**EXHIBIT 10.9**

 

**FIRST AMENDMENT TO CREDIT ANDSECURITY AGREEMENT**

 

THIS FIRSTAMENDMENT TO CREDIT AND SECURITY AGREEMENT (this “Amendment”), dated asof June 25, 2004, is entered into by and among WELLS FARGO BUSINESS CREDIT,INC., a Minnesota corporation (“Lender”), on the one hand, and SMTEK,INC., a California corporation (“SI”), SMTEK NEW ENGLAND, INC., aMassachusetts corporation (“SNEI”), SMTEK SANTA CLARA, INC., aCalifornia corporation (“SSCI”) and TECHNETICS, Inc., a Californiacorporation (“Technetics” and together with SI, SNEI and SSCI, the “Borrowers”,and each a “Borrower”), on the other.

 

**RECITALS**

 

A.            The Borrowers and the Lender are parties to a Credit andSecurity Agreement dated as of September 19, 2003, as amended by that certainConsent dated as of January 9, 2004, and as amended by that certain consentletter executed by the Lender, dated as of January 13, 2004 (as amended,supplemented, restated and modified from time to time, the “Credit Agreement”).  Capitalized terms used in these recitalshave the meanings given to them in the Credit Agreement unless otherwisespecified.

 

B.            The Borrowers and the Lender now wish to amend the CreditAgreement on the terms and conditions set forth herein;

 

C.            The Borrowers are entering into this Amendment with theunderstanding and agreement that, except as specifically provided herein, noneof the Lender’s rights or remedies as set forth in the Credit Agreement arebeing waived or modified by the terms of this Amendment.

 

**AMENDMENT**

 

NOW, THEREFORE, in consideration of the foregoing and the mutualcovenants herein contained, and for other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the parties herebyagree as follows:

 

1.             Defined Terms. Capitalized terms used in this Amendment which are defined in the CreditAgreement shall have the same meanings as defined therein, unless otherwisedefined herein.

 

2.             Amendments to Loan Agreement.

 

(a)           Thedefinition of “Maturity Date” contained in Section 1.1 of the Credit Agreementis hereby amended and restated in its entirety to read as follows:

 

“ ‘Maturity Date’ means September 30, 2007.”

 

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(b)           Thedefinition of “Maximum Line” contained in Section 1.1 of the Credit Agreementis hereby amended and restated in its entirety to read as follows:

 

“ ‘Maximum Line’ means Fifteen Million Dollars($15,000,000).”

 

(c)           Thefirst sentence of Section 2.2(a) of the Credit Agreement is hereby amended andrestated in its entirety to read as follows:

 

“Each Advance shall be funded as either a FloatingRate Advance or a LIBO Rate Advance, as the Administrative Borrower shallspecify in the related notice of borrowing or notice of conversion pursuant tothis Subsection (a) or Section 2.3(a), provided that during Default Periods, noLIBO Rate Advances shall be made, provided further, that the maximum amount ofthe LIBO Rate Advances outstanding at any one time shall not exceed SevenMillion Five Hundred Thousand Dollars ($7,500,000).”

 

(d)           Thefirst sentence of Section 2.13(b) of the Credit Agreement is hereby amended andrestated in its entirety to read as follows:

 

 

“The Margins through and including the firstadjustment occurring as specified below shall be three-quarters of one (.75)percentage point for Advances that are Floating Rate Advances and three andone-half of one (3.50) percentage points for Advances that are LIBO RateAdvances.”

 

(e)           Section2.10(a) of the Credit Agreement is hereby amended and restated in its entiretyto read as follows:

 

“(a)         TheLender agrees, subject to the terms and conditions of this Agreement, to makeadvances to the Borrowers from time to time from the Funding Date to June 30,2007 (each a “CapEx Advance”). The Lender shall have no obligation to make a CapEx Advance if, aftergiving effect to such requested CapEx Advance: (a) the aggregate amount of allCapEx Advances made would exceed Two Million Five Hundred Thousand Dollars($2,500,000), (b) the Debt Service Coverage Ratio would be less than 1.20 to 1,or (c) the amount of the requested CapEx Advance would exceed 80% of thepurchase price (excluding tax, freight and installation charges) for the newEquipment purchased by Borrowers in anticipation of such CapEx Advance.  Lender may in its discretion, confirm thepurchase price values of such new Equipment by any means deemed appropriate byLender.  The Borrowers’ obligation topay the CapEx Advances shall be further evidenced by the CapEx Note and shallbe secured by the Collateral as provided in Article III.”

 

(f)            Section2.10(b)(3) of the Credit Agreement is hereby amended and restated in itsentirety to read as follows:

 

“The Administrative Borrower may only request andLender shall only provide CapEx Advances through June 30, 2007,

 

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and no more than ten (10) CapEx Advances shall beprovided by Lender in such period.”

 

(g)           Section2.11(b)(i) of the Credit Agreement is hereby amended and restated in itsentirety to read as follows:

 

“(i)          (1)           Beginning on March 31 of each fiscalyear of the Borrowers, and on the last day of each month thereafter, insubstantially equal monthly installments equal to an amount sufficient to fullyamortize the principal balance of the CapEx Advances made during the periodbeginning on September 19 of such fiscal year and ending on March 18 of suchfiscal year, over an assumed term of thirty six (36) months; and

 

(2)           Beginning on September 30 of eachfiscal year of the Borrowers, and on the last day of each month thereafter, insubstantially equal monthly installments equal to an amount sufficient to fullyamortize the principal balance of the CapEx Advances made during the periodbeginning on March 19 of the previous fiscal year of the Borrowers and endingon September 18 of the present fiscal year, over an assumed term of thirty six(36) months.”

 

(h)           Section2.14(c) of the Credit Agreement is hereby amended and restated in its entiretyto read as follows:

 

“(c)         ***Audit Fees*. **The Borrowers shall pay the Lender, ondemand, audit fees in connection with any audits or inspections conducted by oron behalf of the Lender of any Collateral or the Borrowers’ operations orbusiness at the rates established from time to time by the Lender as its auditfees (which fees are currently $95.00 per hour per auditor), together with allactual out-of-pocket costs and expenses incurred in conducting any such auditor inspection provided, however, that except during DefaultPeriods, the Borrowers shall not have to reimburse the Lender for such fees,costs and expenses to the extent that they relate to more than three (3) suchaudits per calendar year.”

 

(i)            Section2.14(d) of the Credit Agreement is hereby amended and restated in its entiretyto read as follows:

 

“(d)         ***Termination Fees. ***If the Credit Facility isterminated (i) by the Lender during a Default Period that begins before aMaturity Date, (ii) by the Borrowers (A) as of a date other than aMaturity Date or (B) as of a Maturity Date but without the Lender havingreceived written notice of such termination at least forty-five (45) daysbefore such Maturity Date, the Borrowers shall pay to the Lender a fee in anamount equal to a percentage of the Aggregate Credit Limit****as follows: (A) threepercent (3.0%) if the termination occurs on or before September 30, 2004;(B) two percent (2.0%) if the termination occurs after September 30, 2004but on or before September 30, 2006; and (C) one percent (1.0%) if thetermination occurs after September 30, 2006.”

 

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(j)            Section6.2(a) of the Credit Agreement is hereby amended and restated in its entiretyto read as follows:

 

“(a)         ***Minimum Debt Service Coverage Ratio***.  The Borrowers will maintain their DebtService Coverage Ratio, measured as at the end of each fiscal quarter of theBorrowers, at not less than the 1.20 to 1.00.”

 

(k)           Section 6.2(b) of the CreditAgreement is hereby amended and restated in its entirety to read as follows:

 

“(b)         ***Minimum Book Net Worth***. The Borrowers will maintain, during each month described below, theirBook Net Worth, determined as at the end of each month, at an amount not lessthan the amount set forth opposite such month:

 
| **Period**                            |   | **Minimum Book Net Worth** |
|---------------------------------------|--------|----------------------------|
| June 2004                             |   | $                          | 4,700,000 |
| July 2004                             |   | $                          | 4,700,000 |
| August 2004                           |   | $                          | 4,950,000 |
| September 2004                        |   | $                          | 5,100,000 |
| October 2004                          |   | $                          | 5,350,000 |
| November 2004                         |   | $                          | 5,500,000 |
| December  2004                        |   | $                          | 5,500,000 |
| January 2005                          |   | $                          | 5,650,000 |
| February  2005                        |   | $                          | 5,900,000 |
| March 2005                            |   | $                          | 6,150,000 |
| April 2005                            |   | $                          | 6,400,000 |
| May 2005                              |   | $                          | 6,650,000 |
| June 2005  and every month thereafter |   | $                          | 6,750,000” |

 

(l)            Section 6.2(c) of the CreditAgreement is hereby amended and restated in its entirety to read as follows:

 

“(c)         ***Minimum Net Income***. The Borrowers will achieve Net Income, measured at the end of each ofBorrowers’ fiscal quarters on a fiscal year-to-date basis, of not less than theamount set forth opposite such quarter:

 
| **Quarter  Ending In** |   | **Minimum Net Income** |
|------------------------|--------|------------------------|
| June 2004              |   | $                      | 490,000 |
| September  2004        |   | $                      | 400,000 |
| December  2004         |   | $                      | 800,000 |
| March 2005             |   | $                      | 1,450,000 |
| June 2005              |   | $                      | 2,050,000” |

 

(m)          Section 6.2(d) of the Credit Agreementis hereby amended and restated in its entirety to read as follows:

 

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“(d)         ***Capital Expenditures***. The Borrowers will not incur or contract to incur financed or unfinancedCapital Expenditures of more than: (i) Two Million Four Hundred ThousandDollars ($2,400,000) in the aggregate for the Borrowers’ 2004 fiscal year, (ii)Three Million Dollars ($3,000,000) in the aggregate for the Borrowers’ 2005fiscal year, and (iii) such amounts as determined by the Lender in its solediscretion during any subsequent fiscal year.”

 

(n)           Schedule5.2 of the Credit Agreement is hereby amended by adding the following:

 

“In September, 2003, Parent sold in a privateplacement 250,000 shares of non-redeemable, convertible Series A PreferredStock for $500,000.  The holders of thePreferred Stock have exercised their right to convert the Preferred Stock into268,369 shares of Common Stock of Parent.”

 

(o)           Schedule6.4 of the Credit Agreement is hereby amended by adding the following:

 

“In May, 2004, SMTEK International (Thailand) Limited(“SMTEK Thailand”) entered into a credit agreement with BankThai PublicCompany Limited and Parent unconditionally guaranteed the liabilities andobligations under this credit agreement. The credit agreement includes a $750,000 mortgage loan, a $440,000construction loan, and a $500,000 working capital line.

 

SMTEK Thailand has entered into financing arrangementsrelated to the acquisition of property, equipment and improvements.”

 

(p)           Effectiveas of July 31, 2004, Schedule 6.4 of the Credit Agreement shall be amended todelete therefrom the reference to the indebtedness owed by the Borrowers to theUnited States Internal Revenue Service.

 

3.             AccommodationFee.  The Borrowers shall pay theLender an accommodation fee in the amount of Forty-Two Thousand Five HundredDollars ($42,500) in consideration of Lender’s execution of this Amendment (the“Accommodation Fee”).  TheAccommodation Fee shall be fully earned and non-refundable upon the executionof this Amendment by the Lender. $21,250 of the Accommodation Fee shall be due and payable in cash uponthe execution of this Amendment by Lender, and $21,250 of the Accommodation Feeshall be due and payable in cash on or before December 31, 2004.

 

4.             NoOther Changes.  Except as explicitlyamended by this Amendment, all of the terms and conditions of the CreditAgreement shall remain in full force and effect and shall apply to any Advancethereunder.

 

5.             Effectivenessof this Amendment.  The Lender musthave received the following items, in form and content acceptable to theLender, before this Amendment is effective and before the Lender is required toextend any credit to the Borrowers as provided for by this Amendment:

 

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(a)           Amendment.  This Amendment and the Consent attached tothis Amendment, fully executed in a sufficient number of counterparts fordistribution to the Lender and the Borrowers.

 

(b)           Accommodation Fee.  The first installment of the AccommodationFee as set forth in Section 3 hereof.

 

(c)           Amended and Restated Notes.

 

(1)                                  An original Amended and RestatedRevolving Note, substantially in the form of Exhibit A to thisAmendment, duly executed by the Borrowers.

 

(2)                                  An original Amended and Restated CapExNote, substantially in the form of Exhibit B to this Amendment, dulyexecuted by the Borrowers.

 

(d)           Representations and Warranties.  The representations and warranties set forthherein and in the Credit Agreement must be true and correct.

 

(e)           Other Required Documentation.  All other documents and legal matters inconnection with the transaction contemplated by this Amendment shall have beendelivered or executed or recorded and shall be in form and substancesatisfactory to Lender.

 

6.             Conditions Subsequent.  On or before July 31, 2004, Borrowers shall satisfy all but OneHundred Fifty Thousand Dollars ($150,000) of their outstanding taxreimbursement obligations owed to the United States Internal RevenueService.  The failure to satisfy suchcondition by July 31, 2004 will constitute an Event of Default under the CreditAgreement.

 

7.             Representations and Warranties.  Each Borrower represents and warrants asfollows:

 

(a)           Authority.  Each Borrower has the requisite corporatepower and authority to execute and deliver this Amendment, and to perform itsobligations hereunder and under the Loan Documents (as amended or modifiedhereby) to which it is a party.  Theexecution, delivery and performance by each Borrower of this Amendment havebeen duly approved by all necessary corporate action, have received allnecessary governmental approval, if any, and do not contravene any law or anycontractual restrictions binding on each Borrower.  No other corporate proceedings are necessary to consummate suchtransactions.

 

(b)           Enforceability.  This Amendment has been duly executed anddelivered by each Borrower. This Amendment and each Loan Document (as amendedor modified hereby) is the legal, valid and binding obligation of eachBorrower, enforceable against each Borrower in accordance with its terms, andis in full force and effect.

 

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(c)           Representationsand Warranties.  The representationsand warranties contained in each Loan Document (other than any suchrepresentations or warranties that, by their terms, are specifically made as ofa date other than the date hereof) are correct on and as of the date hereof asthough made on and as of the date hereof.

 

(d)           No Default.  After giving effect to this Amendment, noevent has occurred and is continuing that constitutes an Event of Default, andby entering into this Amendment, Lender is not waiving and shall not be deemedto have waived any Event of Default that may exist.

 

8.             Choiceof Law.  The validity of thisAmendment, its construction, interpretation and enforcement, and the rights ofthe parties hereunder, shall be determined under, governed by, and construed inaccordance with the internal laws of the State of California governingcontracts entered into and wholly performed in that State.

 

9.             Counterparts.  This Amendment may be executed in any numberof counterparts and by different parties and separate counterparts, each ofwhich when so executed and delivered, shall be deemed an original, and all ofwhich, when taken together, shall constitute one and the same instrument.  Delivery of an executed counterpart of asignature page to this Amendment by telefacsimile shall be effective as deliveryof a manually executed counterpart of this Amendment.

 

10.           Reference to and Effect on theLoan Documents.

 

(a)           Upon and after the effectiveness ofthis Amendment, each reference in the Credit Agreement to “this Agreement”,“hereunder”, “hereof” or words of like import referring to the CreditAgreement, and each reference in the other Loan Documents to “the CreditAgreement”, “thereof” or words of like import referring to the CreditAgreement, shall mean and be a reference to the Credit Agreement as modifiedand amended hereby.

 

(b)           Except as specifically amended above,the Credit Agreement and all other Loan Documents, remain unchanged, each isand shall continue to be in full force and effect, and each is hereby in allrespects ratified and confirmed and constitutes the legal, valid, binding andenforceable obligations of each Borrower to Lender without defense, offset,claim or contribution.

 

(c)           Except as provided herein, theexecution, delivery and effectiveness of this Amendment shall not operate as awaiver of any right, power or remedy of Lender under any of the Loan Documentsor constitute a waiver of any provision of any of the Loan Documents.

 

(d)           To the extent that any terms andconditions in any of the Loan Documents shall contradict or be in conflict withany terms or conditions of the Credit Agreement after giving effect to thisAmendment, such terms and conditions are hereby deemed modified or amendedaccordingly to reflect the terms and conditions of the Credit Agreement asmodified or amended hereby.

 

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11.           NoWaiver.  The execution of thisAmendment and acceptance of any documents related hereto shall not be deemed tobe a waiver of any under the Credit Agreement or breach, default or event ofdefault under any Security Document or other document held by the Lender, whetheror not known to the Lender and whether or not existing on the date of thisAmendment.

 

12.           Ratification.  Each Borrower hereby restates, ratifies andreaffirms each and every term and condition set forth in the Credit Agreementas amended hereby and in the Loan Documents effective as of the date hereof.

 

13.           Estoppel.  To induce Lender to enter into thisAmendment and to continue to make advances to Borrowers under the CreditAgreement, each Borrower hereby acknowledges and agrees that to its knowledgeafter due inquiry, after giving effect to this Amendment, as of the datehereof, there exists no Event of Default and no right of offset, defense,counterclaim or objection in favor of any Borrower as against Lender withrespect to the Obligations.

 

14.           Release.  Each Borrower hereby absolutely andunconditionally releases and forever discharges the Lender, and any and allparticipants, parent corporations, subsidiary corporations, affiliatedcorporations, insurers, indemnitors, successors and assigns thereof, togetherwith all of the present and former directors, officers, agents and employees ofany of the foregoing, from any and all claims, demands or causes of action ofany kind, nature or description, whether arising in law or equity or uponcontract or tort or under any state or federal law or otherwise, which suchBorrower has had, now has or has made claim to have against any such person foror by reason of any act, omission, matter, cause or thing whatsoever arisingfrom the beginning of time to and including the date of this Amendment, whethersuch claims, demands and causes of action are matured or unmatured or known orunknown.  It is the intention of theparties in executing this release that the same shall be effective as a bar toeach and every claim, demand and cause of action specified and in furtheranceof this intention each waives and relinquishes all rights and benefits underSection 1542 of the Civil Code of the State of California, which provides:

 

“A GENERALRELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECTTO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BYHIM MIGHT HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

 

The partiesacknowledge that each may hereafter discover facts different from or inaddition to those now known or believed to be true with respect to such claims,demands, or causes of action and agree that this instrument shall be and remaineffective in all respects notwithstanding any such differences or additionalfacts.

 

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15.           Costs and Expenses.  Each Borrower hereby reaffirms its agreementunder the Credit Agreement to pay or reimburse the Lender on demand for allcosts and expenses incurred by the Lender in connection with the CreditAgreement, the Loan Documents and all other documents contemplated thereby,including without limitation all reasonable fees and disbursements of legalcounsel.  Without limiting thegenerality of the foregoing, each Borrower specifically agrees to pay all feesand disbursements of counsel to the Lender for the services performed by suchcounsel in connection with the preparation of this Amendment and the documentsand instruments incidental hereto.  EachBorrower hereby agrees that the Lender may, at any time or from time to time inits sole discretion and without further authorization by any Borrower, make aloan to the Borrowers under the Credit Agreement, or apply the proceeds of anyloan, for the purpose of paying any such fees, disbursements, costs andexpenses.

 

[Remainder of page intentionally blank.]

 

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IN WITNESSWHEREOF, the parties have entered into this Amendment as of the date firstabove written.

 
| **“BORROWERS”**    | **“LENDER”**             |
|------------------------------|------------------------------------|
|                         |                               |
| SMTEK, INC.,                 | WELLS FARGO BUSINESS CREDIT, INC., |
| a California corporation     | a Minnesota corporation            |
|                         |                               |
|                         |                               |
| By:                          | /s/ Kirk A. Waldron                |   | By: | /s/ Jeffrey Cristol |   |
| Name:  Kirk  A. Waldron | Name: Jeffrey Cristol              |
| Title:  CFO             | Title: Vice President              |
|                         |                               |
|                         |                               |
| SMTEK NEW ENGLAND, INC.,     |                               |
| a Massachusetts corporation  |                               |
|                         |                               |
|                         |                               |
| By:                          | /s/ Kirk A. Waldron                |   |   |
| Name:  Kirk  A. Waldron |                               |
| Title:  CFO             |                               |
|                         |                               |
|                         |                               |
| SMTEK SANTA CLARA, INC.,     |                               |
| a California corporation     |                               |
|                         |                               |
|                         |                               |
| By:                          | /s/ Kirk A. Waldron                |   |   |
| Name:  Kirk  A. Waldron |                               |
| Title:  CFO             |                               |
|                         |                               |
|                         |                               |
| TECHNETICS, INC.,            |                               |
| a California corporation     |                               |
|                         |                               |
|                         |                               |
| By:                          | /s/ Kirk A. Waldron                |   |   |
| Name:  Kirk  A. Waldron |                               |
| Title:  CFO             |                               |

 

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**CONSENT**

 

Dated as of June 25, 2004

 

The undersignedSMTEK INTERNATIONAL, INC., a Delaware corporation (“GUARANTOR”), inconsideration of the continued extension of credit to SMTEK, INC., a Californiacorporation, SMTEK NEW ENGLAND, INC., a Massachusetts corporation, SMTEK SANTACLARA, INC., a California corporation and TECHNETICS, Inc., a Californiacorporation by WELLS FARGO BUSINESS CREDIT, INC., a Minnesota corporation (“WELLS”),hereby consents and agrees to the foregoing First Amendment to Credit andSecurity Agreement (the “Amendment”) and hereby confirms and agrees thateach of the Guaranty (the “Guaranty”) and the Security Agreement (the “SecurityAgreement”), each dated as of September 19, 2003 in favor of WELLS is, andshall continue to be, in full force and effect and is hereby ratified andconfirmed in all respects except that, upon the effectiveness of, and on andafter the date of the Amendment, each reference in the Guaranty or the SecurityAgreement to the Credit Agreement (as defined in the Amendment), “thereunder”,“thereof” or words of like import referring to the “Credit Agreement”, shallmean and be a reference to the Credit Agreement as amended or modified by theAmendment.  Although WELLS has informedGUARANTOR of the matters set forth above, and GUARANTOR has acknowledged thesame, GUARANTOR understands and agrees that WELLS has no duty under the CreditAgreement, Guaranty or any other agreement with GUARANTOR to so notifyGUARANTOR or to seek such an acknowledgement, and nothing contained herein isintended to or shall create such a duty as to any advances or transactionhereafter.

 

 
|   | SMTEK INTERNATIONAL, INC.,  |
|--------|-----------------------------|
|   | a Delaware corporation      |
|   |                        |
|   |                        |
|   | By:                         | /s/ Kirk A.  Waldron |   |
|   | Name:  Kirk A. Waldron |
|   | Title:  CFO            |

 

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EXHIBIT A

 

**AMENDED AND RESTATED REVOLVING NOTE**

** **
| $15,000,000 |   | Los Angeles, California |
|-------------|--------|-------------------------|
|        |   | June 25, 2004           |

 

For valuereceived, the undersigned, SMTEK, INC., a California corporation (“SI”),SMTEK NEW ENGLAND, INC., a Massachusetts corporation (“SNEI”), SMTEKSANTA CLARA, INC., a California corporation (“SSCI”), and TECHNETICS,INC., a California corporation (“Technetics”) (SI, SNEI, SSCI, andTechnetics are each referred to herein as a “Borrower” and collectivelyas the “Borrowers”), hereby jointly and severally promise to pay on theTermination Date under the Credit Agreement (defined below), to the order ofWELLS FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the “Lender”),at its main office in Minneapolis, Minnesota, or at any other place designatedat any time by the holder hereof, in lawful money of the United States ofAmerica and in immediately available funds, the principal sum of FifteenMillion Dollars ($15,000,000) or, if less, the aggregate unpaid principalamount of all Revolving Advances made by the Lender to the Borrowers under theCredit Agreement (defined below) together with interest on the principal amounthereunder remaining unpaid from time to time, computed on the basis of theactual number of days elapsed and a 360-day year, from the date hereof untilthis Amended and Restated Revolving Note (this “Note”) is fully paid atthe rate from time to time in effect under the Credit and Security Agreement,dated as of September 19, 2003 (the “Credit Agreement”) by and among theLender and the Borrowers.  The principalhereof and interest accruing thereon shall be due and payable as provided inthe Credit Agreement.  This Note may beprepaid only in accordance with the Credit Agreement.

 

This Note isissued pursuant, and is subject, to the Credit Agreement, which provides, amongother things, for acceleration hereof. This Note is the Revolving Note referred to in the Credit Agreement.

 

This Note issecured, among other things, pursuant to the Credit Agreement and the SecurityDocuments as therein defined, and may now or hereafter be secured by one ormore other security agreements, mortgages, deeds of trust, assignments or otherinstruments or agreements.

 

The Borrowersshall pay all costs of collection, including reasonable attorneys’ fees andlegal expenses if this Note is not paid when due, whether or not legalproceedings are commenced.

 

Presentment orother demand for payment, notice of dishonor and protest are expressly waived.

 

 

This Note amends,restates, replaces and supersedes that certain Revolving Note, dated as ofSeptember 19, 2003, in the original principal amount of Ten Million Dollars($10,000,000), executed by the Borrowers and Jolt Technology, Inc., a Delawarecorporation, to the order of the Lender, which note is null, void and of nofurther legal force or effect.

 

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|   | SMTEK,  INC.,                |
|--------|------------------------------|
|   | a  California corporation    |
|   |                         |
|   |                         |
|   | By:                          | /s/ Kirk A. Waldron |   |
|   | Name:  Kirk  A. Waldron |
|   | Title:  CFO             |
|   |                         |
|   | SMTEK  NEW ENGLAND, INC.,    |
|   | a  Massachusetts corporation |
|   |                         |
|   |                         |
|   | By:                          | /s/ Kirk A. Waldron |   |
|   | Name:  Kirk  A. Waldron |
|   | Title:  CFO             |
|   |                         |
|   | SMTEK  SANTA CLARA, INC.,    |
|   | a  California corporation    |
|   |                         |
|   |                         |
|   | By:                          |  /s/ Kirk A.  Waldron |   |
|   | Name:  Kirk  A. Waldron |
|   | Title:  CFO             |
|   |                         |
|   | TECHNETICS,  INC.,           |
|   | a  California corporation    |
|   |                         |
|   |                         |
|   | By:                          |  /s/ Kirk A.  Waldron |   |
|   | Name:  Kirk  A. Waldron |
|   | Title:  CFO             |

 

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EXHIBIT B

 

**AMENDED AND RESTATED CAPEX NOTE**

** **
| $2,500,000 |   | Los Angeles, California |
|------------|--------|-------------------------|
|       |   | June 25, 2004           |

 

For valuereceived, each of the undersigned, SMTEK, INC., a California corporation (“SI”),SMTEK NEW ENGLAND, INC., a Massachusetts corporation (“SNEI”), SMTEKSANTA CLARA, INC., a California corporation (“SSCI”), and TECHNETICS,INC., a California corporation (“Technetics”) (SI, SNEI, SSCI, andTechnetics are each referred to herein as a “Borrower” and collectivelyas the “Borrowers”), hereby jointly and severally promise to pay on theTermination Date under the Credit Agreement (defined below), to the order ofWELLS FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the “Lender”),at its main office in Minneapolis, Minnesota, or at any other place designatedat any time by the holder hereof, in lawful money of the United States ofAmerica and in immediately available funds, the principal sum of Two MillionFive Hundred Thousand Dollars ($2,500,000) or, if less, the aggregate unpaidprincipal amount of all CapEx Advances made by the Lender to the Borrowersunder the Credit Agreement (defined below) together with interest on theprincipal amount hereunder remaining unpaid from time to time, computed on thebasis of the actual number of days elapsed and a 360-day year, from the datehereof until this Amended and Restated CapEx Note (this “Note”) is fullypaid at the rate from time to time in effect under the Credit and SecurityAgreement, dated as of September 19, 2003 (as the same may hereafter beamended, supplemented or restated from time to time, the “Credit Agreement”)by and between the Lender and the Borrowers. The principal hereof and interest accruing thereon shall be due andpayable as provided in the Credit Agreement. This Note may be prepaid only in accordance with the Credit Agreement.

 

This Note isissued pursuant, and is subject, to the Credit Agreement, which provides, amongother things, for acceleration hereof. This Note is the CapEx Note referred to in the Credit Agreement.

 

This Note issecured, among other things, pursuant to the Credit Agreement and the SecurityDocuments as therein defined, and may now or hereafter be secured by one ormore other security agreements, mortgages, deeds of trust, assignments or otherinstruments or agreements.

 

The Borrowershereby agree to pay all costs of collection, including attorneys’ fees andlegal expenses in the event this Note is not paid when due, whether or notlegal proceedings are commenced.

 

Presentment orother demand for payment, notice of dishonor and protest are expressly waived.

 

 

This Note amends,restates, replaces and supersedes that certain CapEx Note, dated as ofSeptember 19, 2003, in the original principal amount of One Million Dollars($1,000,000), executed by the Borrowers, and Jolt Technology, Inc., a Delawarecorporation, to the order of the Lender, which note is null, void and of nofurther legal force or effect.

 

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|   | SMTEK,  INC.,                |
|--------|------------------------------|
|   | a  California corporation    |
|   |                         |
|   |                         |
|   | By:                     | /s/ Kirk A. Waldron |   |
|   | Name:  Kirk  A. Waldron |
|   | Title:  CFO             |
|   |                         |
|   |                         |
|   | SMTEK  NEW ENGLAND, INC.,    |
|   | a  Massachusetts corporation |
|   |                         |
|   |                         |
|   | By:                          |  /s/ Kirk A.  Waldron |   |
|   | Name:  Kirk  A. Waldron |
|   | Title:  CFO             |
|   |                         |
|   |                         |
|   | SMTEK  SANTA CLARA, INC.,    |
|   | a  California corporation    |
|   |                         |
|   |                         |
|   | By:                     | /s/ Kirk A. Waldron |   |
|   | Name:  Kirk  A. Waldron |
|   | Title:  CFO             |
|   |                         |
|   |                         |
|   | TECHNETICS,  INC.,           |
|   | a  California corporation    |
|   |                         |
|   |                         |
|   | By:                     | /s/ Kirk A. Waldron |   |
|   | Name:  Kirk  A. Waldron |
|   | Title:  CFO             |
|        |                              |  |  |  |

 

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