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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of Earliest event reported): July 24, 1997
CIRCUIT SYSTEMS, INC.
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Exact name of registrant as specified in its charter
Illinois 0-15047 36-2663010
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification Number)
2350 East Lunt Avenue,
Elk Grove Village, Illinois 60007
847/439-1999
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Registrant's telephone number, including area code
N/A
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(Former name or former address, if changed since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 24, 1997, Circuit Systems of Tennessee, a
Tennessee limited partnership ("CST, L.P."), purchased the printed
circuit board ("pcb") manufacturing operation of Philips Consumer
Electronics Company ("PCEC"), a division of Philips North America
Operation. The purchase consisted of all of the inventory,
equipment and 93,360 square foot plant located in Greeneville,
Tennessee, which is primarily utilized for the production of pcbs
for Philips television sets in North America. The agreement also
requires PCEC to purchase all of its North American pcb
requirements for television sets from CST, L.P. for two years after
the closing.
CST, L.P. was formed as a Tennessee limited partnership on May
19, 1997. Circuit Systems of Tennessee, Inc. ("CST, Inc.") is a
Tennessee corporation organized on May 19, 1997 for the purpose of
being the corporate general partner of CST, L.P. CST, Inc. owns 1%
of the units of CST, L.P. Circuit Systems, Inc. ("CSI"), an
Illinois corporation, the sole limited partner, owns 99% of the
units of CST, L.P. and is the sole shareholder of CST, Inc.
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Philips and CST, L.P. signed a Real Estate and Asset Purchase
and Sale Agreement (the "Agreement") on July 24, 1997, providing
for the sale of the real estate and improvements located at 1515
Industrial Road, Greeneville, Tennessee (the "Real Estate"),
inventory, all equipment and machinery (the "Equipment"), all used
in connection with Philips' PCB business located at its
Greeneville, Tennessee facility (collectively, the "Assets"). The
purchase price for the Assets under the Agreement was $10,000,000,
payable in cash at closing. CST, L.P. assumed no liabilities
except Philips' obligations under the personal property leases for
leased equipment included in the sale.
CST, L.P. and Philips entered into a Printed Circuit Board
Purchase Agreement pursuant to which CST, L.P. will manufacture and
sell to Philips all of its PCB requirements for its Greeneville,
Tennessee and Juarez, Mexico, projection and direct view television
manufacturing production. The minimum purchase requirements are for
2,000,000 television sets for each of the next two years.
American National Bank and Trust Company of Chicago lent CST,
L.P. $10,000,000 for the purpose of acquiring the assets. CSI
guaranteed all of the obligations of CST, L.P. and CST, Inc.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) and (b) Financial Statements of Businesses Acquired
Circuit Systems will file financial statements and pro forma
financial information within 60 days of the date of this report.
(c) Exhibits
2.1 Real Estate and Asset Purchase and Sale Agreement between
Circuit Systems of Tennessee, L.P. and Philips Electronics North
America Corporation dated July 24, 1997
10.1 Quality Agreement between Circuit Systems of Tennessee, L.P.
and Philips Electronics North America Corporation dated July 24, 1997
10.2 Printed Circuit Board Purchase Agreement Between Circuit
Systems of Tennessee, L.P. and Philips Electronics North America
Corporation dated July 24, 1997.
10.3 Agreement between Circuit Systems of Tennessee, L.P. and Local
796 of the International Union of Electronic, Electrical, Salaried,
Machine and Furniture Workers, AFL-CIO dated July 25, 1997
10.4 Loan and Security Agreement
10.5 Deed of Trust Note in the amount of $2,800,000<PAGE>
10.6 Installment Note (Secured) in the amount of $2,270,0000
10.7 Security Agreement
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10.8 Continuing Pledge Agreement relating to Circuit Systems,
Inc.'s 400,000 shares of SigmaTron International, Inc. assigned to
American National Bank as additional security
10.9 Master Lease [for equipment in the amount of $4,930,000]
10.10 Circuit Systems, Inc. Guaranty
10.11 Circuit Systems of Tennessee, Inc. Guaranty
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorize.
Date: August 7, 1997
Circuit Systems, Inc.
(Registrant)
/s/ D.S. Patel
D.S. Patel, President and
Chief Executive Officer
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REAL ESTATE AND ASSET PURCHASE AND SALE AGREEMENT
THIS REAL ESTATE AND ASSET PURCHASE AND SALE AGREEMENT
(hereinafter referred to as the "Agreement") is made and entered
into as of the 24th day of July, 1997, by and between CIRCUIT
SYSTEMS OF TENNESSEE, L.P., a Tennessee limited partnership (the
"Buyer"), and PHILIPS ELECTRONICS NORTH AMERICA CORPORATION, a
Delaware corporation with offices in Knoxville, Tennessee (the
"Seller").
W I T N E S S E T H :
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, certain assets (the "Assets") described herein
and relating to the manufacture of printed circuit boards, and in
connection therewith Buyer is willing to assume certain liabilities
of Seller relating to such assets, all upon the terms, conditions
and provisions set forth herein; and
WHEREAS following the closing of the purchase sale of the
Assets, Buyer desires to manufacture and sell to Seller and Seller
desires to purchase from Buyer printed circuit boards ("PCB")
pursuant to a Printed Circuit Board Purchase Agreement between Buyer
and Seller, of even date (the "PCB Purchase Agreement");
NOW, THEREFORE, FOR AND IN CONSIDERATION of the foregoing and
the premises and covenants contained herein, the receipt and
sufficiency of which is hereby acknowledged, Buyer and Seller agree
as follows:
SECTION 1
PURCHASE, SALE, AND AGREEMENTS
S1. Assets Purchased. Buyer agrees to purchase and pay for
and Seller agrees to sell, assign, transfer and convey to Buyer on
the Closing (as defined in Section 6.1), for the consideration
specified in Section 3 hereof, the following Assets (as the same
shall exist at the time of Closing) except Excluded Assets (as
defined herein), as follows:
SA. Real Estate. All of Seller's right, title and
interest in and to those certain tracts of real property being
the site of the printed circuit board manufacturing facility
owned by Seller in Greeneville, Greene County, Tennessee
(hereinafter referred to as the "PCB Facility" or "Greeneville
Facility"), as more particularly described in various parcels
constituting Schedule 1.1A hereto, consisting of approximately
ten (10) acres, together with all and any rights and
appurtenances pertaining to such real property, including any
right, title, and interest of Seller in and to adjacent
streets, easements, alleys, and rights-of-way and subject to
the Permitted Encumbrances (all of such real property rights
and appurtenances being hereinafter referred to as the "Real
Property");
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SB. Improvements. All improvements, structures and
fixtures currently situated upon the Real Property, including
without limitation the PCB manufacturing facilities of
approximately ninety-three thousand (93,000) square feet, and
all other properties or property interests normally included in
the sale of real estate, including but not being limited to
heating, air conditioning, electrical, plumbing fixtures,
drinking fountains, sprinkler systems, bus ducts, dock
levelers, signs, fire extinguishers, alarm and security systems
and motion detectors, environmental process equipment,
electrical disconnects and lines, kitchen equipment, and with
respect to such improvements, all building plans and
specifications, operating contracts, warranties, permits, soil
reports, surveys, maps, or environmental studies or
assessments, and all reports associated therewith (hereinafter
referred to as the "Improvements");
SC. Equipment. All equipment, machinery, furniture,
furnishings, and other tangible personal property owned by the
Seller currently situated upon the Real Property or
Improvements or used or to be used in connection therewith at
the PCB Facility, including without limitation those certain
items of tangible personal property identified in Schedule 1.1C
hereto (all of such tangible personal property to be sold
hereto being hereinafter referred to as the "Equipment"), but
excluding the tooling, dies, equipment and other intangible
personal property shown in Schedule 1.1C-1 (the "Excluded
Equipment"). The Equipment shall include, without limitation,
the paper phenolic machinery equipment described in
Section 1.1C-2;
SD. Inventory, Work in Progress. As such items are
located at the Greeneville Facility at the time of closing, all
right, title and interest of Seller in all inventory and work
in progress (collectively, the "Inventory"), as set forth in
Sections 1.6 and 4.1P hereof which shall be transferred at
Closing to Buyer. There will be no finished goods inventory
transferred to Buyer in this transaction.
SE. Personal Property Leases. All right, title and
interest of Seller as lessee (or sublessee), in, to and under
the leases of personal property (including without limitation
leases for certain manufacturing equipment) listed in Schedule
1.1E hereto (leases described in this paragraph being
individually a "Personal Property Lease" and collectively the
"Personal Property Leases"); at Closing Buyer will assume all
of Seller's obligations under any and all of the Personal
Property Leases;
SF. Other Contracts. All right, title and interest of
Seller in, to and under the sales orders, purchase orders and
other contracts described in Schedule 1.1F hereto (the "Other
Contracts").
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All of the foregoing assets to be purchased by Buyer from
Seller are referred to herein as the "Assets". Buyer is not
purchasing any other assets of Seller. Any and all other assets of
Seller not expressly included herein, including the Excluded
Equipment, utility deposits, insurance deposits, any other
regulatory deposit (if any), and other excluded property
specifically listed in Schedule 1.1, shall be referred to as the
"Excluded Assets." A portion of the Excluded Assets consists of
certain know-how, patents, inventions, formulae, patterns, designs,
and other intangible property that is confidential and contains
trade secrets of Seller pertaining (i) to the operation and
maintenance of the Improvements and Equipment (the "Process IP"), and
(ii) specifically to the design and production of products for
Seller (the "Design IP"), all of which is more specifically
described in Schedule 1.1C (collectively, the "Intellectual
Property"). To the extent the Intellectual Property is necessary to
operate the Improvements and the Equipment or to produce products
for Seller under the PCB Purchase Agreement, Seller shall grant a
nonexclusive, non-transferable license to Buyer to use such
Intellectual Property, as further set forth in Section 1.7 hereof.
S1.2 Purchase Price. At Closing, Buyer agrees to pay in the
aggregate to Seller as the purchase price for the Assets an amount
equal to Ten Million Dollars ($10,000,000) (the "Purchase Price").
The full Purchase Price, plus or minus prorations, shall be paid to
Seller at Closing by certified check or wire transfer of immediately
available funds.
S1.3 Non-Refundable Exclusivity Fee. As consideration for
Seller's grant to Buyer of the exclusive right to purchase the
Assets, pursuant to the terms hereof, on or prior to July 25, 1997,
Buyer has, simultaneously with the execution of this Agreement, paid
to Seller a non-refundable earnest money fee of $250,000 (the
"Fee"). If Buyer does not close this transaction by July 25, 1997,
for any reason other than failure to sign a collective bargaining
agreement for a three (3) year period following a good faith effort
by Buyer to achieve such agreement and without regard to acts or
omissions of Buyer, then the Fee shall be retained by Seller and
this Agreement shall terminate. If the transaction contemplated by
this Agreement does close on or prior to July 25, 1997, then the
purchase price shall be reduced by the amount of the Fee.
S1.4 Additional Documents and Information. Seller shall furnish
to Buyer, at Seller's sole cost and expense, within ten (10) days
after the date of this Agreement, the following documents and
information which are in the possession of Seller:
SA. Copies of any plans and specifications for the
Improvements, surveys, maintenance, service, and operating
contracts, phase one environmental site assessments, notices,
correspondence from governmental or regulatory agencies or bodies
pertaining to the Real Property; and
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SB. Copies of any warranties in Seller's possession
pertaining to the Improvements or the Equipment.
SC. Seller agrees to respond to the requests of Grant,
Thornton (Buyer's accountants) for certain lists of assets,
products, inventory, and other items; provided, however, that such
lists or any other similar data shall not be considered or construed
as financial statements of Seller. Seller expressly disclaims any
responsibility for producing any financial statements for Seller or
for the Printed Circuit Board operations of Seller, as Seller has no
such records. Buyer acknowledges that reference or utilization of
any similar lists or data or materials in the creation of any
financial forecasts, statements or other conclusory compilations are
made without any participation, direction or review by Seller, and
Buyer assumes sole responsibility for such forecasts.
S1.5 Permitted Encumbrances. As used in this Agreement, the term
"Permitted Encumbrances" shall mean:
SA. Current personal property, assessments, and real
property taxes for the year 1996; and
SB. Such covenants, conditions, restrictions, easements,
rights-of-way, title exceptions and other matters presently existing
and/or disclosed in the Preliminary Report and Survey, both as
defined hereinafter.
SC. Such mechanics, materialman, warehouseman, carrier or
similar liens, statutory or otherwise, which will not materially
impair the inventory or the use of the inventory in the production
of PCB at the PCB Facility.
S1.6 Inventory. Seller and Buyer agree to mutually determine by
physical inventory the raw material inventory and work-in-process
inventory at the PCB Facility as of the time of Closing.
S1.7 Grant of License.
SA. Subject to the terms hereof, Seller hereby grants to
Buyer and Buyer hereby accepts, a nonexclusive license (the
"License") to use the Process IP at the PCB Facility for the sole
purpose of operating and maintaining the PCB Facility and for the
purpose of manufacturing PCB products, and to use the Design IP
solely and exclusively for the manufacture of products for Seller.
SB. The License for use of the Design IP shall have a
term expiring upon the later of termination of the PCB Purchase
Agreement or at such time as Seller is no longer purchasing Products
from Buyer.
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SC. Buyer acknowledges that the Design Intellectual
Property includes valuable confidential and secret information of
Seller, the development of which required the expenditure of
considerable time and money by Seller. Buyer shall treat the Design
Intellectual Property in confidence and shall not use, copy, or
disclose to any third party, or permit any of its personnel to use
the same to any extent or for any purpose that is not specifically
authorized under this Agreement. Buyer shall not disclose any
information about the Design Intellectual Property, including the
Intellectual Property itself, to any third party without the prior
written consent of Seller.
SD. Buyer shall not permit any personnel of Buyer to
remove any proprietary or other legend or restrictive notice
contained or included in the Intellectual Property, and Buyer shall
not permit Buyer personnel to copy the Intellectual Property except
as specifically authorized hereunder. Buyer will reproduce and
maintain Seller's copyright and proprietary notices on any copy
(whether complete or partial) of the Intellectual Property permitted
by this Agreement.
SE. Buyer shall limit use of and access to the
Intellectual Property to such personnel of Buyer directly involved
in the use thereof by Buyer. Buyer shall disclose such information
only to personnel of Buyer who Buyer has no reason to believe are
untrustworthy or may violate the provisions of this Section 1.6.
Buyer shall prevent all personnel of Buyer from having access to any
such information that is not required in the performance of their
duties for Buyer. Buyer shall adopt reasonable security practices
to prevent unauthorized access to or use of the Intellectual
Property.
SF. Buyer shall not in any event use any of the Design IP
in the production of printed circuit boards or any other products
for any person other than Seller or its designee.
SG. To the extent any Intellectual Property is not owned
by Seller but is used pursuant to a licensing or other use agreement
between Seller and a third party, Seller shall make a good faith
reasonable commercial effort to obtain the consent of such third
party to a sublicense or assignment of such Intellectual Property to
Buyer.
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DUE DILIGENCE INVESTIGATION
S2.1 Access to the Property; Investigations. Buyer may, at any
time during regular business hours prior to the Closing, through its
own employees, advisors, consultants, and other representatives
(provided that such parties have executed appropriate
confidentiality agreements), make such inspection and investigation
of the Real Property, Improvements and Equipment as it deems
necessary or advisable to familiarize itself with the Real Property,
Improvements and Equipment, and all other matters pertaining to the
Assets. Such investigation may, but need not, include making an
independent environmental audit or investigation of the Real
Property and/or Improvements, the right to conduct such tests,
boring for water or soil samples, or conducting such other tests,
examinations, studies, assessments and analyses of the Real
Property, or any part or aspect thereof, as Buyer may deem or
determine necessary or advisable. Buyer shall indemnify and hold
Seller harmless from and against any liens, claims, costs or
liabilities arising from any activities of Buyer or its employees,
contractors, or agents upon the Real Property. If Buyer or its
agents or representatives causes any damage to any of the Assets
during its investigation thereof, and if for any reason the Closing
shall not occur, Buyer shall restore the Real Property,
Improvements, or Equipment, as the case may be, to the condition
that existed prior to such investigation.
CONDITIONS OF CLOSING
S3.1 Conditions to Buyer's Obligations. The obligations of Buyer
under this Agreement to purchase the Assets are subject to the
fulfillment of the following conditions prior to or at the Closing:
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SA. Twenty (20) days prior to the Closing, Buyer shall
have received a current commitment for title insurance at Buyer's
expense (hereinafter the "Preliminary Report"), issued by a title
insurance company satisfactory Buyer (hereinafter the "Title
Company"), covering the Real Property. Buyer shall within ten
(10) days after Buyer's receipt of the Survey (defined in B. below)
and the Preliminary Report, give written notice to Seller specifying
any and each title exception contained in the Preliminary Report or
on the Survey which is objectionable to Buyer. If Buyer notifies
Seller of any objectionable title exception, then Seller may cause
each such objectionable title exception to be removed or cured prior
to the Closing; provided, however, that if any such objectionable
title exception cannot be so removed or cured by the date on which
the Closing is scheduled to occur, or should Seller elect not to
undertake such action as will cause the objectionable title
exception to be removed or cured, then Buyer shall elect (i) to
waive each such objectionable title exception which cannot be
removed and proceed with the Closing, or (ii) to terminate this
Agreement and all of the rights and obligations of the parties
hereunder. At the Closing, or as soon thereafter as practicable,
Title Company shall issue to Buyer an ALTA Owner's Policy of Title
Insurance in an amount as determined by Buyer, not less than the
then appraised value of the Real Property, insuring that title to
the Real Property is vested in Buyer, subject only to the Permitted
Encumbrances. Said title insurance policy shall provide extended
coverage over general exceptions and shall contain such endorsements
as Buyer's counsel shall reasonably require.
SB. Buyer shall commission at Buyer's cost and expense a
survey (hereinafter referred to as the "Survey"). The Survey shall
include the surveyors' certificate to Buyer in a form reasonably
acceptable to Buyer and Buyer's lender and as necessary for the
issuance of a policy of title insurance insuring Buyer and any
lender.
SC. Seller shall have performed and complied in all
respects with its obligations, covenants, and agreements contained
in this Agreement, to be performed and complied with prior to the
Closing.
SD. There is no suit or proceeding which seeks to
restrain, prohibit, challenge, or obtain damages or other relief in
connection with this Agreement or the consummation of the
transactions contemplated hereby.
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SE. Seller shall have executed the PCB Purchase
Agreement, and such bills of sale, endorsements, assignments, deeds
and other good and sufficient instruments of conveyance and
transfer, as are provided for herein, subject to any Permitted
Encumbrances, including the following:
(1) general bills of sale and assumption and
assignment agreements vesting in Buyer title
to the Equipment and any other Asset of Seller
transferred herein;
(2) assignments of the Personal Property Leases;
(3) endorsements and assignments of the Other Contracts;
(4) a quality agreement by and between Seller and
Buyer in the form attached hereto as Schedule 3.1E(4)
(the "Quality Agreement");
SF. Seller shall have delivered or caused to be delivered
to Buyer all such written consents or waivers necessary to permit
the assignment to Buyer, on the terms provided herein, of the rights
and obligations of Seller under the Personal Property Leases and the
Other Contracts and the assumption of the liabilities thereunder by
Buyer.
SG. The Board of Directors of Seller shall have taken all
corporate action necessary to effectuate the Agreement and the
transactions contemplated hereby, and Seller shall have furnished
Buyer with certified copies of the resolutions duly adopted by
Seller's Board of Directors evidencing the same.
SH. Buyer shall have entered into an acceptable labor
contract/collective bargaining agreement of at least two years
duration with the International Union of Electronic, Electrical,
Salaried, Machine and Furniture Workers, AFL-CIO ("IUE") regarding
the provision of labor for the Greeneville Facility. Said agreement
must be endorsed by Local 796 of the IUE and/or its officers or the
Administrator acting on its behalf.
<PAGE>
In the event that any of such conditions shall not have
been satisfied at or prior to the Closing, or waived by Buyer (and
provided Buyer shall have fulfilled its obligations in connection
with such condition), then Buyer shall have the right, at Buyer's
option, to terminate this Agreement by giving written notice of such
termination to Seller. Buyer shall return to Seller all of the
materials provided to Buyer (including, without limitation, those
provided pursuant to Section 1.3 hereof), and Buyer and Seller each
shall be released from all further obligations and liabilities
hereunder.
S3.2 Conditions to Seller's Obligations. The obligations of
Seller under this Agreement to sell the Assets are subject to the
fulfillment of the following conditions:
SA. Buyer shall have performed and complied in all
respects with its obligations, covenants, and agreements contained
in this Agreement to be performed and complied with prior to the
Closing.
SB. There is no suit or proceeding which seeks to
restrain, prohibit, challenge, or obtain damages or other relief in
connection with this Agreement or the consummation of the
transactions contemplated hereby.
SC. Buyer shall have executed the PCB Purchase Agreement,
and all agreements in connection therewith, including without
limitation, the Quality Agreement.
SD. All actions, proceedings, instruments and documents
required to carry out the transactions contemplated by this
Agreement or incidental hereto and all other related legal matters
shall be reasonably satisfactory to Seller and counsel for Seller.
Buyer shall have delivered to Seller at Closing such documents and
other evidence as Seller may reasonably request in order to
establish the consummation of transactions relating to the
execution, delivery and performance by Buyer of this Agreement, the
purchase, transfer and delivery of the Assets to be purchased
hereunder, the assumption by Buyer of all obligations and
liabilities contemplated by this Agreement, the taking of all
corporate and other proceedings in connection therewith and the
compliance with the conditions set forth herein, in form and
substance reasonably satisfactory to Seller.
SE. The General Partner of Buyer shall have taken all
action necessary to effectuate the Agreement and the other
transactions contemplated hereby, and Buyer shall have furnished the
Seller with certified copies of the resolutions duly adopted by
Buyer's General Partner evidencing the same.
<PAGE>
In the event that any of such conditions shall not have
been satisfied at or prior to the Closing, or waived by Seller (and
provided Seller has fulfilled its obligations in connection with
such conditions), then Seller shall have the right, at Seller's
option, to terminate this Agreement by giving written notice of such
termination to Buyer. Buyer shall return to Seller the materials
provided to Buyer pursuant to Section 1.3 hereof, and Buyer and
Seller each shall be released from all further obligations and
liabilities hereunder.
S3.3 Casualty or Condemnation. Buyer shall be bound to purchase
the Assets for the full purchase price as required by the terms
hereof, without regard to the occurrence or effect of any damage to
or destruction of the Assets or partial condemnation of the Real
Property or Improvements occurring after the date hereof and prior
to the Closing, provided:
SA. The cost to repair any such damage or destruction
does not exceed ONE HUNDRED THOUSAND DOLLARS ($100,000.00) and is
repaired to the satisfaction of Buyer by Seller prior to the
Closing, or Seller assumes full responsibility for the repair and
restoration of the Real Property and Improvements in an agreement
satisfactory to Buyer at the Closing; and
SB. Any partial condemnation that does not affect Buyer's
intended operation and use of the PCB Facility; and
SC. If such damage or destruction exceeds ONE HUNDRED
THOUSAND DOLLARS ($100,000.00), or if any condemnation affects
Buyer's intended use of the Real Property and Improvements, then
Buyer may at its option either terminate this Agreement or
consummate the purchase at the purchase price specified in
Section 1.2 hereof, in which event Seller shall at Closing assign to
Buyer the insurance claims and proceeds thereof. Buyer's option
must be exercised within twenty (20) days from the date on which
Buyer receives written notice from Seller of such damage or
destruction or condemnation.
S3. Employees.
SA. (i) Buyer agrees to offer employment to all active
bargaining unit employees who are employed by Seller at Plant 4, on
the date of the Sale. If Buyer receives an insufficient number of
acceptances of its offers of employment from Seller's active
bargaining unit employees, Buyer will, to the extent necessary to
staff its operations, offer employment to Seller's employees who are
on the recall list at the time the sale occurs, who are qualified to
fill available openings and who make application to the Buyer.
<PAGE>
(ii) Buyer agrees to offer employment to all of
Seller's salaried employees employed by Seller at Plant 4 on terms
to be established by Buyer.
(iii) So long as the affected applicant has given
written authorization to the review of his or her records in
Seller's possession, Seller will allow Buyer to have access to all
pertinent employment documents of Seller related to Seller's
employees including employment and disciplinary folders or records
at a corporate, plant, departmental or supervisory level, excluding
worker's compensation, medical information, or other information
protected by law.
SB. Employees of Seller who are offered and accept
employment with Buyer will cease to be employees of Seller and
become employees of Buyer. Buyer will have no obligation for
severance payments to any of Seller's former employees due to the
termination of employment by Seller and all obligations regarding
the employment relationship between Seller's former employees and
Seller shall be an obligation of Seller.
SC. Buyer shall be responsible for any and all
liabilities and obligations related to its offers of employment to
Seller's former employees and all matters of employment
relationships between it and Seller's former employees.
SD. Seller agrees to comply with all of its obligations
under the National Labor Relations Act, including, but not limited
to, its obligations to bargain over the decision and the effects of
the sale with the Union, bargaining agent for those in the
collective bargaining unit at the Greeneville Facility. Seller and
Buyer agree to comply with all of their obligations under the Worker
Adjustment and Retraining Notification Act ("WARN"). Seller will
hold Buyer harmless from and against any damages or liability
arising out of Seller's conduct under the National Labor Relations
Act and the WARN statute related to the sale of the Greeneville
Facility. Buyer will hold Seller harmless from and against any
damages or liability arising out of Buyer's conduct under the
National Labor Relations Act and the WARN statute related to the
sale of the Greeneville Facility.
SE. Should Seller incur any liability whatsoever due to
Buyer's handling of labor and employment issues, Buyer agrees to
indemnify, defend, and hold Seller harmless from and against any
such liability. Should Buyer incur any liability whatsoever, due to
Seller's handling of labor and employment issues, Seller agrees to
indemnify, defend and hold Buyer harmless from and against any such
liability.
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SF. Buyer has determined that it will not be assuming the
collective bargaining agreement that currently exists between Seller
and the Union, but Buyer does recognize the Union as the bargaining
agents for its hourly employees. In anticipation of this
relationship, Buyer has entered into a collective bargaining
agreement with the International Union of Electronic, Electrical,
Salaried, Machine and Furniture Workers, AFL-CIO which has been
endorsed by Local 796 of the IUE, its officers, or the Administrator
acting on its behalf as referenced in Section 3.1 M supra prior to
the sale. This agreement covers wage rates and protects both Buyer
and Seller from interruption in the production and supply of
products because of strikes.
SG. As of the Closing, Buyer shall adopt, at its expense,
vacation, holiday and health insurance plans for its employees.
Buyer will have no liability or obligation to pay or provide and
Seller will assume all liabilities and expenses for any vacation,
holiday, severance, health insurance, pension or other benefits
earned or accrued by Seller's former employees prior to the Closing.
Buyer will assume all liability or obligations to pay for vacation,
holiday, severance or health insurance or other benefits claimed or
accruing by Seller's former employees for time worked after the
Closing. Assets relating to Seller's benefit plans shall be
retained by Seller.
SH. The covenants of Buyer and Seller in this Section 3.4
are solely for the benefit of Buyer and Seller and are not intended
to create any right in any current or former employee of Seller, or
any of their beneficiaries or personal representatives, or any other
third party, including the Union.
S4. WARRANTIES
S4.1 Seller's Warranties. Seller hereby represents and warrants
to Buyer that except as disclosed on Schedule 4.1:
SA. Seller has good title to the Assets, subject only to
the Permitted Encumbrances.
SB. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware, and is qualified to do business in the State of Tennessee.
<PAGE>
SC. Seller has all corporate and legal right, power, and
authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement by Seller and consummation by Seller of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on behalf of Seller.
This Agreement has been duly executed and delivered by Seller and
together with all other instruments and documents executed and
delivered by Seller at the Closing, constitute and will constitute
legal, valid, and binding agreements of Seller, enforceable in
accordance with their respective terms, except that: (i) enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium,
or other similar laws now or hereafter in effect relating to creditors'
rights generally; and (ii) the remedies of specific performance and
injunctive relief and other forms of equitable relief may be subject to
equitable defenses and other discretion of the court before which any
proceeding therefor may be brought.
SD. Seller does not know and Seller has received no
notice of any litigation, proceeding, or investigation currently
pending or threatened, before any forum, court, body, department, or
agency, which may reasonably be expected to have a material adverse
effect on the transactions contemplated hereby or that might affect
Seller's authority to consummate such transactions.
SE. Seller has received no notice that the occupancy,
operation, and use of the Real Property and/or the Improvements
violate any applicable law, statute, ordinance, rule, regulation,
policy order, or determination of any federal, state, local, or
other governmental authority ("Governmental Authority") or any board
of fire underwriters (or other body exercising similar functions),
or any restrictive covenant or deed restriction affecting any
portion of the Real Property and/or Improvements including, without
limitation, any applicable zoning ordinances and building codes,
flood disaster laws, wetlands laws or regulations.
SF. Except as disclosed on Schedule 4.1, Seller has
received no notice that the Real Property is not in compliance with
applicable environmental laws, regulation or policy relating to
environmental matters, including but not limited to the Clean Air
Act as amended, the Clean Water Act as amended, the Resource
Conservation Recovery Act of 1976 as amended, and the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as
amended, and applicable state and local environmental requirements.
SG. Seller has received no notice that the Real Property,
or any portion thereof, is listed, proposed for listing, or eligible
for listing on the National Priority List under the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C.
9601 Section et seq.), as amended, nor under any comparable listing
or designation of the State of Tennessee.
<PAGE>
SH. There are no maintenance, management, leasing,
service agreements, or other contracts or agreements of any nature
relating to the Real Property which will be in effect at the
Closing, other than those provided by Seller to Buyer pursuant to
Section 1.3 hereof.
SI. There is no pending or threatened litigation or
pending or contemplated condemnation proceedings known to Seller
which affect the Assets or any part thereof.
SJ. There are no municipal or other government
assessments against the Real Property other than current real
property taxes and Seller has not entered into any understanding or
agreement with any taxing or assessing authority with respect to the
imposition or deferment of any taxes or assessment relating to the
Real Property, except as disclosed in the Preliminary Report.
SK. No person, firm, or entity has rights in or to
acquire the Assets or any part thereof, and there is no agreement
other than this Agreement to sell the Assets.
SL. Seller has not received any notice of structural
defects or dangerous mechanical conditions which exist with respect
to the PCB Facility. With respect to the Improvements and
Equipment, all mechanical equipment (including but not limited to
the air conditioning, heating, and electrical systems, and
plumbing), structural members, and utilities are in good condition,
ordinary wear and tear excepted, and all mechanical equipment and
utilities are presently in serviceable and safe operating condition.
SM. Seller has not engaged any broker or finder in
connection with the transactions contemplated hereby and no broker's
or finder's fees or commissions are due or payable in connection
with the transactions contemplated hereby.
SN. Seller has received no notice from any lessor or
third party of any condition of default in any term of the Personal
Property Lease(s) and Other Contract(s).
SO. Seller has good and marketable title to all of the
Equipment, free and clear of all liens, claims, charges, security
interests, encumbrances or other interests of any third party other
than Permitted Encumbrances. All of the Equipment is in good
condition and repair, ordinary wear and tear excepted, and is
suitable for the present uses thereof.
SP. The inventories of Seller to be sold to Buyer will
consist of items of a quality and quantity which are good, usable
and saleable in the usual and ordinary course of business of Seller
at customary prices therefor and will not include any items which
are damaged, obsolete or below standard quality.
<PAGE>
SQ. Set forth on Schedule 4.1(Q) hereto is a true and
correct list of all permits, licenses, certificates, consents and
other authorizations (herein collectively called "Permits")
possessed or used by Seller that relate to and are necessary for the
operation of its business as presently conducted or to own the Real
Property and Improvements owned by it. Seller is in compliance with
all such Permits, and all such Permits are in full force and effect.
At the Closing Seller shall transfer and assign to Buyer all such
Permits that are transferable as indicated by an asterisk on said
Schedule 4.1(Q).
The above representations and warranties of Seller shall
survive the Closing and transfer of title to the Assets to Buyer.
S4.2 Representations and Warranties of Buyer.
SA. Buyer is a Tennessee limited partnership duly
organized, validly existing, and in good standing under the laws of
the State of Tennessee, and will be, by the Closing, qualified to do
business in the State of Tennessee.
SB. Buyer has all legal right, power, and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
by Buyer and consummation by Buyer of the transactions contemplated
hereby have been duly and validly authorized by all necessary action
on behalf of Buyer. This Agreement has been duly executed and
delivered by Buyer and it, together with all other instruments and
documents executed and delivered by Buyer at the Closing, constitute
and will constitute legal, valid, and binding agreements of Buyer,
enforceable in accordance with their respective terms, except that:
(i) enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium, or other similar laws now or hereafter
in effect relating to creditors' rights generally; and (ii) the
remedies of specific performance and injunctive relief and other
forms of equitable relief may be subject to equitable defenses and
other discretion of the court before which any proceedings therefor
may be brought.
SC. To the best of Buyer's knowledge, there is no
litigation, proceeding, or investigation currently pending or
threatened, before any forum, court, body, department, or agency,
which may reasonably be expected to have a material adverse affect
on the transactions contemplated hereby or that might affect Buyer's
authority to consummate such transactions, and Buyer does not know
of any basis for any such litigation, proceeding, or investigation.
<PAGE>
SD. Buyer has not engaged any broker or finder in
connection with the transactions contemplated hereby and no broker's
or finder's fees or commissions are due or payable in connection
with the transactions contemplated hereby.
SECTION 5
INDEMNIFICATION
S5.1 Nature and Survival of Representations and Warranties.
Except as otherwise specifically provided in this Agreement to the
contrary, all of the representations, warranties and covenants made
by Seller and Buyer under this Agreement shall survive the Closing
until the second (2nd) anniversary following closing hereof.
S5.2 Indemnification of Buyer. Seller shall indemnify and hold
Buyer harmless from and against, and reimburse Buyer on demand for,
any actual damage, loss, cost or expense (including reasonable
attorneys' fees) incurred by Buyer resulting from any breach of
Seller's representations or warranties.
S5.3 Indemnification of Seller. Buyer shall indemnify and hold
Seller harmless against, and reimburse Seller on demand for, any
actual damage, loss, cost or expense (including reasonable
attorneys' fees) incurred by Seller resulting from any breach of
Buyer's representations or warranties.
S5.4 Notice of Claims. If any claim is made against a party
hereto that, if sustained, would give rise to a right of indemnity
under this Section 5, the party having the claim made against it
("Indemnitee") shall give the other party ("Indemnitor") written
notice thereof (specifying the nature and amount of the claim and
giving Indemnitor the right to contest the claim) within thirty (30)
days of becoming aware of such claim ("Notice of Claim").
S5.5 Right to Contest. Indemnitee shall afford Indemnitor the
opportunity, at Indemnitor's own expense, to assume the defense or
settlement of any such Notice of Claim, with its own counsel. In
connection therewith, the Indemnitee shall cooperate fully to make
available all pertinent information under its control and shall have
the right to join in the defense, at its own expense, with its own
counsel. If Indemnitor does not elect to undertake the defense of a
claim under a Notice of Claim on the terms provided below,
Indemnitee shall be entitled to undertake the defense or settlement
of the claim at the expense of and for the account and risk of
Indemnitor.
<PAGE>
Indemnitor shall have the right to assume the entire
defense of a claim hereunder provided that (i) Indemnitor gives
written notice of such desire (the "Notice of Defense") to
Indemnitee within fifteen (15) days after Indemnitor's receipt of
the Notice of Claim; (ii) Indemnitor's defense of such claim shall
be without cost to Indemnitee or prejudice to Indemnitee's rights
under this Section 5; (iii) counsel chosen by Indemnitor to defend
such claim shall be reasonably acceptable to Indemnitee; (iv)
Indemnitor shall bear all costs and expenses in connection with the
defense and settlement of such claim; (v) Indemnitee shall have the
right to receive periodic reports from Indemnitor and Indemnitor's
counsel; and (vi) Indemnitor will not, without Indemnitee's written
consent, settle or compromise any claim or consent to any entry of
judgment which does not include the unconditional release by
claimant or plaintiff of all liability with respect to the claim.
Notwithstanding anything contained herein to the contrary, if
Indemnitor assumes the defense of a claim, Indemnitor shall
thereafter be estopped from asserting that indemnity was not proper
with respect to such claim, provided, however, this shall not
relieve Indemnitee of its obligation to cooperate and make available
pertinent information under this Section 5.5.
S5.6 Limitation of Liability. Buyer shall not have any
liability to indemnify Seller in respect of losses incurred by
Seller pursuant to Section 5.3, and Seller shall not have any
liability to indemnify Buyer in respect of Losses incurred by Buyer
pursuant to Section 5.2, in either case unless and until the
aggregate amount of such losses exceeds $50,000, in which event the
party seeking indemnity may recover the full amount of such Losses,
other than the initial $50,000, provided that recovery by Buyer in
respect of such Losses shall be limited to $10,000,000.
SECTION 6
CLOSING
S6.1 Closing. Closing of the purchase and sale of the Assets and
the execution of the PCB Purchase Agreement, the Quality Agreement,
and the Warranty Deed and Bill of Sale conveying the Assets to
Buyer, and any lease assignments related to the foregoing shall be
held on or before July 25, 1997, or a date prior thereto mutually
agreed by Buyer and Seller, at the offices of Seller (or its
counsel) in Atlanta, Georgia or at such other time and date or place
as shall be mutually agreed by Seller and Buyer. The date on which
the Closing actually takes place or, if more than one day is
required to complete the Closing, the date on which the Closing is
actually accomplished is herein referred to and designated as the
"Closing."
<PAGE>
S6.2 Deliveries at Closing. At the Closing the following shall
occur, each action being considered a condition precedent to the
others and all being considered as taking place simultaneously, and
each party covenanting to perform or cause to be performed each such
action to be performed on its part:
SA. Seller and Buyer shall execute (or have previously
executed) the PCB Purchase Agreement and the Quality Agreement.
SB. Seller shall execute, acknowledge, and deliver to
Buyer a Warranty Deed, in the form attached hereto as Schedule
6.2(B), conveying and warranting to Buyer title to the Real Property
and Improvements, subject only to the Permitted Encumbrances.
SC. Seller shall execute, acknowledge, and deliver to
Buyer such Bills of Sale, in the form attached hereto as Schedule
6.2C, selling, assigning, and transferring to Buyer the Equipment
and Inventory to be herein conveyed, subject to the Permitted
Encumbrances.
SD. Seller shall execute, acknowledge and deliver to
Buyer such assignments of lease or other documents as are necessary
to transfer any Personal Property Leases comprising portions of the
Assets.
SE. Buyer shall pay to the Seller in current funds the
sum of TEN MILLION DOLLARS ($10,000,000), subject to adjustments for
prorations and/or the Fee, as set forth herein.
SF. All reasonable and customary prorations shall be made
as of the Closing and appropriate credit shall be given for real
property taxes, assessments, utilities, deposits and other matters,
the nature of which properly require such treatment at the Closing.
SG. Seller and Buyer shall each pay one-half of the taxes
(if any), sales and excise taxes (if any), title insurance, and
survey for the subject transaction. Buyer shall pay all recording
fees and taxes or other fees relating to any mortgage of the Real
Property.
SH. Seller shall execute, acknowledge, and deliver to
Buyer a Non-Foreign Affidavit of Buyer, in a form reasonably
satisfactory to Buyer, in accordance with Section 1445 of the
Internal Revenue Code.
SI. Each party shall execute, acknowledge, and deliver
such other documents and instruments and take such other action as
the other party or its legal counsel may reasonably require in order
to document and carry out the transaction contemplated in this
Agreement.
S6.3 Closing Deadline. If Buyer is unable to close before
July 25, 1997, then this Agreement shall terminate; Seller shall retain
the Fee; each party shall bear its own costs arising from such
termination; and Sections 7.1, 7.2 and 7.3 shall have no effect.
<PAGE>
SECTION 7
DEFAULT AND REMEDIES
S7.1 Default by Seller. In the event of a default by Seller in
the performance of its obligations hereunder, Buyer shall give
written notice to Seller designating such default. Seller shall
have a period of ten (10) days following the effective date of said
notice within which to correct, or in the case of a default which is
of a nature that cannot reasonably be corrected within such ten
(10) day period, within which to commence action to correct, the
default of which Seller has received notice. In the event that
Seller shall fail to correct such default within said ten (10) day
period or, if applicable, to commence action to correct such default
within said ten (10) day period and thereafter diligently to pursue
the same to completion, Buyer shall have the right: (a) If such
default occurs prior to the Closing, to forfeit the Fee, and to
terminate this Agreement and all rights, duties, and obligations of
the parties hereunder by giving written notice thereof to Seller; or
(b) compel specific performance by Seller of its obligations
hereunder or recover damages from Seller resulting from said default.
S7.2 Default by Buyer. In the event of a default by Buyer in the
performance of its obligations hereunder, Seller shall give written
notice to Buyer designating such default. Buyer shall have a period
of ten (10) days following the effective date of said notice within
which to correct, or in the case of a default which is of a nature
that cannot reasonably be corrected within such ten (10) day period,
within which to commence action to correct, the default of which
Buyer has received notice. In the event that Buyer shall fail to
correct such default within said ten (10) day period or, if
applicable, to commence action to correct such default within said ten
(10) day period and thereafter diligently to pursue the same to
completion, Seller shall have the right: (a) If such default occurs
prior to the Closing, to retain the Fee and to terminate this
Agreement and all rights, duties, and obligations of the parties
hereunder by giving written notice thereof to Buyer; or (b) by legal
action recover damages from Buyer resulting from said default.
S7.3 Remedies.
SA. The rights and remedies of any of the parties hereto
shall not be exclusive, and the exercise of any rights or remedies
with respect to one or more of the provisions of this Agreement
shall not preclude the exercise of rights or remedies with respect
to any other provisions; provided, however, the indemnification
provisions of Section shall be the exclusive remedy with respect 5
to any breach of the representations and warranties, and neither
Buyer nor Seller shall be entitled to any remedies other than those
set forth herein with respect to the breach of any such
representation or warranty.
<PAGE>
SB. In the event of any claim or controversy under or
otherwise relating to this Agreement, except as set forth in Section
5 and/or Section 7.3(C), the parties shall attempt to resolve the
claim or controversy by good faith participation in nonbinding
mediation in Knox County, Tennessee, prior to the commencement of
litigation in any forum. The mediator and the rules of mediation
shall be agreed upon by the parties within ten (10) days following
notice of an intent to mediate. In the absence of the parties'
agreement, the mediator and the rules for the mediation shall be
determined by the Federal Mediation and Conciliation Service or, if
that Service is unable or unwilling to serve, the American
Arbitration Association. The mediation shall continue until the
claim or controversy is resolved or the mediator makes a finding
that there is no possibility of settlement through mediation.
SC. Seller acknowledges that the breach by Seller of any
obligation relating to Intellectual Property would cause immediate
and irreparable harm to Buyer, for Buyer would have no adequate
remedy at law. Notwithstanding the provisions of Section 1.7, in
the event of a breach or threatened breach of any obligation of
Seller relating to Intellectual Property, Buyer shall be entitled
(upon reasonable proof thereof by affidavit executed by an officer
or managing agent of Buyer, but without notice or delivery of a
bond) to such temporary restraining and seizure orders as may be
appropriate to prevent the breach or further breach of the
obligation and to protect the rights of Buyer in and to the
Intellectual Property. Furthermore, in the event of a breach or
threatened breach of any obligation relating to Intellectual
Property, Buyer shall also be entitled to such preliminary and
permanent injunctions as may be appropriate to prevent the breach or
further breach of the obligation or to protect the rights of Buyer
in and to the Intellectual Property. Nothing in this paragraph
shall be construed to prevent Buyer from pursuing any other remedy
for the breach or threatened breach of the obligation.
SECTION 8
GENERAL PROVISIONS
S8.1 Notices. All notices and other communications provided for
in this Agreement shall be in writing and shall be sufficient for
all purposes if personally delivered or if mailed by certified or
registered U.S. mail, return receipt requested, postage prepaid,
sent by facsimile with confirmation and addressed to the respective
party at the address set forth below or at such other address as
such party may hereafter designate by written notice to the other
party as herein provided.
<PAGE>
To Seller:
Philips Electronics North America Corporation
Attention: John Porter, Esq.
P.O. Box 14810
Knoxville, Tennessee 37914-1810
Facsimile (423) 521-4330
With a copy to each of:
Philips Electronic North America Corporation
Attention: Thomas M. Hafner, Esq.
64 Perimeter Center East
Atlanta, Georgia 30346-6401
Facsimile (770) 821-2266
and
Hunton & Williams
Attention: Joseph P. Congleton, Esq.
2000 Riverview Tower, 900 S. Gay Street
Knoxville, Tennessee 37902
Facsimile (423) 549-7704
To Buyer:
Circuit Systems, Inc.
Attention: Dilip S. Vyas
2350 East Lunt Avenue
Elk Grove Village, Illinois 60007
Facsimile (847) 437-5910
With a copy to:
Rieck and Crotty, P.C.
Attention: Thomas W. Rieck, Esq.
55 West Monroe Street, Suite 3390
Chicago, Illinois 60603
Facsimile (312) 726-0647
Facsimile notices and other communications shall be deemed to have
been given and received upon confirmation.
S8.2 Costs. Except as otherwise specifically provided in this
Agreement, Seller and Buyer each shall pay their own costs and
expenses incurred in preparation and execution of and performance
under this Agreement.
S8.3 Entire Agreement. This Agreement, including the schedules
hereto, constitutes the entire agreement between the parties hereto
relative to the subject matter hereof and shall supersede any prior
negotiations, correspondence, agreements, or understandings relative
to the subject matter hereof. This Agreement may not be amended or
modified except in writing executed by both of the parties hereto.
<PAGE>
S8.4 Interpretation. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
Tennessee. Whenever the context requires, the singular shall
include the plural, the plural shall include the singular, the whole
shall include any part thereof, any gender shall include both other
genders, the term "person" shall include an individual, partnership
(general or limited), corporation, trust, or other entity or
association or combination thereof. The captions and section
headings contained in this Agreement are for purposes of reference
only and shall not limit, expand, or otherwise affect the
construction of any provisions of this Agreement. This Agreement
shall bind and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. The respective rights
and obligations of any party hereto shall not be assignable without
the consent of the other party. Time is of the essence as to each
and every provision of this Agreement. The provisions of this
Agreement shall be construed both as covenants and conditions in the
same manner as though the words importing such covenants and
conditions were used in each separate provision hereof. Schedules
1.1A through 6.2(C) hereto are by this reference incorporated herein
and made a part hereof for all purposes. As used herein, the
expression "this Agreement" means the body of this Agreement and
such Schedules, and the expressions "herein," "hereof," and
"hereunder" and other words of similar import refer to this
Agreement and such Schedules as a whole and not to any particular
part or subdivision thereof.
S8.5 No Assumption of Liabilities. Except as set forth in this
Agreement, Buyer shall not become liable for and is not assuming any
debt, duty, liability, or obligation (of any nature) of Seller by
entering into this Agreement or by consummating the transaction
contemplated hereby, specifically including, but not limited to any
liability covered by any applicable bulk sales law. Seller shall
indemnify and hold Buyer harmless against and from any and all
liabilities and all costs, including, but not limited to fees and
expenses of counsel, incurred by Buyer and arising out of or
attributable to any liabilities under applicable bulk sales law.
Seller agrees that it will pay or otherwise provide for the payment
and discharge of all such liabilities, including without limitation
any liabilities or obligations, tax or otherwise, imposed on or
incurred by Seller as a result of the transactions contemplated by
this Agreement.
S8.6 Waiver. Either party hereto may to the extent permitted by
applicable law (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other
party contained herein or in any document delivered pursuant hereto,
or (iii) waive compliance with any of the covenants, agreements or
conditions of the other party contained herein. No such extension
or waiver shall be effective unless set forth in a written
instrument duly executed by or on behalf of the party extending the
time of performance or waiving any such inaccuracy or non-
compliance.
<PAGE>
S8.7 Invalidity of Provision. If any provisions of this Agreement
as applied to either party or to any circumstance shall be adjudged
by a court of competent jurisdiction to be void or unenforceable for
any reason, the same shall in no way affect (to the maximum extent
permitted by applicable law) any other provision of this Agreement,
the application of any such provision under circumstances different
from those adjudicated by the court, or the validity or
enforceability of the Agreement as a whole.
S8.8 No Recordation. Buyer covenants and agrees that neither this
Agreement nor any memorandum or other notice of this Agreement
(other than the Warranty Deed) shall be recorded in any real
property records of any Tennessee county, without the prior written
consent of Seller.
S8.9 Tax Allocation. The parties hereby agree that the allocation
of the Purchase Price among the Assets to ensure such allocation
complies with the provisions of Section 1060 of the Internal Revenue
Code of 1986 is as follows, unless modified at Closing by a separate
schedule:
Real Property and - $7,000,000
Improvements
Inventory - $ 400,000
Equipment - $2,600,000
S8.10 Multiple Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original for
all purposes and all of which shall be deemed, collectively, one
agreement.
S8.11 Governing Law; Choice of Forum. This Agreement shall be
governed by the laws of the State of Tennessee and the Buyer and
Seller acknowledge that the only forum and venue for resolution of
any judicial proceeding in connection with any matter pertaining to
this Agreement shall be in the United States District Court for the
Eastern District of Tennessee located at Knoxville, Tennessee.
S8.12 Announcements. Neither party shall make any initial public
or third party announcement of this transaction, or the pendency or
execution of any agreements in connection herewith, without the
prior approval of the other party.
<PAGE>
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, Seller and Buyer have executed this
Agreement as of the day and year first above written.
PHILIPS ELECTRONICS NORTH
AMERICA CORPORATION
By:/s/ Thomas M. Hafner
Thomas M. Hafner
Vice President and General Counsel,
Philips Consumer Electronics Company,
a division of Philips Electronics
North America Corporation
[Signature page to Real Estate and Asset
Purchase and Sale Agreement]
CIRCUIT SYSTEMS OF TENNESSEE, L.P.,
a Tennessee limited partnership
CIRCUIT SYSTEMS OF TENNESSEE, INC.
a Tennessee corporation, general partner
By:/s/ Dilip S. Vyas
Dilip S. Vyas
Vice President
[Signature page to Real Estate and Asset
Purchase and Sale Agreement]
SCHEDULE
1.1A
REAL PROPERTY
SCHEDULE 1.1C
EQUIPMENT
SCHEDULE 1.1C-1
INTELLECTUAL PROPERTY
<PAGE>
Excluded Assets includes the following Intellectual Property
owned by Seller: corporate names, brand names, trade names,
trademarks, servicemarks, copyrights, patents, inventions,
processes, know-how, formulae, patterns, designs, trade secrets and
interests thereunder; licenses; software, design work, and any and
all other Intellectual Property. That portion of the Intellectual
Property that consists of inventories, processes, know-how, and
software that are an integral part of the Improvements and
Equipment, and are necessary for the operation of the Improvements
and Equipment is referred to as "Process IP." That portion of the
Intellectual Property consisting of corporate names, brand names,
trade names, trademarks, servicemarks, copyrights, patents,
inventions, processes, know-how, formulae, patterns, designs, trade
secrets and interests thereunder; licenses; software, and design
work that specifically relates to or contains information about the
specifications for, design and manufacture of products for Seller is
referred to as "Design IP." The Design IP and the Process IP
collectively make up the Intellectual Property.
AND
All Philips product specific tooling and dies.
SCHEDULE 1.1E
REAL PROPERTY LEASES
[Expected to be none]
SCHEDULE 1.1F
OTHER CONTRACTS
SCHEDULE 3.1G(5)
QUALITY AGREEMENT
SCHEDULE 4.1
DISCLOSURE
SCHEDULE 4.1(Q)
PERMITS
SCHEDULE 6.2B
FORM OF WARRANTY DEED
SCHEDULE 6.2C
FORM OF BILL OF SALE
<PAGE>
<PAGE>
MASTER QUALITY AGREEMENT
This Quality Agreement (this "Agreement") is made as of the
July 24, 1997, by and between PHILIPS CONSUMER ELECTRONICS
COMPANY, a division of PHILIPS ELECTRONICS NORTH AMERICA
CORPORATION (hereinafter called "PURCHASER") and CIRCUIT
SYSTEMS OF TENNESSEE, LP (hereinafter called "SUPPLIER") and
provides as follows:
W I T N E S S E T H:
FOR AND IN CONSIDERATION of the mutual promises contained
herein and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Purchaser and
Supplier agree on the quality program for Products (as such term
is defined in that certain Printed Circuit Board Purchase
Agreement between Purchaser and Supplier, initially dated July 29,
1997 (the "Purchase Agreement") as follows:
1. Definitions
Product Specification shall be defined as the Lightning
Stroke "General Printed Circuit Board Specifications for the Sound
& Vision (S&V) Classes 1, 2 and 3, "Draft", issue date of 05-15-
1997." This specification will govern unless otherwise specified
by Engineering (as set forth in Lightning Stroke) and agreed upon
in writing.
"Field Call Rate" or "FCR" shall be identified as the
calculated failure rate for all Products within a specific Product
category and for all model years.
"Paid Call Rate" or "PCR" shall be identified as the
calculated failure rate for all Products within a specific Product
category for a specified model year introduction.
"PPM" or Parts Per Million shall be defined as the
measurement of a Products general quality as measured by the
PURCHASER or PURCHASER's designate as defined by the Product
Specification or other written agreements. The PPM goal will be
as stated in Exhibit A attached hereto as such may be amended from
time to time.
"Final Instrument Facilities" shall be defined as Five Rivers
Manufacturing, LLC, located in Greeneville, Tennessee (to the
extent such facility manufacturers Products for Purchaser) and
Philips Electronics, Juarez, Mexico, plants 2 and 5.
<PAGE>
1. Purpose
a. For Products to be procured by PURCHASER from the
SUPPLIER, the purpose of this Master Quality Agreement (MQA) is to
establish the quality system elements, and to more fully define
the obligations of PURCHASER and SUPPLIER, and to establish the
working relationship and the feedback system between the
PURCHASER, Final Instrument Facilities and SUPPLIER.
b. The Master Quality Agreement establishes also the basic
elements which are required and aimed on the continuous
improvement of the Product conformity and reliability performance.
c. This document supplements the terms and conditions as set
out by the Purchase Agreement.
2. Zero-Defects
a. SUPPLIER, PURCHASER and Final Instrument Facilities have
committed to the principle of Zero Defects in which all Product
defects and failure, and quality discrepancies are to be
considered as unacceptable.
b. SUPPLIER, PURCHASER and Final Instrument Facilities will
actively cooperate to investigate the causes of failure and the
implementation of corrective as well as preventive actions and
generally assist each other in the achievement of mutually
beneficial opportunities for quality improvement.
c. As evidence of SUPPLIER's commitment to the Zero Defect
goal, SUPPLIER agrees to supply Products in accordance with the
PPM targets as specified in the Product Quality Addendum shown in
Exhibit A as well as the applicable terms of the Purchase
Agreement.
3. Applicable Documents
a. Product Specifications
UAN-D1829/020
b. Underwriters Laboratory, Inc. Process Certification
c. Purchase Agreement
Note: Prior to the procurement of Products by the PURCHASER,
both parties will agree on the Product specification. SUPPLIER is
responsible for ensuring that any Product shipped to PURCHASER
meets the requirements of the Product specification.
1. Supplier Obligations
a. SUPPLIER is responsible for the quality of delivered
Products and warrants that all Products will meet the requirements
of the Product Specification as well as the applicable terms of
the Purchase Agreement.
<PAGE>
b. SUPPLIER shall perform and retain records of all the
necessary regulatory compliance testing and verification on all
Products manufactured for the PURCHASER (reference item 4b).
c. SUPPLIER shall assist the PURCHASER or Final Assembly
Facilities in the performance of, or make equipment available for
the investigation of Product failure.
d. SUPPLIER shall provide formal quotation which will
include the following:
1. Tooling cost breakdown
2. Engineering charges (if applicable)
3. Lead time for tooling
4. Lead time for samples
5. Production start date after sample approval
6. Minimum order quantity
7. Samples not electrically tested (fixture ordered
after sample approval)
1. Purchasers Obligations
Except as otherwise set forth in the Purchase Agreement:
a. PURCHASER shall provide tooling package to the SUPPLIER
capable of meeting Product Specifications.
b. PURCHASER shall issue purchase order for required tooling.
c. PURCHASER is responsible for final sample approval.
d. PURCHASER shall assist the SUPPLIER in investigation of
causes of failure and the implementation of corrective and
preventive actions and assist in the achievement of continuous
quality improvement.
e. PURCHASER shall ensure that the SUPPLIER has the latest
information concerning PCB manufacturing design rules.
2. Mutual Access, Verification and Confidentiality
a. SUPPLIER's manufacturing and distribution facilities
shall be accessible to PURCHASER's representatives in order to
verify whether SUPPLIER observes its obligations under this
agreement.
b. To the extent allowable under Purchaser's Contracts for
Products from the Greeneville, Tennessee facilities of Five Rivers
Mfg. LLC, PURCHASER's manufacturing facilities will be accessible
to SUPPLIER's representatives to observe the handling and
processing of SUPPLIER's Products.
c. In both cases, the normal courtesies of prior
notification and agreement will be observed.
<PAGE>
d. Both parties agree to keep in strictest confidence and
ont use for itself or disclose to any third party any confidential
and propriety information disclosed by one of the parties during
the course of audits, visits and discussions, unless agreed
otherwise between SUPPLIER and PURCHASER.
3. Qualifications
a. System
i) SUPPLIER shall maintain ISO 9002 and ISO 14000
certification of its system, or document a quality system of
equivalent standard. This system shall ensure conformance to the
requirements of this agreement and the Purchase Agreement.
Moreover, the system will provide for the prevention and early
detection of discrepancies and for timely corrective and
preventative actions.
ii) Upon prior notification, the PURCHASER shall at
least once per year be afforded the opportunity to visit the
SUPPLIER facility to perform a quality system audit on the basis
of the appropriate ISO 9000 document.
b. Process
i) SUPPLIER shall have a documented process description.
This description shall ensure that Products meet the requirements
of the Product specification.
ii) PURCHASER upon prior notification and agreement
with the SUPPLIER, shall be afforded the opportunity to perform a
process audit in the SUPPLIER production or manufacturing
location.
c. Product
i) SUPPLIER shall use only qualified and approved
materials in the design and manufacture of Products and shall have
appropriate documentation and procedures which support the
qualification process. A joint understanding and agreement of the
qualification process shall be established prior to the delivery
of any Products (see Product Quality Addendum attached).
Exceptions to the agreed upon Product Specification shall be
requested by the SUPPLIER to the PURCHASER and shall be jointly
approved in writing.
ii) After qualification, the SUPPLIER shall not
introduce any significant manufacturing process change without
prior notice to and approval of PURCHASER, if the change effects
the final Product beyond the Product specifications.
iii) PURCHASER reserves the right to refuse shipment
lots in those cases where it has been determined and agreed via
analytical methods that Products are not conforming to the Product
Specifications.
4. Safety
<PAGE>
a. SUPPLIER is responsible for maintaining all appropriate
regulatory certification as evidenced in "Attachment B".
b. Safety defects will be considered as critical defects.
Every Product will be submitted to inspection on critical defects
during SUPPLIER's manufacturing process. SUPPLIER will
immediately notify PURCHASER an defected Final Assembly Facilities
upon detection of any Product with a safety defect or upon
acquiring information that the risk exists that Products with such
defects have been delivered to PURCHASER. A joint action plan
shall be initiated.
c. Should the PURCHASER and/or Final Instrument Facilities
discovery any single safety defect, the SUPPLIER shall be notified
and a joint action plan will be initiated.
5. Application Validation
a. PURCHASER shall ensure that the final material PQA
(Part's Qualification Approval) or a wavier is provided to the
SUPPLIER prior to production start up.
b. The final responsibility for the application of the
material remains with the PURCHASER.
6. Change Control
a. SUPPLIER shall notify PURCHASER a minimum of 90 days in
advance of any intended change that would impact the performance
or specifications of the final instrument/material.
b. Notifications by the SUPPLIER of such changes shall be
accompanied by information which explains the reason for the
change and the possible impact to the final instrument process
and/or performance.
c. SUPPLIER may request from the PURCHASER a time within
which to respond to the change notification. The PURCHASER may
also ask for additional time in order to complete the evaluation
of impact and shall agree with the SUPPLIER as to the appropriate
time.
d. Both the PURCHASER and SUPPLIER shall be in agreement as
to the necessary requalification of the Product prior to the
manufacture of the Product.
e. Emergency instances shall be handled on a case-by-case
basis where a temporary waiver may be granted by the PURCHASER
based on the current information available.
7. Process Control
a. Statistical Process Control shall be applied throughout
the SUPPLIER's process (where applicable and reasonable). Process
capability indexes (Cpk's) shall be established for the critical
Product parameters and the correlating process parameters.
<PAGE>
b. The critical Product parameters shall be established in
mutual agreement with the PURCHASER or via Product specifications.
The minimum Cpk goal shall be 1.33.
8. Product Inspection, Monitoring and Reporting
a. SUPPLIER shall use a monitoring scheme to establish the
reliability and outgoing quality level of Products supplied to the
PURCHASER and shall report the details upon request by the
PURCHASER.
b. SUPPLIER shall notify PURCHASER upon detection of
potential problems which may lead to a deterioration of
PURCHASER's conformity or reliability levels in its development,
manufacturing and customer locations.
c. SUPPLIER shall notify PURCHASER verbally of any
potential quality or reliability problems associated with supplied
Products and confirm in writing. This shall then be supported by
weekly status reports to the PURCHASER until corrective and
preventative actions are in place.
d. The detection of a potential safety hazard, by either
PURCHASER or SUPPLIER shall be cause for immediate joint
notification and action.
9. PPM Management
a. An essential element of PPM management is PPM co-
operation. The purpose of PPM Co-operation is to achieve overall
qualify improvement, whereby the ultimate goal is ZERO DEFECTS.
For certain Products, the PURCHASER may start a PPM management
activity with the SUPPLIER and provide feedback on a monthly
basis.
b. Final Instrument facilities shall provide the SUPPLIER a
monthly summary report of material performance.
c. SUPPLIER and PURCHASER shall establish corrective and
preventative actions that will focus on PPM improvement and
reduction and shall organize regular follow up to ensure that
actions taken are sufficient.
d. SUPPLIER, PURCHASER, and Final Instrument Facilities
shall jointly perform at a minimum of one (1) time per year, a
review of the PPM Management Process.
10. Complaints
PURCHASER may, but shall not be required to subject all
Products supplied to the PURCHASER to inspections and acceptance
or rejection; however, the PURCHASER shall be under no obligation
to perform Incoming Materials Inspection. Areas where rejects may
be identified:
a. Incoming Materials Inspection
<PAGE>
(1) Lots with defects identified by PURCHASER during a
sample inspection may be handled in the following ways:
o return the entire shipment to SUPPLIER for
replacement (RA number required.
o PURCHASER may elect to do 100% inspection of the
defective shipment on site based upon agreed cost
to the SUPPLIER.
o destroy the shipment with written approval from the
SUPPLIER.
o require SUPPLIER to have its personnel and the
necessary equipment attend at PURCHASER's premises
to do a 100% re-inspection and re-work of the
Products.
(1) PURCHASER/Final Instrument Manufacturer, shall
provide SUPPLIER samples of defective material with initial
paperwork requesting corrective action and/or financial
reimbursement.
b. SUPPLIER shall prepare a corrective action plan which
addresses the following items and shall be forwarded to the
PURCHASER and Final Instrument Manufacturer primary contact.
(1) Problem Description (if found to be
other than original)
(2) Interim Containment Action and the
Date and Product Identification of
the implemented action.
(3) Root Cause analysis
(4) Implementation of Permanent Corrective Action
(5) Actions to Prevent Recurrence
c. SUPPLIER Products, packaging or components that have
been reworked shall be readily identifiable by an agreed-upon
marking.
2. Shelf Life and Warranty
a. The shelf life of components, assemblies, sub-assemblies
or finished goods received from the SUPPLIER will be as specified
in the component or Product specifications as set forth in the
Purchase Agreement or Product Specification.
b. Products found to be older than specified upon incoming
inspection shall be subject to return to the SUPPLIER for
replacement by new production. Other options may be agreed upon
between the SUPPLIER and PURCHASER.
3. Product Traceability
<PAGE>
a. SUPPLIER shall maintain a Product tracking system
capable of identifying production batches in the manufacturing and
supply chain.
4. Amendment
This agreement and the attachments and exhibits hereto shall
serve as the Quality Agreement between the parties until amended
in writing as set forth herein or in the Purchase Agreement.
IN WITNESS WHEREOF, Purchaser and Supplier, intending to be
legally bound, have executed this Agreement as of the date and
year first above written.
CIRCUIT SYSTEMS OF TENNESSEE, LP
"Supplier"
By: /s/ Dilip S.Vyas
Dilip S. Vyas
Vice President
PHILIPS ELECTRONICS NORTH
AMERICA CORPORATION
"Purchaser"
By:/s/ Thomas M. Hafner
Thomas M. Hafner, Vice President
and General Counsel
Philips Consumer Electronics
Company, a division of Philips
Electronics North America Corporation
EXHIBIT "A"
Quality Agreement between
Philips Consumer Electronics and
Circuit Systems of Tennessee, L.P.
1997-98 Quality Goals
Product Category: 1997 Goals 1998 Goals
Printed Circuit Board Material
o FRI or FR2 base material
o CEM base material
Impound Number
o TBD
<PAGE>
Quality Goals shall be determined after a six month monitoring and
review of the data from the Final Instrument Facilities in
Greeneville, TN. (Five Rivers Mfg., LLC) and Juarez, Mexico
(Philips Plants 2, 4 and 5).
*"ppm" = Parts Per Million as measured by PURCHASER or PURCHASER's
designated Final Instrument Manufacturing Facilities.
EXHIBIT "B"
Generic Quality Specification between
Philips Consumer Electronics and
Circuit Systems of Tennessee, L.P.
1997-98 Specification
a) Product Safety Certificate/UL Process Certification
o UL Certification Number: E38049
b) Designated Contacts with Signature Authority:
SUPPLIER PURCHASER
1) _______________________
____________________________
Circuit Systems of Philips Consumer Electronics
Tennessee, L.P. Development Engineering
____________________________
Philips Consumer Electronics
V.P. Development Engineering
____________________________
Philips Consumer Electronics
Director Quality, Reliab. &
Comp.
____________________________
Philips Consumer Electronics
Manager Product Compliance
c) Statistical Process Control shall be utilized by the
SUPPLIER when processing Products for the PURCHASER. Process
Control points shall be mutually agreed upon or identified per the
Product Specification prior to the initiation of production.
<PAGE>
EXHIBIT "C"
Product Quality Addendum between
Philips Consumer Electronics and
Circuit Systems of Tennessee, L.P.
1997-98
see attached document from S&V Engineering.
(Draft Process of supplier qualification and
Product Specifics)
<PAGE>
<PAGE>
PRINTED CIRCUIT BOARD PURCHASE AGREEMENT
This PRINTED CIRCUIT BOARD PURCHASE AGREEMENT (this "PCB
Purchase Agreement") is made and entered into as of the 24th day
of July, 1997 by and between PHILIPS ELECTRONICS NORTH AMERICA
CORPORATION, a Delaware corporation, with offices in Knoxville,
Tennessee (hereinafter called "Buyer"), and CIRCUIT SYSTEMS OF
TENNESSEE, L.P., a Tennessee limited partnership, with its
principal place of business at 1515 Industrial Road, Greeneville,
Tennessee (hereinafter called "Seller").
W I T N E S S E T H :
WHEREAS, Buyer desire to purchase from Seller certain printed
circuit board ("PCB") products to be manufactured by Seller in
Greeneville, Tennessee for Buyer (hereinafter called "Products")
for resale and Seller desires to sell such Products to Buyer; and
WHEREAS, the parties hereto deem it desirable by means of
this PCB Purchase Agreement to establish the terms and conditions
which shall govern Seller's manufacture and sale of Products and
Buyer's purchase of Products;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual promises and covenants hereinafter set forth, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereto mutually agree as follows:
ARTICLE 1
Orders; Quantity of Products
1.01 The Agreement between the parties ("Agreement") shall
consist of this PCB Purchase Agreement, the face of purchase
orders, the Schedules to this Agreement and other documents
executed by duly authorized representatives of both parties.
During the term of this Agreement, all agreements between the
parties for the purchase and sale of Products shall include and be
governed exclusively by the terms and conditions of this
Agreement, except as the parties may otherwise agree in writing
duly executed by their respective authorized representatives. In
case of any conflicts between this Agreement and any purchase
orders, acceptances, correspondence, memoranda, listing sheets and
other documents forming part of any order for the Products placed
by Buyer and accepted by Seller or any acceptance of such order by
Seller during the term of this Agreement, this Agreement shall
govern and prevail, and the contrary printed terms and conditions
of any such documents shall not be binding upon Seller or Buyer.
<PAGE>
1.02 Purchase and sale of Products shall be made according
to the following schedule, with production of Products being given
a first priority status in all manufacturing scheduling by Seller:
(a) For the Buyer's model year beginning approximately
May 1, 1997, and continuing for approximately twelve
months thereafter, Seller shall produce in Greeneville,
Tennessee and sell to Buyer, and Buyer shall purchase
from Seller, Products consisting of all of Buyer's PCB
requirements for its Greeneville and Juarez projection
and direct view television manufacturing production for
such model year, which shall consist of a minimum,
collectively, of 2,000,000 television sets (the "1997
Production Level"); and
(b) For the Buyer's model year beginning approximately
May 1, 1998, and continuing for approximately twelve
months thereafter, Seller shall produce in Greeneville,
Tennessee and sell to Buyer, and Buyer shall purchase
from Seller, Products consisting of all of Buyer's PCB
requirements for its Greeneville and Juarez projection
and direct view television manufacturing production for
such model year, which shall consist of a minimum,
collectively, of 2,000,000 television sets (the "1998
Production Level"); and
(c) For the Buyer's model year beginning with the
"1999" and "2000" model years, respectively, Seller and
Buyer shall utilize the procedures for proposals set
forth in Section 2.03 to determine those Products, if
any, which may be manufactured and sold hereunder.
1.03 Purchase and sale of Products for each year of the
Agreement shall be made pursuant to individual purchase orders of
Buyer, provided, however, that the aggregate purchases and sales
of Products in any given year of the Agreement shall be within the
applicable Production Level for such year provided in Sections
1.02(a) and (b), unless such quantities shall be otherwise
adjusted as provided herein. Individual purchase orders shall be
in writing, shall state the quantities of each model of Products
by Buyer's Model Number, and shall indicate prices as calculated
pursuant to Article 2, quantities, shipping schedules and such
other terms of sale not covered by this Agreement as may be
mutually agreed upon; provided, however, that Buyer shall give
Seller not less than twenty (20) days notice in writing of Buyer's
delivery schedule. Price changes attributable to each Product
model agreed to by both parties will be reflected in purchase
order change notices from Buyer to Seller. The Buyer's "Material
Delivery Schedule" will reflect quantity and shipping schedule
changes on a monthly basis, with effects of changes, within the
twenty (20) day leadtime, reviewed as needed. An allowance of one
unscheduled change, per line, per shift, is reflected in the
current Standard Cost. The inability of Buyer and Seller to
mutually agree (in good faith negotiations) on the price,
quantity, production schedules and/or delivery schedules for
Products shall relieve Buyer from obligations hereunder with
<PAGE>
regard to the Products represented by such order and the annual
Production Level shall be reduced accordingly by the number of
sets represented by such Products. For disputes over price only,
Seller may contest such cancellation and/or reduction by Buyer by
submitting the dispute over the price for the specific disputed
Product to binding arbitration pursuant to Section 13.02 hereof;
provided however that disputes over the award of contracts by
Buyer to third party manufacturers for or during the 1999 and 2000
Production years, pursuant to Section 2.03 hereof, shall not be
subject to the binding arbitration requirements hereof.
1.04 Standard production hours are defined for the purpose
of this agreement as the standard direct labor hours required to
manufacture an individual Product hereunder. Schedule 1.04
reflects the standard direct labor hours for Products currently in
production. The standard direct labor hours per product will be
agreed upon between Seller and Buyer in good faith negotiations,
beginning with the allocations per Product as set forth in
Schedule 1.04 for production year 1997.
ARTICLE 2
Price; Price Adjustments; Invoices
2.01 (a) For purposes of the 1997 Production Level and of the
1998 Production Level, the "standard production cost per hour" is
as follows:
Standard Production
Cost Per Hour
PCB Manufacture
1997 $53.58 (U.S.)
1998 $53.58 (U.S.)
(b) (i) For the 1997 and 1998 Production years, the
sale price of each Product of an individual design is
calculated as follows: (1) Standard Material Costs, plus (2)
Standard production costs, which for such item is defined as
the product of: (x) standard production hours multiplied by
(y) standard production cost per hour.
(ii) For the 1999 and 2000 Production years the
sale price per Product, if any, that may be purchased
hereunder shall be negotiated on each Product purchase as set
forth in Section 2.03.
<PAGE>
(c) Standard Material Costs are defined as the cost of
the raw material used in creating Products and utilizing
historical basis for establishing raw material costs, as set
forth in Schedule 1.04. During the term of this Agreement
Standard Material Costs will be established from time to time
by the then current cost structure for raw material through
Philips' purchase price terms for such material with third
party suppliers, as set forth in Section 6.01 and without
mark-up of any nature. Product material volumes in excess of
the Standard Material Costs prescribed for each Product shall
be for the account of the Seller. Additional Standard
Material Cost terms are set forth in Schedule 2.01(c).
2.02 Unless otherwise agreed in writing by both parties,
payment by Buyer to Seller for individual purchase orders shall be
on open account, in U.S. dollars. Payment shall be made following
delivery of a detailed billing invoice by Seller to Buyer net
every sixty (60) days, in the form attached hereto as Schedule
2.02, following the delivery and acceptance of Products in
connection with each individual purchase order of Buyer. All
payments by Buyer to Seller shall be electronically transferred in
such commercial methods as are available to Buyer and as Seller
shall specify in writing.
2.03 Provided that Seller shall have complied with the
requirements of this Agreement for the 1998 model year Production
Level, Buyer agrees to allow Seller to submit to Buyer a proposal
for price, quantity and scheduling for the Buyer's 1999 model year
printed circuit board requirements or portions thereof; Buyer
agrees that, by December 1, 1998, Buyer shall notify Seller of
acceptance or rejection of Seller's proposals for such printed
circuit board requirements or portions thereof. If Seller
successfully completes any obligations for 1999 model year
requirements for Buyer's Products, Seller may similarly propose
for 2000 model year requirements by December 1, 1999. In 1999
and/or 2000 Buyer may solicit third party bids for some or all of
its requirements for such model year printed circuit boards. In
considering printed circuit board proposals for 1999 and 2000
model years hereunder (and provided Seller is in compliance with
this Agreement), Buyer shall give a preference to proposals by
Seller which, within 10 days after the selection date of December
1, are equal to or below any price quotations of any third parties
and based upon equivalent quality, specifications, volumes, and
delivery schedules (as such terms are disclosed to Seller by Buyer
by December 1). If any purchase orders are awarded to Seller for
any portion of the 1999 model year and/or 2000 model year products
of Buyer, all terms and conditions of this Agreements shall govern
the transactions; provided, however, that the price per Product
shall be determined in accordance with this Section 2.03 and the
terms of Sections 1.04, 2.01 and 2.02 shall be inapplicable to any
such order(s).
<PAGE>
ARTICLE 3
Shipment and Delivery
3.01 All sales shall be F.O.B. Seller's Greeneville
premises, at which point title to and the risk of loss of Products
shall pass to Buyer, and Buyer shall bear all costs of insurance
after such point. Buyer will specify the carrier herein or in a
separate agreement. All products shall be packed in road-worthy
packing and containers in the manner specified by Buyer.
3.02 Seller shall strictly conform to the delivery schedule
as set forth in Buyer's individual purchase orders. If Seller
does not meet the delivery schedule and if such failure causes
Buyer's inability to sell Products ordered after good faith
effort, Buyer may, at its own discretion, cancel the relevant
order and/or decrease ratably its purchase obligation under
Section 1.02 hereto without liability for such cancellation.
ARTICLE 4
Government Approvals
Buyer shall, at its sole expense, obtain and maintain
necessary certifications and approvals for Buyer's product design
from Underwriters Laboratory and will comply with any and all
required and applicable laws, regulations and requirements of
United States federal, state or local government agencies, and
shall provide Seller with a copy of all submittals to and
approvals from such agencies.
ARTICLE 5
Buyer-Supplied Material
5.01 All tools and dies exclusively employed now or
hereafter added from time to time in the manufacture of the
Products for Buyer, including but not being limited to the
equipment listed on Schedule 5.01 hereto (the "Tools"), shall be
the sole and exclusive property of Buyer. Use of the Tools by
Seller shall be devoted exclusively to production of Products for
Buyer under this Agreement. Seller shall properly maintain all of
the Tools in its possession or control. Seller shall not, without
Buyer's prior written consent, substitute any tools and dies for
the Tools. The Tools shall be subject to removal at Buyer's
written request within two (2) years after the end of production,
at such time as they are no longer required for the production of
Products hereunder for any reason; and upon receipt of such
request Seller, at Buyer's cost and expense, shall prepare the
Tools for shipment and shall have them delivered to Buyer in the
same condition as originally received by Seller, reasonable wear
and tear excepted. If Buyer does not request delivery thereof,
the Tools may be disposed of by Seller, in its discretion, upon
reasonable prior written notice to Buyer, without incurring any
liability to Buyer.
<PAGE>
5.02 Any equipment, components, tooling, dies, or other
material supplied by Buyer shall remain Buyer's sole property.
Seller shall keep Buyer's property reasonably segregated, shall
bear the risk of loss or damage to Buyer's property while in
Seller's custody or control, and shall adequately insure Buyer's
property within reasonable coverage limits acceptable to Buyer,
with Buyer named as a co-insured. Seller shall furnish Buyer with
certificates of insurance confirming the existence of such
insurance and stipulating that the insurer will give Buyer at
least thirty (30) days' written notice prior to any cancellation
of or material change in such insurance.
ARTICLE 6
Materials and Spare Parts
6.01 Seller shall issue purchase orders to the current
suppliers, and shall pay the suppliers according to the purchase
terms, price and quality standards currently in existence between
Buyer and suppliers. Buyer agrees to use commercially reasonable
good faith efforts to cause vendors to sell to Seller the material
and supplies used at the Greeneville Facility on the same terms as
presently sold to Seller. In order to protect Buyer's Product
quality, Seller may not change suppliers for, or components of, or
materials and supplies used in the manufacture of Products for
Buyer (now or in the future) without the express consent of Buyer.
ARTICLE 7
Specifications
7.01 Specifications applicable to Products (the
"Specifications") shall be as set forth in the Quality Agreement,
collective and/or individual purchase orders and/or in this
Agreement, and/or in specific Product definitions which shall be
supplied by Buyer, and/or in individual requests for quotes from
Buyer, as applicable, prior to production of any Product. All
Products shall be manufactured in accordance with the
Specifications.
7.02 Following the establishment of Specifications for each
Product, if thereafter Buyer requests any variation from the
Specifications or delivery schedule, or in the event current
suppliers (from which Seller is required to purchase pursuant to
Article 6) increase the cost of materials and supplies, and any of
the foregoing impacts cost or delivery times, then the parties
shall negotiate the effect of such variation on price and time of
delivery. The variation shall be made upon the issuance of a
purchase order change from Buyer which is agreed to in writing by
Seller, which agreement shall not be unreasonably withheld.
<PAGE>
7.03 Upon obtaining Buyer's prior written approval, Seller
may from time to time (i) alter or deviate from the Specifications
for the purpose of improving Product quality or safety, or
(ii) substitute equivalent materials or components for unavailable
material or components. Seller shall make no such change in
design, Specifications, drawings, or other descriptions furnished
to Buyer, manufacturing processes, tooling or materials from those
used in manufacturing samples approved by Buyer pursuant to
Article 8 without Buyer's prior written approval. Seller shall
notify Buyer within fourteen (14) days before making any such
changes and provide Buyer with copies of engineering change
notices. Changes made pursuant to this Section 7.03 shall be made
at no cost or expense to Buyer. If any such changes are made
without Buyer's approval, Buyer may, but shall not be obligated
to, cancel all outstanding purchasing orders for the Product(s)
affected, and Seller shall indemnify Buyer against any liability
claim, loss, expense in connection therewith (including reasonable
attorneys fees and cost of voluntary or involuntary recall arising
out of such unapproved change).
7.04 In addition to its other obligations under this
Section 7, Seller shall notify Buyer in writing of all changes in
material, components, design and Specifications permitted by
Article 7 which affect the Products, and shall:
(a) provide the Buyer, as needed, parts change notices
which have been made in the Buyer's Product, with
information such as model number, affected serial
numbers or production dates of Products, and part
interchangeability; and
(b) provide the Buyer, as needed, technical bulletins
which will show circuit changes, modification, changes
in adjustment procedures, and various other engineering
changes using written description and diagrams.
7.05 Any alterations or improvements in Products (and to the
Intellectual Property) made by Seller using Intellectual Property
(as hereafter defined) shall belong exclusively to Buyer and
Seller shall execute all assignments or other instruments of
conveyance reasonably requested by Buyer to effectuate the
complete transfer of rights in those alterations or improvements.
Alterations or improvements in Products made by Seller not using
Intellectual Property shall belong to Seller, provided that Buyer
shall have a royalty free, perpetual, worldwide license to make,
have made, use, offer for sale, and sell, directly or indirectly
Products that embody any of the alterations or improvements. The
rights conferred upon Buyer herein shall extend to customers of
Buyer, and shall survive termination of this Agreement.
<PAGE>
7.06 Seller acknowledges and agrees that the Specifications
and all alterations or improvements therein that become the
property of Buyer under this Agreement are the valuable property
of Buyer and shall be maintained in confidence by the Seller.
Seller represents and warrants that the Specifications and all
alterations or improvements therein shall be used only for the
purpose of manufacturing Products under this Agreement. Seller
shall exercise the same degree of care with respect to
confidentiality of the Specifications as it exercises over its own
confidential information and, with respect thereto, shall comply
with the provisions of Section 1.7 of the Asset Purchase Agreement
as they relate to Design IP.
ARTICLE 8
Samples and Approvals
8.01 From time to time after the execution of this
Agreement, Seller shall supply Buyer with agreed upon operating
samples of each model of the Product (the "Operating Samples"),
together with Specifications therefor relating to its electrical,
mechanical and performance characteristics for Buyer's approval as
to function, performance and serviceability. After submission of
the Operating Samples and specifications, Buyer shall give Seller
notice of its approval or disapproval in accordance with the
provisions of Section 8.02 hereof. After approval of the
Operating Samples, agreed upon pre-production models of each new
model of the Product, made from available production tooling, will
be submitted to Buyer for approval as to performance,
serviceability and conformity to the Specifications, prior to
commencement of actual production of each such model. All such
samples shall be provided to Buyer at cost; provided that prior to
undertaking the production of any Operating Sample, Buyer and
Seller shall negotiate in good faith to establish a commercially
reasonable price for production of Operating Samples, with such
price to be based upon actual cost (i.e., material, labor and
overhead) to Seller to produce the Samples. Production will not
commence until after Buyer's approval of performance,
serviceability and conformity to the Specifications.
8.02 Whenever Buyer's approval shall be requested by Seller
or is required pursuant to this Agreement, Buyer shall notify
Seller in writing of its discretionary approval or rejection, and
reasons therefor, as soon as possible, except as otherwise
expressly provided for herein. At the time of making any such
request, Seller shall advise Buyer of the date by which Seller
should receive such approval or disapproval in order to avoid
delays in the shipment of Products or in the development and
production cycle. In the event that Buyer's approval or
disapproval is not received by Seller by the date designated, the
applicable shipment, development and/or production cycle date, as
the case may be, may be extended by Seller by that number of days
beyond the designated date required for Seller to obtain such
approval.
<PAGE>
ARTICLE 9
Intellectual Property
9.01 The parties adopt and incorporate herein by reference
the definition of "Intellectual Property" and the provisions
relating to granting a license therein as set forth in
Sections 1.1 and 1.7(A)-(G) of the Asset Purchase Agreement of
even date herewith ("Asset Purchase Agreement"). Seller hereby
covenants with Buyer that it shall require affiliates to protect
the Intellectual Property of Buyer to the same extent as is
required of Seller hereunder.
9.02 Buyer hereby grants to Seller, and Seller hereby
accepts, subject to the terms and conditions of this Agreement, a
nonexclusive and nontransferable license to use the trademarks,
service marks, and trade names identified in Schedule 9.02
("Buyer's Brands"), only in connection with the manufacture of
Products for Buyer under the terms of this Agreement. Seller
understands and agrees that Buyer's Brands are the valuable
properties of Buyer, and that the acquisition of secondary meaning
in any instance is associated exclusively with Buyer. All use of
Buyer's Brands by Seller, and the goodwill generated thereby,
shall inure to the benefit of Buyer.
9.03 Buyer shall have the right in its sole discretion to
amend Schedule 9.02 from time to time for the purpose of adding,
deleting, or modifying marks and names contained therein. Buyer
shall give Seller prompt notices of all such amendments. Seller
shall comply with all guidelines and instructions from Buyer
regarding proper usage of the Buyer's Brands, including
instructions or guidelines relating to notices.
9.04 Seller shall not, during the term of this Agreement or
thereafter, (i) claim any right, title, or interest in or to the
Buyer's Brands or Intellectual Property other than the limited
right to use the Buyer's Brands and Intellectual Property under
the terms of this Agreement or the Asset Purchase Agreement,
(ii) challenge any right, title, or interest of Buyer in or to the
Buyer's Brands or Intellectual Property, (iii) take any action
likely to infringe or to violate any right, title, or interest of
Buyer in or to the Buyer's Brands or Intellectual Property, or
(iv) use the Buyer's Brands or Intellectual Property in any manner
that violates the terms of this Agreement or the Asset Purchase
Agreement.
Seller shall notify Buyer promptly of all actual or suspected
infringements of the Buyer's Brands or Intellectual Property.
Buyer shall have the right to take any action it deems
appropriate, including the initiation of legal proceedings, to
enjoin such infringements or otherwise to protect its rights in
and to the Buyer's Brands or Design Intellectual Property. Seller
shall provide reasonable assistance to Buyer (at Buyer's expense)
in protecting such rights against infringements as requested by
Buyer.
<PAGE>
9.05 Seller acknowledges that the breach by Seller of any
obligation relating to Buyer's Brands or Intellectual Property
would cause immediate and irreparable harm to Buyer, and Buyer
would have no adequate remedy at law. Notwithstanding the
provisions of Section 13, in the event of a breach or threatened
breach of any obligation of Seller relating to Buyer's Brands or
Intellectual Property, Buyer shall be entitled (upon reasonable
proof thereof by affidavit executed by an officer or managing
agent of Buyer, but without notice or delivery of a bond) to such
temporary restraining and seizure orders as may be appropriate to
prevent the breach or further breach of the obligation and to
protect the rights of Buyer in and to the Buyer's Brands or
Intellectual Property. Furthermore, in the event of a breach or
threatened breach of any obligation relating to Intellectual
Property, Buyer shall also be entitled to such preliminary and
permanent injunctions as may be appropriate to prevent the breach
or further breach of the obligation or to protect the rights of
Buyer in and to the Intellectual Property. Nothing in this
paragraph shall be construed to prevent Buyer from pursuing any
other remedy for the breach or threatened breach of any such
obligation.
9.06 Without the prior express written consent of the other
party hereto, neither party shall disclose to any third person
(except as necessary to procure articles or services for the
manufacture or production of Products or as necessary to service
Products and under the same care as exercised in the protection of
such party's confidential information) any information which it
has acquired under or as a result of this Agreement, or
negotiations leading to it, concerning the other party's plans,
drawings, trade secrets, specifications, business objectives, know
how, financial and/or sales reports and forecasts, intellectual
property, marketing strategies, service records, product
development plans, price lists, customers or customer lists,
personnel, products and product specifications, product manuals,
work processes, work or services, unless such information (a) was
known to or becomes generally known without fault of the party
making disclosure, (b) is readily obtainable from other sources
without breach of any obligation, or (c) is requested by any
governmental body or court order or which may be reasonably
required in the opinion of Seller's counsel under federal
securities laws. All such confidential information shall be
returned at the termination of this Agreement.
<PAGE>
ARTICLE 10
Warranty
10.01 Seller hereby indemnifies and upon request of Buyer,
at Seller's cost and expense, will defend Buyer from and against
any cause of action, liability, or claims and demands therefor, or
damage arising out of death or injury to any person or damage to
property, by whomsoever suffered, resulting from or arising out of
any defects in the workmanship of Products, or the failure of
Seller or the workmanship of Products to comply with applicable
United States federal, state or local laws, ordinances,
regulations or standards; and against the expenses of any Product
recalls necessary or advisable due to defects caused by Seller.
Buyer hereby indemnifies Seller, and will at Seller's request
defend Seller from damage arising out of death or injury to any
person or damage to property, by whomsoever suffered, resulting
from or arising out of any defects in the design of and materials
specified or components supplied by Buyer for Products, or the
failure of Buyer or the design of and materials specified for
Products to comply with applicable United States federal, state or
local laws, ordinances, regulations or standards; and against the
expenses of any Product recalls necessary or advisable due to
defects caused by Buyer. The parties shall comply with Section
11.04 hereof and any such indemnity shall be null and void if any
such claim, liability or damage is due to the negligence of the
indemnified party.
10.02 Buyer represents and warrants that the design of
Products is not in violation of any applicable United States
Federal, State or local law, ordinance, regulation or standard and
that none of such regulations or standards prohibits the
importation, shipment, offering for sale, sale or use for its
intended purpose of Products on account of their design; and that
Products will be free from defects in design or component parts
which will create a "substantial product hazard" within the
meaning of the United States Consumer Product Safety Act.
Further, Seller represents and warrants that Products will be free
from defects in workmanship that create a "substantial product
hazard" and that all Products will be manufactured, packaged,
labeled, shipped, and if required, certified or registered in
accordance with all such applicable laws, ordinances, regulations
and standards, including the standards of Underwriters
Laboratories, if applicable. Each party agrees to notify the
other of and cooperate in the response to any "substantial product
hazard."
10.03 Simultaneously herewith Buyer and Seller shall enter
into a Quality Agreement which is incorporated herein by
reference, and is attached hereto as Schedule 10.03. All Products
manufactured hereunder shall conform to the requirements of the
Quality Agreement.
<PAGE>
ARTICLE 11
Indemnity and Insurance
11.01 Seller shall procure and maintain product liability
insurance relating to the Products in an amount not less than a
combined single limit of Ten Million U.S. Dollars ($10,000,000)
for bodily injury and death liability and property damage
liability, written by a reputable insurance company satisfactory
to Buyer, naming Buyer as an additional insured. Seller shall
furnish Buyer with certificates of insurance confirming the
existence of such insurance and stipulating that the insurer will
give Buyer at least thirty (30) days' written notice prior to any
cancellation of or material change in such insurance. The
procurement and maintenance of product liability insurance by
Seller shall not operate as any limitation on Seller's liability,
to Buyer or to any third party, for any claim of a third party for
bodily injury, death or property damage caused by Products.
Seller shall be liable for all such claims, as provided in Section
10.01.
11.02 Buyer shall indemnify and hold Seller harmless from
and against any judgments, decrees, costs and expenses (including
any attorney's fees and expenses) resulting from any suit, action
or claim for infringements brought against Seller by any third
party as the result of Seller's use of Intellectual Property in
accordance with this Agreement.
11.03 Buyer shall further indemnify and hold harmless Seller
from and against any and all liabilities, costs, expenses, losses
and damages, including counsel fees and expenses and costs of
settlement, arising out of or relating to any claim made by any
third party which is based upon or arises from or as a result of
any items that are incorporated in any Products at Buyer's
direction.
11.04 Where either party has agreed to indemnify the other
party pursuant to Article 10 or 11 , the indemnifying party shall
assume the defense of any action or suit relating thereto, by
reputable counsel retained at the indemnifying party's expense,
and shall pay any damages assessed against or otherwise payable to
the indemnified party as a result of the disposition of any such
action or suit. The indemnified party shall promptly notify the
indemnifying party of the commencement of any such action or suit,
or threats thereof, and the indemnifying party shall be afforded
the opportunity to determine the manner in which such action or
suit shall be handled or otherwise disposed of. The indemnified
party shall give the indemnifying party the cooperation reasonably
required, at the indemnifying party's expense, for out-of-pocket
expenses incurred by the other party and paid to third parties
(except for salaries of the other party's employees), in
connection with any such action or suit. Notwithstanding the
foregoing, the indemnified party may participate in any such
action or suit at its own expense and by its own counsels.
<PAGE>
ARTICLE 12
Term and Termination
12.01 This Agreement shall become effective on the date of
its execution by the parties hereto and shall remain effective for
two (2) years from such date and shall extend thereafter to
include any Product sold by Seller to Buyer in 1999 and 2000
production years, unless otherwise canceled or terminated as
provided herein.
12.02 This Agreement, and any purchase order hereunder, may
be terminated by either party upon written notice to the other:
(i) in the event that performance of this Agreement or any
purchase order hereunder shall have been rendered impossible or
impracticable for a period of ten (10) consecutive days after the
scheduled delivery date (which is 20 days from the purchase order
date) by reason of the happening of one or more events referred to
in Section 15.03 hereof, or (ii) at any time upon or after the
filing by the other party of a petition in bankruptcy or
insolvency, or upon or after any adjudication that the other party
is insolvent, or upon or after the filing by the other party of
any petition or answer seeking reorganization, readjustment or
arrangement of the business of the other party under any law
relating to bankruptcy or insolvency, or upon or after the
appointment of a receiver for all or substantially all the
property of the other party, or upon or after the making by the
other party of any assignment or attempted assignment for the
benefit of creditors, or upon or after the institution of any
proceedings for the liquidation or winding up of the other party's
business or for the termination of its corporate charter.
12.03 This Agreement may also be terminated upon the
occurrence of an Event of Default. Each of the following shall
constitute a separate "Event of Default" hereunder:
(a) Seller's failure to make any delivery due
hereunder. Seller recognizes that the continual, timely
and conforming delivery to Buyer of Products is the
essence of this Agreement, and that failure to perform
delivery obligations by Seller may damage Buyer and
Buyer's business. Notwithstanding any other provision
contained in this Agreement (including Section 15.03),
in the event Seller is unable to cure any delivery
failure hereunder within ten (10) days of the scheduled
delivery due date, Buyer shall thereafter have the right
(upon twenty-four (24) hours notice to Seller) to remove
Buyer's Tools (as described in Section 5.01) from the
Seller's premises in order to utilize such Tools in
another facility of Buyer's selection. Seller
recognizes and acknowledges that granting this right to
Tool removal is an appropriate and necessary remedy and
has the effect of mitigating damage claims by Buyer
against Seller.
<PAGE>
(b) A default or violation by either Buyer and/or
Seller in performing any of the terms or covenants of
this Agreement (other than delivery requirements as
governed by Section 12.03(a)) which continues for a
period of twenty (20) days after notice thereof,
provided, however, that said twenty (20) day period will
be extended an additional twenty (20) days so long as
Seller is diligently attempting to cure such violation
in a reasonable commercial manner.
(c) Seller's transfer of, or agreement to transfer,
substantially all of its business or assets to an entity
which Buyer, in its reasonable discretion, deems to be a
competitor of Buyer; Buyer shall be given thirty (30)
days advance notice of any proposed transfer of
ownership of more than 10% of the assets of Seller.
(d) The calling of a meeting of creditors, an
appointment of a committee of creditors or liquidating
agents, or an offering of a composition or extension to
creditors by, for, or of Seller.
(e) The occurrence of any transaction or series of
transactions (whether or not such transactions are
related), a result of which the voting control over
Seller is held by a person or entity which Buyer in its
reasonable discretion, deems to be a competitor of
Buyer.
(f) Seller's challenge to Buyer's title or rights in
and to the Buyer's Brands or Intellectual Property, or
the validity of the Buyer's Brand or other proprietary
rights of Buyer relating to Products.
Upon the occurrence of an Event of Default and expiration of
an applicable cure period, if any, the non-defaulting party may,
in its sole discretion, elect to terminate the Agreement by
written notice to the other party.
12.04 Upon termination of this Agreement, Seller shall
immediately cease and desist using the Buyer's Brands, Design IP,
and Tools and shall comply with Buyer's instructions relating to
return or destruction of the Buyer's Brands, Design IP, Tools, or
any of them.
12.05 The termination of this Agreement shall not affect or
impair the rights and obligations of either party under any
Product purchase order placed prior to such termination, nor
relieve any party of any obligation or liability accrued hereunder
or under any such purchase order prior to such termination, nor
affect or impair the rights of either party arising under this
Agreement prior to such termination, except as expressly provided
in this Agreement.
<PAGE>
12.06 Any termination of this Agreement due a party's Event
of Default shall be without prejudice to any remedy of the party
for the recovery of any moneys then due to it under this Agreement
or in respect to any antecedent breach of this Agreement, and
without prejudice to any other right of a party, including,
without limitation, damages for breach to the extent they may be
recoverable.
12.07 The parties' performance and obligations under this
Agreement are contingent upon the execution and closing by the
parties hereto of that certain Asset Purchase Agreement between
the parties of even date and related thereto and referenced
therein and constituting integral parts of this transaction,
provided, however, that the failure to execute and close such
Asset Purchase Agreement shall not terminate the duties and
obligations contained in Section 9 hereto or subsections thereof.
12.08 SELLER HEREBY EXPRESSLY AGREES TO THE FOLLOWING
LIMITATION OF DAMAGE CLAIMS AGAINST BUYER:
Except for claims strictly for payment for Product delivered
in conformity herewith pursuant to purchase orders from Buyer, the
cumulative liability of Buyer to Seller for all other claims
relating to this Agreement, including any cause of action sounding
in contract, tort, or strict liability, shall not exceed the total
amount of the result determined by multiplying the (i)
deficiencies in television PCB sets below the 2,000,000 minimum
requirement (not otherwise subject to force majeure hereunder) in
1997 and/or 1998 by (ii) $1.50 (one dollar and fifty cents). This
limitation of liability is intended to apply without regard to
whether other provisions of this Agreement have been breached or
have proven ineffective. Seller acknowledges that the damages
limitation herein specified is reasonable in light of the
anticipated harm it may suffer as a result of a breach by Buyer.
In no event shall Buyer be liable for any loss of profits;
any incidental, special, exemplary, or consequential damages; or
any claims or demands brought against Buyer, even if Buyer has
been advised of the possibility of such claims or demands. This
limitation upon damages and claims is intended to apply without
regard to whether other provisions of this Agreement have been
breached or have proven ineffective.
<PAGE>
ARTICLE 13
Mediation; Binding Arbitration
13.01 In the event of any claim or controversy under or
otherwise relating to this Agreement, except as set forth in
Section 1.03 and/or Section 9.05, the parties shall attempt to
resolve the claim or controversy by good faith participation in
nonbinding mediation in Knox County, Tennessee, prior to the
commencement of litigation. The mediator and the rules of
mediation shall be agreed upon by the parties within ten (10) days
following notice of an intent to mediate. In the absence of the
parties' agreement, the mediator and the rules for the mediation
shall be determined by the Federal Mediation and Conciliation
Service or, if that Service is unable or unwilling to serve, the
American Arbitration Association. The mediation shall continue
until the claim or controversy is resolved or the mediator makes a
finding that there is no possibility of settlement through
mediation.
13.02 Binding Arbitration on Price Disputes. In order to
achieve an immediate resolution of price disputes, if the parties
are unable to agree on a price adjustment, under Section 1.03
hereof, at any time during the 1997 and/or the 1998 model years of
this agreement, then either party may initiate binding arbitration
in regard to the price dispute, according to the following
procedure: either Buyer or Seller may initiate the binding
arbitration by giving notice of the demand for such resolution to
the other party. Such notice shall be in writing; shall be
delivered in accordance with the notice provisions of this
agreement; shall state in writing the specific terms of the such
parties demand for price adjustment (and the basis therefor);
shall name an arbitrator who shall be the designated arbitrator
for such party. Not later than two business days after receipt of
such notice, the recipient shall respond to said notice: in
writing; in accordance with the Notice delivery terms hereof;
stating the basis for its objection to the proposed adjustment;
and naming an arbitrator who shall be the designated arbitrator
for such party. Thereafter within two business days of the
designation of the second arbitrator by the responsive notice set
forth above, the two designated arbitrators shall select a third
arbitrator. The three arbitrators shall then thereafter
immediately meet to consider the positions of the parties and the
terms of this Agreement and shall render a binding decision of
such price dispute seven days thereafter. This binding
arbitration provision shall apply only to the price issues under
Section 1.03 and not for any other dispute regarding this
Agreement. Neither party hereunder may suspend its performance of
the other terms of this Agreement during the pendency of such
arbitration. To the extent not contradicted by the terms of this
section (in which case this section shall govern) the rules of the
American Arbitration Association shall apply to arbitration
pursuant to this section. A decision of the arbitrators
hereunder, as to any price dispute under Section 1.03, shall be a
final and conclusive resolution of the considered issue, not
<PAGE>
subject to review by, or appeal to, any court otherwise having
jurisdiction over the matter (provided, however, that a court may
be asked to enforce the terms of any arbitration decision pursuant
to this section). The agreed purpose of this provision is to
resolve in two weeks time any price dispute under Section 1.03.
ARTICLE 14
Contract Administrators
14.01 Buyer and Seller each shall designate an employee who
shall have the primary responsibility for implementing these
agreements and who shall be responsible for overseeing the
administration of this Agreement and with the authority to make
decisions required by this Agreement ("Contract Administrators").
The designation required by this Section 14.01 shall be made in
writing at or prior to Closing. The Contract Administrators, and
the parties generally, shall cooperate and negotiate with one
another in good faith to resolve any question that may arise as to
the interpretation of any provision of the Agreement and to
resolve any dispute arising under this Agreement, to the extent
possible. Each party may change the employee designated as
Contract Administrator by written notice to the other party.
ARTICLE 15
Additional Terms
15.01 The relationship between Seller and Buyer is solely
that of vendor and vendee. Neither party, nor its agents, and
employees shall, under any circumstances, be deemed to be agents,
partners, joint venturers, legal representatives or servants of
the other party for any purpose whatsoever, and neither party
shall have any right or authority to enter into any contract,
obligation, responsibility or commitment in the name of or on
behalf of the other or to bind or purport to bind the other in any
manner whatsoever.
15.02 Accordingly, this Agreement shall be assignable by
Seller, in whole or in part, (whether by operation of law or
otherwise) without the prior written consent of the Buyer,
provided Seller is not then in default of any provision of this
Agreement and that the manufacturing facilities for any Product
hereunder (other than the use of present processes at the
Greeneville facility) are certified for the Buyer's Product
Qualification Approval PQA process, attached as Schedule 15.02.
Buyer may assign its rights hereunder to a successor, subsidiary
or affiliated corporation or business entity wholly owned by Buyer
without releasing the Buyer from liability hereunder. Any
assignment contrary to the terms hereof shall be null and void and
of no force or effect and shall be deemed to constitute an Event
of Default hereunder.
<PAGE>
15.03 Neither Buyer nor Seller shall be liable for failure
to perform or be deemed to be in default of this Agreement and/or
any purchase orders under this Agreement because of delays or
failures in the performance of its obligations (other than the
payment of money) results from strikes, accidents, fires, shutdown
of manufacturing plants supplying the affected parties, court
imposed or other allocation of vendor supplies, governmental or
court orders, injunctions, riots, acts of God or war, embargoes,
earthquakes, floods, tornadoes or other types of unusually severe
weather, quarantine restrictions, inability to secure
transportation facilities or contingencies arising out of or due
to national defense activities or emergency conditions, or any
other cause, beyond the reasonable control of the party claiming
benefit hereof. The party claiming the benefit of the
aforementioned force majeure condition shall continue to make a
commercially reasonable good faith effort to cure the condition of
force majeure, promptly resume performance when the cause for non-
performance is removed, and shall send to the other notice in
writing of the cause within three (3) working days after the
occurrence of such cause is known. If any of the condition(s) of
force majeure set forth herein shall continue to exist
uninterrupted for a period of ten (10) consecutive days from the
date of notice, then the party not asserting force majeure
hereunder may elect to suspend deliveries, excuse deliveries
and/or cancel (in whole or in part) affected deliveries hereunder.
If a herein described force majeure condition prohibits Seller
from filling and delivering to Buyer the majority of Products for
ten (10) consecutive days, then (in addition to the rights
otherwise set forth herein) Buyer shall have the right to remove
its tooling and dies from Seller's premises and to transport such
property to other locations in order to provide for the
manufacture of its PCB needs.
15.04 The failure or delay of Buyer or Seller in any one or
more instances to exercise any right or privilege in this
Agreement or the waiver of any breach by Buyer or Seller of any
terms and conditions of this Agreement shall not be construed as
thereafter waiving any such terms and conditions, and the same
shall continue and remain in full force and effect as if no waiver
had occurred. Any such failure, delay or waiver shall not preclude
any other or further exercise thereof or the exercise of any
right, power or remedy provided herein. No express waiver or
assent by either party to any breach or default shall constitute a
waiver of or assent to any succeeding breach or default.
15.05 If any provisions of this Agreement as applied to
either party or to any circumstance shall be adjudged by a court
of competent jurisdiction to be void or unenforceable for any
reason, the same shall in no way affect (to the maximum extent
permitted by applicable law) any other provision of this
Agreement, the application of any such provision under
circumstances different from those adjudicated by the court, or
the validity or enforceability of the Agreement as a whole. Any
clauses of this Agreement intended to survive this Agreement shall
survive the termination date of this Agreement.
<PAGE>
15.06 This Agreement, the Schedules and Purchase Orders
issued hereunder, and all documents for the purchase and sale of
Products shall be governed by and construed and enforced in
accordance with the laws of the State of Tennessee, without regard
to conflicts of laws principles. The Buyer and Seller acknowledge
that the only forum and venue for resolution of any litigation
and/or other judicial proceeding in connection with any matter
pertaining to this Agreement shall be in the United States
District Court for the Eastern District of Tennessee located at
Knoxville, Tennessee.
15.07 The articles, sections, paragraphs, captions and
headings set forth in each of the sections of this Agreement have
been inserted only for the convenience of the parties and shall
not be considered in the interpretation or enforcement of the
provisions of the Agreement.
15.08 All Schedules and amendments to this Agreement are
incorporated as if fully set forth therein.
15.09 All notices required or permitted hereunder, requests
and other communications relating to this Agreement shall be made
in writing and shall be deemed duly given when personally
delivered by hand or when sent by registered or certified mail,
return receipt requested, postage prepaid, by Federal Express or
such other similar overnight courier service, by facsimile
addressed to the intended recipient thereof at the address and
facsimile number set forth below (or to such other address as
either party may hereafter provide to the other party), or by
cable confirmed by letter as aforesaid, as follows:
Notice to Purchasing Department
Buyer: Philips Consumer Electronics Company
P.O. Box 14810
Knoxville, Tennessee 37914-1810
Facsimile: (423) 521-4897
Copy to: Law Department
North American Philips Corporation
P.O. Box 14810
Knoxville, Tennessee 37914-1810
Facsimile: (423) 521-4330
Additional Law Department
Copy to: Philips Electronics North America Corporation
64 Perimeter Center East
Atlanta, Georgia 30346-6401
Facsimile: (770) 821-2266<PAGE>
And to: Hunton & Williams
Attention: Joseph P. Congleton, Esq.
2000 Riverview Tower, 900 S. Gay Street
Knoxville, Tennessee 37902
Facsimile (423) 549-7704
<PAGE>
Notice to Circuit Systems, Inc.
Seller: Attention: Dilip S. Vyas
2350 East Lunt Avenue
Elk Grove Village, Illinois 60007
Fax: (847) 437-5910
Copy to: Rieck and Crotty, P.C.
Attention: Thomas W. Rieck, Esq.
55 West Monroe Street, Suite 3390
Chicago, Illinois 60603
Facsimile (312) 726-0647
or to such other address as either party may hereafter designate
in writing by like notice.
15.10 Time is of the essence as to each and every provision
of this Agreement.
15.11 The specified remedies herein provided in case of
default in the performance of any of the obligations of either
party under this Agreement or any Production Release under this
Agreement are in addition to, and the exercise of any right or
remedy herein provided shall be without prejudice to, any other
right or remedy provided under this Agreement or at law or in
equity.
15.12 This Agreement constitutes the entire contract and
agreement between the parties, and it supersedes all prior and
contemporaneous oral or written statements, representations or
agreements. No course of prior dealings between the parties and
no trade usage shall be relevant or admissible to supplement,
explain or alter any of the terms of this Agreement. Acceptance or
waiver of a course of performance under this Agreement shall not
be relevant or admissible to determine the meaning of this
Agreement. No understandings or agreements have been made or
relied upon in making this Agreement except for those specifically
set forth herein. This Agreement may not be modified or amended
unless such modification or amendment is set forth in a writing
duly executed by authorized representatives of Buyer and Seller.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have executed this Agreement as of the date
first above written.
[Remainder of page intentionally left blank]
<PAGE>
("BUYER")
PHILIPS ELECTRONICS NORTH AMERICA
CORPORATION, a Delaware corporation
BY: /s/ Thomas M. Hafner
Thomas M. Hafner
Vice President and General Counsel,
Philips Consumer Electronics Company,
a division of Philips Electronics
North America Corporation
[Signature Page to Printed Circuit Board Purchase Agreement]
("SELLER")
CIRCUIT SYSTEMS OF TENNESSEE, L.P.,
a Tennessee limited partnership
CIRCUIT SYSTEMS OF TENNESSEE, INC.
a Tennessee corporation, general partner
BY: /s/ Dilip S. Vyas
Dilip S. Vyas
Vice President
[Signature Page to Printed Circuit Board Purchase Agreement]
Schedule 2.01(c)
For Automatic Process
Ink allowance of $0.1248 per square foot of board
Scrap allowance of 2%, of board material (CEM-1) plus ink
allowance, provided that any paper phenolic (or other newly
introduced board material) allowances shall be reviewed by the
parties, subsequent to the Closing and based on experience, to
reflect actual waste experience.
For Carbon Process
Ink allowance of $0.4000 per square foot of board
Scrap allowance of 13%, of board material plus ink allowance
<PAGE>
<PAGE>
CONTENTS
Agreement
ARTICLE I Union Recognition
ARTICLE II Management Responsibility
ARTICLE III No Discrimination
ARTICLE IIIA Check Off
ARTICLE IV Hours and Overtime
ARTICLE V Seniority
ARTICLE VI Wages
ARTICLE VII Holidays
ARTICLE VIII Grievance Procedure
ARTICLE IX Arbitration
ARTICLE X Vacations
ARTICLE XI Leaves of Absence
ARTICLE XII General
ARTICLE XIII Insurance
ARTICLE XIV Pension Plan
ARTICLE XV Duration & Termination of Agreement
Allocation of Stewards
Rework Operations
Pilot run Operations
EXHIBIT A Classification
EXHIBIT B-1 Wage Rate Schedule 1997-1998
EXHIBIT B-2 Wage Rate Schedule 1998-1999
EXHIBIT B-3 Wage Rate Schedule 1999-2000
EXHIBIT C Union Dues Authorization
EXHIBIT D Medical Downgrade Authorization
EXHIBIT E Reasonable Suspicion Testing
EXHIBIT F Weekly Insurance Premiums
APPENDIX I Weekend Overtime
APPENDIX II Letters of Understanding
IUE - Cope Check-off form
AGREEMENT
This Agreement is between Circuit Systems of Tennessee, a
Tennessee Limited Partnership, (hereinafter call the "Company"),
and the International Union of Electronic, Electrical, Salaried,
Machine and Furniture Workers, AFL-CIO, and its Local 796
(hereinafter called the "Union").
<PAGE>
WITNESSETH:
WHEREAS a majority of the employees of the Company in the
collective bargaining unit to be covered by the terms of this
Agreement have designated the union as the collective bargaining
agent; the Company herewith recognizes the Union as the sole and
exclusive collective bargaining representative for all employees
in the unit hereafter specified in all matters pertaining to
wages, hours and working conditions; and,
WHEREAS the parties hereto desire to establish a standard of
conditions and procedures under which employees shall work for
the Company during the terms of this Agreement and desire to
regulate the employment relations between the parties for the
purpose of securing harmonious cooperation and the settling of
all disputes by peaceful means that may arise in the employee-
employer relationship.
NOW THEREFORE, in consideration of the mutual promises and
agreements herein contained the parties agree as follows:
ARTICLE I
UNION RECOGNITION
Recognized to the extent required by federal law but limited
exclusively to such legal requirement, the Company recognizes
International Union of Electronic, Electrical, Salaried, Machine
and Furniture Workers, AFL-CIO, and its Local 796, and its
successors (Union) as the sole and exclusive bargaining agent for
the production and maintenance employees of Circuit Systems of
Tennessee, a Tennessee Limited Partnership, Greeneville,
Tennessee plant ("Company").
ARTICLE II
MANAGEMENT RESPONSIBILITY
The right to hire, layoff and discharge employees for just and
lawful cause; and the management, disposition, and number of
working forces, the right to contract out work, the right to make
reasonable assignments of jobs; to determine the products to be
manufactured, processed or handled by the employee; to establish
production schedules, methods, processes and means and ends; to
determine its general business practice and policy; to open new
units, assembly lines, departments and operations and to
terminate or close them; to make promotions to supervisory or
executive positions; to increase or decrease the working force
are among the sole prerogatives of the Company; provided,
however, that this section will not be used to discriminate
against the Union and membership thereof and also this section
will not in any way abrogate or interfere with the employee's
rights under the terms of this Agreement, including the use of
the grievance and arbitration procedure.
<PAGE>
ARTICLE III
NO DISCRIMINATION
1. The provisions of this Agreement shall be applied to all
employees without discrimination or preferential treatment
for any reason prohibited by law, including age, sex,
martial status, race, color, creed, disability, or national
origin.
2. All reference to employees in this Agreement designate both
sexes, and wherever the male gender is used it shall be
construed to include male and female employees.
3. The Company agrees not to interfere with the rights of its
employees to become members of the Union, and there shall be
no discrimination, interference, restraint, or coercion by
the Company or any of its agents against any employee
because of Union membership or because of his acting as an
officer or in any other bona fide activity on behalf of the
Union.
4. The Union recognizes its responsibility as a result of NLRB
certification to represent all employees in the bargaining
unit and agrees there will be no discrimination,
interference, restraint, or coercion by the Union or any of
its agents against any employee because of his refusal to
join or participate in the Union or Union activities.
5. The parties agree that they will not discriminate against
those who are Vietnam era or disabled veterans.
ARTICLE IIIA
CHECK OFF
1. The Company during the life of this Agreement agrees to make
deductions of dues and the Union initiation fee of each
employee who signs an "Authorization for Dues Check Off"
form as shown in Exhibit "C" of the appendix of this
Agreement.
2. Deductions shall be paid within seven (7) days to the Local
Union Financial Secretary, together with a listing showing
the names of the employees from whose pay deductions were
made and the amount of each.
3. The deduction shall be made weekly. The money deducted,
however, shall be remitted to the Union monthly or on such
other schedule as is agreed by the Union and the Company.
4. Any employee who has authorized dues deductions in
accordance with the foregoing shall be irrevocably committed
to such deductions for a period ending as of each
anniversary date of this Agreement, and shall be
automatically renewed to each succeeding anniversary date
unless written notice of revocation by certified mail is
given to the Company and the Union within fifteen (15) days
preceding such anniversary date.
<PAGE>
ARTICLE IV
HOURS AND OVERTIME
1. The basic work week shall consist of five (5) consecutive
eight (8) hour work days. The basic work week shall begin
for the first shift at 7:00 A.M. Monday morning and end at
3:00 P.M. on Friday afternoon. The basic work week for the
second shift shall begin at 3:00 P.M. Monday and end at
11:00 P.M. on Friday; however, in some areas a special
second shift may begin at 12:00 noon Monday and end at 8:30
P.M. on Friday. The basic work week for the third shift
will begin at 11:00 P.M. on Sunday and end at 7:00 A.M. on
Friday.
The basic work hours of janitors, and of other employees
whose duties require different hours (such as persons who
are obliged to make work or equipment ready prior to
processing) may be different. The above work schedule will
be maintained except when mutually agreed between the
Company and the Union to make any necessary changes.
Particular problems in specific locations may require
setting up operation schedules different from those listed
above. In such instances the Company will discuss such new
schedules with the Union before they are set up.
No schedule will be set up of a discriminatory or
unreasonable nature. If a schedule is created that begins
or ends more than one and one-half hours before or after the
normal workweek, the Union and Company will meet and discuss
the appropriate shift premium for such schedule. When such
changes in schedules are made the new schedules will be
staffed with employees with the greatest seniority who
volunteer to work such schedules before assignment of the
least senior employees is made.
In all events of schedule changes the Union and employees
will be given one (1) week advance notice of such change.
In any event of schedule change where no mutual agreement is
arrived at, the Company may establish new schedules in which
event the Union has recourse to the grievance and
arbitration procedure if they feel the Company action is
discriminatory or unreasonable. When regularly scheduled or
emergency overtime is required the Union will offer full
cooperation in securing the services of all employees
required for the overtime work. However, should any
employee agree to work overtime and then fail to report for
such scheduled overtime work without good cause he will
automatically be subject to a one (1) day disciplinary
layoff. Where overtime work is required on first shift
operations it is agreed that the starting time of the second
shift shall begin no more than two (2) hours after the
regular quitting time of the first shift. Employees will be
given one (1) day advance notice of such schedule.
<PAGE>
2. Employees will be paid for overtime work as follows:
(a) Time and one-half the employee's regular rate for all
work performed in excess of eight (8) hours in any one
(1) day or in excess of forty (40) hours in any one (1)
week. Daily and weekly overtime hours for the purpose
of this clause shall not be pyramided.
(b) Twice the employee's regular rate for all work
performed on the seventh (7th) consecutive scheduled
work day in any employee's assigned work week, and on
Sunday as such, except in case of continuous operation
and for all work in excess of twelve (12) hours in any
one (1) day.
(c) One and one-half times the employee's regular rate
except in case of continuous operation for all work
performed on Saturday. One and one-half times the
employee's rate for all work performed on the sixth
(6th) consecutive scheduled work day in an employee's
assigned work week in case of continuous operation.
(d) Double time will also be paid to an employee for work
performed in excess of eight (8) hours on his/her sixth
working day or Saturday provided the employee worked
all of his scheduled work hours during that same week
or was granted approved paid leave for all absence
within that same week.
(e) These provisions may be changed in the event a work
schedule other than the eight (8) hour per day, five
(5) day per week schedule is used.
3. Overtime shall be offered in the following manner.
(a) Overtime shall first be solicited pursuant to current
practice on a voluntary basis. Employees accepting
overtime assignment shall first be obligated to accept
work in their currently assigned classification and
such overtime will be divided as equally as practical
among employees actively in the affected
classification.
<PAGE>
(b) For the purpose of computing the division of overtime
within a classification, under subsection 3(a) above,
an employee shall be charged with having worked all
overtime hours offered him even though the employee
declined to work such overtime. He shall also be
charged with rework hours. All hours worked over and
above the initial solicitation shall not be charged to
the employee who declined the initial solicitation of
overtime.
(1) All Relief Operator will share overtime with the
job classification of the lowest labor grade they
are assigned to relieve, provided they hold said
classification. Should there be two or more job
classifications in this lower labor grade, they
will share only in the classification to which
they would be entitled in event of a reduction in
force.
(2) Employees eligible for overtime assignment shall
first be obligated to accept work on their
currently assigned shift if overtime is available.
If overtime is not available on their currently
assigned shift, eligible employees will be
solicited for overtime on other shifts in
accordance with their eligibility to work the
available overtime.
(c) The foregoing does not affect the administration of
current disciplinary procedures.
(d) Employees shall not be required to work more than four
(4) hours end-of-shift overtime in order to be
scheduled to perform overtime work. This subsection
shall not however be considered a waiver of Management
Rights to schedule hours and the number and
distribution of work force. The company shall not be
required to schedule any employee in excess of sixteen
(16) hours in any twenty-four (24) hour period.
(e) After exhausting all efforts to schedule overtime on a
voluntary basis and the need for overtime is the result
of a potential loss of a customer, the Company after
consultation with the Union, may require employees to
work the overtime by low hours. An employee who
volunteers and works overtime in a week will go to the
bottom of the list for required overtime that week.
The employee required to work will be informed of the
job to be performed whenever possible.
<PAGE>
4. Shift premiums of fifteen (15c) cents per hour will be paid
to employees whose regular shifts are scheduled to begin
after 12:00 noon and before 5:30 a.m. Payment of night
shift premium will be made to regular night shift employees
called in for work prior to 12:00 noon. It is further
agreed, however, should a day shift employee be placed on a
night shift job for a temporary assignment, he shall be paid
the night shift premium.
5. No overtime pay will be given an employee who by virtue of
change of shifts works more than eight (8) hours in a
twenty-four (24) hour period. Employees will be given not
less than a twenty-four (24) hour notice of change of their
regular shift. If an employee does not receive such notice,
he shall be paid time and one-half for all hours in excess
of eight (8) which he works to affect the change (old shift
and new shift combined).
6. Employees who report to work at the regular starting time on
their shift when they have not been notified not to report
and for whom work is unavailable shall be provided with four
(4) hours work or four (4) hours pay in lieu thereof at
their regular rate of pay. Should such a condition be
caused by act of God or other conditions beyond the control
of the Company, there will be no liability for providing
work or pay as stated above. If an employee fails to
receive notification that he will not be working on the
following day because of his absence from work on that day
he will not benefit from the above provision.
7. The Company agrees that whenever possible, it will give four
(4) hours advance notice for daily overtime work and one (1)
day advance notice for weekend overtime work.
8. When because of emergency situations it is necessary to call
employees back to work, outside their regular schedule,
after one (1) hour has elapsed following the completion of
their regular work shift, such employees will be guaranteed
a minimum of two (2) hours of work at double time or pay in
lieu thereof. It is also agreed all hours worked on such a
call back will be paid at double time. An employee called
in as a result of another employee's failure to honor an
overtime commitment shall receive the regular premium pay
for such hours worked.
9. When employees are scheduled to work two (2) hours or more
of overtime on a regular work day, they will be given a ten
(10) minute rest period with pay at the end of eight (8)
hours. A ten (10) minute rest period will be given for each
succeeding two (2) hours of overtime work.
10. If employees are called to work before the starting time of
their regular work shift, they will not be sent home early
to avoid payment of overtime. If an employee who has been
called in before the regular starting time and sent home
before quitting time of regular shift for any reason shall
receive overtime pay for the early hours.
<PAGE>
11. Splitting of shifts to avoid payment of overtime shall be
prohibited.
12. Senior employees will be given preference of shifts in
accordance with the following procedure:
(1) If there is an opening in an upgraded classification to
be filled:
(a) The job will normally be filled with the employee
holding the greatest seniority in the
classification to be filled presently in a lower
classification, (provided that the lower graded
employee currently holds the upgraded
classification); however, if there are employees
in the same classification on another shift, the
job will be first offered to them if they hold
greater job seniority than the next downgraded
employee in line for the job. An employee, in
order to be considered for shift change just
mentioned, must have his name on file in the Human
Resources Office indicating his classification and
the shift to which he desires to be moved. His
filing, in order to receive consideration must be
made fifteen (15) calendar days prior to the
occurrence of the opening. Any employee who has
his name on file must accept the shift change if
offered. In a reduction in force an employee who
has his name on file in the Human Resources Office
fifteen (15) calendar days in advance of a move
will be allowed to bump to where his seniority
would entitle him.
(2) On the fifteenth day of January each year and on the
fifteenth day of July each year, an employee may
exercise the option of a shift preference, by
displacing a less senior employee on another shift who
holds the same job classification. In order to be
considered for a shift change an employee must have a
shift preference on file in the Human Resources Office
indicating his classification and shift to which he
desires to be moved by January 1 for the January 15th
move and by July 1 for the July 15th move. Employees
with sufficient seniority shall within the following
two (2) weeks be allowed to bump to the shift of their
choice. Employees with less than one (1) year
seniority shall not be entitled to any shift
preference. The bumping privilege described herein
shall prevail only during the period described above.
Employees with less than one (1) year seniority shall
not be entitled to any shift preference.
<PAGE>
(a) Employees returning from a leave of absence will
be treated as follows:
Employees returning from a leave of absence prior
to a window period will be returned to the shift
they previously held if their seniority entitles
them to do so except that, if an employee was on a
leave of absence during a window period, he shall
go to the shift of his preference if his seniority
entitles him to do so.
(3) In labor grade 8 and above it may be necessary to
assign employees contrary to the above provision for a
period not to exceed 30 working days for training
purposes, however no employee shall be subject to such
an assignment more than once in a twelve (12) month
period. Employees so assigned will be returned to
their original shift and classification at the end of
the training period and will be considered as having
been on that shift and classification for the entire
training period so far as bumping rights or other
benefits are concerned. Employees so assigned will be
transferred and in the event of a night shift
assignment will be eligible for night shift premium.
(4) When an employee is moved from the shift of his
preference to accept work on an upgraded job and
subsequently that employee is reduced from an upgraded
job as a result of a Company action he will be
transferred to the shift of his preference provided he
has a preference form filed fifteen (15) calendar days
prior to the Company action and provided his seniority
entitles him to do so. Employees who elect to sign
away a job shall be required to remain on their current
shift until their seniority allows them to move at a
normal window.
Employees may bid on upgrade job openings on any shift
regardless of shift preference; however, if the
employee is awarded the job and accepts the job he must
sign a shift preference form accepting the shift on
which the job is assigned.
ARTICLE V
SENIORITY
1. Seniority as used herein is defined as the right accruing to
employees through length of service which entitles them to
certain considerations and preferences as provided for in
this Agreement. Seniority shall mean the length of
continuous service an employee has with the Company
beginning with the date he was employed by the Company. The
seniority of employees who are employed on the date the
Company begins operations shall be determined by assigning
seniority numbers to the employees based on their seniority
with the predecessor company. For example, the person with
the most seniority with the predecessor company will have
seniority number 1.
<PAGE>
(a) Upgraded Job Classification Seniority - This will be
gained after sixty (60) calendar days, except holidays,
vacations, sick days and days on jury duty, on upgraded
jobs in labor grades 5 through 7 and after seventy-five
(75) calendar days, except holidays, vacations, sick
days and days on jury duty, on upgraded jobs in labor
grades 8 and above. If the employee is performing
adequately after the completion of such a trial period
his job classification seniority shall include his
entire seniority. Upgraded job seniority can be
exercised only on the upgraded job classification in
which it is held. In the event of a reduction of force
the parties agree any and all upgraded classification
seniority can be exercised in any and all non-upgraded
job classification.
(1) In the event a reduction in force becomes
necessary during a trial period employees shall be
reduced from upgraded jobs in order of total
accumulated days credited to their trial period in
that upgraded job classification beginning with
the employee who has the smallest number of such
days. They shall be returned to that job
classification as openings occur in that upgraded
job classification beginning with the employee who
has the most number of such days. Days credited
to trial periods within upgraded job
classification shall provide employees no upgraded
job classification privileges except as stated
within this subsection.
2. Probationary Employees - A new employee shall be regarded as
a probationary employee for sixty (60) calendar days from
the date of his hire. During this probationary period, the
employee shall carry no seniority rights. Upon completion
of the probationary period the employee's seniority is dated
from his hire date. If the employee is laid off during the
probationary period, he has no reemployment rights.
However, if said employee is recalled within twelve (12)
months of his lay off date, he shall be required to complete
the balance of his probationary period. upon satisfactory
completion of this probationary period his seniority shall
date from his original hire date. During the probationary
period the Company will be the sole judge as to whether or
not the employee should be retained and in case of discharge
the probationary employee will have no recourse to the
grievance procedure.
3. Upgraded Jobs
(a) All jobs above Labor Grade 4 will be regarded as
upgraded jobs and will be filled in accordance with
Article V, Section 8 (Promotions).
<PAGE>
4. Lay-Offs and Recalls from Non-Upgraded Job Classifications:
(a) In the event of a lay off due to a reduction of forces
affecting employees in non-upgraded job
classifications, seniority will be exercised causing
the youngest seniority employee to be laid off first.
In case of a recall after lay off, the oldest seniority
employee laid off will be the first one recalled
provided he is qualified to do the work available.
Employees laid off or recalled at any time within a
single day shall be regarded as being laid off or
recalled simultaneously.
(b) When a foreman is advised that a reduction in force
will require the lay off of employees, he will
immediately advise the steward or stewards of the
affected areas.
(c) Employees may be used on a temporary basis only a
maximum of five (5) consecutive days in classifications
they have signed away. This time may be extended if
the employee does not object. There is no intent to
abuse this language.
5. Lay-Offs and Recalls from upgraded Job Classifications:
(a) In case of lay off due to reduction of forces, the
employee with the least job Classification Seniority
will be cut back first from the specific job
classification affected. He may then revert to a
previously held job Classification in the same labor
grade or lower to which his seniority entitles him.
In case of recall after lay off, employees will be
returned to jobs in line with their previously held
seniority.
(b) When an employee is being downgraded and holds
seniority in two or more Job Classifications in the
same labor grade he will downgrade or replace the least
senior employee.
(c) Payment of Temporary Upgrade Pay
In the event of a temporary move to an upgraded job, if
the supervisor is unable to obtain the most senior cut
back employee within the job classification required,
he will temporarily upgrade the employee used to do
the work and will also temporarily upgrade the most
senior cut back employee holding the job classification
required to perform the work within the Plant.
<PAGE>
6. If employees on lay off are recalled by seniority for five
(5) consecutive working days or less of available work they
will not be obligated to accept such recall. Employees
working in the plant may not be temporarily assigned to
classifications of work to which their seniority does not
entitle them for more than five (5) consecutive working days
if the employees entitled to such work are on permanent lay
off.
7. To insure all employees an opportunity to apply for and
receive consideration of jobs in higher classifications, the
following procedure will be followed:
(a) When all employees holding seniority on any upgraded
job have been returned to such job, and additional
employees are needed, an announcement of such openings
will be posted on all shop bulletin boards for a period
of not less than forty-eight (48) hours during the
regular scheduled work week. On all postings for
upgrade jobs, the Company will provide a brief, non-
binding description.
(b) Employees in a lower classification may bid for such
jobs by signing an application in the Human Resources
Office. The Chief Steward will receive copies of the
signed application of all bidders. The Chief Steward
will be advised of the employees who have been selected
for the promotion. An employee who bids on and is
awarded an upgrade job will be required to go to the
job. Once the bid has been awarded the successful
bidder is prohibited from signing it away for a period
of up to fifteen (15) calendar days.
(c) Consideration for placement of personnel on such jobs
will be given in accordance with promotion policy as
outlined in Article V, Section 8.
(d) Posting of a particular job classification will not be
required more than one (1) time in a thirty (30) day
period. All promotions will be made on the basis of
the bids submitted within the forty-eight (48) hour
bidding period. Exception will be made for those
employees absent or on leave to permit them to bid on
any job posted during their absence and be considered
for such promotion provided that the job has not been
filled or that no employee has been sent a recall
notice or transferred, or a new employee hired in
preparation for filling such a job. If all bids have
been exhausted and there are additional openings in a
classification an additional posting will be made at
least one (1) time within the above thirty (30) day
period. Posting shall include the job classification,
labor grade, shift and maximum rate of pay.
<PAGE>
8. Promotions: Promotions will be made on the basis of the
most senior qualified employee receiving the promotion.
Where possible and practical, personnel tests of ability and
aptitude will be used in helping to determine qualifications
of employees. Such tests will not be unreasonable or
discriminatory in nature. Employees who meet the minimum
requirements of such tests who have the greatest seniority
shall be selected for promotion. An employee shall be
allowed to take a particular test only one (1) time in a
four (4) month period; however, he may take the test a
second time within said period on his own time if such test
is given. Test scores will remain in effect for nine
months. Segments of a test which an employee passed will
also remain in effect for nine months. The Union shall have
the right to have a representative present whenever such
tests are given, who will observe the giving of the tests
and the grading. This representative selected and paid by
the Union shall be instructed by the Company in the
mechanics of giving and grading the test. An employee
selected for trial on an upgraded job will serve a
probationary period as provided in Article V, Section 2(a).
Should management determine he is not making satisfactory
progress in learning the job he will be subject to removal
from the job and reassignment to his previously held
classification at any time up to the end of the trial
period. Should the Union challenge such disqualification as
discriminatory it will be subject to the grievance and
arbitration procedure. Should the employee decide he does
not desire the position for which he has bid, he may
voluntarily return to his previously held classification
provided that no employee shall exercise his "voluntary
downgrade" more than one (1) time in any six (6) month
period.
Employees exercising such "voluntary downgrade" shall not be
eligible to bid on the upgraded job affected for a period of
one (1) calendar year. If an employee voluntarily
downgrades by signing away an upgraded classification and
then at a later date rebids on the same job classification,
the previous experience on the same job classification will
not be a factor in obtaining said bid.
<PAGE>
9. Voluntary Lay-Offs: If, in the event of a reduction of
forces, an employee does not wish to take a lower rated job
to which his seniority entitles him, he may take a voluntary
lay off. The employee must acknowledge such voluntary lay
off in writing at the time of the lay off and will be
recalled only to the job classification from which he took
the voluntary lay off. Said employee will have three (3)
working days in which to make the decision and management
may require the employee to work three (3) additional days
on the lower rated job while arrangements are being made for
replacement. If there have been no openings to which he was
entitled in the job classification from which he took the
voluntary lay off during a one (1) year period, he may at
the end of one (1) year exercise his seniority without
limitation as to classification provided he has notified the
Human Resources Office in writing during the twelfth (12th)
month of such lay off that he is available for work. The
Company shall have seven (7) working days following the
expiration of the one (1) year period to arrange for
assignment of the employee to suitable work. Employees may
be temporarily upgraded into upgraded classifications from
which other employees are on voluntary lay off for a period
not to exceed five (5) consecutive work days without
recalling employees from lay off.
10. Temporary Layoffs:
(a) In cases when a line, or section may have cutbacks due to
shortages in materials and other necessary interruptions in
production, temporary layoffs may be made without regard to
seniority for periods not to exceed five (5) consecutive
scheduled work days without permitting the employees to
exercise their seniority.
Where groups of employees are performing identical work and
only part of the group is affected, the most senior
employees actively in the job classification will be
retained. No employee shall be affected by such temporary
lay-off more than one hundred and twelve (112) scheduled
working hours in any one (1) year.
(1) When such a temporary lay off occurs, the reduction
shall be by job classification seniority with employees
holding the least classification seniority on the
affected shift being laid off first. When a temporary
layoff occurs within a non-upgraded job classification,
the reduction shall be by plant seniority with
employees holding the least plant seniority on the
affected shift being laid off first.
(b) If temporary employment is available in other parts of the
plant when employees are temporarily laid off, said
employees may be placed on these temporary jobs in line with
their seniority, provided they are qualified to perform the
jobs. When such temporarily assigned employees' regular
jobs start up again, said employees will be returned to
their regular jobs.
<PAGE>
(c) When it is necessary to start a new line, resumption of work
following a shut down, or other circumstances requiring the
retraining or rescheduling of an assembly line, employees
assigned to that line shall be recalled within a three (3)
day period as operations are available to them without
respect to their seniority status within the line affected.
When such lines are cleaned of work prior to changes of the
type listed above, employees may be laid off as their
operations are concluded over a three (3) day period without
consideration as to their seniority in relation to the group
affected. Any days lost out of line of seniority because of
this section shall apply toward the maximum of one hundred
and twelve (112) hours as specified in Section 12(a) above.
11. It is agreed that it may be necessary at times to retain or
hire an employee irrespective of seniority when by reason of
special training, ability or experience it is essential to
the practical operation of the Company's business and the
Company shall be the sole judge thereof. In no event shall
the total number of employees covered by the foregoing
exceed ten (10) employees and employees included in the
above shall be retained because of such qualifications for
bargaining unity occupations only. Only bargaining unit
jobs in labor grade 9 and above will be retained per this
provision.
12. Loss of Seniority: An employee will lose seniority for the
following reasons:
(a) Resignation.
(b) Discharge for just cause.
(c) Failure to report for work for three (3) consecutive
working days without notice to the Company of the
reason for such absence before the end of the third day
and unexcused absence for three (3) consecutive working
days.
(d) Failure to report within two (2) working days after
receipt of notice at their address on record in the
Human Resources Office, but in no case more than five
(5) working days after recall notice has been sent via
certified mail to the last address supplied to the
Human Resources Office by the employee.
(e) Layoff more than one (1) year duration. Note:
Employees with more than one (1) year of service may
retain their seniority for a total layoff period of
four (4) years provided they notify the Human Resources
Office of any address change. Failure to maintain a
current address with the Human Resources Office will
cause them to lose their seniority.
<PAGE>
(f) Failure to report at termination of a leave of absence.
Employees who do not present themselves for
reemployment by the close of the next scheduled work
day or submit proper evidence requesting extension of
said leave by the close of the next scheduled work day
shall be considered as having resigned.
(g) Re-enlists for a second tour of duty in the Armed
Forces of the United States or Merchant Marines after
completing an initial enlistment or period of
conscripted service, in accordance with law.
13. Where changes in job assignment are required due to
promotion, demotion, layoff, or transfer the Company will
not be required to assign an employee to a job for which he
is not qualified regardless of seniority. The Company will
make the determination of qualification. Employees will
have recourse to the grievance procedure if such
determination is disputed relative to the qualification of
the individual. This section will not be used to deny an
employee the right to bump a younger employee within a
classification where he holds seniority unless he lacks the
physical qualifications to perform the job.
14. Every effort will be made to find suitable work for
employees whose job assignment must be changed. The Company
shall not be required to retain in employment an employee
who cannot maintain standard quantity or quality of
production. An employee will be given time to learn the
job.
When the employee returns to work with a medical
restriction, the Company will exhaust all their means to
find suitable work assignments which will comply with the
doctor's statements. The appropriate Chief Steward will be
notified immediately upon the employee's return and will
assist to help find suitable work that will comply with the
medical restrictions. (See Exhibit D for the appropriate
Medical Downgrade form.)
If every effort has been exhausted by both parties to find
suitable work and no assignment is available, the employee
will be placed on medical leave and a letter shall be
forwarded to the employee's doctor regarding the
restrictions. Until suitable work is found, no liability
for lost wages by the employee will be assessed against
either party.
<PAGE>
15. Employees excluded by Article 1 from participating in the
bargaining unit shall not regularly do production or
maintenance work usually performed by employees included
within this Agreement except that such employees may when
necessary be assigned to production or maintenance work
within reasonable limits whenever it is practical for the
purpose of efficient operations or to eliminate standby or
idle time on the part of unit employees. It shall not be
the intent of this clause to use supervisory employees for
the purpose of replacing regular production or maintenance
employees or to avoid the assignment of such production and
maintenance employees, or to eliminate working production
and/or maintenance employees overtime.
16. (a) The President, Vice-President, and the Grievance
Committee provided there is work available which they
are capable of performing shall possess top ranking
plant wide seniority for purpose of layoff, other than
temporary, and of recall only.
(b) The Chief Steward, provided there is work available
which he is capable of performing, shall possess top
ranking seniority for the plant for the purpose of
layoff and of recall only.
(c) Stewards, provided there is work available which they
are capable of performing shall possess top ranking
seniority for the section to which they are assigned
for the purpose of layoff and of recall only. The
number of section stewards shall be limited in
accordance with the supplementary agreement affixed to
this Agreement.
(d) As long as there is work available which the steward is
qualified to perform a steward will not be moved from
his own shift. However, this section will not permit a
steward to be retained in an upgraded job to which his
upgraded job classification seniority does not entitle
him. Should a steward choose to remain in his own
shift on a lower rated job, he will not be required to
relinquish any seniority rights on any other higher
rated jobs elsewhere.
17. If an employee following the signing of this Agreement
between the Company and the Union works on or is transferred
to a supervisory or other position excluded from the
coverage of this Agreement such employee shall retain his
established and accumulated seniority in the event he should
be transferred back within a period of six months, to any of
the jobs referred to in Article 1 of this Agreement. Should
the return transfer occur after the six months period, he
will accumulate only the six months in addition to his
bargaining unit time.
18. When emergency situations may arise it will be the right of
management to assign any help available in the plant to
perform the necessary work.
<PAGE>
19. An employee with a disability within the meaning of the
Americans with Disabilities Act (ADA) will be reasonably
accommodated whenever possible. The employee with a
disability, however, must be qualified to perform available
work with or without reasonable accommodation as defined in
the ADA. Both the Company and the Union will take all
necessary actions to comply with ADA.
The preceding paragraph will not reduce the rights of
employees with compensable injuries under current practice.
20. At times two (2) or more job classifications may be combined
into a single job assignment. It is understood that such
combination of job classification duties will only be
accomplished when the job classification duties affected
cannot be assigned to a single classification as an
effective operation or would cause a work overload or
underload at a work station.
The Company agrees it will make a reasonable effort to
assign specific job duties within the affected
classification. Disputes arising hereunder may be taken up
through the Grievance Procedure.
21. Employees in Labor Grade 4 may be temporarily assigned to
Labor Grade 5 work for a time not to exceed 10 working days
so long as they are paid for the upgraded work in accordance
with the other provisions of this Agreement. This time may
be extended if the employee does not object. There is no
intent to abuse this language.
ARTICLE VI
WAGES
1. Wages will be paid in accordance with the wages and
classification scheduled set forth in Exhibit "A" and "B" of
this Agreement.
(a) The term month for purposes of computing rate increases
shall be thirty (30) calendar days.
2. Increases within the schedule will be automatic as indicated
by the appropriate schedule.
<PAGE>
3. When an employee is promoted to a higher classification up
to and including grade 6 shall receive at the end of thirty
(30) calendar days an increase of five (5) cents per hour
and at the end of an additional two (2) month period shall
move to the next interval in the progression schedule and
shall progress according to the schedule from that point.
When an employee is promoted to a higher classification
above grade 6, he shall at the end of thirty (30) calendar
days receive an increase of ten (10) cents per hour and at
the end of an additional two (2) months shall move to the
next interval in the progression schedule and shall be
increased according to the schedule from that point on;
however, if the employee has previously held a higher rate
in any classification than the rate which he is receiving at
the time of promotion he will go to that higher rate except
that in no case will he be moved to a rate higher than the
rate of the interval immediately preceding the top rate of
the job.
4. When an employee's classification is reduced, he will
receive the rate at the same interval in the lower
classification as he had attained in the higher
classification, but he will not be reduced below the highest
rate previously attained in the lower classification.
5. New jobs will be fitted into the existing classification
schedule. The Company will advise the Union in writing when
it creates a new job classification. Where existing
classifications are not comparable, the classification of
the new work will be subject to negotiations with the Union.
If agreement cannot be reached, the Company will set the
classification and the Union may submit the disagreement to
the grievance and arbitration procedure. The Arbitrator
will determine the classification and rate.
6. Where it appears justified by the previous training and
experience the Company may at its option hire employees at a
higher rate than the minimum rate indicated in the rate
scheduled, but in no case above the maximum of the
classification for which they are hired.
7. If an employee is moved on a temporary basis to work on a
job in a higher classification, he will receive an
additional five cents per hour for each grade above his
regular classification that the temporary assignment is
classified or rate previously attained in said upgraded
classification, whichever is greater, but in no event will
the temporary rate exceed the maximum rate of the job. If
an employee is moved on a temporary basis from his regular
work assignment to a lower graded job he will continue to
receive his regular rate for the temporary period.
At no time will a temporary assignment exceed ten (10)
consecutive working days, except when need is due to
employee being granted an approved leave of absence for
union business or an employee being granted earned vacation.
<PAGE>
8. Effective June 24, 1997 a general wage increase was granted
in the amount of three percent per hour. Effective June 24,
1998 a general wage increase will be granted in the amount
of three percent per hour. Effective June 24, 1999 a
general wage increase will be granted to all in the amount
of three percent per hour.
9. If an employee suffers a job related injury while working on
Company time and is sent to a doctor's office as authorized
by the Company, said employee shall be compensated for time
lost on the day on which the authorized doctor's visit, as
scheduled by the Company, occurs. Subsequent visits
scheduled by the doctor or the plant nurse during working
hours shall also be paid.
ARTICLE VII
HOLIDAYS
1. The Company agrees to pay its employees eight (8) hours pay
at their regular assigned rates of pay subject to
eligibility as listed below for the following holidays:
(a) New Years Day
(b) Good Friday
(c) Memorial Day
(d) Independence Day
(e) Labor Day
(f) Thanksgiving Day
(g) Friday after Thanksgiving Day
(h) Christmas Day
Employees who work any of these fixed holidays shall be paid
in accordance with Article VII, Section 1.
2. Payment of the above enumerated holidays shall be subject to
the following eligibility rules:
(a) An employee must have completed his probationary period
and established his seniority with the Company.
<PAGE>
(b) Holiday pay shall be given to employees who work the
last scheduled day before and the day following the
holiday. If an employee on the active payroll submits
evidence satisfactory to the Human Resources Office,
that he was absent either the day before or the day
after the holiday as a result of illness or emergency
beyond his control, he shall receive Holiday pay; or if
he did not work the day before or the day after a
holiday as a result of a temporary layoff or if he is
absent because of industrial injury (occurring within
30 calendar days of the holiday), in either case he
will receive holiday pay. If an employee is laid off
or placed on a leave of absence during the week of a
holiday or during the week preceding the holiday or if
he returns from lay off or a leave of absence during
the week of the holiday or during the week following
the holiday he shall receive such holiday pay. Four
(4) hours work on the day before and the day after a
holiday shall be considered as a day worked for the
application of this clause. The following will be
regarded a excusable absence before or after a holiday.
(1) Illness substantiated by a doctor's statement or
recommendation of the plant nurse.
(2) Required attendance before a induction center.
(3) Appearance before legal authorities required by
official summons and due to no fault of employees.
(4) Death or serious illness in employee's immediate
family. "Immediate Family" for the application of
this clause shall include only the following:
Father, mother, sister, brother, husband, wife,
children, mother-in-law, step mother-in-law,
father-in-law, step father-in-law, daughter-in-
law, son-in-law, grandfather, grandmother, or
grandchild, legally adopted children or step-
children, step-father, step-mother, half brother
or sister. In cases where relatives not included
in this listing have been living in the same
household with the employee they will also be
included in the "Immediate Family" where proper
evidence is supplied to the Human Resources
Department.
(5) If an employee attends the funeral of an aunt,
uncle, niece or nephew or is absent as a result of
being a pallbearer, the absence will not be
charged against them for the day of the funeral.
4. An employee shall not be eligible for Holiday pay if such
holiday falls during any one of the following:
(a) A leave of absence, except as described in 2(b) above.
(b) A work stoppage as a result of a labor dispute.
<PAGE>
5. If an employee works on one of the above holidays, he will
be paid time and one-half for all hours worked and in
addition will receive Holiday pay as specified above. If
employees are required for work on a holiday, they will be
solicited by classification seniority.
6. If a holiday falls during an employee's vacation period and
he works the last scheduled day in the week before the
vacation and the first scheduled day in the week after the
vacation he shall receive an extra day of vacation with pay
for the holiday or at the option of the Company, pay for a
day in lieu thereof. Four (4) hours work on the above days
shall be considered a day worked for the application of this
clause. If the holiday falls during a funeral leave, he
will receive an additional day's pay in lieu of the holiday.
ARTICLE VIII
GRIEVANCE PROCEDURE
1. To adequately provide for the settlement of disputes arising
out of the administration of this Agreement a grievance
procedure is hereby provided. A claim that the Company or
the Union has violated some provision of this Agreement or
failed to perform some obligation assumed under this
Agreement is a grievance within the meaning of this
Agreement. Formal grievance must be presented through union
representation as provided in Steps 1,2,3 of the Grievance
Procedure. This does not restrict employees from discussing
day to day problems with their immediate supervisor.
2. The following procedure will be adhered to in the handling
of all disputes as defined in Section 1 of this article. If
an employee is taken from his work position and out of his
general work area by a Company representative for the
purpose of initiating progressive discipline he shall have
the right to have his Section Steward present if he requests
same. The Union Steward will initial copies of such written
notice, if any, as evidence that he was present when it was
administered.
(a) Step 1 - Presentation of Grievance to immediate
Supervisor. The grievance shall be presented orally by
the affected employee or by the affected employee and
the steward to the immediate Supervisor. Such
grievances must be presented within ten (10) working
days of their occurrence and in no case will any
liability for restitution by the Company predate the
presentation of the oral grievance.
<PAGE>
Payroll errors will be corrected when found. Should
those involved be unable to settle the grievance by
oral discussions, the grievance must be reduced to
writing, signed by the aggrieved employee and the
department steward, and presented to the immediate
Supervisor no later than the close of the next
following work day. If a grievance is presented which
involves more than fifteen (15) employees such a
grievance will be presented with the signature of the
steward only, and without the signature of the employee
involved. This grievance will be assigned a number
according to a numbering system agreed to by both the
Company and the Union. The immediate supervisor will
reply in writing within two (2) working days after
receipt of the written grievances. If grievances arise
which involve general policies of departments rather
than individuals or groups of employees such grievances
may be presented without the signature of any employee
other than the steward.
(b) Step 2 - Appeal to the Production Manager/Plant
Engineering Manger - If the immediate supervisor's
written reply to the grievance does not settle the
dispute, the Union through the Chief Steward may appeal
to the Production Manager/Plant Engineering Manager.
This request must be made in writing within three (3)
working days following the receipt of the immediate
supervisor's written reply. This request must give the
primary portion of Agreement violated and remedy
sought. Upon receipt of this request the Production
Manager will schedule a meeting within two (2) working
days to discuss the grievance. Those attending these
meeting will include the Production Manager/Plant
Engineering Manager, immediate supervisor, the
aggrieved employee, the department steward, and the
chief steward. If two (2) or more employees are
filling the grievance, one (1) of the employees
involved will be designated by the Union as their
representative to participate in this stage of the
grievance procedure. Within three (3) working days a
written answer to the grievance will be submitted to
the Chief Steward.
<PAGE>
(c) Step 3 - Appeal to the Plant Manager - If a grievance
still remains unsatisfied the Union may appeal to the
Plant Manager by written notice within five (5) working
days following receipt of the Step 2 answer. Such
grievances will be scheduled in the next meeting
between the Plant Manager and the Grievance Committee.
At these meetings matters may be raised for discussion
which concern employer-employee relationship, but are
not contractual issues. Such meetings may be scheduled
not more than four (4) times per month with the Plant
Manager and the Plant Grievance Committee. The
meetings will be scheduled as agreed by the Union and
the Company. The committee will be limited to two (2)
employees, excluding the recording secretary. If
additional information is needed in discussing a
particular grievance, the committee may caucus with the
witness. The Production Manager/Plant Engineering
Manager, Human Resources Manager and the Business
Manager and/or in the International Representative of
the Union may also participate in these meetings. Such
meetings are to be held only if a request is made by
the Company or the Union with the submission of an
agenda of matters to be discussed at such a meeting.
Within five (5) working days following such meetings
the Plant Manager will reply in writing to all issues
raised in such meetings including final answers on Step
3 grievances. Before arbitrating any matter, the
parties will meet with each other and attempt to
resolve the matter. Either party may have in
attendance the persons involved Step 3 and no more than
two additional persons.
3. It is understood and agreed that all time limits must be
strictly adhered to in the processing of grievances, unless
the Company and Union mutually agree in writing to
extensions. It is further understood that failure on the
part of the Union to submit grievances within the time
limits specified, will automatically exclude them from any
consideration. Should the management representative fail at
any step in the grievance procedure to reply to a formal
grievance within the prescribed time limit the Union will
have the right to immediately process the grievance to the
next step in the grievance procedure.
4. Any disputes not settled in the above procedure may then be
appealed to the Arbitration Procedure as provided for in
Article IX.
<PAGE>
5. It is agreed that time spent by Union Officials in the
investigation of grievances shall be held to a minimum.
When a Union Official is required to participate in a
grievance during working hours he shall first obtain from
his immediate supervisor an "Authorization Pass" and he must
return this pass to his immediate supervisor when returning
to his job. If it is necessary for any reason that he enter
another department he must inform the immediate supervisor
of the department of which he enters of the reason for his
presence and that immediate supervisor must sign his
"Authorization Pass" indicating the times when he enters and
leaves the department. At the request of the Union any and
all stewards will be supplied with pads of blank passes.
Time spent during regular working hours by stewards or chief
stewards in investigating and disposing of grievances will
be paid for by the Company. When employees are scheduled
for overtime work and the Steward of such employees is also
scheduled for overtime the Steward shall be permitted to
handle grievances whenever necessary during such overtime
hours in accordance with the established grievance
procedure. This is not to be construed as requiring the
Company to necessarily schedule stewards on overtime basis
nor does it require the Company to pay stewards for overtime
work if they of their own volition work after their
scheduled quitting time in the investigation or processing
of grievances.
6. When a grievance is presented in accordance with the
Grievance Procedure the Company will not attempt to settle
the grievance with any employee or group of employees
without the appropriate union representative or
representatives being present.
7. If in the presentation of a grievance it is disclosed that
additional witnesses are required the parties may be mutual
consent call such witnesses.
8. Any grievance in which no employee is involved or any
question of interpretation or application of this Agreement
may be raised by the Union at the third step of the
grievance procedure.
9. Prior to discharge, an employee shall be suspended for five
(5) work days pending discharge. Both the employee involved
and the appropriate Chief Steward shall be notified of the
suspension and the employee will have an opportunity to see
the appropriate Chief Steward before leaving the plant. The
sole purpose of said five (5) day suspension period is to
allow further investigation into the facts supporting the
discharge. If no new evidence satisfactory to the Company
is uncovered during said period, the discharge shall be
effective. Both the Union and the employee will be so
advised. Discharge shall be subject to the grievance and
arbitration procedure.
<PAGE>
10. Official notices of hires, rehires, transfers, rate changes,
lay offs, and terminations will be made available daily to
the appropriate chief steward. If said information to be
submitted by the Company to the appropriate chief steward is
incorrect, incomplete, or not provided, the ten (10)
calendar day limitation for filing grievances which such
information would have revealed and the limitation of the
Company's liability for restitution shall not apply. When
the information is corrected or supplied the grievance must
be filed within ten (10) calendar days and the restitution
shall be to the date of the violation.
11. It is agreed that there shall be no strikes, slowdowns, or
lockouts during the life of this Agreement.
12. If in the processing of a grievance a steward finds it
necessary to confer with his Chief Steward in regard to the
disposition of the grievance he shall be permitted to do so
in accordance with the pass procedure. Such request for
conference must be made by the section steward to his
immediate supervisor who will make necessary arrangements.
ARTICLE IX
ARBITRATION
1. A claim that the Company or the Union has violated some
provision of this Agreement or failed to perform some
obligation assumed under the Agreement is an arbitrable
grievance within the meaning of this Agreement, provided
that the grievance or claim has been fully processed through
the grievance procedure as provided in Article VIII of this
Agreement. Such grievances which are not disposed of in the
pre-arbitration meeting of the grievance procedure as
provided in Article VIII of this Agreement shall be
submitted to final and binding arbitration under the
provisions and procedures of this Article, provided the
union or the company makes an appeal to arbitration and the
parties jointly write for an arbitrator and request dates
within thirty (30) calendar days after the date of the
written decision given by the Plant Manager or Union
President in Step 3 of the grievance procedure, or upon the
expiration of the time limits for answering. Claims other
than those defined above shall not be deemed arbitrable
under this Agreement.
<PAGE>
2. Upon request by either party for arbitration, the moving
party will submit to the Human Resources Office or the Union
President their request for arbitration along with a
statement indicating the portion of the Agreement alleged to
have been violated and a definition of the issue to be
determined by the arbitrator. Upon the issuance of such
intent, the parties (within ten (10) calendar days) will
request a panel of seven (7) arbitrators from the Federal
Mediation and Conciliation Service (FMCS). As soon as
possible after receiving the panel of arbitrators from the
FMCS, the arbitrator shall be chosen by alternately striking
the names of the arbitrators until one (1) name remains.
In all matters pertaining to the conducting of the
arbitration case, the rules of the FMCS will apply. The
arbitrator shall not have the power to add to, to ignore, or
to modify any of the terms and conditions of this Agreement.
His decision shall not go beyond what is necessary for the
interpretation and application of this Agreement or the
obligation of the parties under this Agreement.
3. All costs of arbitration, including the arbitrator's fees
and expenses, transcripts, if agreed by the parties, and
other incidental expenses will be shared equally by the two
(2) parties.
If either party withdraws a grievance or postpones a hearing
prior to the time of the hearing or at the hearing, the
party making such withdrawal or requesting such postponement
will pay all costs incurred by said withdrawal or request
including the arbitrator's fees and expenses, official
transcripts, the cost of the meeting room and other
incidental expenses.
If both parties mutually agree to withdraw a grievance or
postpone a hearing they will share the cost of said
withdrawal or postponement equally.
4. Time limits shall be strictly adhered to in the processing
of grievances through the arbitration procedure. Failure of
the grieving party to abide by such time limits shall
automatically exclude the grievance from further
consideration.
5. In the application of the foregoing Arbitration procedure
items included in Article II, Management Responsibility,
shall be excluded from the scope of arbitration as intended
by the parties in this Agreement and are matters subject
only to Management's complete control and judgment provided,
however, that where there is a dispute as to whether a
grievance falls within the scope of Article II the
arbitrator will be empowered to make the decision.
6. An arbitrator under this Agreement shall not have the right
to substitute his judgment for the employer's in matters
which are solely Management's functions and rights under
this Agreement.
<PAGE>
7. The parties specifically veto recourse by arbitrators
hereunder to such criteria as alleged practices of the
industry or alleged industrial common law or alleged common
law of the particular industry.
8. It shall be the duty of any arbitrator hearing arbitration
cases under this Agreement, to justify each award by written
decision explaining the rationale of said award.
9. An arbitrator under this Agreement shall have the authority
to hear only one case on a single date.
ARTICLE X
VACATIONS
1. Eligibility for vacations beginning in 1998 will be
determined on the following basis:
(a) Two (2) weeks of vacation will be granted all hourly
employees who were employed on the date the Company
began its operations and all employees who are
subsequently employed and have seniority of one (1)
year or more as of May 1st of any year.
(b) Employees whose services are terminated for any cause
shall be paid for any full or fractional vacation to
which they became eligible but did not receive prior to
termination.
(c) Earned vacation money as set forth herein will be paid
to employees who are laid off, or are off duty on
account of illness or other legal leave of absence or
industrial injury or to the wife or family of a
deceased employee, where such employee has earned a
vacation as established herein.
2. Vacation pay will be made in accordance with the following
schedule:
(a) An employee who was employed on the date the Company
began its operations and all employees who are
subsequently employed and have seniority of one (1)
year or more as of May 1st shall be entitled to
vacation pay computed at 4% of his total gross earnings
for the immediately preceding period of May 1st through
April 30. Since vacation pay has already been paid for
1997, no vacation pay will be due until May 1st of
1998.
(b) Vacation checks will be issued to employees the last
scheduled work day prior to the vacation.
<PAGE>
3. The vacation period will be scheduled by the Company.
Where it is deemed advisable by the Company a plant shutdown
may be scheduled during which time all vacations will be
scheduled except where employees may be required to work
during such a shut down. No employee may be required to
work unless he has been notified not less than thirty (30)
calendar days in advance of the time when his vacation was
originally scheduled. Employees who might be required to
work will be permitted to schedule their vacations at some
other time during the vacation period subject to management
approval. Should the needs of the business require that
some employees work through the entire scheduled vacation
period, special arrangements may be made to permit these
employees to take their vacations outside of the regular
vacation period. If such arrangements cannot be made the
Company agrees to pay such employees their full vacation pay
in lieu of scheduling them for vacation. When a shut down
is scheduled for the vacation period, employees will be
notified not less than forty-five (45) calendar days in
advance of such shut down.
(a) Employees who volunteer for available work during the
vacation period, in lieu of taking their vacation, will
first be selected by job classification seniority.
Volunteers, from other classifications who are
qualified to perform the work may volunteer to work
during vacation. Qualified volunteers will be selected
by seniority.
(b) Employees who have not taken their previous years'
vacation as of April 30, shall be permitted to do so if
scheduled prior to the following June 15 and if
approved by Management.
ARTICLE XI
LEAVES OF ABSENCE
1. Recognizing that conditions will sometimes require leaves of
absence for employees the following provisions are made:
(a) To qualify for a leave of absence an employee must have
established two (2) months or more of seniority with
the Company except as noted in 1(e) below.
<PAGE>
(b) Sickness or injury leaves of absence may be granted and
will not be unreasonably withheld. An employee
requesting a leave of absence must establish to the
Company by medical evidence that he is incapacitated
and unable to work. Such evidence must indicate the
approximate duration of the incapacity and an initial
leave of up to 60 days will be granted on this basis.
Extensions for periods not to exceed 30 days will be
granted upon presentation of satisfactory medical
evidence immediately prior to the termination of the
previously granted leave. FMLA will run concurrent
with sickness or injury leave. The total continuous
leave time which may be granted will not exceed one (1)
year except that an additional one year will be granted
for chronic cases where there is medical evidence
satisfactory to the Company indicating the probability
of employee returning to work within this period. In
rare and unusual circumstances longer leaves may be
granted at the discretion of the Company. Seniority
will accumulate during periods of authorized leave.
(c) Maternity leave will be administered in accordance with
applicable laws. Employees will report this condition
to the Human Resources Office no later than the end of
the fourth (4th) month of pregnancy. The employee must
submit a medical statement from her personal physician
each thirty (30) calendar days subsequent to the
initial report attesting to her good health and ability
to continue the normal duties of her job. If at any
time the employee is unable to carry out her job
assignment she may be directed to take her leave prior
to the date suggested by her physician. Seniority will
accumulate during periods of authorized leave and
employee will be permitted to resume work when released
by her physician.
(d) Employees returning from sickness or injury or
maternity leave must have release from their doctor
permitting them to return to work. Such releases must
be in writing and must be presented to the Human
Resources Office before they return to work. The
Company further reserves the right to have such
employees examined by a Company doctor before
permitting them to work.
(e) Military leaves will be granted to employees entering
the armed forces of the United States whether by
enlistment or induction. Notwithstanding, Section 1(a)
of this article military leaves will be granted
probationary employees. Request for leave will
indicate length of initial tour of duty. The maximum
length of leave covered under this article shall be
five (5) years. An employee who enlists for or is
drafted for a shorter length of service would only be
covered for the initial period of service and would not
be covered should he/she re-enlist.
<PAGE>
Employees will be required upon return from such leave
to furnish satisfactory evidence that they have been in
military service during this period and have honorably
discharged from service. Probationary employees will
be required to complete their probationary period and
upon completion of same their seniority will date from
their original hire date. Such employees must make
application for reemployment within ninety (90)
calendar days of their release from military service.
They shall be reinstated to their full seniority which
will have accumulated during the period of their leave.
(f) A leave of absence may be granted for personal reasons
of extenuating circumstances, the length of such leave
not to exceed thirty (30) calendar days during any
twelve (12) month period. All requests for personal
leaves of absence shall be made in writing to the Human
Resources Office not less than seven (7) calendar days
where possible prior to the beginning of the leave
period. Such leaves will be granted at the discretion
of the Company. Seniority will accumulate during the
leave of absence. Such leaves may at the discretion of
the Company be renewed for like cause.
(g) Any employee elected or appointed to an office in or as
a delegate to any labor activity of the Union
necessitating a leave of absence shall be granted such
leave upon proper notification from the Union. Such
leave will terminate with the expiration of the term of
office or assignment. Requests for such leaves must be
made in writing to the Human Resources Office seven (7)
days prior to the beginning of the leave period.
Seniority shall accumulate during the leave of absence.
No more than two (2) employees may be on this type of
leave at the same time. Two more people may be allowed
on such leave with the agreement of the parties.
(h) When an employee suffers a death in his immediate
family he will be paid three (3) days pay for
bereavement leave. Additional personal time off shall
be without pay. Immediate family for purposes of this
section shall be the same as defined in Article VII,
Section 2(b)(4). When an employee suffers such
bereavement while on vacation, he shall be entitled to
three days pay.
(h) Servicemen entitled to training under the G.I. Bill may
be granted a leave of absence not to exceed forty-eight
months for such training. Such leave is not to include
full time employment for another employer. Seniority
will accumulate during such leave.
<PAGE>
2. Upon the termination of any leave of absence for any reason
in accordance with the terms outlined above the Company will
have a period not to exceed seven (7) working days following
application from the employee to return to work during which
time arrangements will be made to assign such employees to
suitable work. The seven day period shall begin following
receipt by the Human Resources Office of written
notification from the employee giving the date he wishes to
return. Employees returning from sickness and/or injury
leaves must present a medical release prior to returning to
work.
3. Leaves of absence will be granted for jury duty. Such
employees shall receive make-up for the difference between
earnings received and eight (8) hour straight time pay for
each day they would have been eligible to work during such
period. Seniority will accumulate during such leave. This
applies to all shifts.
4. Members of the National Guard or of reserve military units
which conduct summer encampments or cruises will be excused
for such duty not to exceed two weeks in any year and will
receive make-up for the difference between earnings received
from the government exclusive of travel pay and eight (8)
hours straight time pay for each day they would have been
eligible to work during such a period.
5. Employees absent because of compensable injuries or disease
will be granted a leave during such period unless they are
totally and permanently disabled to such a degree that they
can never return to employment. Seniority will accumulate
during such leave.
6. When necessary a leave of absence in accordance with the
Family and Medical Act will be granted an employee who
desires to adopt a child. Seniority will accumulate during
such leave.
7. No leave of absence shall be granted to engage in or accept
other employment except as specified in Section 1(g) of this
Article.
8. A leave of absence, without pay, will be granted without
loss of seniority to an employee to serve in an appointive
or elective public office. Such leave of absence will be
for one (1) term of office. The employee will continue to
accumulate seniority throughout the leave of absence and
will be returned to work upon expiration of such leave of
absence in accordance with Section 2 above.
<PAGE>
ARTICLE XII
GENERAL
1. The Company will provide bulletin boards in the Plant which
will be used exclusively for the posting of Union notices.
Such notices must be approved by the Human Resources Office
or designated representative and will be placed on the board
by the Human Resources Office. It is understood that such
notices will be automatically approved unless they are of
controversial nature. These bulletin boards will be labeled
"Local 796, IUE, AFL-CIO."
2. The Company will provide two rest periods during the course
of each regular eight (8) hour shift. The first rest period
will be provided during the first four (4) hours of the
shift and will be of ten (10) minute duration. The second
period will be during the last four (4) straight time hours
and will be of ten (10) minute duration. The Company
reserves the right to determine the time when such rest
periods are allowed.
3. The Company will from time to time issue Rules and
Regulations for the maintenance of orderly conditions on
plant property. These rules or their application will not
be unfair or of a discriminatory nature, nor will they
conflict with the terms of this Agreement.
4. In the interest of protecting the health of its employees
the Company may, when it is deemed necessary, require
Physical Examination of any employee by a Company doctor.
Such examinations will in all cases be at Company expense.
In the event of a dispute arising as a result of such
examination, the dispute shall be subject to the grievance
and arbitration procedure.
5. The Company agrees to pay the cost of printing a sufficient
supply of copies of the Agreement to make them available to
all employees. The Agreement will be printed as a pocket
size book with large print.
6. Adequate washing and toilet facilities shall be provided by
the Company for all employees. Precautions to protect the
health and safety of employees shall, as far as practical,
be taken at all times by the Company. Employees shall
observe all rules of the Company relative to the above.
7. The Company shall furnish, free of cost to the employee, all
tools, equipment and special clothing or articles necessary
to perform the required work in a safe and efficient manner.
Employees will be responsible for the safekeeping of tools
issued to them and will be required to return them upon
request or to reimburse the Company for the cost of the
tools if they are unable to return them. This shall not
include personal tools customarily provided for themselves
by machinists, tool and die workers, carpenters and
electricians.
<PAGE>
8. Should any portion of this Agreement be determined through
appropriate legal processes to be contrary to any state or
federal law that portion so found will be regarded as
invalid and the balance of that article and all other
articles of this Agreement will continue in full force and
effect.
9. The parties agree that memoranda and supplementary
agreements predating the signing of this Agreement shall not
be binding on the parties unless resigned and redated to
conform to the effective dates of the Agreement.
10. The Company believes in a fair day's work for a fair day's
pay. If time studies are used, the Union may also time
study the jobs on which there are standards established.
11. The Company and the Union shall jointly appoint a Safety
Team, with appropriate representation from bargaining unit
employees. All business and recommendations of the Safety
Team shall be handled with the assistance of plant
management and any other Circuit Systems of Tennessee, L. P.
employees required to find, report, recommend and correct
safety problems.
ARTICLE XIII
INSURANCE
Effective July 28, 1997, the Company will make available to its
full time active employees in the Greeneville Hourly Bargaining
Unit the Blue Cross Blue Shield Preferred or HMO health plan or
its equivalent. Eligible employees must have completed sixty
(60) calendar days of employment since their last hire date.
See Exhibit F, page 38 for weekly premium rates for employees who
elect to be covered by insurance.
Employees eligible for extended insurance must pay the extended
premium not later than thirty calendar days from last day worked.
Subsequent premium payments must be made prior to the expiration
date. If insurance coverage is not kept in effect by payment of
premium, it will be reinstated automatically on the day employee
returns to work.
ARTICLE XIV
RETIREMENT PLAN
The Company will provide a 401(k) retirement Plan. The details
of the Plan are found in the 401(k) document.
<PAGE>
ARTICLE XV
DURATION AND TERMINATION OF
AGREEMENT
This Agreement shall remain in full force and effect for three
(3) years from July 28, 1997 until June 24, 2000 and shall
thereafter be continued from year to year unless notification of
termination, modification, or amendment is given by either party
by certified mail at least sixty (60) calendar days but not more
than seventy-five (75) calendar days prior to the anniversary
date of this Agreement. Upon receipt of such notice, a
conference shall be held within fifteen (15) calendar days for
the purpose of negotiating an extension, renewal or modification
of this Agreement.
It is also understood and agreed that the terms of this Agreement
constitute the final determination of all matters subject to
collective bargaining between the parties for the entire term of
their Agreement, and that neither party may raise any issues for
collective bargaining other than in accordance with the procedure
established in this Agreement without the written consent of the
other party of this Agreement.
IN WITNESS THEREOF, the parties hereto execute this Agreement on
the 24th day of July, 1997.
FOR THE COMPANY FOR THE UNION
SUPPLEMENTAL AGREEMENTS
ALLOCATION OF STEWARDS
1. There shall be one (1) Chief Steward assigned to the Plant.
There shall be one (1) Steward on a shift other than the
shift of the Chief Steward to serve in areas designated by
the Union.
2. There shall be a maximum ratio of one (1) steward for each
sixty-five (65) employees within the bargaining group. Both
Chief Steward and Steward will be included in computing this
ratio.
3. The Union will determine the number and allocations of
stewards up to the maximum ratio and will advise the Company
in writing what employees are serving as stewards and the
areas which each are servicing. Changes may be made in the
steward listing as required and the Union will advise the
Company in writing of such changes. The Company will
recognize as Stewards only those employees concerning whom
official notification has been given by the Union.
4. The Union agrees that while they will determine the area of
jurisdiction of each steward they will not assign a
disproportionately large number of stewards to any area or
work group.
<PAGE>
REWORK OPERATIONS
1. Rework shall include the doing over of work previously
performed by employees of Circuit Systems of Tennessee, a
Tennessee Limited Partnership, whether due to model change,
engineering change, faulty workmanship, or schedule change.
Drilling of printed circuit boards will be considered
Rework.
2. Such work will be performed by whatever bargaining unit
employees Management shall assign to such work and they will
receive the rate of pay of the classification for which they
are currently classified when assigned to work. Employees
working outside their regularly assigned classifications
will be subject to displacement by the most senior employees
currently in the classification affected by a temporary lay-
off.
3. In case of temporary lay offs when rework is to be
performed, the most senior employees actively in the
classification who are subject to such temporary lay off
will be assigned to the rework. However, no employees who
are engaged in a rework assignment at the time a temporary
lay off occurs will be displaced by other employees subject
to such temporary lay.
4. All overtime performed on rework basis shall be charged to
individual employees as being worked in their own
classification for distribution purposes of the Labor
Agreement.
5. The above provisions shall be applied to employees within a
particular plant but in the event of a more than one plant
operation, said plants shall not be combined for application
of this Supplemental Agreement.
6. Non-production classifications are not covered by this
language for rework operations.
PILOT RUN OPERATIONS
1. When a pilot run is to be made the Union Chief Steward of
the area involved will be advised as to quantity, model,
customer name and release date.
2. It is understood, should the first run necessitate radical
changes or even a number of minor changes, Management
reserves the right to produce other "pilot runs" of the same
instrument if deemed necessary.
3. "Pilot run" work is recognized as non bargaining unit work
and may be performed in part or entirely by non unit
personnel. Assignment of bargain unit personnel to such
work will be optional with the individual employee. If
bargaining unit employees accept pilot run assignments and
should overtime be involved, same will be credited to the
employee's overtime account.
<PAGE>
4. Management shall assign available employees, unit or non
unit, to such work and they will receive the rate of pay of
the classification for which they are currently classified
when assigned to the work. Such assignment shall not
conflict with item 3 above.
5. The Company is in no way production-wise restricted in
location, time, product, quantity, personnel used, or in any
other manner, except as hereby specifically agreed.
6. When an assembly position for pilot run is assigned a
bargaining unit employee, said bargaining unit employee will
continue to be assigned that particular position through
balance of that particular pilot run. In case said employee
is not available, Management may use anyone available, unit
or non unit.
IN WITNESS WHEREOF, the parties hereto execute this Agreement on
the 24th day of July, 19
FOR THE COMPANY FOR THE UNION
EXHIBIT A
CLASSIFICATIONS
Labor Job
Grade Job Classification Code
4 Occupancy Attendant 302
Inspector
4001
5 P.C.B. Operator 5002
6 Relief Operator 2007
P.C.B. initial Inspector 6001
7 P.C.B. Machine S/U 6000
Stockman 516
8 Etching Equipment Attendant
8001
Wet Process Attendant 8002
9 Hourly Team Leader 260
12 Electro-Mechanical Technician 1203
Tool & Die 9000
<PAGE>
EXHIBIT B-1
WAGE RATE SCHEDULE
EFFECTIVE JUNE 24, 1997 THRU JUNE 24, 1998
<TABLE>
1 3 5 7 9 11 13 15
Grd Base Mos. Mos. Mos. Mos. Mos. Mos. Mos. Mos.
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4 8.10 8.28 8.40 8.60
5 8.19 8.34 8.54 8.73
6 8.28 8.46 8.61 8.81 8.88
7 8.36 8.55 8.73 8.91 8.99 9.06
8 8.58 8.68 8.82 8.99 9.15 9.22
9 9.22 9.36 9.45 9.55 9.62 9.74 9.74 9.83 9.93
10 9.45 9.55 9.62 9.74 9.83 9.83 9.83 10.01 10.14
11 9.62 9.74 9.83 9.93 10.01 10.01 10.01 10.14 10.31
12 11.99 12.10 12.23 12.36 12.36 12.46 12.65 12.78 13.00
</TABLE>
EXHIBIT B-2
WAGE RATE SCHEDULE
EFFECTIVE JUNE 24, 1998 THRU JUNE 24, 1999
<TABLE>
1 3 5 7 9 11 13 15
Grd Base Mos. Mos. Mos. Mos. Mos. Mos. Mos. Mos.
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4 8.34 8.53 8.65 8.86
5 8.44 8.59 8.80 8.99
6 8.53 8.71 8.87 9.07 9.15
7 8.61 8.81 8.99 9.18 9.26 9.33
8 8.84 8.94 9.08 9.26 9.42 9.50
9 9.50 9.64 9.73 9.84 9.91 10.03 10.03 10.12 10.23
10 9.73 9.84 9.91 10.03 10.12 10.12 10.12 10.31 10.44
11 9.91 10.03 10.12 10.23 10.31 10.31 10.31 10.44 10.62
12 12.35 12.46 12.60 12.73 12.73 12.83 13.03 13.16 13.39
</TABLE>
EXHIBIT B-3
WAGE RATE SCHEDULE
EFFECTIVE JUNE 24, 1999 THRU JUNE 24, 2000
<TABLE>
1 3 5 7 9 11 13 15
Grd Base Mos. Mos. Mos. Mos. Mos. Mos. Mos. Mos.
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4 8.59 8.79 8.91 9.13
5 8.69 8.85 9.06 9.26
6 8.79 8.97 9.14 9.34 9.42
7 8.87 9.07 9.26 9.46 9.54 9.61
8 9.11 9.21 9.35 9.54 9.71 9.79
9 9.79 9.93 10.02 10.14 10.21 10.33 10.33 10.42 10.54
10 10.02 10.14 10.21 10.33 10.42 10.42 10.42 10.62 10.75
11 10.21 10.33 10.42 10.54 10.62 10.62 10.62 10.75 10.94
12 12.72 12.83 12.98 13.11 13.11 13.21 13.42 13.55 13.79
</TABLE>
<PAGE>
EXHIBIT C
UNION DUES AUTHORIZATION
To Circuit Systems of Tennessee, a Tennessee Limited Partnership,
EMPLOYER
____________________, Tennessee
I hereby assign from my earnings now or hereafter payable to me
from the Employer, to Local 796 of the International Union of
Electronic, Electrical, Salaried, Machine and Furniture Workers,
AFL-CIO, a sum equal to Union membership dues and, if owing by
me, an initiation fee, as certified to the Employer by the Local.
This Assignment and Authorization is voluntarily made in
consideration of the costs of representation and collective
bargaining and is not contingent upon my membership in the Local.
Pursuant to this assignment and irrespective of my present or
future membership status in the Union, I authorize and direct you
to deduct, while I am employed in the represented bargaining unit
of the Employer, such a sum equal to membership dues and, if
owing by me, an initiation fee, as certified to the Employer by
the Local.
Regardless of my membership status in the Local, this Agreement
and Authorization shall be irrevocable from its effective date to
the anniversary date of the collective bargaining Agreement
between the Employer and the Local or until the date on which the
Agreement terminates, whichever is earlier. I agree and direct
that this Assignment and Authorization shall be automatically
renewed, and shall be irrevocable for successive one (1) year
periods from anniversary date to anniversary date of the
collective bargaining Agreement. This Assignment and
Authorization may be revoked by written notice by individual
certified mail, given by me to the Employer and the Local,
postmarked not more than fifteen (15) calendar days immediately
preceding the anniversary date of the collective bargaining
Agreement between the Employer and Local. This authorization
will be automatically renewed to the next anniversary date if
such notice is not received.
This Authorization and Assignment supersedes all previous
Authorization and Assignments.
________________________________________
SIGNATURE OF EMPLOYEE
For purposes of this assignment during the 1997-2000 period,
the anniversary date of the collective bargaining Agreement which
is repeatedly referred to in the form shall be June 24th.
<PAGE>
EXHIBIT D
MEDICAL DOWNGRADE AUTHORIZATION
Date: __________________________
This is to certify that I, ________________________________
SS# ___________________ request a Medical Downgrade from the
classification of _______________________________________________
I understand I will hold this upgraded seniority for a period of
one (1) year from date of doctor's statement submitted and may
return to the classification within this period of time if
released by the doctor providing I have sufficient seniority.
After the one (1) year period, I relinquish the upgraded
seniority and may return to the classification through the bid
procedure only as outlined in the Labor Agreement.
________________________________
Employee
_________________________________
Date
_________________________________
Witness
cc: Union
File
Employee
EXHIBIT E
REASONABLE SUSPICION TESTING
A. Grounds
Reasonable suspicion testing may be based upon, among other
things:
1. Observable phenomena, such as direct observation or
alcohol use or possession and/or the physical symptoms
of being under the influence of a drug or alcohol.
2. A pattern of abnormal conduct or erratic behavior.
3. Conviction for a drug-related or alcohol-related
offense, or the identification of an employee as the
focus of a criminal investigation into illegal drug
possession, use or trafficking.
4. Information provided either by reliable and credible
sources or independently corroborated.
5. Serious injury to the employee or another employee
which results in lost time.
<PAGE>
B. Procedures
If an employee is suspected of using drugs or alcohol at the
work place or reports for work under the influence of drugs
or alcohol, supervision is responsible for taking the
following action:
(I) The supervisor will notify the appropriate steward or
chief steward. If both are unavailable, the supervisor
will call the representative designated by the Union.
(ii) If medical personnel are on the premises, the
supervisor must consult the Company nurse or Company
doctor and relay all information, facts and
circumstances leading to and supporting his suspicion
to medical personnel. The supervisor and the Union
official notified will then request that the employee
accompany them to the nurse or doctor. The nurse or
doctor will at that point conduct their own medical
investigation and determine if a drug/alcohol test is
in order (e.g. it may not be if prescription drugs are
in use). Should a test be deemed appropriate, the
employee will be asked to sign a consent form and will
be advised that a positive test outcome confirming the
presence of drugs or alcohol will not necessarily
result in discipline. For instance, an employee who
tests positive may be referred to the Employee
Assistance Program or other organization for help (e.g.
Alcoholics Anonymous). Employees, however, may face
discipline up to and including discharge for repeated
positive test results. Any employee who refuses to
consent to a test under the aforementioned
circumstances will be terminated for insubordination in
accordance with Plant Rules.
(iii) If medical personnel are not on the premises, the
supervisor must notify the appropriate Union official
and confer with a higher level of supervision and relay
all information facts and circumstances leading to and
supporting his suspicion to said higher level
supervisor. When the higher level supervisor agrees
with the supervisor's reasonable suspicion, both will
then request that the employee accompany them and the
Union official to a private office and review their
suspicions with the employee. Based upon this
discussion, supervision may decide that an appropriate
drug or alcohol test is appropriate (e.g. it may not be
if prescription drugs are in use). Supervision will
then request that the employee sign a consent form and
accompany them to an appropriate testing site. At this
point, the same rules regarding positive test results,
repeat positive test results and refusal to consent to
a test as outlined in subparagraph B (ii) apply.
<PAGE>
C. Supervisory Training
Supervisors will be trained t o address drug and alcohol use
or abuse by employees, to recognize facts that give rise to
a reasonable suspicion, and to document facts and
circumstances to support a finding of reasonable suspicion.
Union officers, chief stewards and stewards will be invited
to attend the same training. Failure to receive such
training, however, shall not invalidate otherwise proper
reasonable suspicion testing.
D. Testing Procedures
(I) Chain of Custody
The testing laboratory will ensure that a proper "chain
of custody" is maintained throughout the testing
process. Both parties will agree upon an appropriate
testing site and testing laboratory.
(ii) Privacy Assured
Should any individual be subject to urine testing under
this policy, he/she shall be permitted to provide a
urine specimen in private, and in a test room, stall or
similar enclosure so that the employee is not observed
while providing the sample. Collection site personnel
of the same gender as the individual tested, however,
may observe the individual provide the urine specimen
when such personnel have reason to believe that the
individual may alter or substitute the specimen to be
provided.
(iii) Test Results
Upon receipt, the Company will share the results of any
test with the Union.
(iv) If an employee undergoes a test and the test results
are reported negative, the employee will be reimbursed
for any and all lost time incurred.
E. Non-Discriminatory Impact
Both the Company and the Union agree that this program
is not to be used to discriminate against or harass
employees.
<PAGE>
CONSENT FORM FOR ALCOHOL,
DRUG AND SUBSTANCE SCREENING
I hereby consent for the Company to collect blood, urine,
hair, breath or saliva samples from me and to conduct other
necessary medical tests to determine the presence or use of
alcohol, drugs or controlled substances. Further, I give my
consent for the release of the test results, and other relevant
medical information to authorized Company management for
appropriate review. I also understand that, if I refuse to
consent, I shall be terminated from employment.
AGREED TO: __________________________________
Signature
__________________________________
Date
__________________________________
Witness
__________________________________
Date
REFUSED: __________________________________
Signature
__________________________________
Date
__________________________________
Witness
__________________________________
Date
Reasons for
Refusal:
____________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
EXHIBIT F
WEEKLY INSURANCE PREMIUMS
Weekly employee contributions for coverage are as follows:
Coverage Duration of Agreement
Employee Only $8.00
Employee +1 $18.00
Employee +2 or more $24.00
Employee Life Insurance, AD&D - $25,000
<PAGE>
S & A benefits of $135 per week for 26 weeks in accordance with
the policy.
APPENDIX I
WEEKEND OVERTIME
Employees will be solicited by having supervision solicit the low
employee regardless of shift. This will assist in the
equalization of overtime in-department with multiple shifts.
There will be times when the need for overtime is not known until
Friday - in such instances the first shift will be solicited -
regardless of which shift is low. It is hoped that this will not
be a frequent occurrence and if it does happen the low shift will
be given the next opportunity to work the overtime. This
procedure makes no changes in the contract language - only in the
method used to solicit in-department overtime.
If any major problem needs to be addressed at any time, the two
parties will discuss the problem as soon as possible. If
resolution to the problem cannot be reached, the issue can be
handled through the grievance procedure.
APPENDIX II
LETTERS OF UNDERSTANDING
A. TEMPORARY UPGRADE TO SUPERVISORY POSITION
If an hourly employee works in a salaried position on a temporary
basis and the work is performed on an overtime basis the employee
will be charged as having worked the hours within his current
classification. This will prevent the problem of the employee
getting two opportunities to work the overtime.
B. JOB BIDS
Based on our understanding in contract negotiations, if an
employee bids on an opening and prior to being awarded the job
withdraws his bid, he shall not be charged with a voluntary
downgrade pursuant to Article V, Section 9 of the Labor
Agreement. If he withdraws his bid, after being awarded the job
however, he shall be charged with exercising his "voluntary
downgrade" and shall not be eligible to exercise his voluntary
downgrade again for six (6) months.
C. EMPLOYMENT PRACTICE
Any former Philips employee (who was actively working for Philips
on June 1, 1997 or laid off subject to recall) will be given
consideration for preferential hiring as a new employee. If
hired, seniority shall begin on the date of hire with Circuit
Systems of Tennessee, a Tennessee Limited Partnership. Selection
of applicants for hire will be at the discretion of the Company.
<PAGE>
AUTHORIZATION FOR ASSIGNMENT FOR CHECKOFF OF CONTRIBUTIONS TO
IUE-COPE To _____________________________________________________
Company Name
I hereby assign to IUE-COPE, from any wages earned or to be
earned by me as your employee, the sum of (check one)
o $1.00 o $1.50 o $2.00 o $2.50 o Other o
each and every month. I hereby authorize and direct you to
deduct such amounts from my pay and to remit same to IUE-COPE at
such times and in such manner as may be agreed upon between you
and the union at any time while this authorization is in effect.
This authorization is voluntarily made. I understand that
the signing of this authorization and the making of payments to
IUE-COPE are not conditions of membership in the union or of
employment with the company, that I have the right to refuse to
sign this authorization and contribute to IUE-COPE without any
reprisal, and the IUE-COPE will use the money it receives to make
political contributions and expenditures in connection with
federal, state and local elections, and that monies contribute to
IUE-COPE constitute a voluntary contribution to a joint fund-
raising effort by the IUE and AFL-CIO.
I also understand that the guidelines for contributions to
IUE-COPE set forth above are merely suggestions, that I can
contribute more or less than the guidelines suggest, and that the
union will not favor or disadvantage me based on the amount of my
contribution or my decision not to contribute.
Name (Print) _____________________________
Dated______________Soc.Sec.No._________________
Address __________________________________
Signature_______________________________________
City ____________ State ______ Zip _________
Local ______ Plant ___________ Dept. _______
IUE-COPE is an independent political committee created by the
IUE. This committee does not ask for or accept authorization from
any candidate and no candidate is responsible for its activities.
Contributions or gifts to IUE-COPE are not deductible as charitable
contributions for federal income tax purposes.
<PAGE>
<PAGE>
LOAN AND SECURITY AGREEMENT
Re: CIRCUIT SYSTEMS OF TENNESSEE, L.P.
THIS AGREEMENT ("Agreement") is made as of this 24th day of July,
1997, by and among CIRCUIT SYSTEMS OF TENNESSEE, L.P., a Tennessee
limited partnership ("Borrower"), CIRCUIT SYSTEMS OF TENNESSEE, INC., a
Tennessee corporation ("General Partner"), CIRCUIT SYSTEMS, INC., an
Illinois corporation ("CSI"; CSI and General Partner are sometimes
referred to individually as a "Guarantor'' and are collectively referred
to as "Guarantors") and AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO, a national banking association ("Lender").
R E C I T A L S:
CSI and Lender, as assignee of NBD Bank, are parties to that certain
Secured Revolving Credit Agreement dated as of April 30, 1993 (the
"Original CSI Loan Agreement"), as amended April 29, 1994, August 23,
1994, August 31, 1995, November 27, 1995, April 30, 1996 and August 30,
1996 (as amended hereinafter referred to as the "CSI Loan Agreement"),
pursuant to which Lender has made certain credit facilities available to
CSI (hereinafter the "Existing Circuit Systems Loan").
CSI is the sole limited partner of Borrower, and the sole
shareholder of General Partner, the sole general partner of Borrower.
Borrower and Guarantors have requested that Lender loan or advance
monies, extend credit, and/or extend other financial accommodations to or
for the benefit of Borrower.
Lender has agreed to provide a $2,270,000.00 secured term loan (the
"60-Month Term Loan"), a $2,800,000.00 secured term loan (the "12- Month
Term Loan"), and a $4,930,000.00 commitment to provide equipment lease
financing (the "Lease Financing Loan") to Borrower upon and subject to
the terms and conditions set forth herein.
ACCORDINGLY, in consideration of the foregoing, the mutual covenants
and agreements and of any extension of credit heretofore now or hereafter
made by Lender to Borrower, and subject to the terms and conditions
hereof, the parties agree as follows:
1. DEFINITIONS. When used herein, the following terms shall
have the following meanings:
1.1 Account(s). All of Borrower's now existing or hereafter
arising or acquired accounts, accounts receivable, and any other rights
to payment, however created, including, without limitation, any right to
payment for goods sold or leased, or for services rendered, whether
arising out of the sale of inventory or otherwise and whether or not it
has been earned by performance, and any and all notes, drafts,
acceptances, chattel paper, general intangibles and other obligations
arising out of or representing a right to payment, however created.
1.2 Account Debtor. Any person and/or entity obligated on an
Account.
<PAGE>
1.3 Affiliate. Any Person (a) directly or indirectly
controlling, controlled by or under common control with, Borrower, (b)
directly or indirectly owning or holding five percent (5%) or more of any
equity interest in Borrower or any general partner of Borrower, (c) five
percent (5%) or more of whose voting stock or other equity interest is
owned directly or indirectly or is held by Borrower or any partner of
Borrower. For the purpose of this definition, "control" means the
possession, directly or indirectly, of the power to direct or to cause
the direction of management and policies, whether through the ownership
of voting securities, by contract or otherwise.
1.4 Base Rate. The rate of interest announced or published
publicly from time to time by Lender as its prime or base rate of
interest.
1.5 Borrower's Liabilities. All obligations and liabilities
of Borrower to Lender (including, without limitation, all debts, claims,
and indebtedness under Article 3 hereof) under the Notes or under the
Master Lease, whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due
or payable, however evidenced, created, incurred, acquired or owing and
however arising, whether under this Agreement or the other Loan Documents
or by operation of law or otherwise.
1.6 Business Day. Any day of the year on which Lender is open
for business at its principal office in Chicago, Illinois.
1.7 Charges. All national, federal, state, county, city,
municipal and/or other governmental (or any instrumentality, division,
agency, body or department thereof, including without limitation the
Pension Benefit Guaranty Corporation) taxes, levies, assessments,
charges, liens, claims or encumbrances upon and/or relating to the
"Collateral"(as hereinafter defined), Borrower's Liabilities, Borrower's
business, Borrower's ownership and/or use of any of its assets, and/or
Borrower's income and/or gross receipts.
1.8 Closing. The date that the closing of the Loan shall
occur, whether or not any disbursement of the proceeds of the Loan shall
occur.
1.9 Collateral. Shall have the meaning set forth in Article 5.
1.10 Debt. Any and all contingent and non-contingent
Indebtedness howsoever evidenced and/or arising and of any nature
whatsoever.
1.11 Default Rate. See Paragraph 3.4.
<PAGE>
1.12 Equipment. Collectively, equipment (as defined in the
UCC) now owned or hereafter acquired by Borrower, including, without
limitation, all machinery, motor vehicles, trucks, trailers, vessels,
aircraft, rolling stock and all other tangible personal property (except
Inventory) and all parts thereof, and all additions and accessories
thereto and replacements thereof, including, without limitation, the
Equipment listed on Schedule 1.1(c) to the Philips Real Estate and Asset
Purchase and Sale Agreement. Said Equipment listed on said Agreement is
herein referred to as the "Philips Equipment."
1.13 ERISA. The Employee Retirement Income Security Act of
1974, as amended.
1.14 Event of Default. Any of the events described as an event
of default in Article 10 hereof or in the 12-Month Term Note, the 60-
Month Term Note, the Master Lease or any of the other Loan Documents.
1.15 Existing Litigation. The litigation disclosed by Borrower
on Exhibit A attached hereto.
1.16 General Intangibles. All choses in action, causes of
action, and other intangible property of Borrower of every kind and
nature now owned or hereafter acquired by Borrower, including, without
limitation, memberships, membership interests, corporate and other
business records, deposit accounts, inventions, designs, patents, patent
and trademark registrations and applications, trademarks, tradenames,
trade secrets, goodwill, copyrights, registrations, licenses, franchises,
deferred tax benefits, tax refund claims, prepaid expenses, computer
programs, covenants not to compete, customer lists and mailing lists,
membership lists, contract rights, indemnification rights, letters of
credit, guaranty claims, security interests, or other security held by or
granted to Borrower.
1.17 Guarantors. Circuit Systems, Inc., an Illinois
corporation, and Circuit Systems of Tennessee, Inc., a Tennessee
corporation.
<PAGE>
1.18 Indebtedness. All liabilities, obligations, and
indebtedness of any and every kind and nature, including, without
limitation, the Liabilities and all obligations to trade creditors,
whether heretofore, now or hereafter owing, arising, due, or payable from
Borrower to any Person and howsoever evidenced, created, incurred,
acquired, or owing, whether primary, secondary, direct, contingent,
fixed, or others. Without in any way limiting the generality of the
foregoing, Indebtedness specifically includes (i) all obligations or
liabilities of any Person that are secured by any lien, claim,
encumbrance, or security interest upon property owned by any Borrower,
even though such Borrower has not assumed or become liable for the
payment thereof; (ii) all obligations or liabilities created or arising
under any lease of real or personal property or conditional sale or other
title retention agreement with respect to property used or acquired by
Borrower, even though the rights and remedies of the lessor, seller or
lender thereunder are limited to repossession of such property; (iii)
obligations under direct or indirect guarantees in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire,
or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in clauses
(i) or (ii) above; (iv) all unfunded pension fund obligations and
liabilities; and (v) deferred taxes.
1.19 Interest Period. With respect to any LIBOR Rate Loan, a
period of one, two, three or six months commencing on a LIBOR Business
Day selected by Borrower pursuant to subsection 3.2 hereof. Each
Interest Period shall end on the day in the first, second, third or (if
applicable) sixth succeeding calendar month (as applicable) which
corresponds numerically to the beginning day of such Interest Period;
provided, however, that if there is no such numerically corresponding day
in such succeeding month, such Interest Period shall end on the last
LIBOR Business Day of such succeeding month. If an Interest Period would
otherwise end on a day which is not a LIBOR Business Day, such Interest
Period shall end on the next succeeding LIBOR Business Day, provided that
if such next succeeding LIBOR Business Day falls in a new month, then
such Interest Period shall end on the last LIBOR Business Day of the
month in which such Interest Period was scheduled to end.
1.20 Interest Rate. See Article 3.
1.21 Interest Rate Determination Date. The date on which
Lender determines the interest rate applicable to any LIBOR Rate Loan
pursuant to subsection 3.2 hereof which shall be the second LIBOR
Business Day prior to the first day of the Interest Period applicable to
such LIBOR Rate Loan.
1.22 Inventory. Any inventory, stock, materials or supplies of
any nature whatsoever, whether raw, finished or partially finished, and
possessed, held or owned by Borrower.
1.23 Lease Financing Loan. That certain loan not to exceed
Four Million Nine Hundred Thirty Thousand Dollars ($4,930,000.00), made
by Lender to Borrower hereunder, and as further described in Article 2.
<PAGE>
1.24 Lease Financing Loan Maturity Date. The earlier of (i)
the fifth anniversary of the Loan Opening Date, or (ii) the date upon
which Lender shall accelerate the due date of the Rent due under the
Master Lease, whether as a result of the occurrence of an Event of
Default or as otherwise permitted hereunder or in the Master Lease. On
the Lease Financing Loan Maturity Date, the Casualty Value of the
Equipment and any unpaid Rent, together with all unpaid costs, fees and
interests under the Master Lease, shall be due and payable in full.
1.25 Liabilities. Collectively, any and all obligations under
or in connection with this Agreement, the 60-Month Term Note, the 12-
Month Term Note, the Master Lease and the Loan Documents.
1.26 LIBOR Business Day. A day which is a Business Day and on
which dealings in United States dollar deposits may be carried out in the
London interbank market.
1.27 LIBOR Rate. For each Interest Period, a rate of interest
equal to
(a) the LIBOR Index Rate on the date which is two (2) LIBOR
Business Days prior to the first day of the Interest Period, as
published in The Wall Street Journal, if such rate is
available, and if the LIBOR Index Rate cannot be determined by
the method stated in (a), then (b) the rate of interest at
which deposits in U.S. Dollars in immediately available funds
are offered to Lender for the relevant Interest Period by major
banks in the interbank Eurodollar market from time to time in
the amount of the relevant LIBOR Rate Loan at 11:00 a.m.
(London time) on the day which is two (2) LIBOR Business Days
prior to the first day of such Interest Period,
divided by
(c) a number equal to 1.00 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of
reserve requirements in effect on the day which is two (2)
LIBOR Business Days prior to the beginning of such Interest
Period (including, without limitation, basic, supplemental,
marginal and emergency reserves under any regulations of the
Board of Governors of the Federal Reserve System or other
governmental authority having jurisdiction with respect
thereto, as now and from time to time in effect) for
Eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board) which are required
to be maintained by a member bank of the Federal Reserve
System.
(such rate to be adjusted to the nearest one-sixteenth of one percent
(1/16 of 1%) or, if there is no nearest one-sixteenth of one percent
(1/16 of 1%), to the next higher one-sixteenth of one percent (1/16 of 1%).
1.28 Loan. Collectively, the lending under the 60-Month Term
Loan, the 12-Month Term Loan and the Lease Financing Loan.
<PAGE>
1.29 Loan Documents. All agreements, instruments and
documents, including, without limitation, notes, guarantees, mortgages,
deeds of trusts, chattel mortgages, pledges, powers of attorney,
consents, assignments, contracts, notices, security agreements, leases,
financing statements, subordination agreements, trust account agreements,
and all other written matter whether heretofore, now, or hereafter
executed by or on behalf of Borrower or delivered to Lender with respect
to this Agreement, including, without limitation, the Notes and the
Master Lease.
1.30 Loan Expenses. As defined in Article 3.
1.31 Intentionally Deleted.
1.32 Loan Opening Date. The date on which the first
disbursement of all or any portion of the Loan is made by Lender to
Borrower.
1.33 Master Lease. The Master Lease in the form attached
hereto and made a part hereof as Exhibit B pursuant to which Lender shall
acquire the Philips Equipment, which Philips Equipment shall be listed on
the Schedule attached thereto, and for which Borrower shall pay the rent
for the term, and upon and subject to the terms and conditions, contained
therein.
1.34 Maturity Date. The 60-Month Term Loan Maturity Date, the
Lease Financing Maturity Date or the 12-Month Term Loan Maturity Date, as
applicable.
1.35 Net Operating Income. As of any date, the amount of net
operating income of Borrower determined in accordance with generally
accepted accounting principles.
1.36 Notes. Collectively, the 60-Month Term Note and the
12-Month Term Note.
1.37 Other Agreements. All agreements, instruments and
documents, including, without limitation, guaranties, mortgages, deeds of
trust, notes, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, subordination
agreements, financing statements and all other written matter heretofore,
now and/or from time to time hereafter executed by and/or on behalf of
Borrower and delivered to Bank.
1.38 Permitted Indebtedness. See Paragraph 7.2(b) and
Exhibit C attached hereto.
1.39 Permitted Liens. See Paragraph 6.1(f) and Exhibit D
attached hereto.
<PAGE>
1.40 Person. Any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, entity, party or
government (whether national, federal, state, county, city, municipal or
otherwise, including without limitation, any instrumentality, division,
agency, body or department thereof).
1.41 Securities. Any stock, shares, voting trust certificates,
bonds, debentures, options, warrants, notes or other evidences of
indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities"
or any certificate of interest, shares or participation in temporary or
interim certificates for the purchase or acquisition of, or any right to
subscribe to, purchase or acquire, any of the foregoing.
1.42 Sigmatron Stock. Shares of common stock of Sigmatron
International, Inc., a Delaware corporation.
1.43 Tangible Net Worth. The value of the total assets of
Borrower as determined in accordance with generally accepted accounting
principles after subtracting therefrom then aggregate amount of any
intangible assets of Borrower as determined in accordance with generally
accepted accounting principles, including ,without limitation, prepaid
expenses, other accounts receivable, goodwill, franchises, licenses,
patents, trademarks, trade names, copyrights and brand names, minus the
aggregate of all contingent and non-contingent liabilities of Borrower.
1.44 Unmatured Event of Default. Any event that has occurred
which with lapse of time or the giving of notice, or both, could
constitute an Event of Default hereunder.
1.45 12-Month Term Loan. That certain loan not to exceed Two
Million Eight Hundred Thousand Dollars ($2,800,000.00) made by Lender to
Borrower hereunder, and as further described in Article 2.
1.46 12-Month Term Loan Maturity Date. The earlier of (i) the
first anniversary of the Loan Opening Date, or (ii) the date upon which
Lender shall accelerate the due date of the 12-Month Term Loan, whether
as a result of the occurrence of an Event of Default or as otherwise
permitted hereunder or in the 12-Month Term Note. On the 12-Month Term
Loan Maturity Date, all of the outstanding principal under the 12-Month
Term Note, together with all unpaid costs, fees and interest thereon,
shall be due and payable in full.
1.47 12-Month Term Loan Note. The promissory note which
evidences the 12-Month Term Loan and which is made by Borrower payable to
the order of Lender in the principal amount of Two Million Eight Hundred
Thousand Dollars ($2,800,000.00) secured by, among other things, the
Collateral and delivered by Borrower to Lender in the form attached
hereto as Exhibit E.
<PAGE>
1.48 60-Month Term Loan. That certain loan, not to exceed Two
Million Two Hundred Seventy Thousand Dollars ($2,270,000.00), made by
Lender to Borrower hereunder, and as further described in Article 2.
1.49 60-Month Term Loan Maturity Date. The earlier of (i)
sixty (60) months following the Loan Opening Date, or (ii) the date upon
which Lender shall accelerate the due date of the 60-Month Term Loan,
whether as a result of the occurrence of an Event of Default or as
otherwise permitted hereunder or in the 60-Month Term Loan Note. On the
60-Month Term Loan Maturity Date, all of the outstanding principal under
the 60-Month Term Loan Note, together with all unpaid costs, fees and
interest thereon shall be due and payable in full.
1.50 60-Month Term Loan Note. The promissory note which
evidences the 60-Month Term Loan and which is made by Borrower payable to
the order of Lender in the principal amount of Two Million Two Hundred
Seventy Thousand Dollars ($2,270,000.00), secured by, among other things,
the Collateral and delivered by Borrower to Lender in the form attached
hereto as Exhibit F.
All other terms contained in this Agreement, unless the context
indicates otherwise, shall have the meanings provided for under the
Uniform Commercial Code ("UCC") of the State of Illinois to the extent
the same are used or defined therein. Any accounting terms used in this
Agreement which are not specifically defined shall have the meanings
customarily given them in accordance with generally accepted accounting
principles.
2. LOAN: GENERAL TERMS.
2.1 Philips Acquisition. Pursuant to the terms of that
certain Real Estate and Asset Purchase and Sale Agreement (the "Philips
Real Estate and Asset Purchase and Sale Agreement" ) made and entered
into as of July 24, 1997 by and between Borrower and Philips Electronics
North America Corporation, a Delaware corporation ("Philips"), Borrower
is acquiring certain assets of Philips described therein, including,
without limitation, that certain printed circuit board manufacturing
facility owned by Philips and located at 1515 Industrial Road,
Greenville, Green County, Tennessee, consisting of a building containing
approximately 93,000 square feet, located on approximately ten (10) acres
(the "PCB Facility") and certain equipment, machinery, furniture,
furnishings and other tangible personal property owned by Philips and
used in connection with the operations at the PCB Facility, including the
property identified in Schedule 1.1(C) to the Philips Real Estate and
Asset Purchase and Sale Agreement (the "Philips Equipment").
<PAGE>
2.2 12-Month Term Loan. Subject to the terms and conditions
hereof, Lender agrees to make the 12-Month Term Loan available to
Borrower on the Loan Opening Date, upon the conditions of disbursement
set forth herein. The proceeds of the 12-Month Term Loan shall be used
by Borrower only for the purchase by Borrower of the Real Property and
Improvements, each as defined in the Philips Real Estate and Asset
Purchase and Sale Agreement.
2.3 60-Month Term Loan. Subject to the terms and conditions
hereof, Lender agrees to make the 60-Month Term Loan available to
Borrower on the Loan Opening Date, upon the conditions of disbursement
set forth herein. The proceeds of the 60-Month Term Loan shall be used
by Borrower only for the acquisition by Borrower of the assets of Philips
described in the Philips Real Estate and Asset Purchase and
Sale Agreement.
2.4 Lease Financing Loan. Subject to the terms and conditions
hereof, Lender agrees to make the Lease Financing Loan available to
Borrower on the Loan Opening Date, upon the conditions of disbursement
set forth herein. The Lease Financing Loan shall be used by Lender to
acquire the Philips Equipment and lease the Philips Equipment to
Borrower, pursuant to the terms and upon the conditions set forth in a
Master Lease Agreement to be entered into between Borrower and Lender on
or prior to the Loan Opening Date, which Master Lease Agreement shall be
in the form attached hereto and made a part hereof as Exhibit B (the
"Master Lease Agreement").
2.5 All Advances to Constitute One Loan. All advances by
Lender to Borrower under the Loan shall constitute one loan and one
general obligation secured by Lender's security interest in all the
Collateral and by all other security interests, liens, claims, and
encumbrances heretofore, now, or at any time hereafter granted by
Borrower and/or any Guarantor to Lender. Borrower agrees that all of
the rights of Lender set forth in this Agreement shall apply to any
modification of or supplement to this Agreement.
2.6 Closing. The closing of the Loan to be made hereunder
shall take place at the offices of Meltzer, Purtill & Stelle, 1515 East
Woodfield Road, Suite 250, Schaumburg, Illinois 60173, at 9:00 a.m. on
July 24, 1997, or such other time or place as the parties may agree in
writing ("Closing") and shall be deemed to have occurred when the Notes
are delivered by Borrower to Lender.
2.7 Representation and Warranty. Each loan or any
disbursement made by Lender to Borrower hereunder shall constitute an
automatic warranty and representation by Borrower to Lender that there
does not then exist an Event of Default or any Unmatured Event of Default
hereunder or under any of the other Loan Documents.
2.8 Duration of Agreement. This Loan Agreement shall be in
effect until all of Borrower's Liabilities have been paid in full and any
and all commitments of Lender to make loans hereunder have terminated.
<PAGE>
3. INTEREST/FEES/COSTS. As consideration for Lender's agreement
to make the Loan to Borrower, Borrower shall be obligated to pay to
Lender certain fees, interest, costs and expenses as provided for herein
or in any of the Loan Documents, including, without limitation, the
following:
3.1 Loan Fee. Intentionally Deleted.
3.2 Interest on the 60-Month Term Loan and the 12-Month Term Loan.
(i) So long as no Event of Default or Unmatured Event of Default
has occurred, the 60-Month Term Loan and the 12-Month Term Loan
and all other obligations hereunder shall bear interest from
the date such Loans are made or such other obligations are
incurred until paid in full at a rate per annum (meaning 360
days) at rates (the "Interest Rate") determined by reference
to the Base Rate or the LIBOR Rate, as follows:
(a) the 60-Month Term Loan shall bear interest either (x) at a
floating rate equal to the Base Rate, or (y) at a rate
equal to the applicable LIBOR Rate plus one and three-
quarters percent (1.75%);
(b) the 12-Month Term Loan shall bear interest either (x) at a
floating rate equal to the Base Rate, or (y) at a rate
equal to the applicable LIBOR Rate plus one and three-
quarters percent (1.75%); and
(c) any other obligations hereunder shall bear interest at a
floating rate equal to the Base Rate.
(ii) The basis for determining the interest rate for all or part of
60-Month Term Loan and the 12-Month Term Loan may be changed
from time to time pursuant to this subsection 3.2. If, on any
day any part of the 60-Month Term Loan or the 12-Month Term Loan
is outstanding with respect to which notice has not been timely
received by Lender in accordance with this Agreement specifying
that the LIBOR Rate shall be applicable thereto, then for that day
such Loan (or portion thereof) shall bear interest at the applic-
able rate specified in subsection 3.2(i) determined by reference
to the Base Rate. Loans bearing interest at rates determined by
reference to the Base Rate are herein sometimes referred to as
"Prime Rate Loans" and Loans bearing interest at rates determined
by reference to the LIBOR Rate are herein sometimes referred to as
LIBOR Rate Loans.
<PAGE>
(iii) Borrower may elect from time to time to convert all or
part of the outstanding principal balance of any Loan from a
Prime Rate Loan to a LIBOR Rate Loan by giving Lender at least
three (3) LIBOR Business Days' prior irrevocable notice of such
an election; provided that no Loan may be converted to a LIBOR
Rate Loan while an Unmatured Event of Default or an Event of
Default has occurred and is continuing. Borrower may also
elect from time to time to continue any outstanding LIBOR Rate
Loan (whether for a similar or a different Interest Period)
upon the expiration of the Interest Period then applicable
thereto by giving Lender at least three (3) LIBOR Business
Days' prior irrevocable notice of such continuation of such
LIBOR Rate Loan; provided that no Loan may be continued as a
LIBOR Rate Loan while an Unmatured Event of Default or an Event
of Default has occurred and is continuing.
(iv) Each notice of election to convert to a LIBOR Rate Loan or to
continue a LIBOR Rate Loan shall be signed by the Chief
Financial Officer of the General Partner and shall specify
(a) the proposed conversion or continuation date; (b) the
amount of the Loan to be converted or continued; (c) the nature
of the proposed conversion or continuation; and (d) the
requested Interest Period, which shall be one (1), two (2) or three
(3) months, or, if then available, six (6) months. Each such
notice shall also certify that no Unmatured Event of Default or
Event of Default has occurred and is then continuing.
(v) On the date upon which each conversion to a LIBOR Rate Loan or
continuation of a LIBOR Rate Loan is being made pursuant to a
notice given in accordance with this Agreement, Lender shall
take such actions as are necessary to effect such conversion or
continuation. Subject to the limitations set forth in this
subsection 3.2 and in the definition of Interest Period, all or
any part of the Loans may be converted into LIBOR Rate Loans or
continued as LIBOR Rate Loans as provided herein, provided that
partial conversions or continuations of any Loan shall be in
the minimum amount of $1,000,000, and, if in excess thereof, in
integral multiples of $1,000,000.
3.3 Lease Financing Payment Factor. Rent payable under the
Master Lease shall be fixed at Closing based upon an amortization not in
excess of seven (7) years and a payment factor determined by Lender.
<PAGE>
3.4 Default Rate/Late Charge. From and after such time as an
Event of Default occurs under this Agreement or any of the Loan
Documents, or if either Loan is not paid in full on or prior to its
Maturity Date, the unpaid balance outstanding under the Loan shall bear
interest at an interest rate equal to the applicable Interest Rate, plus
three percent (3%) (the "Default Rate"). Borrower further agrees to pay a
"Late Charge" of five percent (5%) of any amount due hereunder if
such amount is paid more than ten (10) days after the due date thereof,
to cover the extra expense involved in handling delinquent payments.
This provision shall not be deemed to excuse a late payment or be deemed
a waiver of any other rights Lender may have, including the right to
declare the entire principal and interest immediately due and payable.
3.5 Fees and Costs. Borrower shall pay all expenses, charges,
costs and fees of the Loan, including, without limitation, Lender's
reasonable attorneys' fees, in connection with the negotiation,
documentation, administration, servicing and enforcement of the Loan, and
any fees and costs charged by an appraiser, the cost of any and all
credit checks run by Lender, including UCC, tax and judgment lien
searches, all recording fees and charges, all title insurance charges and
premiums, escrow fees, survey costs and the costs of any bonds required
by Title Company, and any and all other costs, expenses, charges, and
fees referred to in or necessitated by the terms of this Agreement
(collectively, the "Loan Expenses"). The Loan Expenses shall be paid by
Borrower promptly upon Lender's demand or, alternatively, may be paid by
Lender at any time by disbursement of proceeds of the Loan. The Loan
Expenses shall be payable by Borrower regardless of whether there shall
be any disbursements of the Loan. If not paid within ten (10) days
following Lender's demand, the Loan Expenses shall bear interest until
the date paid by Borrower at the Default Rate.
3.6 Funding Losses. In the event that Borrower fails to
borrow any LIBOR Rate Loan, or makes any payment on a LIBOR Rate Loan on
a date other than the last day of the applicable Interest Period,
Borrower shall pay Lender, within ten (10) days following Lender's demand
therefor, any resulting loss or expense, including, without limitation,
any amount incurred in obtaining, liquidating or employing deposits from
third parties acquired or arranged to fund such LIBOR Rate Loan.
4. PAYMENTS; APPLICATION; OFFSET.
4.1 Payments. All payments of principal or interest on the
60-Month Term Note and the 12-Month Term Note, all payments of rent under
the Master Lease and all payments of any other fees and costs due
hereunder shall be made in immediately available funds. All such
payments shall be made to Lender at its principal office in Chicago,
Illinois, not later than 2:00 p.m., Chicago time, on the date due, and
funds received after that hour shall be deemed to have been received by
Lender on its next following Business Day.
<PAGE>
4.2 Loan Repayment/12-Month Term Loan. The 12-Month Term Loan
shall be payable in monthly payments equal to the sum of (a) principal in
an amount equal to $15,555.56 plus (b) accrued interest at the applicable
Interest Rate, in arrears, due and payable commencing on the first day of
the month following the month in which disbursement of the proceeds of the
12-Month Term Loan shall occur and continuing on the first day of the
each month thereafter, through and including the month in which the 12-
Month Term Loan Maturity Date occurs, at which time the outstanding
principal balance and all the then accrued and unpaid interest on the
principal balance of the 12-Month Term Loan shall be due and payable.
4.3 Loan Repayment/60-Month Term Loan. The 60-Month Term Loan
shall be payable in monthly payments equal to the sum of (a) $37,833.33
of principal, and (b) accrued interest at the applicable Interest Rate,
in arrears, due and payable commencing on the first day of the month
following the month in which the disbursement of the proceeds of the
60-Month Term Loan shall occur, and continuing on the first day of each
month thereafter, through and including the 60-Month Term Loan Maturity
Date, at which time the outstanding principal balance and all then
accrued and unpaid interest on the principal balance of the Loan shall be
due and payable.
4.4 Maturity Dates. The unpaid principal balance of the
12-Month Term Loan and all accrued and unpaid interest thereon and any
fees and costs payable by Borrower hereunder with respect thereto, if not
sooner paid or declared to be due in accordance with the terms hereof,
shall be due and payable in full on the 12-Month Term Loan Maturity Date.
The unpaid principal balance of the 60-Month Term Loan and all accrued
and unpaid interest thereon and any fees and costs payable by Borrower
with respect thereto, if not sooner paid or declared to be due in
accordance with the terms hereof, shall be due and payable in full on the
60-Month Term Loan Maturity Date.
4.5 Statement of Account. Lender shall provide Borrower with
a statement of account relating to the Loan on a monthly basis. Each
such statement of account shall be presumed correct and accurate and
shall, except for Lender's right to reapply payments, constitute an
account stated between Borrower and Lender, unless thereafter waived in
writing by Lender or unless, within thirty (30) days after Borrower's
receipt thereof, Borrower delivers to Lender, by certified mail, written
objection thereto specifying the error or errors contained therein.
<PAGE>
4.6 Prepayment. The Borrower may prepay any principal
outstanding under the 60-Month Term Loan or the 12-Month Term Loan, at
any time, and provided Borrower extends one (1) business day's prior
written notice to Lender. Any prepayment of all or any portion of the
outstanding principal balance under the Notes shall include all fees,
costs and interest accrued to the date of such prepayment. Provided that
at the time of any such prepayment, an Event of Default or Unmatured
Event of Default exists hereunder, any prepayment of the Loan may be
applied by Lender at its discretion to either the 12-Month Term Loan
and/or the 60-Month Term Loan. In the event that at any time during the
term of the Loan, Borrower and Lender agree to fix the rate of all or any
portion of the Loan, as a condition of such agreement by Lender, Lender
shall be entitled to charge, and Borrower shall pay, Lender's standard
yield maintenance prepayment premium in connection with the prepayment of
any such fixed rate loan.
4.7 Offset. In addition to and not in limitation of all
rights of offset that Lender or other holder of the Notes may have under
applicable law, Lender or other holder of such Note shall, upon the
occurrence of any Event of Default, or any Unmatured Event of Default,
have the right to appropriate and apply to the payment of the Notes, any
and all balances, credits, deposits, accounts or monies of any of the
Borrower then or thereafter with Lender or other holder.
4.8 Final Release. At such time as Borrower's Liabilities
have been fully paid, Borrower has complied with all requirements of the
Loan Documents, and there is no obligation of Lender to make additional
disbursements of the Loan, then the Notes shall be canceled and returned
to Borrower and all other Loan Documents shall be terminated and any
liens created thereunder shall be released.
4.9 Partial Release. Provided that there is then in existence
no Event of Default or Unmatured Event of Default, Lender agrees to
release the Mortgage and Assignment of Rents at such time as the 12-Month
Term Loan is paid in full. Provided that there is then in existence no
Event of Default or Unmatured Event of Default, Lender agrees to release
its security interest in the Sigmatron Stock at such time as the 60-Month
Term Loan is paid in full.
<PAGE>
5. COLLATERAL SECURITY.
5.1 Security for Existing Circuit Systems Loan. Concurrently
with or prior to the making of the initial disbursement of any of the
proceeds of the Loan, Borrower shall have executed, delivered, granted
and/or caused to be executed, delivered and/or granted, as security for
the payment and performance of the Existing Circuit Systems Loan, a
continuing security interest in, and lien on, all of Borrower' right,
title and interest in and to the following:
(a) all Accounts;
(b) all Inventory;
(c) all Equipment except for the Philips Equipment;
(d) General Intangibles; and
(e) to the extent not included in subparagraphs (a), (b), (c),
and (d) of this Paragraph 5.1, all goods, chattels, machinery,
equipment, inventory, accounts, chattel paper, notes, contract
rights, general intangibles, furniture, fixtures and property of
every kind and nature, wherever located, now or hereafter belonging
to Borrower or in which Borrower has an interest and any and all
products and/or proceeds thereof.
To evidence the grant of security interests to Lender, Borrower shall
execute the Seventh Amendment to Secured Revolving Credit Agreement,
substantially in the form attached hereto as Exhibit G and the Continuing
Security Agreement, substantially in the form attached hereto as Exhibit
H, and from time to time, until the Existing Circuit Systems Loan is paid
in full, Borrower shall deliver to Bank such financing statements,
assignments, security agreements, deeds or other documents as may be
reasonably requested by Lender to further evidence, perfect, confirm or
facilitate the enforcement of the above-described security interests.
<PAGE>
5.2 Collateral. As collateral for the Loan, Borrower shall
have executed, granted and delivered, or caused to be executed, granted
and delivered to Lender, the following:
(a) first and prior Deed of Trust with respect to the PCB Facility;
(b) first and prior Assignment of Leases and Rents with respect to
the PCB Facility;
(c) first and prior security interest in 400,000 shares of
Sigmatron Stock, represented by Stock Certificate Nos. SI 1991,
SI 1992, SI 1993 and SI 1994;
(d) first and prior security interest in the Process ID License
Agreement and the PCB Purchase Agreement; and
(e) A security interest, junior to the security interest described
in Section 5.1 above, in all of Borrower's property, wherever
located, whether or now or hereafter existing, owned, licensed,
leased (to the extent of Borrower's leasehold interest therein)
consigned (to the extent of Borrower's ownership interest
therein), arising and/or acquired, including, without
limitation all of Borrower's (i) Accounts, chattel paper, tax
refunds, contract rights, leases, leasehold interests, letters
of credit, instruments, documents, documents of title, patents,
copyrights, trademarks, trade names, licenses, goodwill,
beneficial interest in general intangibles; (ii) all goods
whose sale, lease or other disposition by Borrower have given
rise to Accounts and have been returned to or repossessed or
stopped in transit by Borrower; (iii) all investment property,
including but not limited to certificated and uncertificated
Securities; (iv) goods, including without limitation all
consumer goods, machinery, Equipment, farm products, fixtures
and inventory; (v) liens, guaranties, and other rights and
privileges pertaining to any of the Collateral; (vi) monies,
reserves, deposits, deposit accounts and interest or dividends
thereon, cash or cash equivalents; (vii) all property now or at
any time or times hereafter in the possession or under the
control of Lender or its bailee; (viii) all accessions to the
foregoing, all litigation proceeds pertaining to the foregoing
and all substitutions, renewals, improvements and replacements
of and additions to the foregoing; and (ix) all books, records
and computer records in any way relating to the above-described
collateral (all of the above-described property herein referred
to as the "Collateral").
<PAGE>
5.3 Deliveries; Further Assurances. The Borrower agrees that
it will, at its sole expense (i) upon request by Lender, within five (5)
days of demand, deliver or cause to be delivered to Lender in due form
for transfer, chattel paper, instruments and documents of title, if any,
at any time representing all or any of the Collateral, (ii) without
request by Lender, cause Lender's security interest under the Loan
Documents to be at all times duly noted on any certificate of title
issuable with respect to any of the Collateral and forthwith deliver or
cause to be delivered to Lender each such certificate of title, and (iii)
upon request of Lender, forthwith execute and deliver or cause to be
executed and delivered to Lender, in due form for filing or recording
(and pay the cost of filing or recording the same in all public offices
deemed necessary by Lender) such assignments, security agreements,
mortgages, deeds of trust, pledge agreements, warehouse receipts, bailee
letters, consents, waivers, financing statements, stock or bond powers,
and other documents, and do such other acts and things, all as Lender may
from time to time reasonably request to establish and maintain to the
reasonable satisfaction of Lender a valid perfected security interest in
all of the Collateral (free of all other liens, claims and rights of
third parties whatsoever except the Permitted Liens) to secure payment of
the Loan. The Borrower irrevocably hereby makes, constitutes and
appoints Lender (and all other persons designated by Lender for that
purpose) as the Borrower's true and lawful attorney (and agent-in-fact)
to sign the name of the Borrower on any such agreements, instruments and
documents referred to in clause (iii) above and to deliver such
agreements, instruments and documents to such persons as Lender in its
sole discretion may elect.
5.4 Verification of Collateral; Inspection; Audit. Any of
Lender's officers, employees or agents shall have the right, at any
reasonable time hereafter, during Borrower's business hours in Lender's
name or in the name of Borrower, to verify the validity, amount or any
other matter relating to any of the Collateral by mail, telephone or
otherwise. Lender (by any of its officers, employees or agents) shall
have the right, at any time during Borrower's usual business hours and
upon not less than three (3) business day's prior notice, to inspect the
Collateral, all records related thereto (and to make extracts from such
records) and the premises upon which any of the Collateral is located,
and the right, at any reasonable time, to discuss Borrower's affairs and
finances and the Collateral with any attorney, accountant, lessee,
Account Debtor or other creditor of Borrower. Costs incurred by Lender
in connection with any audit of the Collateral shall be paid by Lender if
there does not then exist an Event of Default (as defined herein).
Notwithstanding the foregoing, the above restrictions as to reasonable
times during business hours and prior notice shall not apply if an Event
of Default or Unmatured Event of Default has occurred or is continuing.
5.5 Records and Schedules. Borrower shall keep accurate and
complete records of its Accounts, Inventory and other Collateral.
<PAGE>
5.6 Proceeds of Collateral. Borrower shall not, without the
prior written notice to Lender, sell, lease, grant a security interest
in, or otherwise dispose of or encumber the Collateral, or any part
thereof excluding individual sales, dispositions, trade-ins or
replacements of Collateral in the ordinary course of business. Upon any
disposition of Collateral described in clauses (a) through (d) inclusive
of paragraph 5.2 above, Borrower shall deliver all the proceeds thereof
to Lender to be applied to the repayment of the Liabilities provided,
however, that Lender may waive its rights hereunder if no Event of
Default or Unmatured Event of Default has occurred or is continuing under
this Agreement, either of the Notes, or the Loan Documents.
6. WARRANTIES AND REPRESENTATIONS.
6.1 Warranties and Representations of the Borrower. To induce
Lender to enter into this Agreement and to make the Loan hereunder,
Borrower and Guarantors each represent and warrant to Lender that:
(a) Organization. The Borrower is a limited partnership duly
organized, validly existing and in good standing under the laws of
the State of Tennessee and qualified or licensed to do business in
good standing in all states in which the laws thereof require
Borrower to be so qualified and/or licensed, except where the
failure to be so qualified could not reasonably be expected to have
a material adverse effect on Borrower, the Collateral or Borrower's
business. The General Partner is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Tennessee and qualified or licensed to do business and in good
standing in all states in which the laws thereof require General
Partner to be so qualified and/or licensed, except where the failure
to be so qualified could not reasonably be expected to have a
material adverse effect on the Borrower, the Collateral, Borrower's
business or General Partner. CSI is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Illinois and qualified or licensed to do business and in good
standing in all states in which the laws thereof require CSI to be
so qualified and/or licensed, except where failure to be so
qualified could not reasonably be expected to have a material
adverse effect on the Borrower, the Collateral, Borrower's business
or CSI. General Partner is the sole general partner of Borrower,
holding a 1% partnership interest therein, and CSI is the sole
limited partner of Borrower, holding a 99% partnership interest
therein. CSI is the sole shareholder of General Partner holding
100% of the Securities in General Partner.
<PAGE>
(b) Authorization; No Conflict. The execution and delivery of
this Agreement, the Notes and the Loan Documents, any disbursements
of the Loan hereunder and the performance by the Borrower, General
Partner and CSI of their respective obligations under this
Agreement, the Notes and the Loan Documents are within the each of
their respective powers, have been duly authorized by all necessary
action, and do not and will not contravene or conflict with any
provision of law or of the covenants and provisions of the Agreement
of Limited Partnership establishing Borrower or of any other
agreement binding upon the Borrower, the articles of incorporation
establishing General Partner, its bylaws or any other agreement
binding upon General Partner, or the articles of incorporation
establishing CSI, its bylaws or any other agreement binding upon
CSI.
(c) Validity and Binding Nature. This Agreement is, and the
12-Month Term Note, the 60-Month Term Note, and the Loan Documents,
when duly executed and delivered, will be, legal, valid and binding
obligations of the Borrower, General Partner and CSI, as the case
may be, enforceable against each such party in accordance with their
respective terms. As security for the Liabilities, Lender has a
valid perfected security interest in all Collateral.
(d) Financial Statements. All balance sheets, statements of
operations, consolidated and/or unconsolidated statements, audited
or otherwise, and other financial data (other than forecasts and/or
projections) which have been or shall hereafter be furnished to
Lender for purposes of or in connection with this Agreement and/or
the making of the Loan (collectively, "Financials"), do and will
present fairly the financial condition of the entities involved as
of the date thereof and the results of their operations for the
period(s) covered thereby. The Financials of Borrower and each
Guarantor, copies of which have been furnished to Lender, are
complete in every respect, have been prepared in conformity with
generally accepted accounting principles applied on a basis
consistent with that of the financial statements issued during the
preceding fiscal year of such entity, and accurately present the
financial condition of such entity, and as at such dates, and the
results of its operations for the periods then ended, and since such
dates there has been no material adverse change in any financial
conditions or operations contained therein.
<PAGE>
(e) Litigation; Contracts and Contingent Liabilities. Except
as set forth on Exhibit A attached hereto, no litigation (including,
without limitation, derivative actions), arbitration proceedings or
governmental proceedings are pending or threatened against Borrower
or any Guarantor which would, if adversely determined, materially
and adversely affect the financial condition or continued operations
of Borrower or such Guarantor. Borrower and Guarantors each has no
material contingent liabilities not provided for or disclosed in the
Financials and the Borrower is not a party to any agreement or
subject to any charge, restriction or other matter materially and
adversely affecting its business, property, assets, operations or
condition, financial or otherwise, and is not a party to any labor
dispute, and there are no pending or threatened strikes or walkouts
relating to any labor contract.
(f) Liens. Except for the security interests held by Lender
and the Permitted Liens as set forth on Exhibit D hereto, none of
the Collateral, or any of the assets of Borrower is subject to any
mortgage, pledge, title retention lien, or other lien, encumbrance
or security interest, except (i) inchoate liens for current taxes
not delinquent or taxes being contested in good faith and by
appropriate proceedings in which a bond has been posted for the
amount contested; and (ii) liens arising in the ordinary course of
business for sums not due or sums being contested in good faith and
by appropriate proceedings, but not involving any deposits or
advances or borrowed money or the deferred purchase price of
property or services.
(g) Perfection and Priority of Collateral. Except for the
Permitted Liens, no financing statement (other than any which may
have been filed on behalf of Lender) covering any of the Collateral
is on file in any public office; Borrower is and will be the lawful
owner of all of its Collateral, and CSI is and will be the lawful
owner of the Sigmatron Stock, each free and clear of all liens,
claims, and encumbrances whatsoever, except for liens in favor of
Lender; and Lender has or, upon the execution of the Loan Documents,
will have, and will continue to have, as security for the
Liabilities, a valid and perfected lien on, and security interest
in, all of the Collateral, free and clear of all other liens,
claims, encumbrances and rights of third parties whatsoever, except
for the Permitted Liens.
(h) Existing Obligations. To Borrower's knowledge, Borrower
is not in violation of any applicable statute, regulation or
ordinance of any governmental entity, or any agency thereof, in any
respect materially and adversely affecting any of the Collateral or
its business, property, assets, operations or condition, financial
or otherwise, and the Borrower is not in default with respect to any
indenture, loan agreement, mortgage, lease, deed or other similar
agreement relating to borrowing of monies to which it is a party or
by which it is bound. The Borrower has not guaranteed the
obligation of any other person or entity.
<PAGE>
(i) Employee Benefit Plans. Any employee benefit plan as to
which Borrower may have any liability, complies in all material
respects with all requirements of applicable law and regulations.
Borrower has met all applicable minimum funding requirements in
respect of its plans, and all required contributions to any pension,
profit-sharing and other employee benefit plan have been made or
accrued. No Reportable Event (as defined in Paragraph 4043(b) of
ERISA) has occurred, and to the best knowledge of the Borrower, is
not threatened or about to occur with respect to any Employee
Benefit Plan (as defined in ERISA), and no notice of termination has
been filed by the plan administrator pursuant to Paragraph 4041 of
ERISA, or issued by the Pension Benefit Guaranty Corporation
("PBGC") pursuant to Section 4042 of ERISA with respect to any
pension plan subject to ERISA. The present value of all benefits
vested under all Employee Benefit Plans maintained for the benefit
of employees of the Borrower does not exceed the value of the assets
of such plans allocable to such vested benefits. The Borrower is
not a party to, bound by or subject to any Multiemployer Plan (as
that term is defined in Section 4001(a) (3) of ERISA). The Borrower
is not (i) engaged in any Prohibited Transaction (as defined in Sec-
tion 406 of ERISA, and Section 4975 of the Internal Revenue Code of
1986, as amended; (ii) a fiduciary for investments with respect to
any plan existing for the benefit of persons other than employees;
or (iii) completely or partially withdrawn from any Multiemployer
pension plan so as to incur liability under the Multiemployer
Pension Plan Amendments Act of 1980.
(j) Various Regulations. Borrower's execution and delivery
of this Agreement and any of the Loan Documents do not directly or
indirectly violate or result in a violation of Section 7 of the
Securities and Exchange Act of 1934, as amended, or any regulations
issued pursuant thereto, including, without limitation Regulations
G, U, T and X of the Board of Governors of the Federal Reserve
System, and Borrower does not own or intend to purchase or carry any
"margin security" as defined in said Regulations.
(k) Principal Place of Business. The chief executive office
and principal place of business of the Borrower, and the offices
where Borrower maintains its books and records including, without
limitation, computer programs, printouts, and other computer
materials and records, concerning any of the Collateral shall be
deemed to be 1515 Industrial Drive, Greeneville, Tennessee 37745.
<PAGE>
(l) Tax Returns; Reports. Borrower has filed, or will file
pursuant to any applicable extensions duly granted, all federal,
state and local tax returns and other reports it or he, as
applicable, is required by law to file and has paid, to the extent
due and payable, meaning all national, federal, state, county, city,
municipal and/or other governmental (or any instrumentality,
division, agency, body or department thereof, including without
limitation the Pension Benefit Guaranty Corporation) taxes, levies,
assessments, charges, liens, claims or encumbrances upon and/or
relating to the Collateral, the Liabilities, Borrower's employees,
payroll, income and/or gross receipts, Borrower's ownership and/or
use of any of its assets and any other aspect of Borrower's
business.
(m) Names. Borrower has not, during the preceding five (5)
years, been known as or used any other corporate or fictitious name,
except as disclosed herein or as reflected in Borrower's Certificate
of Limited Partnership as filed with the Secretary of State of the
State of Tennessee.
(n) Solvency; Capital. The Borrower now has sufficient
capital to carry on all businesses and transactions in which it now
engages or is about to engage, is now solvent and will continue to
be solvent after the creation of the security interest in the
Collateral by this Agreement, and is able to pay its debts as they
mature, and if requested by Lender, Borrower shall deliver to Lender
an affidavit regarding its solvency and certain related matters in
form reasonably acceptable to Lender's counsel. Each Guarantor now
has sufficient capital to carry on all of its respective businesses
and transactions in which such Guarantor now engages or is about to
engage, is now solvent and will continue to be solvent after the
creation of the security interest in the Collateral by this
Agreement, and each is able to pay its respective debts as they
mature, and if requested by Lender, Guarantors shall each deliver to
Lender an affidavit regarding its solvency and certain related
matters in form reasonably acceptable to Lender's counsel.
(o) Solvency; Personnel. Borrower has sufficient personnel
and possesses adequate assets to continue to conduct its business.
(p) Use of Proceeds. Borrower's use of the proceeds of any
advances and re-advances made by Lender pursuant to this Agreement
are, and shall continue to be, legal and proper partnership uses
duly authorized by the Board of Directors of its general partner and
such uses are consistent with all applicable laws and statutes, as
in effect as of the date hereof.
6.2 Survival of Warranties and Representations. All representations
and warranties of Borrower contained in this Agreement and the Loan
Documents shall survive the execution, delivery and acceptance thereof
by the parties thereto and the closing of the transactions described
therein or related thereto.
<PAGE>
7. FINANCIAL COVENANTS.
7.1 Affirmative Covenants. Until all obligations of the
Borrower hereunder, under the Notes, the Master Lease and under the Loan
Documents are paid and performed in full, Borrower and Guarantors agree
that, unless at any time Lender shall otherwise expressly consent in
writing, each of Borrower and Guarantors shall:
(a) Books of Account and Financials. Keep books of account
and prepare financial statements and shall cause to be furnished to
Lender the following (all of the foregoing and following to be kept
and prepared in accordance with generally accepted accounting
principals applied on a consistent basis, unless Borrower's or any
Guarantor's, as the case may be, certified public accountants concur
in any changes therein and such changes are disclosed to Lender and
are consistent with then generally accepted accounting principles)
such data and information (financial and otherwise) as Lender, from
time to time, may reasonably request, bearing upon or related to the
PCB Facility, Borrower's financial condition or results of
operations: (A) as soon as available but not later than ninety (90)
days after the close of each fiscal year of Borrower, financial
statements, which shall include, but not be limited to, balance
sheets, income statements and statements of cash flow of Borrower
prepared in accordance with generally accepted accounting
principles, consistently applied, audited by a firm of independent
certified public accountants selected by Borrower and acceptable to
Lender; (B) as soon as available but not later than thirty (30) days
after the end of each month hereafter, financial statements of
Borrower certified by Borrower to be prepared in accordance with
generally accepted accounting principles fairly present the
financial position and results of operations of Borrower for such
period; (C) schedule of accounts payable and accounts receivable by
the 15th of every month or otherwise as Lender may direct; and (D)
such other data and information (financial and otherwise) as Bank,
from time to time, may request.
(b) Notice of Default, Adverse Information, Litigation.
Forthwith upon learning of the occurrence of any of the following,
furnish to Lender written notice thereof, describing the same, and
the steps being taken by Borrower with respect thereto: (A) the
occurrence of an Event of Default or an Unmatured Event of Default;
(B) the institution of, or any adverse determination in, any litiga-
tion, arbitration proceeding or governmental proceeding, pending or
threatened, which is material to Borrower and/or any Guarantor; or
(C) any other material information relating to any adverse change in
the financial condition or which may materially and adversely affect
the operations, financial condition or business of Borrower, any
Guarantor, or Lender's security interest in the PCB Facility.
<PAGE>
(c) Books, Records and Inspections. Maintain complete and
accurate books and records; permit access upon notice by Lender to
such books and records and permit Lender to inspect the properties
and operations of Borrower at its principal place of business set
forth herein upon three (3) business days' prior notice provided,
however, such notice requirements shall not apply if an Event of
Default or Unmatured Event of Default has occurred or is continuing
under this Agreement or any of the Loan Documents.
(d) Tax Returns. As soon as available, but not later than
April 15 of each year, Borrower shall provide Lender with copies of
the federal, state, and local, if any, income tax returns of
Borrower and each Guarantor, in the form said returns are filed,
each certified as true, correct and complete by Borrower and each
Guarantor.
7.2 Negative Covenants. Without Lender's prior written consent,
which Lender may or may not in its sole and absolute discretion give,
each of Borrower and Guarantor covenants that Borrower:
(a) Capital Expenditures. Shall not incur or make any
individual capital expenditure in excess of One Hundred Thousand and
No/100ths Dollars ($100,000.00) or any capital expenditure in excess
of Five Hundred Thousand and No/100ths Dollars ($500,000.00) in the
aggregate during any one calendar year during the term hereof.
(b) Covenants. Borrower shall not, without Lender's prior
written consent thereto: (A) grant a security interest in or assign
any of the Collateral to any Person or permit, grant, or suffer a
lien, claim or encumbrance upon any of the Collateral; (B) sell or
transfer any of the Collateral not in the ordinary course of
business; (C) enter into any transaction not in the ordinary course
of business which materially and adversely affects the Collateral or
Borrower's ability to repay Borrower's Liabilities or Indebtedness;
(D) other than as specifically permitted in or contemplated by this
Agreement, encumber, pledge, mortgage, sell, lease or otherwise
dispose of or transfer, whether by sale, merger, consolidation or
otherwise, any of Borrower's assets; and (E) incur Indebtedness
except: (i) unsecured trade debt in the ordinary course of business;
(ii) renewals or extensions of existing Indebtedness and interest
thereon; (iii) Indebtedness that is unsecured and is to Persons who
execute and deliver to Lender in form and substance acceptable to
Lender and its counsel subordination agreements subordinating their
claims against Borrower therefor to the payment of Borrower's
Liabilities; and (iv) Permitted Indebtedness as set forth on Exhibit C
hereto.
<PAGE>
8. GENERAL COVENANTS.
8.1 Affirmative Covenants. Until all the obligations of
Borrower hereunder, under the Notes, and under the Loan Documents are
paid and performed in full, Borrower and Guarantors agree that, unless at
any time Lender shall otherwise expressly consent in writing, each of
Borrower and Guarantors shall:
(a) General Insurance. Maintain such insurance as may be
required by law and such other insurance, to such extent and against
such hazards and liabilities, as is customarily maintained by
companies similarly situated, and provide that all such insurance
shall contain a lender's loss payment clause acceptable to Lender,
naming Lender as lender's loss payee.
(b) Taxes and Liabilities. Pay when due, all Charges.
(c) Agreements. Provide Lender with copies of all agreements
between Borrower or any Affiliate.
(d) Federal Assignment of Claims Act. If any of the
Collateral arises out of a contract with the United States of
America, or any department, agency, subdivision, or instrumentality
thereof, promptly notify Lender thereof in writing and execute any
instruments and take any other action required or requested by
Lender to perfect Lender's security interest in such Collateral
under the provisions of the Federal Assignment of Claims Act.
(e) Maintenance of Collateral. Maintain the Collateral in
good operating condition and repair; make all necessary replacements
thereof so that the value and operating efficiency thereof shall at
all times be substantially maintained and preserved; quarterly
inform Lender of any material additions to or deletions from the
Collateral; take reasonable steps to prevent any such Collateral
from becoming a fixture to real estate or accession to other
personal property and keep the Collateral adequately insured for
full value and liability, noting Lender's interest as secured party
and naming Lender as loss payee thereunder, as more specifically
provided in Paragraph 8.1(h) hereof.
(f) Bank Accounts. Continue to retain Lender as the main bank
of account for Borrower. Lender shall handle all of Borrower's
accounts, receipts, disbursements and related services and Borrower
shall, at a minimum, maintain sufficient balances to cover such
services.
(g) Consents. Provide Lender with any consents of third
parties necessary or appropriate with respect to granting or
perfecting Lender's security interest in the Collateral.
<PAGE>
(h) Insurance; Payment of Premiums. Borrower shall keep and
maintain the Collateral insured for its full insurable value against
loss or damage by fire, theft, explosion, and all other hazards and
risks ordinarily insured against by other owners or users of such
properties, assets, and/or accounts in similar businesses and notify
Lender promptly of any occurrence causing a material loss or decline
in value of the Collateral and the estimated (or actual, if available)
amount of such loss or decline. All policies of insurance on the
Collateral shall be in form and with insurers recognized as adequate by
prudent business persons and all such policies shall be in such amounts
as may be reasonably satisfactory to Lender. Prior to Closing, Borrower
shall deliver or cause to be delivered to Lender the original (or
certified copy) of each policy of insurance and evidence of payment of
all premiums therefor. Such policies of insurance shall contain an
endorsement showing loss payable to Lender. Such endorsement shall
provide that the insurance companies will give Lender at least thirty
(30) days prior written notice before any such policy or policies of
insurance shall be canceled for any reason other than for non-payment
of premium, and in the event the policy or policies shall be canceled
for non-payment of premium, Lender will receive ten (10) days prior
written notice before such cancellation takes effect. Furthermore, in
the event an insurer elects not to renew a policy providing coverage
required herein, Lender shall receive ten (10) days' prior written
notice before the expiration of such policy. No act or default of
Borrower or any other person or entity, other than Lender's gross
negligence or willful misconduct, shall affect the right of Lender
to recover under such policy or policies of insurance in case of
loss or damage. Subject to the foregoing, Borrower hereby directs
all insurers under such policies of insurance to pay all proceeds
payable thereunder directly to Lender. Borrower irrevocably makes,
constitutes and appoints Lender (and all officers, employees or
agents designated by Lender) as its true and lawful attorney (and
agent-in-fact) for the purpose of making, settling and adjusting
claims under such policies of insurance, endorsing the name of
Borrower on any check, draft, instrument or other items of payment
for the proceeds of such policies of insurance and for making all
determinations and decisions with respect to such policies of
insurance. In the event Borrower, at any time hereafter, shall fail
to obtain or maintain any of the policies of insurance required
above or to pay any premium in whole or in part relating thereto,
then Lender, without waiving or releasing any obligations or default
by Borrower hereunder, may at any time thereafter (but shall be
under no obligation to) obtain and maintain such policies of
insurance and pay such premium and take any other action with
respect thereto which Lender deems advisable. All sums so disbursed
by Lender, including reasonable attorneys' fees, court costs,
expenses and other charges relating thereto, shall be payable on
demand, provided that Lender accompanies such demand by a
description of all such charges by Borrower to Lender and shall be
additional Liabilities hereunder secured by the Collateral.
<PAGE>
(i) Covenants With Respect to Collateral. Until all
obligations of the Borrower hereunder and under the Notes are paid
and performed in full, Borrower shall furnish or cause to be
furnished to Lender, from time to time, and such schedules,
certificates and reports with respect to all or any of the
Collateral then subject to the security interests of Lender
hereunder, and under the Collateral Documents (including, without
limitation, schedules identifying all Collateral), all such
schedules, certificates and reports, to be executed by Borrower and
to be in such form and detail as Lender may from time to time
specify.
(j) Organization and Control. Cause CSI to be the sole
limited partner of Borrower, holding 99% of the partnership interest
therein, cause General Partner to be the sole general partner of
Borrower, holding 1% of the partnership interest therein, and cause
CSI to be the sole shareholder of Borrower, holding 100% of the
issued and outstanding Securities thereof. General Partner shall
also maintain at least one of D.S. Patel or Megan Patel in the
capacity of President, Chief Executive Officer or Vice President of
General Partner.
8.2 Negative Covenants. Without Lender's prior written consent,
which Lender may or may not, in its sole and absolute discretion, give,
each of Borrower and Guarantor covenants that Borrower:
(a) Guaranties, Loans, or Advances. Shall not become or be a
guarantor or surety of, or otherwise become or be responsible, in
any manner (whether by agreement to purchase any obligations, stock,
assets, goods, or services , or to supply or advance any funds,
assets, goods, and services, or otherwise), with respect to any
undertaking of any other person or entity, except for the
endorsement, in the ordinary course of collection of instruments
payable to it or to its order.
(b) Mergers, Consolidations, Sales, and Dividends. Shall not
be a party to any merger or consolidation, or redeem, retire,
purchase, or otherwise acquire, directly or indirectly, all or
substantially all of the assets or any portion of stock of any class
of the Borrower, or any class of stock or partnership or joint
venture interest in, any other person or entity, or, except in the
ordinary course of its business, sell, transfer, convey, or lease
all or any substantial part of its assets, or sell or assign, with
or without recourse, any receivables or make or permit any change in
Borrower's capital structure or in any of its business objectives,
purposes, or operations which might in any way materially and
adversely affect the repayment of the Liabilities, or declare or pay
any dividends upon any of the Borrower's stock in violation of any
and all applicable laws.
<PAGE>
(c) Leases. After the date hereof, shall not, without the
prior written consent of Lender, which consent shall not be
unreasonably withheld or delayed, enter into or permit to exist, any
new arrangements for the leasing by it, as lessee of any other real
or personal property (or any interest therein).
(d) Unconditional Purchase Obligations. Shall not enter into
or be a party to any contract for the purchase of materials,
supplies, or other property or services, if such contract requires
that payment be made by it, regardless of whether or not delivery is
ever made of such materials, supplies, or other property or
services.
(e) Accounts Receivable. Shall not sell, assign, pledge, or
otherwise encumber or create or permit to exist any lien on or
security interest in any of the Accounts.
(f) Other Matters. Shall not enter into any transaction which
materially and adversely affects the Collateral or Borrower's
ability to repay the Indebtedness, or permit or agree to any
extension, compromise, or settlement, with Lender's prior written
consent, or make any materially adverse change or modification of
any kind or nature with respect to any agreement relating to the
Collateral or enter into any agreement containing any provision
which would be violated or breached by the performance of its
obligations hereunder or under any Collateral Document.
8.3 Survival of Obligations Upon Termination of Agreement.
Except as otherwise expressly provided for in this Agreement and in any
Loan Document, no termination or cancellation (regardless of cause or
procedure) of this Agreement or any agreements contained in the Loan
Documents shall in any way affect or impair the powers, obligations,
duties, rights, and Liabilities of Borrower or Lender relating to (i) any
transaction or event occurring prior to such termination or cancellation,
or (ii) the Collateral (so long as any Liabilities remain outstanding),
or (iii) any of the undertakings, agreements, covenants, warranties, and
representations of Borrower or Lender contained in this Agreement or in
the Loan Documents. All such undertakings, agreements, covenants,
warranties, and representations shall survive such termination or
cancellation.
<PAGE>
9. CONDITIONS PRECEDENT TO LOAN. The obligation of Lender to
disburse the Loan is subject to the following conditions precedent:
9.1 Execution and delivery of all of the following Loan Documents:
(a) 12-Month Term Note. The 12-Month Term Note duly
executed by Borrower.
(b) 60-Month Term Note. The 60-Month Term Note duly
executed by Borrower.
(c) Continuing Security Agreement. Continuing Security
Agreement duly executed by Borrower.
(d) Guaranties. Guaranties duly executed by each Guarantor.
(e) Sigmatron Stock Pledge Agreement. Sigmatron Stock
Pledge Agreement executed by CSI and Assignment
Separate from Certificates in blank.
(f) Financing Statements. Form UCC-1 Financing
Statements for the States of Tennessee and Illinois
executed by Borrower and each Guarantor and Form UCC-2
Financing Statement for Greene County, Tennessee
executed by Borrower.
(g) Security Agreement/Personal Property. Security
Agreement/ Personal Property executed by Borrower.
(h) Environmental Indemnity Agreement Environmental
Indemnity Agreement executed by Borrower and
each Guarantor.
(i) Deed of Trust. Deed of Trust executed by Borrower
(the "Mortgage").
(j) Assignment of Rents and Leases. Assignment of Rents
and Leases executed by Borrower.
(k) Seventh Amendment to Loan Agreement. Seventh
Amendment to Loan Agreement executed by Borrower,
CSI and General Partner.
(l) Assignment of Process IP License. Assignment of
Process IP License executed by Borrower.
(m) Consent to Assignment of Process IP License. Consent
to Assignment of Process IP License executed by Philips.
(n) Assignment of PCB Purchase Agreement. Assignment of
PCB Purchase Agreement executed by Borrower.
<PAGE>
(o) Consent to Assignment of PCB Purchase Agreement.
Consent to Assignment of PCB Purchase Agreement
executed by Philips.
(p) Master Lease and Supporting Schedule. Master Lease
and Supporting Schedule executed by Borrower.
(q) Bill of Sale. Bill of Sale to Philips Equipment
executed by Borrower conveying such equipment to
Lender free and clear of all liens, claims or
encumbrances.
(r) Resolutions and Certificates. (A) Certified copies
of resolutions of the Board of Directors of General
Partner authorizing or ratifying the execution,
delivery and performance, respectively, of this
Agreement, the 60-Month Term Note, the 12-Month Term
Note, and the Loan Documents, and (B) certified copies
of the Articles of Incorporation and By-Laws and
Certificate of Good Standing recently issued by the
Secretary of State of the State of Tennessee setting
forth that the Borrower and General Partner are each in
good standing and each has full authority to transact
business in Tennessee and in any other jurisdiction in
which Borrower maintains any part of the Collateral.
(s) Consents. Certified copies of all documents evidencing
any necessary corporate action, consents and
governmental approvals, if any, with respect to this
Agreement, the 60-Month Term Note, the 12-Month Term
Note, and the Loan Documents.
(t) Incumbency and Signatures. A certificate of the
Secretary or an Assistant Secretary of the General
Partner and CSI, certifying the names of the officers
and directors of the General Partner and CSI, which
are authorized to execute and deliver this Agreement,
the 12-Month Term Note, the 60-Month Term Note, any of
the Loan Documents, and any other documents provided
for in this Agreement to be executed and delivered by
Borrower, together with a sample of his true signature.
(u) Other Documents. Such other documents, assignments,
certificates and opinions that shall be reasonably
required by Lender or Lender's counsel.
<PAGE>
Each of the Loan Documents shall be in form and substance
prescribed by Lender. Without limiting the foregoing, each of the Loan
Documents, where applicable, shall contain a provision stating that the
occurrence of an Event of Default under this Agreement or the occurrence
of a default under any of the other Loan Documents or the occurrence of
an Event of Default under any loan made or participated in by Lender in
which Borrower, an entity affiliated with Borrower or any Guarantor is a
party, including, without limitation, an Event of Default under any
document securing and/or evidencing the existing CSI Loan, shall
constitute an Event of Default under the Loan Document in question and
each of the other Loan Documents.
9.2 Surveys. Three (3) copies of the survey of the PCB
Facility dated not more than 180 days prior to the Loan Opening Date,
prepared by a registered Tennessee Surveyor, certified to Lender and the
Title Insurer showing no encroachments or other matters which are not
acceptable to Lender, in Lender's sole determination. The survey shall
reflect the same legal description as contained in the Title Policy and
certify that the PCB Facility is not in a Flood Hazard Area.
9.3 Evidence of Insurance Coverage. A prepaid liability, loss
of rents and hazard insurance policy or certificate in favor of Lender,
in form and amounts acceptable to Lender, insuring the PCB Facility and
the improvements thereon against loss or damage by fire, lightning or
windstorm; the hazard insurance policy shall specify that it is "without
co-insurance" and shall be in an amount equal to the greater of: (i) the
full replacement cost (without depreciation) of the improvements on the
PCB Facility, or (ii) the full amount of the Loan, and such other
insurance as Lender may reasonably require, in such form, naming Lender
as an additional insured party and loss payee on standard mortgage
clauses as follows:
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO, its Successors
and/or Assignees
21 North Randall Street
Elk Grove Village, Illinois 60007
and containing a prohibition against cancellation or modification without
giving at least 30 days prior written notice thereof to Lender. Borrower
must furnish a copy of such policy prior to the Loan Opening Date for
final approval and the actual original insurance policy or certificate
must be presented at closing. Borrower shall further provide insurance
that the PCB Facility falls wholly within a Zone C Designated Area
according to the Federal Flood Hazard Maps retained by the Federal Energy
Management Agency.
<PAGE>
9.4 Title Insurance. An ALTA loan policy of title insurance
("Title Policy") issued by the Title Company in the full amount of the
Loan covering the PCB Facility and insuring that the Mortgage is a first
lien upon fee simple title to the PCB Facility subject to no liens,
claims, exceptions or encumbrances except those Permitted Encumbrances
which are specifically agreed to, in writing, by Lender and containing
the following endorsements in form and substance acceptable to Lender:
(a) Comprehensive Endorsement No. 1;
(b) Access endorsement;
(c) An ALTA Broad Form 3.1 Zoning Endorsement (with parking);
(d) Location endorsement;
(e) Survey endorsement; and
(f) Such additional endorsements as may be required by Lender.
9.5 UCC, Tax and Judgment Searches. Currently dated Uniform
Commercial Code, Federal, Tennessee and Illinois Tax Lien Searches,
Judgment Searches and Pending Suit searches, covering Borrower and each
Guarantor, disclosing no matters which are objectionable to Lender. Such
searches must be dated within ninety (90) days of the disbursement of the
Loan.
9.6 Utility Availability. Evidence satisfactory to Lender, of
the availability of sufficient storm and sanitary sewer, water,
electricity, gas, and any and all other necessary utility services at the
PCB Facility.
9.7 Zoning/Licenses/Permits. Copies of all applicable zoning
ordinances and all zoning proceedings relating to the PCB Facility, and
such other evidence as Lender requires that the PCB Facility conforms to
all applicable building, zoning and use laws and ordinances or covenants
of record and may be lawfully occupied for its intended purposes.
Borrower shall provide a final, unconditional certificate of occupancy
issued with respect to the PCB Facility, together with such other
applicable licenses, permits, and approvals as Lender may require.
9.8 Flood Plain/Wetlands. Evidence satisfactory to Lender
that no part of the PCB Facility is located (i) in an area designated by
the Federal Emergency Management Administration as a "flood plain",
"flood-way" or having other special flood hazards, (ii) in an area
designated as "wetland" by the United States Army Corps of Engineers, or
(iii) in a Zone A or Zone B "Flood Hazard Area" according to the Federal
Flood Hazard Maps.
<PAGE>
9.9 Appraisal. An appraisal of the PCB Facility directed to
Lender, with a value of not less than $4,000,000.00. The Appraisal shall
be satisfactory in all respects to Lender. The cost of the Appraisal
shall be borne by Borrower as a Loan Expense regardless of whether the
disbursement under the Loan is made.
9.10 Attorney's Opinion. An opinion of an attorney acceptable
to Lender to the effect that:
(a) Borrower is a duly formed limited partnership under
the laws of the State of Tennessee and such entity is validly
existing and fully qualified to do business in the State of
Tennessee. General Partner is a duly formed corporation under
the laws of the State of Tennessee and such entity is existing
and fully qualified to do business in the State of Tennessee.
CSI is a duly formed corporation under the laws of the State of
Illinois and such entity is validly existing and fully
qualified to do business in the State of Tennessee;
(b) This Agreement and the Loan Documents have been duly
authorized, executed and delivered by Borrower and each
Guarantor and constitute the legal, valid and binding
obligations of Borrower and each Guarantor, enforceable in
accordance with their respective terms, subject only to
applicable bankruptcy, solvency and other laws effecting
creditor's rights;
(c) The Loan is not usurious under the laws of the States
of Illinois or Tennessee;
(d) The execution and delivery of the Loan Documents or
any of them and the carrying out of the transactions
contemplated thereby will not violate, conflict with, or
constitute a default under any agreement to which Borrower or
any Guarantor is a party or by which any of them may be bound;
(e) There are no actions, suits or proceedings pending
or, to said counsel's knowledge, threatened against Borrower,
any Guarantor, or the PCB Facility, either at law or in equity
or before or by any governmental authority; and there are no
other matters which would substantially impair the ability of
Borrower or any Guarantor to pay when due any amounts which may
become payable under the Loan or otherwise perform the
obligations of Borrower under the Loan Documents; and
(f) Any other matters which Lender may reasonably request.
<PAGE>
9.11 Environmental Survey. A Phase I environmental survey of
the PCB Facility and such other evidence or additional studies as Lender
may deem necessary or appropriate to satisfy Lender that the PCB Facility
does not contain any chemical, material or substance exposure to which is
prohibited, general or regulated by any federal, state, county, regional
or local authority or which, even if not so regulated, may or could pose
a hazard to the health and safety of the occupants of the PCB Facility or
the owners of the property adjacent to the PCB Facility ("Environmental
Assessment").
9.12 Warranties and Representations. The warranties and
representations set forth in this Agreement and the Loan Documents are
true and correct.
9.13 No Default. No Event of Default or Unmatured Event of
Default has occurred and is continuing.
9.14 Labor Agreement. Evidence satisfactory to Lender that
Borrower has entered into a labor contract, collective bargaining
agreement of at least two years duration with the International Union of
Electronic, Electrical Salaried, Machine and Furniture Workers AFL-CIO
regarding the provision of labor for the PCB facility, endorsed by Local
796 of such Union and or its officers, in form and substance acceptable
to Lender.
9.15 Phillips' Real Estate and Asset Purchase and Sale
Agreement. Closing of the transactions described in the Phillips' Real
Estate and Asset Purchase and Sale Agreement, and conveyance of the
assets described therein to Borrower free and clear of all liens, claims
and/or encumbrances.
9.16 Sigmatron Stock. Delivery of original stock certificates
issued in the name of CSI for 400,000 shares of Sigmatron Stock.
10. EVENTS OF DEFAULT. The occurrence of any one or more of the
following shall constitute and "Event of Default" for purposes of this
Agreement:
10.1 Payment. Failure to pay within five (5) days after the
date when due any installment of principal or interest, or failure to
pay, within ten (10) days after written notice from Lender, any other
amount payable pursuant to either Note, this Agreement or any of the
other Loan Documents.
10.2 Performance. Failure by Borrower to promptly perform any
other obligation or observe any other condition, covenant, term,
agreement or provision required to be performed or observed by Borrower
under this Agreement, either Note, or any other Loan Document, after
thirty (30) days notice thereof from Lender.
10.3 Misrepresentation. Any inaccuracy, untruth or failure to
perform in any material respect of any representation, covenant or
warranty contained in this Agreement or any other Loan Documents, or of
any statement or certification as to facts delivered to Lender pursuant
hereto.
<PAGE>
10.4 Material Change. A material adverse change in the
financial condition of Borrower or any Guarantor.
10.5 Voluntary Bankruptcy. At any time, Borrower or any
Guarantor files a bankruptcy petition, or is adjudicated a bankrupt or
insolvent, or institutes (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization, arrangement,
composition, readjustment, dissolution, liquidation or similar
proceedings under any present or future Federal, state or other statute
or law, or admits in writing his or its inability to pay his or its debts
as they mature, or makes an assignment for the benefit of his or its
creditors, or seeks or consents to the appointment of any receiver,
trustee or similar officer for all or any substantial part of his or its
property.
10.6 Involuntary Bankruptcy. The commencement of any
involuntary petition in bankruptcy against Borrower or any Guarantor, or
the institution against Borrower, Beneficiary or any Guarantor of any
reorganization, arrangement, composition, readjustment, dissolution,
liquidation or similar proceedings under any present or future Federal,
state or other statute or law, or the appointment of a receiver, trustee
or other officer for all or any substantial part of the property of
Borrower or any Guarantor, which shall remain undismissed or undischarged
for a period of sixty (60) days.
10.7 Receiver. The attachment, seizure, levy upon or taking of
possession by any receiver, custodian, or assignee for the benefit of
creditors of a substantial portion of Borrower's or any Guarantor's
property.
10.8 Sale or Transfer. Any sale, transfer, lease, assignment,
conveyance, lien or encumbrance made in violation of the terms hereof.
10.9 Injunction. Failure of Borrower for a period of thirty
(30) days after Lender's demand to procure the dismissal or disposition
to Lender's satisfaction of any proceedings seeking to enjoin or
otherwise prevent or declare invalid or unlawful the occupancy,
maintenance or operation of the PCB Facility, or any portion thereof, as
called for by the terms of this Agreement, or of any proceedings which
could or might affect the validity or priority of the security for the
Loan or which could materially affect Borrower's ability to perform its
obligations under this Agreement.
10.10 Cross Default. The occurrence of a default under any
of the other loans made or participated in by Lender in which Borrower,
or an entity affiliated with Borrower, Beneficiary or any Guarantor is a
party, including, without limitation, the Existing CSI Loan.
10.11 Death of Guarantor. The death or legal incompetence
of any Individual Guarantor.
<PAGE>
10.13 Non-Payment of Other Indebtedness for Borrowed Money.
Default in the payment when due (subject to any applicable cure period),
whether by acceleration or otherwise, of any other indebtedness for
borrowed money of, or guaranteed by, Borrower or any guarantor or default
in the performance or observance of any obligation or condition with
respect to any such other indebtedness if the effect of such default is
to accelerate the maturity of any such indebtedness, or to permit the
holder or holders thereof, or any trustee or agent for such holders, to
cause such indebtedness to become due and payable prior to its expressed
maturity date.
10.14 Other Material Obligations. Default in the payment
when due(subject to any applicable cure period), or in the performance or
observance of, any material obligation of, or condition agreed to by
Borrower with respect to any material purchase or lease of goods and
services (except only to the extent that the existence of any such
default is being contested by Borrower in good faith and by appropriate
proceedings).
10.15 Employee Benefit Plans. If a contribution failure
occurs with respect to any pension plan maintained by Borrower or any
corporation, trade or business that is, along with Borrower, a member of
a controlled group of corporations or controlled group of trades or
businesses (as defined in Sections 414(b) and (c) of the Internal Revenue
Code of 1986 or Section 4001 of ERISA) sufficient to give rise to a lien
under Section 302(f) of ERISA.
10.16 Security. If Lender is reasonably insecure.
Upon the occurrence of an Event of Default, all Liabilities
then outstanding shall become immediately due and payable, in full and
all without notice of any kind, but with such adjustments, if any, with
respect to interest or other charges as may be provided for herein or in
the Notes, the Loan Documents, or any other written agreements between
Borrower and Lender; and, in the case of any other Event of Default,
Lender may declare the Notes and all other Liabilities then outstanding
to be due and payable. Lender shall promptly advise Borrower of any such
declaration, but failure to do so shall not impair the effect of such
declaration.
11. REMEDIES.
11.1 Lender's Rights and Remedies. Lender shall have available
to it all rights and remedies available herein and/or under the Loan
Documents, including, without limitation, the following rights and
remedies:
<PAGE>
(a) Right to Assign. Lender may assign this Agreement upon
prior written notice to Borrower (but such notice shall not imply
that any consent from Borrower is necessary to effect any such
assignment), and if Lender does assign this Agreement, the assignee
shall be entitled to the performance of all of Borrower's agreements
and obligations under this Agreement, and the assignee shall be
entitled to all the rights and remedies of Lender under this
Agreement, and Borrower expressly agrees that it will assert no
claims or defenses it may have against Lender against the assignee
except those available to it in this Agreement.
(b) Right to Discharge Borrower's Obligations. Lender may, at
its option, discharge taxes, liens or security interests or other
encumbrances at any time levied or placed on the Collateral, may
remedy or cure any default of Borrower under the terms of any lease,
rental agreement, or other document which in any way pertains to or
affects Borrower's title to or interest in any of the Collateral,
may pay for insurance on the Collateral, and may pay for the
maintenance and preservation of the Collateral, and Borrower agrees
to reimburse Lender, on demand, for any payment made or any expense
incurred by Lender, including reasonable attorneys' fees, pursuant
to the foregoing authorization, together with interest at the
Default Rate from the date so paid or incurred by Lender, which
payments, expenses and interest shall be secured by the security
intended to be afforded by this Agreement and/or by the Security
Agreements and the Collateral.
(c) Right of Enforcement. Lender shall have and may exercise
any and all rights of enforcement and remedies before or after
default afforded to a bank under the applicable Uniform Commercial
Code in force (the "Uniform Commercial Code" or the "UCC")
together with any and all other rights and remedies otherwise
provided and available to Lender at law or in equity as of the date
of this Agreement or the date of Borrower's default; and, in
conjunction with, in addition to, or substitution for those rights
and remedies, at Lender's discretion, Lender may:
(i) To the extent permitted by law, enter upon Borrower's
premises to take possession of, assemble and collect the
Collateral or to render it or any portion of the Collateral
unusable; and/or
(ii) Remedy any default in any reasonable manner, without
waiving its rights and remedies upon default and without
waiving any other prior or subsequent default.
<PAGE>
(d) Right of Sale.
(i) Borrower agrees that should it fail to make payments
as provided in the Notes, the Master Lease or the other Loan
Documents, or if a default be made on any obligation or promise
of Borrower contained herein or hereby secured or contained in
or secured by the Notes, the Master Lease or the other Loan
Documents, then Lender may, at its option, sell or dispose of
the Collateral at public or private sale without any previous
demand of performance or notice to Borrower of any such sale
whatsoever, except as provided under the Uniform Commercial
Code, and from the proceeds of sale retain: (A) all costs and
charges incurred by Lender in taking and causing the removal
and sale of said property, including such reasonable attorneys'
fees as shall have been incurred by Lender; (B) all sums due
pursuant to the Notes, the Master Lease, the Loan Documents,
and this Agreement, and all accrued interest thereon; and (C)
all monies due from Borrower to Lender under any other
indebtedness or obligation and all accrued interest thereon.
Any surplus of such proceeds remaining shall be paid to
Borrower.
(ii) At any sale or sales made pursuant to this Agreement
or in a suit to foreclose the same, the Collateral may be sold
en masse or separately, at the same or at different times, at
the option of Lender or its assigns. Such sale may be public
or private, with notice as required by the Uniform Commercial
Code, and the Collateral need not be present at the time or
place of sale. At any such sale, Lender or the holder of the
Notes hereby secured may bid for and purchase any of the
property sold, notwithstanding that such sale is conducted by
Lender or its attorneys, agents, or assigns, and no
irregularity in the manner of sale or of giving notice shall
operate to preclude Lender from recovering the Indebtedness.
(iii) If any notification of intended sale or other
disposition of the Collateral or any part thereof is required
under the Uniform Commercial Code or other law, such
notification, if mailed, shall be deemed reasonably and
properly given if mailed to Borrower at least ten (10) days
before such sale or disposition.
(e) Upon an Event of Default, Borrower, immediately upon
demand by Lender, shall assemble the Collateral and make it
available to Lender at a place or places to be designated by Lender
which is reasonably convenient to Lender and Borrower. Borrower
recognizes that in the event Borrower fails to perform, observe or
discharge any of its obligations or liabilities under this Agreement
or the Other Agreements, no remedy of law will provide adequate
relief to Lender, and agrees that Lender shall be entitled to
temporary and permanent injunctive relief in any such case without
the necessity of proving actual damages.
<PAGE>
(f) Upon an Event of Default, without notice, demand or legal
process of any kind, Lender may take possession of any or all of the
Collateral (in addition to Collateral of which it already has
possession), wherever it may be found, and for that purpose may
pursue the same wherever it may be found, and may enter into any of
Borrower's premises where any of the Collateral may be or is
supposed to be, and search for, take possession of, remove, keep and
store any of the Collateral until the same shall be sold or
otherwise disposed of, and Lender shall have the right to store the
same in any of Borrower's premises without cost to Lender.
(g) Upon an Event of Default, Lender may exercise any remedies
available under the Master Lease.
(h) Upon an Event of Default, Borrower agrees that Lender may,
if Lender deems it reasonable, postpone or adjourn any such sale of
the Collateral from time to time by an announcement at the time and
place of sale or by announcement at the time and place of such
postponed or adjourned sale, without being required to give a new
notice of sale. Borrower agrees that Lender has no obligation to
preserve rights against prior parties to the Collateral. Further,
to the extent permitted by law, Borrower waives and releases any
cause of action and claim against Lender as a result of Lender's
possession, collection or sale of the Collateral, any liability or
penalty for failure of Lender to comply with any requirement imposed
on Lender relating to notice of sale, holding of sale or reporting
of sale of the Collateral, and any right of redemption from such
sale.
(i) Miscellaneous. Lender shall have the right at all times
to enforce the provisions of this Agreement in strict accordance
with the terms hereof, notwithstanding any conduct or custom on the
part of Lender in refraining from so doing at any time or times.
The failure of Lender at any time or times to enforce its rights
under said provisions strictly in accordance with the same shall not
be construed or operate as a waiver of any of the rights and
remedies granted Lender hereunder or as having created a custom in
any way or manner contrary to the specific provisions of this
Agreement or as having in any way or manner modified the same. All
rights and remedies of Lender are cumulative and concurrent, and the
exercise of one right or remedy by Lender shall not be deemed a
waiver or release of any other right or remedy. Except as otherwise
specifically required herein, notice of the exercise of any right,
remedy or power granted to Lender by this Agreement is not required
to be given.
<PAGE>
12. MISCELLANEOUS.
12.1 All payments of principal and interest on the Loan shall
be made to Lender in immediately available funds not later than 2 p.m.
Chicago time on the date such payments are to be made.
12.2 If any advances or payments made by Lender pursuant to
this Agreement or any other Loan Document, together with disbursements of
the Loan, shall exceed the face amount of the Note, all such advances and
payments shall constitute additional indebtedness secured by the Loan
Documents, and shall bear interest at the Default Rate from the date
advanced until paid.
12.3 Borrower shall, upon request, execute and deliver such
further instruments and documents and do such further acts and things as
may be required to provide to Lender the evidence of and security for the
Loan contemplated by this Agreement.
12.4 In the event of any inconsistency between any provision of
this Agreement and any provision of any other Loan Document, the
provision of this Agreement shall govern.
12.5 If Borrower fails to perform any obligation of Borrower
under this Agreement or any other Loan Document, or if any Event of
Default shall occur hereunder or under any other Loan Document, Lender
may, but shall not be obligated to, perform such obligation or cure such
default, and all amounts expended in so doing, all Loan Expenses and all
other amounts paid or advanced by Lender pursuant to the Loan Documents,
and all other amounts advanced by Lender in connection with construction
or preserving any security for the Loan, shall constitute additional
advances of the Loan, shall be secured by the Mortgage, and all other
Loan Documents, and shall bear interest at the Default Rate from the date
advanced until paid.
12.6 This Agreement may only be amended, modified or
supplemented by the written agreement of Borrower and Lender. No waiver
of any provision of this Agreement or any other Loan Documents shall be
effective unless set forth in writing signed by Lender, and any such
waiver shall be effective only to the extent therein set forth. Failure
by Lender to insist upon full and prompt performance of any provisions of
this Agreement or any other Loan Documents, or to take action in the
event of any breach of any such provision or Event of Default, shall not
constitute a waiver of any rights of Lender, and Lender may at any time
thereafter while such breach or Event of Default remains uncured exercise
all rights specified herein or provided by applicable law with respect to
such breach or Event of Default.
<PAGE>
12.7 Any notice which any party hereto gives to any other party
hereunder shall be in writing and shall be deemed given when delivered in
person to a representative of the party, or two business days after
deposited in the United States certified or registered mail, return
receipt requested, addressed to the party, at the address of such party
set forth below, or at such other address as the party to whom notice is
to be given has specified by notice hereunder to the party seeking to
give such notice:
Borrower c/o Circuit Systems, Inc.
or any 2350 East Lunt Avenue
Guarantor: Elk Grove Village, Illinois 60007
Attention: Mr. Dilip S. Vyas
Copy to: Rieck and Crotty
55 West Monroe Street
Suite 3390
Chicago, Illinois 60603-5062
Attention: Douglas C. Conover
Lender: American National Bank and Trust
Company of Chicago
21 North Randall Street
Elk Grove Village, Illinois 60007
Attention: James G. Cygan, Vice President
Copy to: Meltzer, Purtill & Stelle
1515 East Woodfield Road
Suite 250
Schaumburg, Illinois 60173
Attention: Scott D. Gudmundson
12.8 The rights, powers and remedies of Lender under this
Agreement shall inure to the benefit of Lender, its successors and
assigns. Lender shall have the absolute right to assign all or any
portion of its rights, powers and remedies under this Agreement.
12.9 This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Illinois, without
regard to the conflicts of laws rules thereof.
<PAGE>
12.10 Except as arises out of Lender's gross negligence or
willful misconduct, Borrower agrees to indemnify, defend and hold Lender
harmless from and against any and all liabilities, obligations, losses,
damages, claims, costs and expenses (including reasonable attorneys' fees
and court costs) of whatever kind or nature which may be imposed on,
incurred by or asserted against Lender at any time which relate to or
arise from the making of the Loan by Lender, and/or the ownership, use,
operation or maintenance of the PCB Facility, including without
limitation, any brokerage commissions or finder's fees asserted against
Lender with respect to the making of the Loan and any damages incurred by
Lender by reason of the construction of Borrower and Lender as having the
relationship of joint venturers or partners or Borrower or Lender being
deemed to have acted as agent for the other.
12.11 This Loan Agreement is based primarily on the credit
worthiness and representation of Borrower and Guarantors to whom it is
made. The rights and obligations of Borrower under this Agreement may
not be assigned, assumed nor transferred and any other purported action
by Borrower shall be null and void. It is further understood and agreed
that, except as specifically provided herein, the ownership, stock, or
control of Borrower, or any partnership interest in Borrower, or a
substantial portion of Borrower's assets may not be transferred,
conveyed, or alienated in any form, without the written consent of
Lender.
12.12 The titles and headings of the articles and paragraphs
of this Agreement have been inserted as a matter of convenience of reference
only and shall not control or affect the meaning or construction of any of
the terms or provisions of this Agreement.
12.13 Lender, by executing and performing this Agreement,
does not become a partner or joint venturer with Borrower and all
inspections of the Collateral herein provided for are for the sole
benefit of Lender.
12.14 Time is of the essence of the payment of all amounts
due Lender under this Agreement and performance and observance by
Borrower of each covenant, agreement, provision and term of this
Agreement.
12.15 In the event any one or more of the provisions
contained in this Agreement or in any of the Loan Documents shall for any
reason be held to be invalid, illegal or unenforceable in any respect by
a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall at the option of Lender, not affect any other
provision of this Agreement or any such Loan Document, and this Agreement
and any such Loan Document shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein or therein.
<PAGE>
12.16 Should a claim ("Recovery Claim") be made upon
Lender at any time for recovery of any amount received by Lender in
payment of Borrower's Liabilities (whether received from Borrower or
otherwise) and should Lender repay all or part of said amount by reason
any judgment, decree or order of any court or administrative body of (1)
having jurisdiction over Lender or any of its property; or (2) any
settlement or compromise of any such Recovery Claim effected by Lender
with the claimant (including Borrower), this Agreement and the security
interests granted Lender hereunder shall continue in effect with respect
to the amount so repaid to the same extent as if such amount had never
originally been received by Lender, notwithstanding any prior termination
of this Agreement, the return of this Agreement to Borrower, or the
cancellation of any note or other instrument evidencing Borrower's
Liabilities. Borrower may not sell, assign or transfer this Agreement,
or the Other Agreements or any portion thereof.
12.17 Lender's failure to require strict performance by
Borrower of any provision of this Agreement shall not waive, affect or
diminish any right of Lender thereafter to demand strict compliance and
performance therewith. Any suspension or waiver by Lender of an Event of
Default by Borrower under this Agreement or the Other Agreements shall
not suspend, waive or affect any other Event of Default by Borrower under
this Agreement or the Other Agreements, whether the same is prior or
subsequent thereto and whether of the same or of a different type. None
of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in this Agreement or the Other
Agreements and no Event of Default by Borrower under this Agreement or
the Other Agreements shall be deemed to have been suspended or waived by
Lender unless such suspension or waiver is by an instrument in writing
signed by an officer of Lender and directed to Borrower specifying such
suspension or waiver.
12.18 Borrower hereby appoints Lender as Borrower's agent
and attorney-in-fact for the purpose of carrying out the provisions of
this Agreement and taking any action and executing any agreement,
instrument or document which Lender may reasonably deem necessary or
advisable to accomplish the purposes hereof which appointment is
irrevocable and coupled with an interest. All monies paid for the
purposes herein, and all costs, fees and expenses paid or incurred in
connection therewith, shall be part of Borrower's Liabilities, payable by
Borrower to Lender on demand.
12.19 This Agreement, or a carbon, photographic or other
reproduction of this Agreement or of any Uniform Commercial Code
financing statement covering the Collateral or any portion thereof, shall
be sufficient as a Uniform Commercial Code financing statement and may be
filed as such.
12.20 Except as otherwise provided in the Other Agreements,
if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in the Other Agreements, the provision
contained in this Agreement shall govern and control.
<PAGE>
12.21 Except as otherwise specifically provided in this
Agreement, Borrower waives any and all notice or demand which Borrower
might be entitled to receive by virtue of any applicable statute or law,
and waives presentment, demand and protest and notice of presentment,
protest, default, dishonor, non-payment, maturity, release, compromise,
settlement, extension or renewal of any and all agreements, instruments
or documents at any time held by Lender on which Borrower may in any way
be liable.
12.22 Until Lender is notified by Borrower to the contrary
in writing by registered or certified mail directed to Lender's principal
place of business, the signature upon this Agreement or upon any of the
Other Agreements of any partner, manager, employee or agent of the
Borrower, or of any other Person designated in writing to Lender by any
of the foregoing, shall bind Borrower and be deemed to be the duly
authorized act of Borrower.
12.23 If at any time or times hereafter, whether or not
Borrower's Liabilities are outstanding at such time, Lender: (a) employs
counsel for advice or other representation, (i) with respect to the
Collateral, this Agreement, the Other Agreements or the administration of
Borrower's Liabilities, (ii) to represent Lender in any litigation,
arbitration, contest, dispute, suit or proceeding or to commence, defend
or intervene or to take any other action in or with respect to any
litigation, arbitration, contest, dispute, suit or proceeding (whether
instituted by Lender, Borrower or any other Person) in any way or respect
relating to the Collateral, this Agreement, the Other Agreements, or
Borrower's affairs, or (iii) to enforce any rights of Lender against
Borrower or any other Person which may be obligated to Lender by virtue
of this Agreement or the Other Agreements; (b) takes any action with
respect to administration of Borrower's Liabilities or to protect,
collect, sell, liquidate or otherwise dispose of the Collateral; and/or
(c) attempts to or enforces any of Lender's rights or remedies under this
Agreement or the Other Agreements, including, without limitation,
Lender's rights or remedies with respect to the Collateral, the
reasonable costs and expenses incurred by Lender in any manner or way
with respect to the foregoing, shall be part of Borrower's Liabilities,
payable by Borrower to Lender on demand.
12.24 BORROWER AND EACH GUARANTOR IRREVOCABLY AGREE THAT,
SUBJECT TO LENDER'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR
PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR
RELATED TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR THE COLLATERAL SHALL BE
LITIGATED ONLY IN COURTS HAVING SITUS WITHIN EITHER THE CITY OF CHICAGO,
STATE OF ILLINOIS OR THE CITY OF GREENEVILLE, STATE OF TENNESSEE.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL,
STATE OR FEDERAL COURT LOCATED WITHIN SAID CITIES AND STATE. BORROWER
HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF
ANY LITIGATION BROUGHT AGAINST BORROWER BY LENDER IN ACCORDANCE WITH THIS
PARAGRAPH.
<PAGE>
12.25 BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL
BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR
DEFEND ANY RIGHTS UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE LOAN
DOCUMENTS, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR (II) ARISING FROM ANY DISPUTE OR CONTROVERSY ARISING IN
CONNECTION WITH OR RELATED TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR ANY
SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES THAT ANY
SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
12.26 Notwithstanding anything herein contained to the
contrary, Lender will not be required to make any disbursement or perform
any other act under this Agreement if as a result thereof, Lender will
violate any law, statute, ordinance, rule, regulation or judicial
decision applicable thereto. This Agreement may be executed and
delivered by any party hereto by way of counterpart, which, when taken
together with all executed counterparts hereof shall constitute a single
agreement; provided, however, that any counterpart, when taken separately
from other counterparts shall be fully binding and enforceable as against
the party signatory thereto, without respect to the other counterparts.
<PAGE>
Dated: July 24, 1997
LENDER:
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
By:/s/ James G. Cygan_
James G. Cygan
Its: Vice President
BORROWER:
CIRCUIT SYSTEMS OF TENNESSEE, L.P.,
a Tennessee limited partnership
By: CIRCUIT SYSTEMS, INC.,
its general partner
By: /s/ Dilip S. Vyas
Its: Vice-President
ATTEST:
By: /s/ Thomas W. Rieck
Its: Secretary
GUARANTORS:
CIRCUIT SYSTEMS OF TENNESSEE, INC.,
a Tennessee corporation
By: /s/ Dilip S. Vyas
Its: Vice-President
CIRCUIT SYSTEMS, INC., an Illinois corporation
By: /s/ Dilip S. Vyas
Its: Vice-President
<PAGE>
SCHEDULE OF EXHIBITS
Exhibit A Existing Litigation
Exhibit B Master Lease
Exhibit C Permitted Indebtedness
Exhibit D Permitted Liens
Exhibit E 12-Month Term Note
Exhibit F 60-Month Term Note
Exhibit G Seventh Amendment to Secured Revolving
Credit Agreement
Exhibit H Continuing Security Agreement
EXHIBIT A
EXISTING LITIGATION
None.
EXHIBIT B
MASTER LEASE
EXHIBIT C
PERMITTED INDEBTEDNESS
None.
<PAGE>
EXHIBIT D
PERMITTED LIENS
None.
EXHIBIT E
12-MONTH TERM NOTE
EXHIBIT F
60-MONTH TERM NOTE
EXHIBIT G
SEVENTH AMENDMENT TO SECURED
REVOLVING CREDIT AGREEMENT
EXHIBIT H
CONTINUING SECURITY AGREEMENT
<PAGE>
<PAGE>
American National Bank
and Trust Company of Chicago
INSTALLMENT NOTE (SECURED)
(12-Month Term Note)
$2,800,000.00 Chicago, Illinois
July 24, 1997 Due August 1, 1998
FOR VALUE RECEIVED, the undersigned ("Borrower ), promises to
pay to the order of American National Bank and Trust Company of
Chicago ("Bank"), at its principal place of business in Chicago,
Illinois or such other place as Bank may designate from time to
time hereafter, the principal sum of TWO MILLION EIGHT HUNDRED
THOUSAND AND NO/100 DOLLARS ($2,800,000.00), which sum shall be
due on August 1, 1998, and shall be payable in successive
installments as follows: monthly installments of principal in the
amount of Fifteen Thousand Five Hundred Fifty-Five and 56/100
Dollars ($15,555.56) plus accrued interest as hereinafter provided
below; with the final installment equal to the balance of all
amounts due hereunder. The first installment of principal and
interest shall be due on the 1st day of September, 1997, and
successive installments shall be paid on the same day of each
month thereafter until paid.
Borrower's obligations and liabilities to Bank under this
Note, and all other obligations and liabilities of Borrower to
Bank (including without limitation all debts, claims and
indebtedness) whether primary, secondary, direct, contingent,
fixed or otherwise, including those evidenced in rate hedging
agreements designed to protect the Borrower from the fluctuation
of interest rates, heretofore now and/or from time to time
hereafter owing, due or payable, however evidenced, created,
incurred, acquired or owing and however arising, whether under
this Note, any agreement, instrument or document heretofore, now
or from time to time hereafter executed and delivered to Bank by
or on behalf of Borrower, or by oral agreement or operation of law
or otherwise shall be defined and referred to herein as
"Borrower's Liabilities."
This Note is one of the Notes referred to in the Loan and
Security Agreement which has been made by and among Borrower,
Circuit Systems of Tennessee, Inc., a Tennessee corporation
("Circuit/Tennessee"), Circuit Systems, Inc., an Illinois
corporation ("Circuit") and Bank (the "Loan Agreement" and any
security documents and any other documents or instruments securing
this Note or evidencing the indebtedness described herein or
delivered to induce Lender to disburse the proceeds evidenced
hereby are hereinafter collectively referred to as the "Loan
Documents"). Reference is hereby made to the Loan Documents
(which are incorporated herein by reference as fully and with the
same effect as if set forth herein at length) for a statement of
the covenants and agreements contained therein, a statement of the
rights, remedies and security afforded thereby, and all other
matters herein contained. All property which secures all or any
part of the indebtedness evidenced by the Loan Documents is
hereinafter referred to individually and collectively as
"Collateral."
<PAGE>
The unpaid principal balance of Borrower's Liabilities due
hereunder shall bear interest from the date of disbursement until
paid at the rate or rates from time to time applicable to the
12-Month Term Loan as determined in accordance with the Loan
Agreement ("Interest Rate").
Such interest shall be computed daily (on the basis of a 360-
day year and actual days elapsed) on the daily balance at the
Interest Rate, and shall be payable on the first Bank business day
("Business Day") of each month beginning on August 1, 1997;
provided, however, that in the event that any of Borrower's
Liabilities are not paid when due, the unpaid amount of Borrower's
Liabilities shall bear interest after the due date until paid at a
rate equal to the sum of the rate that would otherwise be in
effect plus 3%.
Borrower warrants and represents to Bank that Borrower shall
use the proceeds represented by this Note solely for proper
business purposes and consistently with all applicable laws and
statutes.
Regardless of the adequacy of the Collateral, any deposits or
other sums at any time credited by or payable or due from Bank to
Borrower, or any monies, cash, cash equivalents, securities,
instruments, documents or other assets of Borrower in the
possession or control of Bank or its Bailee for any purpose, may
be reduced to cash and applied by Bank to or setoff by Bank
against Borrower's Liabilities.
The occurrence of any one of the following events shall
constitute a default by the Borrower ("Event of Default") under
this Note: (a) if Borrower fails to pay any of Borrower's
Liabilities when due and payable or declared due and payable
(whether by scheduled maturity, required payment, acceleration,
demand or otherwise); (b) if Borrower or any guarantor of any of
Borrower's Liabilities fails or neglects to perform, keep or
observe any term, provision, condition, covenant, warranty or
representation contained in this Note; (c) occurrence of a
default or an event of default under any agreement, instrument or
document heretofore, now or at any time hereafter delivered by or
on behalf of Borrower to Bank; (d) occurrence of a default or an
event of default under any agreement, instrument or document
heretofore, now or at any time hereafter delivered to Bank by any
guarantor of Borrower's Liabilities or by any person or entity
which has granted to Bank a security interest or lien in and to
some or all of such person's or entity's real or personal property
to secure the payment of Borrower's Liabilities; (e) if the
Collateral or any other of Borrower's assets are attached, seized,
subjected to a writ, or are levied upon or become subject to any
lien or come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors; (f) if a
notice of lien, levy or assessment is filed of record or given to
Borrower with respect to all or any of Borrower's assets by any
federal, state or local department or agency; (g) if Borrower or
any guarantor of Borrower's Liabilities becomes insolvent or
generally fails to pay or admits in writing its inability to pay
<PAGE>
debts as they become due, if a petition under Title 11 of the
United States Code or any similar law or regulation is filed by or
against Borrower or any such guarantor, if Borrower or any such
guarantor shall make an assignment for the benefit of creditors,
if any case or proceeding is filed by or against Borrower or any
such guarantor for its dissolution or liquidation, or if Borrower
or any such guarantor is enjoined, restrained or in any way
prevented by court order from conducting all or any material part
of its business affairs; (h) the death or incompetency of Borrower
or any guarantor of Borrower's Liabilities, or the appointment of
a conservator for all or any portion of Borrower's assets or the
Collateral; (i) the revocation, termination or cancellation of any
guaranty of Borrower's Liabilities without written consent of
Bank; (j) if a contribution failure occurs with respect to any
pension plan maintained by Borrower or any corporation, trade or
business that is, along with Borrower, a member of a controlled
group of corporations or a controlled group of trades or
businesses (as described in Sections 414(b) and (c) of the
Internal Revenue Code of 1986 or Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended, ERISA )
sufficient to give rise to a lien under Section 302(f) of ERISA;
(k) if Borrower or any guarantor of Borrower's Liabilities is in
default in the payment of any obligations, indebtedness or other
liabilities to any third party and such default is declared and is
not cured within the time, if any, specified therefor in any
agreement governing the same; (l) if any material statement,
report or certificate made or delivered by Borrower, any of
Borrower's partners, officers, employees or agents or any
guarantor of Borrower's Liabilities is not true and correct; or
(m) if Bank is reasonably insecure.
Upon the occurrence of an Event of Default, at Bank's option,
without notice by Bank to or demand by Bank of Borrower: (i) all
of Borrower's Liabilities shall be immediately due and payable;
(ii) Bank may exercise any one or more of the rights and remedies
accruing to it under the Loan Documents. No holder hereof shall,
by any act or omission or commission, be deemed to waive any of
its rights, remedies or powers hereunder or otherwise unless such
waiver is in writing signed by the holder hereof, and then only to
the extent specifically set forth therein. The rights, remedies
and powers of the holder hereof, as provided in this Note and in
all of the other Loan Documents, are cumulative and concurrent,
and may be pursued singly, successively against Borrower, any
guarantor hereof, and any security given at any time to secure the
repayment hereof, all at the sole discretion of the holder hereof.
Upon an Event of Default, Borrower, immediately upon demand
by Bank, shall assemble the Collateral and make it available to
Bank at a place or places to be designated by Bank which is
reasonably convenient to Bank and Borrower.
<PAGE>
All of Bank's rights and remedies under this Note are
cumulative and non-exclusive. The acceptance by Bank of any
partial payment made hereunder after the time when any of
Borrower's Liabilities become due and payable will not establish a
custom or waive any rights of Bank to enforce prompt payment
hereof. Bank's failure to require strict performance by Borrower
of any provision of this Note shall not waive, affect or diminish
any right of Bank thereafter to demand strict compliance and
performance therewith. Any waiver of an Event of Default
hereunder shall not suspend, waive or affect any other Event of
Default hereunder. Borrower and every endorser waive presentment,
demand and protest and notice of presentment, protest, default,
non-payment, maturity, release, compromise, settlement, extension
or renewal of this Note, and hereby ratify and confirm whatever
Bank may do in this regard. Borrower further waives any and all
notice or demand to which Borrower might be entitled with respect
to this Note by virtue of any applicable statute or law (to the
extent permitted by law).
Borrower agrees to pay, immediately upon demand by Bank, any
and all costs, fees and expenses (including reasonable attorneys'
fees, costs and expenses) incurred by Bank (i) in enforcing any of
Bank's rights hereunder, and (ii) in representing Bank in any
litigation, contest, suit or dispute, or to commence, defend or
intervene or to take any action with respect to any litigation,
contest, suit or dispute (whether instituted by Bank, Borrower or
any other person) in any way relating to this Note, Borrower's
Liabilities or the Collateral, and to the extent not paid the same
shall become part of Borrower's Liabilities hereunder.
This Note shall be deemed to have been submitted by Borrower
to Bank and to have been made at Bank's principal place of
business. This Note shall be governed and controlled by the
internal laws of the State of Illinois and not the law of
conflicts.
TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY
AGREES THAT, SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL
ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT
OF OR FROM OR RELATED TO THIS NOTE SHALL BE LITIGATED IN COURTS
HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS, AND/OR
THE CITY OF GREENEVILLE, STATE OF TENNESSEE. BORROWER HEREBY
CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN EITHER OF SAID CIT IES AND STATES.
BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE
THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY BANK IN
ACCORDANCE WITH THIS PARAGRAPH.
BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND
ANY RIGHTS UNDER OR IN CONNECTION WITH THIS NOTE OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (II) ARISING FROM
ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS
NOTE OR ANY SUCH AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND
AGREES THAT ANY SUCH ACTION, SUIT, COUNTERCLAIM OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
<PAGE>
BORROWER
1515 Industrial Drive
Greeneville, Tennessee CIRCUIT SYSTEMS OF
TENNESSEE, L.P., a Tennessee limited partnership
62-1692960
FEIN By: CIRCUIT SYSTEMS OF
TENNESSEE, INC., its general partner
By: /s/ Dilip S. Vyas
Its: Vice-President
<PAGE>
<PAGE>
American National Bank
and Trust Company of Chicago
INSTALLMENT NOTE (SECURED)
(60-Month Term Note)
$2,270,000.00 Chicago, Illinois
July 24, 1997 Due August 1, 2002
FOR VALUE RECEIVED, the undersigned ("Borrower"), promises to
pay to the order of American National Bank and Trust Company of
Chicago ("Bank"), at its principal place of business in Chicago,
Illinois or such other place as Bank may designate from time to time
hereafter, the principal sum of TWO MILLION TWO HUNDRED SEVENTY
THOUSAND AND NO/100 DOLLARS ($2,270,000.00), which sum shall be due on
August 1, 2002, and shall be payable in successive installments as
follows: monthly installments of principal in the amount of Thirty-
Seven Thousand Eight Hundred Thirty-Thre e and 33/100 Dollars
($37,833.33) plus accrued interest as hereinafter provided below;
with the final installment equal to the balance of all amounts due
hereunder. The first installment of principal and interest shall be
due on the 1 day of September, 1997, and successive installments
shall be paid on the same day of each month thereafter until paid.
Borrower's obligations and liabilities to Bank under this Note,
and all other obligations and liabilities of Borrower to Bank
(including without limitation all debts, claims and indebtedness)
whether primary, secondary, direct, contingent, fixed or otherwise,
including those evidenced in rate hedging agreements designed to
protect the Borrower from the fluctuation of interest rates,
heretofore now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and
however arising, whether under this Note, any agreement, instrument or
document heretofore, now or from time to time hereafter executed and
delivered to Bank by or on behalf of Borrower, or by oral agreement or
operation of law or otherwise shall be defined and referred to herein
as "Borrower's Liabilities."
This Note is one of the Notes referred to in the Loan and
Security Agreement which has been made by and among Borrower, Circuit
Systems of Tennessee, Inc., a Tennessee corporation
("Circuit/Tennessee"), Circuit Systems, Inc., an Illinois corporation
("Circuit") and Bank ( the "Loan Agreement" and any security
documents and any other documents or instruments securing this Note or
evidencing the indebtedness described herein or delivered to induce
Lender to disburse the proceeds evidenced hereby are hereinafter
collectively referred to as the "Loan Documents" ). Reference is
hereby made to the Loan Documents (which are incorporated herein by
reference as fully and with the same effect as if set forth herein at
length) for a statement of the covenants and agreements contained
therein, a statement of the rights, remedies and security afforded
thereby, and all other matters herein contained. All property which
secures all or any part of the indebtedness evidenced by the Loan
Documents is hereinafter referred to individually and collectively as
"Collateral."
<PAGE>
The unpaid principal balance of Borrower's Liabilities due
hereunder shall bear interest from the date of disbursement until paid
at the rate or rates from time to time applicable to the 60-Month Term
Loan as determined in accordance with the Loan Agreement ("Interest
Rate").
Such interest shall be computed daily (on the basis of a 360-day
year and actual days elapsed) on the daily balance at the Interest
Rate, and shall be payable on the first Bank business day ( "Business
Day") of each month beginning on August 1, 1997; provided, however,
that in the event that any of Borrower's Liabilities are not paid when
due, the unpaid amount of Borrower's Liabilities shall bear interest
after the due date until paid at a rate equal to the sum of the rate
that would otherwise be in effect plus 3%.
Borrower warrants and represents to Bank that Borrower shall use
the proceeds represented by this Note solely for proper business
purposes and consistently with all applicable laws and statutes.
Regardless of the adequacy of the Collateral, any deposits or
other sums at any time credited by or payable or due from Bank to
Borrower, or any monies, cash, cash equivalents, securities,
instruments, documents or other assets of Borrower in the possession
or control of Bank or its Bailee for any purpose, may be reduced to
cash and applied by Bank to or setoff by Bank against Borrower's
Liabilities.
The occurrence of any one of the following events shall
constitute a default by the Borrower ("Event of Default") under this
Note: (a) if Borrower fails to pay any of Borrower's Liabilities when
due and payable or declared due and payable (whether by scheduled
maturity, required payment, acceleration, demand or otherwise); (b) if
Borrower or any guarantor of any of Borrower's Liabilities fails or
neglects to perform, keep or observe any term, provision, condition,
covenant, warranty or representation contained in this Note; (c)
occurrence of a default or an event of default under any agreement,
instrument or document heretofore, now or at any time hereafter
delivered by or on behalf of Borrower to Bank; (d) occurrence of a
default or an event of default under any agreement, instrument or
document heretofore, now or at any time hereafter delivered to Bank by
any guarantor of Borrower's Liabilities or by any person or entity
which has granted to Bank a security interest or lien in and to some
or all of such person's or entity's real or personal property to
secure the payment of Borrower's Liabilities; (e) if the Collateral or
any other of Borrower's assets are attached, seized, subjected to a
writ, or are levied upon or become subject to any lien or come within
the possession of any receiver, trustee, custodian or assignee for the
benefit of creditors; (f) if a notice of lien, levy or assessment is
filed of record or given to Borrower with respect to all or any of
Borrower's assets by any federal, state or local department or agency;
(g) if Borrower or any guarantor of Borrower's Liabilities becomes
insolvent or generally fails to pay or admits in writing its inability
to pay debts as they become due, if a petition under Title 11 of the
United States Code or any similar law or regulation is filed by or
against Borrower or any such guarantor, if Borrower or any such
<PAGE>
guarantor shall make an assignment for the benefit of creditors, if
any case or proceeding is filed by or against Borrower or any such
guarantor for its dissolution or liquidation, or if Borrower or any
such guarantor is enjoined, restrained or in any way prevented by
court order from conducting all or any material part of its business
affairs; (h) the death or incompetency of Borrower or any guarantor of
Borrower's Liabilities, or the appointment of a conservator for all or
any portion of Borrower's assets or the Collateral; (i) the
revocation, termination or cancellation of any guaranty of Borrower's
Liabilities without written consent of Bank; (j) if a contribution
failure occurs with respect to any pension plan maintained by Borrower
or any corporation, trade or business that is, along with Borrower, a
member of a controlled group of corporations or a controlled group of
trades or businesses (as described in Sections 414(b) and (c) of the
Internal Revenue Code of 1986 or Section 4001 of the Employee
Retirement Income Security Act of 1974, as amended, ERISA
sufficient to give rise to a lien under Section 302(f) of ERISA; (k)
if Borrower or any guarantor of Borrower's Liabilities is in default
in the payment of any obligations, indebtedness or other liabilities
to any third party and such default is declared and is not cured
within the time, if any, specified therefor in any agreement governing
the same; (l) if any material statement, report or certificate made or
delivered by Borrower, any of Borrower's partners, officers, employees
or agents or any guarantor of Borrower's Liabilities is not true and
correct; or (m) if Bank is reasonably insecure.
Upon the occurrence of an Event of Default, at Bank's option,
without notice by Bank to or demand by Bank of Borrower: (i) all of
Borrower's Liabilities shall be immediately due and payable; (ii) Bank
may exercise any one or more of the rights and remedies accruing to it
under the Loan Documents. No holder hereof shall, by any act or
omission or commission, be deemed to waive any of its rights, remedies
or powers hereunder or otherwise unless such waiver is in writing
signed by the holder hereof, and then only to the extent specifically
set forth therein. The rights, remedies and powers of the holder
hereof, as provided in this Note and in all of the other Loan
Documents, are cumulative and concurrent, and may be pursued singly,
successively against Borrower, any guarantor hereof, and any security
given at any time to secure the repayment hereof, all at the sole
discretion of the holder hereof.
Upon an Event of Default, Borrower, immediately upon demand by
Bank, shall assemble the Collateral and make it available to Bank at a
place or places to be designated by Bank which is reasonably
convenient to Bank and Borrower.
All of Bank's rights and remedies under this Note are cumulative
and non-exclusive. The acceptance by Bank of any partial payment made
hereunder after the time when any of Borrower's Liabilities become due
and payable will not establish a custom or waive any rights of Bank to
enforce prompt payment hereof. Bank's failure to require strict
performance by Borrower of any provision of this Note shall not waive,
affect or diminish any right of Bank thereafter to demand strict
compliance and performance therewith. Any waiver of an Event of
Default hereunder shall not suspend, waive or affect any other Event
of Default hereunder. Borrower and every endorser waive presentment,
<PAGE>
demand and protest and notice of presentment, protest, default,
non-payment, maturity, release, compromise, settlement, extension or
renewal of this Note, and hereby ratify and confirm whatever Bank may
do in this regard. Borrower further waives any and all notice or
demand to which Borrower might be entitled with respect to this Note
by virtue of any applicable statute or law (to the extent permitted by
law).
Borrower agrees to pay, immediately upon demand by Bank, any and
all costs, fees and expenses (including reasonable attorneys' fees,
costs and expenses) incurred by Bank (i) in enforcing any of Bank's
rights hereunder, and (ii) in representing Bank in any litigation,
contest, suit or dispute, or to commence, defend or intervene or to
take any action with respect to any litigation, contest, suit or
dispute (whether instituted by Bank, Borrower or any other person) in
any way relating to this Note, Borrower's Liabilities or the
Collateral, and to the extent not paid the same shall become part of
Borrower's Liabilities hereunder.
This Note shall be deemed to have been submitted by Borrower to
Bank and to have been made at Bank's principal place of business.
This Note shall be governed and controlled by the internal laws of the
State of Illinois and not the law of conflicts.
TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER IRREVOCABLY AGREES
THAT, SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR
PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT OF OR FROM OR
RELATED TO THIS NOTE SHALL BE LITIGATED IN COURTS HAVING SITUS WITHIN
THE CITY OF CHICAGO, STATE OF ILLINOIS, AND/OR THE CITY OF
GREENEVILLE, STATE OF TENNESSEE. BORROWER HEREBY CONSENTS AND SUBMITS
TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED
WITHIN EITHER OF SAID CITIES AND STATES. BORROWER HEREBY WAIVES ANY
RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION
BROUGHT AGAINST BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH.
BORROWER IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING (I) TO ENFORCE OR DEFEND ANY
RIGHTS UNDER OR IN CONNECTION WITH THIS NOTE OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE
BE DELIVERED IN CONNECTION HEREWITH, OR (II) ARISING FROM ANY DISPUTE
OR CONTROVERSY IN CONNECTION WITH OR RELATED TO THIS NOTE OR ANY SUCH
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT, AND AGREES THAT ANY SUCH
ACTION, SUIT, COUNTERCLAIM OR PROCEEDING SHALL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY.
BORROWER
1515 Industrial Drive
Greeneville, Tennessee CIRCUIT SYSTEMS OF TENNESSEE, L.P.,
a Tennessee limited partnership
62-1692960
FEIN By:CIRCUIT SYSTEMS OF
TENNESSEE, INC., its general partner
By: /s/ Dilip S. Vyas
Its: Vice-President
<PAGE>
<PAGE>
SECURITY AGREEMENT
Re: 1515 INDUSTRIAL DRIVE
THIS SECURITY AGREEMENT ("Agreement") is made and delivered
as of July 24, 1997 by CIRCUIT SYSTEMS OF TENNESSEE, L.P., a
Tennessee limited partnership ("Debtor"), to AMERICAN NATIONAL
BANK AND TRUST COMPANY OF CHICAGO, ("Secured Party").
R E C I T A L S
Debtor, with principal offices located at 2350 East Lunt
Avenue, Elk Grove Village, Illinois 60007, is executing those
certain term notes in the principal amounts of TWO MILLION TWO
HUNDRED SEVENTY THOUSAND AND NO/100 DOLLARS ($2,270,000.00) and
TWO MILLION EIGHT HUNDRED THOUSAND AND NO/100 DOLLARS
($2,800,000.00) (hereinafter individually a "Note" and
collectively the "Notes"), and that certain master lease (the
"Master Lease"), each made as of even da te herewith payable to
the order of, and held by Secured Party.
The Notes and the Master Lease are the Notes and Master Lease
referred to in that certain Loan and Security Agreement ("Loan
Agreement") among Debtor, Circuit Systems of Tennessee, Inc., an
Illinois corporation and the general partner of Debtor
("Circuit/Tennessee"), Circuit Systems, Inc., an Illinois
corporation ("Circuit") and Secured Party. The Notes, the
Master Lease and any documents evidencing and/or securing the
indebtedness under the Notes, Master Lease or Loan Agreement are
hereinafter referred to as the "Loan Documents." All defined
terms used but not defined herein shall have the meanings defined
in the Loan Agreement.
Secured Party requires as a condition precedent to its making
the financial accommodations evidenced by the Notes, the Master
Lease and the Loan Agreement, that Debtor grant to Secured Party a
security interest in the property herein described.
Debtor desires to give such security interest to Secured
Party in order to induce Secured Party to extend such financial
accommodations to Debtor.
ACCORDINGLY, for and in consideration of the making of the
Loan and as an inducement to Secured Party to do so, and for and
in consideration of the mutual promises, covenants and agreements
hereinafter set forth, Debtor and Secured Party agree as follows:
1. Creation of Security Interest. Debtor hereby grants to
Secured Party a security interest in and does hereby collaterally
assign, pledge, mortgage, convey and set over unto Secured Party
the property described as follows (hereinafter referred to as
collectively as the "Collateral"):
<PAGE>
(a) All apparatus, machinery, devices, fixtures,
communication devices, systems and equipment, fittings,
appurtenances, equipment, appliances, furniture, furnishings,
appointments, accessories, landscaping, plants and all other items
of personal property now or hereafter acquired by Debtor, or in
which Debtor may now or hereafter have any interest whatsoever,
and used in the operation of the Property. All fixtures and
equipment now or hereafter installed for use in the operation of
the buildings, structures and improvements now or hereafter on the
Property, including but not limited to, all lighting, heating,
cooking, air-cooling, lifting, fire extinguishing, cleaning,
entertaining, communicating and electrical and power systems, and
the machinery, appliances, ovens, stoves, refrigerators,
dishwashers, disposals, carpeting, doors and windows, shades,
floor coverings, cabinets, partitions, conduits, ducts and
compressors, and all elevators and escalators and the machinery
and appliances, fixtures and equipment pertaining thereto, other
than any such items that are owned by tenants of all or any
portion of the Property.
(b) Any and all judgments, awards, revenues,
receivables, income and accounts now owned or hereafter acquired
and arising from or out of the Property and the businesses and
operations conducted thereon, including, without limitation,
condemnation awards and proceeds, payments or settlements under
insurance policies covering the Property.
(c) Any and all goods, tangible and intangible,
personal property of any kind, nature or description (including
without limitation, any and all accounts, contract rights,
franchises, licenses, permits, documents, instruments and general
intangibles) of Debtor, whether now owned or hereafter acquired,
or in which Debtor now has or shall hereafter acquire by any
right, title or interest whatsoever (whether by bill or sale,
lease, conditional sales contract, or other title retention
document or otherwise), and any and all replacements and
substitutions thereof or therefore, arising from or out of the
Property.
(d) All right, title and interest of Debtor in and to
all construction contracts, subcontracts, architectural
agreements, engineering contracts, service contracts, maintenance
contracts, construction and other governmental consents, permits
and licenses, surveys, plans, specifications, warranties, and
guaranties, and all amendments, modifications, supplements,
general conditions and addenda thereto, which Debtor has, may have
or may subsequently directly or indirectly enter into, obtain or
acquire in connection with the improvements, ownership, operation
or maintenance of the Property.
(e) Any and all additions and accessories to all of the
foregoing and any and all proceeds, renewals, replacements and
substitutions of all of the foregoing.
<PAGE>
(f) Rights of Debtor under any and all declarations
recorded with respect to any portion of the Property.
2. Debtor's Obligations.
(a) Payment of Indebtedness. The security interest
created herein is given as additional security for: the payment
to Secured Party of all indebtedness evidenced by and according to
the terms of the Notes, the Mortgage, the Master Lease and the
other Loan Documents; the payment of all sums hereafter loaned,
paid out, expended or advanced by Secured Party under the terms of
this Agreement or otherwise, to or for the account of Debtor,
together with interest thereon; all extensions or renewals of each
and all of the Notes, the Mortgage, the Master Lease and the other
Loan Documents evidencing sums hereafter loaned, paid out,
expended or advanced by Secured Party, its successors or assigns,
to or for the account of Debtor; the discharge and performance of
all agreements and obligations under the Notes, the Mortgage, the
Master Lease and the other Loan Documents; any other obligations,
liabilities or indebtedness of Debtor to Secured Party, whether
such obligations, liabilities or indebtedness are now existing or
hereafter created, direct or indirect, absolute or contingent,
joint or several, due or to become due, howsoever created,
evidenced or arising and howsoever acquired by Secured Party (all
of the foregoing are hereinafter collectively called the
"Indebtedness").
(b) Protection of Collateral. Debtor shall take any
and all steps required to protect the Collateral and in pursuance
thereof Debtor agrees that the Collateral:
(i) Shall be kept at the Property or at any other real
property hereafter subject to the lien of the Mortgage, as
applicable, and shall be used only in the conduct of Debtor's
business and operation of the buildings, structures and
improvements on the Property or on any other real property
hereafter subject to the lien of the Mortgage, as applicable;
(ii) Shall not be misused, wasted or allowed to
deteriorate, except for the ordinary wear and tear resulting
from its use, as aforesaid;
(iii) Shall at all times be insured against loss,
damage, theft, and such other risks as Secured Party may
require in such amounts, with such companies, under such
policies, in such form and for such periods as shall be
satisfactory to Secured Party, and each such policy shall
provide that the loss thereunder and the proceeds payable
thereunder shall be payable to Secured Party as its interest
may appear, and Secured Party may apply any proceeds of such
insurance which may be received by Secured Party toward the
payment of the Indebtedness whether due or not due, in such
order as Secured Party may determine;
(iv) Shall not be used in violation of any applicable
statute, law, rule, regulation or ordinance; and
<PAGE>
(v) May be examined and inspected by Secured Party at
any reasonable time, wherever located.
(c) Protection of Security Interest. Debtor shall take
any and all steps necessary to protect the priority of the
security interest granted herein, and in pursuance of this
obligation, Debtor agrees that:
(i) Debtor shall not sell, transfer, lease or otherwise
dispose of any of the Collateral or any interest therein or
offer to do so, except in the ordinary course of business,
without the prior written consent of Secured Party, or permit
anything to be done that may impair the value of any of the
Collateral or the security intended to be afforded by this
Agreement;
(ii) Debtor shall pay promptly when due all taxes and
assessments upon the Collateral or for its use or operation
and, if requested in writing by Secured Party, shall deliver
to Secured Party, within ten (10) days after such request, a
receipt or other evidence satisfactory to Secured Party of
the payment thereof;
(iii) Debtor shall sign and execute alone or with
Secured Party any financing statement or other document or
procure any documents and pay all reasonable connected costs,
expenses and fees, including attorneys' fees, necessary to
protect the security interest under this Agreement against
the rights, interests or claims of third persons;
(iv) Debtor shall reimburse Secured Party for all
reasonable costs, expenses and fees, including without
limitation court costs and attorneys' fees, incurred for any
action taken by Secured Party to remedy a default of Debtor
under this Agreement;
<PAGE>
(v) Debtor shall (A) from time to time promptly execute
and deliver to Secured Party all such other assignments,
certificates, supplemental writings, and financing
statements, and do all other acts or things as Secured Party
may request in order to more fully evidence and perfect the
security interest created herein; (B) punctually and properly
perform all of Debtor's agreements and obligations under this
Agreement, the Notes, the Mortgage, the Master Lease and the
other Loan Documents and under any other security agreement,
mortgage, deed of trust, collateral pledge, agreement or
contract of any kind now or hereafter existing as security
for and in connection with payment of the Indebtedness, or
any part thereof; (C) pay the Indebtedness in accordance with
the terms thereof and in accordance with the terms of this
Agreement, the Notes, the Mortgage, the Master Lease and the
other Loan Documents or other writings evidencing the
Indebtedness, or any part thereof; (D) promptly furnish
Secured Party with any information or writings which Secured
Party may request concerning the Collateral; (E) allow
Secured Party to inspect all records of Debtor relating to
the Collateral, the Indebtedness and the business and
operation of Debtor or the Property or any other real
property hereafter subject to the lien of the Mortgage, and
to make and take away copies of such records; (F) promptly
notify Secured Party of any change in any facts or
circumstances warranted or represented by Debtor in this
Security Agreement or in any other writing furnished by
Debtor to Secured Party in connection with the Collateral,
the Indebtedness and the business and operation of Debtor or
the Property or any other real property hereafter subject to
the lien of the Mortgage; (G) promptly notify Secured Party
of any claim, action or proceeding affecting title to the
Collateral, or any part thereof, or the security interest
created herein, and, at the request of Secured Party, appear
in and defend, at Debtor's sole cost and expense, any such
action or proceeding; and (H) promptly, after being requested
by Secured Party, pay to Secured Party the amount of all
expenses, including attorneys' fees, court costs and other
legal expenses, incurred by Secured Party in enforcing the
security interest created herein;
(vi) Debtor shall not, without the prior written
consent of Secured Party: create any other security interest
in, mortgage, pledge, or otherwise encumber the Collateral,
or any part thereof, or permit the same to be or become
subject to any lien, attachment, execution, sequestration,
other legal or equitable process, or any encumbrance of any
kind or character;
<PAGE>
(vii) Should the Collateral, or any part thereof ever
be in any manner converted by its issuer or maker into
another type of property or any money or other proceeds ever
be paid or delivered to Debtor as a result of Debtor's rights
in the Collateral, then, in any such event, all such
property, money and other proceeds shall become part of the
Collateral, and Debtor covenants to forthwith pay or deliver
to Secured Party all of the same which is susceptible of
delivery and, at the same time, if Secured Party deems it
necessary and so requests, Debtor will properly endorse or
assign the same. With respect to any of such property of a
kind requiring any additional security agreement, financing
statement or other writing to perfect a security interest
therein in favor of Secured Party, Debtor will forthwith
execute and deliver to Secured Party whatever Secured Party
shall deem necessary or proper for such purpose; and
(viii) Should any covenant, duty or agreement of Debtor
fail to be performed in accordance with its terms hereunder,
Secured Party may, but shall never be obligated to, perform
or attempt to perform such covenant, duty or agreement on
behalf of Debtor, and any amount expended by Secured Party in
such performance or attempted performance shall become a part
of the Indebtedness, and, at the request of Secured Party,
Debtor agrees to pay such amount promptly to Secured Party at
Secured Party's address set forth opposite its name below, or
at such other place as Secured Party may designate, together
with interest thereon at the Default Rate (as such term
is defined in the Mortgage) from the date of such expenditure
by Secured Party until paid.
3. Default. The occurrence of any one or more of the
Events of Default described in the Loan Agreement and/or the other
Loan Documents shall be an "Event of Default" for purposes of this
Agreement.
4. Consequences of Default. Upon the occurrence of any
such Event of Default, or at any time thereafter while such Event
of Default continues to exist, Secured Party may, at its option,
declare all Indebtedness secured hereby to be immediately due and
payable to Secured Party without demand or notice of any kind
whatsoever, and such Indebtedness thereupon shall immediately
become due and payable to Secured Party without demand or notice,
but with such adjustments, if any, with respect to interest or
other charges as may be provided for herein or in the Notes,
the Mortgage, the Master Lease, the other Loan Documents or any
other written agreements between Debtor and Secured Party.
5. Secured Party's Rights and Remedies. Secured Party
shall have available to it the following rights and remedies:
<PAGE>
(a) Right to Assign. Secured Party may assign this
Agreement, and if Secured Party does assign this Agreement, the
assignee shall be entitled to the performance of all of Debtor's
agreements and obligations under this Agreement, and the assignee
shall be entitled to all the rights and remedies of Secured Party
under this Agreement, and Debtor expressly agrees that it will
assert no claims or defenses it may have against Secured Party
against the assignee except those available to it in this
Agreement.
(b) Right to Discharge Debtor's Obligations. Secured
Party may, at its option, discharge taxes, liens or security
interests or other encumbrances at any time levied or placed on
the Collateral, may remedy or cure any default of Debtor under the
terms of any lease, rental agreement, or other document which in
any way pertains to or affects Debtor's title to or interest in
any of the Collateral, may pay for insurance on the Collateral,
and may pay for the maintenance and preservation of the
Collateral, and Debtor agrees to reimburse Secured Party, on
demand, for any payment made or any expense incurred by Secured
Party, including reasonable attorneys' fees, pursuant to the
foregoing authorization, together with interest at the Default
Rate from the date so paid or incurred by Secured Party, which
payments, expenses and interest shall be secured by the security
intended to be afforded by this Agreement and/or by the Mortgage
and the other Additional Collateral.
(c) Right of Enforcement. Secured Party shall have and
may exercise any and all rights of enforcement and remedies before
or after default afforded to a Secured Party under the Uniform
Commercial Code in force in the State of Tennessee (the "Uniform
Commercial Code") together with any and all other rights and
remedies otherwise provided and available to Secured Party at law
or in equity as of the date of this Agreement or the date of
Debtor's default; and, in conjunction with, in addition to, or
substitution for those rights and remedies, at Secured Party's
discretion, Secured Party may:
(i) To the extent permitted by law, enter upon Debtor's
premises to take possession of, assemble and collect the
Collateral or to render it or any portion of the Collateral
unusable; and/or
(ii) Remedy any default in any reasonable manner,
without waiving its rights and remedies upon default and
without waiving any other prior or subsequent default.
(d) Right of Sale.
<PAGE>
(i) Debtor agrees that should it fail to make payments
as provided in the Notes, the Mortgage, the Master Lease or
the other Loan Documents, or if a default be made on any
obligation or promise of Debtor contained herein or hereby
secured or contained in or secured by the Notes, the
Mortgage, the Master Lease or the other Loan Documents, then
Secured Party may, at its option, sell or dispose of the
Collateral at public or private sale without any previous
demand of performance or notice to Debtor of any such sale
whatsoever, except as provided under the Uniform Commercial
Code, and from the proceeds of sale retain: (A) all costs
and charges incurred by Secured Party in taking and causing
the removal and sale of said property, including such
attorneys' fees as shall have been incurred by Secured Party;
(B) all sums due pursuant to the Notes, the Mortgage, the
Master Lease, the other Loan Documents and this Agreement,
and all accrued interest thereon; and (C) all monies due from
Debtor to Secured party under any other indebtedness or
obligation and all accrued interest thereon. Any surplus of
such proceeds remaining shall be paid to Debtor.
(ii) At any sale or sales made pursuant to this
Agreement or in a suit to foreclose the same, the Collateral
may be sold en masse or separately, at the same or at
different times, at the option of Secured Party or its
assigns. Such sale may be public or private, with notice as
required by the Uniform Commercial Code, and the Collateral
need not be present at the time or place of sale. At any
such sale, Secured Party or the holder of the Notes hereby
secured may bid for and purchase any of the property sold,
notwithstanding that such sale is conducted by Secured Party
or its attorneys, agents, or assigns, and no irregularity in
the manner of sale or of giving notice shall operate to
preclude Secured Party from recovering the Indebtedness.
(iii) If any notification of intended sale or other
disposition of the Collateral or any part thereof is required
under the Uniform Commercial Code or other law, such
notification, if mailed, shall be deemed reasonably and
properly given if mailed to Debtor at least ten (10) days
before such sale or disposition.
<PAGE>
(e) Miscellaneous. Secured Party shall have the right
at all times to enforce the provisions of this Agreement in strict
accordance with the terms hereof, notwithstanding any conduct or
custom on the part of Secured Party in refraining from so doing at
any time or times. The failure of Secured Party at any time or
times to enforce its rights under said provisions strictly in
accordance with the same shall not be construed or operate as a
waiver of any of the rights and remedies granted Secured Party
hereunder or as having created a custom in any way or manner
contrary to the specific provisions of this Agreement or as having
in any way or manner modified the same. All rights and remedies
of Secured Party are cumulative and concurrent, and the exercise
of one right or remedy by Secured Party shall not be deemed a
waiver or release of any other right or remedy. Except as
otherwise specifically required herein, notice of the exercise of
any right, remedy or power granted to Secured Party by this
Agreement is not required to be given.
6. Representations and Warranties. Debtor represents and
warrants that:
(a) Debtor has authority to execute and deliver this
Agreement;
(b) No financing statement covering the Collateral, or
any part thereof, has been filed with any filing officer;
(c) No other security agreement covering the
Collateral, or any part thereof, has been made and no security
interest, other than the one herein created, has attached or been
perfected in the Collateral or in any part thereof;
(d) No dispute, right of setoff, counterclaim or
defenses exist with respect to any part of the Collateral;
(e) All information supplied and statements made in any
financial or credit statements or application for credit prior to
the execution of this Agreement are true and correct in all
material respects as of the date hereof; and
(f) At the time Secured Party's security interest
attaches to any of the Collateral or its proceeds Debtor will be
the lawful owner with the right to transfer any interest therein,
and that Debtor will make such further assurances as to prove
title to the Collateral in Debtor as may be required and will
defend the Collateral and its proceeds against the lawful claims
and demands of all persons whomsoever.
<PAGE>
The delivery at any time by Debtor to Secured Party of the
Collateral shall constitute a representation and warranty by
Debtor under this Agreement that, with respect to such Collateral,
and each item thereof, Debtor is owner of the Collateral and the
matters heretofore represented and warranted in this Paragraph 6
are true, complete and correct. Further Debtor, upon the request
of Secured Party, agrees to amend this Agreement and any and all
financing statements filed in connection therewith for the purpose
of setting forth in said Agreement and said financing statements
an accurate and itemized list, when known, of the Collateral now
generally described herein and in said financing statements and to
include in said accurate and itemized list an identification of
the Collateral by make, model, serial number and other appropriate
descriptive data.
7. Subrogation. If the Indebtedness, or any part thereof,
be given in renewal or extension, or applied toward the payment of
indebtedness secured by mortgage, pledge, security agreement or
other lien, Secured Party shall be and is hereby subrogated to all
of the rights, titles, security interests and other liens securing
the indebtedness so renewed, extended or paid.
8. Mutual Agreements. Debtor and Secured Party mutually
agree as follows:
(a) "Debtor" and "Secured Party" as used in this
Security Agreement include the general partners, if any, joint
venturers, if any, heirs, legatees, administrators, legal
representatives, permitted successors and permitted assigns of
those parties.
(b) This Agreement includes all amendments and
supplements thereto and all assignments thereof. This Agreement
shall not be amended, modified or supplemented without the written
agreement of Debtor and Secured Party at the time of such
amendment, modification or supplement.
(c) It is expressly intended, understood and agreed
that this Agreement, the Notes, the Mortgage, the Master Lease and
the other Loan Documents are made and entered into for the sole
protection and benefit of Secured Party and Debtor, and their
respective successors and assigns (but in the case of assigns of
Debtor, only to the extent permitted hereunder), and no other
person or persons shall have any right of action hereunder or
rights to the Loan proceeds at any time; that the Loan proceeds do
not constitute a trust fund for the benefit of any third party;
that no third party shall under any circumstances be entitled to
any equitable lien on any undisbursed Loan proceeds at any time;
and that Secured Party shall have a lien upon and right to direct
application of any undisbursed Loan proceeds as additional
security for this Agreement, the Notes, the Mortgage, the Master
Lease and the other Loan Documents. The relationship between
Secured Party and Debtor is solely that of a lender and borrower,
and nothing contained herein, or in the Notes, the Mortgage, the
Master Lease or the other Loan Documents shall in any manner be
construed as making the parties hereto partners, joint venturers
or creating any other relationship other than lender and borrower.
<PAGE>
(d) This Agreement shall be construed in accordance
with and governed by the substantive laws of the State of
Illinois. All provisions of this Agreement shall be deemed valid
and enforceable to the extent permitted by law. Any provision or
provisions of this Agreement which are held unenforceable, invalid
or contrary to law by a court of competent jurisdiction, or the
inclusion of which would affect the validity or enforceability of
this Agreement, shall be of no force or effect, and in such event
each and all of the remaining provisions of this Agreement shall
subsist and remain and be fully effective according to the tenor
of this Agreement as though such invalid, unenforceable or
unlawful provision or provisions had not been included in this
Security Agreement.
(e) To the extent permitted by law, Debtor hereby
waives any and all rights to require marshaling of assets by
Secured Party.
(f) Any notices desired or required to be given
hereunder shall be deemed given two (2) business days after the
same is deposited in the United States mail, as registered or
certified mail, postage prepaid, addressed as follows:
TO SECURED PARTY: AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO
21 North Randall Street
Elk Grove Village, Illinois 60007
Attention: James G. Cygan
WITH A COPY TO: MELTZER, PURTILL & STELLE
1515 East Woodfield Road
Suite 250
Schaumburg, Illinois 60173-5431
Attention: Scott D. Gudmundson
TO DEBTOR: CIRCUIT SYSTEMS OF TENNESSEE, L.P.,
a Tennessee limited partnership
c/o Circuit Systems of Tennessee, Inc.,
its general partner
2350 East Lunt Avenue
Elk Grove Village, Illinois 60607
WITH COPY TO: RIECK AND CROTTY
55 West Monroe Street
Suite 3390
Chicago, Illinois 60603-5062
Attention: Douglas C. Conover
Either party may change its address for notice purposes by
complying with the provisions for giving notice as above
described; provided, however, that such notice shall not be deemed
given until actually received by the addressee.
<PAGE>
(g) Debtor hereby agrees that no liability shall be
asserted or enforced by Debtor against Secured Party in its
exercise of the powers and rights herein granted, all such
liability being hereby expressly waived and released by Debtor.
Debtor hereby agrees to indemnify, defend and hold Secured Party
harmless from and against any and all liability, expense, cost or
damage which may be incurred by, asserted against or imposed upon
Secured Party at any time which relate to or arise from the use,
operation or lease of any of the Collateral or the exercise by
Secured Party of the powers and rights herein granted.
(h) This Agreement shall inure to the benefit of
Secured Party, its successors and assigns and shall be binding
upon the debtor and its general partners, if any, joint venturers,
if any, heirs, legatees, administrators, legal representatives,
successors and permitted assigns.
Debtor has executed this Agreement as of the day and year first
above written.
CIRCUIT SYSTEMS OF TENNESSEE, L.P.,
a Tennessee limited partnership
By: CIRCUIT SYSTEMS OF TENNESSEE,
INC., its general partner
By: /s/ Dilip S. Vyas
Its: Vice-President
EXHIBIT A
Legal Description of the Property
SITUATED IN THE 10th CIVIL DISTRICT OF GREENE COUNTY, TENNESSEE,
AND DESCRIBED AS FOLLOWS:
BEGINNING AT A STAKE IN THE NORTHWESTERN BOUNDARY OF THE RIGHT-OF-
WAY OF INDUSTRIAL ROAD, CORNER TO THE LANDS OF GLEN MILLER; THENCE
NORTH 38 DEG. 58 MIN. 46 SEC. WEST 557 FEET TO A STAKE; THENCE
NORTH 52 DEG. 18 MIN. 33 SEC. EAST 809.01 FEET TO A STAKE IN THE
EDGE OF ROCKWELL DRIVE; THENCE WITH THE EDGE OF SAID DRIVE, SOUTH
38 DEG. 51 MIN. 22 SEC. EAST 541.69 FEET TO A STAKE, CORNER OF
ROCKWELL DRIVE WITH THE INDUSTRIAL ROAD; THENCE WITH THE
NORTHWESTERN BOUNDARY OF THE RIGHT-OF-WAY OF INDUSTRIAL ROAD, TWO
COURSES AND DISTANCES AS FOLLOWS: SOUTH 48 DEG. 26 MIN. 49 SEC.
WEST 220 FEET TO A STAKE AND SOUTH 52 DEG. 15 MIN. 49 SEC. WEST
588 FEET TO THE POINT OF BEGINNING, CONTAINING 10.292 ACRES, MORE
OR LESS, ACCORDING TO SURVEY OF JAMES N. LOUPE, SURVEYOR, DATED
JUNE 19, 1990.
<PAGE>
BEING THE SAME PROPERTY CONVEYED TO NORTH AMERICAN PHILIPS
CORPORATION BY WARRANTY DEED FROM KIL-TRA, INCORPORATED (a/k/a
"KIL-TRA, INC.") DATED JUNE 28, 1990, AND RECORDED IN WARRANTY
DEED BOOK 427, PAGE 344, IN THE RECORDS OF THE GREENE COUNTY
REGISTRAR'S OFFICE.
P.I.N. 10-087-087-07902
<PAGE>
<PAGE>
American National Bank
and Trust Company of Chicago
CONTINUING PLEDGE AGREEMENT
This Continuing Pledge Agreement is made by the undersigned,
Circuit Systems, Inc., an Illinois corporation (hereinafter
"Pledgor" or the "Undersigned"), to and for the benefit of
American National Bank and Trust Company of Chicago (hereinafter
referred to as the "Bank").
R E C I T A L S:
Circuit Systems of Tennessee, L.P., a Tennessee limited
partnership, with principal offices located at 2350 East Lunt
Avenue, Elk Grove Village, Illinois 60007 ( "Borrower" ), is
executing those certain term notes in the principal amounts of
TWO MILLION TWO HUNDRED SEVENTY THOUSAND AND NO/100 DOLLARS
($2,270,000.00) and TWO MILLION EIGHT HUNDRED THOUSAND AND NO/100
DOLLARS ($2,800,000.00) (hereinafter individually a "Note" and
collectively the "Notes"), and that certain master lease (the
"Master Lease" ), each made as of even date herewith payable to
the order of, and held by Bank.
The Notes and the Master Lease are the Notes and Master
Lease referred to in that certain Loan and Security Agreement
( "Loan Agreement") among Borrower, Circuit Systems of
Tennessee, Inc., an Illinois corporation and the general partner
of Borrower ( "Circuit/Tennessee"), Pledgor and Bank. The
Notes, the Master Lease and any documents evidencing and/or
securing the indebtedness under the Notes, Master Lease or Loan
Agreement are hereinafter referred to as the "Loan Documents."
Pledgor is the sole shareholder of Circuit/Tennessee, and,
as such, will benefit from the Loan and financial accommodations
of Bank to Borrower described in the Loan Agreement.
Bank requires as a condition precedent to its making the
financial accommodations evidenced by the Notes, the Master Lease
and the Loan Agreement, that Pledgor grant to Bank a security
interest in the property herein described.
Pledgor desires to give such security interest to Bank in
order to induce Bank to extend such financial accommodations to
Borrower.
NOW, THEREFORE, for value received, and in consideration of
the advances, credits or other financial accommodations
heretofore, now or hereafter at any time extended to Borrower by
<PAGE>
Bank (all of such financial accommodations, including, without
limitation, the amounts due under the Notes, the Master Lease and
the Loan Agreement, are hereinafter referred to as the
"Liabilities"), the Undersigned agrees as follows:
PLEDGE: Pledgor pledges and transfers to the Bank, and grants
the Bank a continuing security interest in the property listed
below under the heading "Schedule of Collateral (the "Collateral").
If the Collateral consists of securities, the grant
includes any stock rights, stock dividends, liquidating
dividends, new securities and other property to which the Pledgor
may become entitled because it owns the Collateral. The Pledgor
has transferred the securities to the Bank. This security
interest shall secure all Liabilities and includes principal,
interest, expenses, reasonable attorneys' fees, and all other
costs of collection. The Pledgor agrees to hold the Bank
harmless from any liability caused by its reliance on this
Pledge.
SCHEDULE OF COLLATERAL:
400,000 shares of the stock of Sigmatron International, Inc.,
represented by Certificate Nos. SI 1991, SI 1992, SI 1993 & SI 1994
substitions, replacements, additions and proceeds. Any
securities or other property of the Pledgor at any time in the
custody, possession or control of the Bank shall also constitute
Collateral unless the Bank holds such property solely in a
fiduciary capacity.
WARRANTIES AND COVENANTS: The Pledgor warrants it owns the
Collateral free and clear of any liens. The Pledgor will not
attempt to sell or assign the Collateral or create any lien or
claim against it. The Pledgor agrees to reimburse the Bank, on
demand, for any amounts paid or advanced by the Bank for the
purpose of preserving all or any part of the Collateral. The
Bank shall exercise reasonable care in the custody and
preservation of the Collateral to the extent required by
applicable statute. The Bank shall use its best efforts to take
any action the Pledgor may reasonably request in writing, but the
failure to do so shall not be construed as a failure to exercise
reasonable care.
REGISTRATION RIGHTS: If any of the collateral consists of
securities not registered under the Securities Act of 1933, and
the issuer proposes to register any of its securities, the
Pledgor will give the Bank notice of that fact. In addition, and
at no cost to the Bank, the Pledgor will use its best efforts to
induce the issuer to register the pledged securities so that they
may be disposed of by public sale or other public disposition.
Upon the completion of registration, the Pledgor will deliver
certificates without any restrictive legend in exchange for the
unregistered securities. The Pledgor indemnifies and holds the
Bank harmless against any loss, claim, damage or liability
arising out of the registration process, and will reimburse the
Bank for any legal or other expenses incurred by the Bank as a
result.
<PAGE>
INSTRUCTIONS REGARDING THE COLLATERAL: The Bank may act upon any
instructions given by the Pledgor whether in writing or not, with
regard to additions or substitutions or sale or other disposition
of the Collateral and its proceeds. The Pledgor agrees that any
additions to, substitutions for or proceeds of the Collateral
that it receives will be held for the Bank's benefit and turned
over to the Bank. The Pledgor also gives the Bank permission to
have the Collateral or any part of it transferred to or
registered in the Bank's name or in the name of any other person
or business entity with or without designation of the capacity of
that nominee, and will hold the Bank harmless from any liability
or responsibility that might result. In furtherance of the
Bank's rights under this Pledge, the Pledgor irrevocably appoints
the Bank as its attorney-in-fact, with full power of
substitution.
CONTINUED RELIANCE: The Bank may continue to make loans or
extend credit to the Borrower based on this Pledge until it
receives written notice of termination from the Pledgor. That
notice shall be effective at the opening of the Bank for business
on the third business day after receipt of the notice. The
termination will not affect any of the rights given to the Bank
in this Pledge with respect to any of the Liabilities that were
created, assumed or committed to prior to the effective date of
the termination, and all subsequent renewals, extensions,
modifications and amendments of the Liabilities. Upon receipt of
the notice, the Bank does not have to take any action against the
Borrower or the Collateral in order to maintain its rights. If
this Pledge secures Liabilities of the Pledgor only, this Pledge
is not terminable.
LOAN-TO-VALUE RATIO: If the ratio of the unpaid balance of the
Liabilities to the then fair market value (as reasonably
determined by the Bank) of any securities constituting all or any
portion of the Collateral shall exceed the Bank's fifty percent
(50%) loan-to-value requirements for the 60-Month Term Loan (as
defined in the Loan Agreement), and Pledgor fails, within five
(5) days following the demand of Bank (a Margin Call
pledge such additional Collateral as is required by the Bank to
maintain such fifty percent (50%) loan-to-value requirement, the
Pledgor shall be in default under this Pledge and the Bank may
sell all or any portion of such securities and otherwise exercise
any or all of the rights and remedies set forth in this Pledge.
DEFAULT/REMEDIES: If the Borrower fails to pay any of the
Liabilities when due, or otherwise defaults under the terms of
any agreement related to any of the Liabilities, or if the
Pledgor fails to observe or perform any term of this Pledge, or
if any representation or warranty of the Pledgor contained in
this Pledge is untrue in any material respect, then the Bank
shall have all of the rights and remedies provided by any law to
liquidate or foreclose on and sell the Collateral, including but
<PAGE>
not limited to the rights and remedies of a secured party under
the Uniform Commercial Code. The Pledgor agrees and acknowledges
that because of applicable securities laws, the Bank may not be
able to effect a public sale of the Collateral, and sales at a
private sale may be on terms and at a price less favorable than
if the securities were sold at a public sale. The Pledgor agrees
that all private sales made under these circumstances shall be
construed to have been made in a commercially reasonable manner.
These rights and remedies shall be cumulative and not exclusive.
If the Pledgor is entitled to notice, that requirement will be
met if the Bank sends notice at least seven (7) days prior to the
date of sale, disposition or other event requiring notice. The
proceeds of any sale shall be applied first to costs, then toward
payment of the Liabilities, whether or not the Liabilities have
been declared to be due and owing; provided that, to the extent
any Liabilities consists of extensions of credit to the Borrower
by the issuance of letters of credit or other like obligations of
the Bank to third parties which have not been utilized, such
proceeds shall be held by the Bank in a cash collateral account
as security for the Liabilities.
LIQUIDATION: Upon the occurrence of an Event of Default or
Unmatured Event of Default, each as defined in the Loan
Agreement, or upon any Margin Call, which remains unsatisfied in
whole or in part by Pledgor, Pledgor agrees that it shall not,
for a period ending 180 days following the occurrence of such
event, sell and/or offer to sell any securities of Sigmatron
International, Inc. then held by Pledgor. Pledgor further agrees
that, in such event, it shall not cause or authorize any
Affiliate, as such term is described in the Loan Agreement, to
sell and/or offer to sell any securities of Sigmatron
International, Inc. held by any such Affiliate.
SALE OF COLLATERAL:
(a) Pledgor recognizes that Bank may be unable to effect a
public sale or disposition (including, without limitation, any
disposition in connection with a merger of any Subsidiary) of any
or all of the Collateral by reason of certain prohibitions
contained in the Securities Act of 1933, as amended (the
"Act"), and applicable state securities laws, but may be
compelled to resort to one or more private sales or dispositions
thereof to a restricted group of purchasers who will be obliged
to agree, among other things, to acquire such securities for
their own account for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges and agrees
that any such private sale or disposition may result in prices
and other terms (including the terms of any securities or other
property received in connection therewith) less favorable to the
seller than if such sale or disposition were a public sale or
disposition and, notwithstanding such circumstances, agrees that
any such private sale or disposition shall be deemed to have been
made in a commercially reasonable manner. Bank shall be under no
obligation to delay a sale or disposition of any of the
Collateral to permit Pledgor or any Subsidiary to register such
<PAGE>
securities for public sale under the Act, or under applicable
state securities laws, even if Pledgor or any Subsidiary would
agree to do so.
(b) Pledgor further agrees to do or cause to be done all
such other acts and things as may be necessary to make such sale
or sales or dispositions of any portion or all of the Collateral
valid and binding and in compliance with any and all applicable
laws, regulations, orders, writs, injunctions, decrees or awards
of any and all courts, arbitrators or governmental
instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales or dispositions, all at Pledgor's expense,
provided that Pledgor shall be under no obligation to take any
action to enable any or all of the Collateral to be registered
under the provisions of the Act or to prepare and file a
prospectus in connection therewith. Pledgor further agrees that
a breach of any of the covenants contained in this paragraph will
cause irreparable injury to Bank, that Bank has no adequate
remedy at law in respect of such breach and, as a consequence,
agrees that each and every covenant contained in this paragraph
shall be specifically enforceable against Pledgor, and Pledgor
hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a
defense that no Event of Default has occurred under the Loan
Agreement.
WAIVERS: The Pledgor waives any right it may have to receive
notice of any of the following matters before the Bank enforces
any of its rights: (a) the Bank's acceptance of this Pledge, (b)
any credit that the Bank extends to the Borrower, (c) the
Borrower's default, (d) any demand, or (e) any action that the
Bank takes regarding anyone else, any collateral, or any
Liability, which it might be entitled to take by law or under any
other agreement. No modification or waiver of this Pledge is
effective unless it is in writing and signed by the party against
whom it is being enforced. The Bank may waive or delay enforcing
any of its rights without losing them. Any waiver affects only
the specific terms and time period stated in the waiver. The
Bank shall not be obligated to take any action in connection with
any conversion, call, redemption, retirement or any other event
relating to any of the Collateral.
REPRESENTATION BY PLEDGOR: Each Pledgor represents that: (a)
the execution and delivery of this Pledge and the performance of
the obligations it imposes do not violate any law, do not
conflict with any agreement by which it is bound, or require the
consent or approval of any governmental authority or any third
party; (b) this Pledge is a valid and binding agreement,
enforceable according to its terms; and (c) all balance sheets,
profit and loss statements, and other financial statements
furnished to the Bank are accurate and fairly reflect the
financial condition of the organizations and persons to which
they apply on their effective dates, including contingent
liabilities of every type, which financial condition has not
changed materially and adversely since those dates. Each
Pledgor, other than a natural person, further represents that:
(a) it is duly organized, existing and in good standing under the
<PAGE>
laws where it is organized: and (b) the execution and delivery of
this Pledge and the performance of the obligations it imposes (i)
are within its powers and have been duly authorized by all
necessary action of its governing body; and (ii) do not
contravene the terms of its articles of incorporation or
organization, its by-laws, or any agreement governing its
affairs.
NOTICES: Notice from one party to another relating to this
Pledge is effective if made in writing (including
telecommunications) and delivered to the recipient's address,
telex number or facsimile number set forth in this Pledge by any
of the following means: (a) hand delivery, (b) registered or
certified mail, postage prepaid, (c) first class or express mail
postage prepaid, (d) Federal Express or like overnight courier
service, or (e) facsimile, telex or other wire transmission with
request for assurance of receipt in a manner typical with respect
to communications of that type. Notice made in accordance with
this section shall be construed as delivered on receipt if
delivered by hand or wire transmission, on the third business day
after mailing if mailed by first class, registered or certified
mail, or on the next business day after mailing or deposit with
an overnight courier service if delivered by express mail or
overnight courier. Notwithstanding the foregoing, notice of
termination of the Pledge is received only upon the receipt of
actual written notice by the Bank in accordance with the
paragraph above labeled Continued Reliance.
MISCELLANEOUS: The Pledgor consents to (a) any extension,
postponement, renewal, modification and amendment of any
Liability, (b) the release or discharge of all or any part of any
security for the Liabilities and (c) the release or discharge or
suspension of any rights and remedies against any person who may
be liable for the Liabilities. The Bank does not have to look to
any other right, any other collateral, or any other person for
payment before it exercises its rights under this Pledge. The
Pledgor's obligations to the Bank under this Pledge are not
subject to any condition, precedent or subsequent, and shall not
be released or affected by any change in the composition or
structure of the Pledgor, including a merger or consolidation
with any other person or entity. If this Pledge is signed by
more than one person, all are jointly and severally bound. This
Pledge is binding on the Pledgor and its heirs, successors and
assigns, and is for the benefit of the Bank and its successors
and assigns. This Agreement is governed by Illinois law. The
use of section headings does not limit the provisions of this
Pledge.
WAIVER OF JURY TRIAL: The Bank and the Pledgor, after consulting
or having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right either of them may
have to a trial by jury in any litigation based upon or arising
out of this Pledge or any related instrument or agreement, or any
<PAGE>
of the transactions contemplated by this Pledge, or any course of
conduct, dealing, statements (whether oral or written), or
actions of either of them. Neither the Bank nor the Pledgor
shall seek to consolidate, by counterclaim or otherwise, any
action in which a jury trial has been waived with any other
action in which a jury trial cannot be or has not been waived.
These provisions shall not be deemed to have been modified in any
respect or relinquished by either the Bank or the Pledgor except
by a written instrument executed by both of them.
Dated: July 24, 1997
Address: Pledgor:
2350 East Lunt Avenue CIRCUIT SYSTEMS,INC., an
Elk Grove Village, Illinois 60007 Illinois corporation
Facsimile/Telex No. (847) 439-2093
By: /s/ Dilip S. Vyas
Its: Vice-President
<PAGE>
<PAGE>
MASTER LEASE
This Master Lease Agreement ("Master Lease") is dated JULY 24,
1997, between AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
("Lessor"), and CIRCUIT SYSTEMS OF TENNESSEE, L.P. ("Lessee").
Lessee wants from time to time to lease from Lessor personal
property to be described in one or more schedules ("Schedule") of
leased equipment. Lessor is willing to lease such personal
property to Lessee at the rent, for the term and upon the
conditions stated. Any Schedules executed by Lessor and Lessee
which are identified as being a part of this Master Lease, shall
be deemed to incorporate by reference all the terms of this Master
Lease except as provided in the Schedule. In the event of a
conflict between this Master Lease and any Schedule, the
provisions of such Schedule shall control.
1. Equipment Leased and Term. This Master Lease shall cover such
personal property as is described in any Schedule (the
"Equipment") executed by the parties. Lessor leases to Lessee and
Lessee hires and takes from Lessor, subject to the conditions of
this Master Lease, the Equipment described in any Schedule. The
term for any item of Equipment shall be for the period as set
forth in the Schedule ("Initial Lease Term").
2. Rent. The rent for each item of Equipment shall be payable as,
and in the amount, shown on the Schedule.
3. Purchase and Acceptance. Lessee requests Lessor to acquire all
scheduled Equipment pursuant to an assignment of Lessee's
purchase order(s) for the Equipment. Delivery of each item of
Equipment shall be deemed complete upon the acceptance date
("Acceptance Date") stated in the Schedule. Lessor shall not be
liable for loss or damage or for the delay or failure of any
supplier of the Equipment ("Seller") to deliver any item of
Equipment. THE LESSEE REPRESENTS THAT LESSEE HAS SELECTED BOTH
THE EQUIPMENT LISTED IN ANY SCHEDULE AND THE SELLER BEFORE HAVING
REQUESTED LESSOR TO ACQUIRE THE EQUIPMENT FOR LEASING TO LESSEE.
4. Non-Cancelable Lease. THIS MASTER LEASE IS NON-CANCELABLE. When
Lessee signs and delivers a Certificate of Acceptance for the
Equipment, its obligations to pay all rent and other amounts for
the Initial Lease Term and to perform as required under this
Master Lease are unconditional, irrevocable and independent.
These obligations are not subject to cancellation, termination,
modification, repudiation, excuse or substitution by Lessee.
Lessee is not entitled to any abatement, reduction, offset,
defense or counterclaim with respect to these obligations for any
reason whatsoever, whether arising out of default or other claims
against Lessor, the Seller or the manufacturer of the Equipment,
defects in or damage to the Equipment, its loss or destruction.
<PAGE>
5. Disclaimer of Warranties by Lessor; Rights of Lessee. LESSOR
MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING THE CONDITION OF THE EQUIPMENT, ITS
MERCHANTABILITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, AND,
AS TO LESSOR, LESSEE LEASES THE EQUIPMENT "AS-IS". UNDER NO
CIRCUMSTANCES SHALL LESSOR BE RESPONSIBLE FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES IN CONNECTION WITH THIS MASTER LEASE AND/OR
THE EQUIPMENT. LESSEE IS ENTITLED TO THE PROMISES AND WARRANTIES,
INCLUDING THOSE OF ANY THIRD PARTY, PROVIDED TO LESSOR BY THE
SELLER IN CONNECTION WITH OR AS PART OF THE CONTRACT BY WHICH
LESSOR ACQUIRED THE EQUIPMENT. LESSEE MAY COMMUNICATE WITH THE
SELLER AND RECEIVE AN ACCURATE AND COMPLETE STATEMENT OF THOSE
RIGHTS, PROMISES AND WARRANTIES, INCLUDING ANY DISCLAIMERS AND
LIMITATIONS OF THEM OR OF REMEDIES.
6. Claims Against Seller; Seller Not An Agent of Lessor. If the
Equipment is not properly installed, does not operate as
represented or warranted by the Seller or is unsatisfactory for
any reason, Lessee shall make any claim for same solely against
the Seller and shall nevertheless pay Lessor all rent payable
under this Master Lease. Lessor agrees to assign to Lessee, solely
for the purpose of making and prosecuting any such claim, any
rights it may have against the Seller for breach of warranty or
representation regarding the Equipment. Notwithstanding any fees
that must be paid to Seller or any agent of Seller, Lessee
understands and agrees that neither the Seller nor any agent or
employee of the Seller is an agent or employee of the Lessor and
that neither the Seller nor its agent or employee is authorized to
waive or alter any term or condition of this Master Lease.
7. Title; Location of the Equipment; Equipment is Personal
Property; Termination. Title to the Equipment is in the Lessor and
under no circumstances shall pass to Lessee. The Equipment shall
be kept at Lessee's address indicated in the applicable Schedule
and shall not be removed without the prior written consent of
Lessor. Lessee agrees that the Equipment is, and will at all
times remain, personal property. At each scheduled termination
date, or upon Lessee's default, Lessee, at its own expense, shall
assemble and deliver the Equipment to Lessor at the location
designated by Lessor, in good order and repair, ordinary wear and
tear excepted. Lessee shall give Lessor 90 days written notice
prior to each scheduled termination date, that it is returning
the Equipment.
8. No Assignment by Lessee; Assignment by Lessor. THIS MASTER
LEASE SHALL NOT BE ASSIGNED BY LESSEE, NOR SHALL ANY OF THE
EQUIPMENT BE SUBLEASED BY LESSEE WITHOUT THE PRIOR WRITTEN CONSENT
OF LESSOR. Lessor may sell or assign all or part of its right,
title and interest in this Master Lease, any item of Equipment
and/or any Schedule and in any monies to become due to the
Lessor. The assignee shall not be liable for or be required to
perform any of Lessor's obligations to Lessee. All assigned
rental payments shall be paid directly to assignee, upon written
notice to Lessee of such assignment. Lessee's performance of all
its obligations shall not be subject to any defense, counterclaim
or setoff which the Lessee may have against Lessor. Lessee agrees
that it will not assert any such defenses, setoffs, counterclaims
or claims against the assignee.
<PAGE>
9. Casualty and Liability Insurance; Risk of Loss; Damage or
Destruction. Lessee shall keep all Equipment insured against loss
by fire, theft and all other hazards (comprehensive coverage) in
such amounts as Lessor requires but not less than the casualty
value ("Casualty Value") for such item indicated in the Casualty
Value Table attached to the applicable Schedule. Lessee appoints
Lessor Lessee's attorney in fact to endorse any loss payment or
returned premium check and to make any claim under such insurance.
Lessee shall also insure the Lessor and Lessee with respect to
liability for personal injuries in amounts of at least $1,000,000
per individual, $3,000,000 per occurrence; and $1,000,000 per
occurrence for damage to or loss of use of property resulting from
the ownership, use and operation of the Equipment and against
risks customarily insured against by the Lessee for equipment
owned by it. All policies shall be endorsed with Lessor as a loss
payee and additional insured and shall provide that the interest
of Lessor shall not be invalidated by any act of Lessee. Evidence
of insurance must be delivered to Lessor within 30 days after any
Acceptance Date. In the event of loss, destruction or theft of,
or damage to, any of the Equipment, Lessee will immediately notify
Lessor.
If Lessee defaults in obtaining any insurance, Lessor may but is
not required to, place such insurance. Any premiums paid by
Lessor shall be additional rent payable on demand with interest at
the highest legal rate from the date of payment. At Lessor's sole
option, such amounts together with interest may be added to the
lease balance to be paid by Lessee as additional monthly rent.
Lessee assumes and shall bear all risks of loss of, damage to or
destruction of each item of Equipment, whether partial or
complete. Except as provided in this Section 9, no such event
shall relieve the Lessee of its obligation to pay the full rental
payable for such item.
If any item of Equipment is destroyed, damaged beyond economical
repair, lost or stolen, or taken by governmental action for a
stated period extending beyond the Initial Lease Term for such
item (an "Event of Loss"), Lessee must promptly notify Lessor and
any assignee and pay to Lessor or the assignee, as the case may
be, on the next rent payment date following the Event of Loss the
Casualty Value of the item of Equipment. Upon such payment and
provided no Event of Default as defined in Section 12 has
occurred, Lessee's obligation to pay rent for such item of
Equipment will cease and Lessee will be entitled to receive any
insurance proceeds or other recovery received by the Lessor or
assignee in connection with the Event of Loss.
10. Repairs; Use; Alterations; Attachments. Lessee, at its own
expense, shall keep the Equipment maintained in good repair,
condition, working order, and in accordance with the
manufacturer's recommended maintenance procedures and
specifications; shall use the Equipment lawfully; and shall not
alter the Equipment without the Lessor's prior written consent.
Lessee shall take no action which would void the manufacturer's
warranty on the Equipment. All items which become attached to or
a part of the Equipment become the property of Lessor.
<PAGE>
11. Liens and Taxes. Lessee at its expense shall keep the
Equipment free and clear of all levies and liens. Lessee shall
reimburse the Lessor (or pay directly if, but only if instructed
by Lessor) for all charges and taxes (local, state and federal)
imposed or levied upon this Master Lease, any Schedules, rentals,
operation, leasing, sale, ownership, possession or use of the
Equipment excluding all taxes based upon income or gross receipts
of Lessor.
12. Default. Any of the following shall constitute an event of
default ("Event of Default") by Lessee: (a) Lessee fails to pay
when due any scheduled rent or other amount required by this
Master Lease; (b) Lessee breaches any covenant of this Master
Lease or fails to promptly perform any of its terms or
conditions, including but not limited to return of the leased
Equipment at the expiration of any scheduled lease term; (c)
Lessee makes an assignment for the benefit of creditors; (d) a
petition is filed by or against Lessee in bankruptcy or for the
appointment of a receiver; (e) dissolution or suspension of
Lessee's usual business; (f) Lessee makes a bulk transfer or bulk
sale of any assets, (g) any representation, warranty, or signature
made by Lessee in this Master Lease or related document is
incorrect, fraudulent or breached; or (h) Lessee defaults under
the terms of any agreement or instrument relating to any lease or
debt for borrowed money such that the lessor accelerates the rent
or the creditor declares the debt due before its maturity. Lessee
agrees to give Lessor prompt notice upon the occurrence of an
Event of Default.
13. Lessor's Remedies upon Default by Lessee. Upon the occurrence
of an Event of Default, Lessor, without further notice, and in
addition to any remedy provided by law, may (i) recover from
Lessee the Casualty Value of the Equipment together with any
unpaid rent and (ii) regardless of whether such amounts are paid,
take possession of any items of Equipment and at Lessor's option
sell or lease at public auction or by private sale or otherwise
dispose of such items of Equipment.
If Lessee has paid the Casualty Value, all unpaid rent and all
other amounts owing under this Master Lease and any items of
Equipment have been taken from Lessee, the proceeds of any
reletting or sale (less all costs and expenses including
reasonable attorneys' fees) shall be paid to reimburse the Lessee
for the Casualty Value up to the amount previously paid. Any
surplus remaining after such payment will be retained by the
Lessor.
Regardless of any sale or lease of the Equipment or any payment of
the Casualty Value, Lessee will remain liable to Lessor for all
damages as provided by law and for all costs and expenses caused
by Lessee's breach, including court costs and reasonable
attorneys' fees (whether attributable to Lessor's in-house counsel
or outside counsel). These costs and expenses shall include,
without limitation, any costs or expenses incurred by Lessor in
any bankruptcy, reorganization, insolvency or other similar
proceeding.
<PAGE>
14. Renewal. If the Equipment is not delivered to Lessor at any
scheduled termination date in accordance with paragraph 7, then
the Initial Lease Term shall renew on a month to month basis upon
the same terms and conditions, subject to the right of Lessor or
Lessee to terminate the renewed term on 30 days written notice, in
which event, the Equipment shall immediately be returned to
Lessor.
15. Late Charges. Without limiting Lessor's remedies above, if
Lessee fails to pay any amount of rental or other payment for a
period of ten days after its due date, Lessee agrees to pay Lessor
a late charge of 5% of each such payment or installment with a
minimum late charge of $25.00. This late charge shall be
reassessed in each subsequent month that the rental or other
payment remains unpaid.
16. Financing Statements. The Lessor is authorized to file a
financing statement in accordance with the Uniform Commercial
Code signed by Lessee or by Lessor, as Lessee's attorney in fact.
17. Jurisdiction; Venue; Severability. THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS. LESSEE CONSENTS TO
THE JURISDICTION OF THE COURTS OF ILLINOIS AND TO VENUE IN THE
COURTS OF THE COUNTY OF COOK. No provision which may be construed
as unenforceable shall in any way invalidate any other provision,
all of which shall remain in full force and effect.
18. Warranties by Lessee. Lessee warrants and represents that: (a)
the Equipment is being leased for business purposes; (b) all
signatures are genuine; and (c) the person signing the Master
Lease is authorized to do so. If Lessee is other than a natural
person, it further represents that (a) it is duly organized,
existing and in good standing pursuant to the laws under which it
is organized; and (b) the execution and delivery of this Master
Lease and the performance of the obligations it imposes are within
its powers and have been duly authorized by all necessary action
of its governing body and do not contravene the terms of its
articles of incorporation or organization, its bylaws, or any
partnership, operating or other agreement governing its affairs:
19. Indemnity by Lessee. Lessee agrees to indemnify and hold
Lessor or any assignee harmless from any and all claims, actions,
proceedings, expenses, damages and liabilities, including
attorneys' fees, arising out of or in any manner pertaining to the
Equipment or this Master Lease including, without limitation, the
ownership, selection, possession, purchase, delivery,
installation, leasing, operation, use, control, maintenance and
return of the Equipment and the recovery of claims under insurance
policies.
<PAGE>
Lessee acknowledges that the Equipment is owned by Lessor
("Owner"). It is the intent of Owner/Lessor and Lessee that this
Lease constitute a true lease for Federal income tax purposes so
that, for the purpose of determining its liability for Federal
income taxes, Owner shall be entitled to the tax benefits as are
provided by the Internal Revenue Code of 1986, as amended, (the
"Code") to an owner of personal property.
In addition notwithstanding any other provision of this Master
Lease, if as to any Equipment, the modified accelerated cost
recovery system or depreciation deductions allowed under the Code
shall be lost, disallowed, eliminated, reduced, recaptured or
otherwise unavailable to Lessor for any reason, then Lessee shall
pay to Lessor as additional rent within 30 days after such a loss
an amount equal to the sum of (i) the additional federal, state,
local and foreign income or any other taxes payable as a result
of such loss, disallowance, elimination, reduction, recapture or
unavailability of accelerated cost recovery or depreciation
deductions plus (ii) the amount of any interest, penalties or
additions to tax payable by the Lessor as a result of such
additional tax.
The indemnities given and liabilities assumed by the Lessee
pursuant to this Section 19 shall continue in full force and
effect notwithstanding the expiration or other termination of this
Master Lease.
20. Notices. Notice from one party to another relating to this
Master Lease shall be deemed effective if made in writing
(including telecommunications) and delivered to the recipient's
address, telex number or telecopier number set forth under its
name below.
21. Labels Affixed to Equipment. Lessor shall have the right, but
not the obligation, to attach or require Lessee to attach
ownership identification labels to the Equipment. Lessee agrees
to not remove any such labels.
22. Lessor's Expense. Lessee shall pay Lessor all costs and
expenses, including reasonable attorneys' fees, incurred by
Lessor in enforcing any terms of, or in protecting Lessor's
interests under, this Master Lease.
23. Performance by Lessor. If the Lessee fails to promptly perform
any of its obligations under this Master Lease, Lessor may, at
its option, perform such act or make such payment which the Lessor
deems necessary. All sums paid or incurred by Lessor including
reasonable attorneys' fees shall be immediately due and payable by
Lessee, without demand, and shall bear interest at the lesser of
one and one-half percent (1 -1/2%) per month or the highest rate
permissible by law.
<PAGE>
24. Entire Agreement. This Master Lease and subsequent Schedules
constitute the entire agreement of the parties. Neither party
relies on any other statements, understandings, representations or
assurances, the same, if any having been merged into this
agreement. This agreement cannot be modified except by a writing
signed by each party. This agreement inures to the benefit of the
heirs, executors, administrators, successors and assigns of the
parties.
25. Waiver. No delay on the part of Lessor in the exercise of any
right or remedy shall operate as a waiver. No single or partial
exercise by Lessor of any right or remedy shall preclude any other
future exercise of it or the exercise of any other right or
remedy. No waiver by Lessor of any default shall be effective
unless in writing and signed by Lessor, nor shall a waiver on one
occasion be construed as a bar to or waiver of that right on any
future occasion.
26. Financial Reports. Upon request by Lessor, Lessee will
promptly furnish to Lessor all financial reports deemed necessary
by Lessor.
27. Waiver of Jury Trial. Lessor and Lessee, after consulting or
having had the opportunity to consult with counsel, knowingly,
voluntarily and intentionally waive any right either of them may
have to a trial by jury in any litigation based upon or arising
out of this Master Lease, or any related agreement, or any course
of conduct, dealing or statements (whether oral or written).
These provisions shall not be deemed to have been modified in any
respect or relinquished by either Lessor or Lessee except by a
written instrument executed by both of them.
THIS MASTER LEASE AGREEMENT THE UNDERSIGNED (AND IF MORE THAN
SHALL NOT BE BINDING ON ONE, JOINTLY AND SEVERALLY) AGREE
LESSOR UNTIL IT HAS BEEN TO ALL TERMS AND CONDITIONS ABOVE
ACEPTED AND EXECUTED BY AN WHICH ARE PART OF THIS MASTER LEASE
OFFICER OF LESSOR. AGREEMENT.
Accepted by Lessor:AMERICAN NATIONAL Lessee:CIRCUIT SYSTEMS OF TENNESSEE,L.P.
BANK AND TRUST COMPANY OF CHICAGO CIRCUIT SYSTEMS OF
TENNESSEE,INC., G.P.
By: /s/ James G. Cygan By:/s/ Dilip S. Vyas
Title: Vice-President Title: Vice-President
Date: July 24, 1997 Date: July 24, 1997
Address For Notices: Address For Notices:
1) 33 North LaSalle Street 2350 East Lunt Avenue
Chicago, IL 60690 Elk Grove Village, IL 60007
Fax No.: (312) 661-7352 Fax No.: (847) 439-5910
<PAGE>
2) 660 Woodward Avenue
Suite #200
Detroit, MI 48226
Fax No.: (313) 226-1959
<PAGE>
<PAGE>
American National Bank
and Trust Company of Chicago
GUARANTY
(Circuit Systems, Inc.)
This Guaranty is made by the undersigned, Circuit Systems,
Inc., an Illinois corporation (hereinafter referred to as the
"Undersigned" or "Guarantor"), to and for the benefit of
American National Bank and Trust Company of Chicago (hereinafter
referred to as the "Bank").
R E C I T A L S:
Circuit Systems of Tennessee, L.P., a Tennessee limited
partnership, with principal offices located at 2350 East Lunt
Avenue, Elk Grove Village, Illinois 60007 ("Borrower") is
executing those certain term notes in the principal amounts of Two
Million Two Hundred Seventy Thousand and No/100 Dollars
($2,270,000.00) and Two Million Eight Hundred Thousand and No/100
Dollars ($2,800,000) (hereinafter individually a "Note" and
collectively the "Notes") and executing that certain master lease
(the "Master Lease") made as of even date herewith payable to the
order of, and held by, Bank;
The Notes and the Master Lease are the notes and master lease
referred to in that certain Loan and Security Agreement ("Loan
Agreement" ) among Borrower, Guarantor, Circuit Systems of
Tennessee, Inc., a Tennessee corporation ( "Circuit"), and Bank.
The Notes, the Master Lease and any documents evidencing and/or
securing the indebtedness under the Notes, Master Lease or Loan
Agreement are hereinafter referred to as the "Loan Documents."
Bank requires as a condition precedent to its making the
financial accommodations evidenced by the Notes, the Master Lease
and the Loan Agreement (the "Loan" ) that Guarantor guaranty the
payment of principal and interest provided in the Notes, the rent
provided in the Master Lease and all other amounts provided in the
Loan Documents and the full and faithful performance by Borrower of
all of the covenants to be performed and observed pursuant to the
provisions thereof and all of the terms and conditions contained
therein.
Guarantor desires to give such guaranty to Bank in order to
induce Bank to extend such financial accommodations to Borrower.
Guarantor will be directly benefited by the financial
accommodations extended by Bank to Borrower.
<PAGE>
1. NOW THEREFORE, FOR VALUE RECEIVED, and in consideration of
advances, credit or other financial accommodation heretofore, now
or hereafter at any time extended to the Borrower by the Bank, the
undersigned hereby unconditionally guarantee(s) the full and prompt
payment to the Bank at maturity, whether by acceleration or
otherwise, and at all times thereafter of any and all
"Indebtedness". "Indebtedness" shall mean obligations and
liabilities of every kind and nature of the Borrower to the Bank,
including principal, interest and lease payments, however
evidenced, whether now existing or hereafter created or arising,
directly or indirectly, primary or secondary, absolute or
contingent, due or to become due, or joint or several, and however
owned, held or acquired, whether through discount, overdraft,
returned checks, purchase, direct loan or as collateral, or
otherwise.
The undersigned further unconditionally guarantees the prompt,
full and faithful performance and discharge by the Borrower of all
of the terms, conditions, agreements, representations and
warranties on the part of the Borrower contained in any agreement,
or in any modification or addenda thereto or substitution thereof
in connection with any advance, credit or financial accommodation
afforded by the Bank to the Borrower.
The undersigned further agrees to pay all reasonable expenses,
including, without limitation, legal fees and court costs paid or
incurred by the Bank in endeavoring to collect the Indebtedness, or
any part thereof, in enforcing this guaranty, arising out of any
post-judgment proceedings, or in defending any suit based on any
act or omission of the Bank with respect to the Indebtedness,
collateral, or this guaranty or in connection with any Recovery
Claim hereinbelow defined (hereafter, collectively referred to as
"Expenses").
2. The term "Guaranteed Debt," as used herein, shall be deemed
to mean an amount equal to all the Indebtedness plus Expenses. The
Guaranteed Debt shall be unlimited.
3. In case of the death, incompetence, dissolution, liquidation
or insolvency (however evidenced) of the Borrower, a principal of
the Borrower, or any guarantor of the Indebtedness or in case any
bankruptcy, reorganization, debt arrangement or other proceeding
under any bankruptcy or insolvency law, or any dissolution,
liquidation or receivership proceeding, is instituted by or against
the Borrower, or any of the undersigned or any other guarantor of
the Indebtedness or the inability of the Borrower or any of the
undersigned to pay debts as they mature, or in case of the
assignment by the Borrower or any of the undersigned for the
benefit of creditors, then upon the occurrence of any such event,
all Guaranteed Debt then existing shall at the option of the Bank,
without notice to anyone, immediately become due or accrued and be
payable from the undersigned.
<PAGE>
4. All payments received from whatever source shall be applied
toward the payment of the Indebtedness in such order of application
as the Bank may in its sole discretion, from time to time elect,
and this determination shall be conclusive upon the undersigned.
5. This guaranty shall in all respects be a continuing, absolute
and unconditional guaranty, and shall remain in full force and
effect with respect to each guarantor until written notice shall
have been actually received by the Bank by first class or
certified mail, of its discontinuance as to such guarantor, or of
the death or dissolution of such guarantor, and also until all
Guaranteed Debt created or existing before receipt of such notice
shall have been fully paid. In case of any such discontinuance, or
death or dissolution of any guarantor or guarantors and notice
thereof to the Bank, this guaranty shall nevertheless continue and
remain in force against the other guarantor or guarantors until
discontinued as to such other guarantor or guarantors as herein
provided. No compromise, settlement, release or discharge of, or
indulgence with respect to, or failure, negligence or omission to
enforce or exercise any right against, any one or more guarantors
or the fact that at any time or from time to time, all the
Guaranteed Debt may have been paid in full, shall release or
discharge the undersigned. In the event of the death of the
undersigned, this guaranty shall continue as to all Indebtedness
theretofore incurred by the Borrower even though said Indebtedness
is renewed or the time of maturity of Indebtedness is extended
without the consent of the executors or administrators of the
undersigned. This guaranty shall be valid, irrespective of the
validity, regularity or enforceability of any instrument, writing
or agreement relating to any Indebtedness, whether or not such
Indebtedness is due or to become due before or after any bankruptcy
or insolvency proceeding involving the Borrower.
6. The liability hereunder shall in no way be affected or
impaired by any of the following, any or all of which may be done
or omitted by the Bank in its sole discretion without notice to
anyone and irrespective of whether the Guaranteed Debt shall be
increased or decreased thereby and said Bank is hereby expressly
authorized in its sole discretion to make from time to time,
without notice to anyone: any sale, pledge, surrender, compromise,
settlement, exchange, release, renewal, extension, modification,
election with respect to any collateral under Section 1111 or any
other provision or section of the Bankruptcy Code now existing or
hereinafter amended; or other disposition of or with respect to any
of said Guaranteed Debt or any security or collateral therefor,
whether or not such disposition is commercially reasonable or
accomplished in a commercially reasonable manner; and such
liability shall in no way be affected or impaired by any acceptance
by the Bank of any security for, or other guarantors or obligors
of, any of the Guaranteed Debt, or by any forbearance or indulgence
by the Bank in the collection of, or any failure, negligence or
omission on its part to realize upon any thereof, or to enforce any
claims against any person or persons primarily or secondarily
liable thereon, or upon any collateral or security therefor or to
enforce any lien upon or right of appropriation of any moneys,
credits or property of the Borrower in the possession and control
<PAGE>
of the Bank, or by an application of any payments or credits on the
Guaranteed Debt. Any act or omission of any kind or at any time
upon the part of the Bank with respect to any matter whatsoever
shall not in any manner affect or impair this guaranty nor the
liability thereunder. The undersigned hereby consents to all acts
and omissions of the Bank set forth herein.
7. In order to hold the undersigned liable hereunder and to
enforce this guaranty, there shall be no obligation on the part of
the Bank at any time to resort for payment to the Borrower, or to
any other guarantor, or any person, firm or corporation liable for
the Guaranteed Debt, or to any collateral, security, property,
liens or other rights or remedies of the Bank in respect to the
Guaranteed Debt or any part thereof, all of which is hereby
expressly waived by the undersigned.
8. All diligence in collection, and any presentment for payment,
demand, protest and/or notice, as to any and everyone, of protest,
dishonor, default or nonpayment, and notice of the creation and
existence of any and all of the Guaranteed Debt, and of any
security therefor, and of the acceptance of this guaranty, or
extensions of credit or indulgences hereunder or of any other
matters or things whatsoever relating hereto are expressly waived.
9. The granting of additional credit from time to time by the
Bank to the Borrower in excess of the amount to which the right of
recovery under this guaranty is limited or in excess of the amount
extended to the Borrower at the time this guaranty is executed by
the undersigned, without notice to the undersigned, is hereby
expressly authorized and shall in no way affect or impair this
guaranty.
10. To secure payment of the Guaranteed Debt, the undersigned
grants to Bank a security interest in all property of the
undersigned, including any and all cash, negotiable instruments,
documents of title, chattel paper, securities, certificates of
deposit, deposit accounts, other cash equivalents and other assets
delivered currently herewith or now or at any time hereafter in
transit to, or in the possession or control of the Bank, or any
agent or bailee of Bank, and all proceeds of all such property.
The undersigned agrees that the Bank shall have the rights and
remedies of a secured party under the Uniform Commercial Code of
Illinois with respect to all of the aforesaid property, including,
without limitation thereof, the right to sell or otherwise dispose
of any or all of such property. THE UNDERSIGNED WAIVES EVERY
DEFENSE, COUNTERCLAIM OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE
OR HEREAFTER MAY HAVE AGAINST THE BORROWER OR ANY OTHER PARTY
LIABLE TO THE BANK IN ANY MANNER. As further security, any and all
debts and liabilities now or hereafter arising and owing to any of
the undersigned by the Borrower, or any other party liable to the
Bank are hereby subordinated to the Bank's claims and are hereby
assigned to the Bank. The undersigned ratifies and confirms
whatever the Bank may do pursuant to the terms hereof and with
respect to any collateral for the Guaranteed Debt, and agrees that
the Bank shall not be liable for any error of judgment or mistakes
of fact or law. The Bank may, without notice to anyone, apply or
set off any balances, credits, deposits, accounts, moneys or other
<PAGE>
indebtedness at any time credited by or due from the Bank to any of
the undersigned against the Guaranteed Debt. Any notification of
intended disposition of any property required by law shall be
deemed reasonable and properly given if given at least ten (10)
calendar days before such disposition.
11. Should a claim ("Recovery Claim") be made upon the Bank at
any time for recovery of any amount received by the Bank in payment
of the Guaranteed Debt (whether received from the Borrower, the
undersigned pursuant hereto, or otherwise) and should the Bank
repay all or part of said amount by reason of (i) any judgment,
decree, or order of any court or administrative body having
jurisdiction over the Bank or any of its property; or (ii) any
settlement or compromise of any such Recovery Claim effected by the
Bank with the claimant (including the Borrower), the undersigned
shall remain jointly and severally liable to the Bank for the
amount so repaid to the same extent as if such amount had never
originally been received by the Bank, notwithstanding any
termination hereof or the return of this document to any of the
undersigned or the cancellation of any note, this guaranty or other
instrument evidencing any of the Indebtedness.
12. In the event the Bank shall sell, assign or transfer the
Indebtedness or Guaranteed Debt, or any part thereof, or grant
participations therein, each and every immediate or remote
successive assignee, transferee, holder of or participant therein,
of all or any part of the Indebtedness or Guaranteed Debt shall
have the right to enforce this guaranty by suit or otherwise for
the benefit of such assignee, transferee, holder or participant, as
fully as if such assigned transferee, holder or participant were
herein by name specifically given such rights, powers and benefits;
but the Bank shall have an unimpaired, prior and superior right to
enforce this guaranty for its benefit as to so much of the
Indebtedness or Guaranteed Debt as it has not been sold, assigned
or transferred.
13. No release or discharge of any one or more of the undersigned
(if there is more than one guarantor), or of any other person,
whether primarily or secondarily liable for and obligated with
respect to the Guaranteed Debt, or the institution of bankruptcy,
receivership, insolvency, reorganization, dissolution or
liquidation proceedings by or against any such guarantor or person,
or the entry of any restraining or other order in any such
proceeding, shall release or discharge the undersigned or any other
guarantor of the Guaranteed Debt, or any other person, firm or
corporation liable to the Bank for the Guaranteed Debt, unless and
until all of the Guaranteed Debt shall have been fully paid and
this guaranty stamped "Canceled" and returned to the undersigned.
14. No delay on the part of the Bank in the exercise of any right
or remedy shall operate as a waiver thereof, and no single or
partial exercise by the Bank of any right or remedy shall preclude
any other or further exercise thereof, or the exercise of any other
right or remedy. No action of the Bank permitted hereunder shall
in any way affect or impair the rights of the Bank and the
obligation of the undersigned under this guaranty.
<PAGE>
15. To the extent that the Borrower or any of the undersigned is a
corporation, limited liability company or partnership, all
references herein to the Borrower and to the undersigned,
respectively, shall be deemed to include any successor or
successors, whether immediate or remote, to such corporation,
limited liability company or partnership.
16. This guaranty has been delivered at Chicago, Illinois, and
shall be construed according to the laws of the State of Illinois,
in which state it shall be performed by the undersigned. All
actions arising directly or indirectly as a result or in
consequence of this guaranty shall, in the sole and absolute
discretion of the Bank, be instituted and litigated only in courts
having situs in the City of Chicago, Illinois, and the undersigned
hereby consents to the jurisdiction of any State or Federal Court
located and having its situs in said city and waives any right to
transfer or change the venue of any litigation.
17. Wherever possible, each provision of this guaranty shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this guaranty shall be
prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this guaranty.
18. It is agreed that the undersigned's liability hereunder is
several and is independent of any other guaranties at any time in
effect with respect to all or any part of the Indebtedness and that
the undersigned's liability hereunder may be enforced regardless of
the existence of any such other guaranties.
19. This guaranty, and each and every part hereof, shall be
binding upon the undersigned and upon the heirs, legal
representatives, successors and assigns of the undersigned, and
shall inure to the benefit of the Bank, its successors and assigns.
20. If the undersigned guarantor is a corporation, then and in
such event, the undersigned guarantor expressly represents and
warrants unto the Bank that the execution and delivery of this
guaranty has been duly authorized by resolutions heretofore duly
adopted by its Board of Directors in accordance with law and its
by-laws, that said resolutions have not been amended nor rescinded,
are in full force and effect, that the officers of the undersigned
executing and delivering this guaranty, for and on behalf of the
undersigned, are duly authorized and empowered so to act. The Bank
in accepting this guaranty is expressly relying upon the aforesaid
representations and warranties.
<PAGE>
21. This guaranty constitutes the entire agreement between the
parties relating to the subject matter hereof and is the final and
complete expression of their intent. No prior or contemporaneous
negotiations, promises, agreements, covenants or representations of
any kind or nature, whether made orally or in writing, have been
made by the parties, or any of them, in negotiations leading to
this guaranty or relating to the subject matter hereof, which are
not expressly contained herein, or which have not become merged and
finally integrated into this guaranty; it being the intention of
the parties hereto that in the event of any subsequent litigation,
controversy or dispute concerning the terms and provisions of this
guaranty, no party shall be permitted to offer to introduce oral or
extrinsic evidence concerning the terms and conditions hereof that
are not included or referred to herein and not reflected in
writing. This guaranty can only be changed, modified, waived or
discharged if consented to in a writing duly signed and delivered
on behalf of the Bank. No conditions exist to the legal
effectiveness of this guaranty.
22. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING (i) TO ENFORCE OR DEFEND ANY
RIGHTS UNDER OR IN CONNECTION WITH THIS GUARANTY OR AN AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED IN CONNECTION HEREWITH,
OR (ii) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH
OR RELATED TO THIS GUARANTY, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SIGNED AND SEALED by the undersigned effective this 24 day of
July, 1997.
ADDRESS: CIRCUIT SYSTEMS, INC.,
an Illinois corporation
2350 East Lunt Avenue
Elk Grove Village, Illinois 60007
By: /s/ Dilip S. Vyas
Its: Vice-President
STATE OF ILLINOIS )
) SS:
COUNTY OF COOK )
The Undersigned, a Notary Public within and for said County,
in the State aforesaid, duly commissioned and acting, hereby
certifies that on this 24 day of July, 1997, personally
appeared before me Dilip S. Vyas, the Vice-President of Circuit
Systems, Inc., to me personally well known and known to be the
person who signed the foregoing instrument, and who, being by me
duly sworn, stated and acknowledged that he is the Vice-President of
said corporation and that he signed and delivered the same on
behalf of said corporation, with authority, as his/her and its free
and voluntary act and deed for the uses and purposes therein
mentioned and set forth.
<PAGE>
WITNESS my hand and seal as such Notary Public the day and
year in this certificate above written.
/s/ Douglas Conover
Notary Public
My commission expires: April 15, 2000
<PAGE>
<PAGE>
American National Bank
and Trust Company of Chicago
GUARANTY
(Circuit Systems of Tennessee, Inc.)
This Guaranty is made by the undersigned, Circuit Systems of
Tennessee, Inc., a Tennessee corporation (hereinafter referred to
as the "Undersigned" or "Guarantor"), to and for the benefit of
American National Bank and Trust Company of Chicago (hereinafter
referred to as the "Bank").
R E C I T A L S:
Circuit Systems of Tennessee, L.P., a Tennessee limited
partnership, with principal offices located at 2350 East Lunt
Avenue, Elk Grove Village, Illinois 60007 ("Borrower") is
executing those certain term notes in the principal amounts of Two
Million Two Hundred Seventy Thousand and No/100 Dollars
($2,270,000.00) and Two Million Eight Hundred Thousand and No/100
Dollars ($2,800,000) ( hereinafter individually a "Note" and
collectively the "Notes") and executing that certain master lease
(the "Master Lease") made as of even date herewith payable to the
order of, and held by, Bank;
The Notes and the Master Lease are the notes and master lease
referred to in that certain Loan and Security Agreement ("Loan
Agreement") among Borrower, Guarantor, Circuit Systems, Inc., an
Illinois corporation ("Circuit"), and Bank. The Notes, the
Master Lease and any documents evidencing and/or securing the
indebtedness under the Notes, Master Lease or Loan Agreement are
hereinafter referred to as the "Loan Documents."
Bank requires as a condition precedent to its making the
financial accommodations evidenced by the Notes, the Master Lease
and the Loan Agreement (the "Loan") that Guarantor guaranty the
Loan payment of principal and interest provided in the Notes, the
rent provided in the Master Lease and all other amounts provided in
the Loan Documents and the full and faithful performance by Borrower
of all of the covenants to be performed and observed pursuant to the
provisions thereof and all of the terms and conditions contained
therein.
Guarantor desires to give such guaranty to Bank in order to
induce Bank to extend such financial accommodations to Borrower.
Guarantor will be directly benefited by the financial
accommodations extended by Bank to Borrower.
<PAGE>
1. NOW THEREFORE, FOR VALUE RECEIVED, and in consideration of
advances, credit or other financial accommodation heretofore, now
or hereafter at any time extended to the Borrower by the Bank, the
undersigned hereby unconditionally guarantee(s) the full and prompt
payment to the Bank at maturity, whether by acceleration or
otherwise, and at all times thereafter of any and all
"Indebtedness". "Indebtedness" shall mean obligations and
liabilities of every kind and nature of the Borrower to the Bank,
including principal, interest and lease payments, however
evidenced, whether now existing or hereafter created or arising,
directly or indirectly, primary or secondary, absolute or
contingent, due or to become due, or joint or several, and however
owned, held or acquired, whether through discount, overdraft,
returned checks, purchase, direct loan or as collateral, or
otherwise.
The undersigned further unconditionally guarantees the prompt,
full and faithful performance and discharge by the Borrower of all
of the terms, conditions, agreements, representations and
warranties on the part of the Borrower contained in any agreement,
or in any modification or addenda thereto or substitution thereof
in connection with any advance, credit or financial accommodation
afforded by the Bank to the Borrower.
The undersigned further agrees to pay all reasonable expenses,
including, without limitation, legal fees and court costs paid or
incurred by the Bank in endeavoring to collect the Indebtedness, or
any part thereof, in enforcing this guaranty, arising out of any
post-judgment proceedings, or in defending any suit based on any
act or omission of the Bank with respect to the Indebtedness,
collateral, or this guaranty or in connection with any Recovery
Claim hereinbelow defined (hereafter, collectively referred to as
"Expenses").
2. The term "Guaranteed Debt," as used herein, shall be deemed
to mean an amount equal to all the Indebtedness plus Expenses. The
Guaranteed Debt shall be unlimited.
3. In case of the death, incompetence, dissolution, liquidation
or insolvency (however evidenced) of the Borrower, a principal of
the Borrower, or any guarantor of the Indebtedness or in case any
bankruptcy, reorganization, debt arrangement or other proceeding
under any bankruptcy or insolvency law, or any dissolution,
liquidation or receivership proceeding, is instituted by or against
the Borrower, or any of the undersigned or any other guarantor of
the Indebtedness or the inability of the Borrower or any of the
undersigned to pay debts as they mature, or in case of the
assignment by the Borrower or any of the undersigned for the
benefit of creditors, then upon the occurrence of any such event,
all Guaranteed Debt then existing shall at the option of the Bank,
without notice to anyone, immediately become due or accrued and be
payable from the undersigned.
<PAGE>
4. All payments received from whatever source shall be applied
toward the payment of the Indebtedness in such order of application
as the Bank may in its sole discretion, from time to time elect,
and this determination shall be conclusive upon the undersigned.
5. This guaranty shall in all respects be a continuing, absolute
and unconditional guaranty, and shall remain in full force and
effect with respect to each guarantor until written notice shall
have been actually received by the Bank by first class or
certified mail, of its discontinuance as to such guarantor, or of
the death or dissolution of such guarantor, and also until all
Guaranteed Debt created or existing before receipt of such notice
shall have been fully paid. In case of any such discontinuance, or
death or dissolution of any guarantor or guarantors and notice
thereof to the Bank, this guaranty shall nevertheless continue and
remain in force against the other guarantor or guarantors until
discontinued as to such other guarantor or guarantors as herein
provided. No compromise, settlement, release or discharge of, or
indulgence with respect to, or failure, negligence or omission to
enforce or exercise any right against, any one or more guarantors
or the fact that at any time or from time to time, all the
Guaranteed Debt may have been paid in full, shall release or
discharge the undersigned. In the event of the death of the
undersigned, this guaranty shall continue as to all Indebtedness
theretofore incurred by the Borrower even though said Indebtedness
is renewed or the time of maturity of Indebtedness is extended
without the consent of the executors or administrators of the
undersigned. This guaranty shall be valid, irrespective of the
validity, regularity or enforceability of any instrument, writing
or agreement relating to any Indebtedness, whether or not such
Indebtedness is due or to become due before or after any bankruptcy
or insolvency proceeding involving the Borrower.
6. The liability hereunder shall in no way be affected or
impaired by any of the following, any or all of which may be done
or omitted by the Bank in its sole discretion without notice to
anyone and irrespective of whether the Guaranteed Debt shall be
increased or decreased thereby and said Bank is hereby expressly
authorized in its sole discretion to make from time to time,
without notice to anyone: any sale, pledge, surrender, compromise,
settlement, exchange, release, renewal, extension, modification,
election with respect to any collateral under Section 1111 or any
other provision or section of the Bankruptcy Code now existing or
hereinafter amended; or other disposition of or with respect to any
of said Guaranteed Debt or any security or collateral therefor,
whether or not such disposition is commercially reasonable or
accomplished in a commercially reasonable manner; and such
liability shall in no way be affected or impaired by any acceptance
by the Bank of any security for, or other guarantors or obligors
of, any of the Guaranteed Debt, or by any forbearance or indulgence
by the Bank in the collection of, or any failure, negligence or
omission on its part to realize upon any thereof, or to enforce any
claims against any person or persons primarily or secondarily
liable thereon, or upon any collateral or security therefor or to
enforce any lien upon or right of appropriation of any moneys,
credits or property of the Borrower in the possession and control
<PAGE>
of the Bank, or by an application of any payments or credits on the
Guaranteed Debt. Any act or omission of any kind or at any time
upon the part of the Bank with respect to any matter whatsoever
shall not in any manner affect or impair this guaranty nor the
liability thereunder. The undersigned hereby consents to all acts
and omissions of the Bank set forth herein.
7. In order to hold the undersigned liable hereunder and to
enforce this guaranty, there shall be no obligation on the part of
the Bank at any time to resort for payment to the Borrower, or to
any other guarantor, or any person, firm or corporation liable for
the Guaranteed Debt, or to any collateral, security, property,
liens or other rights or remedies of the Bank in respect to the
Guaranteed Debt or any part thereof, all of which is hereby
expressly waived by the undersigned.
8. All diligence in collection, and any presentment for payment,
demand, protest and/or notice, as to any and everyone, of protest,
dishonor, default or nonpayment, and notice of the creation and
existence of any and all of the Guaranteed Debt, and of any
security therefor, and of the acceptance of this guaranty, or
extensions of credit or indulgences hereunder or of any other
matters or things whatsoever relating hereto are expressly waived.
9. The granting of additional credit from time to time by the
Bank to the Borrower in excess of the amount to which the right of
recovery under this guaranty is limited or in excess of the amount
extended to the Borrower at the time this guaranty is executed by
the undersigned, without notice to the undersigned, is hereby
expressly authorized and shall in no way affect or impair this
guaranty.
10. To secure payment of the Guaranteed Debt, the undersigned
grants to Bank a security interest in all property of the
undersigned, including any and all cash, negotiable instruments,
documents of title, chattel paper, securities, certificates of
deposit, deposit accounts, other cash equivalents and other assets
delivered currently herewith or now or at any time hereafter in
transit to, or in the possession or control of the Bank, or any
agent or bailee of Bank, and all proceeds of all such property.
The undersigned agrees that the Bank shall have the rights and
remedies of a secured party under the Uniform Commercial Code of
Illinois with respect to all of the aforesaid property, including,
without limitation thereof, the right to sell or otherwise dispose
of any or all of such property. THE UNDERSIGNED WAIVES EVERY
DEFENSE, COUNTERCLAIM OR SETOFF WHICH THE UNDERSIGNED MAY NOW HAVE
OR HEREAFTER MAY HAVE AGAINST THE BORROWER OR ANY OTHER PARTY
LIABLE TO THE BANK IN ANY MANNER. As further security, any and all
debts and liabilities now or hereafter arising and owing to any of
the undersigned by the Borrower, or any other party liable to the
Bank are hereby subordinated to the Bank's claims and are hereby
assigned to the Bank. The undersigned ratifies and confirms
whatever the Bank may do pursuant to the terms hereof and with
respect to any collateral for the Guaranteed Debt, and agrees that
the Bank shall not be liable for any error of judgment or mistakes
of fact or law. The Bank may, without notice to anyone, apply or
<PAGE>
set off any balances, credits, deposits, accounts, moneys or other
indebtedness at any time credited by or due from the Bank to any of
the undersigned against the Guaranteed Debt. Any notification of
intended disposition of any property required by law shall be
deemed reasonable and properly given if given at least ten (10)
calendar days before such disposition.
11. Should a claim ("Recovery Claim") be made upon the Bank at
any time for recovery of any amount received by the Bank in payment
of the Guaranteed Debt (whether received from the Borrower, the
undersigned pursuant hereto, or otherwise) and should the Bank
repay all or part of said amount by reason of (i) any judgment,
decree, or order of any court or administrative body having
jurisdiction over the Bank or any of its property; or (ii) any
settlement or compromise of any such Recovery Claim effected by the
Bank with the claimant (including the Borrower), the undersigned
shall remain jointly and severally liable to the Bank for the
amount so repaid to the same extent as if such amount had never
originally been received by the Bank, notwithstanding any
termination hereof or the return of this document to any of the
undersigned or the cancellation of any note, this guaranty or other
instrument evidencing any of the Indebtedness.
12. In the event the Bank shall sell, assign or transfer the
Indebtedness or Guaranteed Debt, or any part thereof, or grant
participations therein, each and every immediate or remote
successive assignee, transferee, holder of or participant therein,
of all or any part of the Indebtedness or Guaranteed Debt shall
have the right to enforce this guaranty by suit or otherwise for
the benefit of such assignee, transferee, holder or participant, as
fully as if such assigned transferee, holder or participant were
herein by name specifically given such rights, powers and benefits;
but the Bank shall have an unimpaired, prior and superior right to
enforce this guaranty for its benefit as to so much of the
Indebtedness or Guaranteed Debt as it has not been sold, assigned
or transferred.
13. No release or discharge of any one or more of the undersigned
(if there is more than one guarantor), or of any other person,
whether primarily or secondarily liable for and obligated with
respect to the Guaranteed Debt, or the institution of bankruptcy,
receivership, insolvency, reorganization, dissolution or
liquidation proceedings by or against any such guarantor or person,
or the entry of any restraining or other order in any such
proceeding, shall release or discharge the undersigned or any other
guarantor of the Guaranteed Debt, or any other person, firm or
corporation liable to the Bank for the Guaranteed Debt, unless and
until all of the Guaranteed Debt shall have been fully paid and
this guaranty stamped "Canceled" and returned to the undersigned.
<PAGE>
14. No delay on the part of the Bank in the exercise of any right
or remedy shall operate as a waiver thereof, and no single or
partial exercise by the Bank of any right or remedy shall preclude
any other or further exercise thereof, or the exercise of any other
right or remedy. No action of the Bank permitted hereunder shall
in any way affect or impair the rights of the Bank and the
obligation of the undersigned under this guaranty.
15. To the extent that the Borrower or any of the undersigned is a
corporation, limited liability company or partnership, all
references herein to the Borrower and to the undersigned,
respectively, shall be deemed to include any successor or
successors, whether immediate or remote, to such corporation,
limited liability company or partnership.
16. This guaranty has been delivered at Chicago, Illinois, and
shall be construed according to the laws of the State of Illinois,
in which state it shall be performed by the undersigned. All
actions arising directly or indirectly as a result or in
consequence of this guaranty shall, in the sole and absolute
discretion of the Bank, be instituted and litigated only in courts
having situs in the City of Chicago, Illinois, and the undersigned
hereby consents to the jurisdiction of any State or Federal Court
located and having its situs in said city and waives any right to
transfer or change the venue of any litigation.
17. Wherever possible, each provision of this guaranty shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this guaranty shall be
prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the
remaining provisions of this guaranty.
18. It is agreed that the undersigned's liability hereunder is
several and is independent of any other guaranties at any time in
effect with respect to all or any part of the Indebtedness and that
the undersigned's liability hereunder may be enforced regardless of
the existence of any such other guaranties.
19. This guaranty, and each and every part hereof, shall be
binding upon the undersigned and upon the heirs, legal
representatives, successors and assigns of the undersigned, and
shall inure to the benefit of the Bank, its successors and assigns.
20. If the undersigned guarantor is a corporation, then and in
such event, the undersigned guarantor expressly represents and
warrants unto the Bank that the execution and delivery of this
guaranty has been duly authorized by resolutions heretofore duly
adopted by its Board of Directors in accordance with law and its
by-laws, that said resolutions have not been amended nor rescinded,
are in full force and effect, that the officers of the undersigned
executing and delivering this guaranty, for and on behalf of the
undersigned, are duly authorized and empowered so to act. The Bank
in accepting this guaranty is expressly relying upon the aforesaid
representations and warranties.
<PAGE>
21. This guaranty constitutes the entire agreement between the
parties relating to the subject matter hereof and is the final and
complete expression of their intent. No prior or contemporaneous
negotiations, promises, agreements, covenants or representations of
any kind or nature, whether made orally or in writing, have been
made by the parties, or any of them, in negotiations leading to
this guaranty or relating to the subject matter hereof, which are
not expressly contained herein, or which have not become merged and
finally integrated into this guaranty; it being the intention of
the parties hereto that in the event of any subsequent litigation,
controversy or dispute concerning the terms and provisions of this
guaranty, no party shall be permitted to offer to introduce oral or
extrinsic evidence concerning the terms and conditions hereof that
are not included or referred to herein and not reflected in
writing. This guaranty can only be changed, modified, waived or
discharged if consented to in a writing duly signed and delivered
on behalf of the Bank. No conditions exist to the legal
effectiveness of this guaranty.
22. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ANY RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING (i) TO ENFORCE OR DEFEND ANY
RIGHTS UNDER OR IN CONNECTION WITH THIS GUARANTY OR AN AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED IN CONNECTION HEREWITH,
OR (ii) ARISING FROM ANY DISPUTE OR CONTROVERSY IN CONNECTION WITH
OR RELATED TO THIS GUARANTY, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SIGNED AND SEALED by the undersigned effective this 24 day of
July, 1997.
ADDRESS: CIRCUIT SYSTEMS OF TENNESSEE, INC.,
a Tennessee corporation
c/o Circuit Systems, Inc.
2350 East Lunt Avenue By: /s/ Dilip S. Vyas
Elk Grove Village, Illinois 60007 Its: Vice-President
STATE OF ILLINOIS )
) SS:
COUNTY OF COOK )
The Undersigned, a Notary Public within and for said County,
in the State aforesaid, duly commissioned and acting, hereby
certifies that on this 24th day of July, 1997, personally
appeared before me Dilip S. Vyas, the Vice-President of Circuit
Systems of Tennessee, Inc., to me personally well known and known
to be the person who signed the foregoing instrument, and who,
being by me duly sworn, stated and acknowledged that he is the
Vice-President of said corporation and that he signed and delivered
the same on behalf of said corporation, with authority, as his/her
and its free and voluntary act and deed for the uses and purposes
therein mentioned and set forth.
<PAGE>
WITNESS my hand and seal as such Notary Public the day and
year in this certificate above written.
/s/ Douglas Conover
Notary Public
My commission expires: April 15, 2000
<PAGE>
