Jaco Electronics Divests Nexus Contract Manufacturing Unit

Jaco Electronics, Inc., Hauppauge, NY, a distributor of electronic components to original equipment manufacturers, has completed the sale of its non-core contract manufacturing subsidiary, Nexus Custom Electronics, Inc., Brandon, VT, to Sagamore Holdings, Inc. for $12.0 million and the assumption of certain liabilities. Pursuant to the agreement, Sagamore Holdings has entered into a contract that designates Jaco as a key supplier of electronic components to Nexus Custom Electronics for a period of five years.

Under the terms of the agreement, Jaco will receive $9.25 million of the purchase consideration in cash at closing. The balance of the purchase consideration will be satisfied through a $2.75 million subordinated note issued by the purchaser. Jaco may also receive up to $1 million as consideration under a six-year earn-out agreement with Sagamore. As a result of the sale, Jaco will classify the operations of Nexus Custom Electronics as "discontinued" as of Jul. 1, 2003.

"While it was a non-core holding for Jaco, Nexus is a solid company and we are delighted to maintain a long-term supply arrangement with Nexus," said Jaco's Chairman and Chief Executive Officer Joel Girsky. "Initially, we plan to utilize net proceeds from the sale to reduce long-term debt, which was approximately $38.9 million at Mar. 31, 2004.

"The new facility will include state-of-the-art equipment allowing Jaco to develop and perform functions such as optical enhancements for optimization of FPDs under various environmental conditions. Undertaking this investment will better align us with our strategic suppliers and will position Jaco as a one-stop source for customers' FPD supply and integration needs. We also plan to deploy the proceeds from the sale to expand in the Far East and explore additional distribution-based opportunities such as strategic acquisitions."

Headquartered in Brandon, VT, with a facility in Woburn, MA, Nexus Custom Electronics provides contract manufacturing of printed circuit boards using surface mount and through-hole assembly. The company is ISO 9001 certified and also offers component sourcing, design engineering, testing, and box build (complete system) assembly services. Nexus recorded trailing twelve-month net sales of $22 million and employs 140 persons.

Jaco is a distributor of electronic components to industrial OEMs and contract manufacturers. Jaco distributes products such as semiconductors, capacitors, resistors, electromechanical devices, flat panel displays and power supplies, which are used in the manufacture and assembly of electronic products, including: telecommunications equipment, computers and office equipment, medical devices and instrumentation, industrial equipment and controls, military/aerospace systems and automotive and consumer electronics.

Jaco has two distribution centers and 16 sales offices throughout the U.S. Jaco provides a variety of value-added services including automated inventory management services, assembling stock items for customers into pre-packaged kits, integrating and assembling various custom components with flat panel displays to customer specifications. The Company's core customer base consists primarily of small and medium-sized manufacturers that produce electronic equipment used in a wide variety of industries.