereof or the Closing regardless
of whether claims in respect thereof had been asserted as of such date),
except liabilities (i) stated or adequately reserved against on the most
recent balance sheet included in the Pre Closing Financial Statements or
in the notes thereto, (ii) reflected in the Disclosure Schedule, or
(iii) incurred after the date hereof in the ordinary course of business
of Technetics consistent with the terms of this Agreement. The
Disclosure Schedule contains a complete list of all liabilities of
Technetics which would be required in accordance with generally accepted
accounting principles to be reflected on the Technetics December 31,
1998 balance sheet and a list of each account payable of Technetics as
of December 31, 1998.
4.14 Warranties; Product Liability. There are no (a) liabilities
of Technetics, fixed or contingent, asserted and arising out of or based
upon incidents occurring on or before the Closing Date with respect to
any products liability or any similar claim that relates to any product
sold by Technetics to others on or before the Closing Date or (b)
liabilities of Technetics, fixed or contingent asserted and arising out
of or based upon incidents occurring on or before the Closing Date with
respect to any claim for the breach of any express or implied product
warranty, or any similar claim that relates to any product sold by
Technetics on or before the Closing Date, and neither Technetics or
Sellers have any knowledge of any product defects which could give rise
to any such liabilities or claims.
4.15 Employment Agreements and Related Matters. Technetics is not
a party to any employment agreements, consulting agreements, collective
bargaining agreements, and pension, bonus, profit sharing, stock option,
or other similar agreements except those listed on the Disclosure
Schedule. Technetics is not liable for any amounts in respect of debts,
wages, salaries or fees, accrued vacation, personal time off, or other
normally accrued benefits (other than for the current pay period) due
and owing to any of the officers, directors or employees of Technetics
that are not reflected in the Pre-Closing Financial Statements.
Technetics has no information indicating that any employee employed by
Technetics at the Closing Date intends to terminate his or her
employment relationship with Technetics within 60 days of the Closing
Date. There do not exist any pending workers' compensation claims
against Technetics that are not adequately provided for by insurance, or
any pending employee claims alleging that the workplace of Technetics is
unsafe or alleging that Technetics has engaged in unfair labor
practices, employment discrimination or wrongful discharge.
4.16 Employee Benefit Plans.
(a) Technetics has set forth on the Disclosure Schedule all
employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) and all
bonus, stock option, stock purchase, fringe benefits, incentive,
deferred compensation, supplemental retirement, post-retirement health
or welfare plan severance and other employee benefit plans and
arrangements, written or otherwise, maintained by Technetics or any
trade or business (whether or not incorporated) which is a member or
which is under common control with Technetics (an "ERISA Affiliate")
within the meaning of Section 414 of the Internal Revenue Code of 1986,
as amended (the "Code"), for the benefit of, or relating to, any current
or former employee of Technetics or an ERISA Affiliate (together, the
"Technetics Group") or with respect to which Technetics or an ERISA
Affiliate may have liability (together, the "Benefit Plans").
(b) With respect to each Benefit Plan, Technetics has made
available to the Buyer a true and correct copy of (i) the most recent
annual report (Form 5500) filed with the Internal Revenue Service
("IRS"), (ii) such Benefit Plan (or in the case of an unwritten Benefit
Plan, a written summary thereof), (iii) each trust agreement and group
annuity contract, if any, relating to such Benefit Plan and (iv) the
most recent actuarial report or valuation relating to a Benefit Plan
subject to Title IV of ERISA.
(c) Each of the Benefit Plans and all related trusts, insurance
contracts and funds have been created, maintained, funded and
administered in all respects in compliance with all applicable laws and
in compliance with the plan document, trust agreement, insurance policy
or other writing creating the same or applicable thereto. No Benefit
Plan is or is proposed to be under audit or investigation, and no
completed audit of any Benefit Plan has resulted in the imposition of
any tax, fine or penalty.
(d) No prohibited transaction (within the meaning of Section 406
of ERISA and Section 4975 of the Code) with respect to any Benefit Plan
exists or has occurred that could subject any member of the Technetics
Group to any liability or tax under Part 5 of Title I of ERISA or
Section 4975 of the Code. Neither Technetics, nor any administrator or
fiduciary of any Benefit Plan, nor any agent of any of the foregoing,
has engaged in any transaction or acted or failed to act in a manner
that will subject Technetics to any liability for a breach of fiduciary
or other duty under ERISA or any other applicable law. With the
exception of the requirements of Section 4980B of the Code, no post-
retirement benefits are provided under any Benefit Plan that is a
welfare benefit plan as described in ERISA Section 3(1).
(e) The Disclosure Schedule discloses each Benefit Plan that
purports to be a qualified plan under Section 401(a) of the Code and
exempt from United States federal income tax under Section 501(a) of the
Code (a "Qualified Plan"). With respect to each Qualified Plan, a
determination letter (or opinion or notification letter, if applicable)
has been received from the IRS that such plan is qualified under Section
401(a) of the Code and exempt from United States federal income tax
under Section 501(a) of the Code. No Qualified Plan has been amended
since the date of the most recent such letter applicable to such
Qualified Plan. Neither Technetics, nor any fiduciary of any Qualified
Plan, nor any agent of any of the foregoing, has taken any action that
would adversely affect the qualified status of a Qualified Plan or the
qualified status of any related trust.
(f) No Benefit Plan is a defined benefit plan within the meaning
of Section 3(35) of ERISA (a "Defined Benefit Plan"). No Defined
Benefit Plan sponsored or maintained by Technetics has been terminated
or partially terminated.
(g) No Benefit Plan is a multiemployer plan within the meaning of
Section 3(37) or Section 4001(a)(3) of ERISA (a "Multiemployer Plan").
Technetics has not withdrawn from any Multiemployer Plan or incurred any
withdrawal liability to or under any Multiemployer Plan. No Benefit Plan
covers any employees of any member of Technetics in any other country or
territory.
(h) With respect to the Benefit Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Sellers, there
exists no condition or set of circumstances in connection with which
Technetics could be subject to any liability, that is reasonably likely
to have a material adverse effect on Technetics, under ERISA, the Code
or any other applicable law.
(i) With respect to the Benefit Plans, individually and in the
aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no
unfunded benefit obligations which have not been accounted for by
reserves, or otherwise properly footnoted in accordance with generally
accepted accounting principles, in the audited financial statements of
Technetics.
4.17 Insurance. All of the insurable properties of Technetics are
insured against such risks as has been determined appropriate in the
reasonable and good faith judgment of Technetics under policies which
are not void or voidable and which the Sellers and Technetics have no
reason to believe are unenforceable in accordance with their terms. The
Disclosure Schedule hereto sets forth a list of all policies of
insurance benefiting or maintained by Technetics with respect to its
properties, assets, operations, business, employees or otherwise. True
and correct copies of each such policy have been delivered or made
available to the Buyer.
4.18 Permits. The Disclosure Schedule lists all licenses, permits,
authorizations and approvals (the "Permits") required from federal,
state or local authorities or other parties in order for Technetics to
conduct its business. Technetics has obtained all such Permits, which
are valid and in full force and effect, and is operating in compliance
therewith. Such Permits include, but are not limited to, those required
under federal, state, provincial, territorial or local statutes,
ordinances, orders, requirements, rules, regulations, or laws pertaining
to environmental protection, public health and safety, worker health and
safety, buildings, highways or zoning.
4.19 Related Transactions.
(a) Except as set forth in the Disclosure Schedule or in
Technetics' audited financial statements for 1997, Technetics has no
contractual relationship with, or any obligation or liability owed to or
by, any Seller. All such contractual relationships are on terms that
are no less favorable to Technetics than would be the case with a non-
affiliated party.
(b) Except as set forth in Disclosure Schedule or in Technetics'
audited financial statements for 1997, all of the transactions of
Technetics during the past two (2) years have been conducted on an arms-
length basis. To the best knowledge of the Sellers, no employee of
Technetics has violated the published business policies of any
governmental agency or customer or supplier with respect to gifts,
services or corporate business practices. To the best knowledge of
Sellers, Technetics has not made any material payments outside the
ordinary course of business to any person or entity in respect of any
business with any customer or supplier of Technetics.
(c) Except for the ownership of non-controlling interests in
securities of corporations the shares of which are publicly traded or as
otherwise set forth in the Disclosure Schedule, neither Sellers nor
Technetics own, and to the best knowledge of Sellers, none of
Technetics's officers, directors or other key employees (including
purchasing agents and departmental managers) owns, directly or
indirectly, any interest or has any investment or profit participation
in any person which (i) is a material competitor, customer,
subcontractor or supplier of Technetics or (ii) has an existing material
relationship with, or a material interest in Technetics, including but
not limited to lessors of real or personal property and persons against
which rights or options are exercisable by Technetics .
4.20 Environmental Matters.
(a) Except as set forth in Schedule 4.20, (i) Technetics has never
generated, handled, transported, used, stored, treated, disposed of, or
managed any Hazardous Substance (as defined in subsection (e) below);
(ii) no Hazardous Substance has ever been or is threatened to be
spilled, emitted, deposited, released, discharged or disposed of, nor
has Technetics permitted any Hazardous Substance to be spilled, emitted,
deposited, released, discharged or disposed of, at any site presently or
formerly owned, operated, leased, or used by Technetics, or, to the
knowledge of Sellers, is located in the soil or groundwater at any such
site; (iii) no Hazardous Substance has ever been transported from any
site presently or formerly owned, operated, leased, or used by
Technetics for treatment, storage, or disposal at any other place; (iv)
Technetics does not presently own, operate, lease, or use nor has it
previously owned, operated, leased, or used any site on which
underground storage tanks are or were located; and (v) no lien has ever
been imposed by any governmental agency on any property, facility,
machinery, or equipment owned, operated, leased, or used by Technetics
in connection with the presence of any Hazardous Substance.
(b) (i) Technetics has not incurred any liability under, nor has
it ever violated, any Environmental Law or Environmental Permit (as
defined in subsection (e) below); (ii) Technetics, any property owned,
operated, leased, or used by it, and any facilities and operations
thereon, have all required Environmental Permits and are presently in
compliance therewith and with all applicable Environmental Laws and
Technetics has not received any notice of non-compliance with any
Environmental Laws or Environmental Permits and there are no proceedings
in progress, pending or threatened which may result in the cancellation,
revocation, suspension, rescission or amendment of any Environmental
Permit; (iii) Technetics has not ever entered into or been subject to
any judgment, consent decree, conviction, sentence, fine, compliance, or
administrative order with respect to any environmental or health and
safety matter or received any request for information, notice, demand
letter, administrative inquiry, or formal or informal complaint or claim
with respect to any environmental or health and safety matter or the
enforcement of any Environmental Law except for routine health and
safety inspections and none of such inspections have resulted in any
adverse findings or any liability to Technetics; and (iv) Technetics has
no reason to believe that any of the items enumerated in clause (iii) of
this subsection will be forthcoming.
(c) Technetics has not received any written or, to the knowledge
of Sellers, verbal notice that any site owned, operated, leased, or used
by Technetics contains any asbestos or asbestos-containing material, any
polychlorinated biphenyls (PCBs) or equipment containing PCBs, any urea
formaldehyde foam insulation or any other Hazardous Substance.
(d) Technetics has provided to Purchaser copies of all documents,
records, and information available to Technetics concerning any
environmental or health and safety matter relevant to Technetics,
whether or not generated by Technetics, including without limitation,
environmental audits, environmental risk assessments, site assessments,
documentation regarding off-site disposal of Hazardous Substances, spill
control plans, and reports, correspondence, permits, licenses,
approvals, consents, and other authorizations related to environmental
or health and safety matters issued by any governmental agency.
(e) For purposes of this Section 4.20, (i) "Hazardous Substance"
shall mean and include any hazardous waste, hazardous material,
hazardous substance, residual hazardous material, petroleum product,
oil, toxic substance, pollutant, contaminant, or other substance which
is explosive, gaseous, flammable, poisonous, radioactive, corrosive,
oxidizing or leachable or which may pose a threat to the environment or
to human health or safety, as defined or regulated under any
Environmental Law; (ii) "Environmental Law" shall mean any federal,
state, county or local statutes, laws, regulations, rules, ordinances,
codes, licenses and permits or any governmental authorities relating to
environmental, health or safety matters, and applicable to the business
or operations of Technetics including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, and applicable regulations promulgated thereunder, the
Clean Air Act, as amended, and applicable regulations promulgated
thereunder, the Federal Water Pollution Control Act of 1972, as amended,
and applicable regulations promulgated thereunder, the Hazardous
Materials Transportation Act, as amended, and applicable regulations
promulgated thereunder, and the Hazardous Materials Transportation
Uniform Safety Act of 1990, as amended, and applicable regulations
promulgated thereunder; (iii) "Environmental Permit" shall mean all
permits, certificates, approvals, consents, authorizations,
attestations, registrations and licenses issued by any governmental or
regulatory authority pursuant to any Environmental Laws in connection
with Technetics's operations, facilities, property, processes,
undertakings or business; and (v) "Technetics" shall mean and include
Technetics, each of its subsidiaries and all other entities for whose
conduct Technetics is or may be held responsible under any Environmental
Law.
4.21 Year 2000 Compliance. Technetics will have no liability with
respect to periods after the Closing Date related to any error,
omission, gap or malfunction in computer programming, data processing or
operations arising from or relating to the inability or failure of
electronic data processing equipment, microprocessors, computer
hardware, computer software, microcontrollers, media, data, microchips
embedded in computer or non-computer equipment or any other computerized
or electronic equipment or components to recognize, interpret, process
or differentiate between years in different centuries; or any other data
processing problems associated with the inability at any time accurately
to process data involving dates on or after January 1, 2000.
4.22 Contracts.
(a) Technetics is not a party to, nor is its property bound by,
any distributor's or manufacturer's representative or agency agreement,
any output or requirements agreement, any obligation to pay royalties,
any indenture, mortgage, deed of trust, lease, service or maintenance
agreement, or any other agreement calling for consideration of more than
$5,000, except the agreements listed on Schedule 4.22 hereto, copies of
which have been furnished or made available to the Buyer.
(b) Technetics is not in default under, nor has it breached any
provision of, any contract, agreement, instrument, document, lease,
license, permit, indenture, insurance policy or other obligation of
Technetics relating to the business, and there is no material oral
modification or past practice inconsistent with the written terms of any
of the foregoing. All of such contracts, agreements, instruments,
documents, leases, licenses, permits, indentures, policies and other
obligations are currently in full force and effect. To the knowledge of
the Sellers, the other parties to such contracts, agreements,
instruments, documents, leases, licenses, permits, indentures, policies
and other obligations have complied with their obligations thereunder
and are not in breach thereof. Technetics fully has performed each such
term, condition and covenant of each such contract, agreement,
instrument, document, lease, license, permit, indenture, policy or other
obligation required to be performed on or prior to the date hereof.
Sellers know of no state of facts which, with the giving of notice or
the passing of time, or both, would give rise to any default in or under
any of the above.
4.23 Burdensome Agreements and Unusual Matters.
(a) Technetics is not a party to any contract, agreement, other
commitment or instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree or award
which materially and adversely affects, or in the future may (as far as
Sellers can now foresee), materially and adversely affect, the business,
operations, properties, assets or condition of Technetics.
(b) There is no fact known to Sellers that has specific
application to Technetics (other than general economic or industry
conditions) and that materially adversely affects or, as far as Sellers
can reasonably foresee, materially threatens, the assets, business,
prospects, financial condition, or results of operations of Technetics
that has not been set forth in this Agreement or the Disclosure
Schedule.
4.24 Lack of Disputes. There is currently no material and adverse
dispute, pending or, to the knowledge of Sellers, threatened,
anticipated or contemplated of any kind with any customer, supplier,
source of financing, employee, landlord, subtenant or licensee of
Technetics or any pending or, to the knowledge of Sellers, threatened,
anticipated or contemplated occurrence or situation of any kind, nature
or description which is reasonably likely to result in any material
reduction in the amount, or any change in the terms or conditions, of
Technetics's business or dealings with any substantial customer,
supplier or source of financing.
4.25 Litigation. There is no suit, action, investigation or
proceeding pending or, to the best knowledge of the Sellers, threatened,
against Technetics or its business which would have a material adverse
effect on the financial condition or operations of Technetics taken as a
whole.
4.26 Broker's Fees. Finder's and Broker's fees, if applicable,
will be the financial responsibility of the Sellers. Technetics has not
and will not incur any liability for, nor will it pay, any brokerage
fees, commissions or finder's fee in connection with the Acquisition.
4.27 Agreement Not in Breach of Other Instruments. Neither the
execution and delivery of this Agreement by the Sellers, nor the
consummation by the Sellers of the transactions contemplated hereby nor
compliance by the Sellers with any of the provisions hereof, will
conflict with or result in a breach or violation of, or default (or give
rise to any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of (i) any material note,
bond, mortgage, indenture, license, agreement or other instrument or
obligation to which Technetics is a party or by which Technetics or any
of its assets or properties are bound, (ii) Technetics' charter
documents or bylaws, or (iii) any judgment, order, injunction, decree,
statute, rule or regulation applicable to Technetics or any of its
properties or assets.
4.28 Consents and Approvals. No authorization, consent or
approval of any governmental body, authority or any third party is
necessary for Technetics or the Seller to transfer the Shares and to
consummate the Acquisition.
4.29 Lambda Inventory. The costed list of excess inventory parts
for Lambda referred to in Section 1.4(c) hereof will have a total cost
amount between $225,000 and $235,000.
ARTICLE V
COVENANTS OF THE BUYER
5.1 Removal of Personal Guarantees. Buyer will use its best efforts
to eliminate all personal guarantees on any of Technetics' debt or
credit facilities by either substituting the guaranty of the Buyer on
such indebtedness or credit facilities, or by refinancing such
indebtedness or credit facilities as soon as practicable following the
Closing Date. Buyer will also enter into a separate agreement with the
guarantors on or before the Closing Date to defend and indemnify such
individuals from any and all claims asserted by a creditor of Technetics
against the guarantors pursuant to any such personal guarantees which
cannot be eliminated through the best efforts of Buyer.
5.2 Release of Guaranty. Buyer will obtain, or cause Technetics to
obtain, a release of the guaranty on Technetics' SBA loan from Rancho Sante
Fe National Bank (the "SBA Loan") no later than the date that Technetics
ceases to lease the building at 481 Cypress Lane, El Cajon, California (the
"Building") or the third anniversary of the Closing Date, whichever occurs
first. If the guaranty is not released by the earlier of the date that
Technetics ceases to lease the Building or the third anniversary of the
Closing Date, then Buyer will, or cause Technetics to, pay a penalty to the
owner of the Building. This penalty will be equal to 3% per annum of the
then outstanding balance of the SBA Loan, and will be payable on a monthly
basis continuing until such time as the guaranty is released as collateral
on the SBA Loan.
5.3 Nondisclosure of Confidential Information..
(a) Buyer acknowledges that the financial and other business
records of Technetics are entitled to protection as confidential and
proprietary documents of a non-public company, and that Technetics'
customer and supplier identities and the terms of contracts with
customers and suppliers are trade secrets. Buyer agrees that its
officers, directors, employees and agents, including legal counsel and
accountants, will maintain such confidences and secrets; that it will
respect such obligations whether or not the transaction reaches a
closing and, in the event it does not close, all papers and documents,
including any copies made by Buyer and such persons shall be promptly
returned to Sellers or to the Sellers' designated representative.
(b) If the Acquisition contemplated by this Agreement is
consummated, the Buyer shall no longer be bound by any of the provisions
of this Section 5.3 as they relate to Technetics.
5.4 Election of Directors and Appointment of Officers. Effective
upon Closing, Buyer will appoint three new directors to Technetics' Board
of Directors, whereupon the Board will appoint Technetics officers, to
consist of Michael E. Perry, President, and Richard K. Vitelle, Secretary,
Treasurer and Chief Financial Officer.
ARTICLE VI
COVENANTS OF THE SELLERS
6.1 The Buyer's Access. Between the date hereof and the Closing
Date, the Sellers shall cause Technetics to allow Buyer and its counsel,
accountants and other representatives reasonable access during normal
business hours to any and all premises, properties, books, accounts,
records, contracts and documents of or relating to Technetics. Sellers
shall cause Technetics to furnish or cause to be furnished to the Buyer
and its representative all data and information concerning the business,
finances and properties of Technetics that may reasonably be requested.
6.2 Delivery of Pre-Closing Financial Statements. Prior to the
Closing Date, Technetics shall have delivered to the Buyer an unaudited
balance sheet as of December 31, 1998 and an unaudited statement of
operations for the year then ended, which statements are subject to all
of the Sellers' representations and warranties pertaining to the Pre-
Closing Financial Statements contained in Article IV of this Agreement.
6.3 Conduct of Business Pending the Closing. Between the date
hereof and the Closing Date, the Sellers will cause Technetics to use
its best efforts to preserve and keep Technetics' business organization
intact, to operate Technetics in the ordinary course of business, to
keep available to Technetics the services of the present employees of
Technetics; to preserve for Technetics the goodwill of the suppliers,
customers and others having business relations with Technetics, to
continue to meet its contractual obligations incurred in the ordinary
course of business, and to maintain Technetics' books and records in
accordance with generally accepted accounting principles applied on a
basis consistent with past practice and in the usual, regular and
ordinary manner and promptly advise the Buyer in writing of any
material adverse change in the financial condition or operations of
Technetics. Prior to Closing, Technetics shall not, without the prior
written consent of Buyer:
(a) issue any additional shares of stock or other securities;
(b) make any distributions to its shareholders, as shareholders,
of any assets by way of dividends, purchase of shares or otherwise;
(c) sell, lease, mortgage, pledge or subject to lien or
encumbrance, any of its properties or assets, tangible or intangible,
except in each case in the ordinary and usual course of business;
(d) incur or assume any indebtedness for money borrowed or make
capital expenditures or commitment for capital expenditures in excess of
$3,000;
(e) adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, warrant, pension, retirement, deferred
compensation, employment, severance, termination or other employee
benefit plan;
(f) increase the rate of compensation of its employees except in
the ordinary course of business in accordance with past practice of
Technetics;
(g) pay any employee bonuses; or
(h) enter into any material contracts or undertake any material
obligations.
6.4 Amendment of Facility Lease. On or before the Closing Date,
Sellers will cause Technetics' existing facility lease dated January 28,
1985, as amended January 23, 1995 for the property located at 481
Cypress Lane, El Cajon, California to be amended to:
(a) provide Technetics with the option, during the remainder of
the lease term, to terminate the lease at the end of each year upon: (i)
ninety (90) days written notice to lessor of intent to terminate the
lease; and (ii) payment equal to one month's rent as an early
termination fee; and
(b) incorporate default provisions which are reasonable and
customary for industrial property leases in the local region.
6.5 No Negotiations.
(a) During the period from December 17, 1998 to January 31, 1999
or the Closing Date or the date of termination of this Agreement,
whichever is earlier, and in consideration of the covenants of Buyer and
for other valuable consideration hereunder, Sellers shall not, nor
permit Technetics to: (i) solicit offers from, provide information to,
or enter into any agreement or understanding with any other person or
entity with respect to an acquisition of all or part of the stock of
Technetics or of Technetics' business or material assets; or (ii)
disclose the material terms or contents hereof.
(b) Sellers shall provide, and cause Technetics to provide, Buyer
with immediate written notice of any offers or proposals of which they
become aware to purchase the stock or assets, or to discuss or to
negotiate the purchase of the stock or assets, of Technetics and shall
refrain from responding affirmatively to any such offers or proposals.
(c) If Sellers breach the provisions in Section 6.4(a) or 6.4(b)
hereof, then Sellers shall pay to Buyer $50,000 cash and will reimburse
Buyer for all out-of-pocket expenses incurred by Buyer related to the
Acquisition.
6.6 Covenant Not to Compete. Each Seller agrees that for a period
of five (5) years after the Closing Date, he or she shall not, directly
or indirectly, engage in electronic manufacturing services within a 250
mile radius of San Diego, California, unless such activity is being
conducted as an employee of Technetics or of one of the Buyer's other
operating subsidiaries.
6.7 Best Efforts. Subject to the terms and conditions herein
provided, each Seller agrees to use his or her best efforts to take or
cause to be taken all such actions necessary, proper or advisable under
applicable laws and regulations to satisfy the conditions set forth in
Article VII and to consummate the transactions contemplated by this
Agreement, including, without limitation, the execution of any additional
documents necessary to consummate the transactions contemplated hereby.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligation of the Buyer to consummate the transaction
contemplated hereby shall be subject to the fulfillment, prior to or at
the Closing, of each of the following conditions precedent, any of which
may be waived in whole or in part by the Buyer:
7.1 Tender by Non-Party Shareholders. Buyer shall have received
tenders of the shares of Technetics shareholders Jerg B. Jergenson,
Salim Khalfan, Ed Reinhorn and Richard A. Keplinger, together with
instruments of transfer for sale of their shares to Buyer at $2.78 per
share, together with such documentation as Sellers shall reasonably
require in order to permit such shareholders to take full payment for
their shares in cash.
7.2 Due Diligence Results. Buyer's due diligence investigation
shall have been completed to the satisfaction of Buyer, and the results
of such investigation shall be reasonably satisfactory to Buyer.
7.3 Accuracy of Representations and Warranties. The
representations and warranties of the Sellers contained in this
Agreement or in any certificate or other written instrument delivered to
the Buyer pursuant hereto or in connection with the transaction
contemplated hereby shall, when made and at and as of the Closing, be
true and correct in all material respects.
7.4 Performance by Sellers. The Sellers shall have duly performed
and complied with all terms, agreements, covenants and conditions
required by this Agreement to be performed or complied with by them
prior to or the Closing.
7.5 Sellers' Closing Deliveries. In addition to any other
documents required by this Agreement to be delivered by Sellers to Buyer
at or before the Closing, Sellers shall have delivered, or caused to be
delivered, to Buyer at or prior to the Closing each of the following:
(a) A copy of Technetics' facility lease as amended pursuant to
Section 6.4 hereof.
(b) a certificate, dated the Closing Date, to the effect that the
Sellers have duly performed and complied with the conditions set forth
in Sections 7.3 and 7.4 hereof.
(c) a certified copy of Technetics' articles of incorporation and
a certificate of good standing issued by the State of California, dated
no more than sixty (60) days prior to the Closing Date;
(d) copy of the bylaws of Technetics which shall be certified to
be accurate, complete and as in effect as of the Closing Date by the
Secretary of Technetics;
(e) the minute and stock records and corporate seal of Technetics;
(f) certified resolutions of the Board of Directors of Technetics
ratifying and confirming the outstanding capital stock of Technetics and
attesting that such shares are fully paid and nonassessable;
(g) a certified resolution of the Board of Directors of Technetics
terminating the Technetics, Inc. 401(k) Plan;
(h) signed resignations of the incumbent directors of Technetics;
(i) a costed list of excess inventory parts for Lambda pursuant to
Section 1.4(c) hereof; and
(j) a statement regarding the status of corrective actions taken
for the non-compliant conditions noted in the County of San Diego
Compliance Inspection Report dated June 16, 1998, to the reasonable
satisfaction of Buyer.
7.6 Legal Opinion. Counsel for Technetics shall have delivered to
Buyer its opinion dated the Closing Date, in form and substance
reasonably satisfactory to Buyer and addressing the matters covered in
Sections 3.1, 3.3, 4.1, 4.2, and 4.25 of this Agreement.
7.7 Governmental Consents and Approvals. All necessary and
appropriate governmental consents, approvals and filings shall have been
obtained or made and all applicable waiting periods (including any
extensions thereof) relating thereto shall have expired or otherwise
terminated.
7.8 Release of Security by Bank. Rancho Sante Fe National Bank
(the "Bank") shall have agreed in writing to unconditionally release as
security, under any existing loan agreement of Bank, Technetics'
accounts receivable, inventory and other collateral not contemplated in
the SBA Loan agreement or any other loan agreement of Bank.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligation of the Sellers to consummate the transaction
contemplated hereby shall be subject to the fulfillment, prior to or at
the Closing, of each of the following conditions precedent, any of which
may be waived by the Sellers:
8.1 Due Diligence Results. Sellers' due diligence investigation
into the financial condition of Buyer shall have been completed to the
reasonable satisfaction of Sellers not later than January 19, 1999.
8.2 Accuracy of Representations and Warranties. The
representations and warranties of the Buyer contained in this Agreement
or in any certificate or other written instrument delivered to the
Sellers pursuant hereto or in connection with the transaction
contemplated hereby shall, when made and at and as of the Closing, be
true and correct in all material respects.
8.3 Performance by Buyer. The Buyer shall have duly performed and
complied with all terms, agreements, covenants and conditions required
by this Agreement to be performed or complied with by it prior to or at
the Closing.
8.4 Indemnification for Personal Guarantees. The Buyer shall have
entered into a separate agreement with the guarantors of Technetics'
debt or credit facilities on or before the Closing Date in the form
attached hereto as Exhibit 8.4 to defend and indemnify such individuals
from any and all claims asserted by a creditor of Technetics against the
guarantors pursuant to any such personal guarantees which cannot be
eliminated through the best efforts of Buyer.
8.5 Sellers' Closing Deliveries. In addition to any other
documents required by this Agreement to be delivered by Buyer to Sellers
at or before the Closing, Buyer shall have delivered, or caused to be
delivered, to Sellers at or prior to the Closing each of the following:
(a) a certificate, dated the Closing Date, to the effect that the
Buyer has duly performed and complied with the conditions set forth in
Sections 8.2 and 8.3 hereof; and
(b) a certified copy of the resolutions of the Board of Directors
of Buyer authorizing the execution, delivery and performance of this
Agreement.
ARTICLE IX
TERMINATION
9.1 Termination.
(a) This Agreement may be terminated in the following manner:
(i) By mutual consent of the Buyer and the Sellers; or
(ii) By the Buyer or the Sellers after January 31, 1999 if the
Closing shall not have occurred and shall not have been extended by
mutual consent.
(b) Termination of this Agreement pursuant to Section 9.1(a) will
not terminate the provisions of Section 5.3(a) or Section 6.5(c) hereof.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by Sellers. Sellers shall indemnify and hold
harmless the Buyer from and against any and all losses, liabilities,
damages, costs and expenses (including, without limitation, reasonable
fees and disbursements of counsel and other professional advisors)
suffered or incurred by the Buyer arising out of or resulting from the
breach by the Sellers of any representation, warranty or covenant made
by the Sellers in this Agreement. In addition, Sellers shall promptly
pay, perform or discharge all liabilities or other obligations relating
to income taxes, payroll taxes, Environmental Laws or the deferred
compensation claim asserted by former Technetics employee David
Chandler, arising out of events or circumstances occurring or in
existence prior to the Closing Date, to the extent such liabilities or
obligations are not fully reflected on the Closing Balance Sheet, or
shall reimburse Buyer or Technetics for the amount of any such liability
or other obligation paid, performed or discharged by the Buyer or
Technetics. Notwithstanding any other provision of this Agreement,
Sellers shall not be required to indemnify Buyer or to satisfy
liabilities or other obligations of Technetics except to the extent such
liabilities or obligations in the aggregate exceed $20,000 (twenty
thousand dollars). Any amounts due by Sellers to Buyer pursuant to the
indemnification provisions of this Section 10.1 may, at the option of
Buyer, be collected by offsetting such amounts against any amounts owed
on the Secured Notes or the Adjusted Secured Notes, as applicable, or
any other amounts owed by Buyer to Sellers.
10.2 Indemnification by the Buyer. The Buyer agrees to indemnify
and hold harmless the Sellers from and against any and all losses
suffered or incurred by the Sellers arising out of or resulting from a
breach by the Buyer of any representation, warranty or covenant made by
the Buyer in this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed given
if delivered personally or mailed by certified or registered mail,
postage prepaid, return receipt requested, or by facsimile (immediately
followed by telephone confirmation of delivery with the intended
recipient), addressed as follows:
If to the Buyer: SMTEK INTERNATIONAL, INC.
Attention: Richard K. Vitelle
2151 Anchor Court
Thousand Oaks, California 91320
Fax: (805) 376-9015
If to the Sellers: Marshall Lewis, Esq.
Lewis, Hoxie & Spear, A.P.L.C.
4330 La Jolla Village Drive, #330
San Diego, California 92122-6203
Fax: (619) 535-0763
11.2 Assignability and Parties in Interest. This Agreement shall
not be assignable by any of the parties hereto. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors.
11.3 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
California.
11.4 Judicial Proceedings. Any judicial proceedings brought by
the Buyer against the Sellers with respect to this Agreement must be
brought in a court of competent jurisdiction in the County of San Diego
in the State of California. Similarly, any judicial proceedings brought
by the Sellers against the Buyer shall be brought in a court of
competent jurisdiction in the County of Ventura in the State of
California. By execution and delivery of this Agreement each of the
parties hereto accepts unconditionally the jurisdiction of said courts
and waives any objection it may now or hereinafter have as to the venue
of such action or proceeding in such courts.
11.5 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original,
but all of which shall constitute but one and the same instrument.
11.6 Publicity. Sellers and the Buyer agree that press releases
and other announcements to be made by any of them with respect to the
Acquisition shall be subject to mutual agreement; provided, however,
that in the event Technetics, the Sellers or the Buyer are required by
law or regulation to make any such announcement, then in order to comply
with applicable law or regulation, Technetics, the Sellers, or the
Buyer, as the case may be, shall use its best efforts to give the other
parties an opportunity to comment prior to such release, but in the
event prior review is impracticable, such party may make such
announcement without the consent of the other parties.
11.7 Entire Agreement; Modification; Waiver. This Agreement, the
Disclosure Schedule and the Exhibits hereto contain the entire agreement
among the parties hereto with respect to the transaction contemplated
herein and supersede all previous oral and written and all
contemporaneous oral negotiations, commitments, writings and
understandings. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by all of the
parties. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provision, whether or
not similar, nor shall any waiver constitute a continuing waiver. No
waiver shall be binding unless executed in writing by the party making
the waiver.
11.8 Survival of Representations.
(a) The representations and warranties in this Agreement shall
terminate upon the Closing, with the effect that neither Buyer nor
Sellers will have any recourse against the other on account of any
alleged breach of any representation or warranty, except as otherwise
set forth in this Section 11.8.
(b) The representations and warranties set forth in Articles II,
III, IV and in paragraphs 7.3 and 8.2 shall survive the Closing.
11.9 Severability. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or
any other provisions of this Agreement invalid, illegal or unenforceable
in any other jurisdiction.
11.10 Payment of Expenses. Each of the parties shall pay all fees
and expenses (including, without limitation, legal fees and expenses)
incurred by it in connection with the transactions contemplated
hereunder.
11.11 Approval by Directors. The Board of Directors of the Buyer
has approved this Agreement by a proper corporate resolution.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed and delivered as of the date first above written.
THE BUYER:
SMTEK INTERNATIONAL, INC.
/s/Richard K. Vitelle
By: ----------------------------
Richard K. Vitelle
Vice President and CFO
THE SELLERS: Number of Shares
/s/Tazuko Tajima, as Trustee 138,750
- ---------------------------------
Tazuko Tajima, Trustee of Trust "B"
of the Tajima Family Trust
/s/Tazuko Tajima, as Trustee 15,150
- ---------------------------------
Tazuko Tajima, Trustee of the Tajima
Children's Trust dtd 11/5/96 FBO Robert
George Tajima
/s/Tazuko Tajima, as Trustee 15,150
- ---------------------------------
Tazuko Tajima, Trustee of the Tajima
Children's Trust dtd 11/5/96 FBO Carol
Rae Jergenson
/s/Tazuko Tajima, as Trustee 15,150
- ---------------------------------
Tazuko Tajima, Trustee of the Tajima
Children's Trust dtd 11/5/96 FBO David
Masumi Tajima
/s/Tazuko Tajima, as Trustee 2,000
- ---------------------------------
Tazuko Tajima, Trustee of the Tajima
Children's Trust dtd 11/5/96 FBO for
Toshi Ann Tajima
/s/Tazuko Tajima, as Trustee 2,000
- ---------------------------------
Tazuko Tajima, Trustee of the Tajima
Children's Trust dtd 11/5/96 FBO for
Kelli Lynn Tajima
/s/Tazuko Tajima, as Trustee 2,000
- ---------------------------------
Tazuko Tajima, Trustee of the Tajima
Children's Trust dtd 11/5/96 FBO for
Allison Renee Tajima
/s/Tazuko Tajima, as Trustee 2,000
- ---------------------------------
Tazuko Tajima, Trustee of the Tajima
Children's Trust dtd 11/5/96 FBO for
Bodhi Montgomery
/s/David M. Tajima 1,000
- ---------------------------------
David M. Tajima, Custodian for Toshi Ann
Tajima, Calif. UGMA
/s/David Masumi Tajima 1,000
- ---------------------------------
David Masumi Tajima, Custodian for Kelli
Lynn Tajima, Calif. UGMA
/s/David Masumi Tajima 1,000
- ---------------------------------
David Masumi Tajima, Custodian for
Allison Renee Tajima, Calif. UGMA
/s/Robert G. Tajima 1,000
- ---------------------------------
Robert George Tajima
/s/Carol R. Jergenson 1,000
- ---------------------------------
Carol Rae Jergenson
/s/David M. Tajima 1,000
- ---------------------------------
David Masumi Tajima
<PAGE>
EXHIBIT 1.2
FORM OF SECURED PROMISSORY NOTE
NEITHER THIS NOTE, NOR THE SECURITIES BY WHICH THIS NOTE HAS BEEN
SECURED, HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933 OR WITH ANY STATE SECURITIES
COMMISSIONER OR AUTHORITY. NEITHER THIS NOTE NOR SUCH SECURITIES MAY BE
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATIONS REQUIREMENTS OF
SUCH ACT OR SUCH LAWS.
SECURED, FULL RECOURSE,
NON-NEGOTIABLE
PROMISSORY NOTE
San Diego, California
January 27, 1999 $____________________________
FOR VALUE RECEIVED, SMTEK INTERNATIONAL, INC., a Delaware
corporation ("SMTEK") hereby promises to pay to ______________________
("Holder EXHIBIT 1.2A
STOCK PLEDGE AGREEMENT
THIS AGREEMENT made and entered into as of this ______ day of
January, 1999 by and between SMTEK INTERNATIONAL, INC., a Delaware
corporation (the "'Pledgor"') and Carol Jergenson, as Agent pursuant to
Agency Agreement dated January 15, 1999 (the "'Secured Party"').
WITNESSETH:
WHEREAS, Pledgor has given Secured Party promissory notes dated
January _______, 1999 in the aggregate principal amount of $150,000.00
(the "'Notes"'); and
WHEREAS, Pledgor owns one-hundred percent (100%) of the currently
outstanding stock of Technetics, Inc., a California corporation (the
"'Company"'); and
WHEREAS, Pledgor wishes to grant further security and assurance to
Secured Party in order to secure performance of the Notes and to that
effect has agreed to pledge to Secured Party all of its right, title and
interest in and to some of the shares of the Common Stock of the Company
owned by Pledgor.
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto mutually agree as follows:
1. Pledge of Shares. As security for the full payment of the
Notes, the Pledgor hereby delivers, pledges and assigns to Secured Party
and creates a security interest in all of its right, title and interest
in and to _____________________ Shares of the Common Stock of the
Company that Pledgor owns (the "'Pledged Shares"'). A stock certificate
(certificate number __________) for the Pledged Shares is being
delivered to Secured Party (or its agent) simultaneously herewith.
Secured Party (or its agent) shall maintain possession and custody of
the certificate representing the Pledged Shares until this Pledge
Agreement is terminated.
2. Inducing Representations of Pledgor. Pledgor represents and
warrants to Secured Party that Pledgor is the record and beneficial
owner of, and has good and marketable title to, the Pledged Shares and
such shares are and will remain free and clear of all pledges, liens,
security interests and other encumbrances and restrictions on the
transfer and assignment thereof, and that Pledgor has good and lawful
right and authority to execute the pledge provided for herein and to
pledge the Pledged Shares to Secured Party.
3. Administration of Security. The following provisions shall
govern the administration of the Pledged Shares:
(a) So long as no Event of Default has occurred and is
continuing (as used herein, "'Event of Default"' shall mean the
occurrence of any default under the Notes, or the failure of Pledgor to
satisfy any obligation under this Pledge Agreement), Pledgor shall be
entitled to vote or consent with respect to the Pledged Shares in any
manner not inconsistent with this Pledge Agreement.
(b) Pledgor shall not permit the Company to issue any
additional shares or to merge or reorganize or to make any distribution
to Pledgor with respect to the Pledged Shares without the written
consent of the Secured Party, which consent shall not be unreasonably
withheld. Pledgor shall deal with the Company directly and indirectly
in all transactions with a view to every transaction being the
equivalent of an arms' length transaction between independent parties.
Pledgor shall provide Secured Party within 30 days after the close of
each month an unaudited statement of income and expense of the Company.
In addition, if Pledgor ceases to be a public reporting company during
the term of this Agreement, then Pledgor will provide Secured Party with
unaudited consolidated financial statements of Pledgor on a quarterly
basis within 45 days of the end of each calendar quarter.
(c) In the event that, during the term of this Pledge
Agreement, the Company effects a stock dividend or stock split
increasing the number of common shares outstanding, Pledgor shall
deliver to Secured Party a stock certificate evidencing the new shares
issued with respect to the Pledged Shares as a result of the stock
dividend or stock split, which shares will thereby become part of the
Pledged Shares.
(d) Subject to any sale by Secured Party or other
disposition by Secured Party of the Pledged Shares, the Pledged Shares
shall be returned to Pledgor upon full payment, satisfaction and
termination of the Notes.
4. Remedies. Upon the occurrence of any Event of Default, the
Secured Party may, on thirty (30) days' prior written notice to the
Pledgor, sell all the Pledged Shares in the manner and for the price
that the Secured Party may determine at either public or private sale.
At any bona fide public or private sale the Secured Party shall be free
to purchase all or any part of the Pledged Shares. In the event that
Secured Party purchases the shares at a private sale, the minimum bid by
the Secured Party shall be the then outstanding aggregate balance of
principal and interest on the Notes. Out of the proceeds of any sale
the Secured Party may retain an amount equal to the principal and
interest then due on the Notes, plus the amount of the expenses of the
sale, and shall pay any balance of the proceeds to the Pledgor. If the
proceeds of the sale are insufficient to cover the outstanding principal
and interest on the Notes plus expenses of the sale, the Pledgor shall
remain liable to the Secured Party for any deficiency.
5. General Provisions.
(a) Any notice required to be given or made to a party
hereunder must be in writing and delivered in person or sent by first
class mail or express delivery to the address of each party appearing
below its signature hereto. Addresses for notice purposes may be
changed by giving a notice of the new address.
(b) No failure on the part of Secured Party to exercise, and
no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise by
Secured Party of any right, power or remedy hereunder preclude any other
or future exercise thereof, or the exercise of any other right, power or
remedy. The remedies herein provided are cumulative and are not
exclusive of any remedies provided by law or any other agreement. The
representations, covenants and agreements of Pledgor herein contained
shall survive the date hereof.
(c) Neither this Pledge Agreement nor the provisions hereof
can be changed, waived or terminated except in writing signed by both
parties.
(d) This Pledge Agreement shall be binding upon, and inure
to the benefit of, the parties hereto and their respective successors,
legal representatives and assigns.
(e) This Pledge Agreement may be executed in two or more
counterparts and shall be governed by, and construed in accordance with,
the internal laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement on the date first above written.
SMTEK INTERNATIONAL, INC.
By:__________________________________________
Gregory L. Horton, President & CEO
2151 Anchor Court
Thousand Oaks, California 91320
SECURED PARTY:
_______________________________________
Carol Jergenson, as Agent pursuant to Agency
Agreement dated January 15, 1999
6307 La Pintura Drive
La Jolla, California 92037
with copy to:
Marshall A. Lewis, Esq.
Lewis, Hoxie & Spear, APLC
4330 La Jolla Village Drive, Suite 330
San Diego, California 92122-6203
<PAGE>
EXHIBIT 1.2A
STOCK PLEDGE AGREEMENT
THIS AGREEMENT made and entered into as of this ______ day of
January, 1999 by and between SMTEK INTERNATIONAL, INC., a Delaware
corporation (the "'Pledgor"') and Carol Jergenson, as Agent pursuant to
Agency Agreement dated January 15, 1999 (the "'Secured Party"').
WITNESSETH:
WHEREAS, Pledgor has given Secured Party promissory notes dated
January _______, 1999 in the aggregate principal amount of $150,000.00
(the "'Notes"'); and
WHEREAS, Pledgor owns one-hundred percent (100%) of the currently
outstanding stock of Technetics, Inc., a California corporation (the
"'Company"'); and
WHEREAS, Pledgor wishes to grant further security and assurance to
Secured Party in order to secure performance of the Notes and to that
effect has agreed to pledge to Secured Party all of its right, title and
interest in and to some of the shares of the Common Stock of the Company
owned by Pledgor.
NOW, THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto mutually agree as follows:
1. Pledge of Shares. As security for the full payment of the
Notes, the Pledgor hereby delivers, pledges and assigns to Secured Party
and creates a security interest in all of its right, title and interest
in and to _____________________ Shares of the Common Stock of the
Company that Pledgor owns (the "'Pledged Shares"'). A stock certificate
(certificate number __________) for the Pledged Shares is being
delivered to Secured Party (or its agent) simultaneously herewith.
Secured Party (or its agent) shall maintain possession and custody of
the certificate representing the Pledged Shares until this Pledge
Agreement is terminated.
2. Inducing Representations of Pledgor. Pledgor represents and
warrants to Secured Party that Pledgor is the record and beneficial
owner of, and has good and marketable title to, the Pledged Shares and
such shares are and will remain free and clear of all pledges, liens,
security interests and other encumbrances and restrictions on the
transfer and assignment thereof, and that Pledgor has good and lawful
right and authority to execute the pledge provided for herein and to
pledge the Pledged Shares to Secured Party.
3. Administration of Security. The following provisions shall
govern the administration of the Pledged Shares:
(a) So long as no Event of Default has occurred and is
continuing (as used herein, "'Event of Default"' shall mean the
occurrence of any default under the Notes, or the failure of Pledgor to
satisfy any obligation under this Pledge Agreement), Pledgor shall be
entitled to vote or consent with respect to the Pledged Shares in any
manner not inconsistent with this Pledge Agreement.
(b) Pledgor shall not permit the Company to issue any
additional shares or to merge or reorganize or to make any distribution
to Pledgor with respect to the Pledged Shares without the written
consent of the Secured Party, which consent shall not be unreasonably
withheld. Pledgor shall deal with the Company directly and indirectly
in all transactions with a view to every transaction being the
equivalent of an arms' length transaction between independent parties.
Pledgor shall provide Secured Party within 30 days after the close of
each month an unaudited statement of income and expense of the Company.
In addition, if Pledgor ceases to be a public reporting company during
the term of this Agreement, then Pledgor will provide Secured Party with
unaudited consolidated financial statements of Pledgor on a quarterly
basis within 45 days of the end of each calendar quarter.
(c) In the event that, during the term of this Pledge
Agreement, the Company effects a stock dividend or stock split
increasing the number of common shares outstanding, Pledgor shall
deliver to Secured Party a stock certificate evidencing the new shares
issued with respect to the Pledged Shares as a result of the stock
dividend or stock split, which shares will thereby become part of the
Pledged Shares.
(d) Subject to any sale by Secured Party or other
disposition by Secured Party of the Pledged Shares, the Pledged Shares
shall be returned to Pledgor upon full payment, satisfaction and
termination of the Notes.
4. Remedies. Upon the occurrence of any Event of Default, the
Secured Party may, on thirty (30) days' prior written notice to the
Pledgor, sell all the Pledged Shares in the manner and for the price
that the Secured Party may determine at either public or private sale.
At any bona fide public or private sale the Secured Party shall be free
to purchase all or any part of the Pledged Shares. In the event that
Secured Party purchases the shares at a private sale, the minimum bid by
the Secured Party shall be the then outstanding aggregate balance of
principal and interest on the Notes. Out of the proceeds of any sale
the Secured Party may retain an amount equal to the principal and
interest then due on the Notes, plus the amount of the expenses of the
sale, and shall pay any balance of the proceeds to the Pledgor. If the
proceeds of the sale are insufficient to cover the outstanding principal
and interest on the Notes plus expenses of the sale, the Pledgor shall
remain liable to the Secured Party for any deficiency.
5. General Provisions.
(a) Any notice required to be given or made to a party
hereunder must be in writing and delivered in person or sent by first
class mail or express delivery to the address of each party appearing
below its signature hereto. Addresses for notice purposes may be
changed by giving a notice of the new address.
(b) No failure on the part of Secured Party to exercise, and
no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise by
Secured Party of any right, power or remedy hereunder preclude any other
or future exercise thereof, or the exercise of any other right, power or
remedy. The remedies herein provided are cumulative and are not
exclusive of any remedies provided by law or any other agreement. The
representations, covenants and agreements of Pledgor herein contained
shall survive the date hereof.
(c) Neither this Pledge Agreement nor the provisions hereof
can be changed, waived or terminated except in writing signed by both
parties.
(d) This Pledge Agreement shall be binding upon, and inure
to the benefit of, the parties hereto and their respective successors,
legal representatives and assigns.
(e) This Pledge Agreement may be executed in two or more
counterparts and shall be governed by, and construed in accordance with,
the internal laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement on the date first above written.
SMTEK INTERNATIONAL, INC.
By:__________________________________________
Gregory L. Horton, President & CEO
2151 Anchor Court
Thousand Oaks, California 91320
SECURED PARTY:
_______________________________________
Carol Jergenson, as Agent pursuant to Agency
Agreement dated January 15, 1999
6307 La Pintura Drive
La Jolla, California 92037
with copy to:
Marshall A. Lewis, Esq.
Lewis, Hoxie & Spear, APLC
4330 La Jolla Village Drive, Suite 330
San Diego, California 92122-6203
<PAGE>
EXHIBIT 8.4
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this _____ day of January,
1999 by and between SMTEK INTERNATIONAL, INC., a Delaware corporation
("SMTEK") and the other parties hereto (individually referred to herein
as a "Guarantor" and collectively referred to herein as the
"Guarantors").
WITNESSETH:
WHEREAS, the Guarantors have personally guaranteed certain debts of
Technetics, Inc., a California corporation ("Technetics"), pursuant to
the guarantees that are listed in the attached Exhibit A (individually
referred to herein as a "Technetics Guaranty" and collectively referred
to herein as the "Technetics Guarantees"); and
WHEREAS, the Guarantors have sold all of their shares of capital
stock of Technetics to SMTEK and no longer desire to be responsible for
any debts of Technetics; and
WHEREAS, SMTEK has agreed to use its best efforts to promptly
arrange to have Guarantors released from their obligations under the
Technetics Guaranties, including the release of collateral which the
Guarantors have provided to secure such Technetics Guaranties and has
agreed to personally indemnify the Guarantors from any loss, damage or
liability they may incur as a result of any and all claims asserted by a
creditor of Technetics against a Guarantor pursuant to a Technetics
Guaranty.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the parties hereto agree as
follows:
1. Indemnification of the Guarantors. SMTEK agrees that, subject
to the terms and conditions herein contained, it will indemnify each
Guarantor and its successors against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on
any and all claims made by a creditor of Technetics against a Guarantor
pursuant to a Technetics Guaranty and will reimburse the Guarantor for
any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action. The reimbursement required by this Agreement shall be made by
periodic payment during the course of the investigation or defense, as
and when bills are received.
2. Notice by Indemnified Party. Each party entitled to
indemnification hereunder (the "Indemnified Party") shall give notice to
SMTEK promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit SMTEK (at
its expense) to assume the defense of any claim or litigation resulting
therefrom, provided that counsel for SMTEK, who shall conduct the
defense of such claim or litigation, shall be reasonably satisfactory to
the Indemnified Party and the Indemnified Party may participate in such
defense at such party's expense.
3. Settlement of Indemnified Claims.
(a) If settled without its consent, which shall not be unreasonably
withheld, SMTEK shall not be liable for any settlement of any action
brought or claim made against an Indemnified Party, in respect of which
indemnity may be sought against SMTEK, but if settled with the consent
of SMTEK or without its consent when unreasonably withheld, or if there
shall be a final judgment, order or decree for the plaintiff in any such
action, SMTEK agrees to indemnify and hold harmless each Indemnified
Party from and against any loss or liability by reason of such
settlement, judgment, order or decree.
(b) In the defense of any such claim or litigation SMTEK shall not,
except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the claimant or plaintiff giving to such
Indemnified Party a release from all liability in respect to such claim
or litigation.
4. Termination. This Agreement shall terminate with respect to a
particular Guarantor when all Technetics Guarantees on which that
Guarantor is liable have been terminated or expired; provided, however,
that the termination with respect to a Guarantor does not prevent the
revival of such obligation by SMTEK to such Guarantor if such Guarantor
becomes the successor in interest to the un-terminated indemnification
obligation of SMTEK to another Guarantor by assignment or inheritance.
5. Notices. All notices, requests, consents and other
communications herein shall be in writing and shall be mailed by
certified mail, return receipt requested, postage prepaid, or personally
delivered, to the address set forth below each party's signature hereto
or such other addresses as each of the parties hereto may provide from
time to time in writing to the other parties concerned.
6. Modifications, Waiver. No modification or waiver of any
provision of this Agreement or consent to any departure therefrom shall
be effective unless in writing and signed by the parties concerned.
7. Entire Agreement. This Agreement and the Stock Purchase
Agreement dated January [ ], 1999 among the parties hereto and others,
contain the entire agreement between the parties with respect to the
transactions contemplated hereby and supersedes all negotiations,
agreements and representations, whether in writing or oral, prior to the
date hereof.
IN WITNESS WHEREOF, the parties hereto have set their hands as of
the date first above written.
SMTEK INTERNATIONAL, INC.
By:________________________________
Gregory L. Horton, President & CEO
2151 Anchor Court
Thousand Oaks, CA 91320
GUARANTORS:
___________________________________
Tazuko Tajima
6307 La Pintura Drive
La Jolla, California 92037
With copy to:
Marshall A. Lewis, Esq.
Lewis, Hoxie & Spear, APLC
4330 La Jolla Village Drive, Suite 330
San Diego, California 92122-6203
___________________________________
Tazuko Tajima, Trustee of the Tajima
Family Trust Dated November 5, 1996
6307 La Pintura Drive
La Jolla, California 92037
With copy to:
Marshall A. Lewis, Esq.
Lewis, Hoxie & Spear, APLC
4330 La Jolla Village Drive, Suite 330
San Diego, California 92122-6203
____________________________________
Carol Jergenson
6307 La Pintura Drive
La Jolla, California 92037
With copy to:
Marshall A. Lewis, Esq.
Lewis, Hoxie & Spear, APLC
4330 La Jolla Village Drive, Suite 330
San Diego, California 92122-6203
____________________________________
Estate of George K. Tajima
6307 La Pintura Drive
La Jolla, California 92037
With copy to:
Marshall A. Lewis, Esq.
Lewis, Hoxie & Spear, APLC
4330 La Jolla Village Drive, Suite 330
San Diego, California 92122-6203
EXHIBIT 99.2
CONTACT: SMTEK INTERNATIONAL, INC.
Rick Vitelle
805/376-2595, ext. 142
FOR IMMEDIATE RELEASE or
FOLEY/FREISLEBEN LLC
John Foley
213/892-6322
SMTEK INTERNATIONAL ACQUIRES
SAN DIEGO EMS COMPANY
----------------------------
THOUSAND OAKS, California (February 3, 1999) - SMTEK International,
Inc. (NYSE: SMK) today announced that it has completed the acquisition of
Technetics, Inc., an electronics manufacturing services (EMS) provider
located in San Diego, California for consideration of cash and notes
payable. Technetics, which is an ISO 9002 registered facility, provides
full turnkey box build production and surface mount technology
capabilities to high-end commercial and military customers. SMTEK has
appointed Michael E. Perry, an industry veteran, to the post of president
of the newly-acquired company.
Gregory L. Horton, chairman and chief executive officer of SMTEK
International stated: "The acquisition of Technetics represents an
important strategic move because it will enable SMTEK to better serve the
San Diego area, which is a hotbed of high-complexity, high-mix work.
Technetics will become a SMTEK Express Services center providing quick-
turn and production manufacturing services to OEMs in San Diego County
and Orange County."
Horton continued, "SMTEK's Thousand Oaks operation will enhance
Technetics' complement of services by providing additional engineering,
test and design capabilities. Other expected synergies from adding
Technetics to the SMTEK family include increased purchasing power and
improved business systems such as enterprise resource planning. This
acquisition is an excellent fit with our goal of creating a global
network of EMS providers."
Headquartered in Thousand Oaks, California, SMTEK International,
Inc. is an EMS provider serving original equipment manufacturers (OEMs)
in the computer, telecommunications, instrumentation, medical, industrial
and aerospace industries. The Company also fabricates multilayer printed
circuit boards (PCBs) for use in the computer, communications and
instrumentation industries. The Company's four EMS operations are
located in Thousand Oaks, San Diego, Fort Lauderdale and Northern
Ireland. Its PCB facilities are located in Northern Ireland.
Certain statements made above are forward-looking in nature and
reflect SMTEK's current expectations and anticipated future plans.
Such statements involve various risks and uncertainties that could
cause actual results to differ materially from those forecast in
the statements. Factors that might cause such differentiation
would include, without limitation, the factors described as "Risk
Factors" in the Company's Registration Statement on Form S-3 (No.
333-62621) on file with the Securities and Exchange Commission.
