UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 000-14824
PLEXUS CORP.
(Exact Name of Registrant as Specified in its Charter)
WISCONSIN 39-1344447
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
55 JEWELERS PARK DRIVE
NEENAH, WISCONSIN 54957-0156
(920) 722-3451
(Address, including zip code, of principal executive offices and Registrant's
telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value
Preferred Stock Purchase Rights
(Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports(s)) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in rule 12b-2 under the Exchange Act). Yes [X] No[ ]
As of December 9, 2003, there were 42,678,101 shares of common stock outstanding. As of March 31, 2003, 42,276,396 shares of Common Stock were outstanding, and the aggregate market value of the shares of Common Stock (based upon the $9.15 closing sale price on that date, as reported on the NASDAQ Stock Market) held by non-affiliates (excludes shares reported as beneficially owned by directors and executive officers - does not constitute an admission as to affiliate status) was approximately $373.2 million.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K Into Which
Document Portions of Document are Incorporated
-------- -------------------------------------
Proxy Statement for 2003 Annual
Meeting of Shareholders Part III
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"SAFE HARBOR" CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995:
The statements contained in the Form 10-K which are not historical facts (such as statements in the future tense and statements including "believe," "expect," "intend," "plan," "anticipate" and similar words and concepts) are forward-looking statements that involve risks and uncertainties, including, but not limited to:
- the continued weak economic performance of the electronics and technology industries,
- the risk of customer delays, changes or cancellations in both ongoing and new programs,
- our ability to secure new customers and maintain our current customer base,
- the results of cost reduction efforts,
- the impact of capacity utilization and our ability to manage fixed and variable costs,
- the effects of facilities closures and restructurings,
- material cost fluctuations and the adequate availability of components and related parts for production,
- the effect of changes in average selling prices,
- the effect of start-up costs of new programs and facilities,
- the effect of general economic conditions and world events,
- the effect of the impact of increased competition and
- other risks detailed below, especially in "Risk Factors" and otherwise herein, and in our Securities and Exchange Commission filings.
In addition, see the Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7, particularly "General" and "Risk Factors" for a further discussion of some of the factors which could affect future results.
* * *
PART 1
ITEM 1. BUSINESS
OVERVIEW
Plexus Corp. and its subsidiaries (together "Plexus," the "Company," or "we") provide product realization services to original equipment manufacturers, or OEMs, in the networking/datacommunications/telecom, medical, industrial/commercial, computer and transportation/other industries. We provide advanced electronics design, manufacturing and testing services to our customers with a focus on complex, high technology and high reliability products. We offer our customers the ability to outsource all stages of product realization, including: development and design, materials procurement and management, prototyping and new product introduction, testing, manufacturing configuration, logistics and test/repair.
Our customers include both industry-leading OEMs and emerging technology companies. Due to our focus on serving OEMs in advanced electronics technology, our business is influenced by major technological trends such as the level and rate of development of fiber optics and RF/wireless infrastructure, the expansion of network computing and internet use, and the expansion of outsourcing by OEMs, generally.
Established in 1979 as a Wisconsin corporation, we have approximately 4,800 full-time employees, including over 300 engineers and technologists, operating from 19 active facilities in 16 locations, totaling approximately 1.6 million square feet. Prior to fiscal 2003, we had expanded our capacity and geographic reach through a series of strategic acquisitions. Through these transactions, we have enhanced our access to, and ability to provide services within important technology corridors in Boston, Chicago, San Jose and Seattle; established facilities in Europe, Mexico and Asia; significantly increased the size and capabilities of our medical services offerings and printed circuit board ("PCB") design services. See note 13 to our consolidated financial statements, which is incorporated herein by reference, for information as to our foreign sales and assets.
We maintain a website at www.plexus.com. We make available through that website, free of charge, copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Reports on Form 8-K, and amendments to those reports, as soon as reasonably practical after we electronically file those materials with, or furnish them to, the
Securities and Exchange Commission ("SEC"). You may access those reports by following the links under "Investors" at our website.
SERVICES
Plexus offers a broad range of integrated services that provide customers with a total design, new product introduction and manufacturing solution to take a product from initial design through production to test/repair. Our customers may utilize any or all of the following services and tend to use more of these services as their outsourcing strategies mature:
Product development and design. We provide comprehensive conceptual design and value engineering services. These services include project management, initial feasibility studies, product concept definition, specifications for product features and functions, product engineering specifications, microprocessor selection, circuit design, software design, application-specific integrated circuit design, printed circuit board layout, product housing design, development of test specifications and product validation testing. Through our product development and design services, we provide customers with a complete product design that can be manufactured efficiently.
Prototyping and new product introduction services. We provide assembly of prototype products within our operating sites. We supplement our prototype assembly services with other value-added services, including printed circuit board design, materials management, manufacturing defects analysis, analysis of the manufacturability and testability of a design, test implementation and pilot production runs leading to volume production. These services link our engineering, our customers' engineering and our volume manufacturing. This link facilitates an efficient transition from engineering to manufacturing. We believe that these services provide significant value to our customers by accelerating their products' time-to-market schedule.
Test development and product testing. Enhanced product functionality has led to increasingly complex components and assembly techniques; consequently, there is a need to design and assemble increasingly complex in-circuit and functional test equipment for electronic products and assemblies. Our internal development of this test equipment allows us to rapidly implement test solutions and to efficiently test printed circuit assemblies, subassemblies, system assemblies and finished product. We also develop and utilize specialized equipment that allows us to environmentally stress-test products during functional testing to assure reliability. We believe that the design and production of test equipment is an important factor in our ability to provide technology-driven products of consistently high quality.
Manufacturing and assembly. We provide contract manufacturing services on either a "turnkey" basis, which means we procure some or all of the materials required for product assembly, or on a "consignment" basis, which means the customer supplies some, or occasionally all, of the materials necessary for product assembly. Turnkey services include materials procurement and warehousing in addition to manufacturing and involve greater resource investment and inventory risk management than consignment services. Substantially all of our manufacturing services currently are on a turnkey basis. These services, which we endeavor to provide on an agile and rapid basis, include developing and implementing a materials strategy that meets customers' demand and flexibility requirements, assembling printed circuit boards utilizing a wide range of assembly technologies, building and configuring final product and system boxes and testing assemblies to meet customers' requirements. We have the expertise to assemble very complex electronic products that utilize multiple printed circuit boards and subassemblies. These complex products are typically configured to fulfill unique customer requirements and many are shipped directly to our customers' end users. In addition, we have developed special processes and tools to meet industry-specific requirements. Among these are the tools and processes to assemble finished medical devices that meet U.S. Food and Drug Administration Quality Systems Regulation requirements and similar regulatory requirements of other countries.
After-market support. We provide service support for manufactured products. In this context, supported products, which may or may not be under a customer's warranty, may be returned for repairs or upgrades at the customer's discretion.
CUSTOMERS AND INDUSTRIES SERVED
We provide services to a wide variety of customers, ranging from large multinational companies to smaller emerging technology companies, including start-ups. During fiscal 2003, we provided services to over 200 customers. Because of the variety of services we offer, our flexibility in design and manufacturing and our ability to respond to customer needs in a timely fashion, we believe that we are well positioned to offer our services to customers in most industries. For many customers, we serve both a design and production function, thereby permitting customers to
concentrate on concept development, distribution and marketing, while accelerating their time to market, reducing their investment in engineering and manufacturing capacity and optimizing total product cost.
Siemens Medical Systems, Inc. ("Siemens") accounted for 12 percent of our net sales in fiscal 2003. No other customer accounted for 10 percent or more of our net sales in fiscal 2003. No customer represented 10 percent or more of net sales in either fiscal 2002 or 2001. The loss of Siemens, or any of our other major customers, could have a significant negative impact.
Many of our large customers contract independently through multiple divisions, subsidiaries, production facilities or locations. We believe that in most cases our sales to one such subsidiary, division, facility or location are not dependent on sales to others.
We provided services to the following industries in the following proportions:
INDUSTRY 2003 2002 2001 -------- ---- ---- ---- Networking/Datacommunications/Telecom 36% 36% 40% Medical 32% 28% 22% Industrial/Commercial 15% 20% 20% Computer 12% 11% 10% Transportation/Other 5% 5% 8% |
MATERIALS AND SUPPLIERS
We purchase raw materials and electronic components from manufacturers and distribution companies. The key electronic components we purchase include printed circuit boards, specialized components such as application-specific integrated circuits, semiconductors, interconnect products, electronic subassemblies (including memory modules, power supply modules and cable and wire harnesses), inductors, resistors and capacitors. Along with these electronic components, we also purchase components for use in higher-level assembly and manufacturing. These components include injection-molded plastic, pressure-formed plastics, vacuum-formed plastics, sheet metal fabrications, aluminum extrusions, die castings and various other hardware and fastener components. These components range from standard to highly customized, and they vary widely in terms of market volatility and price.
From time to time, allocation of components by suppliers becomes an integral part of the electronics industry, and component shortages can occur with respect to particular components. In response, we actively manage our business in a way that minimizes our exposure to materials and component shortages. We have developed a corporate procurement organization whose primary purpose is to create strong supplier alliances to ensure, as much as possible, a steady flow of components at competitive prices. Because we design products and can influence what components are used in some new products, manufacturers of components often provide us with priority access to a supply of materials and components, even during shortages. We have also established and continue to expand our strategic relationships with international purchasing offices, and we attempt to leverage our design position with suppliers. Beyond this, we have undertaken a series of initiatives, including the utilization of in-plant stores, point-of-use programs, assured supply programs and other efforts. All of these undertakings seek to improve our overall supply chain flexibility and to accommodate the current marketplace.
SALES AND MARKETING
We market our services primarily through our sales and marketing organization, which includes sales account managers, strategic customer managers, market sector specialists, technology specialists and advertising and other corporate communications personnel. Our sales and marketing efforts focus on generating new customers and expanding business with existing customers. We use our ability to provide a full range of product realization services as a marketing tool, and our technology specialists participate in marketing through direct customer contact and participation in industry symposia and seminars. Our sales force is integrated with the rest of our business and is aligned geographically within important technology corridors.
COMPETITION
The market for the products and services we provide is highly competitive. We compete primarily on the basis of engineering, testing and production capabilities, technological capabilities and the capacity for responsiveness, quality and price. There are many competitors in the electronics design and assembly industry. Larger and more geographically diverse competitors have substantially more resources than we do. Other, smaller competitors compete
only in specific sectors within limited geographical areas. We also compete against companies that design or manufacture items in-house rather than by outsourcing. In addition, we compete against foreign, low labor cost manufacturers. This foreign, low labor cost competition tends to focus on commodity and consumer-related products, which is not our primary focus.
INTELLECTUAL PROPERTY
We own various service marks, including "Plexus," and "Plexus, The Product Realization Company." Although we own certain patents, they are not currently material to our business. We do not have any material copyrights.
INFORMATION TECHNOLOGY
We began to implement in fiscal 2001 a new enterprise resource planning ("ERP") platform. This ERP platform is intended to augment our management information systems and includes software from J.D. Edwards (now part of Peoplesoft) and several other vendors. The ERP platform is intended to enhance and standardize our ability to globally translate information from production facilities into operational and financial information and to create a consistent set of core business applications at our worldwide facilities, although we will not necessarily convert all of our facilities to the same system. We believe that the related licenses are of a general commercial character on terms customary for these types of agreements. During fiscal 2003, we converted two manufacturing facilities to the new ERP platform. We anticipate converting at least one more facility to the new ERP platform and completing the integration of the core software in fiscal 2004. Some of the supplemental software programs that will be integrated with the core software will be integrated at later dates. Our conversion timetable and project scope remain subject to change based upon our evolving needs and sales levels.
ENVIRONMENTAL COMPLIANCE
We are subject to a variety of environmental regulations relating to the use, storage, discharge and disposal of hazardous chemicals used during our manufacturing process. Although we believe that we are in compliance with all federal, state and local environmental laws, and do not anticipate any significant expenditures in maintaining our compliance, there can be no assurances that violations will not occur which could have a material adverse effect on our results.
EMPLOYEES
Our employees are one of our primary strengths, and we make considerable efforts to maintain a well-qualified staff. We have been able to offer enhanced career opportunities to many of our employees. Our human resources department identifies career objectives and monitors specific skill development for employees with potential for advancement. We invest at all levels of the organization to ensure that employees are well trained. We have a policy of involvement and consultation with employees in every facility and strive for continuous improvement at all levels.
We employ approximately 4,800 full-time employees. Given the quick response time required by our customers, we seek to maintain flexibility to scale our operations as necessary to maximize efficiency. To do so, we use skilled temporary labor in addition to our full-time employees. In Europe, approximately 40 of our employees are covered by union agreements. These union agreements are typically renewed at the beginning of each year, although in a few cases these agreements may last two or more years. Our employees in the United States, China, Malaysia and Mexico are not covered by union agreements. We have no history of labor disputes at any of our facilities. We believe that our employee relationships are good.
ITEM 2. PROPERTIES
Our facilities comprise an integrated network of technology and manufacturing centers, with corporate headquarters located in our engineering facility in Neenah, Wisconsin. We own or lease facilities with approximately 2.2 million square feet of capacity. This includes approximately 1.7 million square feet in the United States, approximately 0.2 million square feet in Mexico, approximately 0.2 million square feet in Asia and approximately 0.1 million square feet in Europe. Approximately 0.6 million square feet of this capacity is either vacant or subleased. The geographic diversity of our technology and manufacturing centers allows us to offer services from locations near our customers and major electronics markets. We believe that this approach reduces material and transportation costs and simplifies logistics and communications. This enables us to provide customers with a responsive, more complete, cost-effective solution. Our facilities are described in the following table:
LOCATION TYPE SIZE (SQ. FT.) OWNED/LEASED
-------- ---- -------------- ------------
Neenah, Wisconsin (1) Manufacturing 277,000 Leased
Nampa, Idaho Manufacturing 216,000 Owned
Juarez, Mexico Manufacturing 210,000 Leased
Buffalo Grove, Illinois Manufacturing 141,000 Leased
Penang, Malaysia Manufacturing 118,000 Owned
Bothell, Washington (2) Manufacturing/Engineering 97,000 Leased
Appleton, Wisconsin Manufacturing 67,000 Owned
Ayer, Massachusetts Manufacturing 65,000 Leased
Xiamen, China Manufacturing 63,000 Leased
Kelso, Scotland Manufacturing 60,000 Leased
Maldon, England Manufacturing 40,000 Owned
Freemont, California Manufacturing 36,000 Leased
Neenah, Wisconsin Engineering 105,000 Owned
Louisville, Colorado Engineering 16,000 Leased
Raliegh, North Carolina Engineering 14,000 Leased
Kelso, Scotland (3) Engineering 2,000 Leased
Hillsboro, Oregon (4) PCB Design 9,000 Leased
Neenah, Wisconsin (1) (5) Office/Warehouse 84,000 Owned
El Paso, Texas Office/Warehouse 13,000 Leased
San Diego, California (6) Inactive/Other 198,000 Leased
Bothell, Washington (1) (7) Inactive/Other 141,000 Leased
Neenah, Wisconsin (8) Inactive/Other 93,000 Leased
Redmond, Washington (9) Inactive/Other 60,000 Leased
San Diego, California (9) Inactive/Other 36,000 Leased
Nashua, New Hampshire (10) Inactive/Other 10,000 Leased
Kelso, Scotland (3) Inactive/Other 2,000 Leased
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(1) Includes more than one building.
(2) We have combined our engineering and manufacturing operations into one facility. Engineering operations occupy approximately 30,000 square feet with manufacturing operations occupying the remaining square footage.
(3) We consolidated two engineering facilities into one facility in December 2002. We are attempting to sublease the abandoned facility (2,500 square feet).
(4) We also have one small leased PCB design office in Tel Aviv, Israel.
(5) Operations ceased in February 2003 and the facilities are now used for warehousing and administrative purposes.
(6) Approximately 71,000 square feet of lease space was subleased to a third party in December 2002. We ceased operations in the remaining part of the facility in May 2003 and are seeking to also sublease that space.
(7) We consolidated the engineering and manufacturing facilities into a new facility. We are seeking to sublease the two unoccupied facilities (60,000 square feet and 81,000 square feet).
(8) We consolidated our leased warehousing space to an owned facility in Neenah, Wisconsin in May 2003. We are seeking to sublease the leased warehousing space.
(9) This building is subleased and no longer used in our business operations.
(10) As part of the sale of our PCB design operations in Nashua, New Hampshire, we subleased the facility to a group of former employees for one year. In addition, during fiscal 2003, we closed a small leased PCB design office in Dallas, Texas and subleased it to a third party.
ITEM 3. LEGAL PROCEEDINGS
As we have previously disclosed, the Company (along with hundreds of
other companies) has been sued by the Lemelson Medical, Educational & Research
Foundation Limited Partnership ("Lemelson") for alleged possible infringement of
certain Lemelson patents. The complaint, which is one of a series of complaints
by Lemelson against hundreds of companies, seeks injunctive relief, treble
damages (amount unspecified) and attorneys' fees. The Company has obtained a
stay of action pending developments in other related litigation. Based on
information received from a party to that other litigation, we do not believe
that it is likely that a decision will be rendered in the other litigation
before spring 2004. The Company believes the vendors from which patent-related
equipment was purchased may be required to contractually indemnify the Company.
However, based upon the Company's observation of the plaintiff's actions in
other parallel cases, it appears that the primary objective of the plaintiff is
to cause defendants to enter into license agreements. Even though the patents at
issue would theoretically relate to a significant portion of our net sales, if a
judgment is rendered and/or a license fee required, it is the opinion of
management that such judgment or fee would not be material to the Company's
financial position, results of operations or cash flows. Lemelson Medical,
Educational & Research Foundation Limited Partnership vs. Esco Electronics
Corporation et al, US District Court for the District of Arizona, Case Number
CIV 000660 PHX JWS (2000).
We are party to certain other lawsuits in the ordinary course of business. We do not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2003.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth our executive officers, their ages and the positions currently held by each person:
NAME AGE POSITION ---- --- -------- Dean A. Foate 45 President, Chief Executive Officer and Director F. Gordon Bitter 60 Vice President and Chief Financial Officer David A. Clark 43 Vice President and Vice President-Materials, Plexus Corp. Electronic Assembly Thomas J. Czajkowski 39 Vice President and Chief Information Officer Paul L. Ehlers 47 Senior Vice President, and President of Plexus Electronic Assembly Joseph D. Kaufman 46 Senior Vice President, Secretary and Chief Legal Officer J. Robert Kronser 44 Executive Vice President and Chief Technology & Strategy Officer Michael J. McGuire 48 Vice President - Worldwide Sales, Marketing and Business Development Simon J. Painter 38 Corporate Controller and Chief Accounting Officer David H. Rust 56 Vice President - Human Resources George W.F. Setton 57 Corporate Treasurer and Chief Treasury Officer Michael T. Verstegen 45 Vice President, and President of Plexus Technology Group |
Dean A. Foate joined Plexus in 1984 and has served as President and Chief Executive Officer since 2002, and as a director since 2000; previously Chief Operating Officer from 2001 to 2002, Executive Vice President from 1999 to 2001 and President of Plexus Technology Group prior thereto.
F. Gordon Bitter joined Plexus out of retirement on October 31, 2002 as Vice President and Chief Financial Officer. Previously, Mr. Bitter was the Senior Vice President-Finance and Administration and Chief Financial Officer for Hadco Corporation, a printed circuit board and electronics contract manufacturer, from 1998 to 2000. From 1997 to 1998, Mr.
Bitter was CEO and CFO of Molten Metal Technology, a recycler of industrial wastes. Prior to that, Mr. Bitter had held numerous senior financial and operational positions in various industrial companies.
David A. Clark joined Plexus in 1995 and has served as Vice President since 2002. In 1999, Mr. Clark took the position of Vice President-Materials for Plexus Electronic Assembly, a position he continues to hold. Prior to that, he was Director of Procurement for Plexus Electronic Assembly.
Thomas J. Czajkowski joined Plexus in 2001 and has served as Vice President and Chief Information Officer since 2002. Prior to that, Mr. Czajkowski served as Chief Information Officer. Prior to joining Plexus, Mr. Czajkowski was a Senior Manager at Deloitte Consulting from 1993 to 2001.
Paul L. Ehlers joined Plexus in 1980 and has served as Senior Vice President since 2002. In 2001, Mr. Ehlers served as Vice President. In addition, Mr. Ehlers has served as President of Plexus Electronic Assembly since 2000. From 1995 to 1999, Mr. Ehlers managed various manufacturing facilities.
Joseph D. Kaufman joined Plexus in 1986 and has served as Senior Vice President, Secretary and Chief Legal Officer since 2001, and as Vice President, Secretary and General Counsel of Plexus from 1990 to 2001.
J. Robert Kronser joined Plexus in 1981 serving in various engineering roles and has served as an Executive Vice President and Chief Technology and Strategy Officer since 2001. From 1999 to 2001, Mr. Kronser served as Vice President of Sales and Marketing. From 1993 to 1999, Mr. Kronser managed the Advanced Manufacturing Center.
Michael J. McGuire joined Plexus in 2002 as Vice President-Worldwide Sales, Marketing and Business Development. Previously, from 2000 to 2002, Mr. McGuire served as Senior Vice President of Sales for Nu Horizons Electronics Corp. Prior to that, Mr. McGuire served as the Midwest Regional Vice President of Sales for Marshall Industries, Inc. from 1987 to 2000.
Simon J. Painter joined Plexus in June 2000 as Corporate Controller. In February 2003, Mr. Painter was appointed to the position of Chief Accounting Officer. Prior to joining Plexus, Mr. Painter was an auditor with the firm of PricewaterhouseCoopers LLP, from 1991 to 2000, serving most recently as an Audit Manager.
David H. Rust joined Plexus in 2001 as Vice President - Human Resources. Previously, Mr. Rust served as Vice President and Chief Human Resources Officer from 1990 to 2001 for Menasha Corporation.
George W.F. Setton joined Plexus in 2001 as Corporate Treasurer and Chief Treasury Officer. He was Plexus' Principal Accounting Officer from 2001 to 2003. Previously, from 2000 to 2001, Mr. Setton was a partner in Euram, Inc., a financial consulting firm, and from 1997 to 1999, Mr. Setton served as Group Treasurer for Carr Futures, Inc. He previously held various positions at Square D/Groupe Schneider, including Assistant Treasurer of Schneider North America, Tresorier Adjoint of Groupe Schneider, and Assistant Treasurer of Square D Company.
Michael T. Verstegen joined Plexus in 1983 and has served as Vice-President since 2002. In addition, Mr. Verstegen served as President of Plexus Technology Group since 2001. Mr. Verstegen has held various management positions within the engineering business unit from 1995 to 2000.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
For the fiscal years ended September 30, 2003 and 2002, the Company's Common Stock has traded on the NASDAQ Stock Market. The price information below represents high and low sale prices of our common stock for each quarterly period.
Fiscal Year Ended September 30, 2003
High Low
---- ---
First Quarter $15.76 $ 7.38
Second Quarter $10.41 $ 7.94
Third Quarter $13.48 $ 8.83
Fourth Quarter $18.45 $ 11.18
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Fiscal Year Ended September 30, 2002
High Low
---- ---
First Quarter $36.74 $21.30
Second Quarter $29.94 $20.96
Third Quarter $28.49 $14.59
Fourth Quarter $18.15 $ 9.15
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As of December 9, 2003, there were approximately 1,050 shareholders of record. We have not paid any cash dividends. We anticipate that all earnings in the foreseeable future will be retained to finance the development of our business. See also Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" for a discussion of the Company's dividend intentions.
ITEM 6 SELECTED FINANCIAL DATA
FINANCIAL HIGHLIGHTS (1) (dollars in thousands, except per share amounts)
FOR THE YEARS ENDED SEPTEMBER 30,
OPERATING STATEMENT DATA 2003 2002 2001 2000 1999
---- ---- ---- ---- ----
Net sales $ 807,837 $ 883,603 $1,062,304 $ 751,639 $ 492,414
Gross profit 52,965 81,320 131,790 107,164 66,409
Gross margin percentage 6.6% 9.2% 12.4% 14.3% 13.5%
Operating income (loss) (71,531) (2) (3,636) (3) 68,388 (4) 69,870 (5) 34,428 (6)
Operating margin percentage (8.9%) (0.4%) 6.4% 9.3% 7.0%
Net income (loss) (67,978) (2) (4,073) (3) 39,150 (4) 40,196 (5) 20,311 (6)
Earnings (loss) per share (diluted) $ (1.61) (2) $ (0.10) (3) $ 0.91 (4) $ 1.04 (5) $ 0.55 (6)
CASH FLOW STATEMENT DATA
Cash flows provided by (used in) operations $ (19,953) $ 130,455 $ 119,479 $ (51,392) $ 19,727
Capital equipment additions 22,372 30,760 54,560 44,228 18,196
BALANCE SHEET DATA
Working capital $ 210,315 $ 219,854 $ 277,055 $ 213,596 $ 110,411
Total assets 553,054 583,945 602,525 515,608 229,636
Long-term debt and capital lease obligations 23,502 25,356 70,016 141,409 142
Shareholders' equity 371,016 430,689 426,852 209,362 146,403
Return on average assets (12.0%) (0.7%) 7.0% 10.8% 9.8%
Return on average equity (17.0%) (0.9%) 12.3% 22.6% 15.5%
Inventory turnover ratio 6.5x 7.0x 5.3x 4.4x 6.2x
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(1) As a result of the fiscal 1999 merger with SeaMED Corporation ("SeaMED"), prior historical results have been restated utilizing the pooling-of-interests method of accounting. Historical results have not been restated for the fiscal 2001 merger with e2E Corporation ("e2E") and the fiscal 2000 merger with Agility, Incorporated ("Agility") as they would not differ materially from reported results.
(2) In response to the reduction in our sales and reduced capacity utilization, we recorded fiscal 2003 restructuring costs of approximately $59.3 million. These costs totaled approximately $36.8 million after-tax. In addition, we adopted SFAS No. 142 for the accounting of goodwill and other intangible assets. Under the transitional provisions of Statement of Financial Accounting Standards No. 142, we determined that a pre-tax transitional impairment charge of $28.2 million was required, which was recorded as a cumulative effect of a change in accounting for goodwill ($23.5 million after-tax).
(3) In January 2002, we completed the acquisition of certain assets of MCMS, Inc. ("MCMS"). The results from operations of the assets acquired from MCMS are reflected in our financial statements from the date of acquisition. No goodwill resulted from the acquisition. We incurred approximately $0.3 million of acquisition costs in fiscal 2002 associated with the acquisition of the MCMS operations. In response to the reduction in our sales and reduced capacity utilization, we also recorded fiscal 2002 restructuring costs of approximately $12.6 million. Together, these costs totaled approximately $8.3 million after-tax.
(4) In connection with the May 2001 acquisition of Qtron Inc. ("Qtron") and merger with e2E, we recorded acquisition and merger costs of approximately $1.6 million ($1.4 million after-tax). In connection with an economic slowdown, we recorded restructuring costs of approximately $1.9 million ($1.1 million after-tax). The effects of the acquisition of Qtron are reflected in the financial statements from the date of acquisition.
(5) In connection with the merger with Agility and the acquisitions of Keltek (Holdings) Limited ("Keltek"), and the turnkey electronics manufacturing services operations of Elamex, S.A. de C.V. ("Mexico turnkey operations"), Plexus recorded acquisition and merger costs of $1.1 million ($0.9 million after-tax).
(6) In connection with the merger with SeaMED, Plexus recorded merger and other related charges of $7.7 million ($6.0 million after-tax).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
We provide product realization services to original equipment manufacturers, or OEMs, in the networking/datacommunications/telecom, medical, industrial/commercial, computer and transportation/other industries. We provide advanced electronics design, manufacturing and testing services to our customers with a focus on complex, high-end products. We offer our customers the ability to outsource all stages of product realization, including: development and design, materials procurement and management, prototyping and new product introduction, testing, manufacturing configuration, logistics and test/repair. The following information should be read in conjunction with our consolidated financial statements included herein and the "Risk Factors" section beginning on page 17.
We provide contract manufacturing services on either a turnkey basis, which means we procure some or all of the materials required for product assembly, or on a consignment basis, which means the customer supplies some, or occasionally all, of the materials necessary for product assembly. Turnkey services include materials procurement and warehousing in addition to manufacturing and involve greater resource investment and inventory risk management than consignment services. Turnkey manufacturing currently represents substantially all of our manufacturing services. Turnkey sales typically generate higher sales and higher gross profit dollars with lower gross margin percentages than consignment sales due to the inclusion of component costs, and related markup, in our net sales. However, turnkey manufacturing involves the risk of inventory management, and a change in component costs can directly impact average selling prices, gross margins and net sales. Our quarterly and annual results are affected by the level and timing of customer orders, fluctuations in materials costs and the degree of automation used in the assembly process.
MERGERS AND ACQUISITIONS/DISPOSITIONS
In January 2002, we acquired certain assets of MCMS, Inc. ("MCMS"), an electronics manufacturing services provider, for approximately $42.0 million in cash. The assets purchased from MCMS include manufacturing operations in Penang, Malaysia; Xiamen, China; and Nampa, Idaho. The acquisition did not include any interest-bearing debt, but included the assumption of total liabilities of approximately $7.2 million. The results from MCMS's operations are reflected in our financial statements from the date of acquisition. No goodwill resulted from this acquisition. We incurred approximately $0.3 million of acquisition costs in the second quarter of fiscal 2002 associated with the acquisition of MCMS.
On May 23, 2001, we acquired Qtron, Inc. ("Qtron"), a privately held EMS provider with a facility located in San Diego, California ("San Diego"). We purchased all of the outstanding shares of Qtron for approximately $29.0 million in cash, paid outstanding Qtron notes payable of $3.6 million to Qtron shareholders and assumed liabilities of $47.4 million, including capital lease obligations of $18.8 million for a manufacturing facility. The results of Qtron's operations have been reflected in our financial statements from the date of acquisition. The excess of the cost over the fair value of the net assets acquired of approximately $24 million was recorded as goodwill. Through September 30, 2002, we were amortizing goodwill over 15 years. Effective the first quarter of fiscal 2003, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, goodwill was no longer amortized. Goodwill was also partially impaired as a result of a transitional impairment evaluation upon adoption of SFAS No. 142. In December 2002, the primary customer of San Diego provided notice of its intent to transition most of its programs to non-Plexus facilities. As a consequence, we closed San Diego during fiscal 2003 and wrote off the remaining goodwill.
In fiscal 2003, we also closed our facility in Richmond, Kentucky ("Richmond"), and ceased production in our oldest plant in Neenah, Wisconsin. These actions and related charges are further discussed below. In addition, we sold our PCB design operations in Nashua, New Hampshire to a group of former employees; however, this transaction did not have a material impact on our consolidated financial statements.
RESULTS OF OPERATIONS
Net sales. Net sales for the year ended September 30, 2003 decreased 9 percent to $807.8 million from $883.6 million for the year ended September 30, 2002. Our reduced sales levels reflected the slowdown in technology markets, primarily in the network/datacommunications/telecom, industrial/commercial and computer industries, which have been further impacted by reduced capital spending by companies in these industries. Net sales in fiscal 2003 compared to net sales in fiscal 2002 were also adversely affected by the loss of the programs of the primary customer in our San Diego facility. The slowdown in the technology markets in fiscal 2003 was offset, in part, by increased sales to the medical industry. We currently expect first quarter of fiscal 2004 sales to be in the range of $230 million to $240 million as a result of strengthened demand from a number of existing customers, as well as the start of production for several new customers. However, our results will ultimately depend on actual customer order levels.
Net sales for the year ended September 30, 2002, decreased 17 percent to $883.6 million from $1.1 billion for the year ended September 30, 2001. Net sales for fiscal 2002 included approximately $71 million, or 8 percent of sales, related to the acquired MCMS operations. Our sales decline reflected the continued slowdown in technology markets in most end-markets but primarily due to the networking/datacommunications/telecom and industrial/commercial end-markets. We were also affected by a relatively sharp downturn of orders and forecasts, particularly in engineering, subsequent to the September 11, 2001 attacks, as a consequence of the economic uncertainties resulting from the attacks and their aftermath. These factors resulted in customers becoming more cautious in placing new orders.
Siemens Medical Systems, Inc. ("Siemens") represented 12 percent of our net sales in fiscal 2003. We had no other customers that represented 10 percent or more of our net sales in fiscal 2003. We had no customers that represented 10 percent or more of net sales for the years ended September 30, 2002 and 2001. Sales to our ten largest customers accounted for 55 percent of sales for the year ended September 30, 2003, compared to 48 percent and 51 percent for the years ended September 30, 2002 and 2001, respectively. As with sales to most of our customers, sales to our largest customers may vary from time to time depending on the size and timing of program commencement, termination, delays, modifications and transitions. We remain dependent on continued sales to our significant customers, and we generally do not obtain firm, long-term purchase commitments from our customers. Customer forecasts can and do change as a result of their end-market demand and other factors. Although any change in orders from these or other customers could materially affect our results of operations, we are dedicated to diversifying our customer base and decreasing our dependence on any particular customer or customers.
Our sales for the years ended September 30, 2003, 2002 and 2001, respectively, by industry were as follows:
INDUSTRY 2003 2002 2001
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Networking/Datacommunications/Telecom 36% 36% 40%
Medical 32% 28% 22%
Industrial/Commercial 15% 20% 20%
Computer 12% 11% 10%
Transportation/Other 5% 5% 8%
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Gross profit. Gross profit for the year ended September 30, 2003, decreased 35 percent to $53.0 million from $81.3 million for the year ended September 30, 2002. The gross margin percentage for the year ended September 30, 2003, was 6.6 percent, compared to 9.2 percent for the year ended September 30, 2002. The decline in gross margin was due primarily to reduced utilization of manufacturing capacity, lower product pricing and higher costs incurred to transfer customer programs to other Plexus operating sites as a result of closing San Diego and Richmond.
Overall gross margins were affected by lower sales levels as a result of a slowdown in end-market demand, particularly in the networking/ datacommunications/telecom and industrial/commercial industries, and the concomitant impact on capacity utilization. Gross margins reflect a number of factors that can vary from period to period, including product mix, the level of start-up costs and efficiencies associated with new programs, product life cycles, sales volumes, price erosion within the electronics industry, capacity utilization of surface mount and other equipment, labor costs and efficiencies, the management of inventories, component pricing and shortages, average sales prices, the mix of turnkey and consignment business, fluctuations and timing of customer orders, changing demand for our customers'
products and competition within the electronics industry. These, and other factors, can cause variations in our operating results. There can be no assurance that gross margins will not decrease in future periods.
Gross profit for the year ended September 30, 2002, decreased 38 percent to $81.3 million from $131.8 million for the year ended September 30, 2001. The gross margin percentage for the year ended September 30, 2002, was 9.2 percent, compared to 12.4 percent for the year ended September 30, 2001. The decline in gross margin in fiscal 2002 compared to fiscal 2001 was due primarily to our reduced utilization of manufacturing and engineering capacity.
Most of the research and development we conduct is paid for by our customers and is therefore included in both sales and cost of sales. We conduct our own research and development, but that research and development is not specifically identified, and we believe such expenses are less than one percent of our sales.
Operating expenses. Selling and administrative (S&A) expenses for the year ended September 30, 2003, were $65.2 million as compared to $66.9 million and $55.8 million for the years ended September 30, 2002 and 2001, respectively. As a percentage of net sales, S&A expenses were 8.1 percent for the year ended September 30, 2003, compared to 7.6 percent and 5.3 percent for the years ended September 30, 2002 and 2001, respectively.
The decrease of S&A expenses in dollar terms in fiscal 2003 as compared to fiscal 2002 was due primarily to fiscal 2003 restructuring actions and reductions in corporate spending. These reductions were offset, in part, by approximately $1.2 million of additional expenses for information technology systems support related to the implementation of a new enterprise resource planning ("ERP") platform. This ERP platform is intended to augment our management information systems and includes various software systems to enhance and standardize our ability to globally translate information from production facilities into operational and financial information and create a consistent set of core business applications at our worldwide facilities.
During fiscal 2003, two manufacturing facilities were converted to the new ERP platform, which resulted in additional training and implementation costs. Over the next two quarters, we intend to develop enhancements for the new ERP platform. We anticipate converting at least one more facility to the new ERP platform. Training and implementation costs are expected to continue over the next several quarters as we make system enhancements and convert an additional facility to the new ERP platform. The conversion timetable and project scope remain subject to change based upon our evolving needs and sales levels. In addition to S&A expenses associated with the new ERP system, we continue to incur capital expenditures for hardware, software and certain other costs for testing and installation. As of September 30, 2003, property, plant and equipment includes $27.9 million of capital expenditures related to the new ERP platform, including $10.9 million capitalized in fiscal 2003. Amortization of the capitalized costs associated with the ERP platform commenced in fiscal 2003 and totaled $0.7 million. We anticipate incurring at least an additional $5.0 million of capital expenditures for the ERP platform over the next fiscal year.
Effective the first quarter of fiscal 2003, in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," we no longer amortized goodwill. However, goodwill was impaired as a result of a transitional impairment evaluation upon adoption of SFAS No. 142. See discussion below under "Cumulative effect of a change in accounting for goodwill." Subsequent to the initial adoption of SFAS No. 142, we are required to perform an annual impairment test, or more frequently if an event or changes in circumstance indicates that an impairment loss has occurred, which could materially affect our results of operations in any given period. In early fiscal 2003, $5.6 million of goodwill was impaired as a result of the loss of a major customer in San Diego (see discussion below). We completed the annual impairment test during our third quarter of fiscal 2003 and determined that no further impairment existed.
During fiscal 2003, we recorded pre-tax restructuring and impairment costs totaling $59.3 million. These costs resulted from actions taken in response to reductions in our end-market demand. These actions included closing San Diego and Richmond, the consolidation of several leased facilities, re-focusing the PCB design group, a write-off of remaining goodwill associated with the acquisition of Qtron, the write-down of underutilized assets to fair value at several locations, and the costs associated with reductions in work force in several manufacturing, engineering and corporate groups. These measures were intended to align our capabilities and resources with lower industry demand.
The Richmond facility was phased out of operations and sold in September 2003. Production was shifted to other Plexus operating sites in the United States and Mexico. The closure of Richmond resulted in a write-down of the building, a write-down of underutilized assets to fair value, and costs relating to the elimination of the facility's work force. Building impairment charges related to Richmond totaled $3.7 million. San Diego was closed in May 2003. The closure of San Diego resulted in a write-off of remaining goodwill, the write-down of underutilized assets to fair value, and costs relating to the elimination of the facility's work force. Building impairment charges totaled $6.3 million. During fiscal 2003, goodwill impairment for San Diego totaled approximately $20.4 million, of which $14.8
million was impaired as a result of a transitional impairment evaluation under SFAS No. 142 (see discussion below under "Cumulative effect of a change in accounting for goodwill") and $5.6 million was impaired as a result of our decision to close the facility.
Other fiscal year 2003 restructuring actions included the consolidation of several leased facilities, the write-down of underutilized assets to fair value and work force reductions, which primarily affected operating sites in Juarez, Mexico ("Juarez"); Seattle, Washington ("Seattle"); Neenah, Wisconsin ("Neenah") and the United Kingdom ("UK"). Restructuring actions also impacted our engineering and corporate organizations. Employee termination and severance costs for fiscal 2003 related to the termination of approximately 1,000 employees.
For the year ended September 30, 2002, we recorded restructuring and impairment costs totaling $12.6 million. These charges resulted from actions taken in response to reductions in sales levels and capacity utilization and included the reduction of our work force and the write-off of certain underutilized assets to fair value at several locations. The employee termination and severance costs for fiscal 2002 affected approximately 700 employees. The operating site closures included two owned facilities: one located in Neenah (the oldest of our four facilities in Neenah) and the other located in Minneapolis, Minnesota. These facilities were no longer adequate to service the needs of our customers and would have required significant investment to upgrade. The Neenah facility was phased out of operation in February 2003 and is currently used for warehousing and administrative purposes. The Minneapolis facility was phased out of operation in July 2002 and sold in October 2002. There was no building impairment charge associated with the closure of these two facilities. The lease termination costs were primarily related to our facilities in Seattle and San Diego.
For the year ended September 30, 2001, we recorded pre-tax restructuring charges of $1.9 million. We reduced our cost structure through the reduction of our work force and by writing off certain underutilized assets in response to the reduction in our sales levels. The employee termination and severance costs provided for the elimination of approximately 50 employees.
The following table summarizes our restructuring and impairment costs for fiscal 2003, 2002 and 2001:
Years ended September 30,
--------------------------------
2003 2002 2001
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Non-cash impairment costs:
Fixed asset impairment $32,451 $ 4,890 $ 1,182
Write-off of goodwill 5,595 - -
------- ------- -------
38,046 4,890 1,182
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Cash restructuring costs:
Severance costs 10,358 3,819 642
Lease termination costs 10,940 3,872 102
------- ------- -------
21,298 7,691 744
------- ------- -------
Total restructuring and impairment costs $59,344 $12,581 $ 1,926
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As of September 30, 2003, we have a remaining restructuring liability of approximately $10.8 million, of which $6.0 million is expected to be paid in fiscal 2004. The remaining $4.8 million of accrued liabilities is expected to be paid through June 2008.
We currently expect that our restructuring actions will result, when fully implemented, in annualized cost savings of approximately $30 million, although these savings may be offset in part by reduced revenues and other changes in our cost structure. These savings will primarily benefit cost of sales through lower depreciation, lower lease expense and reduced employee expenses.
For the year ended September 30, 2002, we incurred approximately $0.3 million of acquisition costs related to the MCMS acquisition. Acquisition and merger costs of approximately $1.6 million for the year ended September 30, 2001 were related to the Qtron and e2E acquisitions.
Cumulative effect of a change in accounting for goodwill. We adopted SFAS No. 142 for the accounting for goodwill and other intangible assets as of October 1, 2002. Under the transitional provisions of SFAS No. 142, we identified locations with goodwill, performed impairment tests on the net goodwill and other intangible assets associated with each location using a valuation date as of October 1, 2002, and determined that a pre-tax transitional impairment charge of $28.2 million was required related to the San Diego and Juarez locations. The impairment charge
was recorded as a cumulative effect of a change in accounting for goodwill in our Consolidated Statements of Operations.
Income taxes. Income taxes decreased to a $27.2 million income tax benefit for the year ended September 30, 2003, from a $1.8 million income tax benefit and $26.2 million of income tax expense for the years ended September 30, 2002 and 2001, respectively. Our effective income tax rate increased to approximately 38 percent in fiscal 2003 as compared to 30 percent in fiscal 2002. The increase in the effective tax rate is due primarily to the absence in fiscal 2003 of non-deductible goodwill amortization expenses that were present in fiscal 2002.
As of September 30, 2003, we had net deferred income tax assets of $48.6 million, which have arisen from available income tax losses and future income tax deductions. Our ability to use these income tax losses and future income tax deductions is dependent upon our future operations in the tax jurisdictions in which such losses or deductions arose. We would record a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Although realization is not assured, based on the reversal of deferred income tax liabilities, projected future taxable income, the character of the income tax asset and tax planning strategies, we determined that as of September 30, 2003, no tax valuation allowance is required. However, should we experience a pre-tax loss in fiscal 2004 resulting from revenue declines and/or the inability to improve operating margins, a tax valuation reserve may be required in fiscal 2004.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used in operating activities were ($20.0) million for the year ended September 30, 2003, compared to cash flows provided by operating activities of $130.5 million and $119.5 million for the years ended September 30, 2002 and 2001, respectively. During fiscal 2003, cash used in operating activities was primarily related to fund losses, increased inventory, deferred income tax assets and payments to terminate our former asset securitization facility. These uses of cash were partially offset by an increase in our accounts payable.
Our days sales outstanding in accounts receivable as of September 30, 2003 remained constant at 47 days compared to September 30, 2002. Included in these calculations are the addback of amounts sold under the asset securitization facility, which were $0 and $16.6 million as of September 30, 2003 and 2002, respectively. Our inventory turns decreased to 6.5 turns for the year ended September 30, 2003 from 7.0 turns for the year ended September 30, 2002. Inventory turns were negatively impacted due to a build up of raw materials and work-in-process inventory for existing and new customers in anticipation of increased customer demand in the first quarter of fiscal 2004.
Cash flows provided by investing activities totaled $13.6 million for the year ended September 30, 2003. The primary sources were sales and maturities of short-term investments offset by purchases of property, plant and equipment.
We utilize available cash, debt and operating leases to fund our operating requirements. We utilize operating leases primarily in situations where concerns about technical obsolescence outweigh the benefits of owning the equipment. We currently estimate capital expenditures for fiscal 2004 will be approximately $20 million to $25 million. This estimate does not include any acquisitions which we may undertake. Our level of capital expenditures for fiscal 2004 will be heavily dependent on anticipated sales levels.
Cash flows provided by financing activities, totaling $1.0 million for the year ended September 30, 2003, primarily represent proceeds from stock issuances and the exercise of stock options offset by payments on capital lease obligations.
On October 22, 2003, we entered into a secured revolving credit facility (the "Secured Credit Facility") with a group of banks that allows us to borrow up to $100 million. Borrowing under the Secured Credit Facility will be either through revolving or swing loans or letters of credit. The Secured Credit Facility is secured by substantially all of our domestic working capital assets and a pledge of 65 percent of the stock of each of our foreign subsidiaries. Interest on borrowings varies with usage and begins at the Prime rate (as defined) or the LIBOR rate plus 1.5 percent. We also are required to pay an annual commitment fee of 0.5 percent of the unused credit commitment, a maximum of $0.5 million per year. The Secured Credit Facility matures on October 22, 2006 and includes certain financial covenants customary in agreements of this type. These covenants include a maximum total leverage ratio, a minimum domestic cash or marketable securities balance, a minimum tangible net worth and a minimum adjusted EBITDA, as defined in the agreement.
We terminated our previous credit facility ("Old Credit Facility") effective December 26, 2002 at which time no amounts were outstanding. Termination of the Old Credit Facility was occasioned by anticipated noncompliance with a minimum interest expense coverage ratio covenant as of December 31, 2002, which was a result of the restructuring and impairment costs incurred in the first quarter of fiscal 2003. At the date of termination of the Old Credit Facility, we wrote off unamortized deferred financing costs of approximately $0.5 million.
In fiscal 2001, we entered into an agreement to sell up to $50 million of trade accounts receivable without recourse to Plexus ABS Inc. ("ABS"), a wholly owned, limited purpose subsidiary of Plexus. ABS is a separate entity that sold, under a separate agreement, participating interests in a pool of our accounts receivable to financial institutions. The financial institutions then received an ownership and security interest in the pool of receivables. The agreement also included standards for determining which receivables may be sold, and included customary indemnification obligations that are more specifically described in Note 14 of Notes to the Consolidated Financial Statements. The agreement expired in September 2003. We did not renew the agreement upon its expiration, which resulted in our use of approximately $17.3 million of cash in the fourth quarter of fiscal 2003 to reacquire accounts receivable previously sold under the asset securitization facility.
We believe that our Secured Credit Facility, leasing capabilities, cash and short-term investments and projected cash from operations should be sufficient to meet our working and fixed capital requirements through fiscal 2004 and the foreseeable future.
We have not paid cash dividends in the past and do not anticipate paying them in the foreseeable future. We anticipate using any earnings to support our business.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Our disclosures regarding contractual obligations and commercial commitments are located in various parts of our regulatory filings. Information in the following table provides a summary of our contractual obligations and commercial commitments as of September 30, 2003 (in thousands):
Payments Due by Fiscal Period
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2009 and
Contractual Obligations Total 2004 2005-2006 2007-2008 thereafter
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Capital Lease Obligations $ 43,705 $ 3,173 $ 5,846 $ 6,041 $ 28,645
Operating Leases 81,136 13,730 23,010 15,826 28,570
Unconditional Purchase Obligations* - - - - -
Other Long-Term Obligations** 1,999 808 1,191 - -
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Total Contractual Cash Obligations $126,840 $ 17,711 $ 30,047 $ 21,867 $ 57,215
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* - There are no unconditional purchase obligations other than purchases of inventory and equipment in the ordinary course of business. All such unconditional purchase obligations of inventory and equipment have a term of less than one year.
** - As of September 30, 2003, other long-term obligations consist of salary commitments under employment agreements. We did not have, and were not subject to, any lines of credit, standby letters of credit, guarantees, standby repurchase obligations, or other commercial commitments. Our off-balance-sheet asset securitization facility expired in September 2003.
DISCLOSURE ABOUT CRITICAL ACCOUNTING POLICIES
Our accounting policies are disclosed in Note 1 to the Consolidated Financial Statements. During the year ended September 30, 2003, the only material change to these policies related to our accounting for intangible assets. Modifications were also made in our policies for accounting for the impairment of long-lived assets and restructuring costs; however, such changes did not have a material effect on our financial position or results of operations. The significant accounting policies are as follows:
Impairment of Long-Lived Assets - We adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" effective October 1, 2002. SFAS No. 144 modifies and expands the financial accounting and reporting for the impairment or disposal of long-lived assets other than goodwill, which is specifically addressed in SFAS No. 142 as described below. SFAS No. 144 maintains the requirement that an impairment loss be recognized for
a long-lived asset to be held and used if its carrying value is not recoverable
from its undiscounted cash flows with the recognized impairment being the
difference between the carrying amount and fair value of the asset. With respect
to long-lived assets to be disposed of other than by sale, SFAS No. 144 requires
that the asset be considered held and used until it is actually disposed of, but
requires that its depreciable life be revised in accordance with APB Opinion No.
20 "Accounting Changes."
We review property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of property, plant and equipment is measured by comparing its carrying value to the projected cash flows the property, plant and equipment are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying value of the property exceeds its fair market value. The impairment analysis is based on significant assumptions of future results made by management, including revenue and cash flow projections. Circumstances that may lead to impairment of property, plant and equipment include decreases in future performance or industry demand and the restructuring of our operations.
Intangible Assets - We adopted SFAS No. 142, "Goodwill and Other Intangible Assets" effective October 1, 2002. Under SFAS No. 142, beginning October 1, 2002, we no longer amortize goodwill and intangible assets with indefinite useful lives, but, instead, test those assets for impairment at least annually with any related losses recognized in earnings when incurred. We will perform goodwill impairment tests annually during the third quarter of each fiscal year and more frequently if an event or circumstance indicates that an impairment loss has occurred.
Under the transitional provisions of SFAS No. 142, we identified locations with goodwill, performed impairment tests on the net goodwill and other intangible assets associated with each location using a valuation date as of October 1, 2002, and determined that a pre-tax transitional impairment charge of $28.2 million was required. The impairment charge was recorded as a cumulative effect of a change in accounting for goodwill in our Consolidated Statements of Operations. See Note 1 to the Notes to Consolidated Financial Statements. In early fiscal 2003, we incurred additional goodwill impairment of $5.6 million as a result of the Company's decision to close the San Diego facility (see Note 10 to the Notes to Consolidated Financial Statements).
We measure the recoverability of goodwill under the annual impairment test by comparing a reporting unit's carrying amount, including goodwill, to the fair market value of the reporting unit based on projected discounted future cash flows. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second test is performed to measure the amount of impairment loss, if any.
Revenue - Revenue from manufacturing services is generally recognized upon shipment of the manufactured product to our customers, under contractual terms, which are generally FOB shipping point. Upon shipment, title transfers and the customer assumes risks and rewards of ownership of the product. Generally, there are no formal customer acceptance requirements or further obligations related to manufacturing services; if such requirements or obligations exist, then revenue is recognized at the time when such requirements are completed and such obligations fulfilled.
Revenue from engineering design and development services, which are generally performed under contracts of twelve months or less duration, is recognized as costs are incurred utilizing the percentage-of-completion method; any losses are recognized when anticipated. Revenue from engineering design and development services is less than ten percent of total revenue.
Revenue is recorded net of estimated returns of manufactured product based on management's analysis of historical returns, current economic trends and changes in customer demand. Revenue also includes amounts billed to customers for shipping and handling. The corresponding shipping and handling costs are included in cost of sales.
Restructuring Costs -From fiscal 2001 through fiscal 2003, we recorded restructuring costs in response to reductions in sales and reduced capacity utilization. These restructuring costs included employee severance and benefit costs, and costs related to plant closings, including leased facilities that will be abandoned (and subleased, as applicable). Prior to January 1, 2003, severance and benefit costs were recorded in accordance with Emerging Issues Task Force ("EITF") 94-3 and for leased facilities that were abandoned and subleased, the estimated lease loss was accrued for future remaining lease payments subsequent to abandonment, less any estimated sublease income. As of September 30, 2003, the significant facilities which we plan to sublease have not yet been subleased; and, accordingly, our estimates of expected sublease income could change based on factors that affect our ability to sublease those facilities such as general economic conditions and the real estate market, among others. For equipment, the impairment
losses recognized are based on the fair value estimated using existing market prices for similar assets, less estimated costs to sell. See Note 10 in the Notes to Consolidated Financial Statements.
Subsequent to December 31, 2002, costs associated with a restructuring activity are recorded in compliance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." The timing and related recognition of recording severance and benefit costs that are not presumed to be an ongoing benefit as defined in SFAS No. 146, depends on whether employees are required to render service until they are terminated in order to receive the termination benefits and, if so, whether employees will be retained to render service beyond a minimum retention period. During fiscal 2003, we concluded that we had a substantive severance plan based upon our past severance practices; therefore, we recorded certain severance and benefit costs in accordance with SFAS No. 112, "Employer's Accounting for Post employment Benefits," which resulted in the recognition of a liability as the severance and benefit costs arose from an existing condition or situation and the payment was both probable and reasonably estimated.
For leased facilities that will be abandoned and subleased, a liability is recognized and measured at fair value for the future remaining lease payments subsequent to abandonment, less any estimated sublease income that could be reasonably obtained for the property. For contract termination costs, including costs that will continue to be incurred under a contract for its remaining term without economic benefit to the entity, a liability for future remaining payments under the contract is recognized and measured at its fair value. See Note 10 in the Notes to Consolidated Financial Statements.
The recognition of restructuring costs requires that we make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned exit activity. If our actual results in exiting these facilities differ from our estimates and assumptions, we may be required to revise the estimates of future liabilities, requiring the recording of additional restructuring costs or the reduction of liabilities already recorded. At the end of each reporting period, we evaluate the remaining accrued balances to ensure that no excess accruals are retained and the utilization of the provisions are for their intended purpose in accordance with developed exit plans.
NEW ACCOUNTING PRONOUNCEMENTS
In August 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations" was issued. SFAS No. 143 sets forth the financial accounting and reporting to be followed for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. We adopted SFAS No 143 effective October 1, 2002. The adoption of this standard did not have a material effect on our financial position or results of operations.
In October 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued. SFAS No. 144 modifies and expands the financial accounting and reporting for the impairment or disposal of long-lived assets other than goodwill, which is specifically addressed by SFAS No. 142. SFAS No. 144 maintains the requirement that an impairment loss be recognized for a long-lived asset to be held and used if its carrying value is not recoverable from its undiscounted cash flows, with the recognized impairment being the difference between the carrying amount and fair value of the asset. With respect to long-lived assets to be disposed of other than by sale, SFAS No. 144 requires that the asset be considered held and used until it is actually disposed of, but requires that its depreciable life be revised in accordance with APB Opinion No. 20, "Accounting Changes." SFAS No. 144 also requires that an impairment loss be recognized at the date a long-lived asset is exchanged for a similar productive asset. We adopted SFAS No. 144 effective October 1, 2002. The adoption of this standard did not have a material effect on our financial position or results of operations.
In June 2002, SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," was issued. This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and replaces Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." This Statement required that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as defined in Issue 94-3 was recognized at the date of an entity's commitment to an exit plan. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material impact on our financial position or results of operations, but may impact the timing of the recognition of the costs and liabilities resulting from any future restructuring activities.
In November 2002, Financial Accounting Standards Board Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" was issued, which requires us at the time we issue a guarantee to recognize an initial liability for the fair value of obligations assumed under the guarantee and to elaborate on existing disclosure requirements. The initial recognition requirements of FIN No. 45 are effective for guarantees issued or modified after
December 31, 2002. The disclosure requirements of FIN No. 45 were effective in our first fiscal quarter of 2003. Adoption of the initial recognition provisions of FIN No. 45 did not have a material impact on our consolidated financial statements; however, FIN No. 45 may have a significant impact on our future results of operations and financial position.
In November 2002, the EITF reached a consensus regarding EITF Issue 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." The consensus addresses not only when and how an arrangement involving multiple deliverables should be divided into separate units of accounting, but also how the arrangement's consideration should be allocated among separate units. The pronouncement is effective for us commencing with our fiscal year 2004 and is not expected to have a material impact on our consolidated results of operations or financial position.
In December 2002, SFAS No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure--an amendment of FASB Statement No. 123" was issued. SFAS No. 148 provides alternative methods of transition for an entity that voluntarily changes to the fair-value-based method of accounting for stock-based employee compensation and is effective for fiscal years ending after December 15, 2002. In addition, SFAS No. 148 requires prominent disclosures in both annual and interim financial statements about the effects on reported net income of an entity's method of accounting for stock-based employee compensation. We did not effect a voluntary change in accounting to the fair value method, and, accordingly, SFAS No. 148 did not have an impact on our results of operations or financial position.
In January 2003, FIN No. 46, "Consolidation of Variable Interest Entities" was issued. FIN No. 46 clarifies the application of Accounting Research Bulletin No. 52, "Consolidated Financial Statements," to certain entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A variable interest entity is required to be consolidated by the company that has a majority of the exposure to expected losses of the variable interest entity. The Interpretation is effective immediately for variable interest entities created after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, the Interpretation, as amended by FSP No. FIN 46-6, applies in the first fiscal year or interim period beginning after December 15, 2003. The issuance of FIN No. 46 is not expected to have a material impact on our financial position or results of operations.
In April 2003, SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" was issued. SFAS No. 149 improves financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. In particular, SFAS No. 149: (1) clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative discussed in paragraph 6(b) of SFAS No. 133, (2) clarifies when a derivative contains a financing component, (3) amends the definition of an underlying to conform it to language used in FIN No. 45, and (4) amends certain other existing pronouncements. Those changes will result in more consistent reporting of contracts as either derivatives or hybrid instruments. In general, SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on our financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity," which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Financial instruments that are within the scope of the Statement, which previously were often classified as equity, must now be classified as liabilities. In November 2003, Financial Accounting Standards Board Staff Position ("FSP") No. SFAS 150-3 deferred the effective date of SFAS No. 150 indefinitely for applying the provisions of the Statement for certain mandatorily redeemable non-controlling interests. However expanded discussions are required during the deferral period. The issuance of SFAS No, 150 is not expected to have a material impact on our financial position or results of operations.
RISK FACTORS
OUR CUSTOMER REQUIREMENTS AND OPERATING RESULTS VARY SIGNIFICANTLY FROM QUARTER TO QUARTER, WHICH COULD NEGATIVELY IMPACT THE PRICE OF OUR COMMON STOCK.
Our quarterly and annual results may vary significantly depending on various factors, many of which are beyond our control. These factors include:
- the volume of customer orders relative to our capacity,
- the level and timing of customer orders, particularly in light of the fact that some of our customers release a significant percentage of their orders during the last few weeks of a quarter,
- the typical short life cycle of our customers' products,
- market acceptance of and demand for our customers' products,
- customer announcements of operating results and business conditions,
- changes in our sales mix to our customers,
- the timing of our expenditures in anticipation of future orders,
- our effectiveness in managing manufacturing processes,
- changes in cost and availability of labor and components,
- local events that may affect our production volume, such as local holidays,
- credit ratings and stock analyst reports and
- changes in economic conditions and world events.
The EMS industry is impacted by the state of the U.S. and global economies and world events. A continued slowdown or flat performance in the U.S. or global economies, or in particular in the industries served by us, may result in our customers further reducing their forecasts. Our sales have been, and we expect them to continue to be, adversely affected by the slowdown in the networking/datacommunications/telecom and industrial/commercial markets, as a result of reduced end-market demand and reduced availability of venture capital to fund existing and emerging technologies. These factors have and continue to substantially influence our levels of net sales. As a result, the demand for our services could continue to be weak or decrease, which in turn would impact our sales, capacity utilization, margins and results.
Our quarterly and annual results are affected by the level and timing of customer orders, fluctuations in material costs and availabilities, and the degree of capacity utilization in the manufacturing process.
THE MAJORITY OF OUR SALES COME FROM A SMALL NUMBER OF CUSTOMERS AND IF WE LOSE ANY OF THESE CUSTOMERS, OUR SALES AND OPERATING RESULTS COULD DECLINE SIGNIFICANTLY.
Sales to our largest customer represented 12 percent of our net sales in fiscal 2003. We had no customers that represented 10 percent or more in fiscal 2002 and 2001. Sales to our ten largest customers have represented a majority, or near majority, of our net sales in recent periods. Our ten largest customers accounted for approximately 55 percent, 48 percent and 51 percent of our net sales for the years ended September 30, 2003, 2002 and 2001, respectively. Our principal customers have varied from year to year, and our principal customers may not continue to purchase services from us at current levels, if at all. Significant reductions in sales to any of these customers, or the loss of major customers, could seriously harm our business. If we are not able to replace expired, canceled or reduced contracts with new business on a timely basis, our sales will decrease.
OUR CUSTOMERS MAY CANCEL THEIR ORDERS, CHANGE PRODUCTION QUANTITIES OR DELAY PRODUCTION.
Electronics manufacturing service providers must provide increasingly rapid product turnaround for their customers. We generally do not obtain firm, long-term purchase commitments from our customers and we continue to experience reduced lead-times in customer orders. Customers may cancel their orders, change production quantities or delay production for a number of reasons that are beyond our control. The success of our customers' products in the market and the strength of the markets themselves affect our business. Cancellations, reductions or delays by a significant customer or by a group of customers could seriously harm our operating results. Such cancellations, reductions or delays have occurred and may continue to occur in response to a slowdown in the overall economy.
In addition, we make significant decisions, including determining the levels of business that we will seek and accept, production schedules, component procurement commitments, facility requirements, personnel needs and other resource requirements, based on our estimates of customer requirements. The short-term nature of our customers' commitments and the possibility of rapid changes in demand for their products reduce our ability to accurately estimate the future requirements of those customers. Because many of our costs and operating expenses are relatively fixed, a reduction in customer demand can harm our gross margins and operating results.
On occasion, customers may require rapid increases in production, which can stress our resources and reduce operating margins. Although we have had a net increase in our manufacturing capacity over the past few fiscal years,
we have significantly reduced our capacity from its peak, and we may not have sufficient capacity at any given time to meet all of our customers' demands or to meet the requirements of a specific project.
FAILURE TO MANAGE OUR CONTRACTION, AND OUR FUTURE GROWTH, IF ANY, MAY SERIOUSLY HARM OUR BUSINESS.
Periods of contraction or reduced sales, such as the period that continued in fiscal 2003, create tensions and challenges. We must determine whether all facilities remain productive, determine whether staffing levels need to be reduced, and determine how to respond to changing levels of customer demand. While maintaining multiple facilities or higher levels of employment increases short-term costs, reductions in employment could impair our ability to respond to later market improvements or to maintain customer relationships. Our decisions as to how to reduce costs and capacity, such as the recent closure of our San Diego facility and our Kentucky facility and the reduction in the number of employees, can affect our expenses, and therefore our short-term and long-term results.
We are involved in a multi-year project to install a common ERP platform and associated information systems. The project was begun at a time when anticipated sales growth and profitability were expected to be much higher than has actually occurred in recent financial performance. We continue to review a number of alternatives to this project, including curtailment or slow-down in the rate of implementation. As of September 30, 2003, ERP implementation costs included in property, plant and equipment totaled $27.9 million and we anticipate incurring at least an additional $5.0 million in capital expenditures for the ERP platform; changes in the scope of this project could result in impairment of these capitalized costs.
The resumption of sales growth would require us to improve and expand our financial, operational and management information systems, continue to develop the management skills of our managers and supervisors, and continue to train, manage and motivate our employees. We may also experience a need for additional facilities. If we are unable to manage future growth effectively, our operating results could be harmed.
OPERATING IN FOREIGN COUNTRIES EXPOSES US TO INCREASED RISKS.
We have operations in China, Malaysia, Mexico and the United Kingdom. We may in the future expand into other international regions. We have limited experience in managing geographically dispersed operations in these countries. We also purchase a significant number of components manufactured in foreign countries. Because of these international aspects of our operations, we are subject to the following risks that could materially impact our operating results:
- economic or political instability
- transportation delays or interruptions and other effects of less developed infrastructure in many countries
- foreign exchange rate fluctuations
- utilization of different systems and equipment
- difficulties in staffing and managing foreign personnel and diverse cultures and
- the effects of international political developments.
In addition, changes in policies by the U.S. or foreign governments could negatively affect our operating results due to changes in duties, tariffs, taxes or limitations on currency or fund transfers. For example, our Mexico based operation utilizes the Maquiladora program, which provides reduced tariffs and eases import regulations, and we could be adversely affected by changes in that program. Also, the Chinese and Malaysian subsidiaries currently receive favorable tax treatment from the governments in those countries for approximately 3 to 10 years, which may or may not be renewed.
WE MAY NOT BE ABLE TO MAINTAIN OUR ENGINEERING, TECHNOLOGICAL AND MANUFACTURING PROCESS EXPERTISE.
The markets for our manufacturing and engineering services are characterized by rapidly changing technology and evolving process development. The continued success of our business will depend upon our ability to:
- retain our qualified engineering and technical personnel
- maintain and enhance our technological capabilities
- develop and market manufacturing services which meet changing customer needs
- successfully anticipate or respond to technological changes in manufacturing processes on a cost-effective and timely basis.
Although we believe that our operations utilize the assembly and testing technologies, equipment and processes that are currently required by our customers, we cannot be certain that we will develop the capabilities required by our customers in the future. The emergence of new technology industry standards or customer requirements may render our equipment, inventory or processes obsolete or noncompetitive. In addition, we may have to acquire new assembly and testing technologies and equipment to remain competitive. The acquisition and implementation of new technologies and equipment may require significant expense or capital investment that could reduce our operating margins and our operating results. Our failure to anticipate and adapt to our customers' changing technological needs and requirements could have an adverse effect on our business.
OUR MANUFACTURING SERVICES INVOLVE INVENTORY RISK.
Most of our contract manufacturing services are provided on a turnkey basis, where we purchase some or all of the materials required for designing, product assembling and manufacturing. These services involve greater resource investment and inventory risk management than consignment services, where the customer provides these materials. Accordingly, various component price increases and inventory obsolescence could adversely affect our selling price, gross margins and operating results.
In our turnkey operations, we need to order parts and supplies based on customer forecasts, which may be for a larger quantity of product than is included in the firm orders ultimately received from those customers. Customers' cancellation or reduction of orders can result in expenses to us. While most of our customer agreements include provisions which require customers to reimburse us for excess inventory specifically ordered to meet their forecasts, we may not actually be reimbursed or be able to collect on these obligations. In that case, we could have excess inventory and/or cancellation or return charges from our suppliers.
In addition, we provide a managed inventory program under which we hold and manage finished goods inventory for two of our key customers. The managed inventory program may result in higher finished goods inventory levels, further reduce our inventory turns and increase our financial risk with such customers, although our customers will have contractual obligations to purchase the inventory from us.
WE MAY NOT BE ABLE TO OBTAIN RAW MATERIALS OR COMPONENTS FOR OUR ASSEMBLIES ON A TIMELY BASIS OR AT ALL.
We rely on a limited number of suppliers for many components used in the assembly process. We do not have any long-term supply agreements. At various times, there have been shortages of some of the electronic components that we use, and suppliers of some components have lacked sufficient capacity to meet the demand for these components. At times, component shortages have been prevalent in our industry, and in certain areas recur from time to time. In some cases, supply shortages and delays in deliveries of particular components have resulted in curtailed production, or delays in production, of assemblies using that component, which contributed to an increase in our inventory levels. We expect that shortages and delays in deliveries of some components will continue from time to time. An increase in economic activity could also result in shortages, if manufacturers of components do not adequately anticipate the increased orders. World events, such as terrorism, armed conflict and epidemics, also could affect supply chains. If we are unable to obtain sufficient components on a timely basis, we may experience manufacturing and shipping delays, which could harm our relationships with customers and reduce our sales.
A significant portion of our sales is derived from turnkey manufacturing in which we provide materials procurement. While most of our customer contracts permit quarterly or other periodic adjustments to pricing based on decreases and increases in component prices and other factors, we typically bear the risk of component price increases that occur between any such repricings or, if such repricing is not permitted, during the balance of the term of the particular customer contract. Accordingly, component price increases could adversely affect our operating results.
START-UP COSTS AND INEFFICIENCIES RELATED TO NEW OR TRANSFERRED PROGRAMS CAN ADVERSELY AFFECT OUR OPERATING RESULTS.
Start-up costs, the management of labor and equipment resources in connection with the establishment of new programs and new customer relationships, and the need to estimate required resources in advance can adversely affect our gross margins and operating results. These factors are particularly evident in the early stages of the life cycle of new products and new programs or program transfers. These factors also affect our ability to efficiently use labor and equipment. In addition, if any of these new programs or new customer relationships were terminated, our operating results could be harmed, particularly in the short term.
WE MAY HAVE NEW CUSTOMER RELATIONSHIPS WITH EMERGING COMPANIES, WHICH MAY PRESENT MORE RISKS THAN WITH ESTABLISHED COMPANIES.
We currently anticipate that less than 5 percent of our fiscal 2004 sales will be to emerging companies, including start-ups, particularly in the networking/datacommunications market. However, similar to our other customer relationships, there are no volume purchase commitments under these new programs, and the revenues we actually achieve from these programs may not meet our expectations. In anticipation of future activities under these programs, we incur substantial expenses as we add personnel and manufacturing capacity and procure materials. Because emerging companies do not have a history of operations, it will be harder for us to anticipate needs and requirements than with established customers. Our operating results will be harmed if sales do not develop to the extent and within the time frame we anticipate.
Customer relationships with emerging companies also present special risks. For example, because they do not have an extensive product history, there is less demonstration of market acceptance of their products. Also, due to the current economic environment, additional funding for such companies may be more difficult to obtain and these customer relationships may not continue or materialize to the extent we plan or we previously experienced. This tightening of financing for start-up customers, together with many start-up customers' lack of prior earnings and unproven product markets increase our credit risk, especially in accounts receivable and inventories. Although we adjust our reserves for accounts receivable and inventories for all customers, including start-up customers, based on the information available, these reserves may not be adequate.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATIONS.
We are also subject to environmental regulations relating to the use, storage, discharge, recycling and disposal of hazardous chemicals used in our manufacturing process. If we fail to comply with present and future regulations, we could be subject to future liabilities or the suspension of business. These regulations could restrict our ability to expand our facilities or require us to acquire costly equipment or incur significant expense. While we are not currently aware of any material violations, we may have to spend funds to comply with present and future regulations or be required to perform site remediation.
In addition, our medical device business, which represented approximately 32 percent of our net sales in fiscal 2003, is subject to substantial government regulation, primarily from the FDA and similar regulatory bodies in other countries. We must comply with statutes and regulations covering the design, development, testing, manufacturing and labeling of medical devices and the reporting of certain information regarding their safety. Failure to comply with these rules can result in, among other things, our and our customers being subject to fines, injunctions, civil penalties, criminal prosecution, recall or seizure of devices, or total or partial suspension of production. The FDA also has the authority to require repair or replacement of equipment, or refund of the cost of a device manufactured or distributed by our customers. Violations may lead to penalties or shutdowns of a program or a facility. In addition, failure or noncompliance could have an adverse effect on our reputation.
PRODUCTS WE MANUFACTURE MAY CONTAIN DESIGN OR MANUFACTURING DEFECTS WHICH COULD RESULT IN REDUCED DEMAND FOR OUR SERVICES AND LIABILITY CLAIMS AGAINST US.
We manufacture products to our customers' specifications which are highly complex and may at times contain design or manufacturing defects. Defects have been discovered in products we manufactured in the past and, despite our quality control and quality assurance efforts, defects may occur in the future. Defects in the products we manufacture, whether caused by a design, manufacturing or component failure or error, may result in delayed shipments to customers or reduced or cancelled customer orders. If these defects occur in large quantities or too frequently, our business reputation may also be tarnished. In addition, these defects may result in liability claims against us. Even if customers are responsible for the defects, they may or may not be able to assume responsibility for any costs or payments.
OUR PRODUCTS ARE FOR THE ELECTRONICS INDUSTRY WHICH PRODUCES TECHNOLOGICALLY ADVANCED PRODUCTS WITH SHORT LIFE CYCLES.
Factors affecting the electronics industry, in particular the short life cycle of products, could seriously harm our customers and, as a result, us. These factors include:
- the inability of our customers to adapt to rapidly changing technology and evolving industry standards which result in short product life cycles
- the inability of our customers to develop and market their products, some of which are new and untested
- the potential that our customers' products may become obsolete or the failure of our customers' products to gain widespread commercial acceptance.
INCREASED COMPETITION MAY RESULT IN DECREASED DEMAND OR PRICES FOR OUR SERVICES.
The electronics manufacturing services industry is highly competitive and has become more so as a result of excess capacity in the industry. We compete against numerous U.S. and foreign electronics manufacturing services providers with global operations, as well as those who operate on a local or regional basis. In addition, current and prospective customers continually evaluate the merits of manufacturing products internally. Consolidations and other changes in the electronics manufacturing services industry result in a continually changing competitive landscape. The consolidation trend in the industry also results in larger and more geographically diverse competitors which may have significant combined resources with which to compete against us.
Some of our competitors have substantially greater managerial, manufacturing, engineering, technical, financial, systems, sales and marketing resources than we do. These competitors may:
- respond more quickly to new or emerging technologies
- have greater name recognition, critical mass and geographic and market presence
- be better able to take advantage of acquisition opportunities
- adapt more quickly to changes in customer requirements
- devote greater resources to the development, promotion and sale of their services
- be better positioned to compete on price for their services.
We may be operating at a cost disadvantage compared to manufacturers who have greater direct buying power from component suppliers, distributors and raw material suppliers or who have lower cost structures. As a result, competitors may have a competitive advantage and obtain business from our customers. Our manufacturing processes are generally not subject to significant proprietary protection, and companies with greater resources or a greater market presence may enter our market or increase their competition with us. Increased competition could result in price reductions, reduced sales and margins or loss of market share.
WE DEPEND ON CERTAIN KEY PERSONNEL, AND THE LOSS OF KEY PERSONNEL MAY HARM OUR BUSINESS.
Our future success depends in large part on the continued service of our key technical and management personnel, and on our ability to attract and retain qualified employees, particularly those highly skilled design, process and test engineers involved in the development of new products and processes and the manufacture of existing products. The competition for these individuals is significant, and the loss of key employees could harm our business.
OUR OPERATIONS, INCLUDING CHINA, COULD BE NEGATIVELY AFFECTED BY THE SARS EPIDEMIC.
We have a production facility in Xiamen, China, which is one of the countries that was hardest hit by the epidemic of SARS. To the best of our knowledge, the SARS epidemic did not affect any of our employees in China, or any employees at our other facilities. In addition, we did not experience any disruption in our supply chain as a result of the SARS epidemic. We have taken a number of initiatives to protect our employees from contracting the SARS virus; however, our production could be severely impacted, if our employees, or the region in which the facility in China is located, experience a renewed outbreak of SARS. For example, the facility in China could be closed by government authorities, some or all of our workforce could be unavailable due to quarantine, fear of catching the disease or other factors, and local, national or international transportation or other infrastructure could be affected, leading to delays or loss of production.
The SARS epidemic was not limited to China, and SARS or other disease outbreaks could also affect our other foreign or domestic facilities in similar ways. In addition, these other factors also could affect our suppliers, leading to a shortage of components, or our customers, leading to a reduction in their demand for our services.
WE MAY FAIL TO SUCCESSFULLY COMPLETE FUTURE ACQUISITIONS AND MAY NOT SUCCESSFULLY INTEGRATE ACQUIRED BUSINESSES, WHICH COULD ADVERSELY AFFECT OUR OPERATING RESULTS.
Although we have previously grown through acquisitions, our current focus is on pursuing organic growth opportunities. If we were to pursue future growth through acquisitions, however, this would involve significant risks that could have a material adverse effect on us. These risks include:
Operating risks, such as the:
- inability to integrate successfully our acquired operations' businesses and personnel
- inability to realize anticipated synergies, economies of scale or other value
- difficulties in scaling up production and coordinating management of operations at new sites
- strain placed on our personnel, systems and resources
- possible modification or termination of an acquired business customer programs, including cancellation of current or anticipated programs
- loss of key employees of acquired businesses.
Financial risks, such as the:
- use of cash resources, or incurrence of additional debt and related interest costs
- dilutive effect of the issuance of additional equity securities
- inability to achieve expected operating margins to offset the increased fixed costs associated with acquisitions, and/or inability to increase margins at acquired entities to Plexus' desired levels
- incurrence of large write-offs or write-downs and
- impairment of goodwill and other intangible assets
- unforeseen liabilities of the acquired businesses.
EXPANSION OF OUR BUSINESS AND OPERATIONS MAY NEGATIVELY IMPACT OUR BUSINESS.
At some future point, we again may expand our operations by establishing or acquiring new facilities or by expanding capacity in our current facilities. We may expand both in geographical areas in which we currently operate and in new geographical areas within the United States and internationally. We may not be able to find suitable facilities on a timely basis or on terms satisfactory to us. Expansion of our business and operations involves numerous business risks, including:
- the inability to successfully integrate additional facilities or capacity and to realize anticipated synergies, economies of scale or other value
- additional fixed costs which may not be fully absorbed by the new business
- difficulties in the timing of expansions, including delays in the implementation of construction and manufacturing plans
- creation of excess capacity, and the need to reduce capacity elsewhere if anticipated sales or opportunities do not materialize
- diversion of management's attention from other business areas during the planning and implementation of expansions
- strain placed on our operational, financial, management, technical and information systems and resources
- disruption in manufacturing operations
- incurrence of significant costs and expenses
- inability to locate enough customers or employees to support the expansion.
WE MAY FAIL TO SECURE NECESSARY FINANCING.
On October 22, 2003, we entered into a secured revolving credit facility (the 'Secured Credit Facility") with a group of banks. The Secured Credit Facility allows us to borrow up to $100 million. However, we cannot assure that the Secured Credit Facility will provide all of the financing capacity that we will need in the future.
Our future success may depend on our ability to obtain additional financing and capital to support our possible future growth. We may seek to raise capital by:
- issuing additional common stock or other equity securities
- issuing debt securities
- obtaining new credit facilities.
We may not be able to obtain capital when we want or need it, and capital may not be available on satisfactory terms. If we issue additional equity securities or convertible debt to raise capital, it may be dilutive to shareholders' ownership interests. Furthermore, any additional financing and capital may have terms and conditions that adversely affect our business, such as restrictive financial or operating covenants, and our ability to meet any financing covenants will largely depend on our financial performance, which in turn will be subject to general economic conditions and financial, business and other factors.
THE PRICE OF OUR COMMON STOCK HAS BEEN AND MAY CONTINUE TO BE VOLATILE.
Our stock price has fluctuated significantly in recent periods. The price of our common stock may fluctuate significantly in response to a number of events and factors relating to us, our competitors and the market for our services, many of which are beyond our control.
In addition, the stock market in general, and especially the NASDAQ Stock Market, along with market prices for technology companies in particular, have experienced extreme volatility and weakness that sometimes has been unrelated to the operating performance of these companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our operating results. Our stock price and the stock price of many other technology companies remain below their peaks.
Among other things, volatility and weakness in Plexus' stock price could mean that investors will not be able to sell their shares at or above the prices which they paid. The volatility and weakness could also impair Plexus' ability in the future to offer common stock or convertible securities as a source of additional capital and/or as consideration in the acquisition of other businesses.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in foreign exchange and interest rates. To reduce such risks, we selectively use financial instruments. A discussion of our accounting policy for derivative financial instruments is incorporated by reference from our Consolidated Financial Statements and Notes thereto, in this Form 10-K, within Note 1--"Description of Business and Significant Accounting Policies."
FOREIGN CURRENCY RISK
We do not use derivative financial instruments for speculative purposes. Our policy is to selectively hedge our foreign currency denominated transactions in a manner that substantially offsets the effects of changes in foreign currency exchange rates. Presently, we use foreign currency contracts to hedge only those currency exposures associated with certain assets and liabilities denominated in non-functional currencies. Corresponding gains and losses on the underlying transaction generally offset the gains and losses on these foreign currency hedges. Our international operations create potential foreign exchange risk. As of September 30, 2003, our foreign currency contracts were scheduled to mature in less than three months and were not material.
In fiscal 2003, 2002 and 2001, we had net sales of approximately 8 percent, 9 percent and 8 percent, respectively, denominated in currencies other than the U.S. dollar. In fiscal 2003, 2002 and 2001, we had total costs of approximately 11 percent for each fiscal year, denominated in currencies other than the U.S. dollar.
INTEREST RATE RISK
We have financial instruments, including cash equivalents and short-term investments, which are sensitive to changes in interest rates. We consider the use of interest-rate swaps based on existing market conditions. We currently do not use any interest-rate swaps or other types of derivative financial instruments to hedge interest rate risk.
The primary objective of our investment activities is to preserve principal, while maximizing yields without significantly increasing market risk. To achieve this, we maintain our portfolio of cash equivalents and short-term investments in a variety of highly rated securities, money market funds and certificates of deposit and limit the amount of principal exposure to any one issuer.
Our only material interest rate risk is associated with our secured credit facility. Interest on borrowings is computed at the applicable Eurocurrency rate on the agreed currency. A 10 percent change in our weighted average interest rate on our average long-term borrowings would have had a nominal impact on net interest expense in fiscal 2003 and 2002, compared to an impact of approximately $0.6 million for fiscal 2001.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See following "List of Financial Statements and Financial Statement Schedules," and accompanying reports, statements and schedules, which follow beginning on page 31.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures: The Company maintains disclosure controls and procedures designed to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. The Company's principal executive officer and principal financial officer have reviewed and evaluated, with the participation of the Company's management, the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period covered by this report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in bringing to their attention on a timely basis material information relating to the Company required to be included in the Company's periodic filings under the Exchange Act.
Internal Control Over Financial Reporting: There have not been any changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in response to this item is incorporated herein by reference to "Election of Directors" in the Registrant's Proxy Statement for its 2004 Annual Meeting of Shareholders ("2004 Proxy Statement") and from "Security Ownership of Certain Beneficial Owners and Management--Section 16(a) Beneficial Ownership Reporting Compliance" in the 2004 Proxy Statement and "Executive Officers of the Registrant" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to "Election of Directors - Directors' Compensation" and "Executive Compensation" in the 2004 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to "Security Ownership of Certain Beneficial Owners and Management" in the 2004 Proxy Statement.
EQUITY COMPENSATION PLAN INFORMATION
The following chart gives aggregate information regarding grants under all Plexus equity compensation plans through September 30, 2003):
Number of securities
remaining available
Number of securities for future issuance under
to be issued upon Weighted-average equity compensation
exercise of exercise price of plans (excluding
outstanding options, outstanding options, securities reflected
Plan category warrants and rights (1) warrants and rights in 1st column) (2)
------------- ------------------------ ------------------- -------------------------
Equity compensation plans
approved by securityholders 4,871,873 $ 17.99 2,633,490
Equity compensation plans not
approved by securityholders -0- n/a -0-
--------- ------------------ ---------
Total (3) 4,871,873 $ 17.99 2,633,490
========= ================== =========
|
(1) Represents options granted under the Plexus 1998 Stock Option Plan or the 1995 Directors' Stock Option Plan (the "Option Plans"), which were approved by shareholders.
(2) Includes additional options that may be granted under the Option Plans, 1,520,565 authorized shares which have not yet been purchased by employees under the Plexus 2000 Employee Stock Purchase Plan.
(3) In addition, there are outstanding options to purchase 39,866 shares, at a weighted average price of $17.45, under option plans of acquired companies. Options under these plans were converted into options to acquire Plexus stock in those transactions. Plexus cannot grant additional options under the plans of the acquired companies.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
Incorporated herein by reference to "Certain Transactions" in the 2004 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Incorporated herein by reference to the subheading "Fees and Services" under "Auditors" in the 2004 Proxy Statement.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed
1. and 2. Financial Statements and Financial Statement Schedules. See following list of Financial Statements and Financial Statement Schedules on page 28 which is incorporated herein by reference.
3. Exhibits. See Exhibit Index included as the last page of this report, which index is incorporated herein by reference.
(b) Reports on Form 8-K.
No reports were filed during the quarter ended September 30, 2003. However, Plexus submitted reports (which are not to be deemed incorporated by reference into other filings) dated July 23, 3003 and October 23, 2003, which furnished certain earnings information.
PLEXUS CORP.
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
SEPTEMBER 30, 2003
CONTENTS PAGES
-------- -----
Report of Independent Auditors .................................................................................. 28
Consolidated Financial Statements:
Consolidated Statements of Operations for the years ended
September 30, 2003, 2002 and 2001 ............................................................. 29
Consolidated Balance Sheets as of September 30, 2003 and 2002.................................. 30
Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss)
for the years ended September 30, 2003, 2002 and 2001.......................................... 31
Consolidated Statements of Cash Flows for the years ended
September 30, 2003, 2002 and 2001.............................................................. 32
Notes to Consolidated Financial Statements ...................................................................... 33-53
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts for the years ended
September 30, 2003, 2002 and 2001.............................................................. 54
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REPORT OF INDEPENDENT AUDITORS
To the Shareholders and
Board of Directors
of Plexus Corp.:
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Plexus Corp. and its subsidiaries at September 30, 2003 and September 30, 2002, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," effective October 1, 2002.
PricewaterhouseCoopers LLP
Milwaukee, WI
October 23, 2003
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2003 2002 2001
----------- ----------- -----------
Net sales $ 807,837 $ 883,603 $ 1,062,304
Cost of sales 754,872 802,283 930,514
----------- ----------- -----------
Gross profit 52,965 81,320 131,790
Operating expenses:
Selling and administrative expenses 65,152 66,921 55,844
Amortization of goodwill - 5,203 4,022
Restructuring and impairment costs 59,344 12,581 1,926
Acquisition and merger costs - 251 1,610
----------- ----------- -----------
124,496 84,956 63,402
----------- ----------- -----------
Operating income (loss) (71,531) (3,636) 68,388
Other income (expense):
Interest expense (2,817) (3,821) (6,448)
Miscellaneous 2,624 1,631 3,426
----------- ----------- -----------
Income (loss) before income taxes and cumulative
effect of change in accounting for goodwill (71,724) (5,826) 65,366
Income tax expense (benefit) (27,228) (1,753) 26,216
----------- ----------- -----------
Income (loss) before cumulative effect of
change in accounting for goodwill (44,496) (4,073) 39,150
Cumulative effect of change in accounting for
goodwill, net of income tax benefit of $4,755 (23,482) - -
----------- ----------- -----------
Net income (loss) $ (67,978) $ (4,073) $ 39,150
=========== =========== ===========
Earnings per share:
Basic:
Income (loss) before cumulative effect of
change in accounting for goodwill $ (1.05) $ (0.10) $ 0.95
Cumulative effect of change in accounting
for goodwill (0.56) - -
----------- ----------- -----------
Net income (loss) $ (1.61) $ (0.10) $ 0.95
=========== =========== ===========
Diluted:
Income (loss) before cumulative effect of
change in accounting for goodwill $ (1.05) $ (0.10) $ 0.91
Cumulative effect of change in accounting
for goodwill (0.56) - -
----------- ----------- -----------
Net income (loss) $ (1.61) $ (0.10) $ 0.91
=========== =========== ===========
Weighted average shares outstanding:
Basic 42,284 41,895 41,129
=========== =========== ===========
Diluted 42,284 41,895 43,230
=========== =========== ===========
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The accompanying notes are an integral part of these consolidated financial statements.
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2003 AND 2002
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2003 2002
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 58,993 $ 63,347
Short-term investments 19,701 53,025
Accounts receivable, net of allowances of $4,100 and $4,200, respectively 111,125 95,903
Inventories 136,515 94,032
Deferred income taxes 23,723 21,283
Prepaid expenses and other 8,326 14,221
-------- --------
Total current assets 358,383 341,811
Property, plant and equipment, net 131,510 170,834
Goodwill, net 32,269 64,957
Deferred income taxes 24,921 355
Other 5,971 5,988
-------- --------
Total assets $553,054 $583,945
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of capital lease obligations $ 958 $ 1,652
Accounts payable 91,445 67,310
Customer deposits 14,779 13,904
Accrued liabilities:
Salaries and wages 17,133 17,505
Other 23,753 21,586
-------- --------
Total current liabilities 148,068 121,957
Capital lease obligations, net of current portion 23,502 25,356
Other liabilities 10,468 5,943
Commitments and contingencies (Notes 9 and 12) - -
Shareholders' equity:
Preferred stock, $.01 par value, 5,000 shares authorized, none issued
or outstanding - -
Common stock, $.01 par value, 200,000 shares authorized,
and 42,607 and 42,030 issued and outstanding, respectively 426 420
Additional paid-in capital 261,214 256,584
Retained earnings 102,840 170,818
Accumulated other comprehensive income 6,536 2,867
-------- --------
371,016 430,689
-------- --------
Total liabilities and shareholders' equity $553,054 $583,945
======== ========
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The accompanying notes are an integral part of these consolidated financial statements.
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
(IN THOUSANDS)
Accumulated
Common Stock Additional Other
---------------------- Paid-In Retained Comprehensive
Shares Amount Capital Earnings Income (Loss) Total
-------------------------------------------------------------------------
BALANCES, OCTOBER 1, 2000 37,054 $ 371 $ 72,699 $ 136,577 $ (285) $ 209,362
Comprehensive income:
Net income - - - 39,150 - 39,150
Foreign currency hedges and translation adjustments - - - - (104) (104)
---------
Total comprehensive income 39,046
Issuances of common stock 3,544 35 166,140 - - 166,175
Effect of e2E pooling 463 5 2,473 (836) - 1,642
Exercise of stock options, including tax benefits 696 7 10,620 - - 10,627
--------- --------- --------- --------- --------- ---------
BALANCES, SEPTEMBER 30, 2001 41,757 418 251,932 174,891 (389) 426,852
Comprehensive income (loss):
Net loss - - - (4,073) - (4,073)
Foreign currency hedges and translation adjustments - - - - 3,277 3,277
Other - - - - (21) (21)
---------
Total comprehensive loss (817)
Issuances of common stock 132 1 2,398 - - 2,399
Exercise of stock options, including tax benefits 141 1 2,254 - - 2,255
--------- --------- --------- --------- --------- ---------
BALANCES, SEPTEMBER 30, 2002 42,030 420 256,584 170,818 2,867 430,689
Comprehensive income (loss):
Net loss - - - (67,978) - (67,978)
Foreign currency hedges and translation adjustments - - - - 3,667 3,667
Other - - - - 2 2
---------
Total comprehensive loss (64,309)
Issuances of common stock 253 3 1,939 - - 1,942
Exercise of stock options, including tax benefits 324 3 2,691 - - 2,694
--------- --------- --------- --------- --------- ---------
BALANCES, SEPTEMBER 30, 2003 42,607 $ 426 $ 261,214 $ 102,840 $ 6,536 $ 371,016
========= ========= ========= ========= ========= =========
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The accompanying notes are an integral part of these consolidated financial statements.
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 2003, 2002 AND 2001
(IN THOUSANDS)
2003 2002 2001
----------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (67,978) $ (4,073) $ 39,150
Adjustments to reconcile net income (loss) to net cash flows
from operating activities:
Depreciation and amortization 27,135 36,604 29,890
Cumulative effect of change in accounting for goodwill 28,237 - -
Non-cash goodwill and asset impairments 38,046 4,890 1,182
Net (repurchases) sales under asset securitization facility (16,612) (6,305) 22,916
Income tax benefit of stock option exercises 926 984 7,420
Provision for inventories and accounts receivable allowances 7,455 19,190 17,584
Deferred income taxes (27,006) (4,352) (1,287)
Changes in assets and liabilities:
Accounts receivable 1,861 33,444 11,334
Inventories (48,869) 34,414 78,455
Prepaid expenses and other 6,309 (3,462) (6,087)
Accounts payable 23,554 7,504 (66,825)
Customer deposits 868 (2,152) 5,624
Accrued liabilities 7,745 14,388 (14,244)
Other (1,624) (619) (5,633)
--------- --------- ---------
Cash flows provided by (used in) operating activities (19,953) 130,455 119,479
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments (105,236) (52,550) (57,475)
Sales and maturities of short-term investments 138,560 20,300 36,700
Payments for property, plant and equipment (22,372) (30,760) (54,560)
Proceeds on sale of property, plant and equipment 2,665 561 48
Payments for business acquisitions, net of cash acquired - (41,985) (32,600)
--------- --------- ---------
Cash flows provided by (used in) investing activities 13,617 (104,434) (107,887)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt - 190,437 167,361
Payments on debt and capital lease obligations (2,749) (242,797) (269,018)
Proceeds from exercise of stock options 1,768 1,271 3,207
Issuances of common stock 1,942 2,399 166,175
--------- --------- ---------
Cash flows provided by (used in) financing activities 961 (48,690) 67,725
--------- --------- ---------
Effect of foreign currency translation on cash 1,021 1,425 (19)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents (4,354) (21,244) 79,298
Cash and cash equivalents, beginning of year 63,347 84,591 5,293
--------- --------- ---------
Cash and cash equivalents, end of year $ 58,993 $ 63,347 $ 84,591
========= ========= =========
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The accompanying notes are an integral part of these consolidated financial statements.
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business: Plexus Corp. together with its subsidiaries, (the "Company") provides product realization services to original equipment manufacturers (OEMs) in the networking/ datacommunications/telecom, medical, industrial/commercial, computer, and transportation/other industries. The Company provides advanced electronics design, manufacturing and testing services to its customers with a focus on complex, high technology and high reliability products. The Company offers its customers the ability to outsource all stages of product realization, including: development and design services, materials procurement and management, prototyping, and new product introduction, testing, manufacturing, configuration, logistics and test/repair.
The contract manufacturing services are provided on either a turnkey basis, whereby the Company procures certain or all of the materials required for product assembly, or on a consignment basis, where the customer supplies some, or occasionally all, materials necessary for product assembly. Turnkey services include material procurement and warehousing, in addition to manufacturing, and involve greater resource investment than consignment services. Turnkey manufacturing currently represents substantially all of the Company's manufacturing services sales.
Consolidation Principles: The consolidated financial statements include the accounts of Plexus Corp. and its subsidiaries. All significant intercompany transactions have been eliminated.
Cash Equivalents and Short-Term Investments: Cash equivalents are highly liquid investments purchased with an original maturity of less than three months. Short-term investments include investment-grade short-term debt instruments with original maturities greater than three months. Short-term investments are generally comprised of securities with contractual maturities greater than one year but with optional or early redemption provisions or rate reset provisions within one year.
Investments in debt securities are classified as "available-for-sale." Such investments are recorded at fair value as determined from quoted market prices, and the cost of securities sold is determined on the specific identification method. If material, unrealized gains or losses are reported as a component of comprehensive income or loss, net of the related income tax effect. For fiscal 2003, 2002 and 2001, such unrealized gains and losses were not material. In addition, there were no realized gains or losses in fiscal 2003, 2002 and 2001.
As of September 30, 2003 and 2002, cash and cash equivalents included the following securities (in thousands):
2003 2002
------- -------
Money market funds and other $22,757 $20,154
U.S. corporate and bank debt 28,877 15,083
State and municipal securities 4,000 -
------- -------
$55,634 $35,237
======= =======
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Short-term investments as of September 30, 2003 and 2002 consist primarily of state and municipal securities.
Inventories: Inventories are valued primarily at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method. Valuing inventories at the lower of cost or market requires the use of estimates and judgment. Customers may cancel their orders, change production quantities or delay production for a number of reasons which are beyond the Company's control. Any of these, or certain additional actions, could impact the valuation of inventory. Any actions taken by the Company's customers that could impact the value of its inventory are considered when determining the lower of cost or market valuations.
Property, Plant and Equipment and Depreciation: These assets are stated at cost. Depreciation, determined on the straight-line method, is based on lives assigned to the major classes of depreciable assets as follows:
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Buildings and improvements 15-50 years Machinery and equipment 3-10 years Computer hardware and software 3-10 years |
Certain facilities and equipment held under capital leases are classified as property, plant and equipment and amortized using the straight-line method over the lease terms and the related obligations are recorded as liabilities. Lease amortization is included in depreciation expense (see Note 3) and the financing component of the lease payments is classified as interest expense.
Goodwill and Other Intangible Assets: The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" effective October 1, 2002. Under SFAS No. 142, beginning October 1, 2002, the Company no longer amortizes goodwill and intangible assets with indefinite useful lives, but instead, tests those assets for impairment at least annually, with any related loss recognized in earnings when incurred. Recoverability of goodwill is measured at the reporting unit level. The Company's goodwill was assigned to three reporting units: San Diego, California ("San Diego"), Juarez, Mexico ("Juarez") and Kelso, Scotland and Maldon, England ("United Kingdom").
SFAS No. 142 required the Company to perform a transitional goodwill impairment evaluation that required the Company to perform an assessment of whether there was an indication of goodwill impairment as of the date of adoption. The Company completed the evaluation and concluded that it had goodwill impairments related to San Diego and Juarez, since the estimated fair value based on expected future discounted cash flows to be generated from each reporting unit was significantly less than their respective carrying value.
The Company then compared the respective carrying amounts of San Diego's and Juarez's goodwill to the implied fair value of each reporting unit's respective goodwill. The implied fair value was determined by allocating the fair value to each respective reporting unit's assets and liabilities in a manner similar to a purchase price allocation for an acquired business. Both values were measured at the date of adoption. The Company identified $28.2 million of transitional impairment losses ($23.5 million, net of income tax benefits) related to San Diego and Juarez, which were recognized as a cumulative effect of a change in accounting for goodwill in the Consolidated Statements of Operations.
The Company is required to perform goodwill impairment tests at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from estimated future cash flows. In early fiscal 2003, $5.6 million of goodwill was impaired as a result of the Company's decision to close the San Diego facility (see Note 10). The Company completed the annual impairment test during the third quarter of fiscal 2003 and determined that no further impairment existed. However, no assurances can be given that future impairment tests of goodwill will not result in an impairment.
The following sets forth a reconciliation of net income (loss) and earnings per share information for fiscal 2003, 2002 and 2001, adjusted to exclude goodwill amortization, net of income taxes (in thousands, except per share data):
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
2003 2002 2001
---------- ---------- ----------
Reported income (loss) before cumulative effect
of change in accounting for goodwill $ (44,496) $ (4,073) $ 39,150
Add back: goodwill amortization, net of income taxes - 4,375 3,203
---------- ---------- ----------
Adjusted income (loss) before cumulative effect of
change in accounting for goodwill (44,496) 302 42,353
Cumulative effect of change in accounting
for goodwill, net of income taxes (23,482) - -
---------- ---------- ----------
Adjusted net income (loss) $ (67,978) $ 302 $ 42,353
========== ========== ==========
Basic weighted average common shares outstanding 42,284 41,895 41,129
Dilutive effect of stock options - 1,223 2,101
---------- ---------- ----------
Diluted weighted average shares outstanding 42,284 43,118 43,230
========== ========== ==========
Basic earnings per share:
Reported income (loss) before cumulative effect
of change in accounting for goodwill $ (1.05) $ (0.10) $ 0.95
Add back: goodwill amortization,
net of income taxes - 0.10 0.08
---------- ---------- ----------
Adjusted income (loss) before cumulative effect
of change in accounting for goodwill (1.05) - 1.03
Cumulative effect of change in accounting
for goodwill, net of income taxes (0.56) - -
---------- ---------- ----------
Adjusted net income (loss) $ (1.61) $ - $ 1.03
========== ========== ==========
Diluted earnings per share:
Reported income (loss) before cumulative effect
of change in accounting for goodwill $ (1.05) $ (0.10) $ 0.91
Add back: goodwill amortization,
net of income taxes - 0.10 0.07
---------- ---------- ----------
Adjusted income (loss) before cumulative effect
of change in accounting for goodwill (1.05) - 0.98
Cumulative effect of change in accounting
for goodwill, net of income taxes (0.56) - -
---------- ---------- ----------
Adjusted net income (loss) $ (1.61) $ - $ 0.98
========== ========== ==========
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The changes in the carrying amount of goodwill for fiscal years ended September 30, 2003 and 2002 are as follows (in thousands):
BALANCE AS OF OCTOBER 1, 2001 $ 70,514
Amortization of goodwill (5,203)
Finalization of purchase accounting (1,684)
Foreign currency translation adjustments 1,330
----------
BALANCE AS OF SEPTEMBER 30, 2002 64,957
Cumulative effect of change in accounting for goodwill (28,237)
Impairment charge (See Note 10) (5,595)
Foreign currency translation adjustments 1,144
----------
BALANCE AS OF SEPTEMBER 30, 2003 $ 32,269
==========
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PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The Company has a nominal amount of identifiable intangibles that are subject to amortization. These intangibles relate to customer lists and patents with useful lives from one to fifteen years. The Company has no intangibles, except goodwill, that are not subject to amortization. During fiscal 2003, there were no additions to intangible assets. Intangible asset amortization expense was nominal for fiscal 2003, 2002 and 2001.
Impairment of Long-Lived Assets: The Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" effective October 1, 2002. SFAS No. 144 modifies and expands the financial accounting and reporting for the impairment or disposal of long-lived assets other than goodwill, which is specifically addressed in SFAS No. 142. SFAS No. 144 maintains the requirement that an impairment loss be recognized for a long-lived asset to be held and used if its carrying value is not recoverable from its undiscounted cash flows, with the recognized impairment being the difference between the carrying amount and fair value of the asset. With respect to long-lived assets to be disposed of other than by sale, SFAS No. 144 requires that the asset be considered held and used until it is actually disposed of, but requires that its depreciable life be revised in accordance with APB Opinion No. 20 "Accounting Changes." Impairment charges recorded in fiscal 2003 against the carrying value of certain of the Company's long-lived assets are discussed in Note 10.
The Company reviews property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of property, plant and equipment is measured by comparing its carrying value to the projected cash flows the property, plant and equipment are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying value of the property exceeds its fair market value. The impairment analysis is based on significant assumptions of future results made by management, including revenue and cash flow projections. Circumstances that may lead to impairment of property, plant and equipment include decreases in future performance or industry demand and the restructuring of the Company's operations.
Revenue Recognition: Revenue from manufacturing services is generally recognized upon shipment of the manufactured product to the Company's customers, under contractual terms, which are generally FOB shipping point. Upon shipment, title transfers and the customer assumes risks and rewards of ownership of the product. Generally, there are no formal customer acceptance requirements or further obligations related to manufacturing services; if such requirements or obligations exist, then revenue is recognized at the time when such requirements are completed and such obligations are fulfilled.
Revenue from engineering design and development services, which are generally performed under contracts of twelve months or less duration, is recognized as costs are incurred utilizing the percentage-of-completion method; any losses are recognized when anticipated. Progress towards completion of product design and development contracts is based on units of work for labor content and costs incurred for component content. Revenue from engineering design and development services is less than ten percent of total revenue in fiscal 2003, 2002 and 2001.
Revenue is recorded net of estimated returns of manufactured product based on management's analysis of historical returns, current economic trends and changes in customer demand. Revenue also includes amounts billed to customers for shipping and handling. The corresponding shipping and handling costs are included in cost of sales.
Restructuring Costs: From time to time, the Company has recorded restructuring costs in response to the reduction in its sales levels and reduced capacity utilization. These restructuring charges included employee severance and benefit costs, costs related to plant closings, including leased facilities that will be abandoned (and subleased, as applicable), and impairment of equipment. Prior to January 1, 2003, severance and benefit costs were recorded in accordance with Emerging Issues Task Force ("EITF") 94-3. For leased facilities that were abandoned and subleased, the estimated lease loss was accrued for future remaining lease payments subsequent to abandonment, less any estimated sublease income. As of September 30, 2003, the significant facilities which the Company plans to sublease have not yet been subleased and, accordingly, the Company's estimates of expected sublease income could change based on factors that affect its ability to
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
sublease those facilities such as general economic conditions and the real estate market, among others. For equipment, the impairment losses recognized are based on the fair value estimated using existing market prices for similar assets, less estimated costs to sell.
Subsequent to December 31, 2002, costs associated with a restructuring activity are recorded in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." The timing and related recognition of recording severance and benefit costs that are not presumed to be an ongoing benefit as defined in SFAS No. 146, depends on whether employees are required to render service until they are terminated in order to receive the termination benefits and, if so, whether employees will be retained to render service beyond a minimum retention period. During fiscal 2003, the Company concluded that it had a substantive severance plan based upon past severance practices; therefore, certain severance and benefit costs were recorded in accordance with SFAS No. 112, "Employer's Accounting for Post employment Benefits," which resulted in the recognition of a liability as the severance and benefit costs arose from an existing condition or situation and the payment was both probable and reasonably estimated.
For leased facilities that will be abandoned and subleased, a liability for the future remaining lease payments subsequent to abandonment, less any estimated sublease income that could be reasonably obtained for the property, is recognized and measured at its fair value. For contract termination costs, including costs that will continue to be incurred under a contract for its remaining term without economic benefit to the entity, a liability for future remaining payments under the contract is recognized and measured at its fair value.
The recognition of restructuring costs requires that the Company make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned exit activity. If actual results in exiting these facilities differ from the Company's estimates and assumptions, the Company may be required to revise the estimates of future liabilities, requiring the recording of additional restructuring costs or the reduction of liabilities already recorded. At the end of each reporting period, the Company evaluates the remaining accrued balances to ensure that no excess accruals are retained and the utilization of the provisions are for their intended purpose in accordance with developed exit plans.
Income Taxes: Deferred income taxes are provided for differences between the bases of assets and liabilities for financial and income tax reporting purposes. The Company records a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized.
Foreign Currency: For foreign subsidiaries using the local currency as their functional currency, assets and liabilities are translated at exchange rates in effect at year-end, with revenues, expenses and cash flows translated at the average of the monthly exchange rates. Adjustments resulting from translation of the financial statements are recorded as a component of accumulated other comprehensive income. Exchange gains and losses arising from transactions denominated in a currency other than the functional currency of the entity involved and remeasurement adjustments for foreign operations where the U.S. dollar is the functional currency are included in the statement of operations. Exchange gains and losses on foreign currency transactions were not significant for the years ended September 30, 2003, 2002 and 2001, respectively.
Derivatives: The Company periodically enters into derivative contracts, primarily foreign currency forward, call and put contracts which are designated as cash-flow hedges. The changes in fair value of these contracts, to the extent the hedges are effective, are recognized in other comprehensive income until the hedged item is recognized in earnings. These amounts were not material during fiscal 2003, 2002 and 2001.
Earnings Per Share: The computation of basic earnings per common share is based upon the weighted average number of common shares outstanding and net income. The computation of diluted earnings per common share reflects additional dilution from stock options, unless such shares are antidilutive.
Stock-based Compensation: In December 2002, SFAS No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure--an amendment of SFAS No. 123" was issued. SFAS No. 148 provides alternative methods of transition for an entity that voluntarily changes to the fair-value-based method of accounting for stock-based employee compensation and is effective for fiscal years ending after
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 15, 2002. In addition, SFAS No. 148 requires prominent disclosures in both annual and interim financial statements about the effects on reported net income of an entity's method of accounting for stock-based employee compensation. The disclosure provisions were effective for the Company in the second quarter of fiscal 2003. The Company did not effect a voluntary change in accounting to the fair value method, and, accordingly, the adoption of SFAS No. 148 did not have a significant impact on the Company's results of operations or financial position.
The Company accounts for its stock option plans under the guidelines of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no compensation expense related to the stock option plans has been recognized in the Consolidated Statements of Operations. The Company's stock-based employee compensation plans are more fully described in Note 11, "Benefit Plans". The following sets forth a reconciliation of net income (loss) and earnings per share information for fiscal 2003, 2002 and 2001 had the Company recognized compensation expense based on the fair value at the grant date for awards under the plans, estimated at the date of grant using the Black-Scholes option pricing method (in thousands, except per share amounts).
Years ended September 30,
--------------------------------------
2003 2002 2001
--------------------------------------
Net income (loss) as reported $ (67,978) $ (4,073) $ 39,150
Add: stock-based employee compensation
expense included in reported net loss, net of related income
tax effect - - -
Deduct: total stock-based employee
compensation expense determined under fair value based
method, net of related tax effects (9,042) (9,947) (2,559)
----------- ----------- -----------
Proforma net income (loss) $ (77,020) $ (14,020) $ 36,591
=========== =========== ===========
Earnings per share:
Basic, as reported $ (1.61) $ (0.10) $ 0.95
=========== =========== ===========
Basic, proforma $ (1.82) $ (0.33) $ 0.89
=========== =========== ===========
Diluted, as reported $ (1.61) $ (0.10) $ 0.91
=========== =========== ===========
Diluted, proforma $ (1.82) $ (0.33) $ 0.85
=========== =========== ===========
Weighted average shares:
Basic 42,284 41,895 41,129
=========== =========== ===========
Diluted 42,284 41,895 43,230
=========== =========== ===========
|
New Accounting Pronouncements: Effective October 1, 2002, the Company adopted SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 sets forth the financial accounting and reporting to be followed for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The adoption of this standard did not have an effect on the Company's financial position or results of operations.
In November 2002, the EITF reached a consensus regarding EITF Issue 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." The consensus addresses not only when and how an arrangement involving multiple deliverables should be divided into separate units of accounting but also how the arrangement's consideration should be allocated among separate units. The pronouncement is effective for the Company commencing with its fiscal year 2004 and is not expected to have a material impact on its consolidated results of operations or financial position.
In January 2003, FIN No. 46, "Consolidation of Variable Interest Entities" was issued. FIN No. 46 clarifies the application of Accounting Research Bulletin No. 52, "Consolidated Financial Statements," to
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
certain entities in which equity investors lack the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A variable interest entity is required to be consolidated by the company that has a majority of the exposure to expected losses of the variable interest entity. FIN No. 46 was effective for variable interest entities created after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, the Interpretation, as amended by FSP No. FIN 46-6, is effective for interim or annual periods ending after December 15, 2003. The adoption of FIN No. 46 is not expected to have a material impact on the Company's financial position or results of operations.
In April 2003, SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" was issued. SFAS No. 149 improves financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. In particular, SFAS No. 149: (1) clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative discussed in paragraph 6(b) of SFAS No. 133, (2) clarifies when a derivative contains a financing component, (3) amends the definition of an underlying to conform it to language used in Financial Accounting Standards Board Interpretation ("FIN") No. 45, and (4) amends certain other existing pronouncements. Those changes will result in more consistent reporting of contracts as either derivatives or hybrid instruments. In general, SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on the Company's financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity," which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Financial instruments that are within the scope of the Statement, which previously were often classified as equity, must now be classified as liabilities. In November 2003, Financial Accounting Standards Board Staff Position ("FSP") No. SFAS 150-3 deferred the effective date of SFAS No. 150 indefinitely for applying the provisions of the Statement for certain mandatorily redeemable non-controlling interests. However expanded discussions are required during the deferral period.
Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Fair Value of Financial Instruments: Accounts receivable, accounts payable and accrued liabilities are reflected in the consolidated financial statements at cost because of the short-term duration of these instruments. The fair value of capital lease obligations is approximately $26.0 million and $28.7 million as of September 30, 2003 and 2002, respectively. The Company uses quoted market prices when available or discounted cash flows to calculate these fair values.
Business and Credit Concentrations: Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, short-term investments and trade accounts receivable. The Company's cash, cash equivalents and short-term investments are managed by recognized financial institutions that follow the Company's investment policy. Such investment policy limits the amount of credit exposure in any one issue and the maturity date of the investment securities that typically comprise investment grade short-term debt instruments. Concentrations of credit risk in accounts receivable resulting from sales to major customers are discussed in Note 13. The Company, at times, requires advanced cash deposits for services performed. The Company also closely monitors extensions of credit.
Related Party Transactions: The Company has provided certain engineering design and development services for MemoryLink Corp. ("MemoryLink"), which develops electronic products. The former Chairman of the Board of the Company is a shareholder and director of MemoryLink. The Company had nominal sales to MemoryLink during fiscal 2003, no sales in fiscal 2002 and $0.9 million in fiscal 2001, respectively. During fiscal 2002, the Company had a receivable outstanding from MemoryLink totaling $1.3 million, all of which was fully reserved in fiscal 2001. During fiscal 2002, such receivable was converted
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
into a minority equity interest in MemoryLink. The minority equity interest represents less than a ten percent ownership interest in MemoryLink and is accounted for under the cost method. Upon receipt of the minority equity interest, the Company wrote off the receivable and the related allowance for doubtful account. Due to uncertainty regarding MemoryLink's financial viability, the Company recorded the minority equity interest at a zero value.
Reclassifications: Certain amounts in prior years' consolidated financial statements have been reclassified to conform to the 2003 presentation.
2. INVENTORIES
Inventories as of September 30, 2003 and 2002, consist of (in thousands):
2003 2002
---- ----
Assembly parts $ 88,562 $ 64,085
Work-in-process 41,514 24,507
Finished goods 6,439 5,440
-------- --------
$136,515 $ 94,032
======== ========
|
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of September 30, 2003 and 2002, consist of (in thousands):
2003 2002
-------- --------
Land, buildings and improvements $ 66,614 $ 74,541
Machinery, and equipment 119,788 144,319
Computer hardware and software 57,576 39,089
Construction in progress 7,079 33,236
-------- --------
251,057 291,185
Less accumulated depreciation and amortization 119,547 120,351
-------- --------
$131,510 $170,834
======== ========
|
As of September 30, 2003 and 2002, computer hardware and software includes $21.9 million and $2.3 million, respectively, related to a new enterprise resource planning platform ("ERP"). As of September 30, 2003 and 2002, construction in process includes $6.0 million and $17.1 million, respectively, of software implementation costs related to the new ERP platform. This ERP platform is intended to augment the Company's management information system and includes hardware and software from various vendors. The ERP platform is also intended to enhance and standardize the Company's ability to globally translate information from production facilities into operational and financial information and to create a consistent set of core business applications at its worldwide facilities, although the Company may not necessarily convert all of its facilities to the same system. During fiscal 2003, two manufacturing facilities were converted to the new ERP platform. The Company anticipates converting at least one more facility to the new ERP platform and completing the integration of the core software in fiscal 2004. Some of the supplemental software programs that will be integrated with the core software will be integrated at later dates. The Company's conversion timetable and project scope remain subject to change based upon the Company's evolving needs and sales levels. Fiscal 2003 amortization of the new ERP platform totaled $0.7 million.
Assets held under capital leases and included in property, plant and equipment as of September 30, 2003 and 2002, consist of (in thousands):
2003 2002
------- -------
Buildings and improvements $23,400 $23,691
Machinery and equipment 1,834 7,494
------- -------
25,234 31,185
Less accumulated amortization 3,240 5,667
------- -------
$21,994 $25,518
======= =======
|
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The above table includes a manufacturing facility in San Diego, which was closed during fiscal 2003 (see Note 10) and is no longer used for operating purposes. The Company subleased a portion of the facility during fiscal 2003 and is attempting to sublease the remaining portion. The portion of the San Diego facility that is subleased is recorded at the net present value of the sublease income. The portion of the facility awaiting sublease is recorded at the net present value of the estimated sublease income. The net book value of the subleased portion of the San Diego facility is reduced on a monthly basis by the amortization of the sublease income. No amortization is recorded on the vacant portion of the San Diego facility. The net book value of the San Diego facility, adjusted for impairment, is approximately $15.5 million as of September 30, 2003.
Amortization of assets held under capital leases totaled $1.6 million and $2.7 million for fiscal 2003 and 2002, respectively. There were no capital lease additions in fiscal 2003. Capital lease additions of $1.5 million and $22.4 million for fiscal 2002 and 2001, respectively, have been treated as non-cash transactions for purposes of the Consolidated Statements of Cash Flows.
4. CAPITAL LEASE OBLIGATIONS AND OTHER FINANCING
Capital lease obligations as of September 30, 2003 and 2002, consist of (in thousands):
2003 2002
------- -------
Capital lease obligations with a weighted
average interest rate of 9.2% and
9.3%, respectively $24,460 $27,008
Less current portion 958 1,652
------- -------
$23,502 $25,356
======= =======
|
The capital lease obligations are for certain equipment and manufacturing facilities, located in the UK and San Diego, which have been recorded as capital leases and expire on various dates through 2016 subject to renewal options. The aggregate scheduled maturities of the Company's debt and its obligations under capital leases as of September 30, 2003, are as follows (in thousands):
2004 $ 3,173
2005 2,928
2006 2,918
2007 2,992
2008 3,049
Thereafter 28,645
-------
43,705
Interest portion of capital leases 19,245
-------
Total $24,460
=======
|
Effective December 26, 2002, the Company terminated its credit facility ("Old Credit Facility). No amounts were outstanding during the first quarter of fiscal 2003 prior to the termination of the Old Credit Facility. Termination of the Old Credit Facility was occasioned by anticipated noncompliance with the minimum interest expense coverage ratio covenant as of December 31, 2002, as a result of restructuring costs incurred in the first quarter of fiscal 2003 (see Note 10). As a result of the termination of the Old Credit Facility, the Company wrote off unamortized deferred financing costs of approximately $0.5 million.
Subsequent to September 30, 2003, the Company entered into a new $100 million secured revolving credit facility. See Note 15 "Subsequent Event."
In fiscal 2001, the Company entered into an amended agreement to sell up to $50 million of trade accounts receivable without recourse to Plexus ABS Inc. ("ABS"), a wholly owned limited-purpose subsidiary of the Company. In September 2003, the asset securitization facility expired. In conjunction with its expiration, the Company repurchased $17.3 million of accounts receivable that had been previously sold under the asset
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
securitization facility. ABS was a separate corporate entity that sold participating interests in a pool of the Company's accounts receivable to financial institutions, under a separate agreement. Accounts receivable sold to financial institutions were reflected as a reduction to accounts receivable in the Consolidated Balance Sheets. The Company had no risk of credit loss on such receivables as they were sold without recourse. The Company retained collection and administrative responsibilities on the participation interests sold as services for ABS and the financial institutions. The cost associated with these responsibilities was not material, and the Company was not compensated for these services. The agreement also included various standards for determining which, and what amount of, receivables could be sold, and included customary indemnification obligations (see Note 14). As of September 30, 2002, $16.6 million was utilized under the asset securitization facility. As a result, accounts receivable were reduced by $16.6 million for the off-balance-sheet financing as of September 30, 2002.
For the fiscal years ended 2003, 2002 and 2001, the Company incurred financing costs of $0.4 million, $0.6 million and $1.9 million, respectively, under the asset securitization facility. These financing costs are included in interest expense in the accompanying Consolidated Statements of Operations. In addition, the net borrowings/(repayments) under the agreement are included in the cash flows from operating activities in the accompanying Consolidated Statements of Cash Flows.
Cash paid for interest in fiscal 2003, 2002 and 2001 was $2.8 million, $4.4 million and $7.3 million, respectively.
5. INCOME TAXES
Income tax expense (benefit) for fiscal 2003, 2002 and 2001 consists of (in thousands):
2003 2002 2001
-------- -------- --------
Currently payable (receivable):
Federal $ 2,096 $ 1,835 $ 22,006
State - 97 3,211
Foreign (69) 1,361 2,286
-------- -------- --------
2,027 3,293 27,503
-------- -------- --------
Deferred:
Federal expense (benefit) (25,094) 322 (904)
State benefit (3,800) (3,902) (383)
Foreign benefit (361) (1,466) -
-------- -------- --------
(29,255) (5,046) (1,287)
-------- -------- --------
$(27,228) $ (1,753) $ 26,216
======== ======== ========
|
Following is a reconciliation of the federal statutory income tax rate to the effective income tax rates reflected in the Consolidated Statements of Operations for fiscal 2003, 2002 and 2001:
2003 2002 2001
-------- -------- --------
Federal statutory income tax rate 35.0% 35.0% 35.0%
Increase (decrease) resulting from:
State income taxes, net of Federal
income tax benefit 4.2 26.4 2.8
Non-deductible goodwill and merger costs 0.2 (21.8) 1.0
Other, net (1.4) (9.5) 1.3
-------- -------- --------
Effective income tax rate 38.0% 30.1% 40.1%
======== ======== ========
|
The components of the net deferred income tax asset as of September 30, 2003 and 2002, consist of (in thousands):
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
2003 2002
------- -------
Deferred income tax assets:
Inventories $ 6,413 $ 7,577
Accrued benefits 4,303 3,335
Allowance for bad debts 1,438 2,118
Loss carryforwards 36,084 14,894
Other 5,049 3,346
------- -------
53,287 31,270
Deferred income tax liabilities:
Property, plant and equipment 4,643 9,632
------- -------
Net deferred income tax asset $48,644 $21,638
======= =======
|
The net deferred income tax asset arises from available income tax losses and future income tax deductions. The Company's ability to use these income tax losses and future income tax deductions is dependent upon the operations of the Company in the tax jurisdictions in which such losses or deductions arose. The Company would record a valuation allowance against deferred income tax assets when management believes it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Although realization is not assured, based on the reversal of deferred income tax liabilities, projected future taxable income, the character of the income tax asset and tax planning strategies, the Company determined that as of September 30, 2003, no valuation allowance is required. However, should the Company experience a pre-tax loss in fiscal 2004 resulting from revenue declines and/or the inability to improve operating margins, a tax valuation reserve may be required in fiscal 2004.
The Company has been granted tax holidays for its Malaysian and Chinese subsidiaries. These tax holidays expire from 2006 through 2013, and are subject to certain conditions with which the Company expects to comply. These subsidiaries generated losses in fiscal 2003 and nominal income in fiscal 2002, resulting in no tax benefit and a nominal tax benefit, respectively.
The Company does not provide for taxes which would be payable if undistributed earnings of foreign subsidiaries were remitted because the Company either considers these earnings to be invested for an indefinite period or anticipates that when such earnings are distributed, the U.S. income taxes payable would be substantially offset by foreign tax credits. The aggregate undistributed earnings of the Company's foreign subsidiaries for which a deferred tax liability has not been recorded is approximately $6.3 million as of September 30, 2003.
As of September 30, 2003, the Company has approximately $118 million of state net operating loss carryforwards, which are available to reduce future state tax liabilities. The Company also has federal net operating losses totaling approximately $84 million, of which $31 million will be carried back to offset prior years' taxes and $53 million is available to reduce future federal taxable income. These loss carryforwards expire in varying amounts through 2023.
Cash paid for income taxes in fiscal 2003, 2002 and 2001 was $0.3 million, $5.2 million and $23.4 million, respectively.
6. SHAREHOLDERS' EQUITY
In October 2001, pursuant to Board of Directors' approval, the Company announced a common stock buyback program that permits it to acquire up to 1.0 million shares for an amount not to exceed $25.0 million. In October 2002, the Board of Directors increased the share limit to 6.0 million shares. To date, no shares have been repurchased.
During fiscal 2001, the Company issued 3.45 million shares of common stock at an offering price to the public of $50 per share. The Company received net proceeds of approximately $164.3 million after discounts and commissions to the underwriters of approximately $8.2 million. Additional expenses were approximately $0.6 million.
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Income tax benefits attributable to stock options exercised are recorded as an increase in additional paid-in capital.
7. EARNINGS PER SHARE
The following is a reconciliation of the amounts utilized in the computation of basic and diluted earnings per share (in thousands, except per share amounts):
Years ended September 30,
--------------------------------------
2003 2002 2001
---------- ---------- ----------
Earnings:
Income (loss) before cumulative effect of change in accounting for goodwill $ (44,496) $ (4,073) $ 39,150
Cumulative effect of change in accounting
for goodwill, net of income taxes (23,482) - -
---------- ---------- ----------
Net income (loss) $ (67,978) $ (4,073) $ 39,150
========== ========== ==========
Basic weighted average common shares outstanding 42,284 41,895 41,129
Dilutive effect of stock options - - 2,101
---------- ---------- ----------
Diluted weighted average shares outstanding 42,284 41,895 43,230
========== ========== ==========
Basic earnings per share:
Income (loss) before cumulative effect of change in accounting for goodwill $ (1.05) $ (0.10) $ 0.95
Cumulative effect of change in accounting
for goodwill, net of income taxes (0.56) - -
---------- ---------- ----------
Net income (loss) $ (1.61) $ (0.10) $ 0.95
========== ========== ==========
Diluted earnings per share:
Income (loss) before cumulative effect of change in accounting for goodwill $ (1.05) $ (0.10) $ 0.91
Cumulative effect of change in accounting
for goodwill, net of income taxes (0.56) - -
---------- ---------- ----------
Net income (loss) $ (1.61) $ (0.10) $ 0.91
========== ========== ==========
|
For the years ended September 30, 2003, 2002 and 2001, stock options to purchase approximately 3.2 million, 3.0 million and 85,000 shares of common stock, respectively, were outstanding, but were not included in the computation of diluted earnings per share because their effect would be antidilutive.
8. ACQUISITIONS AND MERGERS
Acquisitions: In January 2002, the Company acquired certain assets of MCMS, Inc. ("MCMS"), an electronics manufacturing services provider, for approximately $42 million in cash. The assets purchased from MCMS include manufacturing operations in Penang, Malaysia; Xiamen, China; and Nampa, Idaho. The Company acquired these assets primarily to provide electronic manufacturing services in Asia and increase its customer base. The Company recorded the acquisition utilizing the accounting principles promulgated by SFAS No.'s 141 and 142. The acquisition did not include any interest-bearing debt, but included the assumption of total liabilities of approximately $7.2 million. Based on a third-party valuation, the purchase price was primarily allocated to accounts receivable, inventory and property, plant and equipment. The results from MCMS' operations are reflected in the Company's financial statements from the date of acquisition. No goodwill resulted from this acquisition. The Company incurred approximately $0.3 million of acquisition costs during fiscal 2002 associated with the acquisition of the MCMS operations. Due to unique aspects of this acquisition, pro forma financial information is not meaningful and is therefore not presented. The factors leading to this determination included the selective MCMS assets acquired by the
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Company, the limited assumption of liabilities and the exclusion of certain customer relationships which were formerly significant to MCMS.
On May 23, 2001, the Company acquired Qtron, Inc., ("Qtron") a privately held electronics manufacturing service provider located in San Diego, California. The Company purchased all of the outstanding shares of Qtron for approximately $29.0 million in cash, paid outstanding Qtron notes payable of $3.6 million to Qtron shareholders and assumed liabilities of $47.4 million, including capital lease obligations of $18.8 million for a manufacturing facility. The excess of the cost over the fair value of the net assets acquired of approximately $24 million was recorded as goodwill. In December 2002, the primary customer of the San Diego facility, acquired as part of the Qtron acquisition, provided notice of its intent to transition most of its programs to non-Plexus facilities. As a consequence, the Company closed the San Diego facility during fiscal 2003 (see Notes 1 and 10). The results of Qtron's operations are reflected in the Company's financial statements from the date of acquisition.
Unaudited pro forma revenue, net income, earnings per share-basic and earnings per share-diluted for fiscal 2001 as if Qtron had been acquired at the beginning of the respective period was as follows (in thousands, except per share data):
Year ended
September 30, 2001
------------------
Net sales:
Plexus $ 1,046,862
Qtron 74,355
-----------
$ 1,121,217
===========
Net income (loss):
Plexus $ 40,723
Qtron (3,296)
-----------
$ 37,427
===========
Earnings per share:
Basic $ 0.91
===========
Diluted $ 0.87
===========
|
The unaudited pro forma financial information is not necessarily indicative of either the results of operations that would have occurred had the acquisitions been made during the periods presented or the future results of the combined operations.
Mergers: On December 21, 2000, the Company merged with e2E Corporation ("e2E"), a privately held printed circuit board design and engineering service provider for electronic OEMs, through the issuance of 462,625 shares of Company common stock. The transaction was accounted for as a pooling-of-interests. Costs associated with this merger in the amount of $1.0 million have been expensed as required. Prior results were not restated, as they would not differ materially from reported results. The net assets of e2E as of the acquisition date have been recorded in the Consolidated Statement of Shareholders' Equity and Comprehensive Income in 2001.
9. OPERATING LEASE COMMITMENTS
The Company has a number of operating lease agreements primarily involving manufacturing facilities, manufacturing equipment and computerized design equipment. These leases are non-cancelable and expire on various dates through 2016. Rent expense under all operating leases for fiscal 2003, 2002 and 2001 was approximately $14.1 million, $14.6 million and $10.9 million, respectively. Renewal and purchase options are available on certain of these leases. Rental income from subleases amounted to $1.3 million, $1.0 million and $1.0 million in fiscal 2003, 2002 and 2001, respectively.
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Future minimum annual payments on operating leases are as follows (in thousands):
2004 $13,730
2005 12,432
2006 10,578
2007 9,093
2008 6,733
Thereafter 28,570
-------
$81,136
=======
|
For certain leased facilities that were abandoned as result of restructuring actions (see Note 10), the Company accrued estimated losses for future remaining lease payments subsequent to abandonment, less any estimated sublease income. The above table of future minimum annual payments on operating leases includes future payments totaling $7.9 million that are reflected as an obligation for lease exit costs as of September 30, 2003 in the accompanying Consolidated Balance Sheets.
10. RESTRUCTURING AND IMPAIRMENT COSTS
During fiscal 2003, the Company recorded pre-tax restructuring and impairment costs totaling $59.3 million. These costs resulted from the Company's actions taken in response to reductions in its end-market demand. These actions included closing the San Diego and Richmond operating sites, the consolidation of several leased facilities, re-focusing the PCB design group, a write-off of goodwill associated with San Diego, the write-down of underutilized assets to fair value at several locations, and the costs associated with reductions in the work force for manufacturing, engineering and corporate. These measures were intended to align the Company's capabilities and resources with its customer demand.
The Richmond facility was phased out of operations and sold in September 2003. Production was shifted to other Plexus operating sites in the United States and Mexico. The closure of Richmond resulted in a write-down of the building, a write-down of underutilized assets to fair value, and costs relating to the elimination of the facility's work force. Building impairment charges totaled $3.7 million related to the Richmond facility.
The San Diego facility was closed in May 2003. The closure of San Diego resulted in a write-off of goodwill, the write-down of underutilized assets to fair value, and costs relating to the elimination of the facility's work force. Building impairment charges totaled $6.3 million related to the San Diego facility. During fiscal 2003, goodwill impairment for San Diego totaled approximately $20.4 million, of which $14.8 million was impaired as a result of a transitional impairment evaluation under SFAS No. 142 (see Note 1) and $5.6 million was impaired as a result of the Company's decision to close the facility.
Other fiscal year 2003 restructuring actions included the consolidation of several leased facilities, the write-down of underutilized assets to fair value and work force reductions, which primarily affected operating sites such as Juarez; Seattle, Washington ("Seattle"); Neenah, Wisconsin ("Neenah") and the United Kingdom. It also impacted the Company's engineering and corporate organizations. The employee termination and severance costs for fiscal 2003 affected approximately 1,000 employees.
During fiscal 2002, the Company recorded restructuring and impairment costs totaling $12.6 million. These charges resulted from the Company's actions taken in response to reductions in its sales levels and capacity utilization and included a reduction in work force and the write-off of certain underutilized assets to fair value at several locations. The employee termination and severance costs for fiscal 2002 affected approximately 700 employees. The operating site closures included two owned facilities: one located in Neenah (the oldest of the Company's four facilities in Neenah) and the other located in Minneapolis, Minnesota ("Minneapolis"). These facilities were no longer adequate to service the needs of the Company's customers and would have required significant investment to upgrade. The Neenah facility was phased out of operations in February 2003 and is currently used for warehousing and administrative purposes. The Minneapolis facility was phased out of operation in July 2002 and sold in October 2002. There were no building impairment charges associated with the closure of these two facilities. Certain lease consolidations also occurred in fiscal 2002, which primarily affected the Company's facilities in Seattle and San Diego.
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
During fiscal 2001, the Company recorded restructuring and impairment costs totaling $1.9 million. These charges resulted from the Company's actions taken in response to reductions in its sales levels and capacity utilization and primarily included a reduction in work force and the write-off of certain underutilized assets to fair value at several locations. The fiscal 2001 employee termination and severance costs provided for the elimination of approximately 50 employees.
Employee
Termination and Lease Obligations and Non-cash Asset Write-
Severance Costs Other Exit Costs downs Total
--------------- --------------------- --------------------- ---------
ACCRUED BALANCE,
OCTOBER 1, 2000 $ - $ - $ - $ -
Restructuring costs 642 102 1,182 1,926
Adjustment to provisions - - - -
Amounts utilized (563) (102) (1,182) (1,847)
-------- -------- -------- --------
ACCRUED BALANCE,
SEPTEMBER 30, 2001 79 - - 79
Restructuring costs 3,819 3,872 4,890 12,581
Adjustment to provisions - - - -
Amount utilized (3,358) (915) (4,890) (9,163)
-------- -------- -------- --------
ACCRUED BALANCE,
SEPTEMBER 30, 2002 540 2,957 - 3,497
Restructuring costs 10,358 10,940 38,696 59,994
Adjustment to provisions - - (650) (650)
Amount utilized (7,993) (6,005) (38,046) (52,044)
-------- -------- -------- --------
ACCRUED BALANCE
SEPTEMBER 30, 2003 $ 2,905 $ 7,892 $ - $ 10,797
======== ======== ======== ========
|
In fiscal 2003, asset write-downs in the above table include $5.6 million of goodwill impairment. As of September 30, 2003, most of the remaining employee termination and severance costs are expected to be paid by the end of fiscal 2004, while approximately $3.5 million of the lease obligations and other exit costs are expected to be paid in the next twelve months. The remaining liability for lease payments is expected to be paid through June 2008.
11. BENEFIT PLANS
Employee Stock Purchase Plan: On March 1, 2000, the Company established a qualified Employee Stock Purchase Plan ("ESPP"), the terms of which allow for qualified employees to participate in the purchase of the Company's common stock at a price equal to the lower of 85 percent of the average high and low stock price at the beginning or end of each semi-annual stock purchase period. The Company may issue up to 2.0 million shares of its common stock under the ESPP. During fiscal 2003, 2002 and 2001, the Company issued approximately 253,000, 132,000 and 95,000 shares of common stock, respectively, under the ESPP, which were issued for $1.9 million, $2.4 million, and $2.5 million, respectively.
401(k) Savings Plans: The Company's 401(k) savings plans cover all eligible employees. The Company matches employee contributions, after one year of service, up to 2.5 percent of eligible earnings. The Company's contributions for fiscal 2003, 2002 and 2001 totaled $2.3 million, $2.2 million and $2.1 million, respectively.
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Stock Option Plans: The Company has reserved 12.0 million shares of common stock for grant to officers and key employees under an employee stock option plan, of which options for 11.1 million shares have been granted. The exercise price of each option granted must not be less than the fair market value on the date of grant. Options vest over a three-year period from date of grant and have a term of ten years. The plan also authorizes the Company to grant 600,000 stock appreciation rights (in lieu of options for 600,000 shares), none of which have been granted.
Under a separate stock option plan, each outside director of the Company is granted 3,000 stock options each December 1, with the option pricing similar to the employee plan. Commencing in fiscal 2004, to reflect an adjustment for a prior stock split, each outside director of the Company will be granted 6,000 stock options each December 1. These options vest immediately and can be exercised after a minimum six-month holding period. The 400,000 shares of common stock authorized under this plan may come from any combination of authorized but unissued shares, treasury stock or the open market. As of September 30, 2003, approximately 145,000 shares have been granted under this plan.
A summary of the stock option activity follows:
SHARES WEIGHTED AVERAGE
(IN THOUSANDS) EXERCISE PRICE
-------------- ----------------
Options outstanding as of October 1, 2000 4,050 $ 15.03
Granted 659 24.44
Cancelled (117) 27.59
Exercised (721) 5.41
------
Options outstanding as of September 30, 2001 3,871 18.04
Granted 915 25.23
Cancelled (163) 29.43
Exercised (141) 9.01
------
Options outstanding as of September 30, 2002 4,482 19.40
Granted 1,145 10.87
Cancelled (391) 23.74
Exercised (324) 5.46
------
Options outstanding as of September 30, 2003 4,912 $ 17.99
======
Options exercisable as of:
September 30, 2001 2,364 $ 12.20
====== =========
September 30, 2002 2,954 $ 15.55
====== =========
September 30, 2003 3,131 $ 18.97
====== =========
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PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following table summarizes outstanding stock option information as of September 30, 2003 (shares in thousands):
Number of Number of Weighted
Range of shares Weighted Average Weighted Average shares Average
Exercise Prices Outstanding Exercise Price Remaining Life Exercisable Exercise Price
--------------- ----------- -------------- -------------- ----------- --------------
$ 0.63 - $ 7.86 745 $ 5.07 3.0 745 $ 5.07
$ 7.87 - $15.71 2,123 $ 12.03 7.4 1,010 $13.19
$15.72 - $23.57 515 $ 23.20 7.0 365 $23.09
$23.58 - $31.43 794 $ 25.51 8.3 280 $25.61
$31.44 - $47.14 714 $ 35.78 6.2 710 $35.78
$47.15 - $70.71 22 $ 60.26 6.7 21 $60.26
$0.63 - $70.71 4,913 $ 17.99 6.7 3,131 $18.97
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The weighted average fair value of options granted per share during fiscal 2003, 2002 and 2001 is $7.46, $15.55 and $16.00, respectively. The fair value of each option grant is estimated at the date of grant using the Black-Scholes option-pricing method with the following assumption ranges: 75 percent to 85 percent volatility, risk-free interest rates ranging from 2.6 percent to 4.3 percent, expected option life of 5.1 to 9.2 years, and no expected dividends.
Deferred Compensation Plan: In September 1996, the Company entered into agreements with certain of its former executive officers under a nonqualified deferred compensation plan. Under the plan, the Company agreed to pay to these former executives, or their designated beneficiaries upon such executives' death, certain amounts annually for the first 15 years subsequent to their retirement. Life insurance contracts owned by the Company will fund this plan. Expense for this plan totaled approximately $0.4 million, $1.8 million and $0.7 million in fiscal 2003, 2002, and 2001, respectively.
In fiscal 2000, the Company established an additional deferred compensation plan for its executive officers and other key employees (the "Executive Deferred Compensation Plan"). Under the Executive Deferred Compensation Plan, a covered executive may elect to defer some or all of his or her compensation into the plan, and the Company may credit the participant's account with a discretionary employer contribution. Participants are entitled to payment of deferred amounts and any earnings, which may be credited thereon upon termination or retirement from Plexus.
From fiscal 2000 through fiscal 2002, key employee salary deferrals in and discretionary contributions of the Company to the Executive Deferred Compensation Plan were effected through a split-dollar life insurance program, whereby Plexus entered into split-dollar life insurance agreements with various executive officers and key employees. Under these agreements, Plexus paid a minimum annual premium of $13,500 per policy, and such additional premiums as it determined. Upon the death of the covered employee, Plexus had an interest in the proceeds of the policy equal to the premiums paid. No premium payments were made by the Company in fiscal 2003. Premium payments made by the Company totaled approximately $0.1 million and $0.1 million in fiscal 2002 and 2001, respectively.
In fiscal 2003, due to changes in law, Plexus terminated the split-dollar life insurance program and replaced it with a rabbi trust arrangement (the "Trust"). The Trust allows investment of deferred compensation, held on behalf of the participants, into individual accounts and, within these accounts, into one or more designated investments. Investment choices do not include Plexus stock. During fiscal 2003, the cash value proceeds that were received upon the surrender of the split-dollar life insurance policies attributable to each plan participant totaled approximately $0.4 million and were placed into the Trust. During fiscal 2003, the Company made a contribution to the participants' accounts in the amount of $13,500 per participant or approximately $0.1 million in total. Trust assets are subject to the claims of the Company's creditors. As of September 30, 2003, Trust assets and the related liability to the participants totaled approximately $0.7 million and $0.7 million, respectively.
Trust assets and the related liability to the
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
participants are included in Other assets and Other liabilities, respectively, in the accompanying Consolidated Balance Sheets.
Other: The Company is not obligated to provide any post-retirement medical or life insurance benefits to employees.
12. CONTINGENCIES
The Company (along with many other companies) has been sued by the Lemelson Medical, Education & Research Foundation Limited Partnership ("Lemelson") related to alleged possible infringement of certain Lemelson patents. The complaint, which is one of a series of complaints by Lemelson against hundreds of companies, seeks injunctive relief, treble damages (amount unspecified) and attorney's fees. The Company has obtained a stay of action pending developments in other related litigation. Based on information received from a party to that other litigation, we do not believe that it is likely that a decision will be rendered in the other litigation before spring 2004. The Company believes the vendors from whom the patent equipment was purchased may be required to contractually indemnify the Company. However, based upon the Company's observation of the plaintiff's actions in other parallel cases, it appears that the primary objective of the plaintiff is to cause defendants to enter into license agreements. If a judgment is rendered and/or a license fee required, it is the opinion of management of the Company that such judgment or fee would not be material to the Company's financial position, results of operations or cash flows.
In addition, the Company is party to other certain lawsuits in the ordinary course of business. Management does not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the Company's financial position, results of operations or cash flows.
13. BUSINESS SEGMENT, GEOGRAPHIC INFORMATION AND MAJOR CUSTOMERS
The Company operates in one business segment. The Company provides product realization services to electronic OEMs. The Company has three reportable geographic regions: North America, Europe and Asia. The Company has 19 active manufacturing and engineering facilities in North America, Europe and Asia to serve these OEMs. The Company uses an internal management reporting system, which provides important financial data, to evaluate performance and allocate the Company's resources on a geographic basis. Interregional transactions are generally recorded at amounts that approximate arm's length transactions. Certain corporate expenses are allocated to these regions and are included for performance evaluation. The accounting policies for the regions are the same as for the Company taken as a whole. Geographic net sales information reflects the origin of the product shipped. Asset information is based on the physical location of the asset.
Years ended September 30,
------------------------------------------
2003 2002 2001
-------- --------- ----------
(in thousands)
Net sales:
North America $704,057 $ 783,660 $ 972,363
Europe 62,522 78,826 89,941
Asia 41,258 21,117 -
-------- --------- ----------
$807,837 $ 883,603 $1,062,304
======== ========= ==========
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As of September 30,
-------------------------------
2003 2002
-------- ---------
Long-lived assets:
North America $127,405 $ 199,478
Europe 34,251 35,796
Asia 8,094 6,505
-------- ---------
$169,750 $ 241,779
======== =========
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Siemens Medical Systems, Inc. accounted for 12 percent of net sales in fiscal 2003. No customer accounted for 10 percent or more of net sales in fiscal 2002 and 2001. Accounts receivable related to Juniper Networks, Inc. and Motorola, Inc. represented approximately 12 percent and 10 percent, respectively, of the Company's total accounts receivable balance as of September 30, 2003. No customer represented ten percent or more of the Company's total trade receivable balance as of September 30, 2002.
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
14. GUARANTEES
In November 2002, Financial Accounting Standards Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" was issued. FIN No. 45 requires a Company, at the time it issues a guarantee, to recognize an initial liability for the fair value of obligations assumed under the guarantee and to elaborate on existing disclosure requirements. The initial recognition requirements of FIN No. 45 are effective for guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN No. 45 were effective in the Company's first quarter of fiscal 2003. Adoption of the initial recognition provisions of FIN No. 45 did not have a material impact on these Consolidated Financial Statements.
The Company offered certain indemnifications under its asset securitization facility and customer manufacturing agreements. Under the Company's asset securitization facility agreement (see Note 4), which expired in September 2003, the Company is required to provide indemnifications typical of those found in transactions of this sort, such as upon a breach of the Company's representations and warranties in the facility agreement, or upon the Company's failure to perform its obligations under such agreement, or in the event of litigation concerning the agreement. The asset securitization agreement also includes an obligation by the Company to indemnify participating financial institutions if regulatory changes result in either reductions in their return on capital or increases in the costs of performing their obligations under the funding arrangements. The Company is unable to estimate the maximum potential amount of future payments under this indemnification due to the uncertainties inherent in predicting potential regulatory change. Moreover, although the Company's indemnification obligation survived the termination of this facility in September 2003, the Company believes that it is unlikely to have any on-going indemnification obligations because the Company will not be engaged in further asset securitization transactions after such date; the Company also has no reasonable basis to believe that any unasserted indemnification obligations exist as of the date hereof.
In the normal course of business, the Company may from time to time be obligated to indemnify its customers or its customers' customers against damages or liabilities arising out of the Company's negligence, breach of contract, or infringement of third party intellectual property rights relating to its manufacturing processes. Certain of the manufacturing agreements have extended broader indemnification and while most agreements have contractual limits, some do not. However, the Company generally excludes from such indemnities, and seeks indemnification from its customers for, damages or liabilities arising out of the Company's adherence to customers' specifications or designs or use of materials furnished, or directed to be used, by its customers. The Company does not believe its obligations under such indemnities are material.
In the normal course of business, the Company also provides its customers a limited warranty covering workmanship, and in some cases materials, on products manufactured by the Company for them. Such warranty generally provides that products will be free from defects in the Company's workmanship and meet mutually agreed upon testing criteria for periods ranging from 12 months to 24 months. If a product fails to comply with the Company's warranty, the Company's obligation is generally limited to correcting, at its expense, any defect by repairing or replacing such defective product. The Company's warranty excludes defects resulting from faulty customer-supplied components, design defects or damage caused by any party other than the Company.
The Company provides for an estimate of costs that may be incurred under its limited warranty at the time product revenue is recognized. These costs primarily include labor and materials, as necessary, associated with repair or replacement. The primary factors that affect the Company's warranty liability include the number of shipped units and historical and anticipated rates of warranty claims. As these factors are impacted by actual experience and future expectations, the Company assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.
Below is a table summarizing the warranty activity for fiscal 2003 (in thousands):
PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Limited warranty liability, as of October 1, 2002 $ 1,246
Accruals for warranties issued during the period 150
Accruals related to pre-existing warranties (20)
Settlements (in cash or in kind) during the period (391)
---------
Limited warranty liability, as of September 30, 2003 $ 985
=========
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15. SUBSEQUENT EVENT
On October 22, 2003, the Company entered into a secured revolving credit facility (the "Secured Credit Facility") with a group of banks that allows the Company to borrow up to $100 million. Borrowings under the Secured Credit Facility will be either through revolving or swing loans or letters of credit obligations. The Secured Credit Facility is secured by substantially all of the Company's domestic working capital assets and a pledge of 65 percent of the stock of the Company's foreign subsidiaries. Interest on borrowings varies with usage and begins at the Prime rate, as defined, or the LIBOR rate plus 1.5 percent. The Company is also required to pay an annual commitment fee of 0.5 percent of the unused credit commitment, a maximum of $0.5 million per year. The Secured Credit Facility matures on October 22, 2006 and requires certain financial covenants. These covenants include a maximum total leverage ratio, a minimum domestic cash or marketable securities balance, a minimum tangible net worth and a minimum adjusted EBITDA, as defined in the agreement.
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for fiscal 2003 and 2002 consists of (in thousands, except per share amounts):
FIRST SECOND THIRD FOURTH
2003 QUARTER QUARTER QUARTER QUARTER TOTAL
---------------------------------------------------------------------------------------------------
Net sales $ 205,379 $ 190,773 $ 195,609 $ 216,076 $ 807,837
Gross profit 15,540 9,623 11,829 15,973 52,965
Loss before cumulative
effect of change in
accounting for goodwill (20,832) (5,044) (14,747) (3,873) (44,496)
Cumulative effect of
change in accounting for
goodwill, net of tax (23,482) - - - (23,482)
Net loss (44,314) (5,044) (14,747) (3,873) (67,978)
Earnings per share:
Basic:
Loss before cumulative
effect of change in
accounting for goodwill $ (0.49) $ (0.12) $ (0.35) $ (0.09) $ (1.05)
Cumulative effect of
change in accounting
for goodwill, net of
tax (0.56) - - - (0.56)
Net loss $ (1.05) $ (0.12) $ (0.35) $ (0.09) $ (1.61)
Diluted:
Loss before cumulative
effect of change in
accounting for goodwill $ (0.49) $ (0.12) $ (0.35) $ (0.09) $ (1.05)
Cumulative effect of
change in accounting
for goodwill, net of tax (0.56) - - - (0.56)
Net loss $ (1.05) $ (0.12) $ (0.35) $ (0.09) $ (1.61)
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PLEXUS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FIRST SECOND THIRD FOURTH
2002 QUARTER QUARTER QUARTER QUARTER TOTAL
------------------------------------------------------------------------------------------
Net sales $ 200,218 $ 231,162 $ 234,749 $ 217,475 $ 883,603
Gross profit 15,471 20,471 23,077 22,301 81,320
Net income (loss) (2,023) (2,154) 656 (552) (4,073)
Earnings per share:
Basic $ (0.05) $ (0.05) $ 0.02 $ (0.01) $ (0.10)
Diluted $ (0.05) $ (0.05) $ 0.02 $ (0.01) $ (0.10)
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Earnings per share is computed independently for each quarter. The annual total amounts may not equal the sum of the quarterly amounts due to rounding.
In the first, third and fourth quarters of fiscal 2003, the Company recorded pre-tax restructuring and impairment costs of $31.8 million, $19.6 million and $7.9 million, respectively. These costs resulted from our actions taken in response to reductions in our end-market demand. These actions included closing our San Diego and Richmond operating sites, the consolidation of several leased facilities, re-focusing our PCB design group, a write-off of goodwill associated with the San Diego operating site, the write-down of underutilized assets to fair value at several locations, and the costs associated with a reduction in work force in several operating sites, engineering and corporate groups. These measures were intended to align the Company's capabilities and resources with its lower demand.
In addition, the Company adopted SFAS No. 142 for the accounting of goodwill and other intangible assets on October 1, 2002. Under the transitional provisions of SFAS No. 142, the Company identified reporting units with goodwill, performed impairment tests on the net goodwill and other indefinite-lived intangible assets associated with each reporting unit using a valuation date as of October 1, 2002, and determined that a pre-tax transitional impairment charge of $28.2 million was required at the San Diego and Juarez operating sites. The impairment charge was recorded in the first quarter of fiscal 2003 as a cumulative effect of a change in accounting for goodwill.
In the first, second, third and fourth fiscal quarters of 2002, the Company recorded pre-tax restructuring and impairment costs of $2.8 million, $4.7 million, $2.7 million and $2.4 million, respectively. These charges were taken in response to the reduction in the Company's sales levels and reduced capacity utilization. The Company evaluated its cost structure compared to anticipated sales levels and determined that reductions of its work force, consolidation of certain leased facilities, write-downs of certain underutilized assets to fair value and facility closures were necessary to reduce costs to more appropriate levels in line with current and expected customer demand. In addition, the Company incurred approximately $0.3 million of acquisition costs associated with the acquisition of the MCMS operations in the second fiscal quarter of 2002.
* * * * *
PLEXUS CORP. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the years ended September 30, 2003, 2002 and 2001
(in thousands)
ADDITIONS
BALANCE AT ADDITIONS FROM CHARGED TO
BEGINNING OF MERGERS/ COSTS AND BALANCE AT
DESCRIPTIONS PERIOD ACQUISITIONS EXPENSES DEDUCTIONS END OF PERIOD
----------------------------------------------------------------------------------------------------------------------------
Fiscal Year 2003:
Allowance for losses on accounts receivable
(deducted from the asset to which it relates) $ 4,200 $ - $ 438 $ 538 $ 4,100
Inventory reserves
(deducted from the asset to which it relates) 17,761 - 7,017 8,495 16,283
------- ------- ------- ------- -------
$21,961 $ - $ 7,455 $ 9,033 $20,383
======= ======= ======= ======= =======
Fiscal Year 2002:
Allowance for losses on accounts receivable
(deducted from the asset to which it relates) $ 6,500 $ 51 $ 2,994 $ 5,345 $ 4,200
Inventory reserves
(deducted from the asset to which it relates) 16,469 203 16,746 15,657 17,761
------- ------- ------- ------- -------
$22,969 $ 254 $19,740 $21,002 $21,961
======= ======= ======= ======= =======
Fiscal Year 2001:
Allowance for losses on accounts receivable
(deducted from the asset to which it relates) $ 1,522 $ 329 $ 5,688 $ 1,039 $ 6,500
Inventory reserves
(deducted from the asset to which it relates) 9,406 2,815 12,334 8,086 16,469
------- ------- ------- ------- -------
$10,928 $ 3,144 $18,022 $ 9,125 $22,969
======= ======= ======= ======= =======
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
By: PLEXUS CORP. (Registrant)
/s/ Dean A. Foate
-----------------------
Dean A. Foate, President and Chief Executive Officer
December 15, 2003
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Dean A. Foate, F. Gordon Bitter and Joseph D. Kaufman, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and any other regulatory authority, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirement of the Security Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the date indicated.*
SIGNATURE AND TITLE
/s/ Dean A. Foate /s/ Steven P. Cortinovis
--------------------------------------------------------- --------------------------------
Dean A. Foate, President, Chief Executive Officer, and Steven P. Cortinovis, Director
Director (Principal Executive Officer)
/s/ F. Gordon Bitter /s/ David J. Drury
--------------------------------------------------------- --------------------------------
F. Gordon Bitter, Vice President and Chief Financial David J. Drury, Director
Officer (Principal Financial Officer)
/s/ Simon J. Painter /s/ Thomas J. Prosser
--------------------------------------------------------- --------------------------------
Simon J. Painter, Corporate Controller (Principal Thomas J. Prosser, Director
Accounting Officer)
/s/ John L. Nussbaum /s/ Dr. Charles M. Strother
--------------------------------------------------------- --------------------------------
John L. Nussbaum, Chairman and Director Dr. Charles M. Strother, Director
/s/ Jan K. Ver Hagen
--------------------------------------------------------- --------------------------------
Jan K. Ver Hagen, Director
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* Each of the above signatures is affixed as of December 15, 2003.
EXHIBIT INDEX
PLEXUS CORP.
10-K FOR YEAR ENDED SEPTEMBER 30, 2003
INCORPORATED BY FILED
EXHIBIT NO. EXHIBIT REFERENCE TO HEREWITH
----------- ------- ------------ --------
3(i) Restated Articles of Incorporation of Exhibit 3(i) to Plexus' Report on
Plexus Corp., as amended through Form 10-Q for the quarter ended
March 13, 2001 March 31, 2001 ("3/31/01")
3(ii) Bylaws of Plexus Corp., as amended Exhibit 3(ii) to the 3/31/01 10-Q
through March 7, 2001
4.1 Restated Articles of Incorporation of Exhibit 3(i) above
Plexus Corp.
4.2 (a) Amended and Restated Shareholder Exhibit 1 to Plexus'
Rights Agreement, dated as of August Form 8-A/A filed
13, 1998, (as amended through on December 6, 2000
November 14, 2000) between Plexus
and Firstar Bank, N.A. (n/k/a US Bank,
N.A.) as Rights Agent, including form
of Rights Certificates
(b) Agreement of Substitution and First Exhibit 4.2 (b) to Plexus' Annual
Amendment to the Amended and Report on Form 10-K for the fiscal
Restated Shareholder Rights Agreement year ended September 30, 2002
dated as of December 5, 2002
10.1 (a) Supplemental Executive Retirement Exhibit 10.1 (b) to Plexus' Report
Agreements with John Nussbaum dated on Form 10-K for the fiscal year
as of September 19, 1996**: ended September 30, 1996
(b) First Amendment Agreement to Exhibit 10.1 to Plexus' Quarterly
Supplemental Retirement Agreement Report on Form 10-Q for the
between Plexus and John Nussbaum, quarter ended December 31, 2000
dated as of September 1, 1999
10.2 Forms of Change of Control
Agreements dated October 1, 2003
with **
(a) Dean A. Foate X
Thomas B. Sabol
F. Gordon Bitter
David A. Clark
Thomas J. Czajkowski
Paul L. Ehlers
Joseph D. Kaufman
Michael J. McGuire
J. Robert Kronser
David H. Rust
Michael T. Verstegen
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(b) George W.F. Setton
Simon J. Painter X
10.3 Plexus Corp. 1998 Option Plan** Exhibit A to the Registrant's
definitive proxy statement for its
1998 Annual Meeting of Shareholders
10.4 Plexus Corp. 1995 Directors' Stock Exhibit 10.10 to 1994 10-K
Option Plan**
10.5 (a) Credit Agreement dates as of Exhibit 10.6(a) to Plexus' Annual
October 25, 2000, among Plexus, Report on Form 10-K for the fiscal
certain Plexus subsidiaries and various year ended September 30, 2000
signatory lending institutions whose ("2000 10-K")
agents are ABN Amro Bank N.V.,
Firstar Bank, N.A. (n/k/a US Bank,
N.A.) and Bank One, N.A.
(b) Exhibits thereto Exhibit 10.6(b) to 2000 10-K
(c) First Agreement to Credit Exhibit 10.1 to Plexus' Quarterly
Agreement and Waiver dated as of May Report on Form 10-Q for the
13, 2002 quarter ended March 31, 2002
(d) Notice of Plexus dated November 9, Exhibit 10.4 (d) to 2002 10-K
2002, reducing credit line.
(e) Notice of Plexus dated December Exhibit 10.1 to 12/31/02 10-Q
26, 2002 eliminating credit line
Note: All agreements included in Exhibit 10.5 are now terminated.
10.6 (a) Credit Agreement dated as of X
October 22, 2003 among Plexus, certain
Plexus subsidiaries and various lending
institutions whose Administrative Agent
is Harris Trust and Savings Bank
(b) First Amendment and Waiver to X
Credit Agreement dated as of October
31, 2003
10.7 (a) Lease Agreement between Neenah Exhibit 10.8(a) to Plexus' Report
(WI) QRS 11-31, Inc. ("QRS: 11-31") on Form 10-K for the year ended
and EAC, dated August 11, 1994 September 30, 1994 ("1994
10-K")
(b) Guaranty and Suretyship Agreement Exhibit 10.8(c) to 1994 10-K
between Plexus Corp. and QRS: 11-31
dated August 11, 1994, together with
related Guarantor's Certificate of Plexus
Corp.
10.8 (a) Plexus Corp. 1998 Management Plexus' Annual Report n Form 10-K
Incentive Compensation Plan** for the fiscal year ended September
(no longer in effect) 30, 1997
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(b) Plexus Corp. 2004 Incentive X
Compensation Plan- Executive
Leadership Team **
10.9 Promissory Note from Thomas B. Sabol Exhibit 10.1 to Plexus' Report on
dated March 13, 2000 (repaid) Form 10-Q for the quarter ended
March 31, 2000
10.10(a) (a) Amended and Restated Receivables Exhibit 10.1 to Plexus' Quarterly
Sale Agreement, dated July 1, 2001, Report on Form 10-Q for the
between Plexus Services Corp. and quarter ended June 30, 2001
Plexus ABS, Inc. ("6/30/01 10-Q")
(b) First Amendment to amended and Exhibit 10.1 to Plexus' Quarterly
Restated Receivables Sale Agreement, Report on Form 10-Q for the
dated June 28, 2002, between Plexus quarter ended June 30, 2002
Services Corp. and Plexus ABS, Inc. ("6/30/02 10-Q")
10.11 (a) Receivables Purchase Agreement Exhibit 10.10(a) to 2000 10-K
dated as of October 6, 2000, among
Plexus, Preferred Receivables Funding
Corporation and Bank One, NA
(b) First Amendment to Receivables Exhibit 10.2 to Plexus' 6/30/01 10-Q
Purchase Agreement, dated July 1, 2001
(c) Second Amendment to Receivables Exhibit 10.2(a) to 6/30/02 10-Q
Purchase Agreement, dated October 3, 2001
(d) Limited Waiver and Third Exhibit 10.2(b) to 6/30/02
Amendment to Receivables Purchase 10-Q
Agreement, dated April 25, 2002
(e) Fourth Amendment to Receivables Exhibit 10.2(c) to 6/30/02
Purchase Agreement, dated June 28, 2002 10-Q
(f) Fifth Amendment to Receivables Exhibit 10.2(f) to 2002 10-K
Purchase Agreement, dated September
30, 2002
(g) Limited Waiver and Sixth Exhibit 10.2(g) to 2002 10-K
Amendment to Receivables Purchase
Agreement, dated December 4, 2002
(h) Limited Waiver and Seventh Exhibit 10.2 to 12/31/02 10-Q.
Amendment to Receivables Purchase
Agreement, dated January 28, 2003
(i) Limited Waiver and Seventh Exhibit 10.4 to Plexus' Quarterly
Amendment to Receivables Purchase Report on Form 10-Q for the quarter
Agreement, dated January 28, 2003 ended December 31, 2002
|
Note: All agreements included in Exhibit 10.10 and 10.11 were terminated in September 2003.
10.12 Plexus Corp. Executive Deferred Exhibit 10.17 to 2000 10-K
Compensation Plan**
10.13 Form of Split Dollar Life Insurance Exhibit 10.18 to 2000 10-K
Agreements between Plexus and each
of:**
Thomas B. Sabol
Dean A. Foate
J. Robert Kronser
Joseph D. Kaufman
Paul L. Ehlers
Michael T. Verstegen
David A. Clark
10.14 Plexus Corp Executive Deferred
Compensation Plan Trust dated April 1,
2003 between Plexus Corp. and Bankers
Trust Company**
10.15 (a) Employment Agreement dated as of Exhibit 10.3 to the 6/30/02 10-Q
July 1, 2002, between Plexus Corp. and
Dean A. Foate** [superceded]
(b) Amended and Restated Employment
Agreement dated as of September 1, X
2003 between Plexus Corp and Dean A.
Foate **
10.16 Employment Agreement, dated as of Exhibit 10.4 to the 6/30/02 10-Q
July 1, 2002, by and between Plexus
Corp. and Thomas B. Sabol **
21 List of Subsidiaries X
23 Consent of PricewaterhouseCoopers LLP X
24 Power of Attorney (Signature Page
Hereto)
31.1 Certification of Chief Executive Officer
pursuant to Section 302(a) of the
Sarbanes-Oxley Act of 2002 X
31.2 Certification of Chief Financial Officer
pursuant to section 302 (a) of the
Sarbanes-Oxley Act of 2002 X
32.1 Certification of the CEO pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 X
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32.2 Certification of the CFO pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 X
|
EXHIBIT 10.2(a)
PLEXUS CORP.
CHANGE OF CONTROL AGREEMENT
This AGREEMENT (the "Agreement") is made as of the 1st day of October, 2003, by and between PLEXUS CORP., a Wisconsin corporation (the "Company") and ______________________ employed as the ___________ at Plexus Corp. (the "Executive").
The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. The Company and the Executive have previously entered into a Change of Control Agreement, which they now wish to supersede in its entirety.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company or this Agreement is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment or of this Agreement (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment or purported termination of this Agreement.
(b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company's Board of Directors has elected not to extend the Change of Control Period and has given written notice of such intent to the Executive.
2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean:
(a) any cash tender exchange offer; or
(b) merger or other business combination; or
(c) a sale of assets or contested election; or
(d) any combination of the foregoing transactions (a "Transaction"), and either or both of the following events occur:
(i) the persons who constituted the top management of the Company (the Chief Executive Officer and the President) no longer serve in their former capacity or no longer retain the authority to make decisions concerning the employment of the Executive, and/or
(ii) the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company (which term as used herein shall include any successor of the Company), and/or
(iii) the current Board of Directors, by majority action, declares that a Change of Control has occurred.
3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of such date; provided, however, that on each anniversary of the Effective Date the term of the Agreement shall automatically be extended for an additional one-year period (restoring the initial three-year term), unless either party notifies the other party in writing at least 60 days prior to such anniversary. The term of employment under this Agreement as effective from time to time shall be referred to as the "Employment Period."
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, [a] the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and [b] the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 45 miles from such location.
(ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to [a] serve on corporate, civic or charitable boards or committees, [b] deliver lectures, fulfill speaking engagements or teach at educational institutions and [c] manage personal investments, so long as such activities do not significantly interfere with the
performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary ("Annual Base Salary") at least equal to base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies as reflected on the Company's records immediately prior to the Effective Date and immediately prior to entering into an agreement with any other party that could lead to a Change in Control, excluding any temporary salary adjustment, such as a temporary salary reduction. During the Employment Period, the Annual Base Salary shall be reviewed at least annually for possible increase. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be eligible to participate in any bonus plan sponsored by the Company, on a basis consistent with that of other comparable employees.
(iii) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable in the aggregate, than the most favorable of such plans, practices, policies and programs provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.
(iv) Other Benefits. During the Employment Period, the Executive shall be entitled to participate in all fringe benefits, deferred compensation programs, expense reimbursement programs, vacation, company car or car allowance, as applicable (if Executive was receiving such benefit prior to the Change of Control), incentive, savings and retirement plans (including, but not limited to the 401(k) Plan and Employee Stock Purchase Plan), practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most
favorable of those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.
(v) Stock Option Grants. During the Employment Period, the Executive shall receive annual stock option grants (or other types of long-term incentive compensation) with a value no less than the value of the last stock option grant received by the Executive immediately preceding the Effective Date.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For the sole and exclusive purposes of this Agreement, "Cause" shall mean:
(i) The willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board, the Chief Executive Officer of the Company or the President of the Company which specifically identifies the manner in which the Board, the Chief Executive Officer or the President believes that the Executive has not substantially performed the Executive's duties, or
(ii) The willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to
be for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the Executive for Good Reason. For the sole and exclusive purposes of this Agreement, "Good Reason" shall mean:
(i) The assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(ii) Any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(iii) The Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(b) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (iv) Any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or
(v) Any failure by the Company to comply with and satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Executive for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated, and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination, and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, death or Disability or the Executive shall terminate employment for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:
[a] The sum of [i] the Executive's Annual
Base Salary through the Date of Termination to the extent not theretofore paid,
[ii] the Annual Target Bonus payable as provided for in the Company's current
Annual Bonus Plan, pro-rated through the Date of Termination using a fraction,
the numerator of which is the number of days in the current fiscal year through
the Date of Termination, and the denominator of which is 365 and [iii] any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon) and any accrued vacation pay, in each case to the
extent not theretofore paid (the sum of the amounts described in clauses [i],
[ii] and [iii] shall be hereinafter referred to as the "Accrued Obligations");
and
[b] An amount equal to the sum of (i) the product of three times the Executive's Annual Base Salary and (ii) three times the Annual Target Bonus as provided for in the Company's current Annual Bonus Plan; and
[c] An amount equal to the difference between [i] the actuarial equivalent of the benefit (utilizing actuarial assumptions no less favorable to the Executive than those in effect under the Retirement Plan (as defined below) immediately prior to the Effective Date) under any qualified retirement plan in which the Executive participates (the "Retirement Plan") and any excess or supplemental retirement plan or nonqualified deferred compensation plan in which the Executive participates (together, the "SERP") which the Executive would receive if the Executive's employment continued for three years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, and, assuming that Executive's compensation in each of the three years is equal to Executive's compensation in the
last full fiscal year prior to the Date of Termination, and [ii] the actuarial equivalent of the Executive's actual benefit (paid or payable), if any, under any Retirement Plan and the SERP as of the Date of Termination;
(ii) For three years after the Executive's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iii) of this Agreement if the Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies applicable generally to other peer executives and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until two and one-half years after the Date of Termination and to have retired on the last day of such period;
(iii) The Company shall, at its sole expense as incurred, provide the Executive with executive-level outplacement services for a period of fifteen (15) months, the scope and provider of which shall be selected by the Executive in his sole discretion; and
(iv) To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect as of the date of the Executive's death.
(c) Disability. If the Executive's employment is terminated by reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time after the Effective Date.
(d) Cause; Other than for Good Reason. If the Executive's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (i) his Annual Base Salary through the Date of Termination, (ii) the amount of any compensation previously deferred by the Executive, and (iii) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination.
7. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. The Executive shall not be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by such certified public accounting firm as may be designated by the Executive
(the "Accounting Firm") which shall provide detailed supporting calculations
both to the Company and the Executive within 15 business days of the receipt of
notice from the Executive that there has been a Payment, or such earlier time as
is requested by the Company. All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:
(i) Give the Company any information reasonably requested by the Company relating to such claim,
(ii) Take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,
(iii) Cooperate with the Company in good faith in order effectively to contest such claim, and
(iv) Permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
PLEXUS CORP.
55 Jewelers Park Drive
Neenah, WI 54956-0156
Attn: Joseph D. Kaufman
or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, prior to the Effective Date, the Executive's employment and this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.
EXHIBIT 10.2(b)
PLEXUS CORP.
CHANGE OF CONTROL AGREEMENT
This AGREEMENT (the "Agreement") is made as of the 1st day of October, 2003, by and between PLEXUS CORP., a Wisconsin corporation (the "Company") and ______________________ (the "Employee").
The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Employee, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Employee by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Employee's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Employee with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Employee will be satisfied and which are competitive with those of other corporations. The Company and the Employee have previously entered into a Change of Control Agreement, which they now wish to supersede in its entirety.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Employee's employment with the Company or this Agreement is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Employee that such termination of employment or of this Agreement (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment or purported termination of this Agreement.
(b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the second anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate two years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Employee that the Change of Control Period shall not be extended.
2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean:
(a) any cash tender exchange offer; or
(b) merger or other business combination; or
(c) a sale of assets or contested election; or
(d) any combination of the foregoing transactions (a "Transaction"), and either or both of the following events occur:
(i) the persons who constituted the top management of the Company (the Chief Executive Officer and the President) no longer serve in their former capacity or no longer retain the authority to make decisions concerning the employment of the Employee, and/or
(ii) the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company (which term as used herein shall include any successor of the Company), and/or
(iii) the current Board of Directors, by majority action, declares that a Change of Control has occurred.
3. Employment Period. The Company hereby agrees to continue the Employee in its employ, and the Employee hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date; provided, however, that on each anniversary of the Effective Date the term of the Agreement shall automatically be extended for an additional two-year period (restoring the initial two-year term), unless either party notifies the other party in writing at least 60 days prior to such anniversary. The term of employment under this Agreement as effective from time to time shall be referred to as the "Employment Period."
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, [a] the Employee's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and [b] the Employee's services shall be performed at the location where the Employee was employed immediately preceding the Effective Date or any office or location less than 45 miles from such location.
(ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Employee is entitled, the Employee agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Employee hereunder, to use the Employee's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Employee to [a] serve on corporate, civic or charitable boards or committees, [b] deliver lectures, fulfill speaking engagements or teach at educational institutions and [c] manage personal investments, so long as such activities do not significantly interfere with the
performance of the Employee's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Employee prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Employee's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Employee shall receive an annual base salary ("Annual Base Salary") at least equal to base salary paid or payable, including any base salary which has been earned but deferred, to the Employee by the Company and its affiliated companies as reflected on the Company's records immediately prior to the Effective Date and immediately prior to entering into an agreement with any other party that could lead to a Change in Control, excluding any temporary salary adjustment, such as a temporary salary reduction. During the Employment Period, the Annual Base Salary shall be reviewed at least annually for possible increase. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Employee under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Employee shall be eligible to participate in any bonus plan sponsored by the Company, on a basis consistent with that of other comparable employees.
(iii) Welfare Benefit Plans. During the Employment Period, the Employee and/or the Employee's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer Employees of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Employee with benefits which are less favorable in the aggregate, than the most favorable of such plans, practices, policies and programs provided generally at any time after the Effective Date to other peer Employees of the Company and its affiliated companies.
(iv) Other Benefits. During the Employment Period, the Employee shall be entitled to participate in all fringe benefits, deferred compensation programs, expense reimbursement programs, vacation, company car or car allowance, as applicable (if Employee was receiving such benefit prior to the Change of Control), incentive, savings and retirement plans (including, but not limited to the 401(k) Plan and Employee Stock Purchase Plan), practices, policies and programs applicable generally to other peer Employees of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Employee with benefits which are less favorable, in the aggregate, than the most
favorable of those provided generally at any time after the Effective Date to other peer Employees of the Company and its affiliated companies.
(v) Stock Option Grants. During the Employment Period, the Employee shall receive annual stock option grants (or other types of long-term incentive compensation) with a value no less than the value of the last stock option grant received by the Employee immediately preceding the Effective Date.
5. Termination of Employment.
(a) Death or Disability. The Employee's employment shall terminate
automatically upon the Employee's death during the Employment Period. If the
Company determines in good faith that the Disability of the Employee has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Employee written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Employee's
employment. In such event, the Employee's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the Employee
(the "Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Employee from the Employee's duties with the Company on a
full-time basis for 180 consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the Employee
or the Employee's legal representative (such agreement as to acceptability not
to be withheld unreasonably).
(b) Cause. The Company may terminate the Employee's employment during the Employment Period for Cause. For the sole and exclusive purposes of this Agreement, "Cause" shall mean:
(i) The willful and continued failure of the Employee to perform substantially the Employee's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Employee by the Board, the Chief Executive Officer of the Company or the President of the Company which specifically identifies the manner in which the Board, the Chief Executive Officer or the President believes that the Employee has not substantially performed the Employee's duties, or
(ii) The willful engaging by the Employee in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the Employee, shall be considered "willful" unless it is done, or omitted to be done, by the Employee in bad faith or without reasonable belief that the Employee's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company. The cessation of employment of the Employee shall not be deemed to
be for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Employee and the Employee is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Employee is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.
(c) Good Reason. The Employee's employment may be terminated by the Employee for Good Reason. For the sole and exclusive purposes of this Agreement, "Good Reason" shall mean:
(i) The assignment to the Employee of any duties inconsistent in any respect with the Employee's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee;
(ii) Any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee;
(iii) The Company's requiring the Employee to be based at any office or location other than as provided in Section 4(a)(i)(b) hereof or the Company's requiring the Employee to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date;
(iv) Any purported termination by the Company of the Employee's employment otherwise than as expressly permitted by this Agreement; or
(v) Any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Employee shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Employee for any reason during the 30-day period immediately following the first anniversary of the Effective Date shall be deemed to be a termination for Good Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause, or by the Employee for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment under the provision so indicated, and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Employee or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Employee or the Company, respectively, hereunder or preclude the Employee or the Company, respectively, from asserting such fact or circumstance in enforcing the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the Employee's employment is terminated by the Company for Cause, or by the Employee for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Employee's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Employee of such termination, and (iii) if the Employee's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Employee or the Disability Effective Date, as the case may be.
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Employee's employment other than for Cause, death or Disability or the Employee shall terminate employment for Good Reason:
(i) The Company shall pay to the Employee in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:
[a] The sum of [i] the Employee's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, [ii] the Annual Target
Bonus payable as provided for in the Company's current Annual Bonus Plan,
pro-rated through the Date of Termination using a fraction, the numerator of
which is the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and [iii] any compensation
previously deferred by the Employee (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described in clauses [i], [ii] and
[iii] shall be hereinafter referred to as the "Accrued Obligations"); and
[b] An amount equal to the sum of (i) the product of two times the Employee's Annual Base Salary and (ii) two times the Annual Target Bonus as provided for in the Company's current Annual Bonus Plan; and
[c] An amount equal to the difference between [i] the actuarial equivalent of the benefit (utilizing actuarial assumptions no less favorable to the Employee than those in effect under the Retirement Plan (as defined below) immediately prior to the Effective Date) under any qualified retirement plan in which the Employee participates (the "Retirement Plan") and any excess or supplemental retirement plan or nonqualified deferred compensation plan in which the Employee participates (together, the "SERP") which the Employee would receive if the Employee's employment continued for two years after the Date of Termination assuming for this purpose that all accrued benefits are fully vested, and, assuming that Employee's compensation in each of the two years is equal to Employee's compensation in the
last full fiscal year prior to the Date of Termination, and [ii] the actuarial equivalent of the Employee's actual benefit (paid or payable), if any, under any Retirement Plan and the SERP as of the Date of Termination;
(ii) For two years after the Employee's Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Employee and/or the Employee's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iii) of this Agreement if the Employee's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies applicable generally to other peer Employees and their families, provided, however, that if the Employee becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Employee for retiree benefits pursuant to such plans, practices, programs and policies, the Employee shall be considered to have remained employed until two and one-half years after the Date of Termination and to have retired on the last day of such period;
(iii) The Company shall, at its sole expense as incurred, provide the Employee with Employee-level outplacement services for a period of six months, the scope and provider of which shall be selected by the Employee in his sole discretion; and
(iv) To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Employee any other amounts or benefits required to be paid or provided or which the Employee is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Employee's employment is terminated by reason of the Employee's death during the Employment Period, this Agreement shall terminate without further obligations to the Employee's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Employee's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Employee's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer Employees of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect as of the date of the Employee's death.
(c) Disability. If the Employee's employment is terminated by reason of the Employee's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Employee, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Employee in a lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Employee shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled Employees and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer Employees and their families at any time after the Effective Date.
(d) Cause; Other than for Good Reason. If the Employee's employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Employee other than the obligation to pay to the Employee (i) his Annual Base Salary through the Date of Termination, (ii) the amount of any compensation previously deferred by the Employee, and (iii) Other Benefits, in each case to the extent theretofore unpaid. If the Employee voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Employee, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Employee in a lump sum in cash within 30 days of the Date of Termination.
7. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Employee may qualify, nor shall anything herein limit or otherwise affect such rights as the Employee may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Employee or others. The Employee shall not be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Employee under any of the provisions of this Agreement. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Employee may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Employee or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Employee about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by such
certified public accounting firm as may be designated by the Employee (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Employee within 15 business days of the receipt of notice
from the Employee that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Employee within five days of
the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Employee, it shall furnish the
Employee with a written opinion that failure to report the Excise Tax on the
Employee's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Employee. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Employee is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Employee shall:
(i) Give the Company any information reasonably requested by the Company relating to such claim,
(ii) Take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,
(iii) Cooperate with the Company in good faith in order effectively to contest such claim, and
(iv) Permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Employee agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee, on an interest-free basis and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 9(c), the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Employee shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have
been obtained by the Employee during the Employee's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Employee or representatives of the Employee in violation of this Agreement). After termination of the Employee's employment with the Company, the Employee shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Employee under this Agreement.
11. Successors.
(a) This Agreement is personal to the Employee and without the prior written consent of the Company shall not be assignable by the Employee otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Employee:
If to the Company:
PLEXUS CORP.
55 Jewelers Park Drive
Neenah, WI 54956-0156
Attn: Joseph D. Kaufman
or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Employee or the Company may have hereunder, including, without limitation, the right of the Employee to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
(f) The Employee and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Employee and the Company, the employment of the Employee by the Company is "at will" and, prior to the Effective Date, the Employee's employment and this Agreement may be terminated by either the Employee or the Company at any time prior to the Effective Date, in which case the Employee shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.
PLEXUS CORP.
By:______________________________
EXHIBIT 10.6(a)
CREDIT AGREEMENT
DATED AS OF OCTOBER 22, 2003,
AMONG
PLEXUS CORP.,
THE GUARANTORS FROM TIME TO TIME PARTIES HERETO,
THE LENDERS FROM TIME TO TIME PARTIES HERETO,
AND
HARRIS TRUST AND SAVINGS BANK,
as Administrative Agent and as Sole Lead Arranger
TABLE OF CONTENTS
SECTION HEADING PAGE
SECTION 1. THE CREDIT FACILITIES..................................................................1
Section 1.1. Revolving Credit Commitments...........................................................1
Section 1.2. Letters of Credit......................................................................1
Section 1.3. Applicable Interest Rates..............................................................4
Section 1.4. Minimum Borrowing Amounts; Maximum Eurodollar Loans....................................6
Section 1.5. Manner of Borrowing Loans and Designating Applicable Interest Rates....................6
Section 1.6. Interest Periods.......................................................................8
Section 1.7. Maturity of Revolving Loans and Swing Loans............................................9
Section 1.8. Prepayments............................................................................9
Section 1.9. Default Rate..........................................................................11
Section 1.10. The Notes.............................................................................12
Section 1.11. Funding Indemnity.....................................................................12
Section 1.12. Revolving Credit Commitment Terminations..............................................13
Section 1.13. Substitution of Lenders...............................................................13
Section 1.14. Swing Loans...........................................................................14
SECTION 2. FEES..................................................................................15
Section 2.1. Fees..................................................................................15
SECTION 3. PLACE AND APPLICATION OF PAYMENTS.....................................................16
Section 3.1. Place and Application of Payments.....................................................16
SECTION 4. GUARANTIES AND COLLATERAL.............................................................18
Section 4.1. Guaranties............................................................................18
Section 4.2. Collateral............................................................................18
Section 4.3. Further Assurances....................................................................19
SECTION 5. DEFINITIONS; INTERPRETATION...........................................................19
Section 5.1. Definitions...........................................................................19
Section 5.2. Interpretation........................................................................35
Section 5.3. Change in Accounting Principles.......................................................35
SECTION 6. REPRESENTATIONS AND WARRANTIES........................................................35
Section 6.1. Organization and Qualification........................................................35
Section 6.2. Subsidiaries..........................................................................36
Section 6.3. Authority and Validity of Obligations.................................................36
Section 6.4. Use of Proceeds; Margin Stock.........................................................37
Section 6.5. Financial Reports.....................................................................37
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Section 6.6. No Material Adverse Change............................................................37
Section 6.7. Full Disclosure.......................................................................37
Section 6.8. Trademarks, Franchises, and Licenses..................................................37
Section 6.9. Governmental Authority and Licensing..................................................38
Section 6.10. Good Title............................................................................38
Section 6.11. Litigation and Other Controversies....................................................38
Section 6.12. Taxes.................................................................................38
Section 6.13. Approvals.............................................................................38
Section 6.14. Affiliate Transactions................................................................39
Section 6.15. Investment Company; Public Utility Holding Company....................................39
Section 6.16. ERISA.................................................................................39
Section 6.17. Compliance with Laws..................................................................39
Section 6.18. Other Agreements......................................................................40
Section 6.19. Solvency..............................................................................40
Section 6.20. No Default............................................................................40
SECTION 7. CONDITIONS PRECEDENT..................................................................40
Section 7.1. All Credit Events.....................................................................40
Section 7.2. Initial Credit Event..................................................................41
SECTION 8. COVENANTS.............................................................................43
Section 8.1. Maintenance of Business...............................................................43
Section 8.2. Maintenance of Properties.............................................................43
Section 8.3. Taxes and Assessments.................................................................43
Section 8.4. Insurance.............................................................................43
Section 8.5. Financial Reports.....................................................................44
Section 8.6. Inspection............................................................................46
Section 8.7. Borrowings and Guaranties.............................................................46
Section 8.8. Liens.................................................................................47
Section 8.9. Investments, Acquisitions, Loans and Advances.........................................48
Section 8.10. Mergers, Consolidations and Sales.....................................................49
Section 8.11. Maintenance of Subsidiaries...........................................................50
Section 8.12. Dividends and Certain Other Restricted Payments.......................................50
Section 8.13. ERISA.................................................................................50
Section 8.14. Compliance with Laws..................................................................50
Section 8.15. Burdensome Contracts With Affiliates..................................................51
Section 8.16. No Changes in Fiscal Year.............................................................51
Section 8.17. Formation of Subsidiaries.............................................................52
Section 8.18. Change in the Nature of Business......................................................52
Section 8.19. Use of Loan Proceeds..................................................................52
Section 8.20. No Restrictions.......................................................................52
Section 8.21. Financial Covenants...................................................................52
SECTION 9. EVENTS OF DEFAULT AND REMEDIES........................................................53
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Section 9.1. Events of Default.....................................................................53
Section 9.2. Non-Bankruptcy Defaults...............................................................55
Section 9.3. Bankruptcy Defaults...................................................................56
Section 9.4. Collateral for Undrawn Letters of Credit..............................................56
Section 9.5. Notice of Default.....................................................................56
Section 9.6. Expenses..............................................................................57
SECTION 10. CHANGE IN CIRCUMSTANCES...............................................................57
Section 10.1. Change of Law.........................................................................57
Section 10.2. Unavailability of Deposits or Inability to Ascertain, or Inadequacy of,
LIBOR.............................................................................57
Section 10.3. Increased Cost and Reduced Return.....................................................58
Section 10.4. Lending Offices.......................................................................59
Section 10.5. Discretion of Lender as to Manner of Funding..........................................59
SECTION 11. THE ADMINISTRATIVE AGENT..............................................................59
Section 11.1. Appointment and Authorization of Administrative Agent.................................59
Section 11.2. Administrative Agent and its Affiliates...............................................60
Section 11.3. Action by Administrative Agent........................................................60
Section 11.4. Consultation with Experts.............................................................60
Section 11.5. Liability of Administrative Agent; Credit Decision....................................60
Section 11.6. Indemnity.............................................................................61
Section 11.7. Resignation of Administrative Agent and Successor Administrative Agent................61
Section 11.8. L/C Issuer............................................................................62
Section 11.9. Hedging Liability and Funds Transfer and Deposit Account Liability
Arrangements......................................................................62
Section 11.10. Designation of Additional Agents......................................................63
Section 11.11. Authorization to Release or Subordinate or Limit Liens................................63
Section 11.12. Authorization to Enter into, and Enforcement of, the Collateral
Documents.........................................................................63
SECTION 12. THE GUARANTEES........................................................................63
Section 12.1. The Guarantees........................................................................63
Section 12.2. Guarantee Unconditional...............................................................64
Section 12.3. Discharge Only upon Payment in Full; Reinstatement in Certain
Circumstances.....................................................................65
Section 12.4. Subrogation...........................................................................65
Section 12.5. Waivers...............................................................................66
Section 12.6. Limit on Recovery.....................................................................66
Section 12.7. Stay of Acceleration..................................................................66
Section 12.8. Benefit to Guarantors.................................................................66
Section 12.9. Guarantor Covenants...................................................................66
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SECTION 13. MISCELLANEOUS.........................................................................66
Section 13.1. Withholding Taxes.....................................................................66
Section 13.2. No Waiver, Cumulative Remedies........................................................68
Section 13.3. Non-Business Days.....................................................................68
Section 13.4. Documentary Taxes.....................................................................68
Section 13.5. Survival of Representations...........................................................68
Section 13.6. Survival of Indemnities...............................................................68
Section 13.7. Sharing of Set-Off....................................................................68
Section 13.8. Notices...............................................................................69
Section 13.9. Counterparts..........................................................................69
Section 13.10. Successors and Assigns................................................................70
Section 13.11. Participants..........................................................................70
Section 13.12. Assignments...........................................................................70
Section 13.13. Amendments............................................................................71
Section 13.14. Headings..............................................................................72
Section 13.15. Costs and Expenses; Indemnification...................................................72
Section 13.16. Set-off...............................................................................72
Section 13.17. Entire Agreement......................................................................73
Section 13.18. Governing Law.........................................................................73
Section 13.19. Severability of Provisions............................................................73
Section 13.20. Excess Interest.......................................................................73
Section 13.21. Construction..........................................................................74
Section 13.22. Lender's Obligations Several..........................................................74
Section 13.23. Submission to Jurisdiction; Waiver of Jury Trial......................................74
Section 13.24. Confidentiality.......................................................................74
Signature Page...............................................................................................S-1
EXHIBIT A -- Notice of Payment Request
EXHIBIT B -- Notice of Borrowing
EXHIBIT C -- Notice of Continuation/Conversion
EXHIBIT D-1 -- Revolving Note
EXHIBIT D-2 -- Swing Note
EXHIBIT E -- Borrowing Base Certificate
EXHIBIT F -- Compliance Certificate
EXHIBIT G -- Additional Guarantor Supplement
EXHIBIT H -- Assignment and Acceptance
SCHEDULE 1 -- Revolving Credit Commitments
SCHEDULE 6.2 -- Subsidiaries
SCHEDULE 6.8 -- Trademarks, Franchises and Licenses
SCHEDULE 8.7 -- Existing Guarantees
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CREDIT AGREEMENT
This Credit Agreement is entered into as of October 22, 2003, by and among PLEXUS CORP., a Wisconsin corporation (the "Borrower"), the direct and indirect Domestic Subsidiaries of the Borrower from time to time party to this Agreement, as Guarantors, the several financial institutions from time to time party to this Agreement, as Lenders, and Harris Trust and Savings Bank, as Administrative Agent as provided herein. All capitalized terms used herein without definition shall have the same meanings herein as such terms are defined in Section 5.1 hereof.
PRELIMINARY STATEMENT
The Borrower has requested, and the Lenders have agreed to extend, certain credit facilities on the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. THE CREDIT FACILITIES.
Section 1.1. Revolving Credit Commitments. Subject to the terms and
conditions hereof, each Lender, by its acceptance hereof, severally agrees to
make a loan or loans (individually a "Revolving Loan" and collectively the
"Revolving Loans") in U.S. Dollars to the Borrower from time to time on a
revolving basis up to the amount of such Lender's Revolving Credit Commitment,
subject to any reductions thereof pursuant to the terms hereof, before the
Revolving Credit Termination Date. The sum of the aggregate principal amount of
Revolving Loans, Swing Loans, and L/C Obligations at any time outstanding shall
not exceed the Revolving Credit Commitments in effect at such time; provided,
however, that at all times after the occurrence of the Borrowing Base Condition,
the sum of the aggregate principal amount of Revolving Loans, Swing Loans, and
L/C Obligations at any time outstanding shall not exceed the lesser of (i) the
Revolving Credit Commitments in effect at such time and (ii) the Borrowing Base
as then determined and computed. Each Borrowing of Revolving Loans shall be made
ratably by the Lenders in proportion to their respective Revolver Percentages.
As provided in Section 1.5(a) hereof, the Borrower may elect that each Borrowing
of Revolving Loans be either Base Rate Loans or Eurodollar Loans. Revolving
Loans may be repaid and the principal amount thereof reborrowed before the
Revolving Credit Termination Date, subject to the terms and conditions hereof.
The Administrative Agent will, within 30 days of determining or being notified
that the Borrowing Base Condition has occurred, conduct or cause to be conducted
a field audit of the Collateral, at the expense of the Borrower as set forth in
Section 2.1(d) hereof, for the purpose of verifying the amount of the initial
Borrowing Base.
Section 1.2. Letters of Credit. (a) General Terms. Subject to the terms and conditions hereof, as part of the Revolving Credit, the L/C Issuer shall issue standby and commercial letters of credit (each a "Letter of Credit") for the account of Borrower in an aggregate undrawn face amount up to the L/C Sublimit. Each Letter of Credit shall be issued by the L/C Issuer, but each
Lender shall be obligated to reimburse the L/C Issuer for such Lender's Revolver Percentage of the amount of each drawing thereunder and, accordingly, each Letter of Credit shall constitute usage of the Revolving Credit Commitment of each Lender pro rata in an amount equal to its Revolver Percentage of the L/C Obligations then outstanding.
(b) Applications. At any time before the Revolving Credit Termination
Date, the L/C Issuer shall, at the request of the Borrower, issue one or more
Letters of Credit in U.S. Dollars, in a form satisfactory to the L/C Issuer,
with expiration dates no later than the earlier of twelve (12) months from the
date of issuance (or which are cancelable not later than twelve (12) months from
the date of issuance and each renewal) or thirty (30) days prior to the
Revolving Credit Termination Date, in an aggregate face amount as set forth
above, upon the receipt of an application duly executed by the Borrower for the
relevant Letter of Credit in the form then customarily prescribed by the L/C
Issuer for the Letter of Credit requested (each an "Application").
Notwithstanding anything contained in any Application to the contrary: (i) the
Borrower shall pay fees in connection with each Letter of Credit as set forth in
Section 2.1 hereof, (ii) except as otherwise provided in Section 1.8 hereof,
before the occurrence of an Event of Default, the L/C Issuer will not call for
the funding by the Borrower of any amount under a Letter of Credit before being
presented with a drawing thereunder, and (iii) if the L/C Issuer is not timely
reimbursed for the amount of any drawing under a Letter of Credit on the date
such drawing is paid, the Borrower's obligation to reimburse the L/C Issuer for
the amount of such drawing shall bear interest (which the Borrower hereby
promises to pay) from and after the date such drawing is paid at a rate per
annum equal to the sum of the Applicable Margin plus the Base Rate from time to
time in effect (computed on the basis of a year of 365 or 366 days, as the case
may be, and the actual number of days elapsed). If the L/C Issuer issues any
Letter of Credit with an expiration date that is automatically extended unless
the L/C Issuer gives notice that the expiration date will not so extend beyond
its then scheduled expiration date, unless the Required Lenders instruct the L/C
Issuer otherwise, the L/C Issuer will give such notice of non-renewal before the
time necessary to prevent such automatic extension if before such required
notice date: (i) the expiration date of such Letter of Credit if so extended
would be after the Revolving Credit Termination Date, (ii) the Revolving Credit
Commitments have been terminated, or (iii) a Default or an Event of Default
exists and the Administrative Agent, at the request or with the consent of the
Required Lenders, has given the L/C Issuer instructions not to so permit the
extension of the expiration date of such Letter of Credit. The L/C Issuer agrees
to issue amendments to the Letter(s) of Credit increasing the amount, or
extending the expiration date, thereof at the request of the Borrower subject to
the conditions of Section 7 hereof and the other terms of this Section 1.2.
(c) The Reimbursement Obligations. Subject to Section 1.2(b) hereof, the obligation of the Borrower to reimburse the L/C Issuer for all drawings under a Letter of Credit (a "Reimbursement Obligation") shall be governed by the Application related to such Letter of Credit, except that reimbursement shall be made by no later than 12:00 Noon (Chicago time) on the date when each drawing is to be paid if the Borrower has been informed of such drawing by the L/C Issuer on or before 11:30 a.m. (Chicago time) on the date when such drawing is to be paid or, if notice of such drawing is given to the Borrower after 11:30 a.m. (Chicago time) on the date when such drawing is to be paid, by the end of such day, in immediately available funds at the Administrative Agent's principal office in Chicago, Illinois or such other office as the
Administrative Agent may designate in writing to the Borrower (who shall thereafter cause to be distributed to the L/C Issuer such amount(s) in like funds). If the Borrower does not make any such reimbursement payment on the date due and the Participating Lenders fund their participations therein in the manner set forth in Section 1.2(d) below, then all payments thereafter received by the Administrative Agent in discharge of any of the relevant Reimbursement Obligations shall be distributed in accordance with Section 1.2(d) below.
(d) The Participating Interests. Each Lender (other than the Lender acting as L/C Issuer in issuing the relevant Letter of Credit), by its acceptance hereof, severally agrees to purchase from the L/C Issuer, and the L/C Issuer hereby agrees to sell to each such Lender (a "Participating Lender"), an undivided percentage participating interest (a "Participating Interest"), to the extent of its Revolver Percentage, in each Letter of Credit issued by, and each Reimbursement Obligation owed to, the L/C Issuer. Upon any failure by the Borrower to pay any Reimbursement Obligation at the time required on the date the related drawing is to be paid, as set forth in Section 1.2(c) above, or if the L/C Issuer is required at any time to return to the Borrower or to a trustee, receiver, liquidator, custodian or other Person any portion of any payment of any Reimbursement Obligation, each Participating Lender shall, not later than the Business Day it receives a certificate in the form of Exhibit A hereto from the L/C Issuer (with a copy to the Administrative Agent) to such effect, if such certificate is received before 1:00 p.m. (Chicago time), or not later than 1:00 p.m. (Chicago time) the following Business Day, if such certificate is received after such time, pay to the Administrative Agent for the account of the L/C Issuer an amount equal to such Participating Lender's Revolver Percentage of such unpaid or recaptured Reimbursement Obligation together with interest on such amount accrued from the date the related payment was made by the L/C Issuer to the date of such payment by such Participating Lender at a rate per annum equal to: (i) from the date the related payment was made by the L/C Issuer to the date two (2) Business Days after payment by such Participating Lender is due hereunder, the Federal Funds Rate for each such day and (ii) from the date two (2) Business Days after the date such payment is due from such Participating Lender to the date such payment is made by such Participating Lender, the Base Rate in effect for each such day. Each such Participating Lender shall thereafter be entitled to receive its Revolver Percentage of each payment received in respect of the relevant Reimbursement Obligation and of interest paid thereon, with the L/C Issuer retaining its Revolver Percentage thereof as a Lender hereunder. The several obligations of the Participating Lenders to the L/C Issuer under this Section 1.2 shall be absolute, irrevocable, and unconditional under any and all circumstances whatsoever and shall not be subject to any set-off, counterclaim or defense to payment which any Participating Lender may have or have had against the Borrower, the L/C Issuer, the Administrative Agent, any Lender or any other Person whatsoever. Without limiting the generality of the foregoing, such obligations shall not be affected by any Default or Event of Default or by any reduction or termination of any Revolving Credit Commitment of any Lender, and each payment by a Participating Lender under this Section 1.2 shall be made without any offset, abatement, withholding or reduction whatsoever.
(e) Indemnification. The Participating Lenders shall, to the extent of their respective Revolver Percentages, indemnify the L/C Issuer (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the L/C Issuer's gross negligence or willful
misconduct) that the L/C Issuer may suffer or incur in connection with any Letter of Credit issued by it. The obligations of the Participating Lenders under this Section 1.2(e) and all other parts of this Section 1.2 shall survive termination of this Agreement and of all Applications, Letters of Credit, and all drafts and other documents presented in connection with drawings thereunder.
(f) Manner of Requesting a Letter of Credit. The Borrower shall provide at least five (5) Business Days' advance written notice to the Administrative Agent of each request for the issuance of a Letter of Credit, such notice in each case to be accompanied by an Application for such Letter of Credit properly completed and executed by the Borrower and, in the case of an extension or an increase in the amount of a Letter of Credit, a written request therefor, in a form acceptable to the Administrative Agent and the L/C Issuer, in each case, together with the fees called for by this Agreement. The Administrative Agent shall promptly notify the L/C Issuer of the Administrative Agent's receipt of each such notice and the L/C Issuer shall promptly notify the Administrative Agent and the Lenders of the issuance of the Letter of Credit so requested.
Section 1.3. Applicable Interest Rates. (a) Base Rate Loans. Each Base Rate Loan made or maintained by a Lender shall bear interest during each Interest Period it is outstanding (computed on the basis of a year of 365 or 366 days, as the case may be, and the actual days elapsed) on the unpaid principal amount thereof from the date such Loan is advanced or continued, or created by conversion from a Eurodollar Loan, until maturity (whether by acceleration or otherwise) at a rate per annum equal to the sum of the Applicable Margin plus the Base Rate from time to time in effect, payable on the last day of its Interest Period and at maturity (whether by acceleration or otherwise).
"Base Rate" means for any day the greater of: (i) the rate of interest announced or otherwise established by the Administrative Agent from time to time as its prime commercial rate as in effect on such day, with any change in the Base Rate resulting from a change in said prime commercial rate to be effective as of the date of the relevant change in said prime commercial rate (it being acknowledged and agreed that such rate may not be the Administrative Agent's best or lowest rate) and (ii) the sum of (x) the rate determined by the Administrative Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the rates per annum quoted to the Administrative Agent at approximately 10:00 a.m. (Chicago time) (or as soon thereafter as is practicable) on such day (or, if such day is not a Business Day, on the immediately preceding Business Day) by two or more Federal funds brokers selected by the Administrative Agent for sale to the Administrative Agent at face value of Federal funds in the secondary market in an amount equal or comparable to the principal amount owed to the Administrative Agent for which such rate is being determined, plus (y) 1/2 of 1%.
(b) Eurodollar Loans. Each Eurodollar Loan made or maintained by a Lender shall bear interest during each Interest Period it is outstanding (computed on the basis of a year of 360 days and actual days elapsed) on the unpaid principal amount thereof from the date such Loan is advanced or continued, or created by conversion from a Base Rate Loan, until maturity (whether by acceleration or otherwise) at a rate per annum equal to the sum of the Applicable Margin plus the Adjusted LIBOR applicable for such Interest Period, payable on the last day of the Interest Period and at maturity (whether by acceleration or otherwise), and, if the applicable Interest
Period is longer than three months, on each day occurring every three months after the commencement of such Interest Period.
"Adjusted LIBOR" means, for any Borrowing of Eurodollar Loans, a rate per annum determined in accordance with the following formula:
"Eurodollar Reserve Percentage" means, for any Borrowing of Eurodollar Loans, the daily average for the applicable Interest Period of the maximum rate, expressed as a decimal, at which reserves (including, without limitation, any supplemental, marginal, and emergency reserves) are imposed during such Interest Period by the Board of Governors of the Federal Reserve System (or any successor) on "eurocurrency liabilities", as defined in such Board's Regulation D (or in respect of any other category of liabilities that includes deposits by reference to which the interest rate on Eurodollar Loans is determined or any category of extensions of credit or other assets that include loans by non-United States offices of any Lender to United States residents), subject to any amendments of such reserve requirement by such Board or its successor, taking into account any transitional adjustments thereto. For purposes of this definition, the Eurodollar Loans shall be deemed to be "eurocurrency liabilities" as defined in Regulation D without benefit or credit for any prorations, exemptions or offsets under Regulation D.
"LIBOR" means, for an Interest Period for a Borrowing of Eurodollar Loans, (a) the LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if the LIBOR Index Rate cannot be determined, the arithmetic average of the rates of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) at which deposits in U.S. Dollars in immediately available funds are offered to the Administrative Agent at 11:00 a.m. (London, England time) two (2) Business Days before the beginning of such Interest Period by three (3) or more major banks in the interbank eurodollar market selected by the Administrative Agent for delivery on the first day of and for a period equal to such Interest Period and in an amount equal or comparable to the principal amount of the Eurodollar Loan scheduled to be made by the Administrative Agent as part of such Borrowing.
"LIBOR Index Rate" means, for any Interest Period, the rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a period equal to such Interest Period, which appears on the Telerate Page 3750 as of 11:00 a.m. (London, England time) on the day two (2) Business Days before the commencement of such Interest Period.
"Telerate Page 3750" means the display designated as "Page 3750" on the Telerate Service (or such other page as may replace Page 3750 on that service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association Interest Settlement Rates for U.S. Dollar deposits).
(c) Rate Determinations. The Administrative Agent shall determine each interest rate applicable to the Loans and the Reimbursement Obligations hereunder, and its determination thereof shall be conclusive and binding except in the case of manifest error.
Section 1.4. Minimum Borrowing Amounts; Maximum Eurodollar Loans. Each Borrowing of Base Rate Loans advanced hereunder shall be in an amount not less than $500,000 or such greater amount which is an integral multiple of $100,000. Each Borrowing of Eurodollar Loans advanced, continued or converted hereunder shall be in an amount equal to $1,000,000 or such greater amount which is an integral multiple of $100,000. Without the Administrative Agent's consent, there shall not be more than five (5) Borrowings of Eurodollar Loans outstanding hereunder at any one time.
Section 1.5. Manner of Borrowing Loans and Designating Applicable
Interest Rates. (a) Notice to the Administrative Agent. The Borrower shall give
notice to the Administrative Agent by no later than 10:00 a.m. (Chicago time):
(i) at least three (3) Business Days before the date on which the Borrower
requests the Lenders to advance a Borrowing of Eurodollar Loans and (ii) on the
date the Borrower requests the Lenders to advance a Borrowing of Base Rate
Loans. The Loans included in each Borrowing shall bear interest initially at the
type of rate specified in such notice of a new Borrowing. Thereafter, subject to
the terms and conditions hereof, the Borrower may from time to time elect to
change or continue the type of interest rate borne by each Borrowing or, subject
to Section 1.4's minimum amount requirement for each outstanding Borrowing, a
portion thereof, as follows: (i) if such Borrowing is of Eurodollar Loans, on
the last day of the Interest Period applicable thereto, the Borrower may
continue part or all of such Borrowing as Eurodollar Loans or convert part or
all of such Borrowing into Base Rate Loans or (ii) if such Borrowing is of Base
Rate Loans, on any Business Day, the Borrower may convert all or part of such
Borrowing into Eurodollar Loans for an Interest Period or Interest Periods
specified by the Borrower. The Borrower shall give all such notices requesting
the advance, continuation or conversion of a Borrowing to the Administrative
Agent by telephone or telecopy (which notice shall be irrevocable once given
and, if by telephone, shall be promptly confirmed in writing), substantially in
the form attached hereto as Exhibit B (Notice of Borrowing) or Exhibit C (Notice
of Continuation/Conversion), as applicable, or in such other form acceptable to
the Administrative Agent. Notice of the continuation of a Borrowing of
Eurodollar Loans for an additional Interest Period or of the conversion of part
or all of a Borrowing of Base Rate Loans into Eurodollar Loans must be given by
no later than 10:00 a.m. (Chicago time) at least three (3) Business Days before
the date of the requested continuation or conversion. All such notices
concerning the advance, continuation or conversion of a Borrowing shall specify
the date of the requested advance, continuation or conversion of a Borrowing
(which shall be a Business Day), the amount of the requested Borrowing to be
advanced, continued or converted, the type of Loans to comprise such new,
continued or converted Borrowing and, if such Borrowing is to be comprised of
Eurodollar Loans, the Interest Period applicable thereto. The Borrower agrees
that the Administrative Agent may rely on any such telephonic or telecopy notice
given by any person the Administrative Agent in good faith believes is an
Authorized Representative without the necessity of independent investigation,
and in the event any such notice by telephone conflicts with any written
confirmation such telephonic notice shall govern if the Administrative Agent has
acted in reliance thereon.
(b) Notice to the Lenders. The Administrative Agent shall give prompt telephonic or telecopy notice to each Lender of any notice from the Borrower received pursuant to Section 1.5(a) above and, if such notice requests the Lenders to make Eurodollar Loans, the Administrative Agent shall give notice to the Borrower and each Lender by like means of the interest rate applicable thereto promptly after the Administrative Agent has made such determination.
(c) Borrower's Failure to Notify; Automatic Continuations and Conversions. Any outstanding Borrowing of Base Rate Loans shall automatically be continued for an additional Interest Period on the last day of its then current Interest Period unless the Borrower has notified the Administrative Agent within the period required by Section 1.5(a) that the Borrower intends to convert such Borrowing, subject to Section 7.1 hereof, into a Borrowing of Eurodollar Loans or such Borrowing is prepaid in accordance with Section 1.8(a). If the Borrower fails to give notice pursuant to Section 1.5(a) above of the continuation or conversion of any outstanding principal amount of a Borrowing of Eurodollar Loans before the last day of its then current Interest Period within the period required by Section 1.5(a) or, whether or not such notice has been given, one or more of the conditions set forth in Section 7.1 for the continuation or conversion of a Borrowing of Eurodollar Loans would not be satisfied, and such Borrowing is not prepaid in accordance with Section 1.8(a), such Borrowing shall automatically be converted into a Borrowing of Base Rate Loans. In the event the Borrower fails to give notice pursuant to Section 1.5(a) above of a Borrowing equal to the amount of a Reimbursement Obligation and has not notified the Administrative Agent by 12:00 noon (Chicago time) on the day such Reimbursement Obligation becomes due that it intends to repay such Reimbursement Obligation through funds not borrowed under this Agreement, the Borrower shall be deemed to have requested a Borrowing of Base Rate Loans under the Revolving Credit (or, at the option of the Administrative Agent, under the Swing Line) on such day in the amount of the Reimbursement Obligation then due, which Borrowing shall be applied to pay the Reimbursement Obligation then due.
(d) Disbursement of Loans. Not later than 1:00 p.m. (Chicago time) on the date of any requested advance of a new Borrowing, subject to Section 7 hereof, each Lender shall make available its Loan comprising part of such Borrowing in funds immediately available at the principal office of the Administrative Agent in Chicago, Illinois. The Administrative Agent shall make the proceeds of each new Borrowing available to the Borrower at the Administrative Agent's principal office in Chicago, Illinois, by depositing such proceeds to the credit of the Borrower's operating account maintained with the Administrative Agent or as the Borrower and the Administrative Agent may otherwise agree.
(e) Administrative Agent Reliance on Lender Funding. Unless the Administrative Agent shall have been notified by a Lender prior to (or, in the case of a Borrowing of Base Rate Loans, by 1:00 p.m. (Chicago time) on) the date on which such Lender is scheduled to make payment to the Administrative Agent of the proceeds of a Loan (which notice shall be effective upon receipt) that such Lender does not intend to make such payment, the Administrative Agent may assume that such Lender has made such payment when due and the Administrative Agent may in reliance upon such assumption (but shall not be required to) make available to the Borrower the proceeds of the Loan to be made by such Lender and, if any Lender has not in fact
made such payment to the Administrative Agent, such Lender shall, on demand, pay to the Administrative Agent the amount made available to the Borrower attributable to such Lender together with interest thereon in respect of each day during the period commencing on the date such amount was made available to the Borrower and ending on (but excluding) the date such Lender pays such amount to the Administrative Agent at a rate per annum equal to: (i) from the date the related advance was made by the Administrative Agent to the date two (2) Business Days after payment by such Lender is due hereunder, the Federal Funds Rate for each such day and (ii) from the date two (2) Business Days after the date such payment is due from such Lender to the date such payment is made by such Lender, the Base Rate in effect for each such day. If such amount is not received from such Lender by the Administrative Agent immediately upon demand, the Borrower will, on demand, repay to the Administrative Agent the proceeds of the Loan attributable to such Lender with interest thereon at a rate per annum equal to the interest rate applicable to the relevant Loan, but without such payment being considered a payment or prepayment of a Loan under Section 1.11 hereof so that the Borrower will have no liability under such Section with respect to such payment.
Section 1.6. Interest Periods. As provided in Section 1.5(a) and 1.14 hereof, at the time of each request to advance, continue or create by conversion a Borrowing of Eurodollar Loans or Swing Loans, the Borrower shall select an Interest Period applicable to such Loans from among the available options. The term "Interest Period" means the period commencing on the date a Borrowing of Loans is advanced, continued or created by conversion and ending: (a) in the case of Base Rate Loans, on the last day of the calendar quarter (i.e., the last day of March, June, September or December, as applicable) in which such Borrowing is advanced, continued or created by conversion (or on the last day of the following calendar quarter if such Loan is advanced, continued or created by conversion on the last day of a calendar quarter), (b) in the case of a Eurodollar Loan, 1, 2, 3 or 6 months thereafter, and (c) in the case of a Swing Loan, on the date 1 to 5 days thereafter as mutually agreed to by the Borrower and the Administrative Agent; provided, however, that:
(i) any Interest Period for a Borrowing of Revolving Loans or Swing Loans consisting of Base Rate Loans that otherwise would end after the Revolving Credit Termination Date shall end on the Revolving Credit Termination Date;
(ii) no Interest Period with respect to any portion of the Revolving Loans or Swing Loans shall extend beyond the Revolving Credit Termination Date;
(iii) whenever the last day of any Interest Period would otherwise be a day that is not a Business Day, the last day of such Interest Period shall be extended to the next succeeding Business Day, provided that, if such extension would cause the last day of an Interest Period for a Borrowing of Eurodollar Loans to occur in the following calendar month, the last day of such Interest Period shall be the immediately preceding Business Day; and
(iv) for purposes of determining an Interest Period for a Borrowing of Eurodollar Loans, a month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month;
provided, however, that if there is no numerically corresponding day in the month in which such an Interest Period is to end or if such an Interest Period begins on the last Business Day of a calendar month, then such Interest Period shall end on the last Business Day of the calendar month in which such Interest Period is to end.
Section 1.7. Maturity of Revolving Loans and Swing Loans. Each Revolving Loan and Swing Loan, both for principal and interest not sooner paid, shall mature and become due and payable by the Borrower on the Revolving Credit Termination Date.
Section 1.8. Prepayments. (a) Optional. The Borrower may prepay in
whole or in part (but, if in part, then: (i) if such Borrowing is of Base Rate
Loans, in an amount not less than $500,000, (ii) if such Borrowing is of
Eurodollar Loans, in an amount not less than $1,000,000, and (iii) in each case,
in an amount such that the minimum amount required for a Borrowing pursuant to
Section 1.4 and 1.14 hereof remains outstanding) any Borrowing of Eurodollar
Loans at any time upon three (3) Business Days prior notice by the Borrower to
the Administrative Agent or, in the case of a Borrowing of Base Rate Loans,
notice delivered by the Borrower to the Administrative Agent no later than 10:00
a.m. (Chicago time) on the date of prepayment (or, in any case, such shorter
period of time then agreed to by the Administrative Agent), such prepayment to
be made by the payment of the principal amount to be prepaid and, in the case of
any Term Loans or Eurodollar Loans or Swing Loans, accrued interest thereon to
the date fixed for prepayment plus any amounts due the Lenders under Section
1.11 hereof.
(b) Mandatory. (i) If the Borrower or any Subsidiary shall at any time
or from time to time make or agree to make a Disposition or shall suffer an
Event of Loss with respect to any Property, then the Borrower shall promptly
notify the Administrative Agent of such proposed Disposition or Event of Loss
(including the amount of the estimated Net Cash Proceeds to be received by the
Borrower or such Subsidiary in respect thereof) and, promptly upon receipt by
the Borrower or such Subsidiary of the Net Cash Proceeds of such Disposition or
Event of Loss, the Borrower shall prepay the Revolving Loans in an aggregate
amount equal to 100% of the amount of all such Net Cash Proceeds; provided that
(x) so long as no Default or Event of Default then exists, this subsection shall
not require any such prepayment with respect to Net Cash Proceeds received on
account of an Event of Loss so long as such Net Cash Proceeds are applied to
replace or restore the relevant Property in accordance with the relevant
Collateral Documents, (y) this subsection shall not require any such prepayment
with respect to Net Cash Proceeds received on account of any Disposition of or
Event of Loss with respect to assets with a value not exceeding 10% of the
aggregate book value of the total consolidated assets of the Borrower and its
Subsidiaries immediately prior to such Disposition or Event of Loss so long as
no Default or Event of Default then exists, and (z) in the case of any
Disposition not covered by clause (y) above, so long as no Default or Event of
Default then exists, if the Borrower states in its notice of such event that the
Borrower or the relevant Subsidiary intends to reinvest, within 90 days of the
applicable Disposition, the Net Cash Proceeds thereof in assets similar to the
assets which were subject to such Disposition, then the Borrower shall not be
required to make a mandatory prepayment under this subsection in respect of such
Net Cash Proceeds to the extent such Net Cash Proceeds are actually reinvested
in such similar assets with such 90-day period. Promptly after the end of such
90-day period, the Borrower shall notify the Administrative Agent whether the
Borrower or such Subsidiary has reinvested such Net Cash Proceeds in such
similar
assets, and, to the extent such Net Cash Proceeds have not been so reinvested, the Borrower shall promptly prepay the Revolving Loans in the amount of such Net Cash Proceeds not so reinvested. The amount of each such prepayment shall be applied on a ratable basis among the outstanding Revolving Loans of the several Lenders based on the principal amounts thereof. If the Administrative Agent or the Required Lenders so request, all proceeds of such Disposition or Event of Loss shall be deposited with the Administrative Agent (or its agent) and held by it in the Collateral Account. So long as no Default or Event of Default exists, the Administrative Agent is authorized to disburse amounts representing such proceeds from the Collateral Account to or at the Borrower's direction for application to or reimbursement for the costs of replacing, rebuilding or restoring such Property.
(ii) If after the Closing Date the Borrower or any Subsidiary shall issue new equity securities (whether common or preferred stock or otherwise), other than (1) equity securities issued in connection with the exercise of employee stock options or pursuant to the Borrower's employee stock purchase or 401(k) plans, (2) capital stock issued to the seller of an Acquired Business in connection with an Acquisition permitted hereby and (3) other issuances of equity securities the Net Cash Proceeds of which do not exceed $5,000,000 in the aggregate during the term of this Agreement, the Borrower shall promptly notify the Administrative Agent of the estimated Net Cash Proceeds of such issuance to be received by or for the account of the Borrower or such Subsidiary in respect thereof. Promptly upon receipt by the Borrower or such Subsidiary of Net Cash Proceeds of such issuance, the Borrower shall prepay the Revolving Loans in an aggregate amount equal to 100% of the amount of such Net Cash Proceeds. The amount of each such prepayment shall be applied on a ratable basis among the outstanding Revolving Loans of the several Lenders based on the principal amounts thereof. The Borrower acknowledges that its performance hereunder shall not limit the rights and remedies of the Lenders for any breach of Section 8.11 (Maintenance of Subsidiaries) or Section 9.1(i) (Change of Control) hereof or any other terms of the Loan Documents.
(iii) If after the Closing Date the Borrower or any Subsidiary shall issue any Indebtedness for Borrowed Money, other than Indebtedness for Borrowed Money permitted by Section 8.7(a)-(h) hereof, the Borrower shall promptly notify the Administrative Agent of the estimated Net Cash Proceeds of such issuance to be received by or for the account of the Borrower or such Subsidiary in respect thereof. Promptly upon receipt by the Borrower or such Subsidiary of Net Cash Proceeds of such issuance, the Borrower shall prepay the Revolving Loans in an aggregate amount equal to 100% of the amount of such Net Cash Proceeds. The amount of each such prepayment shall be applied on a ratable basis among the outstanding Revolving Loans of the several Lenders based on the principal amounts thereof. The Borrower acknowledges that its performance hereunder shall not limit the rights and remedies of the Lenders for any breach of Section 8.7 hereof or any other terms of the Loan Documents.
(iv) The Borrower shall, on each date the Revolving Credit Commitments are reduced pursuant to Section 1.12 hereof, prepay the Revolving Loans, Swing Loans, and, if necessary, prefund the L/C Obligations by the amount, if any, necessary to reduce the sum of the aggregate principal amount of Revolving Loans, Swing Loans, and L/C Obligations then outstanding to the amount to which the Revolving Credit Commitments have been so reduced.
(v) If at any time after the occurrence of the Borrowing Base Condition the sum of the unpaid principal balance of the Revolving Loans, Swing Loans, and the L/C Obligations then outstanding shall be in excess of the Borrowing Base as then determined and computed, the Borrower shall immediately and without notice or demand pay over the amount of the excess to the Administrative Agent for the account of the Lenders as and for a mandatory prepayment on such Obligations, with each such prepayment first to be applied to the Revolving Loans and Swing Loans until payment in full thereof with any remaining balance to be held by the Administrative Agent in the Collateral Account as security for the Obligations owing with respect to the Letters of Credit.
(vi) Unless the Borrower otherwise directs, prepayments of Loans under this Section 1.8(b) shall be applied first to Borrowings of Base Rate Loans until payment in full thereof with any balance applied to Borrowings of Eurodollar Loans in the order in which their Interest Periods expire. Each prepayment of Loans under this Section 1.8(b) shall be made by the payment of the principal amount to be prepaid and, in the case of Eurodollar Loans or Swing Loans, accrued interest thereon to the date of prepayment together with any amounts due the Lenders under Section 1.11 hereof. Each prefunding of L/C Obligations shall be made in accordance with Section 9.4 hereof.
(c) Any amount of Revolving Loans and Swing Loans paid or prepaid before the Revolving Credit Termination Date may, subject to the terms and conditions of this Agreement, be borrowed, repaid and borrowed again.
Section 1.9. Default Rate. Notwithstanding anything to the contrary contained herein, while any Event of Default exists or after acceleration, the Borrower shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all Loans and Reimbursement Obligations, and letter of credit fees at a rate per annum equal to:
(a) for any Base Rate Loan or any Swing Loan bearing interest based on the Base Rate, the sum of 2.0% plus the Applicable Margin plus the Base Rate from time to time in effect;
(b) for any Eurodollar Loan or any Swing Loan bearing interest at the Administrative Agent's Quoted Rate, the sum of 2.0% plus the rate of interest in effect thereon at the time of such default until the end of the Interest Period applicable thereto and, thereafter, at a rate per annum equal to the sum of 2.0% plus the Applicable Margin for Base Rate Loans plus the Base Rate from time to time in effect;
(c) for any Reimbursement Obligation, the sum of 2.0% plus the amounts due under Section 1.2 with respect to such Reimbursement Obligation; and
(d) for any Letter of Credit, the sum of 2.0% plus the letter of credit fee due under Section 2.1 with respect to such Letter of Credit;
provided, however, that in the absence of acceleration, any adjustments pursuant to this Section shall be made at the election of the Administrative Agent, acting at the request or with the consent of the Required Lenders, with written notice to the Borrower. While any Event of Default exists or after acceleration, interest shall be paid on demand of the Administrative Agent at the request or with the consent of the Required Lenders.
Section 1.10. The Notes. (a) The Revolving Loans made to the Borrower by a Lender shall be evidenced by a single promissory note of the Borrower issued to such Lender in the form of Exhibit D-1 hereto. Each such promissory note is hereinafter referred to as a "Revolving Note" and collectively such promissory notes are referred to as the "Revolving Notes."
(b) The Swing Loans made to the Borrower by the Administrative Agent shall be evidenced by a single promissory note of the Borrower issued to the Administrative Agent in the form of Exhibit D-2 hereto. Such promissory note is hereinafter referred to as the "Swing Note."
(c) Each Lender shall record on its books and records or on a schedule to its appropriate Note the amount of each Loan advanced, continued or converted by it, all payments of principal and interest and the principal balance from time to time outstanding thereon, the type of such Loan, and, for any Eurodollar Loan or Swing Loan, the Interest Period and the interest rate applicable thereto. The record thereof, whether shown on such books and records of a Lender or on a schedule to the relevant Note, shall be prima facie evidence as to all such matters; provided, however, that the failure of any Lender to record any of the foregoing or any error in any such record shall not limit or otherwise affect the obligation of the Borrower to repay all Loans made to it hereunder together with accrued interest thereon. At the request of any Lender and upon such Lender tendering to the Borrower the appropriate Note to be replaced, the Borrower shall furnish a new Note to such Lender to replace any outstanding Note.
Section 1.11. Funding Indemnity. If any Lender shall incur any loss, cost or expense (including, without limitation, any loss of profit, and any loss, cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by such Lender to fund or maintain any Eurodollar Loan or Swing Loan or the relending or reinvesting of such deposits or amounts paid or prepaid to such Lender) as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Loan or Swing Loan on a date other than the last day of its Interest Period,
(b) any failure (because of a failure to meet the conditions of Section 7 or otherwise) by the Borrower to borrow or continue a Eurodollar Loan or Swing Loan, or to convert a Base Rate Loan into a Eurodollar Loan or Swing Loan, on the date specified in a notice given pursuant to Section 1.5(a) or 1.14 hereof,
(c) any failure by the Borrower to make any payment of principal on any Eurodollar Loan or Swing Loan when due (whether by acceleration or otherwise), or
(d) any acceleration of the maturity of a Eurodollar Loan or Swing Loan as a result of the occurrence of any Event of Default hereunder,
then, upon the demand of such Lender, the Borrower shall pay to such Lender such amount as will reimburse such Lender for such loss, cost or expense. If any Lender makes such a claim for compensation, it shall provide to the Borrower, with a copy to the Administrative Agent, a certificate setting forth the amount of such loss, cost or expense in reasonable detail (including an explanation of the basis for and the computation of such loss, cost or expense) and the amounts shown on such certificate shall be conclusive if reasonably determined.
Section 1.12. Revolving Credit Commitment Terminations. (a) Optional
Revolving Credit Terminations. The Borrower shall have the right at any time and
from time to time, upon five (5) Business Days prior written notice to the
Administrative Agent (or such shorter period of time agreed to by the
Administrative Agent), to terminate the Revolving Credit Commitments without
premium or penalty and in whole or in part, any partial termination to be (i) in
an amount not less than $5,000,000 or, if greater, a whole multiple thereof, and
(ii) allocated ratably among the Lenders in proportion to their respective
Revolver Percentages, provided that the Revolving Credit Commitments may not be
reduced to an amount less than the sum of the aggregate principal amount of
Revolving Loans, Swing Loans, and L/C Obligations then outstanding. Any
termination of the Revolving Credit Commitments below the L/C Sublimit or Swing
Line Sublimit then in effect shall reduce the L/C Sublimit and Swing Line
Sublimit, as applicable, by a like amount. The Administrative Agent shall give
prompt notice to each Lender of any such termination of the Revolving Credit
Commitments.
(b) Mandatory Revolving Credit Termination. The Revolving Credit Commitments shall ratably terminate by the amount of any mandatory prepayments made by the Borrower pursuant to Section 1.8(b)(i), (ii) or (iii).
(c) Any termination of the Revolving Credit Commitments pursuant to this Section 1.12 may not be reinstated.
Section 1.13. Substitution of Lenders. In the event (a) the Borrower receives a claim from any Lender for compensation under Section 10.3 or 13.1 hereof, (b) the Borrower receives notice from any Lender of any illegality pursuant to Section 10.1 hereof, (c) any Lender is in default in any material respect with respect to its obligations under the Loan Documents, or (d) a Lender fails to consent to an amendment or waiver requested under Section 13.13 hereof at a time when the Required Lenders have approved such amendment or waiver (any such Lender referred to in clause (a), (b), (c), or (d) above being hereinafter referred to as an "Affected Lender"), the Borrower may, in addition to any other rights the Borrower may have hereunder or under applicable law, require, at its expense, any such Affected Lender to assign, at par plus accrued interest and fees, without recourse, all of its interest, rights, and obligations hereunder (including all of its Revolving Credit Commitments and the Loans and participation interests in Letters of Credit and other amounts at any time owing to it hereunder and the other Loan Documents) to a commercial bank or other financial institution specified by the Borrower, provided that (i) such assignment shall not conflict with or violate any law, rule or regulation or order of any court or other governmental authority, (ii) the Borrower shall have received the written consent of the Administrative Agent, which consent shall not be unreasonably withheld, to such assignment, (iii) the Borrower shall have paid to the Affected Lender all monies (together with amounts due such Affected Lender under Section 1.11 hereof as if the Loans owing to it were prepaid rather
than assigned) other than such principal owing to it hereunder, and (iv) the assignment is entered into in accordance with the other requirements of Section 13.12 hereof (provided any assignment fees and reimbursable expenses due thereunder shall be paid by the Borrower).
Section 1.14. Swing Loans. (a) Generally. Subject to the terms and conditions hereof, as part of the Revolving Credit, the Administrative Agent agrees to make loans to the Borrower under the Swing Line (individually a "Swing Loan" and collectively the "Swing Loans") which shall not in the aggregate at any time outstanding exceed the Swing Line Sublimit. The Swing Loans may be availed of by the Borrower from time to time and borrowings thereunder may be repaid and used again during the period ending on the Revolving Credit Termination Date; provided that each Swing Loan must be repaid on the last day of the Interest Period applicable thereto. Each Swing Loan shall be in a minimum amount of $250,000 or such greater amount which is an integral multiple of $100,000.
(b) Interest on Swing Loans. Each Swing Loan shall bear interest until
maturity (whether by acceleration or otherwise) at a rate per annum equal to (i)
the Administrative Agent's Quoted Rate (computed on the basis of a year of 360
days for the actual number of days elapsed) or (ii) if no such Administrative
Agent's Quoted Rate is given and accepted by the Borrower as described in clause
(c), below, the sum of the Base Rate plus the Applicable Margin for Base Rate
Loans under the Revolving Credit as from time to time in effect (computed on the
basis of a year of 365 or 366 days, as the case may be, for the actual number of
days elapsed). Interest on each Swing Loan shall be due and payable on the last
day of its Interest Period and at maturity (whether by acceleration or
otherwise).
(c) Requests for Swing Loans. The Borrower shall give the Administrative Agent prior notice (which may be written or oral) no later than 12:00 Noon (Chicago time) on the date upon which a Borrower requests that any Swing Loan be made, of the amount and date of such Swing Loan, and the Interest Period requested therefor. Within 30 minutes after receiving such notice, the Administrative Agent shall in its discretion quote an interest rate to the Borrower at which the Administrative Agent would be willing to make such Swing Loan available to the Borrower for the Interest Period so requested (the rate so quoted for a given Interest Period being herein referred to as "Administrative Agent's Quoted Rate"). The Borrower acknowledges and agrees that the interest rate quote is given for immediate and irrevocable acceptance. If the Borrower does not so immediately accept the Administrative Agent's Quoted Rate for the full amount requested by the Borrower for such Swing Loan, the Administrative Agent's Quoted Rate shall be deemed immediately withdrawn and such Swing Loan shall bear interest at the rate per annum determined by adding the Applicable Margin for Base Rate Loans under the Revolving Credit to the Base Rate as from time to time in effect. Subject to the terms and conditions hereof, the proceeds of such Swing Loan shall be made available to the Borrower on the date so requested at the offices of the Administrative Agent in Chicago, Illinois, by depositing such proceeds to the credit of the Borrower's operating account maintained with the Administrative Agent or as the Borrower and the Administrative Agent may otherwise agree. Anything contained in the foregoing to the contrary notwithstanding, (i) the obligation of the Administrative Agent to make Swing Loans shall be subject to all of the terms and conditions of this Agreement and (ii) the Administrative Agent shall not be obligated to make more than one Swing Loan during any one day.
(d) Refunding Loans. In its sole and absolute discretion, the Administrative Agent may at any time, on behalf of the Borrower (which hereby irrevocably authorizes the Administrative Agent to act on its behalf for such purpose) and with notice to the Borrower, request each Lender to make a Revolving Loan in the form of a Base Rate Loan in an amount equal to such Lender's Revolver Percentage of the amount of the Swing Loans outstanding on the date such notice is given. Unless an Event of Default described in Section 9.1(j) or 9.1(k) exists with respect to the Borrower, regardless of the existence of any other Event of Default, each Lender shall make the proceeds of its requested Revolving Loan available to the Administrative Agent, in immediately available funds, at the Administrative Agent's principal office in Chicago, Illinois, before 12:00 Noon (Chicago time) on the Business Day following the day such notice is given. The proceeds of such Borrowing of Revolving Loans shall be immediately applied to repay the outstanding Swing Loans.
(e) Participations. If any Lender refuses or otherwise fails to make a Revolving Loan when requested by the Administrative Agent pursuant to Section 1.14(d) above (because an Event of Default described in Section 9.1(j) or 9.1(k) exists with respect to the Borrower or otherwise), such Lender will, by the time and in the manner such Revolving Loan was to have been funded to the Administrative Agent, purchase from the Administrative Agent an undivided participating interest in the outstanding Swing Loans in an amount equal to its Revolver Percentage of the aggregate principal amount of Swing Loans that were to have been repaid with such Revolving Loans. Each Lender that so purchases a participation in a Swing Loan shall thereafter be entitled to receive its Revolver Percentage of each payment of principal received on the Swing Loan and of interest received thereon accruing from the date such Lender funded to the Administrative Agent its participation in such Loan. The several obligations of the Lenders under this Section shall be absolute, irrevocable and unconditional under any and all circumstances whatsoever and shall not be subject to any set-off, counterclaim or defense to payment which any Lender may have or have had against the Borrower, any other Lender or any other Person whatever. Without limiting the generality of the foregoing, such obligations shall not be affected by any Default or Event of Default or by any reduction or termination of the Revolving Credit Commitments of any Lender, and each payment made by a Lender under this Section shall be made without any offset, abatement, withholding or reduction whatsoever.
SECTION 2. FEES.
Section 2.1. Fees. (a) Revolving Credit Commitment Fee. The Borrower shall pay to the Administrative Agent for the ratable account of the Lenders in accordance with their Revolver Percentages a commitment fee at the rate of 0.50% per annum (computed on the basis of a year of 360 days and the actual number of days elapsed) on the average daily Unused Revolving Credit Commitments. Such commitment fee shall be payable quarterly in arrears on the last day of each March, June, September, and December in each year (commencing on the first such date occurring after the date hereof) and on the Revolving Credit Termination Date, unless the Revolving Credit Commitments are terminated in whole on an earlier date, in which event the commitment fee for the period to the date of such termination in whole shall be paid on the date of such termination.
(b) Letter of Credit Fees. On the date of issuance or extension, or increase in the amount, of any Letter of Credit pursuant to Section 1.2 hereof, the Borrower shall pay to the L/C Issuer for its own account a fronting fee equal to 0.125% of the face amount of (or of the increase in the face amount of) such Letter of Credit. Quarterly in arrears, on the last day of each March, June, September, and December, commencing on the first such date occurring after the date hereof, the Borrower shall pay to the Administrative Agent, for the ratable benefit of the Lenders in accordance with their Revolver Percentages, a letter of credit fee at a rate per annum equal to the Applicable Margin in effect during each day of such quarter (computed on the basis of a year of 360 days and the actual number of days elapsed) applied to the daily average face amount of Letters of Credit outstanding during such quarter. In addition, the Borrower shall pay to the L/C Issuer for its own account the L/C Issuer's standard issuance, drawing, negotiation, amendment, and other administrative fees for each Letter of Credit as established by the L/C Issuer from time to time.
(c) Administrative Agent Fees. The Borrower shall pay to the Administrative Agent, for its own use and benefit, the fees agreed to between the Administrative Agent and the Borrower in a fee letter dated August 13, 2003, or as otherwise agreed to in writing between them.
(d) Audit Fees. The Borrower shall pay to the Administrative Agent for its own use and benefit charges for audits of the Collateral performed by the Administrative Agent or its agents or representatives in such amounts as the Administrative Agent may from time to time request (the Administrative Agent acknowledging and agreeing that such charges shall be computed in the same manner as it at the time customarily uses for the assessment of charges for similar collateral audits).
SECTION 3. PLACE AND APPLICATION OF PAYMENTS.
Section 3.1. Place and Application of Payments. All payments of principal of and interest on the Loans and the Reimbursement Obligations, and of all other Obligations payable by the Borrower under this Agreement and the other Loan Documents, shall be made by the Borrower to the Administrative Agent by no later than 12:00 Noon (Chicago time) on the due date thereof at the office of the Administrative Agent in Chicago, Illinois (or such other location as the Administrative Agent may designate to the Borrower) for the benefit of the Lender or Lenders entitled thereto. Any payments received after such time shall be deemed to have been received by the Administrative Agent on the next Business Day. All such payments shall be made in U.S. Dollars, in immediately available funds at the place of payment, in each case without set-off or counterclaim. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal or interest on Loans and on Reimbursement Obligations in which the Lenders have purchased Participating Interests ratably to the Lenders and like funds relating to the payment of any other amount payable to any Lender to such Lender, in each case to be applied in accordance with the terms of this Agreement. If the Administrative Agent causes amounts to be distributed to the Lenders in reliance upon the assumption that the Borrower will make a scheduled payment and such scheduled payment is not so made, each Lender shall, on demand, repay to the Administrative Agent the amount distributed to such Lender together with interest thereon in respect of each day during the period
commencing on the date such amount was distributed to such Lender and ending on (but excluding) the date such Lender repays such amount to the Administrative Agent, at a rate per annum equal to: (i) from the date the distribution was made to the date two (2) Business Days after payment by such Lender is due hereunder, the Federal Funds Rate for each such day and (ii) from the date two (2) Business Days after the date such payment is due from such Lender to the date such payment is made by such Lender, the Base Rate in effect for each such day.
Anything contained herein to the contrary notwithstanding (including, without limitation, Section 1.8(b) hereof), all payments and collections received in respect of the Obligations and all proceeds of the Collateral received, in each instance, by the Administrative Agent or any of the Lenders after acceleration or the final maturity of the Obligations or termination of the Revolving Credit Commitments as a result of an Event of Default shall be remitted to the Administrative Agent and distributed as follows:
(a) first, to the payment of any outstanding costs and expenses incurred by the Administrative Agent, and any security trustee therefor, in monitoring, verifying, protecting, preserving or enforcing the Liens on the Collateral, in protecting, preserving or enforcing rights under the Loan Documents, and in any event including all costs and expenses of a character which the Borrower has agreed to pay the Administrative Agent under Section 13.15 hereof (such funds to be retained by the Administrative Agent for its own account unless it has previously been reimbursed for such costs and expenses by the Lenders, in which event such amounts shall be remitted to the Lenders to reimburse them for payments theretofore made to the Administrative Agent);
(b) second, to the payment of principal and interest on the Swing Note until paid in full;
(c) third, to the payment of any outstanding interest and fees due under the Loan Documents to be allocated pro rata in accordance with the aggregate unpaid amounts owing to each holder thereof;
(d) fourth, to the payment of principal on the Notes, unpaid Reimbursement Obligations, together with amounts to be held by the Administrative Agent as collateral security for any outstanding L/C Obligations pursuant to Section 9.4 hereof (until the Administrative Agent is holding an amount of cash equal to the then outstanding amount of all such L/C Obligations), and Hedging Liability, the aggregate amount paid to, or held as collateral security for, the Lenders and, in the case of Hedging Liability, their Affiliates to be allocated pro rata in accordance with the aggregate unpaid amounts owing to each holder thereof;
(e) fifth, to the payment of all other unpaid Obligations and all other indebtedness, obligations, and liabilities of the Borrower and its Subsidiaries secured by the Collateral Documents (including, without limitation, Funds Transfer and Deposit Account Liability) to be allocated pro rata in accordance with the aggregate unpaid amounts owing to each holder thereof; and
(f) finally, to the Borrower or whoever else may be lawfully entitled thereto.
Section 3.2. Account Debit. The Borrower hereby irrevocably authorizes the Administrative Agent to charge the Borrower's deposit account or accounts maintained with the Administrative Agent for the amounts from time to time necessary to pay any then due Obligations; provided that the Borrower acknowledges and agrees that the Administrative Agent shall not be under an obligation to do so and the Administrative Agent shall not incur any liability to the Borrower or any other Person for the Administrative Agent's failure to do so.
SECTION 4. GUARANTIES AND COLLATERAL.
Section 4.1. Guaranties. The payment and performance of the Obligations, Hedging Liability, and Funds Transfer and Deposit Account Liability shall at all times be guaranteed by the Borrower and by each direct and indirect Subsidiary of the Borrower (individually a "Guarantor" and collectively the "Guarantors") pursuant to Section 12 hereof or pursuant to one or more guaranty agreements in form and substance acceptable to the Administrative Agent, as the same may be amended, modified or supplemented from time to time (individually a "Guaranty" and collectively the "Guaranties"); provided, however, that (i) unless otherwise required by the Administrative Agent or the Required Lenders during the existence of any Event of Default, no Foreign Subsidiary shall be required to be a Guarantor hereunder and (ii) no Foreign Subsidiary shall be required to be a Guarantor hereunder if its entry into a Guaranty would be prohibited by the laws of any jurisdiction applicable to it.
Section 4.2. Collateral. The Obligations, Hedging Liability, and Funds Transfer and Deposit Account Liability shall be secured by valid, perfected, and enforceable Liens on all right, title, and interest of the Borrower and each other Guarantor in all of their accounts, chattel paper, instruments, documents, deposit accounts, inventory and certain other personal property, whether now owned or hereafter acquired or arising, and all proceeds thereof; provided, however, that: (i) until the occurrence of the Borrowing Base Condition and thereafter until otherwise required by the Administrative Agent or the Required Lenders, Liens on deposit accounts maintained by the Borrower and the other Guarantors need not be perfected, (ii) unless otherwise required by the Administrative Agent or the Required Lenders during the existence of any Event of Default, no Liens need be granted on the stock of any Domestic Subsidiaries, and Liens on the Voting Stock of a Foreign Subsidiary shall be limited to 65% of the total outstanding Voting Stock of such Foreign Subsidiary or, if less at any time, the greatest percentage of the total outstanding Voting Stock thereof the pledge of which would not, under applicable U.S. tax laws and regulations in effect at such time, cause the owner of such Voting Stock or its direct or indirect parent corporation to recognize a "deemed dividend" for U.S. federal income tax purposes, and (iii) unless otherwise required by the Administrative Agent or the Required Lenders during the existence of any Event of Default, Liens need not be granted on the assets of a Foreign Subsidiary. The Borrower acknowledges and agrees that the Liens on the Collateral shall be granted to the Administrative Agent for the benefit of the holders of the Obligations, the Hedging Liability, and the Funds Transfer and Deposit Account Liability and shall be valid and perfected first priority Liens subject, however, to the proviso appearing at the end of the preceding sentence and to Liens permitted by Section 8.8 hereof, in each case pursuant to one or more Collateral
Documents from such Persons, each in form and substance satisfactory to the Administrative Agent.
Section 4.3. Further Assurances. The Borrower agrees that it shall, and
shall cause each other Guarantor to, from time to time at the request of the
Administrative Agent or the Required Lenders, execute and deliver such documents
and do such acts and things as the Administrative Agent or the Required Lenders
may reasonably request in order to provide for or perfect or protect such Liens
on the Collateral. In the event the Borrower or any other Guarantor forms or
acquires any other Subsidiary after the date hereof, except as otherwise
provided in Sections 4.1 and 4.2 above, the Borrower shall promptly upon such
formation or acquisition cause such newly formed or acquired Subsidiary to
execute a Guaranty and such Collateral Documents as the Administrative Agent may
then require, and the Borrower shall also deliver to the Administrative Agent,
or cause such Subsidiary to deliver to the Administrative Agent, at the
Borrower's cost and expense, such other instruments, documents, certificates,
and opinions reasonably required by the Administrative Agent in connection
therewith. Without limiting the foregoing provisions of this Section 4.3, (i)
promptly upon the request of the Administrative Agent after the occurrence of
the Borrowing Base Condition, the Borrower will cause to be delivered to the
Administrative Agent deposit account and securities account control agreements
in form and substance satisfactory to the Administrative Agent with respect to
its and its Domestic Subsidiaries' deposit accounts and securities accounts and
(ii) the Borrower shall use commercially reasonable efforts to deliver to the
Administrative Agent, within 45 days after a request therefor, fully executed
landlord waivers or warehouse agreements in form and substance reasonably
acceptable to the Administrative Agent with respect to those leased locations or
public warehouses, as the case may be, identified by the Administrative Agent at
which material amounts of inventory of the Borrower or any other Guarantor is
located and with respect to which such waivers or agreements were not delivered
prior to the Closing Date.
SECTION 5. DEFINITIONS; INTERPRETATION.
Section 5.1. Definitions. The following terms when used herein shall have the following meanings:
"Account Debtor" means any Person obligated to make payment on any Receivable.
"Acquired Business" means the entity or assets acquired by the Borrower or a Subsidiary in an Acquisition, whether before or after the date hereof.
"Adjusted EBITDA" means, with reference to any period, the sum of (a)
EBITDA for such period, (b) without duplication of amounts included in clause
(a), EBITDA of the Acquired Business subject of any Permitted Acquisition
consummated during such period for that portion of such period prior to the
consummation of such Permitted Acquisition, and (c) all non-cash restructuring
and other non-recurring non-cash charges for such period (not to exceed
$15,000,000 in aggregate from the date hereof through the Revolving Credit
Termination Date).
"Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person (other than a Person that is a Subsidiary), or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary) provided that the Borrower or the Subsidiary is the surviving entity.
"Adjusted LIBOR" is defined in Section 1.3(b) hereof.
"Administrative Agent" means Harris Trust and Savings Bank and any successor pursuant to Section 11.7 hereof.
"Administrative Agent's Quoted Rate" is defined in Section 1.14(c) hereof.
"Affiliate" means any Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, another Person. A Person shall be deemed to control another Person for the purposes of this definition if such Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of the other Person, whether through the ownership of voting securities, common directors, trustees or officers, by contract or otherwise; provided that, in any event for purposes of this definition, any Person that owns, directly or indirectly, 5% or more of the securities having the ordinary voting power for the election of directors or governing body of a corporation or 5% or more of the partnership or other ownership interest of any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person.
"Agreement" means this Credit Agreement, as the same may be amended, modified, restated or supplemented from time to time pursuant to the terms hereof.
"Applicable Margin" means, with respect to Loans, Reimbursement
Obligations, and the commitment fees and letter of credit fees payable under
Section 2.1 hereof, until the first Pricing Date, the rates per annum shown
opposite Level I below, and thereafter from one Pricing Date to the next the
Applicable Margin means the rates per annum determined in accordance with the
following schedule:
APPLICABLE
MARGIN FOR APPLICABLE
BASE RATE MARGIN FOR
LOANS UNDER EURODOLLAR
TOTAL USAGE REVOLVING LOANS UNDER
RATIO CREDIT AND REVOLVING CREDIT
CALCULATED ON REIMBURSEMENT AND FOR LETTER OF
SUCH PRICING OBLIGATIONS CREDIT FEE SHALL
LEVEL DATE SHALL BE: BE:
III Greater than or equal 0.50% 2.00%
to 0.50 to 1.0
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APPLICABLE
MARGIN FOR APPLICABLE
BASE RATE MARGIN FOR
LOANS UNDER EURODOLLAR
TOTAL USAGE REVOLVING LOANS UNDER
RATIO CREDIT AND REVOLVING CREDIT
CALCULATED ON REIMBURSEMENT AND FOR LETTER OF
SUCH PRICING OBLIGATIONS CREDIT FEE SHALL
LEVEL DATE SHALL BE: BE:
II Less than 0.50 to 1.0, 0.25% 1.75%
but greater than or
equal to 0.33 to 1.0
I Less than 0.33 to 1.0 0.00% 1.50%
|
For purposes hereof, the term "Pricing Date" means, for any fiscal quarter of the Borrower ending on or after December 31, 2003, the date on which the Administrative Agent calculates the Total Usage Ratio for the 30-day period ending on the last day of such fiscal quarter, which date of calculation, unless otherwise agreed by the Borrower and the Required Lenders, will be the tenth Business Day following the end of such fiscal quarter. The Applicable Margin shall be established based on the Total Usage Ratio for the 30-day period ending on the last day of the most recently completed fiscal quarter and the Applicable Margin established on a Pricing Date shall remain in effect until the next Pricing Date. Each determination of the Applicable Margin made by the Administrative Agent in accordance with the foregoing shall be conclusive and binding on the Borrower and the Lenders absent manifest error.
"Application" is defined in Section 1.2(b) hereof.
"Authorized Representative" means those persons shown on the list of officers provided by the Borrower pursuant to Section 7.2 hereof or on any update of any such list provided by the Borrower to the Administrative Agent, or any further or different officers of the Borrower so named by any Authorized Representative of the Borrower in a written notice to the Administrative Agent.
"Base Rate" is defined in Section 1.3(a) hereof.
"Base Rate Loan" means a Loan bearing interest at a rate specified in
Section 1.3(a) hereof.
"Borrower" is defined in the introductory paragraph of this Agreement.
"Borrowing" means the total of Loans of a single type advanced, continued for an additional Interest Period, or converted from a different type into such type by the Lenders under a Credit on a single date and, in the case of Eurodollar Loans, for a single Interest Period.
Borrowings of Loans are made and maintained ratably from each of the Lenders
under a Credit according to their Percentages of such Credit. A Borrowing is
"advanced" on the day Lenders advance funds comprising such Borrowing to the
Borrower, is "continued" on the date a new Interest Period for the same type of
Loans commences for such Borrowing, and is "converted" when such Borrowing is
changed from one type of Loan to the other, all as determined pursuant to
Section 1.5 hereof. Borrowings of Swing Loans are made by the Administrative
Agent in accordance with the procedures set forth in Section 1.14 hereof.
"Borrowing Base" means, as of any time it is to be determined, the sum of:
(a) 85% of the then outstanding unpaid amount of Eligible Receivables; plus
(b) the lesser of (x) 25% of the value (computed at the lower
of market or cost using the first-in/first-out method of inventory
valuation applied in accordance with GAAP) of Eligible Inventory and
(y) $30,000,000;
provided that (i) the Borrowing Base shall be computed only as against and on so much of such Collateral as is included on the Borrowing Base Certificates furnished from time to time by the Borrower pursuant to this Agreement and, if required by the Administrative Agent or the Required Lenders pursuant to any of the terms hereof or any Collateral Document, as verified by such other evidence reasonably required to be furnished to the Administrative Agent or the Lenders pursuant hereto or pursuant to any such Collateral Document, and (ii) the Administrative Agent shall have the right to reduce the advance rates against Eligible Receivables or Eligible Inventory and the sublimit on Eligible Inventory and to modify so as to make more restrictive the definitions of "Eligible Receivables" and "Eligible Inventory" in the reasonable exercise of its discretion based on the results of any field audit of any Collateral which reasonably supports any such reduction or modification, as the case may be.
"Borrowing Base Certificate" means the certificate in the form of Exhibit E hereto, or in such other form acceptable to the Administrative Agent, to be delivered to the Administrative Agent and the Lenders pursuant to Sections 7.2 and 8.5 hereof.
"Borrowing Base Condition" has occurred if the aggregate outstanding principal amount of Revolving Loans, Swing Loans and L/C Obligations either (i) equals or exceeds $20,000,000 for a period of thirty (30) days or more during any rolling sixty (60) day period or (ii) equals or exceeds $40,000,000 at any time.
"Business Day" means any day (other than a Saturday or Sunday) on which banks are not authorized or required to close in Chicago, Illinois and, if the applicable Business Day relates to the advance or continuation of, or conversion into, or payment of a Eurodollar Loan, on which banks are dealing in U.S. Dollar deposits in the interbank eurodollar market in London, England and Nassau, Bahamas.
"Capital Expenditures" means, with respect to any Person for any period, the aggregate amount of all expenditures (whether paid in cash or accrued as a liability) by such Person during that period for the acquisition or leasing (pursuant to a Capital Lease) of fixed or capital assets or
additions to property, plant, or equipment (including replacements, capitalized repairs, and improvements) which should be capitalized on the balance sheet of such Person in accordance with GAAP.
"Capital Lease" means any lease of Property which in accordance with GAAP is required to be capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligation" means, for any Person, the amount of the liability shown on the balance sheet of such Person in respect of a Capital Lease determined in accordance with GAAP.
"CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. SECTIONS 9601 et seq., and any future amendments.
"Change of Control" means any of (a) the acquisition by any "person" or "group" (as such terms are used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) at any time of beneficial ownership of 20% or more of the outstanding capital stock or other equity interests of the Borrower on a fully-diluted basis, other than acquisitions of such interests by the Borrower or any of its Subsidiaries, (b) the failure of individuals who are members of the board of directors (or similar governing body) of the Borrower on the Closing Date (together with any new or replacement directors whose initial nomination for election was approved by a majority of the directors who were either directors on the Closing Date or previously so approved) to constitute a majority of the board of directors (or similar governing body) of the Borrower, or (c) any "Change of Control" (or words of like import), as defined in any agreement or indenture relating to any issue of Indebtedness for Borrowed Money shall occur.
"Closing Date" means the date of this Agreement or such later Business Day upon which each condition described in Section 7.2 shall be satisfied or waived in a manner acceptable to the Administrative Agent in its discretion.
"Code" means the Internal Revenue Code of 1986, as amended, and any successor statute thereto.
"Collateral" means all properties, rights, interests, and privileges from time to time subject to the Liens granted to the Administrative Agent, or any security trustee therefor, by the Collateral Documents.
"Collateral Account" is defined in Section 9.4 hereof.
"Collateral Documents" means the Security Agreement, the Pledge Agreement, and all other mortgages, deeds of trust, security agreements, pledge agreements, assignments, financing statements and other documents as shall from time to time secure or relate to the Obligations, the Hedging Liability, and the Funds Transfer and Deposit Account Liability or any part thereof.
"Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Code.
"Credit" means any of the Revolving Credit or the Swing Line.
"Credit Event" means the advancing of any Loan, the continuation of or conversion into a Eurodollar Loan, or the issuance of, or extension of the expiration date or increase in the amount of, any Letter of Credit.
"Default" means any event or condition the occurrence of which would, with the passage of time or the giving of notice, or both, constitute an Event of Default.
"Disposition" means the sale, lease, conveyance or other disposition of Property, other than sales or other dispositions expressly permitted under Sections 8.10(a)-(f) hereof.
"Domestic Subsidiary" means any Subsidiary other than a Foreign Subsidiary.
"EBITDA" means, with reference to any period, Net Income for such period plus the sum of all amounts deducted in arriving at such Net Income amount in respect of (a) Interest Expense for such period, (b) federal, state, and local income taxes for such period, and (c) depreciation of fixed assets and amortization of intangible assets for such period.
"Eligible Inventory" means any raw materials or finished goods inventory of the Borrower or any other Guarantor (other than packaging, crating and supplies inventory) which:
(a) is an asset of such Person to which it has good and marketable title, is freely assignable, and is subject to a perfected, first priority Lien in favor of the Administrative Agent free and clear of any other Liens (other than Liens permitted by Section 8.8(a) or (b) hereof arising by operation of law which are subordinate to the Liens in favor of the Administrative Agent);
(b) is located in the United States of America at a Permitted Collateral Location as set forth in the Security Agreement and, in the case of facilities not owned by such Person, which are at all times subject to lien waiver agreements from such landlords or other third parties to the extent required by, and in form and substance satisfactory to, the Administrative Agent;
(c) is not so identified to a contract to sell that it constitutes a Receivable;
(d) is not obsolete or slow moving, and is of good and merchantable quality free from any defects which might adversely affect the market value thereof;
(e) is not covered by a warehouse receipt or similar document;
(f) in the case of finished goods inventory, was produced pursuant to binding and existing purchase orders therefor to which the Borrower or such other Guarantor has title; and
(g) is otherwise deemed to be Eligible Inventory in the reasonable judgment of the Administrative Agent (it being acknowledged and agreed that with five (5) Business Days prior written notice any inventory or categories thereof of the Borrower or any other Guarantor may be deemed ineligible by the Administrative Agent acting in its reasonable judgment).
"Eligible Line of Business" means any business engaged in as of the date of this Agreement by the Borrower or any of its Subsidiaries or reasonably related thereto.
"Eligible Receivables" means any Receivable of the Borrower or any other Guarantor which:
(a) arises out of the sale of finished goods inventory delivered to and accepted by, or out of the rendition of services fully performed and accepted by, the Account Debtor on such Receivable, and such Receivable does not represent a pre-billed Receivable or a progress billing;
(b) is payable in U.S. Dollars and the Account Debtor on such Receivable is located within the United States of America or, if such right has arisen out of the sale of such goods shipped to, or out of the rendition of services to, an Account Debtor located in any other country, such right is secured by a valid and irrevocable transferable letter of credit issued by a lender reasonably acceptable to the Administrative Agent for the full amount thereof, which has been assigned or transferred to the Administrative Agent in a manner acceptable to the Administrative Agent;
(c) is the valid, binding and legally enforceable obligation
of the Account Debtor obligated thereon and such Account Debtor is not
(i) a Subsidiary or an Affiliate of the Borrower, (ii) a shareholder,
director, officer or employee of the Borrower or any Subsidiary, (iii)
the United States of America, or any state or political subdivision
thereof, or any department, agency or instrumentality of any of the
foregoing, unless the Assignment of Claims Act or any similar state or
local statute, as the case may be, is complied with to the satisfaction
of the Administrative Agent, (iv) a debtor under any proceeding under
the United States Bankruptcy Code, as amended, or any other comparable
bankruptcy or insolvency law, or (v) an assignor for the benefit of
creditors;
(d) is not evidenced by an instrument or chattel paper unless the same has been endorsed and delivered to the Administrative Agent;
(e) is an asset of such Person to which it has good and marketable title, is freely assignable, and is subject to a perfected, first priority Lien in favor of the Administrative Agent free and clear of any other Liens (other than Liens permitted by
Section 8.8(a) or (b) hereof arising by operation of law which are subordinate to the Liens in favor of the Administrative Agent);
(f) is not subject to any counterclaim or defense asserted by the Account Debtor or subject to any offset or contra account payable to the Account Debtor (unless the amount of such Receivable is net of such contra account established to the reasonable satisfaction of the Administrative Agent);
(g) no surety bond was required or given in connection with said Receivable or the contract or purchase order out of which the same arose;
(h) it is evidenced by an invoice to the Account Debtor dated not more than five (5) Business Days subsequent to the shipment date of the relevant inventory or completion of performance of the relevant services and is issued on ordinary trade terms requiring payment within 60 days of invoice date;
(i) is not unpaid more than 90 days after the original invoice date;
(j) is not owed by an Account Debtor who is obligated on Receivables more than 25% of the aggregate unpaid balance of which have been past due for longer than the relevant period specified in subsection (i) above unless the Administrative Agent has approved the continued eligibility thereof;
(k) would not cause the total Receivables owing from any one Account Debtor and its Affiliates to exceed 15% of all Eligible Receivables;
(l) does not arise from a sale on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment or any other repurchase or return basis; and
(m) is otherwise deemed to be an Eligible Receivable in the reasonable judgment of the Administrative Agent (it being acknowledged and agreed that with five (5) Business Days prior written notice any Receivable of the Borrower or any other Guarantor may be deemed ineligible by the Administrative Agent acting in its reasonable judgment).
"Environmental Claim" means any investigation, notice, violation, demand, allegation, action, suit, injunction, judgment, order, consent decree, penalty, fine, lien, proceeding or claim (whether administrative, judicial or private in nature) arising (a) pursuant to, or in connection with an actual or alleged violation of, any Environmental Law, (b) in connection with any Hazardous Material, (c) from any abatement, removal, remedial, corrective or response action in connection with a Hazardous Material, Environmental Law or order of a governmental authority or (d) from any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment.
"Environmental Law" means any current or future Legal Requirement pertaining to (a) the protection of health, safety and the indoor or outdoor environment, (b) the conservation,
management or use of natural resources and wildlife, (c) the protection or use of surface water or groundwater, (d) the management, manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, Release, threatened Release, abatement, removal, remediation or handling of, or exposure to, any Hazardous Material or (e) pollution (including any Release to air, land, surface water or groundwater), and any amendment, rule, regulation, order or directive issued thereunder.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute thereto.
"Eurodollar Loan" means a Loan bearing interest at the rate specified in Section 1.3(b) hereof.
"Eurodollar Reserve Percentage" is defined in Section 1.3(b) hereof.
"Event of Default" means any event or condition identified as such in
Section 9.1 hereof.
"Event of Loss" means, with respect to any Property, any of the following: (a) any loss, destruction or damage of such Property or (b) any condemnation, seizure, or taking, by exercise of the power of eminent domain or otherwise, of such Property, or confiscation of such Property or the requisition of the use of such Property.
"Federal Funds Rate" means the fluctuating interest rate per annum
described in part (x) of clause (ii) of the definition of Base Rate appearing in
Section 1.3(a) hereof.
"Foreign Subsidiary" means each Subsidiary which is organized under the laws of a jurisdiction other than the United States of America or any state thereof.
"Funds Transfer and Deposit Account Liability" means the liability of the Borrower or any Subsidiary owing to any of the Lenders, or any Affiliates of such Lenders, arising out of (a) the execution or processing of electronic transfers of funds by automatic clearing house transfer, wire transfer or otherwise to or from deposit accounts of the Borrower and/or any Subsidiary now or hereafter maintained with any of the Lenders or their Affiliates, (b) the acceptance for deposit or the honoring for payment of any check, draft or other item with respect to any such deposit accounts, and (c) any other deposit, disbursement, and cash management services afforded to the Borrower or any Subsidiary by any of such Lenders or their Affiliates.
"GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination.
"Guarantor" and "Guarantors" each is defined in Section 4.1 hereof.
"Guaranty" and "Guaranties" each is defined in Section 4.1 hereof.
"Hazardous Material" means any substance, chemical, compound, product, solid, gas, liquid, waste, byproduct, pollutant, contaminant or material which is hazardous or toxic, and includes, without limitation, (a) asbestos, polychlorinated biphenyls and petroleum (including crude oil or any fraction thereof) and (b) any material classified or regulated as "hazardous" or "toxic" or words of like import pursuant to an Environmental Law.
"Hazardous Material Activity" means any activity, event or occurrence involving a Hazardous Material, including, without limitation, the manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, Release, threatened Release, abatement, removal, remediation, handling of or corrective or response action to any Hazardous Material.
"Hedging Liability" means the liability of the Borrower or any Subsidiary to any of the Lenders, or any Affiliates of such Lenders, in respect of any interest rate, foreign currency, and/or commodity swap, exchange, cap, collar, floor, forward, future or option agreement, or any other similar interest rate, currency or commodity hedging arrangement, as the Borrower or such Subsidiary, as the case may be, may from time to time enter into with any one or more of the Lenders party to this Agreement or their Affiliates.
"Hostile Acquisition" means the acquisition of the capital stock or other equity interests of a Person through a tender offer or similar solicitation of the owners of such capital stock or other equity interests which has not been approved (prior to such acquisition) by resolutions of the Board of Directors of such Person or by similar action if such Person is not a corporation, and as to which such approval has not been withdrawn.
"Indebtedness for Borrowed Money" means for any Person (without duplication) (a) all indebtedness created, assumed or incurred in any manner by such Person representing money borrowed (including by the issuance of debt securities), (b) all indebtedness for the deferred purchase price of property or services (other than trade accounts payable arising in the ordinary course of business which are not more than sixty (60) days past due), (c) all indebtedness secured by any Lien upon Property of such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness, (d) all Capitalized Lease Obligations of such Person, and (e) all obligations of such Person on or with respect to letters of credit, bankers' acceptances and other extensions of credit whether or not representing obligations for borrowed money, such obligations to be included at the full face or stated amount thereof.
"Interest Expense" means, with reference to any period, the sum of all interest charges (including imputed interest charges with respect to Capitalized Lease Obligations and all amortization of debt discount and expense) of the Borrower and its Subsidiaries for such period determined on a consolidated basis in accordance with GAAP.
"Interest Period" is defined in Section 1.6 hereof.
"L/C Issuer" means the Administrative Agent, or any other Lender requested by the Borrower and approved by the Administrative Agent in its sole discretion with respect to any Letter of Credit.
"L/C Obligations" means the aggregate undrawn face amounts of all outstanding Letters of Credit and all unpaid Reimbursement Obligations.
"L/C Sublimit" means $10,000,000, as reduced pursuant to the terms hereof.
"Legal Requirement" means any treaty, convention, statute, law, regulation, ordinance, license, permit, governmental approval, injunction, judgment, order, consent decree or other requirement of any governmental authority, whether federal, state, or local.
"Lenders" means and includes Harris Trust and Savings Bank and the other financial institutions from time to time party to this Agreement, including each assignee Lender pursuant to Section 13.12 hereof.
"Lending Office" is defined in Section 10.4 hereof.
"Letter of Credit" is defined in Section 1.2(a) hereof.
"LIBOR" is defined in Section 1.3(b) hereof.
"Lien" means any mortgage, lien, security interest, pledge, charge or encumbrance of any kind in respect of any Property, including the interests of a vendor or lessor under any conditional sale, Capital Lease or other title retention arrangement.
"Loan" means any Revolving Loan or Swing Loan, whether outstanding as a Base Rate Loan or Eurodollar Loan or otherwise, each of which is a "type" of Loan hereunder.
"Loan Documents" means this Agreement, the Notes, the Applications, the Collateral Documents, the Guaranties, and each other instrument or document to be delivered hereunder or thereunder or otherwise in connection therewith.
"Material Adverse Effect" means (a) a material adverse change in, or material adverse effect upon, the operations, business, Property, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole, (b) a material impairment of the ability of the Borrower or any Subsidiary to perform its material obligations under any Loan Document or (c) a material adverse effect upon (i) the legality, validity, binding effect or enforceability against the Borrower or any Subsidiary of any Loan Document or the rights and remedies of the Administrative Agent and the Lenders thereunder or (ii) the perfection or priority of any Lien granted under any Collateral Document.
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" means, as applicable, (a) with respect to any Disposition by a Person, cash and cash equivalent proceeds received by or for such Person's account, net of (i) reasonable direct costs relating to such Disposition and (ii) sale, use or other transactional taxes paid or payable by such Person as a direct result of such Disposition, (b) with respect to any Event of Loss, cash and cash equivalent proceeds received in respect thereof (whether as a result of payments made under any applicable insurance policy therefor or in connection with condemnation proceedings or otherwise), net of reasonable direct costs incurred in connection with the collection of such proceeds, awards or other payments, and (c) with respect to any offering of equity securities of a Person or the issuance of any Indebtedness for Borrowed Money by a Person, cash and cash equivalent proceeds received by or for such Person's account, net of reasonable legal, underwriting, and other fees and expenses incurred as a direct result thereof.
"Net Income" means, with reference to any period, the net income (or net loss) of the Borrower and its Subsidiaries for such period computed on a consolidated basis in accordance with GAAP; provided that there shall be excluded from Net Income (a) the net income (or net loss) of any Person accrued prior to the date it becomes a Subsidiary of, or has merged into or consolidated with, the Borrower or another Subsidiary, and (b) the net income (or net loss) of any Person (other than a Subsidiary) in which the Borrower or any of its Subsidiaries has a equity interest in, except to the extent of the amount of dividends or other distributions actually paid to the Borrower or any of its Subsidiaries during such period.
"Notes" means and includes the Revolving Notes and the Swing Note.
"Obligations" means all obligations of the Borrower to pay principal and interest on the Loans, all Reimbursement Obligations owing under the Applications, all fees and charges payable hereunder, and all other payment obligations of the Borrower or any of its Subsidiaries arising under or in relation to any Loan Document, in each case whether now existing or hereafter arising, due or to become due, direct or indirect, absolute or contingent, and howsoever evidenced, held or acquired.
"Operating Lease" shall mean any lease of Property other than a Capital Lease.
"Participating Interest" is defined in Section 1.2(d) hereof.
"Participating Lender" is defined in Section 1.2(d) hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person succeeding to any or all of its functions under ERISA.
"Percentage" means for any Lender its Revolver Percentage.
"Permitted Acquisition" means any Acquisition approved by the Required Lenders in writing with respect to which all of the following conditions shall have been satisfied:
(a) the Acquired Business is in an Eligible Line of Business;
(b) the Acquisition shall not be a Hostile Acquisition;
(c) the financial statements of the Acquired Business shall have been audited by one of the "Big Three" accounting firms or by another independent accounting firm of national or regional repute or otherwise reasonably satisfactory to the Administrative Agent, or if such financial statements have not been audited by such an accounting firm, (i) such financial statements shall have been approved by the Administrative Agent and (ii) the Acquired Business has undergone a successful so-called businessman's review by one of the "Big Three" accounting firms as part of the Borrower's due diligence on the Acquisition;
(d) the Total Consideration for the Acquired Business, when taken together with the Total Consideration for all Acquired Businesses acquired during the immediately preceding 12-month period, does not exceed $5,000,000 in the aggregate;
(e) if a new Subsidiary is formed or acquired as a result of or in connection with the Acquisition, the Borrower shall have complied with the requirements of Section 4 hereof in connection therewith; and
(f) after giving effect to the Acquisition, no Default or Event of Default shall exist, including with respect to the financial covenants contained in Section 8.21 hereof on a pro forma basis (and, prior to the consummation of the Acquisition, the Borrower shall have demonstrated such pro forma compliance in a manner reasonably acceptable to the Administrative Agent).
"Person" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof.
"Plan" means any employee pension benefit plan covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code that either (a) is maintained by a member of the Controlled Group for employees of a member of the Controlled Group or (b) is maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions.
"Pledge Agreement" means that certain Pledge Agreement dated the date of this Agreement among the Borrower and the other Guarantors and the Administrative Agent, as the same may be amended, modified, supplemented or restated from time to time.
"Premises" means the real property owned or leased by the Borrower or any Subsidiary.
"Property" means, as to any Person, all types of real, personal, tangible, intangible or mixed property owned by such Person, whether or not included in the most recent balance sheet of such Person and its subsidiaries under GAAP.
"RCRA" means the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Sections 6901 et seq., and any future amendments.
"Receivables" means all rights to the payment of a monetary obligation, now or hereafter owing to the Borrower or any other Guarantor, evidenced by accounts, instruments, chattel paper, or general intangibles.
"Receivables Purchase Agreement" means that certain Receivables Purchase Agreement dated as of October 6, 2000, as amended, among Plexus ABS, Inc., Plexus Corp., Bank One, NA (Main Office Chicago) and Preferred Receivables Funding Corporation.
"Reimbursement Obligation" is defined in Section 1.2(c) hereof.
"Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migration, dumping, or disposing into the indoor or outdoor environment, including, without limitation, the abandonment or discarding of barrels, drums, containers, tanks or other receptacles containing or previously containing any Hazardous Material.
"Required Lenders" means, as of the time when the same is to be determined, not fewer than three (3) Lenders whose Revolving Credit Commitments constitute a majority of the aggregate Revolving Credit Commitments of the Lenders or, at any time when the Revolving Credit Commitments have been terminated, a majority of the total outstanding Loans and interests in Letters of Credit; provided, that if fewer than three (3) Lenders are party hereto at such time, "Required Lenders" shall mean all Lenders.
"Revolver Percentage" means, for each Lender, the percentage of the Revolving Credit Commitments represented by such Lender's Revolving Credit Commitment or, if the Revolving Credit Commitments have been terminated, the percentage held by such Lender (including through participation interests in Reimbursement Obligations) of the aggregate principal amount of all Revolving Loans and L/C Obligations then outstanding.
"Revolving Credit" means the credit facility for making Revolving Loans and issuing Letters of Credit described in Sections 1.1 and 1.2 hereof.
"Revolving Credit Commitment" means, as to any Lender, the obligation of such Lender to make Revolving Loans and to participate in Swing Loans and Letters of Credit issued for the account of the Borrower hereunder in an aggregate principal or face amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule 1 attached hereto and made a part hereof, as the same may be reduced or modified at any time or from time to time pursuant to the terms hereof. The Borrower and the Lenders acknowledge and agree that the Revolving Credit Commitments of the Lenders aggregate $100,000,000 on the date hereof.
"Revolving Credit Termination Date" means October 22, 2006, or such earlier date on which the Revolving Credit Commitments are terminated in whole pursuant to Section 1.12, 9.2 or 9.3 hereof.
"Revolving Loan" is defined in Section 1.1 hereof and, as so defined, includes a Base Rate Loan or a Eurodollar Loan, each of which is a "type" of Revolving Loan hereunder.
"Revolving Note" is defined in Section 1.10 hereof.
"S&P" means Standard & Poor's Ratings Services Group, a division of The McGraw-Hill Companies, Inc.
"Security Agreement" means that certain Security Agreement dated the date of this Agreement among the Borrower and the other Guarantors and the Administrative Agent, as the same may be amended, modified, supplemented or restated from time to time.
"Subsidiary" means, as to any particular parent corporation or organization, any other corporation or organization more than 50% of the outstanding Voting Stock of which is at the time directly or indirectly owned by such parent corporation or organization or by any one or more other entities which are themselves subsidiaries of such parent corporation or organization. Unless otherwise expressly noted herein, the term "Subsidiary" means a Subsidiary of the Borrower or of any of its direct or indirect Subsidiaries.
"Swing Line" means the credit facility for making one or more Swing Loans described in Section 1.14 hereof.
"Swing Line Sublimit" means $5,000,000, as reduced pursuant to the terms hereof.
"Swing Loan" and "Swing Loans" each is defined in Section 1.14 hereof.
"Swing Note" is defined in Section 1.10 hereof.
"Tangible Capital" means, at any time the same is to be determined, the sum of (a) Tangible Net Worth at such time and (b) Total Funded Debt at such time.
"Tangible Net Worth" means, at any time the same is to be determined, the total shareholders' equity (including capital stock, additional paid-in capital and retained earnings after deducting treasury stock) which would appear on the balance sheet of the Borrower and its Subsidiaries determined on a consolidated basis in accordance with GAAP, less the sum of (a) the aggregate book value of all assets which would be classified as intangible assets under GAAP, including, without limitation, goodwill, patents, trademarks, trade names, copyrights and franchises and (b) all prepaids and deferred income tax assets as identified on the Borrower's financial statements.
"Total Consideration" means, with respect to an Acquisition, the sum
(but without duplication) of (a) cash paid in connection with any Acquisition,
(b) indebtedness payable to the
seller in connection with such Acquisition, (c) the fair market value of any
equity securities, including any warrants or options therefor, delivered in
connection with any Acquisition, (d) the present value of covenants not to
compete entered into in connection with such Acquisition or other future
payments which are required to be made over a period of time and are not
contingent upon the Borrower or its Subsidiaries meeting financial performance
objectives (exclusive of salaries paid in the ordinary course of business and
earn-outs unless such earn-outs are not contingent upon the Borrower or its
Subsidiaries meeting financial performance objectives) (discounted at the Base
Rate), but only to the extent not included in clause (a), (b) or (c) above, and
(e) the amount of indebtedness assumed in connection with such Acquisition.
"Total Funded Debt" means, at any time the same is to be determined, the sum (but without duplication) of (a) all Indebtedness for Borrowed Money of the Borrower and its Subsidiaries at such time and (b) all Indebtedness for Borrowed Money of any other Person at such time which is directly or indirectly guaranteed by the Borrower or any of its Subsidiaries or which the Borrower or any of its Subsidiaries has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which the Borrower or any of its Subsidiaries has otherwise assured a creditor against loss.
"Total Leverage Ratio" means, at any time the same is to be determined, the ratio of (a) Total Funded Debt at such time to (b) Tangible Capital at such time.
"Total Usage Ratio" means the ratio, for any period, of (a) the average aggregate outstanding principal amount during such period of Revolving Loans, Swing Loans and L/C Obligations to (b) the average amount of Revolving Credit Commitments in effect during such period.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of Illinois.
"Unfunded Vested Liabilities" means, for any Plan at any time, the amount (if any) by which the present value of all vested nonforfeitable accrued benefits under such Plan exceeds the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA.
"Unused Revolving Credit Commitments" means, at any time, the difference between the Revolving Credit Commitments then in effect and the aggregate outstanding principal amount of Revolving Loans and L/C Obligations; it being understood that Swing Loans outstanding from time to time shall not be counted as usage of the Revolving Credit Commitments for purposes of computing the commitment fee under Section 2.1(a) hereof.
"U.S. Dollars" and "$" each means the lawful currency of the United States of America.
"Voting Stock" of any Person means capital stock or other equity interests of any class or classes (however designated) having ordinary power for the election of directors or other similar
governing body of such Person, other than stock or other equity interests having such power only by reason of the happening of a contingency.
"Welfare Plan" means a "welfare plan" as defined in Section 3(1) of
ERISA.
"Wholly-owned Subsidiary" means a Subsidiary of which all of the issued and outstanding shares of capital stock (other than directors' qualifying shares as required by law) or other equity interests are owned by the Borrower and/or one or more Wholly-owned Subsidiaries within the meaning of this definition.
Section 5.2. Interpretation. The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined. The words "hereof", "herein", and "hereunder" and words of like import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All references to time of day herein are references to Chicago, Illinois, time unless otherwise specifically provided. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, it shall be done in accordance with GAAP except where such principles are inconsistent with the specific provisions of this Agreement.
Section 5.3. Change in Accounting Principles. If, after the date of this Agreement, there shall occur any change in GAAP from those used in the preparation of the financial statements referred to in Section 6.5 hereof and such change shall result in a change in the method of calculation of any financial covenant, standard or term found in this Agreement, either the Borrower or the Required Lenders may by notice to the Lenders and the Borrower, respectively, require that the Lenders and the Borrower negotiate in good faith to amend such covenants, standards, and term so as equitably to reflect such change in accounting principles, with the desired result being that the criteria for evaluating the financial condition of the Borrower and its Subsidiaries shall be the same as if such change had not been made. No delay by the Borrower or the Required Lenders in requiring such negotiation shall limit their right to so require such a negotiation at any time after such a change in accounting principles. Until any such covenant, standard, or term is amended in accordance with this Section 5.3, financial covenants shall be computed and determined in accordance with GAAP in effect prior to such change in accounting principles.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Administrative Agent and the Lenders as follows:
Section 6.1. Organization and Qualification. The Borrower is duly organized, validly existing, and in active status as a corporation under the laws of the State of Wisconsin, has full and adequate power to own its Property and conduct its business as now conducted, and is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying, except where the failure to do so would not have a Material Adverse Effect.
Section 6.2. Subsidiaries. Each Subsidiary is duly organized, validly existing, and in good standing under the laws of the jurisdiction in which it is organized, has full and adequate power to own its Property and conduct its business as now conducted, and is duly licensed or qualified and in good standing (or other comparable status) in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying, except where the failure to do so would not have a Material Adverse Effect. Schedule 6.2 hereto identifies each Subsidiary, the jurisdiction of its organization, the percentage of issued and outstanding shares of each class of its capital stock or other equity interests owned by the Borrower and the other Subsidiaries and, if such percentage is not 100% (excluding directors' qualifying shares as required by law), a description of each class of its authorized capital stock and other equity interests and the number of shares of each class issued and outstanding. All of the outstanding shares of capital stock and other equity interests of each Subsidiary are validly issued and outstanding and fully paid and nonassessable (except as provided in Wisconsin Statutes Sect. 180.0622(b) as judicially interpreted) and all such shares and other equity interests indicated on Schedule 6.2 as owned by the Borrower or another Subsidiary are owned, beneficially and of record, by the Borrower or such Subsidiary free and clear of all Liens other than the Liens granted in favor of the Administrative Agent pursuant to the Collateral Documents. There are no outstanding commitments or other obligations of any Subsidiary to issue, and no options, warrants or other rights of any Person to acquire, any shares of any class of capital stock or other equity interests of any Subsidiary.
Section 6.3. Authority and Validity of Obligations. The Borrower has full right and authority to enter into this Agreement and the other Loan Documents executed by it, to make the borrowings herein provided for, to issue its Notes in evidence thereof, to grant to the Administrative Agent the Liens described in the Collateral Documents executed by the Borrower, and to perform all of its obligations hereunder and under the other Loan Documents executed by it. Each Subsidiary has full right and authority to enter into the Loan Documents executed by it, to guarantee the Obligations, Hedging Liability, and Funds Transfer and Deposit Account Liability, to grant to the Administrative Agent the Liens described in the Collateral Documents executed by such Person, and to perform all of its obligations under the Loan Documents executed by it. The Loan Documents delivered by the Borrower and by each Subsidiary have been duly authorized, executed, and delivered by such Person and constitute valid and binding obligations of such Person enforceable against it in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law); and this Agreement and the other Loan Documents do not, nor does the performance or observance by the Borrower or any Subsidiary of any of the matters and things herein or therein provided for, (a) contravene or constitute a default under any provision of law or any judgment, injunction, order or decree binding upon the Borrower or any Subsidiary or any provision of the organizational documents (e.g., charter, certificate or articles of incorporation and by-laws, certificate or articles of association and operating agreement, partnership agreement, or other similar organizational documents) of the Borrower or any Subsidiary, (b) contravene or constitute a default under any covenant, indenture or agreement of or affecting the Borrower or any Subsidiary or any of its Property, in each case where such contravention or default, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (c) result
in the creation or imposition of any Lien on any Property of the Borrower or any Subsidiary other than the Liens granted in favor of the Administrative Agent pursuant to the Collateral Documents.
Section 6.4. Use of Proceeds; Margin Stock. The Borrower shall use the proceeds of the Revolving Credit for its general working capital purposes and for such other legal and proper purposes as are consistent with all applicable laws. Neither the Borrower nor any Subsidiary is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Loan or any other extension of credit made hereunder will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock. Margin stock (as hereinabove defined) constitutes less than 25% of the assets of the Borrower and its Subsidiaries which are subject to any limitation on sale, pledge or other restriction hereunder.
Section 6.5. Financial Reports. The consolidated balance sheet of the Borrower and its Subsidiaries as at September 30, 2002, and the related consolidated statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, and accompanying notes thereto, which financial statements are accompanied by the audit report of PricewaterhouseCoopers LLP, independent public accountants, and the unaudited interim consolidated balance sheet of the Borrower and its Subsidiaries as at June 30, 2003, and the related consolidated statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for the nine (9) months then ended, heretofore furnished to the Administrative Agent and the Lenders, fairly present in all material respects the consolidated financial condition of the Borrower and its Subsidiaries as at said dates and the consolidated results of their operations and cash flows for the periods then ended in conformity with GAAP applied on a consistent basis. Neither the Borrower nor any Subsidiary has contingent liabilities which are material to it other than as indicated on such financial statements or, with respect to future periods, on the financial statements furnished pursuant to Section 8.5 hereof.
Section 6.6. No Material Adverse Change. Since June 30, 2003, there has been no Material Adverse Effect.
Section 6.7. Full Disclosure. The statements and information furnished to the Administrative Agent and the Lenders in connection with the negotiation of this Agreement and the other Loan Documents and the commitments by the Lenders to provide all or part of the financing contemplated hereby do not, to the knowledge of the Borrower after due investigation, contain any untrue statements of a material fact or omit a material fact necessary to make the material statements contained herein or therein not misleading, the Administrative Agent and the Lenders acknowledging that as to any projections furnished to the Administrative Agent and the Lenders, the Borrower only represents that the same were prepared on the basis of information and estimates the Borrower believed to be reasonable.
Section 6.8. Trademarks, Franchises, and Licenses. Except as set forth on Schedule 6.8, the Borrower and its Subsidiaries own, possess, or have the right to use all necessary patents, licenses, franchises, trademarks, trade names, trade styles, copyrights, trade secrets, know how,
and confidential commercial and proprietary information to conduct their businesses as now conducted, without known conflict with any patent, license, franchise, trademark, trade name, trade style, copyright or other proprietary right of any other Person.
Section 6.9. Governmental Authority and Licensing. The Borrower and its Subsidiaries have received all licenses, permits, and approvals of all federal, state, and local governmental authorities, if any, necessary to conduct their businesses, in each case where the failure to obtain or maintain the same could reasonably be expected to have a Material Adverse Effect. No investigation or proceeding which, if adversely determined, could reasonably be expected to result in revocation or denial of any material license, permit or approval is pending or, to the knowledge of the Borrower, threatened.
Section 6.10. Good Title. The Borrower and its Subsidiaries have good and defensible title (or valid leasehold interests) to their assets as reflected on the most recent consolidated balance sheet of the Borrower and its Subsidiaries furnished to the Administrative Agent and the Lenders (except for sales of assets in the ordinary course of business), subject to no Liens other than such as are permitted by Section 8.8 hereof.
Section 6.11. Litigation and Other Controversies. There is no litigation or governmental or arbitration proceeding or labor controversy pending, nor to the knowledge of the Borrower threatened, against the Borrower or any Subsidiary which if adversely determined, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 6.12. Taxes. All material tax returns required to be filed by the Borrower or any Subsidiary in any jurisdiction have, in fact, been filed ("material tax returns" as used herein being understood to refer to returns in connection with which the Borrower or any Subsidiary would be required to pay taxes in excess of the amount set forth in clause (i), below), and all taxes, assessments, fees, and other governmental charges upon the Borrower or any Subsidiary or upon any of its Property, income or franchises, which are shown to be due and payable in such returns, have been paid, except such taxes, assessments, fees and governmental charges, if any (i) in an aggregate amount not to exceed $25,000 at any one time and (ii) as are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and as to which adequate reserves established in accordance with GAAP have been provided. The Borrower does not know of any proposed additional tax assessment against it or its Subsidiaries for which adequate provisions in accordance with GAAP have not been made on their accounts. Adequate provisions in accordance with GAAP for taxes on the books of the Borrower and each Subsidiary have been made for all open years, and for its current fiscal period.
Section 6.13. Approvals. No authorization, consent, license or exemption from, or filing or registration with, any court or governmental department, agency or instrumentality, nor any approval or consent of any other Person, is or will be necessary to the valid execution, delivery or performance by the Borrower or any Subsidiary of any Loan Document, except for such approvals which have been obtained prior to the date of this Agreement and remain in full force and effect.
Section 6.14. Affiliate Transactions. Neither the Borrower nor any Subsidiary is a party to any contracts or agreements with any of its Affiliates (other than with Wholly-owned Subsidiaries which are Domestic Subsidiaries) on terms and conditions which are less favorable to the Borrower or such Subsidiary than would be usual and customary in similar contracts or agreements between Persons not affiliated with each other.
Section 6.15. Investment Company; Public Utility Holding Company. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "public utility holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 6.16. ERISA. The Borrower and each other member of its Controlled Group has fulfilled its obligations under the minimum funding standards of and is in compliance in all material respects with ERISA and the Code to the extent applicable to it and has not incurred any liability to the PBGC or a Plan under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. Neither the Borrower nor any Subsidiary has any contingent liabilities with respect to any post-retirement benefits under a Welfare Plan, other than liability for continuation coverage described in article 6 of Title I of ERISA.
Section 6.17. Compliance with Laws. (a) The Borrower and its Subsidiaries are in compliance with the requirements of all federal, state and local laws, rules and regulations applicable to or pertaining to their Property or business operations (including, without limitation, the Occupational Safety and Health Act of 1970, the Americans with Disabilities Act of 1990, and laws and regulations establishing quality criteria and standards for air, water, land and toxic or hazardous wastes and substances), where any such non-compliance, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
(b) Without limiting the representations and warranties set forth in
Section 6.17(a) above, except for such matters, individually or in the
aggregate, which could not reasonably be expected to result in a Material
Adverse Effect, the Borrower represents and warrants that: (i) the Borrower and
its Subsidiaries, and each of the Premises, comply in all material respects with
all applicable Environmental Laws; (ii) the Borrower and its Subsidiaries have
obtained all governmental approvals required for their operations and each of
the Premises by any applicable Environmental Law; (iii) the Borrower and its
Subsidiaries have not, and the Borrower has no knowledge of any other Person who
has, caused any Release, threatened Release or disposal of any Hazardous
Material at, on, about, or off any of the Premises in any material quantity and,
to the knowledge of the Borrower, none of the Premises are adversely affected by
any Release, threatened Release or disposal of a Hazardous Material originating
or emanating from any other property; (iv) none of the Premises contain and have
contained any: (1) underground storage tank, (2) material amounts of asbestos
containing building material, (3) landfills or dumps, (4) hazardous waste
management facility as defined pursuant to RCRA or any comparable state law, or
(5) site on or nominated for the National Priority List promulgated pursuant to
CERCLA or any state remedial priority list promulgated or published pursuant to
any comparable state law; (v) the Borrower and its Subsidiaries have not used a
material quantity of any Hazardous Material and have conducted no Hazardous
Material Activity at any of the Premises; (vi) the
Borrower and its Subsidiaries have no material liability for response or
corrective action, natural resource damage or other harm pursuant to CERCLA,
RCRA or any comparable state law; (vii) the Borrower and its Subsidiaries are
not subject to, have no notice or knowledge of and are not required to give any
notice of any Environmental Claim involving the Borrower or any Subsidiary or
any of the Premises, and there are no conditions or occurrences at any of the
Premises which could reasonably be anticipated to form the basis for an
Environmental Claim against the Borrower or any Subsidiary or such Premises;
(viii) none of the Premises are subject to any, and the Borrower has no
knowledge of any imminent restriction on the ownership, occupancy, use or
transferability of the Premises in connection with any (1) Environmental Law or
(2) Release, threatened Release or disposal of a Hazardous Material; and (ix)
there are no conditions or circumstances at any of the Premises which pose an
unreasonable risk to the environment or the health or safety of Persons.
Section 6.18. Other Agreements. Neither the Borrower nor any Subsidiary is in default under the terms of any covenant, indenture or agreement of or affecting such Person or any of its Property, which default if uncured could reasonably be expected to have a Material Adverse Effect.
Section 6.19. Solvency. The Borrower and its Subsidiaries are solvent, able to pay their debts as they become due, and have sufficient capital to carry on their business and all businesses in which they are about to engage.
Section 6.20. No Default. No Default or Event of Default has occurred and is continuing.
SECTION 7. CONDITIONS PRECEDENT.
The obligation of each Lender to advance, continue or convert any Loan (other than the continuation of, or conversion into, a Base Rate Loan) or of the L/C Issuer to issue, extend the expiration date (including by not giving notice of non-renewal) of or increase the amount of any Letter of Credit under this Agreement, shall be subject to the following conditions precedent:
Section 7.1. All Credit Events. At the time of each Credit Event hereunder:
(a) each of the representations and warranties set forth herein and in the other Loan Documents shall be and remain true and correct as of said time, except to the extent the same expressly relate to an earlier date;
(b) the Borrower and each Subsidiary shall be in compliance with all of the terms and conditions hereof and of the other Loan Documents, and no Default or Event of Default shall have occurred and be continuing or would occur as a result of such Credit Event;
(c) in the case of a Borrowing the Administrative Agent shall have received the notice required by Section 1.5 hereof, in the case of the issuance of any Letter of Credit the L/C Issuer shall have received a duly completed Application for such Letter of Credit together with any fees called for by Section 2.1 hereof, and, in the case of an
extension or increase in the amount of a Letter of Credit, a written request therefor in a form acceptable to the L/C Issuer together with fees called for by Section 2.1 hereof; and
(d) such Credit Event shall not violate any order, judgment or decree of any court or other authority or any provision of law or regulation applicable to the Administrative Agent, the L/C Issuer, or any Lender (including, without limitation, Regulation U of the Board of Governors of the Federal Reserve System) as then in effect.
Each request for a Borrowing hereunder and each request for the issuance of, increase in the amount of, or extension of the expiration date of, a Letter of Credit shall be deemed to be a representation and warranty by the Borrower on the date of such Credit Event as to the facts specified in subsections (a) through (c), both inclusive, of this Section.
Section 7.2. Initial Credit Event. Before or concurrently with the initial Credit Event:
(a) the Administrative Agent shall have received for each Lender this Agreement duly executed by the Borrower and its Subsidiaries, as Guarantors, and the Lenders;
(b) the Administrative Agent shall have received for each Lender such Lender's duly executed Notes of the Borrower dated the date hereof and otherwise in compliance with the provisions of Section 1.10 hereof;
(c) the Administrative Agent shall have received the Pledge Agreement and the Security Agreement duly executed by the Borrower and its Domestic Subsidiaries, together with (i) original stock certificates or other similar instruments or securities representing 65% of the issued and outstanding shares of capital stock or other equity interests in each first-tier Foreign Subsidiary as of the Closing Date, (ii) stock powers for the Collateral consisting of the stock or other equity interest in each first-tier Foreign Subsidiary executed in blank and undated, and (iii) UCC financing statements to be filed against the Borrower and each Domestic Subsidiary, as debtor, in favor of the Administrative Agent, as secured party;
(d) the Administrative Agent shall have received evidence of insurance required to be maintained under the Loan Documents, naming the Administrative Agent as loss payee and additional insured;
(e) the Administrative Agent shall have received for each Lender copies of the Borrower's and each Domestic Subsidiary's articles of incorporation and bylaws (or comparable organizational documents) and any amendments thereto, certified in each instance by its Secretary or Assistant Secretary;
(f) the Administrative Agent shall have received for each Lender copies of resolutions of the Borrower's and each Domestic Subsidiary's Board of Directors (or similar governing body) authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party and the consummation of
the transactions contemplated hereby and thereby, together with specimen signatures of the persons authorized to execute such documents on the Borrower's and each Domestic Subsidiary's behalf, all certified in each instance by its Secretary or Assistant Secretary;
(g) the Administrative Agent shall have received for each Lender copies of the certificates of good standing (or comparable status) for the Borrower and each Domestic Subsidiary (dated no earlier than thirty (30) days prior to the date hereof) from the office of the secretary of the state of its incorporation or organization and of each state in which it is qualified to do business as a foreign corporation or organization;
(h) the Administrative Agent shall have received for each Lender a list of the Borrower's Authorized Representatives;
(i) the Administrative Agent shall have received for itself and for the Lenders the initial fees called for by Section 2.1 hereof;
(j) each Lender shall have received such evaluations and certifications as it may reasonably require in order to satisfy itself as to the value of the Collateral, the financial condition of the Borrower and its Subsidiaries, and the lack of material contingent liabilities of the Borrower and its Subsidiaries;
(k) the Administrative Agent shall have received financing statement, tax, and judgment lien search results against the Property of the Borrower and each Domestic Subsidiary evidencing the absence of Liens on its Property except as permitted by Section 8.8 hereof;
(l) the Administrative Agent shall have received pay-off and lien release letters from secured creditors of the Borrower and each Subsidiary (including, without limitation, the parties to the Receivables Purchase Agreement) setting forth, among other things, the total amount of indebtedness outstanding and owing to them (or outstanding letters of credit issued for the account of the Borrower or any Subsidiary) and containing an undertaking to cause to be delivered to the Administrative Agent UCC termination statements and any other lien release instruments necessary to release their Liens on the assets of the Borrower and each Subsidiary, which pay-off and lien release letters shall be in form and substance acceptable to the Administrative Agent, and the obligations under the Receivables Purchase Agreement shall be repaid in full and the Receivables Purchase Agreement shall be cancelled;
(m) the Administrative Agent shall have received for each Lender the favorable written opinion of counsel to the Borrower and each Domestic Subsidiary, in form and substance satisfactory to the Administrative Agent;
(n) the Administrative Agent shall have received for each Lender the historical financial audits, the interim financial statements and the three-year projections of the Borrower, each in form and substance satisfactory to the Administrative Agent; and
(o) the Administrative Agent shall have received for the account of the Lenders such other agreements, instruments, documents, certificates, and opinions as the Administrative Agent may reasonably request.
SECTION 8. COVENANTS.
The Borrower agrees that, so long as any credit is available to or in use by the Borrower hereunder, except to the extent compliance in any case or cases is waived in writing pursuant to the terms of Section 13.13 hereof:
Section 8.1. Maintenance of Business. The Borrower shall, and shall cause each Subsidiary to, preserve and maintain its existence, except as otherwise provided in Section 8.10(c) hereof. The Borrower shall, and shall cause each Subsidiary to, preserve and keep in force and effect all licenses, permits, franchises, approvals, patents, trademarks, trade names, trade styles, copyrights, and other proprietary rights necessary to the proper conduct of its business where the failure to do so could reasonably be expected to have a Material Adverse Effect.
Section 8.2. Maintenance of Properties. The Borrower shall, and shall cause each Subsidiary to, maintain, preserve, and keep its property, plant, and equipment in good repair, working order and condition (ordinary wear and tear excepted), and shall from time to time make all needful and proper repairs, renewals, replacements, additions, and betterments thereto so that at all times the efficiency thereof shall be fully preserved and maintained, except to the extent that, in the reasonable business judgment of such Person, any such Property is no longer necessary for the proper conduct of the business of such Person.
Section 8.3. Taxes and Assessments. The Borrower shall duly pay and discharge, and shall cause each Subsidiary to duly pay and discharge, all taxes, rates, assessments, fees, and governmental charges upon or against it or its Property, in each case before the same become delinquent and before penalties accrue thereon except for taxes, rates, assessments, fees and governmental charges (i) not to exceed $25,000 in the aggregate at any one time and (ii) which are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves are provided therefor.
Section 8.4. Insurance. The Borrower shall insure and keep insured, and shall cause each Subsidiary to insure and keep insured, with good and responsible insurance companies, all insurable Property owned by it which is of a character usually insured by Persons similarly situated and operating like Properties against loss or damage from such hazards and risks, and in such amounts, as are insured by Persons similarly situated and operating like Properties; and the Borrower shall insure, and shall cause each Subsidiary to insure, such other hazards and risks (including, without limitation, business interruption, employers' and public liability risks) with good and responsible insurance companies as and to the extent usually insured by Persons similarly situated and conducting similar businesses. The Borrower shall in any event maintain, and cause each Subsidiary to maintain, insurance on the Collateral to the extent required by the Collateral Documents. The Borrower shall, upon the request of the Administrative Agent,
furnish to the Administrative Agent and the Lenders a certificate setting forth in summary form the nature and extent of the insurance maintained pursuant to this Section.
Section 8.5. Financial Reports. The Borrower shall, and shall cause each Subsidiary to, maintain a standard system of accounting in accordance with GAAP and shall furnish to the Administrative Agent, each Lender and each of their duly authorized representatives such information respecting the business and financial condition of the Borrower and each Subsidiary as the Administrative Agent or such Lender may reasonably request; and without any request, shall furnish to the Administrative Agent and the Lenders:
(a) as soon as available at all times after the Borrowing Base Condition has occurred, and in any event within 30 days after the last day of each calendar month at all times after the Borrowing Base Condition has occurred, a Borrowing Base Certificate showing the computation of the Borrowing Base in reasonable detail as of the close of business on the last day of such month, together with an accounts receivable and accounts payable aging, prepared by the Borrower and certified to by its chief financial officer or another officer of the Borrower acceptable to the Administrative Agent;
(b) as soon as available, and in any event within thirty (30) days after the last day of each calendar month, a copy of the consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the last day of such month and the consolidated and consolidating statements of income, retained earnings, and cash flows of the Borrower and its Subsidiaries for the month and for the fiscal year-to-date period then ended, each in reasonable detail showing in comparative form the figures for the corresponding date and period in the previous fiscal year, prepared by the Borrower in accordance with GAAP (subject to the absence of footnote disclosures and year-end audit adjustments) and certified to by its chief financial officer or another officer of the Borrower acceptable to the Administrative Agent;
(c) as soon as available, and in any event within forty-five
(45) days after the close of each fiscal quarter of each fiscal year of
the Borrower, a copy of the consolidated and consolidating balance
sheet of the Borrower and its Subsidiaries as of the last day of such
fiscal quarter and the consolidated and consolidating statements of
income, retained earnings, and cash flows of the Borrower and its
Subsidiaries for the fiscal quarter and for the fiscal year-to-date
period then ended, each in reasonable detail showing in comparative
form the figures for the corresponding date and period in the previous
fiscal year, prepared by the Borrower in accordance with GAAP (subject
to the absence of footnote disclosures and year-end audit adjustments)
and certified to by its chief financial officer or another officer of
the Borrower acceptable to the Administrative Agent;
(d) as soon as available, and in any event within ninety (90) days after the close of each fiscal year of the Borrower, a copy of the consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the last day of the fiscal year then ended and the consolidated and consolidating statements of income, retained earnings, and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, and accompanying notes thereto, each in reasonable detail showing in comparative form the
figures for the previous fiscal year, accompanied in the case of the consolidated financial statements by an unqualified opinion of PricewaterhouseCoopers LLP or another firm of independent public accountants of recognized national standing, selected by the Borrower and reasonably satisfactory to the Administrative Agent and the Required Lenders, to the effect that the consolidated financial statements have been prepared in accordance with GAAP and present fairly in accordance with GAAP the consolidated financial condition of the Borrower and its Subsidiaries as of the close of such fiscal year and the results of their operations and cash flows for the fiscal year then ended and that an examination of such accounts in connection with such financial statements has been made in accordance with generally accepted auditing standards;
(e) promptly after receipt thereof, any additional written reports, management letters or other detailed information contained in writing concerning significant aspects of the Borrower's or any Subsidiary's operations and financial affairs given to it by its independent public accountants;
(f) promptly after the sending or filing thereof, copies of each financial statement, report, notice or proxy statement sent by the Borrower or any Subsidiary to its stockholders or other equity holders, and copies of each regular, periodic or special report, registration statement or prospectus (including all Form 10-K, Form 10-Q and Form 8-K reports) filed by the Borrower or any Subsidiary with any securities exchange or the Securities and Exchange Commission or any successor agency;
(g) as soon as available, and in any event within thirty (30) days after the beginning of each fiscal year of the Borrower, a copy of the Borrower's consolidated and consolidating operating budget for such fiscal year, such operating budget to show the Borrower's projected consolidated and consolidating revenues, expenses and balance sheet on a month-by-month basis, such operating budget to be in reasonable detail prepared by the Borrower and in form satisfactory to the Administrative Agent and the Required Lenders (which shall include a summary of all assumptions made in preparing such operating budget);
(h) notice of any Change of Control;
(i) promptly after knowledge thereof shall have come to the attention of any responsible officer of the Borrower, written notice of any threatened or pending litigation or governmental or arbitration proceeding or labor controversy against the Borrower or any Subsidiary which, if adversely determined, could reasonably be expected to have a Material Adverse Effect or of the occurrence of any Default or Event of Default hereunder; and
(j) with each of the financial statements furnished to the Lenders pursuant to subsections (c) and (d) above, a written certificate in the form attached hereto as Exhibit F signed by the chief financial officer of the Borrower or another officer of the Borrower acceptable to the Administrative Agent to the effect that to the best of such officer's knowledge and belief no Default or Event of Default has occurred during the
period covered by such statements or, if any such Default or Event of Default has occurred during such period, setting forth a description of such Default or Event of Default and specifying the action, if any, taken by the Borrower or any Subsidiary to remedy the same. Such certificate shall also set forth the calculations supporting such statements in respect of Section 8.21 hereof.
Section 8.6. Inspection. The Borrower shall, and shall cause each Subsidiary to, permit the Administrative Agent, each Lender, and each of their duly authorized representatives and agents to visit and inspect any of its Property, corporate books, and financial records, to examine and make copies of its books of accounts and other financial records, and to discuss its affairs, finances, and accounts with, and to be advised as to the same by, its officers, employees and independent public accountants (and by this provision the Borrower hereby authorizes such accountants to discuss with the Administrative Agent and such Lenders the finances and affairs of the Borrower and its Subsidiaries) at such reasonable times and intervals as the Administrative Agent or any such Lender may designate and, so long as no Default or Event of Default exists, with reasonable prior notice to the Borrower.
Section 8.7. Borrowings and Guaranties. The Borrower shall not, nor shall it permit any Subsidiary to, issue, incur, assume, create or have outstanding any Indebtedness for Borrowed Money, or be or become liable as endorser, guarantor, surety or otherwise for any debt, obligation or undertaking of any other Person, or otherwise agree to provide funds for payment of the obligations of another, or supply funds thereto or invest therein or otherwise assure a creditor of another against loss, or apply for or become liable to the issuer of a letter of credit which supports an obligation of another, or subordinate any claim or demand it may have to the claim or demand of any other Person; provided, however, that the foregoing shall not restrict nor operate to prevent:
(a) the Obligations, Hedging Liability, and Funds Transfer and Deposit Account Liability of the Borrower and its Subsidiaries owing to the Administrative Agent and the Lenders (and their Affiliates);
(b) purchase money indebtedness and Capitalized Lease Obligations of the Borrower and its Subsidiaries in an amount not to exceed $40,000,000 in the aggregate at any one time outstanding;
(c) obligations of the Borrower arising out of interest rate, foreign currency, and commodity hedging agreements entered into with financial institutions in the ordinary course of business;
(d) endorsement of items for deposit or collection of commercial paper received in the ordinary course of business;
(e) indebtedness from time to time owing by any Subsidiary to the Borrower;
(f) indebtedness secured by Liens permitted by Section 8.8(h) hereof;
(g) unsecured indebtedness of the Borrower and its Subsidiaries not otherwise permitted by this Section in an amount not to exceed $5,000,000 in the aggregate at any one time outstanding; and
(h) guarantees existing on the Closing Date and listed on Schedule 8.7 hereto.
Section 8.8. Liens. The Borrower shall not, nor shall it permit any Subsidiary to, create, incur or permit to exist any Lien of any kind on any Property owned by any such Person; provided, however, that the foregoing shall not apply to nor operate to prevent:
(a) Liens arising by statute in connection with worker's compensation, unemployment insurance, old age benefits, social security obligations, taxes, assessments, statutory obligations or other similar charges (other than Liens arising under ERISA), good faith cash deposits in connection with tenders, contracts or leases to which the Borrower or any Subsidiary is a party or other cash deposits required to be made in the ordinary course of business, provided in each case that the obligation is not for borrowed money and that the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves have been established therefor;
(b) mechanics', workmen's, materialmen's, landlords', carriers' or other similar Liens arising in the ordinary course of business with respect to obligations which are not due or which are being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest;
(c) judgment liens and judicial attachment liens not constituting an Event of Default under Section 9.1(g) hereof and the pledge of assets for the purpose of securing an appeal, stay or discharge in the course of any legal proceeding, provided that the aggregate amount of such judgment liens and attachments and liabilities of the Borrower and its Subsidiaries secured by a pledge of assets permitted under this subsection, including interest and penalties thereon, if any, shall not be in excess of $2,500,000 at any one time outstanding;
(d) Liens on equipment of the Borrower or any Subsidiary
created solely for the purpose of securing indebtedness permitted by
Section 8.7(b) hereof, representing or incurred to finance the purchase
price of such Property, provided that no such Lien shall extend to or
cover other Property of the Borrower or such Subsidiary other than the
respective Property so acquired, and the principal amount of
indebtedness secured by any such Lien shall at no time exceed the
purchase price of such Property, as reduced by repayments of principal
thereon;
(e) any interest or title of a lessor under any Operating Lease;
(f) easements, rights-of-way, restrictions, and other similar encumbrances against real property incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not materially detract from the value of the
Property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any Subsidiary;
(g) the Liens granted in favor of the Administrative Agent pursuant to the Collateral Documents;
(h) Liens not otherwise permitted by this Section securing indebtedness in an amount not to exceed $10,000,000 in the aggregate at any one time outstanding, provided that the value of the Property encumbered by such Liens may not exceed $10,000,000 at any time;
(i) Liens in the nature of licenses that arise in the ordinary course of business and consistent with past practice of the Borrower and its Subsidiaries; and
(j) any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any Lien referred to in the foregoing clauses; provided that such extension, renewal or replacement Lien shall be limited to all or a part of the Property which secured the Lien so extended, renewed or replaced, and the allowance of such extension, renewal and replacement Liens pursuant to this clause (j) shall not be understood to increase the maximum amounts described in the foregoing clauses (c) and (h).
Section 8.9. Investments, Acquisitions, Loans and Advances. The Borrower shall not, nor shall it permit any Subsidiary to, directly or indirectly, make, retain or have outstanding any investments (whether through purchase of stock or obligations or otherwise) in, or loans or advances to (other than for travel advances and other similar cash advances made to employees in the ordinary course of business), any other Person, or acquire all or any substantial part of the assets or business of any other Person or division thereof; provided, however, that the foregoing shall not apply to nor operate to prevent:
(a) investments in direct obligations of the United States of America or of any agency or instrumentality thereof whose obligations constitute full faith and credit obligations of the United States of America, provided that any such obligations shall mature within one year of the date of issuance thereof;
(b) investments in commercial paper rated at least P-1 by Moody's and at least A-1 by S&P maturing within one year of the date of issuance thereof;
(c) investments in certificates of deposit issued by any Lender or by any United States commercial bank having capital and surplus of not less than $100,000,000 which have a maturity of one year or less;
(d) investments in repurchase obligations with a term of not more than seven (7) days for underlying securities of the types described in subsection (a) above entered into with any bank meeting the qualifications specified in subsection (c) above, provided
all such agreements require physical delivery of the securities securing such repurchase agreement, except those delivered through the Federal Reserve Book Entry System;
(e) investments in money market funds that invest solely, and which are restricted by their respective charters to invest solely, in investments of the type described in the immediately preceding subsections (a), (b), (c), and (d) above;
(f) the Borrower's investments from time to time in its Subsidiaries, and investments made from time to time by a Subsidiary in or more of its Subsidiaries;
(g) intercompany advances made from time to time by the Borrower to its Subsidiaries in the ordinary course of business to finance working capital needs;
(h) Permitted Acquisitions; and
(i) other investments, loans, and advances in addition to those otherwise permitted by this Section in an amount not to exceed $5,000,000 in the aggregate at any one time outstanding.
In determining the amount of investments, acquisitions, loans, and advances permitted under this Section, investments and acquisitions shall always be taken at the original cost thereof (regardless of any subsequent appreciation or depreciation therein), and loans and advances shall be taken at the principal amount thereof then remaining unpaid.
Section 8.10. Mergers, Consolidations and Sales. The Borrower shall not, nor shall it permit any Subsidiary to, be a party to any merger or consolidation, or sell, transfer, lease or otherwise dispose of all or any part of its Property, including any disposition of Property as part of a sale and leaseback transaction, or in any event sell or discount (with or without recourse) any of its notes or accounts receivable; provided, however, that so long as no Default or Event of Default exists (except as otherwise permitted by the Security Agreement) this Section shall not apply to nor operate to prevent:
(a) the sale or lease of inventory in the ordinary course of business;
(b) the sale, transfer, lease or other disposition of Property of the Borrower and its Subsidiaries to one another in the ordinary course of its business;
(c) the merger of any Subsidiary with and into the Borrower or any other Subsidiary, provided that, (i) in the case of any merger involving the Borrower, the Borrower is the corporation surviving the merger and (ii) no Domestic Subsidiary shall be permitted to merge into any Foreign Subsidiary;
(d) the sale of delinquent notes or accounts receivable in the ordinary course of business for purposes of collection only (and not for the purpose of any bulk sale or securitization transaction);
(e) the sale, transfer or other disposition of any tangible personal property that, in the reasonable business judgment of the Borrower or its Subsidiary, has become obsolete or worn out, and which is disposed of in the ordinary course of business; and
(f) the sale, transfer, lease or other disposition of Property of the Borrower or any Subsidiary (including any disposition of Property as part of a sale and leaseback transaction) aggregating for the Borrower and its Subsidiaries not more than $10,000,000 during any fiscal year of the Borrower.
Section 8.11. Maintenance of Subsidiaries. The Borrower shall not
assign, sell or transfer, nor shall it permit any Subsidiary to issue, assign,
sell or transfer, any shares of capital stock or other equity interests of a
Subsidiary; provided, however, that the foregoing shall not operate to prevent
(a) Liens on the capital stock or other equity interests of Subsidiaries granted
to the Administrative Agent pursuant to the Collateral Documents, (b) the
issuance, sale, and transfer to any person of any shares of capital stock of a
Subsidiary solely for the purpose of qualifying, and to the extent legally
necessary to qualify, such person as a director of such Subsidiary, and (c) any
transaction permitted by Section 8.10(c) above.
Section 8.12. Dividends and Certain Other Restricted Payments. The Borrower shall not, nor shall it permit any Subsidiary to, (a) declare or pay any dividends on or make any other distributions in respect of any class or series of its capital stock or other equity interests or (b) directly or indirectly purchase, redeem, or otherwise acquire or retire any of its capital stock or other equity interests or any warrants, options, or similar instruments to acquire the same; provided, however, that the foregoing shall not operate to prevent (i) the making of dividends or distributions by any Subsidiary to the Borrower or (ii) the declaration or payment of dividends by the Borrower, provided that no Default or Event of Default exists or would be caused thereby.
Section 8.13. ERISA. The Borrower shall, and shall cause each Subsidiary to, promptly pay and discharge all obligations and liabilities arising under ERISA of a character which if unpaid or unperformed could reasonably be expected to result in the imposition of a Lien against any of its Property. The Borrower shall, and shall cause each Subsidiary to, promptly notify the Administrative Agent and each Lender of: (a) the occurrence of any reportable event (as defined in ERISA) with respect to a Plan, (b) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor, (c) its intention to terminate or withdraw from any Plan, and (d) the occurrence of any event with respect to any Plan which would result in the incurrence by the Borrower or any Subsidiary of any liability, fine or penalty, or any increase in the contingent liability of the Borrower or any Subsidiary with respect to any post-retirement Welfare Plan benefit which, in any of the cases described in this clause (d), could reasonably be expected to have a Material Adverse Effect.
Section 8.14. Compliance with Laws. (a) The Borrower shall, and shall cause each Subsidiary to, comply in all respects with the requirements of all federal, state, and local laws, rules, regulations, ordinances and orders applicable to or pertaining to its Property or business operations, where any such non-compliance, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or result in a Lien upon any of its Property other than a Lien permitted pursuant to Section 8.8 hereof.
(b) Without limiting the agreements set forth in Section 8.14(a) above,
the Borrower shall, and shall cause each Subsidiary to, at all times, do the
following to the extent the failure to do so, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect: (i) comply in
all material respects with, and maintain each of the Premises in compliance in
all material respects with, all applicable Environmental Laws; (ii) require that
each tenant and subtenant, if any, of any of the Premises or any part thereof
comply in all material respects with all applicable Environmental Laws; (iii)
obtain and maintain in full force and effect all material governmental approvals
required by any applicable Environmental Law for operations at each of the
Premises; (iv) cure any material violation by it or at any of the Premises of
applicable Environmental Laws; (v) not allow the presence or operation at any of
the Premises of any (1) landfill or dump or (2) hazardous waste management
facility or solid waste disposal facility as defined pursuant to RCRA or any
comparable state law; (vi) not manufacture, use, generate, transport, treat,
store, release, dispose or handle any Hazardous Material at any of the Premises
except in the ordinary course of its business and in compliance with all
applicable Environmental Laws; (vii) within ten (10) Business Days notify the
Administrative Agent in writing of and provide any reasonably requested
documents upon learning of any of the following in connection with the Borrower
or any Subsidiary or any of the Premises: (1) any material liability for
response or corrective action, natural resource damage or other harm pursuant to
CERCLA, RCRA or any comparable state law; (2) any material Environmental Claim;
(3) any material violation of an Environmental Law or material Release,
threatened Release or disposal of a Hazardous Material; (4) any restriction on
the ownership, occupancy, use or transferability arising pursuant to any (x)
Release, threatened Release or disposal of a Hazardous Material or (y)
Environmental Law; or (5) any environmental, natural resource, health or safety
condition, which could reasonably be expected to have a Material Adverse Effect;
(viii) conduct at its expense any investigation, study, sampling, testing,
abatement, cleanup, removal, remediation or other response action necessary to
remove, remediate, clean up or abate any material Release, threatened Release or
disposal of a Hazardous Material as required by any applicable Environmental
Law, (ix) abide by and observe any restrictions on the use of the Premises
imposed by any governmental authority as set forth in a deed or other instrument
affecting the Borrower's or any Subsidiary's interest therein; (x) promptly
provide or otherwise make available to the Administrative Agent any reasonably
requested environmental record concerning the Premises which the Borrower or any
Subsidiary possesses or can reasonably obtain; and (xi) perform, satisfy, and
implement any operation or maintenance actions required by any governmental
authority or Environmental Law, or included in any no further action letter or
covenant not to sue issued by any governmental authority under any Environmental
Law.
Section 8.15. Burdensome Contracts With Affiliates. The Borrower shall not, nor shall it permit any Subsidiary to, enter into any contract, agreement or business arrangement with any of its Affiliates (other than with Wholly-owned Subsidiaries which are Domestic Subsidiaries) on terms and conditions which are less favorable to the Borrower or such Subsidiary than would be usual and customary in similar contracts, agreements or business arrangements between Persons not affiliated with each other.
Section 8.16. No Changes in Fiscal Year. The fiscal year of the Borrower and its Subsidiaries ends on September 30 of each year; and the Borrower shall not, nor shall it permit any Subsidiary to, change its fiscal year from its present basis.
Section 8.17. Formation of Subsidiaries. Promptly upon the formation or
acquisition of any Subsidiary, the Borrower shall provide the Administrative
Agent and the Lenders notice thereof and timely comply with the requirements of
Section 4 hereof (at which time Schedule 6.2 shall be deemed amended to include
reference to such Subsidiary). The Borrower shall not allow Plexus Technology
Group, Limited to have any assets or engage in any business or activity other
than entering into a proceeding to dissolve under applicable law.
Section 8.18. Change in the Nature of Business. The Borrower shall not, nor shall it permit any Subsidiary to, engage in any business or activity if as a result the general nature of the business of the Borrower or any Subsidiary would be changed in any material respect from the general nature of the business engaged in by it as of the Closing Date.
Section 8.19. Use of Loan Proceeds. The Borrower shall use the credit extended under this Agreement solely for the purposes set forth in, or otherwise permitted by, Section 6.4 hereof.
Section 8.20. No Restrictions. Except as provided herein, the Borrower
shall not, nor shall it permit any Subsidiary to, directly or indirectly create
or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of the Borrower or any
Subsidiary to: (a) pay dividends or make any other distribution on any
Subsidiary's capital stock or other equity interests owned by the Borrower or
any other Subsidiary, (b) pay any indebtedness owed to the Borrower or any other
Subsidiary, (c) make loans or advances to the Borrower or any other Subsidiary,
(d) transfer any of its Property to the Borrower or any other Subsidiary or (e)
guarantee the Obligations and/or grant Liens on its assets to the Administrative
Agent as required by the Loan Documents.
Section 8.21. Financial Covenants. (a) Total Leverage Ratio. As of the last day of each fiscal quarter of the Borrower, the Borrower shall not permit the Total Leverage Ratio to be greater than 0.35 to 1.0.
(b) Minimum Cash and Marketable Securities. The Borrower shall, at all times, maintain cash on hand in deposit accounts in United States commercial banks and marketable United States domestic securities in certificated form or in United States domestic brokerage accounts in an aggregate amount of not less than $40,000,000.
(c) Tangible Net Worth. The Borrower shall, at all times, maintain
Tangible Net Worth in an amount not less than the sum of (i) $245,000,000 and
(ii) 50% of Net Income (if positive) for each fiscal quarter of the Borrower
ending on or after December 31, 2003 (without deduction for losses).
(d) Minimum Adjusted EBITDA. As of the last day of each fiscal quarter of the Borrower set forth below, the Borrower shall have earned Adjusted EBITDA for such period then ended in an amount not less than the following:
MINIMUM ADJUSTED EBITDA
FISCAL PERIOD: SHALL NOT BE LESS THAN
fiscal quarter ending $0
September 30, 2003
fiscal quarter ending $2,500,000
December 31, 2003
two consecutive fiscal quarters $5,000,000
ending March 31, 2004
three consecutive fiscal $7,500,000
quarters ending June 30, 2004
four consecutive fiscal $10,000,000
quarters ending September 30,
2004 and each fiscal quarter
ending thereafter
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(e) Maximum Rentals. The Borrower shall not, nor shall it permit any of its Subsidiaries to, create, incur or suffer to exist obligations for fixed rentals or other consideration payable under Operating Leases during any fiscal year in the aggregate for the Borrower and its Subsidiaries in excess of $24,000,000.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
Section 9.1. Events of Default. Any one or more of the following shall constitute an "Event of Default" hereunder:
(a) default (i) in the payment when due of all or any part of the principal of any Note (whether at the stated maturity thereof or at any other time provided for in this Agreement) or of any Reimbursement Obligation or (ii) for a period of five (5) Business Days in the payment of any interest or any fee or other Obligation payable hereunder or under any other Loan Document;
(b) default in the observance or performance of any covenant set forth in Sections 8.1, 8.5, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.17, 8.18 or 8.21 hereof or of any provision in any Loan Document dealing with the use, disposition or remittance of the proceeds of Collateral or requiring the maintenance of insurance thereon;
(c) default in the observance or performance of any other provision hereof or of any other Loan Document which is not remedied within thirty (30) days after the earlier of (i) the date on which such failure shall first become known to any officer of the
Borrower or (ii) written notice thereof is given to the Borrower by the Administrative Agent;
(d) any representation or warranty made herein or in any other Loan Document or in any certificate furnished to the Administrative Agent or the Lenders pursuant hereto or thereto or in connection with any transaction contemplated hereby or thereby proves untrue in any material respect as of the date of the issuance or making or deemed making thereof;
(e) any event occurs or condition exists (other than those described in subsections (a) through (d) above) which is specified as an event of default under any of the other Loan Documents, or any of the Loan Documents shall for any reason not be or shall cease to be in full force and effect or is declared to be null and void, or any of the Collateral Documents shall for any reason fail to create a valid and perfected first priority Lien in favor of the Administrative Agent in any Collateral purported to be covered thereby except as expressly permitted by the terms thereof, or any Subsidiary takes any action for the purpose of terminating, repudiating or rescinding any Loan Document executed by it or any of its obligations thereunder;
(f) default shall occur under any Indebtedness for Borrowed Money issued, assumed or guaranteed by the Borrower or any Subsidiary aggregating in excess of $5,000,000, or under any indenture, agreement or other instrument under which the same may be issued, and such default shall continue for a period of time sufficient to permit the acceleration of the maturity of any such Indebtedness for Borrowed Money (whether or not such maturity is in fact accelerated), or any such Indebtedness for Borrowed Money shall not be paid when due (whether by demand, lapse of time, acceleration or otherwise);
(g) any judgment or judgments, writ or writs or warrant or
warrants of attachment, or any similar process or processes, shall be
entered or filed against the Borrower or any Subsidiary, or against any
of its Property, in an aggregate amount in excess of $5,000,000 (except
to the extent fully covered by insurance pursuant to which the insurer
has accepted liability therefor in writing), and which remains
undischarged, unvacated, unbonded or unstayed for a period of thirty
(30) days;
(h) the Borrower or any Subsidiary, or any member of its Controlled Group, shall fail to pay when due an amount or amounts aggregating in excess of $5,000,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $5,000,000 (collectively, a "Material Plan") shall be filed under Title IV of ERISA by the Borrower or any Subsidiary, or any other member of its Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against the Borrower or any Subsidiary, or any member of its Controlled Group, to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within thirty (30) days thereafter; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated;
(i) any Change of Control shall occur;
(j) the Borrower or any Subsidiary shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (ii) not pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its Property, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (vi) take any action in furtherance of any matter described in parts (i) through (v) above, or (vii) fail to contest in good faith any appointment or proceeding described in Section 9.1(k) hereof; or
(k) a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any Subsidiary, or any substantial part of any of its Property, or a proceeding described in Section 9.1(j)(v) shall be instituted against the Borrower or any Subsidiary, and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of sixty (60) days.
Section 9.2. Non-Bankruptcy Defaults. When any Event of Default other than those described in subsection (j) or (k) of Section 9.1 hereof has occurred and is continuing, the Administrative Agent shall, by written notice to the Borrower: (a) if so directed by the Required Lenders, terminate the remaining Revolving Credit Commitments and all other obligations of the Lenders hereunder on the date stated in such notice (which may be the date thereof); (b) if so directed by the Required Lenders, declare the principal of and the accrued interest on all outstanding Notes to be forthwith due and payable and thereupon all outstanding Notes, including both principal and interest thereon, shall be and become immediately due and payable together with all other amounts payable under the Loan Documents without further demand, presentment, protest or notice of any kind; and (c) if so directed by the Required Lenders, demand that the Borrower immediately pay to the Administrative Agent the full amount then available for drawing under each or any Letter of Credit, and the Borrower agrees to immediately make such payment and acknowledges and agrees that the Lenders would not have an adequate remedy at law for failure by the Borrower to honor any such demand and that the Administrative Agent, for the benefit of the Lenders, shall have the right to require the Borrower to specifically perform such undertaking whether or not any drawings or other demands for payment have been made under any Letter of Credit. The Administrative Agent, after giving notice to the Borrower pursuant to Section 9.1(c) or this Section 9.2, shall also promptly send a copy of such notice to the other Lenders, but the failure to do so shall not impair or annul the effect of such notice.
Section 9.3. Bankruptcy Defaults. When any Event of Default described in subsections (j) or (k) of Section 9.1 hereof has occurred and is continuing, then all outstanding Notes shall immediately become due and payable together with all other amounts payable under the Loan Documents without presentment, demand, protest or notice of any kind, the obligation of the Lenders to extend further credit pursuant to any of the terms hereof shall immediately terminate and the Borrower shall immediately pay to the Administrative Agent the full amount then available for drawing under all outstanding Letters of Credit, the Borrower acknowledging and agreeing that the Lenders would not have an adequate remedy at law for failure by the Borrower to honor any such demand and that the Lenders, and the Administrative Agent on their behalf, shall have the right to require the Borrower to specifically perform such undertaking whether or not any draws or other demands for payment have been made under any of the Letters of Credit.
Section 9.4. Collateral for Undrawn Letters of Credit. (a) If the prepayment of the amount available for drawing under any or all outstanding Letters of Credit is required under Section 1.8(b) or under Section 9.2 or 9.3 above, the Borrower shall forthwith pay the amount required to be so prepaid, to be held by the Administrative Agent as provided in subsection (b) below.
(b) All amounts prepaid pursuant to subsection (a) above shall be held
by the Administrative Agent in one or more separate collateral accounts (each
such account, and the credit balances, properties, and any investments from time
to time held therein, and any substitutions for such account, any certificate of
deposit or other instrument evidencing any of the foregoing and all proceeds of
and earnings on any of the foregoing being collectively called the "Collateral
Account") as security for, and for application by the Administrative Agent (to
the extent available) to, the reimbursement of any payment under any Letter of
Credit then or thereafter made by the Administrative Agent, and to the payment
of the unpaid balance of any other Obligations. The Collateral Account shall be
held in the name of and subject to the exclusive dominion and control of the
Administrative Agent for the benefit of the Administrative Agent, the Lenders,
and the L/C Issuer. If and when requested by the Borrower, the Administrative
Agent shall invest funds held in the Collateral Account from time to time in
direct obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America with a remaining
maturity of one year or less, provided that the Administrative Agent is
irrevocably authorized to sell investments held in the Collateral Account when
and as required to make payments out of the Collateral Account for application
to amounts due and owing from the Borrower to the L/C Issuer, the Administrative
Agent or the Lenders; provided, however, that if (i) the Borrower shall have
made payment of all such obligations referred to in subsection (a) above and
(ii) no Letters of Credit, Revolving Credit Commitments, Loans or other
Obligations remain outstanding hereunder, then the Administrative Agent shall
release to the Borrower any remaining amounts held in the Collateral Account.
Section 9.5. Notice of Default. The Administrative Agent shall give notice to the Borrower under Section 9.1(c) hereof promptly upon being requested to do so by any Lender and shall thereupon notify all the Lenders thereof.
Section 9.6. Expenses. The Borrower agrees to pay to the Administrative Agent and each Lender, and any other holder of any Note outstanding hereunder, all costs and expenses reasonably incurred or paid by the Administrative Agent and such Lender or any such holder, including reasonable attorneys' fees and court costs, in connection with any Default or Event of Default hereunder or in connection with the enforcement of any of the Loan Documents (including all such costs and expenses incurred in connection with any proceeding under the United States Bankruptcy Code involving the Borrower or any Subsidiary as a debtor thereunder).
SECTION 10. CHANGE IN CIRCUMSTANCES.
Section 10.1. Change of Law. Notwithstanding any other provisions of this Agreement or any Note, if at any time any change in applicable law or regulation or in the interpretation thereof makes it unlawful for any Lender to make or continue to maintain any Eurodollar Loans or to perform its obligations as contemplated hereby, such Lender shall promptly give notice thereof to the Borrower and such Lender's obligations to make or maintain Eurodollar Loans under this Agreement shall be suspended until it is no longer unlawful for such Lender to make or maintain Eurodollar Loans. The Borrower shall prepay on demand the outstanding principal amount of any such affected Eurodollar Loans, together with all interest accrued thereon and all other amounts then due and payable to such Lender under this Agreement; provided, however, subject to all of the terms and conditions of this Agreement, the Borrower may then elect to borrow the principal amount of the affected Eurodollar Loans from such Lender by means of Base Rate Loans from such Lender, which Base Rate Loans shall not be made ratably by the Lenders but only from such affected Lender.
Section 10.2. Unavailability of Deposits or Inability to Ascertain, or Inadequacy of, LIBOR. If on or prior to the first day of any Interest Period for any Borrowing of Eurodollar Loans:
(a) the Administrative Agent determines that deposits in U.S. Dollars (in the applicable amounts) are not being offered to it in the interbank eurodollar market for such Interest Period, or that by reason of circumstances affecting the interbank eurodollar market adequate and reasonable means do not exist for ascertaining the applicable LIBOR, or
(b) the Required Lenders advise the Administrative Agent that
(i) LIBOR as determined by the Administrative Agent will not adequately
and fairly reflect the cost to such Lenders of funding their Eurodollar
Loans for such Interest Period or (ii) that the making or funding of
Eurodollar Loans become impracticable,
then the Administrative Agent shall forthwith give notice thereof to the Borrower and the Lenders, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Lenders to make Eurodollar Loans shall be suspended.
Section 10.3. Increased Cost and Reduced Return. (a) If, on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:
(i) shall subject any Lender (or its Lending Office) to any tax, duty or other charge with respect to its Eurodollar Loans, its Notes, its Letter(s) of Credit, or its participation in any thereof, any Reimbursement Obligations owed to it or its obligation to make Eurodollar Loans, issue a Letter of Credit, or to participate therein, or shall change the basis of taxation of payments to any Lender (or its Lending Office) of the principal of or interest on its Eurodollar Loans, Letter(s) of Credit, or participations therein or any other amounts due under this Agreement or any other Loan Document in respect of its Eurodollar Loans, Letter(s) of Credit, any participation therein, any Reimbursement Obligations owed to it, or its obligation to make Eurodollar Loans, or issue a Letter of Credit, or acquire participations therein (except for changes in the rate of tax on the overall net income of such Lender or its Lending Office imposed by the jurisdiction in which such Lender's principal executive office or Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Eurodollar Loans any such requirement included in an applicable Eurodollar Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Lender (or its Lending Office) or shall impose on any Lender (or its Lending Office) or on the interbank market any other condition affecting its Eurodollar Loans, its Notes, its Letter(s) of Credit, or its participation in any thereof, any Reimbursement Obligation owed to it, or its obligation to make Eurodollar Loans, or to issue a Letter of Credit, or to participate therein;
and the result of any of the foregoing is to increase the cost to such Lender (or its Lending Office) of making or maintaining any Eurodollar Loan, issuing or maintaining a Letter of Credit, or participating therein, or to reduce the amount of any sum received or receivable by such Lender (or its Lending Office) under this Agreement or under any other Loan Document with respect thereto, by an amount deemed by such Lender in good faith to be material, then, within fifteen (15) Business Days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall be obligated to pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction.
(b) If, after the date hereof, any Lender or the Administrative Agent shall have determined that the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Lending Office) or any corporation
controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has had the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within fifteen (15) Business Days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction.
(c) A certificate of a Lender claiming compensation under this Section 10.3 and setting forth in reasonable detail the additional amount or amounts to be paid to it hereunder shall be conclusive if reasonably determined. In determining such amount, such Lender may use any reasonable averaging and attribution methods.
Section 10.4. Lending Offices. Each Lender may, at its option, elect to make its Loans hereunder at the branch, office or affiliate specified on the appropriate signature page hereof (each a "Lending Office") for each type of Loan available hereunder or at such other of its branches, offices or affiliates as it may from time to time elect and designate in a written notice to the Borrower and the Administrative Agent. To the extent reasonably possible, a Lender shall designate an alternative branch or funding office with respect to its Eurodollar Loans to reduce any liability of the Borrower to such Lender under Section 10.3 hereof or to avoid the unavailability of Eurodollar Loans under Section 10.2 hereof, so long as such designation is not otherwise disadvantageous to the Lender.
Section 10.5. Discretion of Lender as to Manner of Funding. Notwithstanding any other provision of this Agreement, each Lender shall be entitled to fund and maintain its funding of all or any part of its Loans in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder with respect to Eurodollar Loans shall be made as if each Lender had actually funded and maintained each Eurodollar Loan through the purchase of deposits in the interbank eurodollar market having a maturity corresponding to such Loan's Interest Period, and bearing an interest rate equal to LIBOR for such Interest Period.
SECTION 11. THE ADMINISTRATIVE AGENT.
Section 11.1. Appointment and Authorization of Administrative Agent. Each Lender hereby appoints Harris Trust and Savings Bank as the Administrative Agent under the Loan Documents and hereby authorizes the Administrative Agent to take such action as Administrative Agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto. The Lenders expressly agree that the Administrative Agent is not acting as a fiduciary of the Lenders in respect of the Loan Documents, the Borrower or otherwise, and nothing herein or in any of the other Loan Documents shall result in any duties or obligations on the Administrative Agent or any of the Lenders except as expressly set forth herein.
Section 11.2. Administrative Agent and its Affiliates. The
Administrative Agent shall have the same rights and powers under this Agreement
and the other Loan Documents as any other Lender and may exercise or refrain
from exercising such rights and power as though it were not the Administrative
Agent, and the Administrative Agent and its affiliates may accept deposits from,
lend money to, and generally engage in any kind of business with the Borrower or
any Affiliate of the Borrower as if it were not the Administrative Agent under
the Loan Documents. The term "Lender" as used herein and in all other Loan
Documents, unless the context otherwise clearly requires, includes the
Administrative Agent in its individual capacity as a Lender. References in
Section 1 hereof to the Administrative Agent's Loans, or to the amount owing to
the Administrative Agent for which an interest rate is being determined, refer
to the Administrative Agent in its individual capacity as a Lender.
Section 11.3. Action by Administrative Agent. If the Administrative
Agent receives from the Borrower a written notice of an Event of Default
pursuant to Section 8.5 hereof, the Administrative Agent shall promptly give
each of the Lenders written notice thereof. The obligations of the
Administrative Agent under the Loan Documents are only those expressly set forth
therein. Without limiting the generality of the foregoing, the Administrative
Agent shall not be required to take any action hereunder with respect to any
Default or Event of Default, except as expressly provided in Sections 9.2 and
9.5. Upon the occurrence of an Event of Default, the Administrative Agent shall
take such action to enforce its Lien on the Collateral and to preserve and
protect the Collateral as may be directed by the Required Lenders. Unless and
until the Required Lenders give such direction, the Administrative Agent may
(but shall not be obligated to) take or refrain from taking such actions as it
deems appropriate and in the best interest of all the Lenders. In no event,
however, shall the Administrative Agent be required to take any action in
violation of applicable law or of any provision of any Loan Document, and the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder or under any other Loan Document unless it first
receives any further assurances of its indemnification from the Lenders that it
may require, including prepayment of any related expenses and any other
protection it requires against any and all costs, expense, and liability which
may be incurred by it by reason of taking or continuing to take any such action.
The Administrative Agent shall be entitled to assume that no Default or Event of
Default exists unless notified in writing to the contrary by a Lender or the
Borrower. In all cases in which the Loan Documents do not require the
Administrative Agent to take specific action, the Administrative Agent shall be
fully justified in using its discretion in failing to take or in taking any
action thereunder. Any instructions of the Required Lenders, or of any other
group of Lenders called for under the specific provisions of the Loan Documents,
shall be binding upon all the Lenders and the holders of the Obligations.
Section 11.4. Consultation with Experts. The Administrative Agent may consult with legal counsel, independent public accountants, and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts.
Section 11.5. Liability of Administrative Agent; Credit Decision. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection with the Loan Documents: (i) with the consent or at
the request of the Required Lenders or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify: (i) any statement, warranty or representation made in connection with this Agreement, any other Loan Document or any Credit Event; (ii) the performance or observance of any of the covenants or agreements of the Borrower or any Subsidiary contained herein or in any other Loan Document; (iii) the satisfaction of any condition specified in Section 7 hereof, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness, genuineness, enforceability, perfection, value, worth or collectibility hereof or of any other Loan Document or of any other documents or writing furnished in connection with any Loan Document or of any Collateral; and the Administrative Agent makes no representation of any kind or character with respect to any such matter mentioned in this sentence. The Administrative Agent may execute any of its duties under any of the Loan Documents by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, the Borrower, or any other Person for the default or misconduct of any such agents or attorneys-in-fact selected with reasonable care. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, other document or statement (whether written or oral) believed by it to be genuine or to be sent by the proper party or parties. In particular and without limiting any of the foregoing, the Administrative Agent shall have no responsibility for confirming the accuracy of any compliance certificate or other document or instrument received by it under the Loan Documents. The Administrative Agent may treat the payee of any Note as the holder thereof until written notice of transfer shall have been filed with the Administrative Agent signed by such payee in form satisfactory to the Administrative Agent. Each Lender acknowledges that it has independently and without reliance on the Administrative Agent or any other Lender, and based upon such information, investigations and inquiries as it deems appropriate, made its own credit analysis and decision to extend credit to the Borrower in the manner set forth in the Loan Documents. It shall be the responsibility of each Lender to keep itself informed as to the creditworthiness of the Borrower and its Subsidiaries, and the Administrative Agent shall have no liability to any Lender with respect thereto.
Section 11.6. Indemnity. The Lenders shall ratably, in accordance with their respective Percentages, indemnify and hold the Administrative Agent, and its directors, officers, employees, agents, and representatives harmless from and against any liabilities, losses, costs or expenses suffered or incurred by it under any Loan Document or in connection with the transactions contemplated thereby, regardless of when asserted or arising, except to the extent they are promptly reimbursed for the same by the Borrower and except to the extent that any event giving rise to a claim was caused by the gross negligence or willful misconduct of the party seeking to be indemnified. The obligations of the Lenders under this Section shall survive termination of this Agreement. The Administrative Agent shall be entitled to offset amounts received for the account of a Lender under this Agreement against unpaid amounts due from such Lender to the Administrative Agent hereunder (whether as fundings of participations, indemnities or otherwise), but shall not be entitled to offset against amounts owed to the Administrative Agent by any Lender arising outside of this Agreement and the other Loan Documents.
Section 11.7. Resignation of Administrative Agent and Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Lenders
and the Borrower. Upon any such resignation of the Administrative Agent, the Required Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within thirty (30) days after the retiring Administrative Agent's giving of notice of resignation then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which may be any Lender hereunder or any commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $200,000,000. Upon the acceptance of its appointment as the Administrative Agent hereunder, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent under the Loan Documents, and the retiring Administrative Agent shall be discharged from its duties and obligations thereunder. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 11 and all protective provisions of the other Loan Documents shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent, but no successor Administrative Agent shall in any event be liable or responsible for any actions of its predecessor. If the Administrative Agent resigns and no successor is appointed, the rights and obligations of such Administrative Agent shall be automatically assumed by the Required Lenders and (i) the Borrower shall be directed to make all payments due each Lender hereunder directly to such Lender and (ii) the Administrative Agent's rights in the Collateral Documents shall be assigned without representation, recourse or warranty to the Lenders as their interests may appear.
Section 11.8. L/C Issuer. The L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith. The L/C Issuer shall have all of the benefits and immunities (i) provided to the Administrative Agent in this Section 11 with respect to any acts taken or omissions suffered by the L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and the Applications pertaining to such Letters of Credit as fully as if the term "Administrative Agent", as used in this Section 11, included the L/C Issuer with respect to such acts or omissions and (ii) as additionally provided in this Agreement with respect to such L/C Issuer.
Section 11.9. Hedging Liability and Funds Transfer and Deposit Account Liability Arrangements. By virtue of a Lender's execution of this Agreement or an assignment agreement pursuant to Section 13.12 hereof, as the case may be, any Affiliate of such Lender with whom the Borrower or any Subsidiary has entered into an agreement creating Hedging Liability or Funds Transfer and Deposit Account Liability shall be deemed a Lender party hereto for purposes of any reference in a Loan Document to the parties for whom the Administrative Agent is acting, it being understood and agreed that the rights and benefits of such Affiliate under the Loan Documents consist exclusively of such Affiliate's right to share in payments and collections out of the Collateral and the Guaranties as more fully set forth in Section 3.1 hereof. In connection with any such distribution of payments and collections, the Administrative Agent shall be entitled to assume no amounts are due to any Lender or its Affiliate with respect to Hedging Liability or Funds Transfer and Deposit Account Liability unless such Lender has notified the Administrative Agent in writing of the amount of any such liability owed to it or its Affiliate prior to such distribution.
Section 11.10. Designation of Additional Agents. The Administrative Agent shall have the continuing right, for purposes hereof, at any time and from time to time to designate one or more of the Lenders (and/or its or their Affiliates) as "syndication agents," "documentation agents," "arrangers," or other designations for purposes hereto, but such designation shall have no substantive effect, and such Lenders and their Affiliates shall have no additional powers, duties or responsibilities as a result thereof.
Section 11.11. Authorization to Release or Subordinate or Limit Liens. The Administrative Agent is hereby irrevocably authorized by each of the Lenders to (a) release any Lien covering any Collateral that is sold, transferred, or otherwise disposed of in accordance with the terms and conditions of this Agreement and the relevant Collateral Documents (including a sale, transfer, or disposition permitted by the terms of Section 8.10 hereof or which has otherwise been consented to in accordance with Section 13.13 hereof), (b) release or subordinate any Lien on Collateral consisting of goods financed with purchase money indebtedness or under a Capital Lease to the extent such purchase money indebtedness or Capitalized Lease Obligation, and the Lien securing the same, are permitted by Sections 8.7(b) and 8.8(d) hereof, and (c) reduce or limit the amount of the indebtedness secured by any particular item of Collateral to an amount not less than the estimated value thereof to the extent necessary to reduce mortgage registry, filing and similar tax.
Section 11.12. Authorization to Enter into, and Enforcement of, the Collateral Documents. The Administrative Agent is hereby irrevocably authorized by each of the Lenders to execute and deliver the Collateral Documents on behalf of each of the Lenders and their Affiliates and to take such action and exercise such powers under the Collateral Documents as the Administrative Agent considers appropriate, provided the Administrative Agent shall not amend the Collateral Documents unless such amendment is agreed to in writing by the Required Lenders and any other Persons whose agreement to such amendment is required pursuant to the terms thereof. Each Lender acknowledges and agrees that it will be bound by the terms and conditions of the Collateral Documents upon the execution and delivery thereof by the Administrative Agent. Except as otherwise specifically provided for herein, no Lender (or its Affiliates) other than the Administrative Agent shall have the right to institute any suit, action or proceeding in equity or at law for the foreclosure or other realization upon any Collateral or for the execution of any trust or power in respect of the Collateral or for the appointment of a receiver or for the enforcement of any other remedy under the Collateral Documents; it being understood and intended that no one or more of the Lenders (or their Affiliates) shall have any right in any manner whatsoever to affect, disturb or prejudice the Lien of the Administrative Agent (or any security trustee therefor) under the Collateral Documents by its or their action or to enforce any right thereunder, and that all proceedings at law or in equity shall be instituted, had, and maintained by the Administrative Agent (or its security trustee) in the manner provided for in the relevant Collateral Documents for the benefit of the Lenders and their Affiliates.
SECTION 12. THE GUARANTEES.
Section 12.1. The Guarantees. To induce the Lenders to provide the credits described herein and in consideration of benefits expected to accrue to the Borrower by reason of the Revolving Credit Commitments and for other good and valuable consideration, receipt of which
is hereby acknowledged, each of the Borrower and each Subsidiary party hereto (including any Subsidiary formed or acquired after the Closing Date executing an Additional Guarantor Supplement in the form attached hereto as Exhibit G or such other form acceptable to the Administrative Agent) hereby unconditionally and irrevocably guarantees jointly and severally to the Administrative Agent, the Lenders, and their Affiliates, the due and punctual payment of all present and future Obligations, Hedging Liability, and Funds Transfer and Deposit Account Liability, including, but not limited to, the due and punctual payment of principal of and interest on the Notes, the Reimbursement Obligations, and the due and punctual payment of all other Obligations now or hereafter owed by the Borrower under the Loan Documents and the due and punctual payment of all Hedging Liability and Funds Transfer and Deposit Account Liability, in each case as and when the same shall become due and payable, whether at stated maturity, by acceleration, or otherwise, according to the terms hereof and thereof (including interest which, but for the filing of a petition in bankruptcy, would otherwise accrue on any such indebtedness, obligation, or liability), provided that no Guarantor shall be understood to guarantee pursuant to this Section 12 the payment of any Obligations, Hedging Liability or Funds Transfer and Deposit Account Liability with respect to which it is the primary obligor. In case of failure by the Borrower or other obligor punctually to pay any Obligations, Hedging Liability, or Funds Transfer and Deposit Account Liability guaranteed hereby, each Guarantor hereby unconditionally agrees to make such payment or to cause such payment to be made punctually as and when the same shall become due and payable, whether at stated maturity, by acceleration, or otherwise, and as if such payment were made by the Borrower or such obligor.
Section 12.2. Guarantee Unconditional. The obligations of each Guarantor under this Section 12 shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged, or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver, or release in respect of any obligation of the Borrower or other obligor or of any other guarantor under this Agreement or any other Loan Document or by operation of law or otherwise;
(b) any modification or amendment of or supplement to this Agreement or any other Loan Document or any agreement relating to Hedging Liability or Funds Transfer and Deposit Account Liability;
(c) any change in the corporate existence, structure, or ownership of, or any insolvency, bankruptcy, reorganization, or other similar proceeding affecting, the Borrower or other obligor, any other guarantor, or any of their respective assets, or any resulting release or discharge of any obligation of the Borrower or other obligor or of any other guarantor contained in any Loan Document;
(d) the existence of any claim, set-off, or other rights which the Borrower or other obligor or any other guarantor may have at any time against the Administrative Agent, any Lender, or any other Person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or demand or any exercise of, or failure to exercise, any rights or remedies against the Borrower or other obligor, any other guarantor, or any other Person or Property;
(f) any application of any sums by whomsoever paid or howsoever realized to any obligation of the Borrower or other obligor, regardless of what obligations of the Borrower or other obligor remain unpaid;
(g) any invalidity or unenforceability relating to or against the Borrower or other obligor or any other guarantor for any reason of this Agreement or of any other Loan Document or any agreement relating to Hedging Liability or Funds Transfer and Deposit Account Liability or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower or other obligor or any other guarantor of the principal of or interest on any Note or any Reimbursement Obligation or any other amount payable under the Loan Documents or any agreement relating to Hedging Liability or Funds Transfer and Deposit Account Liability; or
(h) any other act or omission to act or delay of any kind by the Administrative Agent, any Lender, or any other Person or any other circumstance whatsoever that might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the obligations of any Guarantor under this Section 12.
Section 12.3. Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances. Each Guarantor's obligations under this Section 12 shall remain in full force and effect until the Revolving Credit Commitments are terminated, all Letters of Credit have expired, and the principal of and interest on the Notes and all other amounts payable by the Borrower and the Guarantors under this Agreement and all other Loan Documents and, if then outstanding and unpaid, all Hedging Liability and Funds Transfer and Deposit Account Liability shall have been paid in full. If at any time any payment of the principal of or interest on any Note or any Reimbursement Obligation or any other amount payable by the Borrower or other obligor or any Guarantor under the Loan Documents or any agreement relating to Hedging Liability or Funds Transfer and Deposit Account Liability is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy, or reorganization of the Borrower or other obligor or of any guarantor, or otherwise, each Guarantor's obligations under this Section 12 with respect to such payment shall be reinstated at such time as though such payment had become due but had not been made at such time.
Section 12.4. Subrogation. Each Guarantor agrees it will not exercise any rights which it may acquire by way of subrogation by any payment made hereunder, or otherwise, until all the Obligations, Hedging Liability, and Funds Transfer and Deposit Account Liability shall have been paid in full subsequent to the termination of all the Revolving Credit Commitments and expiration of all Letters of Credit. If any amount shall be paid to a Guarantor on account of such subrogation rights at any time prior to the later of (x) the payment in full of the Obligations, Hedging Liability, and Funds Transfer and Deposit Account Liability and all other amounts payable by the Borrower hereunder and the other Loan Documents and (y) the termination of the Revolving Credit Commitments and expiration of all Letters of Credit, such amount shall be held
in trust for the benefit of the Administrative Agent and the Lenders (and their Affiliates) and shall forthwith be paid to the Administrative Agent for the benefit of the Lenders (and their Affiliates) or be credited and applied upon the Obligations, Hedging Liability, and Funds Transfer and Deposit Account Liability, whether matured or unmatured, in accordance with the terms of this Agreement.
Section 12.5. Waivers. Each Guarantor irrevocably waives acceptance hereof, presentment, demand, protest, and any notice not provided for herein, as well as any requirement that at any time any action be taken by the Administrative Agent, any Lender, or any other Person against the Borrower or other obligor, another guarantor, or any other Person.
Section 12.6. Limit on Recovery. Notwithstanding any other provision hereof, the right of recovery against each Guarantor under this Section 12 shall not exceed $1.00 less than the lowest amount which would render such Guarantor's obligations under this Section 12 void or voidable under applicable law, including, without limitation, fraudulent conveyance law.
Section 12.7. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Borrower or other obligor under this Agreement or any other Loan Document, or under any agreement relating to Hedging Liability or Funds Transfer and Deposit Account Liability, is stayed upon the insolvency, bankruptcy or reorganization of the Borrower or such obligor, all such amounts otherwise subject to acceleration under the terms of this Agreement or the other Loan Documents, or under any agreement relating to Hedging Liability or Funds Transfer and Deposit Account Liability, shall nonetheless be payable by the Guarantors hereunder forthwith on demand by the Administrative Agent made at the request of the Required Lenders.
Section 12.8. Benefit to Guarantors. The Borrower and the other Guarantors are engaged in related businesses and integrated to such an extent that the financial strength and flexibility of the Borrower has a direct impact on the success of each other Guarantor. Each Guarantor will derive substantial direct and indirect benefit from the extensions of credit hereunder.
Section 12.9. Guarantor Covenants. Each Guarantor shall take such action as the Borrower is required by this Agreement to cause such Guarantor to take, and shall refrain from taking such action as the Borrower is required by this Agreement to prohibit such Guarantor from taking.
SECTION 13. MISCELLANEOUS.
Section 13.1. Withholding Taxes. (a) Payments Free of Withholding. Except as otherwise required by law and subject to Section 13.1(b) hereof, each payment by the Borrower and the other Guarantors under this Agreement or the other Loan Documents shall be made without withholding for or on account of any present or future taxes (other than overall net income taxes on the recipient) imposed by or within the jurisdiction in which the Borrower or such other Guarantor is domiciled, any jurisdiction from which the Borrower or such other Guarantor makes any payment, or (in each case) any political subdivision or taxing authority thereof or therein. If any such withholding is so required, the Borrower or such other Guarantor shall make the
withholding, pay the amount withheld to the appropriate governmental authority before penalties attach thereto or interest accrues thereon, and forthwith pay such additional amount as may be necessary to ensure that the net amount actually received by each Lender and the Administrative Agent free and clear of such taxes (including such taxes on such additional amount) is equal to the amount which that Lender or the Administrative Agent (as the case may be) would have received had such withholding not been made. If the Administrative Agent or any Lender pays any amount in respect of any such taxes, penalties or interest, the Borrower or such other Guarantor shall reimburse the Administrative Agent or such Lender for that payment on demand in the currency in which such payment was made. If the Borrower or such other Guarantor pays any such taxes, penalties or interest, it shall deliver official tax receipts evidencing that payment or certified copies thereof to the Lender or Administrative Agent on whose account such withholding was made (with a copy to the Administrative Agent if not the recipient of the original) on or before the thirtieth day after payment.
(b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Borrower and the Administrative Agent on or before the date the
initial Credit Event is made hereunder or, if later, the date such financial
institution becomes a Lender hereunder, two duly completed and signed copies of
(i) either Form W-8 BEN (relating to such Lender and entitling it to a complete
exemption from withholding under the Code on all amounts to be received by such
Lender, including fees, pursuant to the Loan Documents and the Obligations) or
Form W-8 ECI (relating to all amounts to be received by such Lender, including
fees, pursuant to the Loan Documents and the Obligations) of the United States
Internal Revenue Service or (ii) solely if such Lender is claiming exemption
from United States withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8 BEN, or any
successor form prescribed by the Internal Revenue Service, and a certificate
representing that such Lender is not a bank for purposes of Section 881(c) of
the Code, is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign
corporation related to the Borrower (within the meaning of Section 864(d)(4) of
the Code). Thereafter and from time to time, each Lender shall submit to the
Borrower and the Administrative Agent such additional duly completed and signed
copies of one or the other of such Forms (or such successor forms as shall be
adopted from time to time by the relevant United States taxing authorities) and
such other certificates as may be (i) requested by the Borrower in a written
notice, directly or through the Administrative Agent, to such Lender and (ii)
required under then-current United States law or regulations to avoid or reduce
United States withholding taxes on payments in respect of all amounts to be
received by such Lender, including fees, pursuant to the Loan Documents or the
Obligations. Upon the request of the Borrower or the Administrative Agent, each
Lender that is a United States person (as such term is defined in Section
7701(a)(30) of the Code) shall submit to the Borrower and the Administrative
Agent a certificate to the effect that it is such a United States person.
(c) Inability of Lender to Submit Forms. If any Lender determines, as a result of any change in applicable law, regulation or treaty, or in any official application or interpretation thereof, that it is unable to submit to the Borrower or the Administrative Agent any form or certificate that such Lender is obligated to submit pursuant to subsection (b) of this Section 13.1 or that such Lender is required to withdraw or cancel any such form or certificate previously
submitted or any such form or certificate otherwise becomes ineffective or inaccurate, such Lender shall promptly notify the Borrower and Administrative Agent of such fact and the Lender shall to that extent not be obligated to provide any such form or certificate and will be entitled to withdraw or cancel any affected form or certificate, as applicable.
Section 13.2. No Waiver, Cumulative Remedies. No delay or failure on the part of the Administrative Agent or any Lender or on the part of the holder or holders of any of the Obligations in the exercise of any power or right under any Loan Document shall operate as a waiver thereof or as an acquiescence in any default, nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof or the exercise of any other power or right. The rights and remedies hereunder of the Administrative Agent, the Lenders and of the holder or holders of any of the Obligations are cumulative to, and not exclusive of, any rights or remedies which any of them would otherwise have.
Section 13.3. Non-Business Days. If any payment hereunder becomes due and payable on a day which is not a Business Day, the due date of such payment shall be extended to the next succeeding Business Day on which date such payment shall be due and payable. In the case of any payment of principal falling due on a day which is not a Business Day, interest on such principal amount shall continue to accrue during such extension at the rate per annum then in effect, which accrued amount shall be due and payable on the next scheduled date for the payment of interest.
Section 13.4. Documentary Taxes. The Borrower agrees to pay on demand any documentary, stamp or similar taxes payable in respect of this Agreement or any other Loan Document, including interest and penalties, in the event any such taxes are assessed, irrespective of when such assessment is made and whether or not any credit is then in use or available hereunder.
Section 13.5. Survival of Representations. All representations and warranties made herein or in any other Loan Document or in certificates given pursuant hereto or thereto shall survive the execution and delivery of this Agreement and the other Loan Documents, and shall continue in full force and effect with respect to the date as of which they were made as long as any credit is in use or available hereunder.
Section 13.6. Survival of Indemnities. All indemnities and other provisions relative to reimbursement to the Lenders of amounts sufficient to protect the yield of the Lenders with respect to the Loans and Letters of Credit, including, but not limited to, Sections 1.11, 10.3, and 13.15 hereof, shall survive the termination of this Agreement and the other Loan Documents and the payment of the Obligations.
Section 13.7. Sharing of Set-Off. Each Lender agrees with each other Lender a party hereto that if such Lender shall receive and retain any payment, whether by set-off or application of deposit balances or otherwise, on any of the Loans or Reimbursement Obligations in excess of its ratable share of payments on all such Obligations then outstanding to the Lenders, then such Lender shall purchase for cash at face value, but without recourse, ratably from each of the other Lenders such amount of the Loans or Reimbursement Obligations, or participations therein, held
by each such other Lenders (or interest therein) as shall be necessary to cause such Lender to share such excess payment ratably with all the other Lenders; provided, however, that if any such purchase is made by any Lender, and if such excess payment or part thereof is thereafter recovered from such purchasing Lender, the related purchases from the other Lenders shall be rescinded ratably and the purchase price restored as to the portion of such excess payment so recovered, but without interest. For purposes of this Section, amounts owed to or recovered by the L/C Issuer in connection with Reimbursement Obligations in which Lenders have been required to fund their participation shall be treated as amounts owed to or recovered by the L/C Issuer as a Lender hereunder.
Section 13.8. Notices. Except as otherwise specified herein, all notices hereunder and under the other Loan Documents shall be in writing (including, without limitation, notice by telecopy) and shall be given to the relevant party at its address or telecopier number set forth below, or such other address or telecopier number as such party may hereafter specify by notice to the Administrative Agent and the Borrower given by courier, by United States certified or registered mail, by telecopy or by other telecommunication device capable of creating a written record of such notice and its receipt. Notices under the Loan Documents to the Lenders and the Administrative Agent shall be addressed to their respective addresses or telecopier numbers set forth on the signature pages hereof, and to the Borrower or any other Guarantor to:
Plexus Corp.
55 Jewelers Park Drive
P.O. Box 156
Neenah, Wisconsin 54957-0156
Attention: Mr. George W.F. Setton Telephone: (920) 751-5656 Telecopy: (920) 751-3234 |
With a copy to:
Attention: Mr. Joseph Kaufman (same address as above) Telephone: (920) 751-3311 Telecopy: (920) 751-3234 |
Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified in this Section or on the signature pages hereof and a confirmation of such telecopy has been received by the sender, (ii) if given by mail, five (5) days after such communication is deposited in the mail, certified or registered with return receipt requested, addressed as aforesaid or (iii) if given by any other means, when delivered at the addresses specified in this Section or on the signature pages hereof; provided that any notice given pursuant to Section 1 hereof shall be effective only upon receipt.
Section 13.9. Counterparts. This Agreement may be executed in any number of counterparts, and by the different parties hereto on separate counterpart signature pages, and all such counterparts taken together shall be deemed to constitute one and the same instrument.
Section 13.10. Successors and Assigns. This Agreement shall be binding upon the Borrower and the other Guarantors and their successors and assigns, and shall inure to the benefit of the Administrative Agent and each of the Lenders and the benefit of their respective successors and assigns, including any subsequent holder of any of the Obligations. The Borrower and the other Guarantors may not assign any of their rights or obligations under any Loan Document without the written consent of all of the Lenders.
Section 13.11. Participants. Each Lender shall have the right at its
own cost to grant participations (to be evidenced by one or more agreements or
certificates of participation) in the Loans made and Reimbursement Obligations
and/or Revolving Credit Commitments held by such Lender at any time and from
time to time to one or more other Persons (other than any Person which is a
direct competitor of the Borrower or any of its Subsidiaries); provided that no
such participation shall relieve any Lender of any of its obligations under this
Agreement, and, provided, further that no such participant shall have any rights
under this Agreement except as provided in this Section, and the Administrative
Agent shall have no obligation or responsibility to such participant. Any
agreement pursuant to which such participation is granted shall provide that the
granting Lender shall retain the sole right and responsibility to enforce the
obligations of the Borrower under this Agreement and the other Loan Documents
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of the Loan Documents, except that such agreement may
provide that such Lender will not agree to any modification, amendment or waiver
of the Loan Documents that would reduce the amount of or postpone any fixed date
for payment of any Obligation in which such participant has an interest. Any
party to which such a participation has been granted shall have the benefits of
Section 1.11 and Section 10.3 hereof. The Borrower authorizes each Lender to
disclose to any participant or prospective participant under this Section any
financial or other information pertaining to the Borrower or any Subsidiary,
provided that such participant or prospective participant shall have agreed to
keep such information confidential pursuant to the terms of Section 13.24
hereof.
Section 13.12. Assignments. (a) Each Lender shall have the right at any
time, with the prior consent of the Administrative Agent (and the L/C Issuers,
if other than the Administrative Agent) and, so long as no Event of Default then
exists, the Borrower (which consent of the Borrower shall not be unreasonably
withheld) to sell, assign, transfer or negotiate all or any part of its rights
and obligations under the Loan Documents (including, without limitation, the
indebtedness evidenced by the Notes then held by such assigning Lender, together
with an equivalent percentage of its obligation to make Loans and participate in
Letters of Credit) to one or more commercial banks or other financial
institutions or investors, provided that, unless otherwise agreed to by the
Administrative Agent, such assignment shall be of a fixed percentage (and not by
its terms of varying percentage) of the assigning Lender's rights and
obligations under the Loan Documents; provided, however, that in order to make
any such assignment (i) unless the assigning Lender is assigning all of its
Revolving Credit Commitments, outstanding Loans and interests in Letters of
Credit Obligations, the assigning Lender shall retain at least $5,000,000 in
unused Revolving Credit Commitments, outstanding Loans and interests in Letters
of Credit, (ii) the assignee Lender shall have Revolving Credit Commitments,
outstanding Loans and interests in Letters of Credit of at least $5,000,000,
(iii) each such assignment shall be evidenced by a written agreement
(substantially in the form attached hereto as Exhibit H or in such other form
acceptable to the Administrative Agent) executed by such assigning Lender,
such assignee Lender or Lenders, the Administrative Agent (and the L/C Issuers, if other than the Administrative Agent) and, if required as provided above, the Borrower, which agreement shall specify in each instance the portion of the Obligations which are to be assigned to the assignee Lender and the portion of the Revolving Credit Commitments of the assigning Lender to be assumed by the assignee Lender, and (iv) the assigning Lender shall pay to the Administrative Agent a processing fee of $3,500 and any out-of-pocket attorneys' fees and expenses incurred by the Administrative Agent in connection with any such assignment agreement. Any such assignee shall become a Lender for all purposes hereunder to the extent of the rights and obligations under the Loan Documents it assumes and the assigning Lender shall be released from its obligations, and will have released its rights, under the Loan Documents to the extent of such assignment. The address for notices to such assignee Lender shall be as specified in the assignment agreement executed by it. Promptly upon the effectiveness of any such assignment agreement, the Borrower shall execute and deliver replacement Notes to the assignee Lender and the assigning Lender in the respective amounts of their Revolving Credit Commitments (or assigned principal amounts, as applicable) after giving effect to the reduction occasioned by such assignment (all such Notes to constitute "Notes" for all purposes of the Loan Documents), and the assignee Lender shall thereafter surrender to the Borrower its old Notes. The Borrower authorizes each Lender to disclose to any purchaser or prospective purchaser of an interest in the Loans and interest in Letters of Credit owed to it or its Revolving Credit Commitments under this Section any financial or other information pertaining to the Borrower or any Subsidiary.
(b) Any Lender may at any time pledge or grant a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any such pledge or grant to a Federal Reserve Bank, and this Section shall not apply to any such pledge or grant of a security interest; provided that no such pledge or grant of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or secured party for such Lender as a party hereto; provided further, however, the right of any such pledgee or grantee (other than any Federal Reserve Bank) to further transfer all or any portion of the rights pledged or granted to it, whether by means of foreclosure or otherwise, shall be at all times subject to the terms of this Agreement.
Section 13.13. Amendments. Any provision of this Agreement or the other Loan Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by (a) the Borrower, (b) the Required Lenders, and (c) if the rights or duties of the Administrative Agent or the L/C Issuer are affected thereby, the Administrative Agent or such L/C Issuer, as applicable; provided that:
(i) no amendment or waiver pursuant to this Section 13.13 shall (A) increase any Revolving Credit Commitment of any Lender without the consent of such Lender or (B) reduce the amount of or postpone the date for any scheduled payment of any principal of or interest on any Loan or of any Reimbursement Obligation or of any fee payable hereunder without the consent of the Lender to which such payment is owing or which has committed to make such Loan or Letter of Credit (or participate therein) hereunder;
(ii) no amendment or waiver pursuant to this Section 13.13 shall, unless signed by each Lender, increase the aggregate Revolving Credit Commitments of the
Lenders, change the definitions of Revolving Credit Termination Date or Required Lenders, change the provisions of this Section 13.13, release any material guarantor or any substantial part of the Collateral (except as otherwise provided for in the Loan Documents), change the definition of Borrowing Base Condition, increase the advance rates against Eligible Receivables or Eligible Inventory or the sublimit on Eligible Inventory in the Borrowing Base, change the requirement set forth in Section 1.1 hereof to conduct a field audit of the Collateral upon the occurrence of the Borrowing Base Condition, change the provisions set forth in this Agreement which cause the Borrowing Base to become effective upon the occurrence of the Borrowing Base Condition, or affect the number of Lenders required to take any action hereunder or under any other Loan Document; and
(iii) no amendment to Section 12 hereof shall be made without the consent of the Guarantor(s) affected thereby.
Section 13.14. Headings. Section headings used in this Agreement are for reference only and shall not affect the construction of this Agreement.
Section 13.15. Costs and Expenses; Indemnification. (a) The Borrower agrees to pay all costs and expenses of the Administrative Agent in connection with the preparation, negotiation, syndication, and administration of the Loan Documents, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent, in connection with the preparation and execution of the Loan Documents, and any amendment, waiver or consent related thereto, whether or not the transactions contemplated herein are consummated, together with any fees and charges suffered or incurred by the Administrative Agent in connection with collateral filing fees and lien searches. The Borrower further agrees to indemnify the Administrative Agent, each Lender, and their respective directors, officers, employees, agents, financial advisors, and consultants against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all reasonable expenses of litigation or preparation therefor, whether or not the indemnified Person is a party thereto, or any settlement arrangement arising from or relating to any such litigation) which any of them may pay or incur arising out of or relating to any Loan Document or any of the transactions contemplated thereby or the direct or indirect application or proposed application of the proceeds of any Loan or Letter of Credit, other than those which arise from the gross negligence or willful misconduct of the party claiming indemnification. The Borrower, upon demand by the Administrative Agent or a Lender at any time, shall reimburse the Administrative Agent or such Lender for any legal or other expenses incurred in connection with investigating or defending against any of the foregoing (including any settlement costs relating to the foregoing) except if the same is directly due to the gross negligence or willful misconduct of the party to be indemnified. The obligations of the Borrower under this Section shall survive the termination of this Agreement.
Section 13.16. Set-off. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default, each Lender and each subsequent holder of any Obligation is hereby authorized by the Borrower and each other Guarantor at any time or from time to time, without notice to the Borrower or such Guarantor or to any other Person, any such notice being hereby expressly waived, to set-off
and to appropriate and to apply any and all deposits (general or special, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts, and in whatever currency denominated) and any other indebtedness at any time held or owing by that Lender or that subsequent holder to or for the credit or the account of the Borrower or such Guarantor, whether or not matured, against and on account of the Obligations of the Borrower or such Guarantor to that Lender or that subsequent holder under the Loan Documents, including, but not limited to, all claims of any nature or description arising out of or connected with the Loan Documents, irrespective of whether or not (a) that Lender or that subsequent holder shall have made any demand hereunder or (b) the principal of or the interest on the Loans or Notes and other amounts due hereunder shall have become due and payable pursuant to Section 9 and although said obligations and liabilities, or any of them, may be contingent or unmatured.
Section 13.17. Entire Agreement. The Loan Documents constitute the entire understanding of the parties thereto with respect to the subject matter thereof and any prior agreements, whether written or oral, with respect thereto are superseded hereby.
Section 13.18. Governing Law. This Agreement and the other Loan Documents (except as otherwise specified therein), and the rights and duties of the parties hereto, shall be construed and determined in accordance with the internal laws of the State of Illinois.
Section 13.19. Severability of Provisions. Any provision of any Loan Document which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. All rights, remedies and powers provided in this Agreement and the other Loan Documents may be exercised only to the extent that the exercise thereof does not violate any applicable mandatory provisions of law, and all the provisions of this Agreement and other Loan Documents are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement or the other Loan Documents invalid or unenforceable.
Section 13.20. Excess Interest. Notwithstanding any provision to the
contrary contained herein or in any other Loan Document, no such provision shall
require the payment or permit the collection of any amount of interest in excess
of the maximum amount of interest permitted by applicable law to be charged for
the use or detention, or the forbearance in the collection, of all or any
portion of the Loans or other obligations outstanding under this Agreement or
any other Loan Document ("Excess Interest"). If any Excess Interest is provided
for, or is adjudicated to be provided for, herein or in any other Loan Document,
then in such event (a) the provisions of this Section shall govern and control,
(b) neither the Borrower nor any guarantor or endorser shall be obligated to pay
any Excess Interest, (c) any Excess Interest that the Administrative Agent or
any Lender may have received hereunder shall, at the option of the
Administrative Agent, be (i) applied as a credit against the then outstanding
principal amount of Obligations hereunder and accrued and unpaid interest
thereon (not to exceed the maximum amount permitted by applicable law), (ii)
refunded to the Borrower, or (iii) any combination of the foregoing, (d) the
interest rate payable hereunder or under any other Loan Document shall be
automatically subject to reduction
to the maximum lawful contract rate allowed under applicable usury laws (the "Maximum Rate"), and this Agreement and the other Loan Documents shall be deemed to have been, and shall be, reformed and modified to reflect such reduction in the relevant interest rate, and (e) neither the Borrower nor any guarantor or endorser shall have any action against the Administrative Agent or any Lender for any damages whatsoever arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any of Borrower's Obligations is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on the Borrower's Obligations shall remain at the Maximum Rate until the Lenders have received the amount of interest which such Lenders would have received during such period on the Borrower's Obligations had the rate of interest not been limited to the Maximum Rate during such period.
Section 13.21. Construction. Nothing contained herein shall be deemed or construed to permit any act or omission which is prohibited by the terms of any Collateral Document, the covenants and agreements contained herein being in addition to and not in substitution for the covenants and agreements contained in the Collateral Documents.
Section 13.22. Lender's Obligations Several. The obligations of the Lenders hereunder are several and not joint. Nothing contained in this Agreement and no action taken by the Lenders pursuant hereto shall be deemed to constitute the Lenders a partnership, association, joint venture or other entity.
Section 13.23. Submission to Jurisdiction; Waiver of Jury Trial. The
Borrower and the other Guarantors hereby submit to the nonexclusive jurisdiction
of the United States District Court for the Northern District of Illinois and of
any Illinois State court sitting in the City of Chicago for purposes of all
legal proceedings arising out of or relating to this Agreement, the other Loan
Documents or the transactions contemplated hereby or thereby. The Borrower and
the other Guarantors irrevocably waive, to the fullest extent permitted by law,
any objection which they may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
THE BORROWER, THE OTHER GUARANTORS, THE ADMINISTRATIVE AGENT, AND THE LENDERS
HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
Section 13.24. Confidentiality. Each of the Administrative Agent, the Lenders and the L/C Issuer agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or
any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (A) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower, (h) to the extent such Information (A) becomes publicly available other than as a result of a breach of this Section or (B) becomes available to the Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis from a source other than the Borrower, (i) to rating agencies if requested or required by such agencies in connection with a rating relating to the Loans or Revolving Credit Commitments hereunder, or (j) to entities which compile and publish information about the syndicated loan market, provided that only basic information about the pricing and structure of the transaction evidenced hereby may be disclosed pursuant to this clause (j).
For purposes of this Section, "Information" means all information received from the Borrower or any of its Subsidiaries relating to the Borrower or any of its Subsidiaries or any of their respective businesses, other than any such information that is available to the Administrative Agent, any Lender or the L/C Issuer on a nonconfidential basis prior to disclosure by the Borrower, provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential.
Notwithstanding anything in this Agreement or any other Loan Document to the contrary, Information shall not include, and each Lender (and each employee, representative or other agent of any Lender or its Affiliates) may disclose to any and all Persons, without limitation of any kind, the "tax treatment" and "tax structure" (in each case, within the meaning of Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including opinions or other tax analyses) that are or have been provided to such Lender relating to such tax treatment or tax structure; provided that with respect to any document or similar item that in either case contains information concerning such tax treatment or tax structure of the transactions contemplated hereby as well as other information, this sentence shall only apply to such portions of the document or similar item that relate to such tax treatment or tax structure.
[SIGNATURE PAGES TO FOLLOW]
This Credit Agreement is entered into between us for the uses and purposes hereinabove set forth as of the date first above written.
"BORROWER"
PLEXUS CORP.
By
George W.F. Setton
Corp. Treasurer & Chief Treasury Officer
"GUARANTORS"
PLEXUS SERVICES CORP.
By
George W.F. Setton
Treasurer
PLEXUS ELECTRONIC ASSEMBLY CORP.
By
George W.F. Setton
Treasurer
PLEXUS INTL. SALES & LOGISTICS, LLC
By
George W.F. Setton
Treasurer
PLEXUS QS, LLC
By
George W.F. Setton
Treasurer
PLEXUS TECHNOLOGY GROUP INC.
By
George W.F. Setton
Treasurer
PLEXUS INTERNATIONAL SERVICES, INC.
By
Angelo Ninivaggi
President
PTL INFORMATION TECHNOLOGY SERVICES CORP.
By
Angelo Ninivaggi
President
"LENDERS"
HARRIS TRUST AND SAVINGS BANK, in its
individual capacity as a Lender, as
L/C Issuer, and as Administrative Agent
By Name_____________________________________ Title____________________________________ Address: 111 West Monroe Street Chicago, Illinois 60603 Attention: Michael M. Fordney Telecopy: (312) 293-5041 Telephone: (312) 461-7514 |
LASALLE BANK NATIONAL ASSOCIATION
By Name_____________________________________ Title____________________________________ Address: 135 South LaSalle Street Chicago, Illinois 60603 Attention: Lou D. Banach Telecopy: (414) 224-0071 Telephone: (414) 224-0394 |
NATIONAL CITY BANK
By Name_____________________________________ Title____________________________________ Address: 2021 Spring Road, Suite 600 Oak Brook, IL 60523 Attention: Tiffany Cozzolino Telecopy: (630) 954-3730 Telephone: (630) 954-5782 |
THE BANK OF TOKYO - MITSUBISHI, LTD.,
CHICAGO BRANCH
By Name_____________________________________ Title____________________________________ Address: 227 West Monroe Street, Suite 2300 Chicago, Illinois 60606 Attention: Wayne Yamanaka Telecopy: (312) 696-4535 Telephone: (312) 696-4664 |
THE PROVIDENT BANK
By Name_____________________________________ Title____________________________________ Address: __________________________ __________________________ Attention: ________________ Telecopy: (___) ___-____ Telephone: (___) ___-____ |
EXHIBIT A
NOTICE OF PAYMENT REQUEST
[Date]
[Name of Lender]
[Address]
Attention:
Reference is made to the Credit Agreement, dated as of October 22, 2003, among PLEXUS CORP., the Lenders party thereto, and Harris Trust and Savings Bank, as Administrative Agent (the "Credit Agreement"). Capitalized terms used herein and not defined herein have the meanings assigned to them in the Credit Agreement. [The Borrower has failed to pay its Reimbursement Obligation in the amount of $____________. Your Revolver Percentage of the unpaid Reimbursement Obligation is $_____________] or [________________________ has been required to return a payment by the Borrower of a Reimbursement Obligation in the amount of $_______________. Your Revolver Percentage of the returned Reimbursement Obligation is $_______________.]
Very truly yours,
HARRIS TRUST AND SAVINGS BANK,
as L/C Issuer
By
Name_____________________________________
Title____________________________________
EXHIBIT B
NOTICE OF BORROWING
Date:_________________, ____
To: Harris Trust and Savings Bank, as Administrative Agent for the Lenders parties to the Credit Agreement dated as of October 22, 2003 (as extended, renewed, amended or restated from time to time, the "Credit Agreement"), among Plexus Corp., certain Lenders which are signatories thereto, and Harris Trust and Savings Bank, as Administrative Agent
Ladies and Gentlemen:
The undersigned, Plexus Corp. (the "Borrower"), refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 1.5 of the Credit Agreement, of the Borrowing specified below:
1. The Business Day of the proposed Borrowing is ___________, ____.
2. The aggregate amount of the proposed Borrowing is $______________.
3. The Borrowing is being advanced under the Revolving Credit.
4. The Borrowing is to be comprised of $___________ of [BASE RATE] [EURODOLLAR] Loans.
[5. THE DURATION OF THE INTEREST PERIOD FOR THE EURODOLLAR
LOANS INCLUDED IN THE BORROWING SHALL BE ____________ MONTHS.]
The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Borrowing, before and after giving effect thereto and to the application of the proceeds therefrom:
(a) the representations and warranties of the Borrower contained in Section 6 of the Credit Agreement are true and correct as though made on and as of such date (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date); and
(b) no Default or Event of Default has occurred and is continuing or would result from such proposed Borrowing.
PLEXUS CORP.
By
Name_____________________________________
Title____________________________________
EXHIBIT C
NOTICE OF CONTINUATION/CONVERSION
Date: ____________, ____
To: Harris Trust and Savings Bank, as Administrative Agent for the Lenders parties to the Credit Agreement dated as of October 22, 2003 (as extended, renewed, amended or restated from time to time, the "Credit Agreement") among Plexus Corp., certain Lenders which are signatories thereto, and Harris Trust and Savings Bank, as Administrative Agent
Ladies and Gentlemen:
The undersigned, Plexus Corp. (the "Borrower"), refers to the Credit Agreement, the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 1.5 of the Credit Agreement, of the [CONVERSION] [CONTINUATION] of the Loans specified herein, that:
1. The conversion/continuation Date is __________, ____.
2. The aggregate amount of the Revolving Loans to be
[CONVERTED] [CONTINUED] is $______________.
3. The Loans are to be [CONVERTED INTO] [CONTINUED AS]
[EURODOLLAR] [BASE RATE] Loans.
4. [IF APPLICABLE:] The duration of the Interest Period for the Revolving Loans included in the [CONVERSION] [CONTINUATION] shall be _________ months.
The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the proposed conversion/continuation date, before and after giving effect thereto and to the application of the proceeds therefrom:
(a) the representations and warranties of the Borrower contained in Section 6 of the Credit Agreement are true and correct as though made on and as of such date (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date); provided, however, that this condition shall not apply to the conversion of an outstanding Eurodollar Loan to a Base Rate Loan; and
(b) no Default or Event of Default has occurred and is
continuing, or would result from such proposed [CONVERSION]
[CONTINUATION].
PLEXUS CORP.
By
Name_____________________________________
Title____________________________________
EXHIBIT D-1
REVOLVING NOTE
U.S. $_______________ October 22, 2003
FOR VALUE RECEIVED, the undersigned, Plexus Corp., a Wisconsin corporation (the "Borrower"), hereby promises to pay to the order of ____________________ (the "Lender") on the Revolving Credit Termination Date of the hereinafter defined Credit Agreement, at the principal office of Harris Trust and Savings Bank, as Administrative Agent, in Chicago, Illinois, in immediately available funds, the principal sum of ___________________ Dollars ($__________) or, if less, the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to the Credit Agreement, together with interest on the principal amount of each Revolving Loan from time to time outstanding hereunder at the rates, and payable in the manner and on the dates, specified in the Credit Agreement.
This Note is one of the Revolving Notes referred to in the Credit Agreement dated as of October 22, 2003, among the Borrower, the Guarantors party thereto, the Lenders party thereto, and Harris Trust and Savings Bank, as Administrative Agent for the Lenders (the "Credit Agreement"), and this Note and the holder hereof are entitled to all the benefits and security provided for thereby or referred to therein, to which Credit Agreement reference is hereby made for a statement thereof. All defined terms used in this Note, except terms otherwise defined herein, shall have the same meaning as in the Credit Agreement. This Note shall be governed by and construed in accordance with the internal laws of the State of Illinois.
Voluntary prepayments may be made hereon, certain prepayments are required to be made hereon, and this Note may be declared due prior to the expressed maturity hereof, all in the events, on the terms and in the manner as provided for in the Credit Agreement.
The Borrower hereby waives demand, presentment, protest or notice of any kind hereunder.
PLEXUS CORP.
By
Name_____________________________________
Title____________________________________
EXHIBIT D-2
SWING NOTE
U.S. $_____________ October 22, 2003
FOR VALUE RECEIVED, the undersigned, Plexus Corp., a Wisconsin corporation (the "Borrower"), hereby promises to pay to the order of ___________________ (the "Lender") on the Revolving Credit Termination Date of the hereinafter defined Credit Agreement, at the principal office of Harris Trust and Savings Bank, as Administrative Agent, in Chicago, Illinois, in immediately available funds, the principal sum of ________________________ Dollars ($___________) or, if less, the aggregate unpaid principal amount of all Swing Loans made by the Lender to the Borrower pursuant to the Credit Agreement, together with interest on the principal amount of each Swing Loan from time to time outstanding hereunder at the rates, and payable in the manner and on the dates, specified in the Credit Agreement.
This Note is the Swing Note referred to in the Credit Agreement dated as of October 22, 2003, among the Borrower, the Guarantors party thereto, the Lenders party thereto, and Harris Trust and Savings Bank, as Administrative Agent for the Lenders (the "Credit Agreement"), and this Note and the holder hereof are entitled to all the benefits and security provided for thereby or referred to therein, to which Credit Agreement reference is hereby made for a statement thereof. All defined terms used in this Note, except terms otherwise defined herein, shall have the same meaning as in the Credit Agreement. This Note shall be governed by and construed in accordance with the internal laws of the State of Illinois.
Voluntary prepayments may be made hereon, certain prepayments are required to be made hereon, and this Note may be declared due prior to the expressed maturity hereof, all in the events, on the terms and in the manner as provided for in the Credit Agreement.
The Borrower hereby waives demand, presentment, protest or notice of any kind hereunder.
PLEXUS CORP.
By
Name_____________________________________
Title____________________________________
EXHIBIT E
PLEXUS CORP.
BORROWING BASE CERTIFICATE
To: Harris Trust and Savings Bank, as Administrative Agent under, and the Lenders party to, the Credit Agreement described below.
Pursuant to the terms of the Credit Agreement dated as of October 22, 2003, among us (the "Credit Agreement"), we submit this Borrowing Base Certificate to you and certify that the information set forth below and on any attachments to this Certificate is true, correct and complete as of the date of this Certificate.
A. RECEIVABLES IN BORROWING BASE
1. Gross Receivables ____________________
Less
(a) Ineligible sales ____________________
(b) Owed by an account debtor who is an Affiliate ____________________
(c) Owed by an account debtor who is in an insolvency ____________________
or reorganization proceeding
(d) Credits/allowances ____________________
(e) Terms longer than 60 days from invoice date ____________________
(f) Unpaid more than 90 days from invoice date ____________________
(g) Owing from an Account Debtor more than 25% of ____________________
whose Receivables are ineligible under clause (f)
(taint factor)
(h) Concentration exceeding 15% ____________________
(i) Otherwise ineligible ____________________
2. Total Deductions (sum of lines A1a - A1g) ____________________
3. Eligible Receivables (line A1 minus line A2) ____________________
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4. Eligible Receivables in Borrowing Base ____________________
(line A3 x .85)
B. INVENTORY IN BORROWING BASE
1. Gross inventory of Finished Goods and Raw Materials ____________________
2. Less
(a) Finished Goods and Raw Materials not located at ____________________
approved locations
(b) Obsolete, slow moving, or not merchantable ____________________
(c) Otherwise ineligible ____________________
3. Total Deductions (sum of lines B2a - B2c above) ____________________
4. Eligible Inventory (line B1 minus line B3) ____________________
5. Eligible Inventory in Borrowing Base (lesser of line B4 ____________________
x .25 and $30,000,000)
C. TOTAL BORROWING BASE
1. Line A4 ____________________
2. Line B5 ____________________
3. Sum of Lines C1 and C2 (Borrowing Base) ____________________
D. REVOLVING CREDIT ADVANCES
1. Loans ____________________
2. Letters of Credit ____________________
3. Total Outstandings (line D1 plus D2) ____________________
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E. AVAILABLE BORROWING BASE COLLATERAL
(line C3 minus line D3) ____________________
Dated as of this ______ day of __________________.
PLEXUS CORP.
By
Name_____________________________________
Title____________________________________
EXHIBIT F
PLEXUS CORP.
COMPLIANCE CERTIFICATE
To: Harris Trust and Savings Bank, as Administrative Agent under, and the Lenders party to, the Credit Agreement described below
This Compliance Certificate is furnished to the Administrative Agent and the Lenders pursuant to that certain Credit Agreement dated as of October 22, 2003, among us (the "Credit Agreement"). Unless otherwise defined herein, the terms used in this Compliance Certificate have the meanings ascribed thereto in the Credit Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected ____________ of Plexus Corp.;
2. I have reviewed the terms of the Credit Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the Borrower and its Subsidiaries during the accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or the occurrence of any event which constitutes a Default or Event of Default during or at the end of the accounting period covered by the attached financial statements or as of the date of this Compliance Certificate, except as set forth below;
4. The financial statements required by Section 8.5 of the Credit Agreement and being furnished to you concurrently with this Compliance Certificate are true, correct and complete as of the date and for the periods covered thereby; and
5. The Schedule I hereto sets forth financial data and computations evidencing the Borrower's compliance with certain covenants of the Credit Agreement, all of which data and computations are, to the best of my knowledge, true, complete and correct and have been made in accordance with the relevant Sections of the Credit Agreement.
Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the Borrower has taken, is taking, or proposes to take with respect to each such condition or event:
The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this ______ day of __________________ 20___.
PLEXUS CORP.
By
Name_____________________________________
Title____________________________________
SCHEDULE I
TO COMPLIANCE CERTIFICATE
PLEXUS CORP.
COMPLIANCE CALCULATIONS
FOR CREDIT AGREEMENT DATED AS OF OCTOBER 22, 2003
CALCULATIONS AS OF _____________, _______
A. Total Leverage Ratio (Section 8.21(a))
1. Total Funded Debt $___________
2. Tangible Net Worth $___________
3. Line A1 plus Line A2 ("Tangible Capital") $___________
4. Ratio of Line A1 to A3 ____:1.0
5. Line A4 ratio must not exceed 0.35:1.0
6. The Borrower is in compliance (circle yes or no) yes/no
B. Minimum Cash and Marketable Securities (Section 8.21(b))
1. Domestic cash on deposit $___________
2. Marketable domestic securities $___________
3. Sum of lines B1 and B2 $___________
4. Line B3 must not be less than $40,000,000
5. The Borrower is in compliance (circle yes or no) yes/no
C. Minimum Tangible Net Worth (Section 8.21(c))
1. Tangible Net Worth $___________
2. Base amount required $245,000,000
3. 50% of Net Income (if positive) for each quarter ending on or after $___________
12/31/03
4. Sum of Lines C2 and C3 (Required minimum) $___________
5. The Borrower is in compliance (circle yes or no) yes/no
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D. Minimum Adjusted EBITDA (Section 8.21(d))
1. Net Income for calculation period $___________
2. Interest Expense for calculation period $___________
3. Income taxes for calculation period $___________
4. Depreciation and Amortization Expense for calculation period $___________
5. Sum of lines D1, D2, D3 and D4 ("EBITDA") $___________
6. EBITDA of Acquired Businesses during calculation period prior to
Acquisition and not otherwise included in Net Income $___________
7. Non-cash restructuring/other non-cash non-recurring charges for
calculation period (not to exceed $15,000,000 during term of Agreement) $___________
8. Sum of lines D5, D6 and D7 ("Adjusted EBITDA")
$___________
9. Line D8 must not be less than $___________
10. The Borrower is in compliance (circle yes or no) yes/no
E. Maximum Rentals (Section 8.21(f))
1. Obligations for fixed rentals or other consideration payable under $___________
Operating Leases during most recent fiscal year
2. Line F1 shall not be greater than $24,000,000
3. The Borrower is in compliance (circle yes or no) yes/no
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EXHIBIT G
ADDITIONAL GUARANTOR SUPPLEMENT
______________, ___
Harris Trust and Savings Bank, as
Administrative Agent for the Lenders
named in the Credit Agreement dated
as of October 22, 2003, among Plexus
Corp., as Borrower, the Guarantors
referred to therein, the Lenders from
time to time party thereto, and the
Administrative Agent (the "Credit
Agreement")
Ladies and Gentlemen:
Reference is made to the Credit Agreement described above. Terms not defined herein which are defined in the Credit Agreement shall have for the purposes hereof the meaning provided therein.
The undersigned, [NAME OF SUBSIDIARY GUARANTOR], a [JURISDICTION OF
INCORPORATION OR ORGANIZATION] hereby elects to be a "Guarantor" for all
purposes of the Credit Agreement, effective from the date hereof. The
undersigned confirms that the representations and warranties set forth in
Section 6 of the Credit Agreement are true and correct as to the undersigned as
of the date hereof and the undersigned shall comply with each of the covenants
set forth in Section 8 of the Credit Agreement applicable to it.
Without limiting the generality of the foregoing, the undersigned hereby agrees to perform all the obligations of a Guarantor under, and to be bound in all respects by the terms of, the Credit Agreement, including without limitation Section 12 thereof, to the same extent and with the same force and effect as if the undersigned were a signatory party thereto.
The undersigned acknowledges that this Agreement shall be effective upon its execution and delivery by the undersigned to the Administrative Agent, and it shall not be necessary for the Administrative Agent or any Lender, or any of their Affiliates entitled to the benefits hereof, to execute this Agreement or any other acceptance hereof. This Agreement shall be construed in accordance with and governed by the internal laws of the State of Illinois.
Very truly yours,
[NAME OF SUBSIDIARY GUARANTOR]
By
Name______________________________
Title_____________________________
EXHIBIT H
ASSIGNMENT AND ACCEPTANCE
Dated _____________, _____
Reference is made to the Credit Agreement dated as of October 22, 2003 (the "Credit Agreement") among Plexus Corp., the Guarantors party thereto, the Lenders party thereto, and Harris Trust and Savings Bank, as Administrative Agent for the Lenders (the "Administrative Agent"). Terms defined in the Credit Agreement are used herein with the same meaning.
______________________________________________________ (the "Assignor") and _________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, a _______% interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the Effective Date (as defined below), including, without limitation, such percentage interest in the Assignor's Revolving Credit Commitments as in effect on the Effective Date and the Loans, if any, owing to the Assignor on the Effective Date and the Assignor's Revolver Percentage of any outstanding L/C Obligations.
2. The Assignor (i) represents and warrants that as of the date hereof (A) its Revolving Credit Commitment is $_______________, (B) the aggregate outstanding principal amount of Loans made by it under the Credit Agreement that have not been repaid is $___________ and a description of the interest rates and interest periods of such Loans is attached as Annex 1 hereto, and (C) the aggregate principal amount of Assignor's Revolver Percentage of outstanding L/C Obligations is $___________; (ii) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim, lien, or encumbrance of any kind; (iii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto; and (iv) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any Subsidiary or the performance or observance by the Borrower or any Subsidiary of any of their respective obligations under the Credit Agreement or any other instrument or document furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered to the Lenders pursuant to Section 8.5(b), (c), and (d) thereof and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance;
(ii) agrees that it will, independently and without reliance upon the
Administrative Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iii) appoints and authorizes the
Administrative Agent to take such action as Administrative Agent on its
behalf and to exercise such powers under the Credit Agreement and the
other Loan Documents as are delegated to the Administrative Agent by
the terms thereof, together with such powers as are reasonably
incidental thereto; (iv) agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender; and (v)
specifies as its lending office (and address for notices) the offices
set forth beneath its name on the signature pages hereof.
4. As consideration for the assignment and sale contemplated in Annex 1 hereof, the Assignee shall pay to the Assignor on the Effective Date in Federal funds the amount agreed upon by the Assignor and the Assignee. It is understood that commitment and/or letter of credit fees accrued to the Effective Date with respect to the interest assigned hereby are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party.
5. The effective date for this Assignment and Acceptance shall be ___________ (the "Effective Date"). Following the execution of this Assignment and Acceptance, it will be delivered to the Administrative Agent for acceptance and recording by the Administrative Agent and, if required, the Borrower.
6. Upon such acceptance and recording, as of the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement.
7. Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments under the Credit Agreement in respect of the interest assigned hereby (including, without limitation, all payments of principal, interest and commitment fees with respect thereto) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Effective Date directly between themselves.
8. In accordance with Section 13.12 of the Credit Agreement, the Assignor and the Assignee request and direct that the Administrative Agent prepare and cause the Borrower to execute and deliver to the Assignee the relevant Notes payable to the
Assignee in the amount of its Revolving Credit Commitments and new Notes to the Assignor in the amount of its Revolving Credit Commitments after giving effect to this assignment.
9. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of Illinois.
[Assignor Lender]
By Name_________________________________ Title________________________________
[Assignee Lender]
By Name_________________________________ Title________________________________
Lending office (and address for notices):
Accepted and consented this
____ day of _____________
PLEXUS CORP.
By_________________________________
Name__________________________
Title_________________________
Accepted and consented to by the Administrative Agent and L/C Issuer this ___ day of ________
HARRIS TRUST AND SAVINGS BANK, as
Administrative Agent and L/C Issuer
By_________________________________
Name__________________________
Title_________________________
ANNEX I
TO ASSIGNMENT AND ACCEPTANCE
PRINCIPAL AMOUNT TYPE OF LOAN INTEREST RATE MATURITY DATE
SCHEDULE 1
REVOLVING CREDIT COMMITMENTS
REVOLVING CREDIT SWING LINE
NAME OF LENDER COMMITMENT COMMITMENT
Harris Trust and Savings Bank $ 29,000,000 $5,000,000
LaSalle Bank National $ 24,000,000 $ -0-
Association
National City Bank $ 24,000,000 $ -0-
The Bank of Tokyo - Mitsubishi, $ 14,000,000 $ -0-
Ltd., Chicago Branch
The Provident Bank $ 9,000,000 $ -0-
TOTAL $100,000,000 $5,000,000
============ ==========
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SCHEDULE 6.2
SUBSIDIARIES
JURISDICTION PERCENTAGE
NAME ORGANIZATION OWNERSHIP OWNER
Plexus Services Corp. Nevada 100% Borrower
Plexus Electronic Assembly Corp. Nevada 100% Plexus Services Corp.
Plexus Intl. Sales & Logistics, LLC Delaware 100% Plexus Electronic
Assembly Corp.
Plexus QS, LLC Delaware 100% Plexus Electronic
Assembly Corp.
Plexus Technology Group Inc. Nevada 100% Plexus Services Corp.
Plexus International Services, Inc. Nevada 100% Borrower
Plexus ABS, Inc. (special purpose entity Nevada 100% Borrower
to be dissolved)
PTL Information Technology Services Corp. Nevada 100% Borrower
Plexus Electronica S. de R.L. de C.V. Mexico 99%(1) Plexus Intl. Sales &
Logistics, LLC
Plexus Servicios, S. de R.L. de C.V. Mexico 99%(1) Plexus Electronica S.
de R.L. de C.V.
Plexus Corp. Limited United Kingdom 100% Plexus International
Services, Inc.
|
Plexus Asia, Ltd. British Virgin Islands 81%(2) Plexus International
Services, Inc.
Plexus Technology Group, Limited (inactive) United Kingdom 100% Plexus International
Services, Ltd.
Plexus Corp. (UK) Limited United Kingdom 100% Plexus Corp. Limited
Plexus Corp. (Kelso) Limited (inactive) United Kingdom 100% Plexus Corp. (UK)
Limited
Plexus Corp. (Maldon) Limited (inactive) United Kingdom 100% Plexus Corp. (UK)
Limited
Plexus (Xiamen) Co. Ltd. China 100% Plexus Asia, Ltd.
Plexus Manufacturing Sdn. Bhd. Malaysia 100% Plexus Asia, Ltd.
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SCHEDULE 6.8
TRADEMARKS, FRANCHISES AND LICENSES
Plexus Corp. (along with hundreds of other companies) has been sued by the Lemelson Medical, Educational & Research Foundation Limited Partnership ("Lemelson") for alleged possible infringement of certain Lemelson patents. The complaint, which is one of a series of complaints by Lemelson against hundreds of companies, seeks injunctive relief, treble damages (amount unspecified) and attorney's fees. Plexus Corp. has obtained a stay of action pending developments in other related litigation; that litigation is currently expected to be tried in November 2003. Plexus Corp. believes the vendors from which patent-related equipment was purchased may be required to contractually indemnify it. However, based upon Plexus Corp.'s observation of the plaintiff's actions in other parallel cases, it appears that the primary objective of the plaintiff is to cause defendants to enter into license agreements. If a judgment is rendered and/or a license fee required, it is the opinion of the management of Plexus Corp. that such judgment or fee would not be material to Plexus Corp.'s consolidated financial position or the results of its operations. Lemelson Medical, Educational & Research Foundation Limited Partnership vs. Esco Electronics Corporation et al, US District Court for the District of Arizona, Case Number CIV 000660 PHX JWS (2000).
SCHEDULE 8.7
EXISTING GUARANTEES
Plexus Corp. has two existing guarantees to the following parties and for the following outstanding amounts:
Party Amount Outstanding
----- ------------------
Samsung $14,878.90
ATI Technology Systems Corp. $0.00
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EXHIBIT 10.6(b)
PLEXUS CORP.
FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT
This First Amendment and Waiver to Credit Agreement (herein, the "Amendment") is entered into as of October 31, 2003, by and among Plexus Corp., a Wisconsin corporation (the "Borrower"), the Subsidiaries listed on the signature pages hereof, as Guarantors, the several financial institutions listed on the signature pages hereof, as Lenders, and Harris Trust and Savings Bank, as Administrative Agent for the Lenders.
PRELIMINARY STATEMENTS
A. The Borrower, the Guarantors, the Lenders and the Administrative Agent are parties to a Credit Agreement dated as of October 22, 2003 (the "Credit Agreement"). All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement.
B. The Borrower has requested that the Lenders (i) amend Section
8.21(b) of the Credit Agreement so as to allow cash held by Wholly-owned
Subsidiaries of the Borrower to count against the required amount thereunder and
(ii) waive for a certain period following the date hereof any Default or Event
of Default which would otherwise be caused by the existence of certain Liens not
otherwise permitted pursuant to the terms of Section 8.8 of the Credit Agreement
on the assets of the Borrower and its Subsidiaries.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. WAIVER.
By signing below, subject to the satisfaction of the conditions precedent set forth below, the Lenders hereby waive during the period from and including the Closing Date through but excluding December 15, 2003 any violation of Section 8.8 of Credit Agreement which could or would otherwise be caused by the existence of the Liens described in a certain memorandum from Chapman and Cutler dated on or about the date hereof (the "Post-Closing Liens"), copies of which memorandum have been distributed to the Lenders prior to the date hereof, provided that the Borrower agrees that (i) the waiver set forth in this Section 1 shall expire on December 15, 2003, and (ii) it shall use commercially reasonable efforts to have the Post-Closing Liens released prior to December 15, 2003 or, alternatively, to cause the secured parties holding such Liens to enter into intercreditor agreements with the Administrative Agent relating to such Liens prior to December 15, 2003, which intercreditor agreements shall be in form and substance acceptable to the Required Lenders.
SECTION 2. AMENDMENT.
Subject to the satisfaction of the conditions precedent set forth in
Section 3 below, Section 8.21(b) of the Credit Agreement shall be and hereby is
amended by deleting the words
"The Borrower shall . . . " and replacing them with the words "The Borrower and its Wholly-owned Subsidiaries shall . . .".
SECTION 3. CONDITION PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of the following condition precedent:
3.1. The Borrower, the other Guarantors and the Required Lenders shall have executed and delivered this Amendment.
SECTION 4. REPRESENTATIONS.
In order to induce the Lenders to execute and deliver this Amendment, the Borrower hereby represents to the Lenders that as of the date hereof the representations and warranties set forth in Section 6 of the Credit Agreement as amended hereby are and shall be and remain true and correct (except, with respect to the representation set forth in Section 6.10, to the extent that any Default or Event of Default which would otherwise be caused by the existence of Liens not permitted by Section 8.8 of the Credit Agreement is specifically waived hereby) and that the Borrower is in compliance with the terms and conditions of the Credit Agreement and no Default or Event of Default has occurred and is continuing under the Credit Agreement or shall result after giving effect to this Amendment (other than any such Default or Event of Default as is specifically waived hereby).
SECTION 5. MISCELLANEOUS.
5.1. The Borrower and the other Guarantors (collectively, the "Credit Parties") have heretofore executed and delivered to the Lenders the Collateral Documents. The Credit Parties hereby acknowledge and agrees that the Liens created and provided for by the Collateral Documents continue to secure, among other things, the Obligations arising under the Credit Agreement as amended hereby; and the Collateral Documents and the rights and remedies of the Lenders thereunder, the obligations of the Borrower, and the other Guarantors thereunder, and the Liens created and provided for thereunder, remain in full force and effect and shall not be affected, impaired or discharged hereby. Nothing herein contained shall in any manner affect or impair the priority of the liens and security interests created and provided for by the Collateral Documents as to the indebtedness which would be secured thereby prior to giving effect to this Amendment.
5.2. Except as specifically amended herein, the Credit Agreement shall continue in full force and effect in accordance with its original terms. Reference to this specific Amendment need not be made in the Credit Agreement, the Notes, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Credit Agreement, any reference in any of such items to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby.
5.3. The Borrower agrees to pay on demand all reasonable third party costs and expenses incurred by the Administrative Agent in connection with the negotiation, preparation, execution and delivery of this Amendment, including the reasonable fees and expenses of counsel for the Administrative Agent.
5.4. This Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois.
[SIGNATURE PAGE TO FOLLOW]
This First Amendment and Waiver to Credit Agreement is entered into as of this 31st day of October, 2003.
BORROWER
PLEXUS CORP.
By /s/ George W.F. Setton ---------------------------------- Name George W.F. Setton Title Treasurer |
GUARANTORS
PLEXUS SERVICES CORP.
By /s/ George W.F. Setton ---------------------------------- George W.F. Setton Treasurer |
PLEXUS ELECTRONIC ASSEMBLY CORP.
By /s/ George W.F. Setton ---------------------------------- George W.F. Setton Treasurer |
PLEXUS INTL. SALES & LOGISTICS, LLC
By /s/ George W.F. Setton ---------------------------------- George W.F. Setton Treasurer |
PLEXUS QS, LLC
By /s/ George W.F. Setton ---------------------------------- George W.F. Setton Treasurer |
PLEXUS TECHNOLOGY GROUP INC.
By /s/ George W.F. Setton --------------------------------------- George W.F. Setton Treasurer |
PLEXUS INTERNATIONAL SERVICES, INC.
By /s/ Angelo Ninivaggi --------------------------------------- Angelo Ninivaggi President |
PTL INFORMATION TECHNOLOGY SERVICES CORP.
By /s/ Angelo Ninivaggi --------------------------------------- Angelo Ninivaggi President |
LENDERS
HARRIS TRUST AND SAVINGS BANK, in its
individual capacity as a Lender and as
Administrative Agent
By /s/ George M. Kluhy ---------------------------------------------- Name George M. Kluhy Title Vice President |
LASALLE BANK NATIONAL ASSOCIATION
By /s/ Lou D. Banach ---------------------------------------------- Name Lou D. Banach Title First Vice President & Senior Lender |
NATIONAL CITY BANK
By /s/ Tiffany Cozzolino ---------------------------------------------- Name Tiffany Cozzolino Title Vice President |
THE BANK OF TOKYO - MITSUBISHI, LTD.,
CHICAGO BRANCH
By /s/ Shinichiro Munechika ---------------------------------------------- Name Shinichiro Munechika Title Deputy General Manager |
THE PROVIDENT BANK
By /s/ Alan R. Henning ---------------------------------------------- Name Alan R. Henning Title Vice President |
EXHIBIT 10.8(b)
PLEXUS CORP.
2004 INCENTIVE COMPENSATION PLAN
EXECUTIVE LEADERSHIP TEAM
PLAN OBJECTIVES
The primary objectives of the 2004 Incentive Compensation Plan (Plan) are to reward results delivered by plan participants that enhance shareholder value and to assist Plexus Corp. (Plexus) to attract, retain and motivate highly qualified and talented executives. The Plan provides annual variable incentive compensation opportunities to participants for the achievement of specified financial performance and other significant results that contribute to the overall success of Plexus. Increasing revenues, improving financial returns on capital employed, and achieving specific personal objectives are the three performance elements of this Plan.
PLAN YEAR
The Plan Year is effective October 1, 2003 and continues through September 30, 2004.
ELIGIBILITY FOR PLAN PARTICIPATION
Participation in this Plan is limited to the members of the Plexus Executive Leadership Team.
INCENTIVE PLAN COMPENSATION
Plan awards are to be calculated based upon the Plan Year base salary (salary excluding bonuses, paid commissions, reimbursed relocation expenses, or any other special pay, but including amounts deferred) of each participant adjusted for pro-rations as applicable (See Award Payment Timing and Eligibility, below). Incentive awards are calculated for each position (job) a participant holds through the plan year and are pro-rated accordingly based on calendar weeks in each position (FY 2004 = 52 weeks).
INCENTIVE PLAN PERFORMANCE MEASURES
The incentive performance measures, each of which stands independently of the others with regard to award opportunities, are:
* REVENUES: Total Fiscal Year 2004 Net Sales of Plexus Corp.
* RETURN ON AVERAGE CAPITAL EMPLOYED (ROCE): Annual Operating Income
for Fiscal Year 2004 divided by Average Capital Employed. Where,
* OPERATING INCOME: As reported in the company's audited
income statement for Fiscal Year 2004 adjusted, if
necessary, to eliminate non-recurring or unusual charges.
* AVERAGE CAPITAL EMPLOYED: The 5 point average of the
year-end Fiscal Year 2003 and the quarterly Fiscal Year 2004
Capital Employed balances.
* CAPITAL EMPLOYED: Total Assets (minus Cash) less
non-interest bearing Current and Non-current
Liabilities.
* OBJECTIVES: Individual participant assigned objectives that relate to personal or site/location/department measurable goals for the plan year, typically 3 to 5, which have been reviewed with and approved by the participant's supervisor.
INCENTIVE PLAN PERFORMANCE AND REWARD OPPORTUNITIES
Incentive compensation is paid based on the following achievement levels, resulting in a percentage determined according to the following matrix. That percentage is then applied to a "target bonus" amount, which is set separately for each individual.
COMPONENT THRESHOLD PAYOUT TARGET PAYOUT MAXIMUM PAYOUT
---------------------------------------- ------------ ---------- ------------- ------------ -------------- -------------
REVENUE (a) 0% (a) (a)% (a) (a)%
ROCE (a) 0% (a) (a)% (a) (a)%
PERSONAL OBJECTIVES 0% (a)% (a)%
TOTAL INCENTIVE = 0% 100% 200%
REVENUES + ROCE + PERSONAL OBJECTIVES
---------------------------------------- ------------ ---------- ------------- ------------ -------------- -------------
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(a) Specific threshold, target and maximum amounts, and percentages allocated to each component, are to be the same for each participant and determined with the approval of the Compensation and Leadership Development Committee; that information shall be communicated to eligible participants. Such determinations will be made on an annual basis, if it is decided to continue the Plan beyond fiscal 2004 (in which case all year references herein will be deemed to refer to the appropriate future year).
* THRESHOLD: At or below Revenue and/or ROCE Thresholds, only personal objectives awards can be earned. Revenue and ROCE measures begin producing incentive awards for above Threshold achievement.
* TARGET: Targets for the Revenue and ROCE measures relate to FY 2004 financial performance goals. Personal objectives relate to individual participant performance and may reflect personal, location, site, department, or other measurable requirements. Awards will be pro-rated on a straight-line basis for performance that falls between Threshold and Target achievement.
* MAXIMUM: The maximum performance levels reflect the maximum award for each component. Awards will be pro-rated on a straight-line basis for performance that falls between Target and Maximum achievement.
Note: No award will be paid for any component if the company incurs a net loss for the fiscal year (excluding non-recurring or unusual charges).
AWARD PAYMENT TIMING AND ELIGIBILITY
Eligible participants will receive earned incentive awards no later than December 15, 2004 (payment date). Adjustments occur under the following circumstances:
* PARTICIPANT TRANSFER: Awards will be pro-rated for participants who transfer between company organizations (sites, locations, departments, SBU's, etc.) based upon time spent in each job.
* PARTICIPANT STATUS CHANGE: Participants changing status (to/from eligible/ineligible position) are to be pro-rated by eligible weeks on the company payroll divided by the number of weeks of the plan year (FY 2004 = 52 weeks).
* EMPLOYMENT/RE-EMPLOYMENT: New or rehired employees who enter the Plan after the start of the Plan Year will receive a pro-rated award based on the time actually in the Plan.
* EMPLOYMENT TERMINATION: Plan participants who leave the employ of Plexus (whether voluntarily or involuntarily) prior to the payout date (December 15, 2004), except in the case of retirement, disability, death or approval by the CEO, forfeit all rights to incentive awards accrued during the Plan Year.
* RETIREMENT, DISABILITY, OR DEATH: "Retirement" means eligible for retirement under Plexus Corp.'s retirement guidelines. Disability means eligible for disability benefits and unable to continue in the employ of the company due to such disability. In the event of death, any payable award will be paid to the participant's beneficiary(ies), or to the estate in the event that no beneficiary is named, following the end of the Plan Year. Awards for participants who leave due to retirement, disability or death will be pro-rated by eligible weeks on the company payroll divided by the number of weeks of the plan year (FY 2004 = 52 weeks).
* NON-PERFORMING EMPLOYEES: If at any time during the plan year an individual's performance is not satisfactory and the participant is on a formal written performance improvement plan, such participant may be removed from this Plan, and either no award or a reduced award will be paid to the individual. Final approval of such action will be made by Executive Leadership.
* LEAVES OF ABSENCE: Awards for participants who are on an unpaid Leave of Absence will be pro-rated for the ROCE and Revenue components based upon eligible calendar weeks on the company payroll divided by the number of weeks of the plan year. (FY 2004 = 52 weeks)
COMMUNICATION
Each participant will receive a copy of this plan document and a Participant Award Opportunity Summary, which will include the individual's target bonus amount (which may be expressed as a dollar amount or as a percent of base salary, as described above) and the specific threshold, target and maximum amounts, and percentages allocated to each component (as described above). To ensure understanding of the status of plan awards, Management will communicate periodic performance trends and results to participants.
ADMINISTRATION
Overall policy direction shall be provided by the Board of Directors. Plan administration shall be the responsibility of the CEO with support and guidance from the Compensation and Leadership Development Committee of the Board of Directors.
EXCEPTIONS AND REVISIONS
It is conceivable that there may be particular situations which are not properly accommodated by the regular criteria and boundaries of the prevailing incentive program, e.g. the effect that an acquisition, a secondary offering, or the like, may have on Plexus' financial performance. Should such situation(s) occur, the CEO will recommend appropriate adjustments to the Compensation and Leadership Development Committee of the Board of Directors. If adjustments are made, the reason for such adjustments will be set forth in the Committee's Minutes and communicated to Plan participants. Nothing in this plan document or associated communications in any way promises or guarantees the compensation or employment of any participant with Plexus Corp. or any successor or related company(ies).
EXHIBIT 10.14
PLEXUS CORP
EXECUTIVE DEFERRED COMPENSATION PLAN TRUST
THIS AGREEMENT made this 1st day of April, 2003, by and between PLEXUS (the "Employer") and BANKERS TRUST COMPANY (the "Trustee");
WHEREAS, Employer has adopted the Plexus Corp Executive Deferred Compensation Plan (the "Plan") to provide benefits to certain eligible employees of the Employer and its designated affiliates; and
WHEREAS, Employer has incurred or expect to incur liability under the terms of such Plan with respect to the individuals participating in such Plan and certain of its subsidiaries who adopt the Plan may likewise incur or expect to incur such liabilities; and
WHEREAS, Employer wishes to establish a trust (the "Trust") and to contribute to the Trust assets to be held therein, subject to the claims of the creditors of the Employer and all contributing subsidiaries, in the event of Insolvency, as defined herein, of the Employer or any contributing subsidiary, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; and
WHEREAS, it is the intention of Employer and certain of its subsidiaries to make contributions to the Trust to provide a source of funds to assist in the meeting of liabilities under the Plan;
NOW, THEREFORE, the parties do hereby create the Trust and agree that the Trust shall be comprised, held and disposed of as follows:
SECTION 1. ESTABLISHMENT OF TRUST
(a) Employer shall make an initial contribution to the Trust, which shall become the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which Employer is the grantor, within the meaning of subpart E, part 1, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of Employer or any of its subsidiaries and shall be used exclusively for
the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against Employer. Any assets held by the Trust will be subject to the claims of general creditors of the Employer and any contributing subsidiary under federal and state law in the event of Insolvency, as defined in Section 3(a) herein.
(e) Employer, in its sole discretion, may at any time, or from time to time, make additional deposits of cash or other property in trust with Trustee to augment the principal to be held, administered and disposed of by Trustee as provided in this Trust Agreement. Neither Trustee nor any Plan participant or beneficiary shall have any right to compel such additional deposits.
(f) Upon a Change of Control, as defined in the Plan, Company shall, as soon as possible, but in no event longer than 60 days following the Change of Control, make an irrevocable contribution to the Trust in any amount that is sufficient to pay each Plan participant or beneficiary would be entitled pursuant to the terms of the Plan(s) as of the date on which the Change of Control occurred.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) Employer shall deliver to Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Plan participant (and his or her beneficiaries), that provides a formula or other instructions acceptable to Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plan, and the time of commencement for payment of such amounts. Except as otherwise provided herein, Trustee shall make payments to the Plan participants and their beneficiaries in accordance with such Payment Schedule. Trustee shall make provision with the Employer for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan(s) and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by Employer.
(b) The entitlement of a Plan participant or his or her beneficiaries to benefits under the Plan shall be determined by Employer or such party as it shall designate under the Plan, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan.
(c) Employer may make payment of benefits directly to Plan participants or their beneficiaries as they become due under the terms of the Plan. Employer shall notify Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan, Employer shall make the balance of each such payment as it falls due. Trustee shall notify Employer where principal and earnings are not sufficient.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN EMPLOYER IS INSOLVENT.
(a) Trustee shall cease payment of benefits to Plan participants and their beneficiaries if Employer or any contributing subsidiary is Insolvent. Whenever the term "Employer" is used in this Section 3, it shall also be deemed to mean any contributing subsidiary of the Employer. Employer shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Employer is unable to pay its debts as they become due, or (ii) Employer is subject to a pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Employer under federal and state law as set forth
below.
(1) The Board of Directors and the Chief Executive Officer of Employer shall have the duty to inform Trustee in writing of Employer's Insolvency. If a person claiming to be a creditor of Employer alleges in writing to Trustee that Employer has become Insolvent, Trustee shall determine whether Employer is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits to Plan participants or their beneficiaries.
(2) Unless Trustee has actual knowledge of Employer's Insolvency, or has received notice from Employer or a person claiming to be a creditor alleging that Employer is Insolvent, Trustee shall have no duty to inquire whether Employer is Insolvent. Trustee may in all events rely on such evidence concerning Employer's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Employer's solvency.
(3) If at any time Trustee has determined that Employer is Insolvent, Trustee shall discontinue payments to Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of Employer's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of Employer with respect to benefits due under the Plan or otherwise.
(4) Trustee shall resume the payment of benefits to Plan participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Employer is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by Employer in lieu of the payments provided for hereunder during any such period of discontinuance.
SECTION 4. PAYMENTS TO EMPLOYER.
Except as provided in Section 3 hereof, Employer shall have no right or power to direct Trustee to return to Employer or to divert to others any of the Trust assets before all payment of benefits have been made to Plan participants and their beneficiaries pursuant to the terms of the Plan.
SECTION 5. INVESTMENT AUTHORITY.
(a) In no event may Trustee invest in securities (including stock or rights to acquire stock) or obligations issued by Employer, other than a de minimis amount held in common investment vehicles in which Trustee invests. All rights associated with assets of the Trust shall be exercised by the Trustee or the person designated by the Trustee, and except as described in (c) below, shall in no event be exercisable by or rest with Plan participants.
(b) Subject to (a) above and unless directed by the Employer under (c) below, Trustee shall invest and reinvest the principal and income of the Trust fund in any and all common stocks, preferred stocks, bonds, notes, debentures, mortgages, equipment trust certificates, investment trust certificates, common, collective or group trust investments or mutual fund investments (including any such trusts or funds as may be established by Trustee or any of its affiliates), real and personal property wherever situated, and in such other property, investments and securities of any kind, class or character as Trustee may deem suitable for the Trust. Trustee shall have the power, in its sole discretion, to do all such acts, execute all such instruments, take all such proceedings and exercise all rights and privileges with respect to any property or asset constituting a part of the Trust fund as if Trustee were the absolute owner thereof.
(c) The Trustee's responsibility for investment and diversification of the assets in the Trust shall be subject to, and is limited by, any investment instructions issued to it by Employer or any investment guidelines agreed to by Employer and Trustee. The Employer may direct Trustee as to the investment of some or all of the Trust fund for the purpose of adhering to Participant deemed investment directions which may be available under the Plan or otherwise. When investment directions are provided by the Employer, the Trustee shall have no liability for it or any other person properly following such directions or failing to act in the absence of any such directions. Notwithstanding the foregoing, Trustee shall remain ultimately responsible for the investment of Trust assets and may disregard any direction under this (c) to the extent Trustee determines such direction is inconsistent with Trustee's fiduciary duties hereunder.
SECTION 6. DISPOSITION OF INCOME.
During the term of this Trust, all income received by the Trust, net of expenses and taxes, shall be accumulated and reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE.
Trustee shall keep or cause to be maintained accurate and detailed accounts of all investments, receipts and disbursements and other transactions hereunder, and all accounts, books and records relating thereto shall be open to inspection and audit at all reasonable times by any person or persons designated by Employer. Trustee shall file with Employer annually or
more frequently if requested by Employer (and within 60 days following the removal or resignation of Trustee) a written report setting forth all investments, receipts and disbursements, and other transactions effected by it to the date covered by the report, and showing all cash and other property held at the end of such period. At the request of Employer, Trustee shall establish and maintain separate records on contributions made hereunder by Employer and any contributing subsidiary. Such funds may be commingled, invested and reinvested hereunder in all respects as a commingled single fund, but Trustee, to the extent it is maintaining separate records hereunder as to the contributing entity, shall always maintain separate accounts within the Trust showing the value of the separate interests of each contributing entity, on a pro rata basis. In connection with the Plan, which provides for a separate bookkeeping account for the interests of each participant therein, Trustee shall maintain such separate account records for each participant and beneficiary as it considers necessary or desirable for the proper administration of the Trust.
SECTION 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability to any person for any action taken pursuant to a direction, request or approval given by Employer which is contemplated by, and in conformity with, the terms of the Plan or this Trust and is given in writing by Employer. In the event of a dispute between Employer and a party, Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) Trustee may consult with legal counsel, who may be counsel for Employer or in the employ of Employer, in respect to any of its rights, duties and obligations hereunder.
(c) Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder.
(d) Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as a asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy.
(e) Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code.
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE.
Employer shall pay all administrative and Trustee's fees and expenses as shall be agreed to from time to time by Employer. If not so paid, the fees and expenses shall be paid from the Trust.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to Employer, which shall be effective 60 days after receipt of such notice unless Employer and Trustee agree otherwise.
(b) Trustee may be removed by Employer on 60 days' notice or upon shorter notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within 60 days after receipt of notice of resignation removal or transfer, unless Employer extends the time limit.
(d) If Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date of resignation or removal under paragraphs (a) or (b) of this section. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR.
If Trustee resigns or is removed in accordance with Section 10(a) or
(b) hereof, Employer may appoint any third party, such as a bank or trust
department or other party that may be granted corporate trust powers under state
law, as a successor to replace Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by Employer or the successor
Trustee to evidence the transfer.
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust Agreement may be amended by a written instrument executed by Trustee and Employer. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plan or shall make the Trust revocable after it has become irrevocable in accordance with Section 1(b) hereof.
(b) The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan. Upon termination of the Trust any assets remaining in the Trust shall be returned to Employer.
(c) Upon written approval of participants or beneficiaries entitled to payment of benefits pursuant to the terms of the Plan, Employer may terminate this Trust prior to the time all benefit payments under the Plan have been made. All assets in the Trust at termination shall be returned to Employer.
SECTION 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance with the laws of Wisconsin and of the United States of America.
(d) If the Internal Revenue Service (the "IRS") makes a final determination that a Plan participant or beneficiary is subject to federal income tax with respect to the value of any amounts held in accounts under this Trust prior to the actual distribution to such participant or beneficiary, or the Trustee receives an opinion of counsel satisfactory to it that it is likely that the IRS will determine that such federal income tax will be payable as described above, then the Employer may, at the written request of a participant or beneficiary accompanied by evidence reasonably satisfactory to the Employer, notify and direct the Trustee to make distribution of such amounts to the participant or beneficiary as soon thereafter as practicable.
SECTION 14. EFFECTIVE DATE.
The effective date of this Trust Agreement shall be the date first above set forth.
PLEXUS CORP.
BY: /s/
--------------------------------
ATTEST: /s/
--------------------------------
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BANKERS TRUST COMPANY
BY: /s/
--------------------------------
ATTEST: /s/
--------------------------------
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INVESTMENT AGREEMENT
WHEREAS, PLEXUS CORP. (the Company) has retained Bankers Trust Company, N.A. Des Moines, (BTC) as Trustee of the Trust Fund (the Trust) established with respect to certain plans established to provide deferred compensation, for certain of its employees.
AND WHEREAS, that Trust is evidenced by certain Trust Agreement by virtue of which BTC has agreed to serve as Trustee,
AND WHEREAS, that section 5(c) of the Trust authorized BTC to act pursuant to investment guidelines agreed to in writing form time to time by the Company and BTC,
NOW, THEREFORE, in consideration of mutual promises and covenants contained herein and the performance thereof, it is hereby agreed by and between these Parties:
1. All contribution to the aforementioned Plan and all assets of the Trust will be held in certain annuity contracts, mutual fund shares, or other instruments issued by Principal Life Insurance Company or other companies which are members of The Principal Financial Group.
2. BTC will not be liable for the acts or omission of Principal Life Insurance Company or other companies which are members of The Principal Financial Group with regard to the investment of the contributions of the aforementioned plans and all assets of the Trust.
3. That this agreement shall run for the full term of the Trust unless superseded by a subsequent written agreement between the Parties. This Agreement shall be terminated immediately and without notice if the Trust is terminated, or if BTC resigns or is removed from its role as Trustee.
4. That this agreement shall be construed, interpreted, and governed by the laws of the State of Iowa.
This Agreement shall be effective on this 1st day of February, 2003.
AGREED & ACCEPTED:
/s/ /s/
--------------------------------------- --------------------------------
Plexus Corp. Bankers Trust Company, N.A.
Title Vice President, Human Resources Trust Officer
Date 4/1/03 Date 4-11-03
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EXHIBIT 10.15(b
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of the 1st day of September, 2003, by and between Plexus Corp., a Wisconsin corporation ("Employer"), and Dean A. Foate, a Wisconsin resident individual ("Employee").
WHEREAS, Employee is currently employed as the President and Chief Executive Officer of Employer; and
WHEREAS, the Employer and the Employee have previously entered into an employment agreement dated July 1, 2002 (the "Prior Agreement"); and
WHEREAS, the Employer and the Employee desire to amend the provisions of the Prior Agreement to modify the term of the Agreement and to extend the period of time following Employee's termination of employment during which Employee agrees that he will not compete with the Employer and to make other miscellaneous modifications; and
WHEREAS, Employee is willing to commit himself to serve Employer upon the terms and conditions herein provided; and
WHEREAS, Employer and Employee have agreed to restrict Employee's ability to disclose confidential information and to compete with Employer with respect to the type of business conducted by Employer and its subsidiaries (collectively, the "Company"); and
WHEREAS, any breach of this Agreement by Employee will cause irreparable injury to Employer; and
WHEREAS, Employee has consulted with and obtained advice from independent legal counsel concerning the terms and conditions of this Agreement, or has had the opportunity to do so which he has declined; and
WHEREAS, in order to effect the foregoing, Employer and Employee wish to enter into this Agreement on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby mutually agreed as follows:
1. Recitals. The recitals set forth above shall constitute and be deemed to be an integral part of this Agreement.
2. Employment and Acceptance. During the Term (as hereinafter defined) of this Agreement, Employer hereby agrees to employ Employee as President and Chief Executive Officer upon the terms and conditions hereinafter set forth. Employee hereby accepts such employment and agrees:
(a) Except for illness, vacation periods, and reasonable leaves of absence, to devote all of his working time, attention and energy, using his best efforts, to the duties and
responsibilities as are customary for an employee of a business of like size and nature to that of the Employer, as well as to any other duties and responsibilities that may be mutually agreed upon in writing between Employer and Employee from time to time; provided, however, that Employee shall be permitted to serve as a director of other noncompeting entities and/or as a director and/or officer of a nonprofit or industry association so long as such activities do not interfere with the performance of Employee's duties hereunder;
(b) faithfully to serve and further the interests of Employer in every lawful way, giving honest, diligent, loyal and cooperative service to Employer;
(c) to comply with all rules and policies which, from time to time, may be reasonably and uniformly adopted by Employer, including, without limitation, those rules and policies regarding disclosure of information concerning Employer, its business, affairs, plans or customers; and
(d) to be responsible for duties, including but not limited to, acting as President and Chief Executive Officer, as well as any of the other operations requiring Employee's assistance.
During the Term it shall not be a violation of this Agreement for Employee to manage personal investments, so long as such activities do not significantly interfere with the performance of Employee's responsibilities as an employee of Employer in accordance with this Agreement.
3. Compensation. As compensation for the services to be performed by Employee under this Agreement, and the noncompetition covenant contained herein, Employer agrees to pay to Employee, and Employee agrees to accept, an initial base salary of $450,000 per year, payable at Employer's normal payroll intervals, subject to required payroll withholding provisions. Employee shall be eligible for changes in future years consistent with performance and Employer's evaluation criteria and compensation policies.
4. Bonus/Incentive Compensation. Employee shall participate in any bonus or incentive compensation plan of Employer on the terms and conditions determined by the Compensation and Leadership Development Committee of Employer, but in a manner not less favorable than other executive officers of Employer.
5. Employee Benefits. Employee shall receive benefits that are substantially similar to those offered under Employer's benefit plans and programs for an executive officer, including, without limitation, any medical, life, disability, and vacation.
6. Stock Options. Employee shall participate in Employer's Stock Option Plan consistent with Employee's position with the Company and in accordance with the currently effective Stock Option Plan, or any similar long-term incentive plan which may be implemented in the future.
7. Term. The term of this Agreement (the "Term") shall commence on September 1, 2003 and shall continue until the earliest to occur of the following:
(a) the termination of Employee's employment for Cause upon ten (10) business day's prior written notice to Employee;
(b) Employee's termination of employment for Good Reason upon ten (10) business day's prior written notice to Employer;
(c) Employee's or Employer's termination of Employee's employment without Cause or without Good Reason upon ninety (90) days' prior written notice to the other (this notice period shall not extend the term of this Agreement);
(d) Employee's death or Disability; or
(e) August 31, 2006; provided, however, that on each August 31 the Term shall automatically be extended for an additional one-year period (restoring the full three-year term), unless either party notifies the other party in writing at least six (6) months prior to such date of the party's intention not to extend the Agreement.
8. Cause. The term "Cause" as used herein with respect to the termination of this Agreement shall mean:
(a) A good faith determination by Employer after reasonable investigation that Employee has committed fraud, misappropriation, embezzlement, or theft against or from Employer;
(b) Employee's conviction of a felony, or of any other crime that brings discredit to Employer or materially impairs Employee's ability to perform Employee's job;
(c) Employee's failure to carry out the reasonable directives of the Employer or his material duties and responsibilities under this Agreement, after written notice of such failure and a reasonable opportunity to cure; or
(d) Employee's material breach of Employee's obligations of noncompetition or nondisclosure under Sections 12 and 13, respectively, of this Agreement;
9. "Good Reason" shall mean:
(a) Material reduction of Employee's base salary under Section 3 bonus/incentive compensation under Section 4, or benefits under Section 5, stock options under Section 6, or other material breach by the Company of its obligations under this Agreement;
(b) Assignment of Employee to duties inconsistent with and substantially diminished from his responsibilities as holding the position specified in Section 2; or
(c) Relocation of Employee to any location outside the Appleton metropolitan area.
(d) The delivery by the Company of a notice of non-renewal pursuant to Section 7(e) hereof.
10. Disability. The term "Disability" as used herein with respect to the termination of this Agreement shall mean the inability of Employee, as a result of physical or mental incapacity, to substantially perform his duties with Employer for a period of three consecutive months.
11. Compensation Upon Termination.
(a) In the event that the Employer terminates Employee for
Cause (Section 7(a)), Employee voluntarily resigns without Good Reason during
the term of this Agreement (Section 7(c)), Employee dies or is Disabled (Section
7(d)), or in the event that this Agreement expires naturally at the conclusion
of the Term under Section 7(e), Employer shall have no further obligation to pay
to Employee or provide Employee with either salary or other benefits, except
those which may have accrued as of the date of such termination or as available
through any disability insurance or other applicable plan or program.
(b) In the event that Employer terminates Employee without Cause (Section 7(c)), or Employee resigns with Good Reason (Section 7(b)), or Employer fails to continue to employ Employee on substantially the same terms hereof, Employee shall be entitled to Employee's base salary and benefits (which shall include welfare benefits, the 401(k) plan, the Employee Stock Purchase Plan, the deferred compensation program, the executive reimbursement program, the company vehicle program, and any other benefit programs of a similar nature) through the remainder of the term of this Agreement or for three years, whichever is greater. Employee shall also be entitled to a target bonus or incentive compensation benefit for the remainder of the term of this Agreement, or for three years, whichever is greater. In addition, for the remainder of the term of this Agreement, or for three years, whichever is greater, the Employer shall treat Employee as a continuing employee for purposes of vesting and exercising stock options which were granted to him prior to the termination date.
(c) The Change in Control Agreement dated as of August 1, 1998 between Employer and Employee (the "Change in Control Agreement") shall remain in full force and effect, and is not superceded by the terms of the Agreement; provided, however, that in the event of a termination covered by the Change in Control Agreement, Employee shall be entitled to the greater of the benefits thereunder or hereunder, but not both.
(d) The amounts payable pursuant to subsection 11(b) above or pursuant to the Change in Control Agreement shall be in lieu of any other severance benefits during the Term or at the end of the Term.
12. Non-Competition.
(a) The parties agree that the profitability and reputation of the Company depend on continued amicable relations with the Company's suppliers and customers. Employee agrees that he will not cause, request, solicit, or advise any suppliers or customers of the Company during the Term or for two years thereafter, to curtail or cancel their business with the Company, other than in the ordinary course of business.
(b) Employee agrees that during Employee's employment with Employer and for a period of two years thereafter (when Employee may be receiving payment under Section 11(b) hereof, as applicable), the Employee will not:
(i) Render services, either directly or indirectly, to any Competitor in connection with the development, marketing, promotion, distribution, sale, or licensing of any Competitive Services; or
(ii) Engage, either directly or indirectly, within the Restricted Area, either on behalf of the Employee or as a representative, agent, employee, officer, director, trustee, stockholder or partner, joint venturer or investor, in the development, marketing, promotion, distribution, sale, or licensing of any Competitive Services.
(iii) The capitalized terms used in this Section 12(b) shall have the meanings as follows:
(A) Business. "Business" shall mean the business and operations of the Company.
(B) Competitive Services. "Competitive Services" shall mean a service or product, developed, marketed, distributed or provided by a Competitor, which is the same as or is directly competitive with a service or product constituting a part of the Business and with respect to which the Employee has acquired confidential information by reason of the Employee's position and duties with the Company.
(C) Competitor. "Competitor" shall mean (a) any person engaged in, or about to become engaged in, the development, marketing, distribution or provision of any Competitive Service on behalf of other parties, and (b) any customer of the Company, as of the date of this Agreement or during the Term, which begins to perform for itself services previously provided by the Company.
(D) Restricted Area. "Restricted Area" shall mean, collectively: (a) Outagamie, Winnebago and Brown counties in the State of Wisconsin; and (b) anywhere else within a twenty-five (25) mile radius of any location in any U.S. city in which the Company had, at any time during the Term, a place of business at or through which it engaged in the Business.
(iv) Nothing in Section 12(b) shall prohibit the Employee from owning or acquiring securities of any corporation or other business enterprise that may be engaged in activities described in this Section, provided that: (A) the Employee is not an officer, director or employee of, or consultant to, such corporation or business enterprise; (B) such securities are held by the Employee for investment purposes only and represent less than five percent (5%) of the total voting power and of the total equity interests of such corporation or business enterprise; and (C) such securities are listed on a national securities exchange or are regularly quoted in the over-the-counter market by one or more members of the National Association of Securities Dealers.
(v) It shall not be deemed a violation of this
Section 12(b) if the Employee accepts employment with a business entity which is
diversified and made up of separate divisions in which, as to parts of its
business, is not a Competitor, provided that Employer shall be furnished prior
to such employment definitive written assurances satisfactory to it, separately
from the Employee and such business entity, that the Employee will not be
expected, required or permitted to, and in fact does not, render services
directly or indirectly to a division or a part of such business entity which
division or part is a Competitor.
(c) The parties agree that the profitability and reputation of Employer also depend on employment relationships with its employees. Employee agrees that he will not cause, request, or advise any employees of Employer during the Term to terminate or curtail their employment with the Company during the Term (except for performance related terminations in accordance with Employer standards, in consultation with Employer's Human Resources Department) and for two years after the Term.
(d) During the Term, Employee shall not be an officer or employee of any other business entity without Employer's prior written consent, except as otherwise permitted herein.
13. Confidentiality. Employee recognizes that as a key member of the staff of Employer, Employee occupies a position of trust with respect to business information of a secret or confidential nature, which is the property of the Company, and which was imparted to or developed by Employee from time to time in the course of Employee's duties. Employee, therefore, agrees that:
(a) Employee will not at any time or in any manner, directly or indirectly, use or disclose such information, except as specifically directed to do so by Employer or a court of competent jurisdiction;
(b) immediately upon termination of employment with Employer, he will promptly return to Employer, at its direction and expense, any and all copies of records, drawings, writings, materials, memoranda, computer programs and printouts and other data pertaining to such secret or confidential information; provided, however, that Employee shall be permitted to retain his personal property; and
(c) information of a secret or confidential nature is any information that would constitute a "trade secret," including but not limited to, test programs and systems relating to inventory control or any other aspect of the business of the Company; patents and patent applications; copyrights or copyright applications, inventions and improvements, whether patentable or not; writings, whether copyrightable or not; development projects; machines, policies, processes, formulas, techniques, normative data, know-how, data, data bases, computer design, computer programs or software and facts relating to development and implementation of inventory controls relative to the business of the Company, requirements for systems and programs, customer lists, customers' purchases or rentals, business records, price lists, business plans and forecasts and other trade secrets.
(d) Provided, however, that subparagraphs (a) and (c) above shall not apply to any such information which (1) was or is in the public domain or (2) hereafter through an act or failure becomes information generally available to the public.
(e) In addition, the terms of the Employer's Agreement with Regard to Proprietary Information Including Inventions, Patents, Copyrights, Trade Secrets, and Confidential Information, dated as of June 1, 1990 between Employer and Employee (the "Trade Secrets Agreement") shall remain in full force and effect.
14. Remedies. In addition to other remedies provided by law or equity, upon a breach by Employee of any of the covenants contained in Sections 12 and 13 hereof, Employer shall be entitled to seek an injunction against Employee prohibiting any further breach of the covenants contained herein. The parties agree that it is impossible to measure in money the damages that may accrue to the Company by reason of Employee's failure to perform any of his obligations under this Agreement. Therefore, in the event of any controversy concerning rights or obligations under this Agreement, such rights or obligations may be enforceable in a court of competent jurisdiction at law or equity by a decree of specific performance or, if the Company elects, by obtaining damages or such other relief as the Company may elect to pursue. Such remedies, however, shall be cumulative and nonexclusive and shall be in addition to any other remedies which the Company may have.
15. Assignment. The rights, duties and obligations hereunder may not be assigned or delegated by either party without the other's written consent.
16. Notice. Any notice (including notice of change of address) permitted or required to be given pursuant to the provisions of this Agreement shall be made as provided in the Purchase Agreement.
17. Waiver. The failure to enforce any provision of this Agreement by either party shall not operate or be construed as a waiver of any provision or obligation of either party.
18. Invalidity of Any Provision. The provisions of this Agreement are severable, it being the intention of the parties hereto that should any provisions hereof be invalid or unenforceable, such invalidity or unenforceability of any provision shall not affect the remaining provisions hereof, but the same shall remain in full force and effect as if such invalid or unenforceable provisions were omitted.
19. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Wisconsin.
20. Headings. Headings in this Agreement are for informational purposes only and shall not be used to construe the intent of this Agreement.
21. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement.
22. Reasonableness of Restrictions. EMPLOYEE HAS HAD THE OPPORTUNITY TO
CONSULT COUNSEL, HAS READ THIS AGREEMENT AND AGREES THAT THE CONSIDERATION
PROVIDED BY EMPLOYER IS FAIR AND REASONABLE AND FURTHER AGREES THAT THE
POST-EMPLOYMENT RESTRICTIONS ON EMPLOYEE'S ACTIVITIES ARE LIKEWISE FAIR AND
REASONABLE.
23. Amendment. This Agreement may be further amended or canceled by mutual agreement of the parties in writing without the consent of any other person and, so long as Employee lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof.
24. Entire Agreement. This Agreement, together with the Change in Control Agreement and the Trade Secrets Agreement and the other documents and materials referred to herein or therein (collectively, the "Effective Agreements"), constitute the entire understanding of the parties with respect to the subject matter hereof. There are no restrictions, promises, warranties, covenants or undertakings other than those expressly set forth herein and therein. The Effective Agreements supersede all prior negotiations, agreements and undertakings between the parties with respect to such subject matter, including without limitation the Prior Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first above written.
PLEXUS CORP.
By: /s/
-------------------------------------
John L. Nussbaum, Chairman of the Board
By: /s/
--------------------------------------
F. Gordon Bitter, Vice President and CFO
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EMPLOYEE:
/s/
-----------------------------------
Dean A. Foate
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EXHIBIT 21
Plexus 2003 10-K
1. Plexus Services Corp. ("Services"), a Nevada corporation and subsidiary of Plexus Corp. [Will merge into PEAC on 12/31/03]
a. Plexus Electronic Assembly Corp. ("PEAC"), a Nevada corporation and subsidiary of Services [Name will change to "Plexus Services Corp." on 12/31/03 upon the merger of Services into PEAC]
(i) Plexus Intl. Sales & Logistics, LLC ("PISL"), a Delaware LLC and subsidiary of PEAC
(ii) Plexus QS, LLC, ("PQS"), a Delaware LLC and subsidiary of PEAC
(iii) Plexus Electronica S.de R.L. de C.V., a Mexico entity and subsidiary of PSS and PQS
(iv) Plexus Servicios, S.de R.L. de C.V., a Mexico entity and subsidiary of PSS and PQS
b. Plexus Technology Group, Inc., a Nevada corporation and subsidiary of Services. [Will merge into PEAC on 12/31/03]
2. Plexus International Services, Inc. ("PISI"), a Nevada corporation and subsidiary of Plexus Corp.
a. Plexus Corp. Limited ("PCL"), a United Kingdom corporation and subsidiary of PISI
(i) Plexus Corp. (UK) Limited ("PCUKL"), a United Kingdom corporation and subsidiary of PCL
(ii) Plexus Corp. (Kelso) Limited, a United Kingdom corporation and subsidiary of PCUKL (inactive)
(iii) Plexus Corp. (Maldon) Limited, a United Kingdom corporation and subsidiary of PCUKL (inactive)
b. Plexus International, LLC, an Oregon limited liability company and subsidiary of PISI
c. Plexus Asia, Ltd. ("PAL"), a British Virgin Islands corporation
(i) Plexus (Xiamen) Co., Ltd., a Peoples' Republic of China corporation and subsidiary of PAL
(ii) Plexus Manufacturing Sdn. Bhd., a Malaysia corporation and subsidiary of PAL
d. Plexus Technology Group, Limited, a United Kingdom corporation and subsidiary of PISI (inactive)
3. Plexus ABS, Inc., a Nevada corporation and subsidiary of Plexus Corp.
[Will merge into Plexus Corp. on 12/31/03]
4. PTL Information Technology Services Corp., a Nevada corporation and subsidiary of Plexus Corp.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-45116), Form S-4 (No. 333-48700) and Form S-8 (No.'s 33-28309, 33-56932, 33-89862, 33-89864, 333-76245, 333-84583, 333-37154, 333-62774 and 333-76728) of Plexus Corp. and subsidiaries of our report dated October 23, 2003 relating to the financial statements and financial statement schedules, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Milwaukee, WI
December 15, 2003
EXHIBIT 31.1
CERTIFICATION
I, Dean A. Foate, certify that:
1. I have reviewed this annual report on Form 10-K of Plexus Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: December 15, 2003
/s/ Dean A. Foate
------------------------
Dean A. Foate
President and Chief Executive Officer
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EXHIBIT 31.2
CERTIFICATION
I, F. Gordon Bitter, certify that:
1. I have reviewed this annual report on Form 10-K of Plexus Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: December 15, 2003
/s/ F. Gordon Bitter
-----------------------------
F. Gordon Bitter,
Vice President and Chief Financial Officer
|
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Plexus Corp. (the "Company") on
Form 10-K for the fiscal year ended September 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Dean A.
Foate, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that To the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Dean A. Foate ------------------------------------- Dean A. Foate President and Chief Executive Officer December 15, 2003 |
This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Plexus Corp. (the "Company") on Form 10-K for the fiscal year ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, F. Gordon Bitter, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that To the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ F. Gordon Bitter ----------------------------------------- F. Gordon Bitter Vice President and Chief Financial Officer December 15, 2003 |
This certification accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.