<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d)
----- of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14824
PLEXUS CORP.
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1344447
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 JEWELERS PARK DRIVE, NEENAH, WISCONSIN 54957-0156
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (920) 722-3451
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01
PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s)) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of December 12, 1997, 14,810,353 shares of Common Stock were outstanding,
and the aggregate market value of the shares of Common Stock (based upon the
$23.00 closing sale price on that date, as reported on the NASDAQ National
Market System) held by non-affiliates (excludes shares reported as beneficially
owned by directors and officers - does not constitute an admission as to
affiliate status) was approximately $313 million.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
PART OF FORM 10-K
INTO WHICH PORTIONS OF
DOCUMENT DOCUMENT ARE INCORPORATED
-------- -------------------------
<S> <C>
Proxy Statement for 1998 Annual
Meeting of Shareholders Part III
</TABLE>
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Plexus Corp., through its subsidiaries (together "Plexus" or the
"Company"), offers contract development, design, manufacturing and test
services primarily to original equipment manufacturers in the computer
(primarily mainframes, servers and peripherals), medical, industrial,
telecommunications and transportation electronics industries. Plexus offers a
full range of services including product development, printed circuit board
(PCB) design, material procurement and management, prototyping, PCB and higher
level assembly, functional and in-circuit testing, final system box build and
distribution.
The contract manufacturing services are provided on either a turnkey
basis, where the Company procures certain or all of the materials required for
product assembly, or on a consignment basis, where the customer supplies
materials necessary for product assembly. Turnkey services include material
procurement and warehousing, in addition to manufacturing, and involve greater
resource investment then consignment services. Other than test equipment
products, the Company does not design or manufacture its own proprietary
products.
Plexus is a Wisconsin corporation incorporated in 1979. Its principle
subsidiaries are Electronic Assembly Corporation and Technology Group, Inc.
The Company's principle office is located at 55 Jewelers Park Drive, Neenah,
Wisconsin 54957-0156, and its telephone number is (920) 722-3451.
RECENT DEVELOPMENTS
On November 14, 1997, through the Company's recently formed PAC
Acquisition Corp. subsidiary, the Company acquired substantially all of the
electronic manufacturing-related assets of Nguyen Electronics, Inc. and
Tertronics, Inc. (together, "NEI"), electronic manufacturing and assembly
companies operating in Minneapolis, Minnesota and Milpitas, California,
respectively. The acquisitions provide the Company with assembly capabilities,
facilities and sales offices in the Twin Cities and Silicon Valley, both of
which have a concentration of technology-based companies which the Company
believes constitute potential customers. The Company also expects to continue
customer relationships which were assumed from NEI.
In the NEI acquisition, the Company acquired substantially all of NEI's
assets (other than assets of an unrelated Tertronics business), as well as
related real estate in Minnesota, and assumed certain specified related
liabilities. The NEI acquisition represented, individually and combined, less
than 3% of the Company's total assets. Total combined sales of NEI were
approximately $3.0 million in the 12-month period ended September 30, 1997.
Because the NEI acquisition is being accounted for as a purchase transaction,
results of the acquired operations will be included in Plexus financial
information only from and after the date of the acquisition.
In September 1997, the Company occupied an engineering design center,
with approximately 5,000 square feet, in Raleigh, North Carolina. This
expansion establishes a new engineering and sales facility to further develop,
support and strengthen the Company's technological capabilities and customer
base on the East Coast. This facility will also provide the Company with
another avenue for attracting additional human resources. In April 1997, the
Company occupied its new manufacturing center near Green Bay, Wisconsin. The
new Green Bay facility is leased under an operating agreement with the Oneida
tribe of Indians. See "Properties" (Item 2) below.
ELECTRONIC PRODUCTS
GENERAL BACKGROUND. The Company's services involve the design of
electronic products and systems, the arrangement of electronic components
thereon, and the assembly and testing of such products including the
incorporation of the electronic assemblies into the final product housing. The
products designed and assembled by the Company consist primarily of electronic
components assembled on printed circuit boards and programmed to perform
<PAGE> 3
specific functions. The electronic components include computer memory chips,
microprocessors, integrated circuits, resistors, capacitors, transformers, and
switches. Printed circuit boards are the basic element in the manufacture of
most electronic products and act as the interconnection platforms for various
integrated circuits and electronic components. In addition to the Company's
ability to design and manufacture complete electronic products, the Company
also has the capacity of designing and assembling printed circuitry products
and products utilizing circuit boards with multiple layers of circuitry.
The various types of electronic product services offered by the Company
are discussed below. A customer of the Company may utilize any or all of these
services. The Company charges for these services under a variety of pricing
methods that vary accordingly to the customer or type of service involved.
PRODUCT DESIGN. The Company, primarily through its Technology Group, Inc.
subsidiary, provides product design and engineering services. These services
include software development, circuit design, printed circuit board layout, and
product housing design. The Company's design services provide customers with a
product which is capable of performing an intended function and which can be
manufactured in an efficient and economical manner.
The Company's technologies involve the design of electronic systems,
including printed circuit boards and the arrangement of electronic components
thereon, and the development and/or programming of the application software
necessary to control the functions of those components. The Company's
personnel design printed circuit boards using computer assisted design
equipment and software. This equipment permits the design of complex
multi-layered printed circuit boards which not only have wiring on the top and
bottom surfaces but also incorporate multiple inside layers of circuitry.
The Company's design services may include initial feasibility studies,
product concept definition, development or specifications for product feature
and functions, product engineering specifications, microprocessor design,
design of circuit and custom or semi-custom computer chips, software
development, drafting, prototype production and testing, and development of
test specifications and procedures.
The NEI acquisition added additional design and prototyping/quick turn
capabilities in California.
See "Engineering, Testing and Development."
PRODUCT MANUFACTURE. The Company, primarily through its Electronic
Assembly Corporation subsidiary, manufactures electronic products and
assemblies for use in a wide variety of industries and applications. The NEI
acquisition added additional assembly capability in Minnesota.
The Company's assembly processes involve the fabrication of products from
components manufactured to specification by others. Electronic components such
as memory chips, microprocessing units, integrated circuits, resistors,
capacitors, transformers, switches, wire and related items are purchased as
stock items from a variety of manufacturers and distributors. The Company is
not dependent upon any single supplier for such material. The Company's
printed circuit boards and certain other components are manufactured for it to
its customers' specifications. The Company believes these products would be
available from a variety of sources and that the loss of any single source of
supply would not materially affect the Company's business.
The Company's manufacturing operations include printed circuit board
assembly, testing, and final system box build into the final product housing.
While the Company has automated various aspects of many processes, the assembly
of components into electronic products remains a labor-intensive process
generally requiring a high degree of precision and dexterity in the assembly
stage and integration of quality control checks into the manufacturing
processes. The Company utilizes specially designed equipment and techniques to
maintain its ability to assemble efficiently a wide variety of electronic
products.
PRODUCT TESTING. The increasingly complex design and assembly techniques
for production of electronic products have created a need for the Company's
services in designing and assembling test equipment for electronic
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<PAGE> 4
assemblies. Such test equipment includes functional test fixtures for
testing printed circuit assemblies; in-circuit component measurement testers;
and intelligent burn-in chambers, which temperature cycle products under load.
The Company designs and assembles test products for testing customers'
products.
The Company believes that the design and production of test equipment is
an important factor in its ability to provide products of consistent and high
quality.
CUSTOMERS AND MARKETING
The Company performs services for a wide variety of customers ranging from
large multi-national companies to smaller companies. Because of the variety of
services it offers, its flexibility in design and manufacturing, and its
ability to timely respond to customer needs, the Company believes it is well
positioned to offer its services to customers in its market segments. For many
customers, the Company functions as both a design and production arm, thus
permitting customers to concentrate on concept development and marketing and to
avoid the expense of development of manufacturing capacity. This method
provides an economical and efficient alternative to in-house production.
The Company markets its services primarily through its own employees. It
also employs several sales representative agencies covering selected customer
accounts. The representatives are paid commissions based upon sales.
During fiscal 1997, the Company's services were sold to approximately 113
customers. Three customers represented over 10% of the Company's fiscal 1997
net sales, as follows:
<TABLE>
<CAPTION>
Fiscal Year % of Net Sales
--------------------------
Customer 1997 1996 1995
- ------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
International Business Machines Corporation 12% 26% 26%
General Electric Company 13% 13% 17%
Motorola, Inc. 10% * *
__________________
*Less than 10%
</TABLE>
Many large customers, including those above, contract independently
through multiple divisions, subsidiaries or production facilities. The Company
believes that in many cases its sales to one such subsidiary, division or
facility are not dependent on sales to others. Although the complete loss of
any major customer could have a significant negative impact on the Company, the
Company does not believe the loss of all divisions, subsidiaries or facilities
of a major customer to be likely. For a further discussion of sales to these
and other large customers, see "Management's Discussion and Analysis -- Results
of Operations -- Net Sales" (Item 7) which is incorporated herein by reference.
Substantially all of Plexus' business is done on a project by project
basis for its customers. Although Plexus has several projects and customers
for which it provides services on a continuing basis, the timing and nature of
particular customer projects can vary significantly from period to period.
Substantial changes in the nature or timing of these projects affect the
Company's sales and profitability from period to period.
The Company also from time to time considers strategic acquisitions, joint
ventures and strategic partnerships with other companies. Under certain
circumstances, and subject to identification of appropriate candidates, the
Company believes that such transactions may provide an attractive means of
growth by providing access to additional customers and/or by adding new
capabilities, capacity or locations.
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COMPETITION
The market for electronic products and services provided by the Company is
highly competitive, primarily on the basis of engineering, testing and
production capability, and the capacity for prompt delivery, quality and price.
The capability to design in a timely manner and the capacity to produce
quality items and to assure prompt delivery are particularly important in the
electronics industry. The average product designed and assembled by the
Company has a technologically useful life of only 18 months to three years.
Through its design and production services, the Company serves as an extension
or replacement for its customers' engineering, testing and manufacturing
operations.
Competitors in the electronics design and assembly field are numerous and
range in size from several very large multi-national companies with
substantially greater resources than the Company to many smaller companies
competing only in specific aspects of the Company's business. The Company also
competes against companies which determine to manufacture items in-house rather
than contract with a third-party manufacturer. The Company estimates that it
controls less than one percent of the global market in the outsourced
electronics manufacturing services industry.
EMPLOYEES
As of December 1, 1997, the Company employed full time approximately 2,168
persons. These employees included approximately 834 professional, technical
and engineering employees and approximately 1,334 employees who work in
assembly. The Company also employed 71 temporary employees through various
temporary employment agencies. The Company has never experienced a work
stoppage due to a labor dispute, considers its relations with employees to be
very good, and is not a party to any labor contract. To date, the Company has
not had any difficulty fulfilling its employment needs.
PATENTS AND TRADEMARKS
The Company does not own any material patents or copyrights. The Company
owns the servicemark "Plexus" and has applied for (and is using) the
servicemark "Plexus, the Product Realization Company".
ENGINEERING, TESTING AND DEVELOPMENT
The Company believes that its engineering, testing and development
capabilities are significant factors in the success of its business. The
Company maintains a design team of 164 employees, including 146 hardware and
software design engineers and support staff, and utilizes an integrated design
system in the Company's engineering services.
To supplement its internal capabilities, Plexus has formed a strategic
alliance with Battelle, a leading private independent research and development
organization. The Company believes that Battelle will make available to Plexus
a wide spectrum of advanced technology and innovative product development
experience, to complement the Company's capacities in electronic product
design, testing and manufacturing. In selected circumstances in which the
Company and Battelle believe use of the alliance is appropriate, the Company
believes it will be able to use this alliance to accelerate new product
introduction for its customers. The Company has also recently entered into a
similar arrangement with Cadence Design Systems, a world leader in software
design, for cooperative design and marketing programs.
MATERIALS AND COMPONENTS
The Company does not generally fabricate the component parts which it uses
for the products which it assembles. However, the Company uses various
component parts which are manufactured by others. Important components include
integrated circuits (primarily logic and memory devices), resistors, capacitors
and printed circuit boards; these components may be either custom or standard.
The Company has numerous suppliers for these
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<PAGE> 6
components and has generally not experienced difficulties in fiscal 1997
in obtaining the components needed for its assemblies.
ENVIRONMENTAL COMPLIANCE
The Company believes that it is in compliance with all federal, state and
local environmental laws, and does not anticipate any significant expenditures
in maintaining its compliance.
ITEM 2. PROPERTIES
The Company owns its headquarters, the Plexus Technology Center, in
Neenah, Wisconsin, which consists of approximately 45,000 square feet and
includes Plexus' headquarters office. The Technology Center provides office,
design and testing space for the Company.
Three of the Company's manufacturing facilities are located at Neenah,
Wisconsin, and the fourth at Richmond, Kentucky. The facilities in the
original Neenah complex, which are owned by the Company and were built in the
period from 1980 to 1985, contain an aggregate of approximately 80,000 square
feet of assembly and office space.
In 1990, the Company occupied an additional assembly facility in Neenah,
Wisconsin, with approximately 110,000 square feet of assembly and office space,
which provides additional capacity. The Company leases this facility under a
fifteen year lease.
In January 1994, the Company occupied a newly constructed surface mount
assembly facility in Neenah, Wisconsin. This facility is approximately 175,000
square feet, and is used for manufacturing purposes. The Company leases the
facility, designated the "Advanced Manufacturing Center" as a result of its
design by the Company to incorporate advanced assembly processes, under a
twenty year lease.
In 1985, the Company opened an assembly facility with approximately 45,000
square feet of assembly and office space, which it owns in Richmond, Kentucky.
In February 1996, the Company entered into a lease agreement with Oneida
Nation Electronics ("ONE"), corporation chartered by the Oneida tribe of
Indians of Wisconsin. Pursuant to the lease agreement, ONE agreed to construct
and equip an approximately 110,000 square foot manufacturing facility located
in the Green Bay, Wisconsin area for the use by the Company. The facility was
occupied by the Company in April 1997. Annual lease payments by the Company
for the building and equipment will be based on the profitability of the
facility pursuant to a formula defined in the lease agreement. There are no
required minimum lease payments. Company management believes this lease
provides a financial arrangement under which the Company's earnings would be
less likely to be negatively impacted during the start-up phase of the facility
than under conventional financing methods and capital commitments would be
minimized, although it involves a sharing of potential future profits (if any)
from the facility.
In July 1996, the Company occupied an additional office building, with
approximately 19,000 square feet of office space, in Neenah, Wisconsin. The
Company leases this office building under a ten-year lease. In March 1997, the
Company occupied another additional office building, with approximately 13,000
square feet of office space, in Neenah, Wisconsin. The Company leases this
office building under a ten-year lease.
In September 1997, the Company occupied an engineering design center, with
approximately 5,000 square feet, in Raleigh, North Carolina. The Company
leases this building under a six-year lease.
In November 1997, the Company purchased an approximately 14,000 square
foot manufacturing and office facility in Minneapolis, Minnesota as part of the
NEI acquisition. In addition, as part of the NEI transaction, the Company has
leased an approximately 5,000 square foot manufacturing and office facility in
Milpitas, California for a five-year term, to house its west coast assembly and
sales operations.
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The Company also uses substantial specialized equipment in its operations.
The Company leases a substantial amount of this equipment.
The Company believes that its equipment and facilities are modern, well
maintained and adequate for its present needs. However, continued expansion of
the Company's business may require additional facility expansion in the future.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table contains certain information regarding the present
executive officers of the Company, who are elected by the Board of Directors
after each annual meeting of shareholders for one-year terms or until replaced
by the Board of Directors.
<TABLE>
<CAPTION>
Present
Office
Name Age Position Held Since
---- --- -------- ----------
<S> <C> <C> <C>
Peter Strandwitz 60 Chairman, Chief Executive Office, Director 1979
John L. Nussbaum 55 President, Chief Operating Officer, Director 1996(1)
Gerald A. Pitner 56 Executive Vice President, Director 1989
Charles C. Williams 61 Vice President 1989
Thomas B. Sabol 38 Vice President-Finance and Chief Financial 1996(2)
Officer
Joseph D. Kaufman 40 Vice President, Secretary and General Counsel 1990
William F. Denney 64 Vice President and Treasurer 1995(3)
</TABLE>
(1) Mr. Nussbaum has served as President and a director of the Company since
1980. Mr. Nussbaum became Chief Operating Officer in 1996.
(2) Mr. Sabol joined the Company in January 1996. From 1993 to 1995, Mr.
Sabol served as Vice President and General Auditor for Kemper Corporation.
Prior to that time, Mr. Sabol served as Business Assurance Manager for
Coopers & Lybrand, LLP.
(3) Mr. Denney has served as the Vice President of the Company since 1990,
and became Treasurer in 1995. He was the Company's Controller from 1990
to 1997.
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* * *
"SAFE HARBOR" CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995:
The statements contained in this Form 10-K which are not historical
facts (such as statements which are in the future tense or which include
terms such as "believe," "expect," "plan," "look forward to" or "anticipate")
are forward looking statements that involve risks and uncertainties, including,
but not limited to, the Company's ability to integrate acquired operations, the
Company's ability to secure new customers and maintain its current customer
base, the risk of customer reductions, delays or cancellations in both on-going
and new programs, the results of cost reduction efforts, the adequate
availability of components and related parts for production, the effect of
economic conditions, the ability to successfully integrate acquired operations,
the impact of technological changes and increased competition, design and
manufacturing deficiencies, and other risks detailed herein and in the
Company's other Securities and Exchange Commissions filings.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
INFORMATION ON COMMON STOCK
For the years ended September 30, 1997 and 1996, the Company's Common
Stock has traded on the NASDAQ National Market System; the price information
for that period represents high and low sale prices.
The Company has not paid any cash dividends. See "Management's
Discussion and Analysis of Operations" for a discussion of the Company's
dividend intentions.
<TABLE>
<CAPTION>
PRICE RANGE OF COMMON STOCK
FISCAL YEAR ENDED SEPTEMBER 30, 1997 FISCAL YEAR ENDED SEPTEMBER 30, 1996
High Low High Low
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Quarter 10 3/8 6 7/8 First Quarter 9 3/8 7 3/8
-----------------------------------------------------------------------------------------------
Second Quarter 17 5/8 8 3/8 Second Quarter 8 5/8 6 1/4
-----------------------------------------------------------------------------------------------
Third Quarter 28 12 1/2 Third Quarter 7 5/8 5 5/8
-----------------------------------------------------------------------------------------------
Fourth Quarter 38 1/4 23 1/2 Fourth Quarter 8 6 1/2
-----------------------------------------------------------------------------------------------
YEAR 38 1/4 6 7/8 Year 9 3/8 5 5/8
-----------------------------------------------------------------------------------------------
</TABLE>
INVESTOR INFORMATION
Plexus Corp. Common Stock is traded over-the-counter on the NASDAQ National
Market Sytem, symbol PLXS. As of September, 30, 1997, there were approximately
6,000 shareholders of record. On December 19, 1997, the Company announced that
it may repurchase up to 2,000,000 shares (or $25 million in value) of its
Common Stock in market purchases.
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<PAGE> 9
ITEM 6. SELECTED FINANCIAL DATA.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(dollars in thousands, except per share amounts) For the Years Ended September 30,
OPERATING STATEMENT DATA 1997 1996 1995 1994 1993
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $386,431 $316,124 $283,134 $242,483 $159,597
--------------------------------------------------------------------------------------------------------------------------
Gross profit 44,016 27,333 23,696 16,170 13,074
--------------------------------------------------------------------------------------------------------------------------
Gross margin 11.4% 8.6% 8.4% 6.7% 8.2%
--------------------------------------------------------------------------------------------------------------------------
Operating income 26,817 13,987 12,435 7,926 6,310
--------------------------------------------------------------------------------------------------------------------------
Operating margin 6.9% 4.4% 4.4% 3.3% 4.0%
--------------------------------------------------------------------------------------------------------------------------
Net income 16,400 7,431 6,343 3,057 2,570
--------------------------------------------------------------------------------------------------------------------------
Fully diluted net income per share $ 1.04 $ .52 $ .44 $ .23 $ .20
--------------------------------------------------------------------------------------------------------------------------
CASH FLOWS STATEMENT DATA
--------------------------------------------------------------------------------------------------------------------------
Cash flows provided by operations $ 20,361 $ 29,243 $ 4,188 $(11,171) $ (9,548)
--------------------------------------------------------------------------------------------------------------------------
Capital equipment additions 10,738 4,144 2,106 5,288 8,233
--------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA
--------------------------------------------------------------------------------------------------------------------------
Working capital $ 53,258 $ 51,425 $ 71,302 $ 62,784 $ 45,169
--------------------------------------------------------------------------------------------------------------------------
Total assets 121,817 107,374 115,088 122,021 95,149
--------------------------------------------------------------------------------------------------------------------------
Long-term debt 3,516 15,372 41,734 40,691 40,064
--------------------------------------------------------------------------------------------------------------------------
Stockholders' equity 67,583 48,017 41,009 34,879 24,801
--------------------------------------------------------------------------------------------------------------------------
Return on average assets 14.3% 6.7% 5.4% 2.8% 3.2%
--------------------------------------------------------------------------------------------------------------------------
Return on average equity 28.4% 16.7% 16.7% 10.2% 10.7%
--------------------------------------------------------------------------------------------------------------------------
Inventory turnover ratio 6.7x 5.6x 4.8x 4.1x 3.7x
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: All share and per share information reported throughout this
10-K has been restated (except where noted) to give effect to the
Company's two-for-one stock split effective August 25, 1997.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONDITION AND
RESULTS OF OPERATIONS.
STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISION OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Management's Discussion and Analysis of Financial Condition and Results of
Operations, with the exception of historical matters, contains forward-looking
statements (such as statements in the future tense and those including the terms
"believe," "expect," "anticipate," "intend" and similar concepts) which involve
risks and uncertainties. Actual results may differ materially from these
statements as a result of various factors, including those discussed in further
detail below (in particular "General").
GENERAL
Plexus Corp. is a contract provider of design, manufacturing and testing
services to the electronics industry. Headquartered in Neenah, Wisconsin, the
Company provides product realization services and is one of the largest
electronic assembly organizations in the United States. Through its wholly
owned subsidiaries, Plexus Technology Group, Inc., and Plexus Electronic
Assembly Corporation, the Company offers a full range of services including
product development and design, material procurement and management,
prototyping, assembly, testing, manufacturing, final system box build and
distribution. Services are provided to original equipment manufacturers in the
computer (primarily mainframe, server and peripheral products), medical,
industrial, telecommunications and transportation electronics industries.
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<PAGE> 10
The Company has operations in Wisconsin and Kentucky, and recently expanded to
North Carolina, Minnesota and California. The expansion in Raleigh, N.C., in
September 1997 established a new engineering and sales facility to further
develop, support and strengthen the Company's technological capabilities and
customer base on the East Coast. In November 1997, the Company acquired the
assets of two related companies located in Minneapolis, Minn., and Milpitas,
Calif., in a cash transaction made through the Company's newly formed PAC
Acquisition Corp. subsidiary. The assets acquired, individually and combined,
were less than 3 percent of the Company's total assets. Total combined sales of
the acquired companies were approximately $3 million in the 12-month period
ended September 30, 1997. The Minneapolis location strengthens the Company's
presence in the medical industry. The California location puts the Company in
the heart of Silicon Valley. The acquisitions are intended to support the
Company's growth as the product realization company. Because the acquisitions
were accounted for using the purchase method of accounting, the effects of the
acquisitions will only be included in the Company's financial statements from
the acquisition date. The acquisitions are not expected to have a material
impact on the Company's financial condition and results of operations.
The Company continues to look for other opportunities for geographical
expansion that will improve the Company's ability to provide services to its
customers.
The Company's contract manufacturing services are provided on either a
turnkey basis, where the Company procures certain or all of the materials
required for product assembly, or on a consignment basis, where the customer
supplies some or, occasionally, all materials necessary for product assembly.
Turnkey services include material procurement and warehousing, in addition to
manufacturing, and involve greater resource investment and inventory risk
management than consignment services. Turnkey manufacturing currently
represents almost all of the Company's sales. Turnkey sales typically generate
higher net sales and higher gross profit dollars with lower gross margin
percentages than consignment sales due to the inclusion of component costs, and
related markup, in the Company's net sales. Variations in the Company's turnkey
sales have caused, and could continue to cause, the Company's gross margin and
profitability to fluctuate year to year and quarter to quarter.
Since a substantial portion of the Company's sales are derived from turnkey
manufacturing, net sales can be negatively impacted by component shortages.
Shortages of key electronic components which are provided directly from
customers or suppliers can cause manufacturing interruptions, customer
rescheduling issues, production downtime and production set-up and restart
inefficiencies. From time to time, allocations of components can be an integral
part of the electronics industry. Shortages that occurred in the past,
including the first half of fiscal 1996, mainly in logic and memory devices,
were mitigated in the second half of fiscal year 1996, as well as in fiscal
1997, due to a shift in the supply-demand cycle for such components. While in
general the marketplace for such components has eased, allowing greater
availability, key component shortage issues can still occur with respect to
specific industries or particular components. In response to this dynamic
environment, the Company has a corporate procurement organization whose primary
purpose is to create strong supplier alliances to assure a steady flow of
components at competitive prices and mitigate shortages. Strategic
relationships have been established with international purchasing offices to
improve shortage and pricing issues. However, because of the limited number of
suppliers for certain electronic components and other supply and demand
concerns, the Company can neither eliminate component shortages nor determine
the timing or impact of such shortages on the Company's results. As a result,
the Company's sales and profitability can be affected from period to period.
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<PAGE> 11
Many of the industries for which the Company currently provides electronic
products are subject to rapid technological change, product obsolescence,
increased competition, and pricing pressures. In fiscal 1997, approximately 6
percent of the Company's total sales were foreign, with less than 2 percent
going into the Southeast Asian market, which is currently experiencing
unfavorable currency and economic conditions. These and other factors which
affect the industries or the markets that the Company serves, and which affect
any of the Company's major customers in particular, could have a material
adverse effect on the Company's results of operations.
The Company has no long-term volume commitments from its customers, and
lead-times for customer orders and product-life cycles continue to contract.
Customer programs can be canceled and volume levels can be changed or delayed
at any time. The timely replacement of delayed, canceled or reduced programs
with new business cannot be assured. Because of these and other factors, there
can be no assurance that the Company's recent historical sales growth rate will
continue. In fiscal 1998, sales growth, when compared to like periods in fiscal
1997, is expected to be more pronounced in the second half of the year due to
the effect of the timing of certain programs on first half sales, and
anticipated new customers and new programs ramping production up in the second
half of the fiscal year. See "Results of Operations -- Net Sales" below for
certain factors affecting net sales to the Company's largest customers.
The Company believes that its growth has been achieved in significant part by
its approach to partnering with customers mainly through its product design and
development services. Approximately 20 percent of the Company's contract
manufacturing sales are a direct result of these services. The Company intends
to continue to leverage this aspect of its product design and development
services for continued growth in contract manufacturing revenues. Currently,
the design and development services are less than 10 percent of total sales. In
order to achieve expanded sales growth, the Company must continue to generate
additional sales from existing customers from both current and future programs,
and must successfully market to new customers. The Company must also
successfully integrate and leverage its new regional product design centers
into this strategy. In addition, the Company must continue to attract and
retain top quality product development engineers in order to continue to expand
its design and development services. Because of these and other factors, there
can be no assurance that the Company's historic growth rates will continue.
Start-up costs and the management of labor and equipment efficiencies for new
programs and new customers can have an effect on the Company's gross margins.
Due to these and other factors, gross margins can be negatively impacted
early on in the life cycle of new programs. In addition, labor efficiency and
equipment utilization rates ultimately achieved and maintained by the Company
for new and current programs impact the Company's gross margins.
Geographical expansion and growth by acquisition can have an effect on the
Company's operations. The successful operation of an acquired business will
require communication and cooperation among key managers, along with the
transition of customer relationships. There can be no assurance that the
Company will successfully manage the integration of new locations or acquired
operations and may experience certain inefficiencies which could negatively
impact the results of operations. Additionally, no assurance can be given that
any past or future acquisition by the Company will enhance the Company's
business.
The Company has a corporate information technology organization whose
primary purpose is to ensure vision and direction of information systems to
meet internal and external needs. The Company must keep pace with rapid
technological developments in its management information systems and its
production facilities and equipment, and can experience costs and conversion
difficulties in connection with the implementation of new systems and
processes. In addition, like all other companies, the Company must assure that
its computer and software systems, and other machinery and systems that depend
upon computer-driven operations or which have embedded chips or
micro-processors, are capable of accurately functioning and accurately
recognizing and processing data in the year 2000 and beyond ("Year 2000
Compliant"). The Company expects to be Year 2000 Compliant in calendar 1998,
although certain functions are subject to the efforts of third-party suppliers.
The costs associated with implementing year 2000 applications currently are not
expected to be material, although there can be no assurances.
-10-
<PAGE> 12
The Company operates in a highly competitive industry. The Company faces
competition from a number of domestic and foreign electronic manufacturing
services companies, some with financial and manufacturing resources greater
than the Company's. The Company also faces competition in the form of current
and prospective customers that have the capabilities to develop and manufacture
products internally. In order to remain a viable alternative, the Company must
continue to enhance its total engineering and manufacturing technologies.
Other factors that could adversely affect forward-looking statements include
the Company's ability to maintain and expand its customer base, gross margin
pressures, the effect of start-up costs related to new facilities, the overall
economic conditions affecting the electronics industry, and other factors and
risks detailed herein and in the Company's other Securities and Exchange
Commission filings.
RESULTS OF OPERATIONS
NET SALES
In fiscal 1997, net sales grew to $386 million, an increase of $70 million, or
22 percent, over the previous year. Net sales in fiscal 1996 were $316 million,
an increase of $33 million, or 12 percent, over fiscal 1995. The increase in
net sales in fiscal 1997 was due both to increased orders from existing
customers, including ongoing and new programs, and the addition of new
customers, the largest of which was Unisys Corporation (Unisys). However, sales
to International Business Machines Corporation (IBM), the Company's largest
customer in fiscal 1996, were significantly below the prior year as certain
low-margin programs, primarily disk drive business, transitioned to low-cost
labor markets overseas and other programs reached end-of-life status or were
transitioned by IBM into in-house manufacturing facilities. The reduction in
IBM sales was more than offset by the above-mentioned sales gains with other
current and new customers.
The sales increase in fiscal 1996 was due to increased orders from existing
customers, including ongoing and new programs, and the addition of new
customers. However, the increases were not as extensive as originally
anticipated by Company management primarily due to delays in several new
programs caused by customer cutbacks in original forecasts, component shortages
and customer time-to-market issues caused by design changes or other
customer-specific factors. In addition, certain ongoing programs had volume
reductions from prior years based on revised customer forecasts. Finally,
certain customers adjusted production schedules because of their own internal
excess manufacturing capacity.
While the Company experienced sales growth in fiscal 1997 across all the
industries it services, except the computer industry which had essentially flat
sales, growth was more pronounced in the telecommunications, industrial and
transportation industries of the electronics market. Sales to the computer
industry were impacted primarily by the reduction in sales to IBM, offset by
the addition of Unisys as a new customer. As a result, the percentage of
overall computer industry sales declined to 31 percent from 38 percent of total
sales. Sales for fiscal 1997 for the other industries were as follows: Medical
21 percent (21 percent in fiscal 1996), Industrial 21 percent (18 percent),
Transportation 12 percent (11 percent), Telecommunications 11 percent (9
percent), and Other 4 percent (3 percent). Currently, the Company does not
expect there will be any material changes in the breakdown of its sales by
industry in fiscal 1998.
-11-
<PAGE> 13
The Company's largest customers continue to be IBM and General Electric Company
(GE). Sales to IBM (including up to six subsidiaries or divisions) were 12
percent, 26 percent and 26 percent of total sales for fiscal 1997, 1996, and
1995, respectively. Sales to GE (including up to four subsidiaries or
divisions) were 13 percent, 13 percent and 17 percent of total sales for fiscal
1997, 1996, and 1995, respectively. Sales to Motorola, Inc. (including up to
five subsidiaries or divisions) reached 10 percent of total sales for the first
time in fiscal 1997. Finally, fiscal 1997 sales to Unisys were slightly less
than 10 percent of the Company's total sales. These results reflect the
Company's dedication to continue diversifying its customer base, and decrease
its dependence on any particular customer or customers. Each division or
subsidiary of these customers contracts independently of the other divisions or
subsidiaries. The Company has continued to obtain new business from other
customers that has resulted in a reduced dependency on IBM and GE. The
reduction in IBM sales was discussed above. Sales in dollar terms to GE were up
over 19 percent from fiscal 1996, the decrease as a percentage of net sales
resulted from the Company's increasing sales to other customers. This dollar
volume increase was primarily due to increased sales to GE Medical Systems. The
increase in sales to Motorola resulted from new programs commenced in fiscal
1997. Sales to Unisys resulted from the transition of programs during the year
to the Company. Currently the Company expects sales from IBM, GE and Unisys to
remain steady in fiscal 1998. However, their percentage of total Company sales
could continue to decline as other customers grow. The timing and amount of
sales to Motorola vary due to its in-house manufacturing capacity.
Sales to the Company's ten largest customers accounted for 68 percent, 70
percent, and 75 percent of total revenues in fiscal 1997, 1996, and 1995,
respectively. The decline has occurred primarily due to the Company's ability
to obtain new business from other customers, thereby reducing its dependency on
these customers. The Company remains dependent upon continued sales to IBM, GE,
Motorola, Unisys and its other significant customers. Any material change in
orders from these or other customers could have a material effect on the
Company's results of operations.
GROSS PROFIT
Gross profit increased by $16.7 million, or 61 percent, in fiscal 1997 compared
to fiscal 1996 and by $3.6 million, or 15 percent, during fiscal 1996 compared
to fiscal 1995. The gross margin increased to 11.4 percent in fiscal 1997, from
8.6 percent in fiscal 1996. The gross margin in fiscal 1995 was 8.4 percent.
The increase in gross margin in fiscal 1997 compared to fiscal 1996 reflects
the leverage generated by higher sales volumes, continued cost savings from
initiatives instituted in the second quarter of fiscal 1996, the increased
utilization of the Company's Advanced Manufacturing Facility, better component
pricing, improved product mix, and the Company's integration of its flexible
labor force within its Wisconsin operations. These were partially offset by
increased start-up costs associated with new programs, primarily Unisys, and
increased hiring in the Company's engineering and technical manufacturing areas
in order to continue to expand its capabilities and meet customer demands.
The slight increase in gross margin in fiscal 1996 over fiscal 1995 was due to
the cost-saving initiatives, together with enhanced procurement management, the
continued broadening of the Company's customer base, declining material pricing
and the increased utilization of the Company's Advanced Manufacturing Facility
resulting from increased sales. These factors were mitigated by slower first
half sales growth, and increased reserves and write-offs of inventories and
accounts receivable, primarily due to improved inventory management procedures
instituted in fiscal 1996.
-12-
<PAGE> 14
The fiscal 1996 cost-saving initiatives included reductions in
production and administrative personnel, and equipment lease reductions.
Specifically, the Company reduced production and administrative personnel by
approximately 140 since February 1, 1996, through layoffs and attrition. These
reductions amounted to an approximate 6 percent decrease in overall employment
at the Company. In addition to the staffing decreases, the Company reduced
fixed expenses, primarily through equipment lease reductions. Severance and
related costs with respect to staff reductions and equipment lease reductions
were not material. In the second half of fiscal 1996, the Company realized
pre-tax cost savings of approximately $1.5 million. The Company also
implemented tighter controls over the monitoring and addition of both variable
and fixed costs. Future savings, which can not be assured, have continued but
at reduced levels because of certain increases which were necessary to support
the Company's continued growth in fiscal 1997.
Most of the research and development conducted by the Company is paid for
by customers and is, therefore, included in cost of sales. Other research and
development is conducted by the Company, but is not specifically identified, as
the Company believes such expenses are less than 1 percent of its total sales.
The Company's gross margin also reflects a number of other factors, including
product mix, the level of start-up costs and efficiencies of new programs,
sales volume, capacity utilization of surface mount and other equipment, labor
costs and efficiencies, the management of inventories, component pricing and
shortages, fluctuations and timing of customer orders, changing demand for
customer's products and competition within the electronics business. These and
other factors can cause variations in the Company's operating results. While
the Company's focus is on maintaining and expanding gross margins, there can
be no assurance that gross margins will not decrease in future periods.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative (S&A) expenses increased to $17.2 million in fiscal
1997, compared to $13.3 million in fiscal 1996, and $11.3 million in fiscal
1995. As a percentage of sales, S&A expenses were 4.5 percent, 4.2 percent and
4.0 percent in fiscal 1997, 1996 and 1995, respectively. These increases
reflect the Company's planned expansion of its sales and marketing efforts,
enhancement of its information systems to support the Company's continued
growth, and increase in its customer support function. In addition, fiscal 1997
amounts include provisions for attainment of the Company's management bonus
plan. The Company anticipates that future S&A expenses will increase in
absolute dollars but should remain between 4.5 percent and 4.7 percent of
sales, as the Company continues to expand these support areas.
OTHER INCOME (EXPENSE)
Interest expense was $0.8 million in fiscal 1997, compared to $1.9 million in
fiscal 1996 and $2.5 million in fiscal 1995. The continuous decrease in
interest expense is primarily due to reduced borrowings required to support
working capital, coupled with lower interest rates. See "Liquidity and Capital
Resources."
Miscellaneous income was $1.0 million in fiscal 1997, compared to $0.3
million in fiscal 1996 and 1995. The increase in 1997 includes approximately
$600,000 in gains from the buyout and sale of certain leased manufacturing
equipment.
INCOME TAXES
Income taxes increased to $10.7 million in fiscal 1997, from $4.9 million in
fiscal 1996, and $3.9 million in fiscal 1995, as a result of increased
earnings. The Company's effective income tax rate has remained constant at
rates between 38 percent to 40 percent in fiscal 1997, 1996, and 1995. These
rates approximate the blended Federal and state statutory rate as a result of
the Company's operations being located within the United States.
-13-
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were $20.4 million in fiscal 1997,
compared to $29.2 million in fiscal 1996. Cash from operations was provided
primarily by improved net profits. Accounts receivable increases have occurred
primarily due to increased sales volumes. The changes in inventory and customer
deposits reflect improved materials management. Inventory turnover improved to
6.7 turns as of September 30, 1997, from 5.6 turns as of September 30, 1996.
The cash generated from operating activities was utilized primarily to purchase
additional manufacturing equipment and to reduce outstanding debt. Borrowings
under the Company's long-term revolving credit agreement have been reduced by
approximately $12 million to $3.3 million as of September 30, 1997, from $15.2
million as of September 30, 1996. The Company also obtained $3.5 million in net
capital as a result of stock option exercises, which were significant due to
the increase in the Company's stock price in fiscal 1997.
In 1997, the Company's $40 million revolving credit agreement was amended
resulting in an unsecured arrangement and a reduction in the Company's
borrowing rates. All other major terms were unchanged from the previous
agreement. The new borrowing rates are LIBOR plus 0.875 percent and prime less
1/4 percent (previously LIBOR plus 0.875 percent to LIBOR plus 2 percent and
prime less 1/4 percent to prime plus 1/4 percent). The Company's revolving
credit agreement extends through July 2002.
Capital additions of $10.7 million for fiscal 1997 were primarily concentrated
in surface mount assembly equipment, engineering workstations and related
software, and management information systems hardware and software. Payments
for property, plant and equipment for fiscal 1996 and 1995 were $4.1 million
and $2.1 million, respectively. These acquisitions were financed from working
capital.
The Company has historically utilized operating leases to fund the majority of
its manufacturing equipment needs. The Company now anticipates utilizing
operating leases primarily in situations where technical obsolescence concerns
are determined to outweigh the benefits of financing the equipment purchase.
The Company estimates that capital expenditures for fiscal 1998 to be similar
to fiscal 1997 at approximately $10 to $12 million, which the Company expects
to fund through cash flows from operations and the revolving credit agreement.
A new 110,000-square-foot manufacturing facility located in Green Bay,
Wisconsin, began production in April 1997. The facility is the result of a
partnership with Oneida Nation Electronics (ONE), a corporation chartered by
the Oneida Tribe of Indians of Wisconsin. Pursuant to a lease agreement, ONE
constructed and equipped the facility for use by the Company. Annual lease
payments by the Company for the building and the equipment are based on the
profitability of the facility pursuant to a formula defined in the lease
agreement. Company management believes this lease provides a financial
arrangement under which the Company's earnings would be less likely to be
negatively impacted during the start-up phase of the facility than under
conventional financing methods, and capital commitments would be minimized,
although it involves a sharing of potential future profits from the facility.
The Company's Series A Preferred Stock was converted into 554,454 shares
(pre-split) of Company Common Stock on February 28, 1997. (See footnote 6 to
the Company's consolidated financial statements.)
The ratio of total debt-to-equity as of September 30, 1997, was 0.8 to 1,
compared to 1.2 to 1 as of September 30, 1996.
-14-
<PAGE> 16
The Company anticipates increases in working capital in order to facilitate
growth. However, because of the dynamics of the Company's industry, the exact
timing and amount of these increases cannot be determined. The Company believes
that its credit facilities, leasing capabilities and projected cash flows from
operations will be sufficient to meet its anticipated working capital needs and
its anticipated short-term and long-term capital requirements. The Company's
recent acquisitions did not have a material effect on the Company's cash flows.
The Company has not paid dividends on its common stock, but has reinvested its
earnings to support its working capital and expansion requirements. The Company
intends to continue to utilize its earnings in the development and expansion of
the business and does not expect to pay cash dividends in the foreseeable
future.
NEW ACCOUNTING PRINCIPLES
The Company is required to adopt Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share," in the first quarter of fiscal 1998. The
Company is also required to adopt SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," in fiscal 1999. (See footnotes 1 and 9 to the Company's
consolidated financial statements.)
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See following "List of Financial Statements and Financial Statement
Schedules", and accompanying reports, statements and schedules, which follow
beginning on page F.1, all of which are incorporated by reference herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in response to this item is incorporated herein by
reference to "Election of Directors" in the Registrant's Proxy Statement
for its 1998 Annual Meeting of Shareholders ("1998 Proxy Statement") and from
"Security Ownership of Certain Beneficial Owners and Management--Section 16(a)
Beneficial Ownership Reporting Compliance" in the 1998 Proxy Statement and
"Executive Officers of the Registrant" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the paragraph under "Election of
Directors --Directors' Compensation" and "Executive Compensation" in the 1998
Proxy Statement.
-15-
<PAGE> 17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to "Security Ownership of Certain
Beneficial Owners and Management" in the 1998 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed:
1. and 2. Financial Statements and Financial Statement Schedules. See
following List of Financial Statements and Financial
Statement Schedules, on page F-1, which is incorporated
herein by reference.
3. Exhibits. See Exhibit Index included as the last pages of
this report, which index is incorporated herein by reference.
(b) Reports on Form 8-K.
No reports on Form 8-K filed by the Company during the last quarter of
fiscal 1997.
-16-
<PAGE> 18
PLEXUS CORP. 10-K
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
CONTENTS Pages
-------- -----
<S> <C>
Report of Independent Accountants F-2
Consolidated Statements of Operations for the three years ended F-3
September 30, 1997, 1996 and 1995.
Consolidated Balance Sheets as of September 30, 1997 and 1996. F-4
Consolidated Statements of Stockholders' Equity for the three years F-5
ended September 30, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the three years ended F-6
September 30, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements F-7 TO F-11
Financial Statement Schedule:
Report of Independent Accountants F-12
Schedule II - Valuation and Qualifying Accounts F-13
</TABLE>
F-1
<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS PLEXUS CORP.
We have audited the accompanying consolidated balance sheets of Plexus Corp.
and Subsidiaries as of September 30, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended September 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material mistatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Plexus Corp. and
Subsidiaries as of September 30, 1997 and 1996, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1997, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
October 30, 1997
F-2
<PAGE> 20
===============================================================================
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATMENTS OF OPERATIONS
for the years ended September 30, 1997, 1996 and 1995
(in thousands, except share data)
<TABLE>
1997 1996 1995
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Net sales $386,431 $316,124 $283,134
- --------------------------------------------------------------------------------
Cost of sales 342,415 288,791 259,438
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Gross profit 44,016 27,333 23,696
- --------------------------------------------------------------------------------
Selling and adminstrative expenses 17,199 13,346 11,261
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating income 26,817 13,987 12,435
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Other income (expense):
- --------------------------------------------------------------------------------
Interest expense (787) (1,924) (2,470)
- --------------------------------------------------------------------------------
Miscellaneous 1,050 314 317
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Income before income taxes 27,080 12,377 10,282
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Income taxes 10,680 4,946 3,939
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET INCOME $ 16,400 $ 7,431 $ 6,343
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net income per common and common
equivalent share:
- --------------------------------------------------------------------------------
Primary $ 1.08 $ 0.52 $ 0.45
- --------------------------------------------------------------------------------
Fully diluted $ 1.04 $ 0.52 $ 0.44
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Weighted average common and common
equivalent shares:
- --------------------------------------------------------------------------------
Primary 15,014,423 13,264,726 13,166,064
- --------------------------------------------------------------------------------
Fully diluted 15,790,885 14,376,428 14,498,572
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 21
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of September 30, 1997 and 1996
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS 1997 1996
<S> <C> <C>
- ------------------------------------------------------------------------------
Current assets:
- ------------------------------------------------------------------------------
Cash and cash equivalents $ 3,655 $ 1,847
- ------------------------------------------------------------------------------
Accounts receivable, net
of allowance of $360 and $275
in 1997 and 1996, respectively 47,648 35,312
- ------------------------------------------------------------------------------
Inventories 47,931 54,386
- ------------------------------------------------------------------------------
Deferred income taxes 2,571 1,753
- ------------------------------------------------------------------------------
Prepaid expenses and other 981 1,451
- ------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 102,786 94,749
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Property, plant and equipment, net 18,687 12,423
- ------------------------------------------------------------------------------
Other 344 202
- ------------------------------------------------------------------------------
TOTAL ASSETS $ 121,817 $ 107,374
- ------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------------------------------------------------
Current liabilities:
- ------------------------------------------------------------------------------
Current portion of long-term debt $ 214 $ 63
- ------------------------------------------------------------------------------
Accounts payable 35,099 27,758
- ------------------------------------------------------------------------------
Customer deposits 3,414 8,614
- ------------------------------------------------------------------------------
Accrued liabilities:
- ------------------------------------------------------------------------------
Salaries and wages 5,908 3,148
- ------------------------------------------------------------------------------
Other 4,893 3,741
- ------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 49,528 43,324
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Long-term debt 3,516 15,372
- ------------------------------------------------------------------------------
Deferred income taxes 998 661
- ------------------------------------------------------------------------------
Other liabilities 192 -
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Stockholders' equity:
- ------------------------------------------------------------------------------
Series A preferred stock, $.01 par
value, $1,000 face value, 7,000
shares authorized, 0 and 7,000
issued and outstanding, respectively - 0
- ------------------------------------------------------------------------------
Preferred stock, $.01 par value,
4,993,000 shares authorized,
none issued or outstanding - -
- ------------------------------------------------------------------------------
Common stock, $.01 par value,
20,000,000 shares authorized,
14,739,914 and 6,501,196 issued
and outstanding, respectively 147 65
- ------------------------------------------------------------------------------
Additional paid-in capital 17,675 14,253
- ------------------------------------------------------------------------------
Retained earnings 49,761 33,699
- ------------------------------------------------------------------------------
67,583 48,017
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 121,817 $ 107,374
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 22
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended September 30, 1997, 1996 and 1995
(in thousands, except share data)
<TABLE>
<CAPTION>
SERIES A ADDITIONAL TOTAL
PREFERRED STOCK COMMON STOCK PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS EQUITY
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, October 1, 1994 7,000 $ 0 6,460,498 $ 65 $ 13,829 $ 20,985 $ 34,879
- -----------------------------------------------------------------------------------------------------------------------------
Exercise of stock options - - 30,834 - 331 - 331
- -----------------------------------------------------------------------------------------------------------------------------
Net income - - - - - 6,343 6,343
- -----------------------------------------------------------------------------------------------------------------------------
Preferred stock dividends
($77.69 per share) - - - - - (544) (544)
- -----------------------------------------------------------------------------------------------------------------------------
Balances, September 30, 1995 7,000 0 6,491,332 65 14,160 26,784 41,009
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Exercise of stock options - - 9,864 - 93 - 93
- -----------------------------------------------------------------------------------------------------------------------------
Net income - - - - - 7,431 7,431
- -----------------------------------------------------------------------------------------------------------------------------
Preferred stock dividends
($73.71 per share) - - - - - (516) (516)
- -----------------------------------------------------------------------------------------------------------------------------
Balances, September 30, 1996 7,000 0 6,501,196 65 14,253 33,699 48,017
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Exercise of stock options - - 346,049 3 3,501 - 3,504
- -----------------------------------------------------------------------------------------------------------------------------
Net income - - - - - 16,400 16,400
- -----------------------------------------------------------------------------------------------------------------------------
Preferred stock dividends
($48.33 per share) - - - - - (338) (338)
- -----------------------------------------------------------------------------------------------------------------------------
Preferred stock conversion (7,000) 0 554,454 6 (6) - 0
- -----------------------------------------------------------------------------------------------------------------------------
Two-for-one common stock split - - 7,338,215 73 (73) - 0
- -----------------------------------------------------------------------------------------------------------------------------
BALANCES, SEPTEMBER 30, 1997 - $ - 14,739,914 $147 $ 17,675 $ 49,761 $ 67,583
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 23
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended September 30, 1997, 1996 and 1995
(in thousands)
<TABLE>
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 16,400 $ 7,431 $ 6,343
- ------------------------------------------------------------------------------
Adjustments to reconcile net
income to net cash flows
from operating activities:
- ------------------------------------------------------------------------------
Depreciation and amortization 4,487 3,653 3,237
- ------------------------------------------------------------------------------
Provision for inventories and
accounts receivable allowances 2,253 2,145 341
- ------------------------------------------------------------------------------
Deferred income taxes (481) (906) 92
- ------------------------------------------------------------------------------
Non-operating gains (620) - -
- ------------------------------------------------------------------------------
Changes in assets and liabilities:
- ------------------------------------------------------------------------------
Accounts receivable (12,432) 12,060 (4,050
- ------------------------------------------------------------------------------
Inventories 4,298 (7,377) 10,929
- ------------------------------------------------------------------------------
Prepaid expenses and other 470 479 1,270
- ------------------------------------------------------------------------------
Accounts payable 7,341 4,479 (13,612
- ------------------------------------------------------------------------------
Customer deposits (5,200) 5,084 29
- ------------------------------------------------------------------------------
Accrued liabilities 3,912 2,178 (333
- ------------------------------------------------------------------------------
Other (67) 17 (58
- ------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES 20,361 29,243 4,188
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------------------------------------------------
Payments for property, plant and
equipment (10,738) (4,144) (2,106
- ------------------------------------------------------------------------------
Proceeds on sale of property, plant
and equipment 724 8 19
- ------------------------------------------------------------------------------
CASH FLOWS USED IN
INVESTING ACTIVITIES (10,014) (4,136) (2,087
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------------------------------------------------
Proceeds from debt 96,442 196,300 121,900
- ------------------------------------------------------------------------------
Payments on debt (108,147) (222,706) (121,300
- ------------------------------------------------------------------------------
Proceeds from exercise of
stock options 3,504 93 331
- ------------------------------------------------------------------------------
Payments of preferred stock dividends (338) (516) (544
- ------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY (USED
IN) FINANCING ACTIVITIES (8,539) (26,829) 387
- ------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 1,808 (1,722) 2,488
- ------------------------------------------------------------------------------
Cash and cash equivalents,
beginning of year 1,847 3,569 1,081
- ------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 3,655 $ 1,847 $ 3,569
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 24
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business: Plexus Corp. provides product realization services to
original equipment manufacturers (OEMs) in the computer (primarily mainframes,
servers and peripherals), medical, industrial, telecommunications and
transportation electronics industries. The Company offers a full range of
services including product development and design services, material
procurement and management, prototyping, assembly, testing, manufacturing,
final system box build and distribution.
The contract manufacturing services are provided on either a turnkey basis,
where the Company procures certain or all of the materials required for product
assembly, or on a consignment basis, where the customer supplies materials
necessary for product assembly. Turnkey services include material procurement
and warehousing, in addition to manufacturing, and involve greater resource
investment than consignment services. Turnkey manufacturing currently
represents almost all of the Company's sales. The Company has operations in
Wisconsin, Kentucky and North Carolina.
Consolidation Principles: The consolidated financial statements include the
accounts of Plexus Corp. and its subsidiaries (together "the Company"). All
significant intercompany transactions have been eliminated.
Cash Equivalents: The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
Inventories: Inventories are valued primarily at the lower of cost or market.
Cost is determined by the first-in, first-out (FIFO) method.
Property, Plant and Equipment and Depreciation: These assets are stated at
cost. Depreciation, determined on the straight-line method, is based on lives
assigned to the major classes of depreciable assets as follows:
Buildings and improvements 18-40 years
Machinery and equipment 3-10 years
Revenue Recognition: Revenue is recognized primarily when inventory is
shipped. Revenue and profit relating to product design and development
contracts (such sales are less than 10% of total revenue) are recognized as
costs are incurred utilizing the percentage-of-completion method; any losses
are recognized when anticipated. Progress towards completion of product design
and development contracts are based on units of work for labor content and cost
for component content.
Income Taxes: Deferred income taxes are provided for differences between the
bases of assets and liabilities for financial and tax reporting purposes.
Stock Options: Proceeds from the sale of newly issued common stock to
employees under the Company's stock option plan are credited to common stock to
the extent of par value and the excess to additional paid-in capital. Income
tax benefits attributable to stock options exercised are recorded as an
increase in additional paid-in captial.
Net Income Per Common and Common Equivalent Share: The computation of primary
net income per common share is based upon the weighted average number of common
shares outstanding plus the effect of common shares contingently issuable
relating to outstanding stock options using the treasury stock method and net
income reduced for preferred stock dividends. The computation of fully diluted
net income per common share reflects additional dilution from stock options and
convertible preferred shares using if-converted method.
The Company is required to adopt Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share" in the first quarter of fiscal 1998. SFAS
No. 128 specifies the computation, presentation and disclosure requirements for
earnings per share. Under SFAS No. 128, the Company will be required to present
both basic net income per share and diluted net income per share. Basic net
income per share is expected to be higher than the currently presented primary
net income per share as the effect of dilutive stock options will not be
considered in computing basic net income per share. Diluted net income per
share is expected to be comparable to the currently presented fully diluted net
income per share. Upon adoption of this statement, all prior-period earnings
per share data will be restated to conform to the provisions of SFAS No. 128.
The Company is required to adopt SFAS No. 130, "Reporting Comprehensive Income"
in fiscal 1999. SFAS No. 130 requires reporting comprehensive income in a
financial statement, which includes, in addition to net income, other items that
are reported as direct adjustments to stockholders' equity. Such items include
foreign currency translation items, minimum pension liability adjustments, and
unrealized gains and losses on certain investments in debt and equity
securities. Presently the Company does not have any items that would require
inclusion under this statement.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-7
<PAGE> 25
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. INVENTORIES
Inventories as of September 30, 1997 and 1996 consist of (in thousands):
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Assembly parts $ 28,828 $ 37,941
- ------------------------------------------------------------------------
Work-in-process 18,557 16,281
- ------------------------------------------------------------------------
Finished goods 546 164
- ------------------------------------------------------------------------
$ 47,931 $ 54,386
========================================================================
</TABLE>
NOTE 3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of September 30, 1997 and 1996 consist
of (in thousands):
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Land, buildings
and improvements $ 8,583 $ 8,414
- ------------------------------------------------------------------------
Machinery and equipment 35,439 25,262
- ------------------------------------------------------------------------
44,022 33,676
- ------------------------------------------------------------------------
Less accumulated
depreciation 25,335 21,253
- ------------------------------------------------------------------------
$ 18,687 $ 12,423
========================================================================
</TABLE>
NOTE 4. DEBT
Long-term debt as of September 30, 1997 and 1996 consists of
(in thousands):
<TABLE>
<CAPTION>
1997 1996
- ------------------------------------------------------------------------
<S> <C> <C>
Revolving credit
arrangement $ 3,250 $ 15,200
- ------------------------------------------------------------------------
Other notes and
obligations with a
weighted average
interest rate of 3.0%
and 5.5%, respectively 480 235
- ------------------------------------------------------------------------
3,730 15,435
- ------------------------------------------------------------------------
Less current portion 214 63
- ------------------------------------------------------------------------
$ 3,516 $ 15,372
========================================================================
</TABLE>
The Company's revolving credit arrangement was amended in March 1997. The
agreement provides for maximum borrowings of $40 million with all or a portion
of the principal bearing interest at a LIBOR based or a prime based rate as
elected by the Company. These rates are LIBOR plus 0.875% and prime less 1/4%
(previously rates ranged from LIBOR plus 0.875% to LIBOR plus 2% and prime less
1/4% to prime plus 1/4%). The weighted average interest rate of borrowings
under this agreement was 6.6% as of September 30, 1997. The credit arrangement
is unsecured (previously was limited to the sum of 80% of qualified accounts
receivable and the lesser of 50% or $27.5 million of qualified inventory, and
was collateralized by accounts receivable and inventories). A commitment fee
of 1/8 of 1% per annum on the unused portion of this agreement is payable
quarterly. The agreement matures in July 2002. The revolving credit agreement,
as amended, includes covenants which require the maintenance of various debt
to net worth ratios.
The carrying amount of the Company's long-term debt approximates fair value.
The aggregate scheduled maturities of long-term debt in subsequent years are as
follows (in thousands):
<TABLE>
- ------------------------------------------------------------------------
<S> <C>
1998 $ 214
- ------------------------------------------------------------------------
1999 114
- ------------------------------------------------------------------------
2000 10
- ------------------------------------------------------------------------
2001 11
- ------------------------------------------------------------------------
2002 3,261
- ------------------------------------------------------------------------
Thereafter 120
- ------------------------------------------------------------------------
$ 3,730
========================================================================
</TABLE>
Cash paid for interest in fiscal 1997, 1996 and 1995 was $0.9 million, $2.0
million and $3.0 million, respectively.
F-8
<PAGE> 26
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INCOME TAXES
Income tax expense (benefit) consists of (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
Federal $ 9,422 $ 4,983 $ 3,209
- --------------------------------------------------------------
State 1,739 869 638
- --------------------------------------------------------------
11,161 5,852 3,847
- --------------------------------------------------------------
Deferred:
- --------------------------------------------------------------
Federal (422) (800) 52
- --------------------------------------------------------------
State (59) (106) 40
- --------------------------------------------------------------
(481) (906) 92
- --------------------------------------------------------------
$ 10,680 $ 4,946 $ 3,939
- --------------------------------------------------------------
</TABLE>
Following is a reconciliation of the Federal statutory income tax rate to the
effective tax rates reflected in the consolidated statements of operations for
fiscal 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory
income tax rate 34.0% 34.0% 34.0%
- --------------------------------------------------------------
Increase (decrease)
resulting from:
- --------------------------------------------------------------
State income
taxes, net of
Federal income
tax benefit 4.2 4.1 4.4
- --------------------------------------------------------------
Other, net 1.2 1.9 (0.1)
- --------------------------------------------------------------
EFFECTIVE INCOME
- --------------------------------------------------------------
TAX RATE 39.4% 40.0% 38.3%
- --------------------------------------------------------------
</TABLE>
The components of the net deferred income tax asset as of September 30, 1997
and 1996, consist of (in thousands):
<TABLE>
<CAPTION>
1997 1996
- -----------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
- -----------------------------------------------------------------------
Inventories $ 1,423 $ 713
- -----------------------------------------------------------------------
Accrued benefits 753 582
- -----------------------------------------------------------------------
Capital loss carryforwards 160 207
- -----------------------------------------------------------------------
Other 395 458
- -----------------------------------------------------------------------
2,731 1,960
- -----------------------------------------------------------------------
Less valuation allowance (160) (207)
- -----------------------------------------------------------------------
2,571 1,753
- -----------------------------------------------------------------------
Deferred tax liabilities:
- -----------------------------------------------------------------------
Property, plant and equipment 998 661
- -----------------------------------------------------------------------
NET DEFERRED INCOME TAX ASSET $ 1,573 $ 1,092
- -----------------------------------------------------------------------
</TABLE>
The Company records a valuation allowance to reflect the estimated amount of
deferred income tax assets which relate to the realization of capital losses.
Cash paid for income taxes in fiscal 1997, 1996 and 1995 was $11.1 million,
$5.0 million and 4.6 million, respectively.
6. STOCKHOLDERS' EQUITY
On February 4, 1997, the Company gave notice to the holders of its Series A
Preferred stock ("Preferred Shares") that the shares would be redeemed unless
the 7,000 Preferred Shares were converted into shares of the Company's common
stock. On February 28, 1997, the holders of the Preferred Shares converted all
such shares, in accordance with their terms, into a total of 554,454
(pre-split) shares of the Company's common stock. The Preferred Shares, with a
face value of $1,000 per share were issued in 1994. Dividends were earned on
the face value of the Preferred Shares at the prime rate less 1%. Dividends
were cumulative and payable semiannually in arrears when and as declared by the
Company's Board of Directors.
On July 17, 1997, the Company declared a two-for-one stock split payable in the
form of a stock dividend of one share of common stock for every share of common
stock outstanding. The new stock was issued on August 25, 1997, to holders of
record as of August 14, 1997. Share and per share amounts, where required, have
been restated to reflect this stock split.
7. LEASE COMMITMENTS
The Company has a number of operating lease agreements primarily involving
manufacturing equipment, computerized design equipment and manufacturing
facilities. These leases are noncancelable and expire on various dates through
2014. Rent expense under all operating leases for fiscal 1997, 1996 and 1995
was approximately $10.2 million, $13.5 million and $12.5 million, respectively.
Renewal and purchase options are available on certain of these leases. The
subsequent sale of equipment obtained through the exercise of the purchase
option on certain leases resulted in miscellaneous income of $620,000 in fiscal
1997.
In April 1997, the Company began leasing a new 110,000-square-foot manufacturing
facility located in Green Bay, Wisconsin. The facility was constructed and
equipped by Oneida Nation Electronics (ONE), a corporation chartered by the
Oneida Tribe of Indians of Wisconsin. All lease payments for the building and
equipment are based on the profitability of the facility pursuant to a formula
defined in the lease agreement. There are no required minimum lease payments.
Future minimum annual payments on operating leases are as follows (in
thousands):
1998 $ 7,311
- ---------------------------------------
1999 5,380
- ---------------------------------------
2000 4,153
- ---------------------------------------
2001 2,056
- ---------------------------------------
2002 1,926
- ---------------------------------------
Thereafter 15,827
- ---------------------------------------
$ 36,653
--------------------------------------
F-9
<PAGE> 27
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. BENEFIT PLANS
401(K) Savings Plan: The Company's 401(k) savings plan covers all employees
with 90 days or more of service. The Company matches employee contributions,
for those employees who have one or more years of service, up to 2.5% of
eligible earnings. The Company's contributions for the fiscal 1997, 1996 and
1995 totaled $966,000, $828,000 and $644,000, respectively.
Stock Option Plans: The company has reserved 3.8 million shares of common
stock for grant to officers and key employees under employee stock options
plans. The exercise price of each option granted shall not be less than the
fair market values on the date of grant and options vest over a three-year
period from date of grant. The plans also authorize the Company to grant
1,500,000 stock appreciation rights, none of which have been granted.
Additionally, under a separate plan, each independent outside director is
granted 1,500 stock options each December 1 with options pricing similar to the
employee plans, that are fully vested upon grant and can be exercised after a
minimum six-month holding period. The 200,000 shares of common stock
authorized under this plan may come from any combination of authorized but
unissued shares, treasury stock or the open market. A summary of the stock
option activity follows (shares in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at beginning of year 2,029 $ 6.16 1,501 $ 5.90 1,122 $ 5.42
- ------------------------------------------------------------------------------------------------------------------------------------
Granted 668 $ 12.12 563 $ 6.80 490 $ 6.92
- ------------------------------------------------------------------------------------------------------------------------------------
Canceled (32) $ 6.68 (16) $ 6.40 (50) $ 5.63
- ------------------------------------------------------------------------------------------------------------------------------------
Exercised ($1.27 - $8.31 per share) (632) $ 5.57 (19) $ 4.69 (61) $ 5.37
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONS OUTSTANDING AT END OF YEAR 2,033 $ 8.29 2,029 $ 6.16 1,501 $ 5.90
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONS EXERCISABLE AT END OF YEAR 883 $ 6.23 1,061 $ 5.72 700 $ 5.44
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES AVAILABLE FOR FUTURE
- ------------------------------------------------------------------------------------------------------------------------------------
OPTIONS AT END OF YEAR 576 1,212 1,759
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes outstanding stock option information at
September 30, 1997 (shares in thousands):
<TABLE>
<CAPTION>
RANGE OF NUMBER WEIGHTED AVERAGE WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING EXERCISE PRICE REMAINING LIFE EXERCISABLE EXERCISE PRICE
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
$ $ 1.27 5 $ 1.27 0.6 Years 5 $ 1.27
- ------------------------------------------------------------------------------------------------------------------------------------
$ 2.42- $ 2.46 88 $ 2.45 3.7 Years 88 $ 2.45
- ------------------------------------------------------------------------------------------------------------------------------------
$ 5.21- $ 7.03 1,159 $ 6.49 7.8 Years 649 $ 6.24
- ------------------------------------------------------------------------------------------------------------------------------------
$ 8.31- $ 12.31 781 $ 11.66 8.7 Years 141 $ 8.70
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1.27- $ 12.31 2,033 $ 8.29 7.9 Years 883 $ 6.23
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company has elected to continue to account for its stock option plans
under the guidelines of Accounting Principles Board Opinion No. 25.
Accordingly, no compensation cost related to the stock option has been
recognized in the statement of operations. Had the Company recognized
compensation expense based on the fair value at the grant date for awards under
the plans, consistent with the method prescribed by SFAS No. 123 "Accounting
for Stock-Based Compensation," the Company's net income for fiscal 1997 and
1996 would have been reduced by approximately $5.1 million and $0.7 million,
respectively. Primary earnings per share would have been reduced by $0.36 and
$0.05, respectively. these pro forma results will not be representative of the
impact in future years because only grants made since October 1, 1995 were
considered. The fair value of each option grant is estimated at the date of
grant using the Black-Scholes prorated straight line option-pricing method with
the following assumptions: 45% volatility, 0% annual dividend yield, and
risk-free interest rates ranging from 5.3% to 6.6% based on expected terms and
grant dates.
F-10
<PAGE> 28
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred Compensation Plan: In September 1996, the Company entered into
agreements with certain of its officers under a nonqualified deferred
compensation plan. Under the plan the Company has agreed to pay certain
amounts annually for the first 15 years subsequent to retirement or to a
designated beneficiary upon death. It is management's intent that life
insurance contracts owned by the Company will fund this plan. Expense for this
plan totaled $315,000 and $29,000 in fiscal 1997 and 1996, respectively.
Other: The Company is not obligated to provide any post-retirement medical or
life insurance benefits to employees.
9. BUSINESS SEGMENT AND MAJOR CUSTOMERS
The Company its subsidiaries operate in one business segment, the production
and sale of electronic products including the designing, manufacturing,
programming and testing of computerized electronic assemblies. The following
table summarizes the percentage of net sales to customers that account for more
than 10% of net sales in fiscal 1997, 1996 and 1995:
1997 1996 1995
- --------------------------------------------------------------------------------
IBM 12% 26% 26%
- --------------------------------------------------------------------------------
General Electric 13% 13% 17%
- --------------------------------------------------------------------------------
Motorola 10% * *
- --------------------------------------------------------------------------------
(*represents sales less than 10%)
Accounts receivable related to these customers represented 28% of the Company's
trade accounts receivable as of September 30, 1997.
The Company is required to adopt SFAS NO. 131, "Disclosure about Segments of an
Enterprise and Related Information" in fiscal 1999. SFAS No. 131 establishes
standards for the way public business enterprises are to report information
about operating segments in annual financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic area and major customers. The Company is evaluating the
effect of this pronouncement on its consolidated financial statements.
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for fiscal 1997 and 1996 consists of (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1997 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 87,366 $ 96,750 $ 99,092 $ 103,223 $ 386,431
- ------------------------------------------------------------------------------------------------------------------------------------
Gross profit 8,653 10,420 11,943 13,000 44,016
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 2,864 3,597 4,419 5,520 16,400
- ------------------------------------------------------------------------------------------------------------------------------------
Income per common share*
- ------------------------------------------------------------------------------------------------------------------------------------
Primary $ 0.20 $ 0.24 $ 0.29 $ 0.34 $ 1.08
- ------------------------------------------------------------------------------------------------------------------------------------
Fully diluted 0.20 0.23 0.28 0.34 1.04
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1996 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 71,308 $ 75,286 $ 86,066 $ 83,464 $ 316,124
- ------------------------------------------------------------------------------------------------------------------------------------
Gross profit 4,673 5,176 7,923 9,561 27,333
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 805 839 2,604 3,183 7,431
- ------------------------------------------------------------------------------------------------------------------------------------
Income per common share*
- ------------------------------------------------------------------------------------------------------------------------------------
Primary $ 0.06 $ 0.06 $ 0.18 $ 0.23 $ 0.52
- ------------------------------------------------------------------------------------------------------------------------------------
Fully diluted 0.06 0.06 0.18 0.22 0.52
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) Income per common share is computed independently for each quarter. The
annual per share amount may not equal the sum of the quarterly amounts do to
rounding.
F-11
<PAGE> 29
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Plexus Corp.
Our report on the consolidated financial statements of Plexus Corp. is included
on page F-2 of the Form 10-K. In connection with our audits of such financial
statements, we have also audited the related consolidated financial statement
schedule listed in the index on page F-1 of this Form 10-K.
In our opinion, the consolidated financial statement schedule referred to above,
when considered in relation to the basic consolidated financial statements taken
as a whole, present fairly, in all material respects, the information required
to be included therein.
/s/ Coopers & Lybrand LLP
- -------------------------
Milwaukee, Wisconsin
October 30, 1997
F-12
<PAGE> 30
PLEXUS CORP. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended September 30, 1997, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and Deductions At End of
Descriptions of Period Expenses (A) Period
- ------------------------------ ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
1997:
Allowance for losses on
accounts receivable
(deducted from the
asset to which it
relates) $ 275 $ 96 $ 11 $ 360
Allowance for inventory
obsolescence (deducted from
the asset to which it relates) 1,466 2,157 589 3,034
------- ------- ------- -------
$ 1,741 $ 2,253 $ 600 $ 3,394
======= ======= ======= =======
1996:
Allowance for losses on
accounts receivable (deducted
from the asset to which
it relates) $ 145 $ 188 $ 58 $ 275
Allowance for inventory
obsolescence (deducted from
the asset to which it relates) 307 1,957 798 1,466
------- ------- ------- -------
$ 452 $ 2,145 $ 856 $ 1,741
======= ======= ======= =======
1995:
Allowance for losses on
accounts receivable (deducted
from the asset to which it
relates) $ 130 $ 189 $ 174 $ 145
Allowance for inventory
obsolescence (deducted from
the asset to which it relates) 735 152 580 307
------- ------- ------- -------
$ 865 $ 341 $ 754 $ 452
======= ======= ======= =======
</TABLE>
F-13
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
December 23, 1997
PLEXUS CORP.
(Registrant)
By /s/ Peter Strandwitz
--------------------------
(Registrant) Peter Strandwitz, Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Peter Strandwitz, John L. Nussbaum and Joseph D.
Kaufman, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments to
this report, and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
and any other regulatory authority, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirement of the Security Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.*
SIGNATURE AND TITLE
/s/ Peter Strandwitz /s/ Rudolph T. Hoppe
- ----------------------------------- ----------------------------------------
Peter Strandwitz, Rudolph T. Hoppe, Director
Chairman and Chief Executive
Officer, and Director
/s/ John L. Nussbaum /s/ Harold R. Miller
- ----------------------------------- ----------------------------------------
John L. Nussbaum, President Harold R. Miller, Director
and Chief Operating
Officer, and Director
/s/ Thomas B. Sabol /s/ Gerald A. Pitner
- ----------------------------------- ----------------------------------------
Thomas B. Sabol, Gerald A. Pitner, Director
Vice President-Finance and
Chief Financial Officer
/s/ William F. Denney /s/ Thomas J. Prosser
- ----------------------------------- ----------------------------------------
William F. Denney, Vice President Thomas J. Prosser, Director
and Treasurer
(Principal Accounting Officer)
________________
* Each of the above signatures is affixed as of December 23, 1997.
<PAGE> 32
EXHIBIT INDEX
PLEXUS CORP.
10-K FOR YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
INCORPORATED BY FILED
EXHIBIT NO. EXHIBIT REFERENCE TO HEREWITH
- ----------- ------- ------------ --------
<S> <C> <C> <C>
3(i) Restated Articles of Exhibit 3(i) to Plexus'
Plexus Corp., as amended Quarterly Report on
through June 29, 1994 Form 10-Q for the
quarter ended June 30,
1994 ("6/30/94 10-Q")
3(ii) Bylaws of Plexus Corp., Exhibit 3(ii) to
as amended through Plexus' Report on Form
November 14, 1996 10-K for the year ended
September 30, 1996
("1996 10-K")
4.1 Restated Articles of Exhibit 3(i) to 6/30/94 10-Q
Incorporation of Plexus
Corp.
10.1 Supplemental Executive
Retirement Agreements
dated as of September
19, 1996**
(a) Peter Strandwitz Exhibit 10.1(a) to 1996 10-K
(b) John Nussbaum Exhibit 10.1(b) to 1996 10-k
(c) Gerald Pitner x
10.2 Employment Agreements
dated 11/15/88** with
(a) William F. Denney Exhibit 10.10(b) to 1988 10-K
(b) Joseph D. Kaufman Exhibit 10.10(c) to 1988 10-K
10.3 Employee Savings Plan
and Trust**:
(a) Plan Document Exhibit 10.3(a) to 1996 10-K
(b) Non-Standardized Form Exhibit 10.3(b) to 1996 10-K
Adoption Agreement
10.4 1988 Stock Option Plan, Exhibit 12.12 to
as amended** Plexus' Annual Report
on Form 10-K for the
year ended September
30, 1992 ("1992 10-K")
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
INCORPORATED BY FILED
EXHIBIT NO. EXHIBIT REFERENCE TO HEREWITH
- ----------- ------- ------------ --------
<S> <C> <C> <C>
10.5(a) Credit Agreement dated X
as of March 20, 1997
among Firstar Bank
Milwaukee, National
Association, Harris
Trust and Savings Bank,
and Bank One, Wisconsin
(the "Credit
Agreement")*
(b) Corporate Guarantee
Agreements related
thereto dated as of
March 20, 1997 by:
(i) EAC X
(ii) Technology Group, Inc. X
10.6(a) Lease Agreement between
Neenah (WI) QRS 11-31,
Inc. ("QRS: 11-31") and
EAC, dated August 11,
1994* Exhibit 10.8(a) to 1994 10-K
(b) Bill of Sale of EAC to Exhibit 10.8(b) to 1994 10-K
QRS: 11-31 dated August
31, 1994, together with
related Seller's/Lessee's
Certificate of EAC
(c) Guaranty and Suretyship Exhibit 10.8(c) to 1994 10-K
Agreement between Plexus
Corp. and QRS: 11-31
dated August 11, 1994,
together with related
Guarantor's Certificate
of Plexus Corp.
10.7 Plexus Corp. 1995 Exhibit 10.9 to 1994 10-K
Executive Stock Option
Plan**
10.8 Plexus Corp. 1995 Exhibit 10.10 to 1994 10-K
Directors' Stock Option
Plan**
10.9 Plexus Corp. 1995 Senior Exhibit 10.11 to 1994 10-K
Executive Incentive
Compensation Plan**
10.10 Plexus Corp. 1998 X
Management Incentive
Compensation Plan**
10.11 Plexus Corp. 1998 Option Exhibit A to the
Plan** Registrant's
definitive proxy
statement for its
1998 Annual Meeting
of Shareholders
10.12 Lease Agreement dated Exhibit 10.16 to 3/31/96 10-Q
February 12, 1996
between Plexus and
Oneida Nation
Electronics
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
INCORPORATED BY FILED
EXHIBIT NO. EXHIBIT REFERENCE TO HEREWITH
- ----------- ------- ------------ --------
<S> <C> <C> <C>
11 Statement regarding
computation of Per
Share Earnings X
21 List of Subsidiaries X
23 Consent of Coopers X
& Lybrand L.L.P.
24 Power of Attorney (Signature
Page
Hereto)
27 Financial Data Schedule X
</TABLE>
______________________
* Excludes certain schedules and/or exhibits, which will be furnished to the
Commission upon request.
** Designates management compensatory plans or agreements.
<PAGE> 1
Exhibit 10.1(c)
Plexus 1997 10-K
SUPPLEMENTAL EXECUTIVE
RETIREMENT AGREEMENT
THIS AGREEMENT is made as of this 19th day of September, 1996 between
PLEXUS CORP., a Wisconsin corporation (the "Company"), and GERALD PITNER (the
"Employee").
WHEREAS, the Employee is a key executive officer of the Company and the
Company wishes to continue to receive the benefit of the Employee's knowledge
and experience and is willing to offer the Employee certain deferred
compensation arrangements as set forth herein as an inducement for continued
service.
NOW, THEREFORE, in consideration of the premises, the parties hereto agree
as follows:
SECTION 1
DEFINITIONS
1.1 "Account" means the bookkeeping reserve account for the Employee which
shall be established by the Company solely as a device for determining the
amounts which may become payable to or on behalf of the Employee hereunder.
The Company shall keep a record in the Account of the current fair values of
all contributions and any Policy or other property or funds held therein from
time to time. Such Account shall not constitute or be treated as a trust fund
of any kind, it being expressly provided that the amounts credited to such
Account shall at all time be and remain the sole property of the Company. The
Employee shall have no proprietary rights of any nature whatsoever with respect
thereto but shall simply be an unsecured creditor of the Company, unless and
until such time as a payment under this Agreement is made to or on behalf of
the Employee.
1.2 "Annual Contribution" means the sum of $58,917.62.
1.3 "Beneficiary" means any one or more primary or secondary beneficiaries
designated in writing by the Employee on a form provided by the Company to
receive any benefits which may become payable under this Agreement on or after
the Employee's death. The Employee shall have the right to name, change or
revoke his designation of Beneficiary on a form provided by the Company. The
designation on file with the Company at the time of the Employee's death shall
be controlling. Should the Employee
<PAGE> 2
fail to make a valid Beneficiary designation or leave no named Beneficiary
surviving, any benefits due shall be paid to the Employee's spouse, if living;
or if not living, then to the Employee's estate.
1.4 "Board" means the Board of Directors of the Company.
1.5 "Cause" in connection with any termination of the Employee's
employment by the Company means (i) the willful and continued failure of the
Employee to substantially perform the duties of his position with the Company
(other than as a result of physical or mental illness or injury), after the
Board has given written notice to the Employee demanding substantial
performance, which notice specifically identifies the manner in which the Board
believes the Employee has not substantially performed such duties, (ii)
commission or conviction of any felony, misdemeanor or other offense, the
circumstance of which substantially relate to the circumstances of the
Employee's job, or (iii) the willful engaging by the Employee in illegal or
gross misconduct resulting in a demonstrably material injury to the Company.
No act or failure to act on the Employee's part shall be considered to be
"willful" unless it is done, or permitted to be done, by the Employee in bad
faith or without reasonable belief that the Employee's action or omission was
in the best interests of the Company.
1.6 "Change of Control" with respect to the Company means the occurrence
of any one of the following events, as a result of one transaction or a series
of transaction:
(a) any "person (as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934, but excluding the
Company, its affiliates as of the date of this Agreement, and any
qualified or non-qualified plan maintained by the Company or its
affiliates), becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated under such Act) of securities of the Company representing
more than 25% of the combined voting power of the Company's then
outstanding voting securities;
(b) individuals who constitute a majority of the Board
immediately prior to a contested election for positions in the Board
cease to constitute a majority as a result of such contested
election;
-2-
<PAGE> 3
(c) the Company is combined with or acquired by (by merger,
share exchange, consolidation, tender offer or otherwise) another
corporation or business entity and a result thereof, less than 67% of
the outstanding securities of or voting power in the surviving or
resulting corporation or other business entity is owned in the
aggregate by the former shareholders of the Company;
(d) the Company sells, leases, or otherwise transfers all or
substantially all of its properties or assets not in the ordinary
course of business to another person or entity;
(e) the Board determines in its sole and absolute discretion
either that there has been a change in control of the Company or that
such change in control is imminent; or
(f) the outstanding voting securities of the Company are no longer
listed on either the NASDAQ National Market System, the New York
Stock Exchange or the American Stock Exchange or the Company is
no longer registered under Section 12 of the Securities Exchange Act
of 1934, as amended.
1.7 "Disability" means the absence of the Employee from the Employee's
duties with the Company on a full-time basis for 180 consecutive business days
as a result of incapacity due to mental or physical illness or accident which
is determined to be of continued and indefinite duration and to render the
Employee unable to continue in the regular duties of his job. When used in the
context of the Employee's duties under a consulting agreement entered into
after employment has ceased, the term means such incapacity due to mental
illness or accident which is determined to be of continued and indefinite
duration and to render the former Employee unable to perform his duties under
the consulting agreement. If necessary, such determination shall be made by a
physician selected by the Employee or his legal representatives and acceptable
to the Company, with the Company's agreement as to acceptability not to be
withheld unreasonably.
1.8 "Good Reason" in connection with any termination of the Employee's
employment with the Company means any termination because of Disability, any
termination at or after attainment of age 55 and completion of 10 years of
service with the Company, or
-3-
<PAGE> 4
any termination at any time on or after the occurrence of a Change of Control.
The term also means in connection with any termination by the Employee of his
employment with the Company (i) the Employee's duties and responsibilities are
materially and adversely diminished in comparison to the duties and
responsibilities enjoyed by him on the date this Agreement is signed, (ii) any
reduction of the Employee's base salary below the level in effect on the date
this Agreement is signed, without the consent of the Employee, (iii) any
request by the Company that the Employee's services be rendered primarily at a
location or locations outside Winnebago County, Wisconsin, or (iv) any material
breach of this Agreement shall occur that either is not taken by the Company in
good faith or is not remedied by the Company promptly after receipt of written
notice thereof from the Employee. The Employee may terminate his employment
with the Company for Good Reason by giving the Company written notice of
termination setting forth the specific conduct of the Company that constitutes
Good Reason. Any termination of employment covered by this paragraph shall be
referred to as a "Good Reason Termination."
1.9 "Hypothetical Cash Values" means the term as it is defined in
paragraph 3.1 hereof.
1.10 "Policy" means any policy or policies of life insurance which the
Company may purchase on the life of the Employee or a substitute insured and
hold in the Account. As of the date of this Agreement, the Employee
acknowledges that investment of the Annual Contribution in a Policy on his life
may be less effective than in a Policy on the life of a substitute insured in
whom the Company has an insurable interest under applicable law and
acknowledges that the Company intends to so invest the Annual Contribution in a
Policy on the life of a substitute insured. While any such Policy may be used
as a device for measuring the amounts which may become payable to or on behalf
of the Employee under this Agreement, the Company (or the trustee of any
grantor Trust established by the Company) shall be the applicant, owner and
sole beneficiary of the Policy, with all rights and all incidents of ownership.
The Employee shall have no proprietary rights of any nature whatsoever with
respect to the Policy.
1.11 "Trust" means such grantor trust (a "rabbi trust") as the Company
shall establish to serve as a vehicle to hold any Policy or contributions held
in the Account as the Company may choose to make in connection with this
Agreement, but the Trust shall be designed so that all assets therein are
subject to the
-4-
<PAGE> 5
claims of the Company or any of its affiliates which have used such rabbi
trust in the event of insolvency, consistent with the provision of Revenue
Procedure 92-64 issued by the Internal Revenue Service. Notwithstanding the
existence of such a rabbi trust, this Agreement shall remain an unfunded
agreement, with the Employee's rights to benefits hereunder being those of an
unsecured creditor.
SECTION 2
CONTRIBUTIONS TO ACCOUNT
2.1 Contributions. The Company will credit annually to the Employee's
Account an amount equal to the Annual Contribution, starting on the date hereof
and continuing on the anniversary thereof thereafter for the next ten years,
provided that the Employee is continuing in employ of the Company on each such
anniversary date or has entered into a consulting agreement with the Company in
the form attached hereto as Exhibit A and made a part hereof and continues in
the absence of Disability to comply with the terms thereof.
2.2 Credits to Account. Any amounts credited to the Employee's Account
shall be invested in a Policy which shall be held in the Trust.
2.3 Special Contribution in the Event of a Change of Control. Upon the
occurrence of a Change of Control, the Company shall, as soon as possible, but
in no event later than thirty (30) days following the Change of Control, make a
contribution to the Trust and credit the Account in a lump sum amount equal to
the present value of all Annual Contributions that would have been made under
the provisions of paragraph 2.1 above, discounted at 5%, and the Company shall
have no further contribution obligations thereafter.
SECTION 3
PAYMENT OF SUPPLEMENTAL RETIREMENT BENEFITS
3.1 Retirement or Termination Other Than For Cause At or After 65. Upon
the Employee's retirement or termination other than for Cause at or after
attainment of age 65, the Company shall pay the Employee fifteen (15) annual
installments, with the
-5-
<PAGE> 6
first installment to be made within sixty (60) days of the date of such
retirement or termination, in an annual amount equal to the sum of the
following:
(a) an amount equal to one-fifteenth (1/15) of the cash values
in each Policy as of the date the Employee retires or terminates,
plus
(b) an amount equal to the increase, if any, in the cash values
in each Policy, over those in the immediately prior Policy year.
For purposes of calculation of the amount of such annual payments, should the
substitute insured referred to in paragraph 1.10 above die during the
Employee's lifetime and before all fifteen annual payments have been made or
before all Annual Contributions required under paragraph 2.1 been completed,
the Company shall obtain information from the insurer which has issued any
Policy on the life of the substitute insured and held in the Employee's Account
as to what the cash values in such Policy would have been (the "Hypothetical
Cash Values") had the substitute insured continued to live during the
Employee's lifetime and had all required Annual Contributions been invested in
such Policy. However, no Annual Contribution shall be deemed to be made for
this purpose unless it is in fact a required Annual Contribution under the
terms of paragraph 2.1. Under the circumstances described, the Hypothetical
Cash Values shall be used for purposes of calculating the amount of annual
payments required under this paragraph 3.1.
3.2 Death Before Employee has Begun Receiving Payments. Should the
Employee die while in the employ of the Company before he has begun to receive
the payments provided in under paragraph 3.1 above, the Company shall make a
lump sum payment to the Employee's Beneficiary in an amount equal to the
greater of (i) the actual cash values under each Policy held in his Account, or
(ii) the Hypothetical Cash Values of each such Policy if the substitute insured
has predeceased the Employee.
3.3 Death After the Employee has Begun Receiving Payments. Should the
Employee die after he has begun to receive the payments provided in under
paragraph 3.1 above, but before all fifteen annual payments have been made, the
Company shall continue to make such payments to his Beneficiary until an
aggregate total of fifteen annual payments have been made.
-6-
<PAGE> 7
3.4 Termination of Employment by the Company Other Than for Cause or Good
Reason Termination. Should the Company terminate the Employee's employment,
other than for Cause or death, or if a Good Reason Termination occurs, and
provided that the Employee continues in the absence of Disability to comply
with the terms of the consulting agreement attached hereto as Exhibit A and
made a part hereof, the Company shall continue to credit the Employee's
Account annually with an amount equal to the Annual Contribution for the number
of years specified in paragraph 2.1 above, just as if the Employee had remained
employed pursuant to this Agreement until the end of such period, or until the
Employee's death, if earlier. Thereafter, if the Employee survives to age 65,
the payments called for by paragraph 3.1 shall be made, just as if the Employee
had continued in the employ of the Company and had retired upon reaching age
65. Paragraph 3.3 shall apply should the Employee die after he has begun to
receive such payments, but before all of the same have been made. If the
Employee does not survive to age 65 but dies before he has begun to receive the
payments provided for in paragraph 3.1, paragraph 3.2 shall apply. If the
Employee fails in the absence of Disability to comply with the terms of the
consulting agreement attached as Exhibit A, the provisions of Paragraph 3.5
below shall apply, as if the Employee had voluntarily terminated other than for
Good Reason prior to the commencement of payments under this Agreement.
3.5 Termination of Employment for Cause by the Company or By the Employee
Other Than for Good Reason. Notwithstanding any other provision of this
Agreement, should the Company terminate the Employee's employment for Cause at
any time prior to the occurrence of a Change of Control and prior to the
commencement of payments under this Agreement, the Company shall have no
obligation to make any payments whatsoever under this Agreement to or on behalf
of the Employee. Should the Employee voluntarily terminate other than for Good
Reason prior to the commencement of payments under this Agreement, the Employee
shall become entitled to receive fifteen (15) annual installment payments from
the Company, with the first installment to be made within sixty (60) days of
the date such termination, in annual amounts calculated in the same manner as
provided in paragraph 3.1 above. Paragraph 3.3 shall apply should the Employee
die after he has begun to receive any installments payments, but before all of
the same have been made.
3.6 Payment of Account Under Certain Circumstances. If at any time on or
after the occurrence of a Change of Control,
-7-
<PAGE> 8
either the Company's Consolidated Tangible Net Worth declines below thirty-five
million dollars ($35,000,000.00) or the ratio of the Company's Consolidated
Total Debt to the Company's Consolidated Tangible Net Worth becomes greater
than 2.5 to 1, then the Employee (or former Employee if he is no longer in the
Company's employ but is either receiving or entitled to receive payment
hereunder at some future date) shall become entitled to receive an immediate
payment from the Company of an amount equal to the greater of (i) the actual
cash values under each Policy held in his Account, or (ii) the Hypothetical
Cash Values of each such Policy if the substitute insured has predeceased the
Employee. For purposes of this paragraph, the Company's "Consolidated Tangible
Net Worth" means the excess, if any, of all consolidated assets of the Company
and all subsidiaries (excluding goodwill patents, trademarks, tradenames,
copyrights and other assets properly classified as intangible assets) over all
consolidated liabilities of the Company and all subsidiaries determined in
accordance with generally accepted accounting principles; and the Company's
"Consolidated Total Debt" means the total of all consolidated liabilities of
the Company and all subsidiaries which would appear as liabilities on a
consolidated balance sheet of the Company and all subsidiaries in accordance
with generally accepted accounting principles.
3.7 Payment of Account on Company Breach. Should the Company fail to make
any payments when due hereunder to the Employee or his Beneficiary or otherwise
materially breach any provision of this Agreement and such failure or breach
continue for a period of ten (10) days after written notice and demand for
payment or cure by the Employee (or Beneficiary, as the case may be) is
received by the Company, then the Employee (or Beneficiary) shall become
entitled, without prejudice to any other right or remedy the Employee (or
Beneficiary) may have for breach of this Agreement, to receive an immediate
payment from the Company of an amount equal to the greater of (i) the actual
cash values under each Policy held in his Account, or (ii) the Hypothetical
Cash Values of each such Policy if the substitute insured has predeceased the
Employee.
SECTION 4
CLAIMS PROCEDURE
4.1 Claim Review. If the Employee or his Beneficiary (a "Claimant") is
denied all or a portion of a benefit under this Agreement, he or she may file a
written claim for benefits with the Company. The Company shall review the
claim and notify the
-8-
<PAGE> 9
Claimant of the Company's decision within sixty (60) days of receipt of such
claim, unless the Claimant receives written notice prior to the end of the
sixty (60) day period stating that special circumstances require an extension
of the time for decision. The Company's decision shall be in writing, sent by
mail to the Claimant's last known address, and if a denial of the claim, must
contain the specific reasons for the denial, reference to pertinent provisions
of this Agreement on which the denial is based, a designation of any additional
material necessary to perfect the claim, and an explanation of the claim review
procedure.
4.2 Appeal Procedure to the Board. A Claimant is entitled to request a
review of any denial by the full Board by written request to the Chair of the
Board within 60 days of receipt of the denial. Absent a request for review
within the 60-day period, the claim will be deemed to be conclusively denied.
The Board shall afford the Claimant the opportunity to review all pertinent
documents and submit issues and comments in writing and shall render a review
decision in writing, all within sixty (60) days after receipt of a request for
review (provided that, in special circumstances the Board may extend the time
for decision by not more than sixty (60) days upon written notice to the
Claimant.) The Board's review decision shall contain specific reasons for the
decision and reference to the pertinent provisions of this Agreement.
4.3 Attorney's Fees. The Company agrees to pay, as incurred, to the
fullest extent permitted by law, all legal fees and expenses that the Employee
may reasonably incur as a result of any contest (regardless of the outcome) by
the Company, the Employee or others of the validity or enforceability of, or
liability under, or otherwise involving any provision of this Agreement.
-9-
<PAGE> 10
SECTION 5
MISCELLANEOUS
5.1 Non-Assignability. This Agreement is personal to the Employee and,
without the prior written consent of the Company, shall not be assignable by
the Employee otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns and shall also be enforceable by the Employee's
legal representatives.
5.2 Successors. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
both the Company as defined above and any such successor that assumes and
agrees to perform this Agreement, by operation of law or otherwise.
5.3 Taxes. No later than the date as of which an amount first becomes
includible in the income of the Employee for purposes of employment or income
taxes, the Employee agrees to pay to the Company, or make satisfactory
arrangements with the Company regarding the payment of any federal, state or
other taxes of any kind required to be withheld with respect to such amount.
5.4 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Wisconsin, without reference to
principles of conflict of laws, to the extent preempted by federal law. The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect. This Agreement may not be amended or modified except by a
written agreement executed by the parties hereto or their respective successors
and legal representatives.
5.5 Notices. All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
-10-
<PAGE> 11
If to the Employee: Gerald Pitner
E902 South Tammy Trail
Waupaca, WI 54981
If to the Company: Plexus Corp.
Attn: Corporate Secretary
55 Jewelers Park Drive
Neenah, WI 54957-0156
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph. Notices and communications shall be effective
when actually received by the addressee.
5.6 Construction. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with law. Nothing contained in this Agreement shall give the
Employee the right to be retained in the employment of the Company or affect
the right of the Company to dismiss the Employee.
5.7 CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
paragraph 5.7) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or
any interest or penalties are incurred by the Employee with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Employee
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Employee of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest
-11-
<PAGE> 12
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of paragraph 5.7 (c), all determinations
required to be made under this paragraph 5.7, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
such certified public accounting firm as may be designated by the Employee (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Employee within 15 business days of the receipt of notice
from the Employee that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant
to this paragraph 5.7, shall be paid by the Company to the Employee within five
days of the receipt of the Accounting Firm's determination. If the Accounting
Firm determines that no Excise Tax is payable by the Employee, it shall furnish
the Employee with a written opinion that failure to report the Excise Tax on
the Employee's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Employee. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to paragraph 5.7 (c) and the Employee thereafter is required
to make payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Employee is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be
-12-
<PAGE> 13
paid. The Employee shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such a claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it desires to contest such
claim, the Employee shall:
(i) Give the Company any information reasonably requested by the Company
relating to such claim,
(ii) Take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company,
(iii) Cooperate with the Company in good faith in order to effectively
contest such claim, and
(iv) Permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph 5.7 (c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Employee agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company
directs the Employee to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Employee, on an interest-free basis
and shall indemnify and hold the Employee harmless, on an after-tax basis, from
any Excise Tax or income tax including interest or penalties with respect to
any imputed income with respect to such advance; and further provided that
-13-
<PAGE> 14
any extension of the statute of limitations relating to payment of taxes for
the taxable year of the Employee with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Employee shall be
entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by the
Company pursuant to paragraph 5.7 (c), the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of paragraph 5.7 (c) ) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to paragraph 5.7 (c), a
determination is made that the Employee shall not be entitled to any refund
with respect to such claim and the Company does not notify the Employee in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
5.8 Amendment; Entire Agreement. This Agreement may be amended by a
written instrument signed by both parties. This Agreement contains the entire
agreement between the parties on the subjects covered and replaces all prior
writings, proposals, specifications or other oral or written materials relating
thereto.
IN WITNESS WHEREOF, the Employee has signed this Agreement and, pursuant
to the authorization of the Board, the Company has caused this Agreement to be
signed, all as of the date first set forth above.
/s/ Gerald Pitner
GERALD PITNER
PLEXUS CORP.
By: /s/ Jos. D. Kaufman, V.P. Law and Admin.
-14-
<PAGE> 1
Exhibit 10.5(a)
1997 Plexus 10-K
PLEXUS CORP.
55 Jewelers Park Drive
Neenah, Wisconsin 54956
CREDIT AGREEMENT
March 20, 1997
Firstar Bank Milwaukee,
National Association
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
Bank One, Wisconsin
111 East Wisconsin Avenue
P.O. Box 2033
Milwaukee, Wisconsin 53201
Ladies/Gentlemen:
Plexus Corp., a Wisconsin corporation with its principal offices located in the
City of Neenah, Wisconsin, (the "Company"), hereby requests that each of you
(collectively the "Banks" and individually a "Bank") agree to lend the Company
the amount of the commitment (the "Commitment") set opposite your name below,
to wit:
<TABLE>
<CAPTION>
Name of Bank Amount Percent of Total
------------ ------ ----------------
<S> <C> <C>
Firstar Bank Milwaukee,
National Association $18,000,000 45%
Harris Trust and Savings
Bank $15,000,000 37.5%
Bank One, Wisconsin $ 7,000,000 17.5%
----------- -----
$40,000,000 100%
</TABLE>
<PAGE> 2
The failure of any one or more of the Banks to lend in accordance with its
Commitment shall not relieve the other Banks of their several obligations
hereunder, but no Bank shall be liable in respect to the obligation of any
other Bank hereunder or be obligated in any event to lend in excess of its
Commitment. Such loans shall be on the terms and conditions set forth below:
ARTICLE I
LOANS AND NOTES
1.1 Revolving Credit. From time to time prior to July 31, 2002 or the
earlier termination in full of the Commitments (in either case the "Termination
Date"), and subject to all of the terms and conditions of this Agreement, the
Company may obtain loans from each of the Banks, pro rata up to the amount of
such Bank's outstanding Commitment, repay such loans and reborrow hereunder.
Each loan from each Bank shall be in a minimum principal amount of $100,000 or
a multiple of $50,000 in excess of such amount (except as provided in Section
2.1 with respect to Adjusted LIBOR Rate Loans), and shall be evidenced by a
single promissory note of the Company (a "Revolving Credit Note" or a "Note")
in the form of Exhibit 1.1 annexed hereto, payable to the order of the lending
Bank. The Notes shall be executed by the Company and delivered to the Banks
prior to the initial loans. Although the Notes shall be expressed to be
payable in the full amounts specified above, the Company shall be obligated to
pay only the amounts actually disbursed to or for the account of the Company,
together with interest on the unpaid balance of sums so disbursed which remains
outstanding from time to time, at the rates and on the dates specified herein
or in the Notes, together with the other amounts provided herein.
1.2 Use of Proceeds. The Company represents, warrants and agrees that:
(a) The proceeds of the loans made hereunder will be used solely for
the following purposes: (i) contemporaneously with the making of the
initial loans hereunder, except as otherwise provided in Section 1.7, the
proceeds of such initial loans shall be used to the extent necessary to
pay all indebtedness outstanding under the Amended and Restated Revolving
Credit Agreement dated as of March 18, 1996 among Electronic Assembly
Corporation and the Banks, as amended (the "EAC Credit Agreement"); and
(ii) all other proceeds shall be used for working capital and other lawful
corporate purposes.
(b) No part of the proceeds of any loan made hereunder will be used to
"purchase" or "carry" any "margin stock" or to extend credit to others
for the purpose of "purchasing" or "carrying" any "margin stock" (as such
terms are defined in the Regulation U of the Board of Governors of the
Federal Reserve System), and the assets of the Company and its
Subsidiaries do not include, and neither the Company nor any Subsidiary
has any present intention of acquiring, any such security.
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1.3 Agent's Fees. The Company shall pay to the Agent, for the Agent's own
account, such fees as the Company and the Agent may agree upon in writing for
the Agent's services as such hereunder (the "Agent's Fees").
1.4 Commitment Fee. The Company shall pay to the Agent for the account of
each Bank a commitment fee computed at the rate of 1/8 of 1% per annum on the
difference existing from time to time between (a) the amount of such Bank's
Commitment (as reduced pursuant to section 1.5), and (b) the outstanding unpaid
principal balance of sums disbursed to the Company by such Bank hereunder.
Such commitment fees shall accrue for the period from the date of this
Agreement to the Termination Date, and shall be payable quarterly in arrears on
the later of (i) the twentieth day of the first month in each calendar quarter
or (ii) five days after the Company's receipt of an invoice for such fees from
the Agent.
1.5 Termination or Reduction of the Commitments. The Company shall have
the right, upon five Business Days' prior written notice to each Bank, to
ratably reduce in part the Commitments on any interest payment date, provided,
however, that each partial reduction of the Commitment of each Bank shall be in
the amount of $1,000,000 or an integral multiple thereof, and provided,
further, that no reduction shall reduce the Commitment of any Bank to an amount
less than the aggregate amount of the loans of such Bank outstanding hereunder
at the time. The entire Commitments of all of the Banks may be terminated in
whole at any time upon five Business Days' prior written notice to each Bank.
1.6 Optional Prepayment. The Notes may be prepaid in whole or in part at
the option of the Company on any interest payment date without premium or
penalty; provided, however, that prepayment of an Adjusted LIBOR Rate Loan
prior to the last day of the Interest Period applicable thereto shall be
subject to the provisions of Sections 2.11 and 2.12. All prepayments of
Adjusted LIBOR Rate Loans shall be accompanied by interest accrued on the
amount prepaid through the date of prepayment.
1.7 Special Provisions for Assumption of Certain LIBOR Rate Loans.
Notwithstanding any contrary provision of this Agreement, on the date of the
initial loans made hereunder, the Company shall assume the obligations of
Electronic Assembly Corporation with respect to all LIBOR-based loans then
outstanding under the EAC Credit Agreement for the remainder of the interest
periods then in effect for such loans, so that such loans shall not be
considered to have been prepaid under the EAC Credit Agreement. Such loans
shall continue to bear interest at the rates determined pursuant to the EAC
Credit Agreement for the remainder of the interest periods then in effect, and
such loans shall be deemed to be Adjusted LIBOR Rate Loans to the Company
hereunder in all other respects and for all purposes of this Agreement.
ARTICLE II
ADMINISTRATION OF CREDIT
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2.1 Elective Rates of Interest on Loans. The unpaid principal balance of
the Notes may be comprised of Variable Rate Loans and/or Adjusted LIBOR Rate
Loans as elected by the Company from time to time in accordance with the
procedures set forth below; provided, however, that each Adjusted LIBOR Rate
Loan must be in a minimum amount of $1,500,000 or a multiple of $50,000 in
excess of that amount; provided, further, that no election of an Adjusted LIBOR
Rate Loan shall become effective if any Default or Event of Default has
occurred and is continuing; and provided, further, that no more than ten
different Interest Periods for Adjusted LIBOR Rate Loans may be outstanding at
any one time. Each notice of election of an Adjusted LIBOR Rate Loan shall be
irrevocable.
2.2 Borrowing Procedure. The Company will request a loan hereunder by
written notice in the form of Exhibit 2.2 annexed hereto, or by telephonic
notice (which notice shall be confirmed in writing if the Agent so requests),
which notices will be irrevocable, to the Agent not later than 12:00 noon,
Milwaukee time, on the proposed Borrowing Date, or, in the case of an Adjusted
LIBOR Rate Loan, not later than 10:30 a.m. (Milwaukee time) on the date three
Business Days before the proposed Borrowing Date. In the event of any
inconsistency between the telephonic notice and the written confirmation
thereof, the telephonic notice will control. Each such request will be
effective upon receipt by the Agent and will specify (i) the amount of the
requested loan; (ii) the proposed Borrowing Date; (iii) whether such loan will
bear interest at the Variable Rate or at the Adjusted LIBOR Rate; and (iv) in
the case of an Adjusted LIBOR Rate Loan, the Interest Period therefor.
Upon its receipt of such notice from the Company, the Agent shall give
notice of such borrowing request to the other Banks not later than 1:30 p.m.
(Milwaukee time) on the Borrowing Date. Each Bank shall have its respective
portion of the loans available to the Agent in Milwaukee in immediately
available funds not later than 3:30 p.m., Milwaukee time, on the Borrowing
Date. Out of the funds received from each Bank for the making of the loans
hereunder, the Agent will make a loan to the Company in such amount on behalf
of such Bank. Notes and other required documents delivered to the Agent for
the account of each Bank shall be promptly delivered to such Bank, or in
accordance with instructions received from it, together with copies of such
other documents received in connection with the borrowing as such Bank shall
request.
Unless the Agent shall have been notified by telephone, confirmed promptly
thereafter in writing, by a Bank not later than 3:30 p.m., Milwaukee time, on a
Borrowing Date that such Bank will not make available to the Agent such Bank's
pro rata share of the requested loan, the Agent may assume that such Bank has
made such amount available to the Agent and, in reliance upon such assumption,
make available to the Company on such Borrowing Date a corresponding amount.
If and to the extent that such Bank, without giving such notice, shall not have
so made such amount available to the Agent, such Bank and the Company severally
agree to repay the Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date the Agent made such amount
available to the Company to the date such amount is repaid to the Agent, at (i)
in the case of the Company, the Variable Rate, and (ii) in the case of such
Bank, the Federal Funds Rate for each of the first three days (or fraction
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thereof) after the date of demand and the Variable Rate for each day (or
fraction thereof) thereafter.
2.3 Conversion. The Company may elect from time to time, subject to the
terms and conditions of the Notes and this Agreement, to convert all or a
portion of a Variable Rate Loan into an Adjusted LIBOR Rate Loan or to convert
all or a portion of an Adjusted LIBOR Rate Loan into a Variable Rate Loan;
provided, however, that any conversion of an Adjusted LIBOR Rate Loan will
occur on the last day of the Interest Period applicable thereto.
2.4 Automatic Conversion. A Variable Rate Loan will continue as a Variable
Rate Loan unless and until converted into an Adjusted LIBOR Rate Loan. At the
end of the applicable Interest Period for an Adjusted LIBOR Rate Loan, such
Adjusted LIBOR Rate Loan will automatically be converted into a Variable Rate
Loan unless the Company shall have given the Agent notice in accordance with
section 2.5 requesting that, at the end of such Interest Period, all or a
portion of such Adjusted LIBOR Rate Loan be continued as an Adjusted LIBOR Rate
Loan for an additional Interest Period.
2.5 Conversion and Continuation Procedure. The Company will give the
Agent written notice in the form of Exhibit 2.5 annexed hereto, or telephonic
notice (confirmed in writing if the Agent so requests), which notices will be
irrevocable, of each conversion of a Variable Rate Loan or continuation of an
Adjusted LIBOR Rate Loan not later than 10:30 a.m., Milwaukee time, on a
Business Day which is not less than three Business Days before the date of the
requested conversion or continuation, specifying (i) the requested date (which
must be a Business Day) of such conversion or continuation; (ii) the amount of
the loan to be converted or continued; (iii) whether such loan currently bears
interest at the Variable Rate or the Adjusted LIBOR Rate; and (iv) the duration
of the Interest Period to be applicable thereto.
2.6 Basis for Determining Interest Rate Inadequate or Unfair. If with
respect to an Interest Period for any Adjusted LIBOR Rate Loan:
(i) any Bank determines in good faith (which determination will be binding
and conclusive on the Company) that by reason of circumstances affecting the
London interbank market adequate and reasonable means do not exist for
ascertaining the applicable Adjusted LIBOR Rate; or
(ii) any Bank reasonably determines (which determination will be binding
and conclusive on the Company) that the Adjusted LIBOR Rate will not
adequately and fairly reflect the cost of maintaining or funding such
Adjusted LIBOR Rate Loan for such Interest Period, or that the making or
funding of Adjusted LIBOR Rate Loans has become impracticable as a result of
an event occurring after the date of this Agreement which in the opinion of
such Bank materially affects Adjusted LIBOR Rate Loans;
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then, [a] such Bank will promptly notify the Company thereof, and [b] so long
as such circumstances continue, such Bank will not be under any obligation to
make any new Adjusted LIBOR Rate Loan so affected.
2.7 Changes in Law Rendering Certain Loans Unlawful. In the event that any
Regulatory Change should make it (or, in the good faith judgment of a Bank,
should raise substantial questions as to whether it is) unlawful for such Bank
to make, maintain or fund an Adjusted LIBOR Rate Loan, (i) such Bank will
promptly notify each of the other parties hereto; (ii) the obligation of such
Bank to make Adjusted LIBOR Rate Loans shall, upon the effectiveness of such
event, be suspended for the duration of such unlawfulness; and (iii) upon such
notice, any outstanding Adjusted LIBOR Rate Loan made by such Bank will
automatically convert into a Variable Rate Loan.
2.8 Increased Costs. If any Regulatory Change,
(a) shall subject any Bank to any tax, duty or other charge with respect
to any of its loans hereunder, or shall change the basis of taxation of
payments to any Bank of the principal or interest on its loans hereunder, or
any other amounts due under this Agreement in respect of such loans, or its
obligation to make loans hereunder (except for changes in the rate of tax on
the overall net income of such Bank);
(b) shall impose, modify or make applicable any reserve (including,
without limitation, any reserve imposed by the Board of Governors of the
Federal Reserve System, but excluding any reserve included in the
determination of the Adjusted LIBOR Rate), special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Bank; or
(c) shall impose on any Bank any other condition affecting its loans
hereunder;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D or any other analogous law, rule or regulation, to impose
a cost on) such Bank of making or maintaining any loans hereunder, or to reduce
the amount of any sum received or receivable by such Bank under this Agreement
and any document or instrument related hereto; then upon 15 days' notice from
such Bank (which notice shall be sent to the Agent and the Company and shall be
accompanied by a statement setting forth in reasonable detail the basis of such
increased cost or other effect on the loans), the Company shall pay directly to
such Bank, on demand, such additional amount or amounts as will compensate such
Bank for such increased cost or such reduction.
2.9 Discretion of Banks as to Manner of Funding. Notwithstanding any
provision of this Agreement to the contrary, each Bank shall be entitled to
fund and maintain its funding of all or any part of its loans hereunder in any
manner it sees fit.
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2.10 Capital Adequacy. If any Regulatory Change affects the treatment of
any loan hereunder of a Bank as an asset or other item included for the purpose
of calculating the appropriate amount of capital to be maintained by such Bank
or any corporation controlling such Bank and has the effect of reducing the
rate of return on such Bank's or such corporation's capital as a consequence of
the obligations of such Bank hereunder to a level below that which such Bank or
such corporation could have achieved but for such Regulatory Change (taking
into account such Bank's or such corporation's policies with respect to capital
adequacy) by an amount deemed in good faith by such Bank to be material, then,
upon 15 days' notice from such Bank, the Company shall pay to such Bank, on
demand, such additional amount or amounts as will compensate such Bank or such
corporation, as the case may be, for such reduction.
2.11 Limitation on Prepayment. A Variable Rate Loan may be prepaid at the
option of the Company in whole or in part on any interest payment date without
premium or penalty. An Adjusted LIBOR Rate Loan may be prepaid at any time at
the option of the Company; provided, however, that prepayment prior to the last
day of the Interest Period applicable thereto will require the payment by
Company of the amount (if any) required by section 2.12.
2.12 Funding Losses. The Company hereby agrees that upon demand by any
Bank (which demand shall be sent to the Agent and the Company and shall be
accompanied by a statement setting forth in reasonable detail the basis for the
calculations of the amount being claimed) the Company will indemnify such Bank
against any loss or expense which such Bank may sustain or incur (including,
without limitation, any net loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Bank to
fund or maintain Adjusted LIBOR Rate Loans and any loss of anticipated return),
as reasonably determined by such Bank, as a result of (i) any payment,
prepayment or conversion of any Adjusted LIBOR Rate Loan on a date other than
the last day of an Interest Period for such loan whether not required by any
other provisions of this Agreement, or (ii) any failure of the Company to
obtain an Adjusted LIBOR Rate Loan on a Borrowing Date or to convert a Variable
Rate Loan to an Adjusted LIBOR Rate Loan or to continue an Adjusted LIBOR Rate
Loan at the end of any Interest Period, as specified by the Company in a notice
to the Agent as set forth above.
2.13 Conclusiveness of Statements; Survival of Provisions. Determinations
and statements of any Bank pursuant to sections 2.7, 2.8, 2.10 and 2.12 shall
be rebuttably presumptive evidence of the correctness of the determinations and
statements and shall be conclusive absent manifest error. The provisions of
section 2.8, 2.10 and 2.12 shall survive the obligation of the Banks to extend
credit under this Agreement and the repayment of the loans.
2.14 Computations of Interest. All computations of interest and other
amounts due under the Notes and fees and other amounts due under this Agreement
will be based on a 360-day year using the actual number of days occurring in
the period for which such interest, fees or other amounts are payable.
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2.15 Payments. Interest on all loans will be due and payable (i) in the
case of a Variable Rate Loan, monthly beginning on the last Business Day of the
month in which the Company obtains such Variable Rate Loan and on the last
Business Day of each month thereafter; (ii) in the case of an Adjusted LIBOR
Rate Loan, on the last Business Day of the applicable Interest Period; and
(iii) in the case of any loan, at the respective maturity of such loan, whether
by acceleration or otherwise. All payments and prepayments of principal,
interest and fees (other than Agent's Fees) under this Agreement and the Notes
shall be made to the Agent prior to 12:00 noon, Milwaukee time, in immediately
available funds for the ratable account of the Banks and the holders of the
Notes then outstanding, as appropriate.
2.16 Application of Payments. The Agent shall promptly distribute to each
such Bank or holder pro rata the amount of principal, interest or fees (other
than Agent's Fees) received by the Agent for the account of such holder. Any
payment to the Agent for the account of a Bank or a holder of a Note under this
Agreement shall constitute a payment by the Company to such Bank or holder of
the amount so paid to the Agent, and any Notes or portions thereof so paid
shall not be considered outstanding for any purpose after the date of such
payment to the Agent.
2.17 Pro Rata Treatment. In the event that any Bank shall receive from
the Company or any other source (other than the sale of a participation to
another commercial lender in the ordinary course of business) any payment
(other than a payment of Agent's fees) of, on account of, or for any obligation
of the Company hereunder or under the Notes (whether pursuant to the exercise
of any right of set off, banker's lien, realization upon any security held for
or appropriated to such obligation, counterclaim or otherwise) other than as
above provided, then such Bank shall immediately purchase, without recourse and
for cash, an interest in the obligations of the same nature held by the other
Banks so that each Bank shall thereafter have a percentage interest in all of
such obligations equal to the percentage interest which such Bank held in the
Notes outstanding immediately before such payment; provided, that if any
payment so received shall be recovered in whole or in part from such purchasing
Bank, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest. The Company specifically
acknowledges and consents to the preceding sentence.
2.18 Interest Following Event of Default. From and after the occurrence
and during the continuance of an Event of Default, the unpaid principal amount
of all loans and all other amounts due and unpaid under this Agreement and the
Notes will bear interest until paid computed at a rate equal to 2% per annum in
excess of the rate or rates otherwise payable hereunder.
2.19 Deposits; Set Off. The Company grants each Bank, as security for the
Notes, a lien and security interest in any and all monies, balances, accounts
and deposits (including certificates of deposit) of the Company at such Bank
now or at any time hereafter. If any Event of Default occurs hereunder or any
attachment of any balance of the Company occurs, each Bank may offset and apply
any such security toward the payment of the Note or Notes held by such Bank,
whether or not such Note or Notes, or any part thereof, shall then be due.
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Promptly upon its charging any account of the Company pursuant to this section,
such Bank shall give the Company notice thereof.
ARTICLE III
CONDITIONS OF BORROWING
Without limiting any of the other terms of this Agreement, none of the
Banks shall be required to make any loan to the Company hereunder:
3.1 Representations. Unless the representations and warranties contained
in Article IV hereof continue to be true and correct on the date of such loan;
no Default or Event of Default hereunder shall have occurred and be continuing;
and there has been no material adverse change in the business operations or
financial condition of the Company and its Subsidiaries, taken as a whole,
since September 30, 1996.
3.2 Guaranties. Unless prior to the initial loan each of Electronic
Assembly Corporation and Technology Group, Inc. (each a "Guarantor" and
collectively the "Guarantors"), shall have executed and delivered to each Bank
a guaranty agreement in the form attached hereto as Exhibit 3.2 (each a
"Guaranty" and collectively the "Guaranties").
3.3 Insurance Certificate. Unless prior to the initial loan the Banks
shall have received evidence satisfactory to them that the Company maintains
hazard and liability insurance coverage reasonably satisfactory to the Banks.
3.4 Form U1. Unless prior to the initial loan the Company shall have
executed and delivered to the Banks a Federal Reserve Form U1 provided for in
Regulation U of the Board of Governors of the Federal Reserve System, and the
statements made therein shall be such, in the opinion of the Banks, as to
permit the transactions contemplated hereby without violation of Regulation U.
3.5 Counsel Opinion. Unless prior to the initial loan the Banks shall
have received from their special counsel and from Company's counsel,
satisfactory opinions as to such matters relating to the Company and its
Subsidiaries, the validity and enforceability of this Agreement, the loans to
be made hereunder and the other documents required by this Article III as the
Banks shall reasonably require. The Company shall execute and/or deliver to
the Banks or their respective counsel such documents concerning its corporate
status and the authorization of such transactions as may be requested.
3.6 Proceedings Satisfactory. Unless all proceedings taken in connection
with the transactions contemplated by this Agreement, and all instruments,
authorizations and other documents applicable thereto, shall be satisfactory in
form and substance to the Banks and their respective counsel.
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3.7 Violation of Environmental Laws. If in the opinion of the Banks there
exists any uncorrected violation by the Company or any Subsidiary of an
Environmental Law or any condition which requires, or may require, a cleanup,
removal or other remedial action by the Company or any Subsidiary under any
Environmental Laws.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Banks to make the loans as provided herein, the
Company represents and warrants to the Banks as follows as of the date of this
Agreement and each request by the Company for a loan or other extension of
credit hereunder shall constitute a representation and warranty by the Company
that all such representations and warranties remain true on and as of the date
of such requested loan or extension of credit:
4.1 Organization. The Company and each of its Subsidiaries is a
corporation duly organized and existing in good standing or active status under
the laws of the jurisdiction under which it was incorporated, and has all
requisite power and authority, corporate or otherwise, to conduct its business
and to own its properties. Set forth in Schedule 4.1 hereto is a complete and
accurate list of all of its Subsidiaries, showing as of the date hereof (as to
each such Subsidiary) the jurisdiction of its incorporation, the number of
shares of each class of capital stock authorized, the number outstanding and
the percentage of the outstanding shares of each such class owned (directly or
indirectly) by the Company. All of the outstanding stock of each Subsidiary
has been legally and validly issued, is fully paid and non-assessable except as
provided by Section 180.0622 of the Wisconsin Business Corporation Law, and is
owned by the Company free and clear of all pledges, liens, security interests
and other charges or encumbrances. The Company and each of its Subsidiaries is
duly licensed or qualified to do business in all jurisdictions in which such
qualification is required, and failure to so qualify could have a material
adverse effect on the property, financial condition or business operations of
the Company or any Subsidiary.
4.2 Authority. The execution, delivery and performance of this Agreement
and the Notes are within the corporate powers of the Company, have been duly
authorized by all necessary corporate action and do not and will not (i)
require any consent or approval of the stockholders of the Company, (ii)
violate any provision of the articles of incorporation or by-laws of the
Company or of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to the
Company or any Subsidiary; (iii) require the consent or approval of, or filing
or registration with, any governmental body, agency or authority; or (iv)
result in a breach of or constitute a default under, or result in the
imposition of any lien, charge or encumbrance upon any property of the Company
or any Subsidiary pursuant to, any indenture or other agreement or instrument
under which the Company or any Subsidiary is a party or by which it or its
properties may be bound or affected. This Agreement constitutes, and each of
the Notes and Loan Documents when executed and delivered hereunder will
constitute, legal, valid and binding obligations of the Company or other
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signatory enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy or similar laws affecting the
enforceability of creditors' rights generally.
4.3 Investment Company Act of 1940. Neither the Company nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
4.4 Employee Retirement Income Security Act. All Plans are in compliance
in all material respects with the applicable provisions of ERISA. Neither the
Company nor any Subsidiary has incurred any material "accumulated funding
deficiency" within the meaning of section 302(a)(2) of ERISA in connection with
any Plan. There has been no Reportable Event for any Plan, the occurrence of
which would have a materially adverse effect on the Company or any Subsidiary,
nor has the Company or any Subsidiary incurred any material liability to the
Pension Benefit Guaranty Corporation under section 4062 of ERISA in connection
with any Plan. There are no Unfunded Liabilities relating to any Plans.
Neither the Company nor any Subsidiary is a member of any Multiemployer Plan.
4.5 Financial Statements. The audited consolidated balance sheet of the
Company and its Subsidiaries as of September 30, 1996, and the audited
consolidated statements of income, changes in shareholders' equity and cash
flows of the Company and its Subsidiaries for the year ended on that date, as
certified by Coopers & Lybrand L.L.P. and heretofore furnished to the Banks,
are correct and complete and truly represent the financial condition of the
Company and such Subsidiaries as of September 30, 1996, and the results of
their operations for the fiscal year ended on that date. Since such date there
has been no material adverse change in the property, financial condition or
business operations of the Company or any Subsidiary.
4.6 Dividends and Redemptions. The Company has not, since September 30,
1996, paid or declared any dividend, or made any other distribution on account
of any shares of any class of its stock, or redeemed, purchased or otherwise
acquired, directly or indirectly, any shares of any class of its stock, except
as permitted by this Agreement. The Company is not a party to any agreement
which may require it to redeem, purchase or otherwise acquire any shares of any
class of its stock.
4.7 Liens. The Company and each Subsidiary has good and marketable title
to all of its assets, real and personal, free and clear of all liens, security
interests, mortgages and encumbrances of any kind, except Permitted Liens. All
owned and leased buildings and equipment of the Company and its Subsidiaries
are in good condition, repair and working order in all material respects and,
to the best of the Company's knowledge and belief, conform in all material
respects to all applicable laws, regulations and ordinances.
4.8 Contingent Liabilities. Neither the Company nor any Subsidiary has
any guarantees or other contingent liabilities outstanding (including, without
limitation, liabilities by way of agreement, contingent or otherwise, to
purchase, to provide funds for payment, to supply funds to or otherwise invest
in the debtor or otherwise to assure the creditor against loss), except those
permitted by section 5.9 hereof.
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4.9 Taxes. Except as expressly disclosed in the financial statements
referred to in section 4.5 above, neither the Company nor any Subsidiary has
any material outstanding unpaid tax liability (except for taxes which are
currently accruing from current operations and ownership of property, which are
not delinquent), and no tax deficiencies have been proposed or assessed against
the Company or any Subsidiary. The most recent completed audit of the
Company's federal income tax returns was for the Company's income tax year
ending September 30, 1993, and all taxes shown by such returns (together with
any adjustments arising out of such audit, if any) have been paid.
4.10 Absence of Litigation. Neither the Company nor any Subsidiary is a
party to any litigation or administrative proceeding, nor so far as is known by
the Company is any litigation or administrative proceeding threatened against
it or any Subsidiary, which in either case (i) relates to the execution,
delivery or performance of this Agreement, the Notes, or any of the Loan
Documents, (ii) could, if adversely determined, cause any material adverse
change in the property, financial condition or the conduct of the business of
the Company or any Subsidiary, (iii) asserts or alleges the Company or any
Subsidiary violated Environmental Laws, (iv) asserts or alleges that Company or
any Subsidiary is required to cleanup, remove, or take remedial or other
response action due to the disposal, depositing, discharge, leaking or other
release of any hazardous substances or materials, (v) asserts or alleges that
Company or any Subsidiary is required to pay all or a portion of the cost of
any past, present or future cleanup, removal or remedial or other response
action which arises out of or is related to the disposal, depositing,
discharge, leaking or other release of any hazardous substances or materials by
Company or any Subsidiary.
4.11 Absence of Default. No event has occurred which either of itself or
with the lapse of time or the giving of notice or both, would give any creditor
of the Company or any Subsidiary the right to accelerate the maturity of any
indebtedness of the Company or any Subsidiary for borrowed money. Neither the
Company nor any Subsidiary is in default under any other lease, agreement or
instrument, or any law, rule, regulation, order, writ, injunction, decree,
determination or award, non-compliance with which could materially adversely
affect its property, financial condition or business operations.
4.12 No Burdensome Agreements. Neither the Company nor any Subsidiary is
a party to any agreement, instrument or undertaking, or subject to any other
restriction, (i) which materially adversely affects or may in the future so
affect the property, financial condition or business operations of the Company
or any Subsidiary, or (ii) under or pursuant to which the Company or any
Subsidiary is or will be required to place (or under which any other person may
place) a lien upon any of its properties securing indebtedness either upon
demand or upon the happening of a condition, with or without such demand.
4.13 Trademarks, etc. The Company and its Subsidiaries possess adequate
trademarks, trade names, copyrights, patents, permits, service marks and
licenses, or rights thereto, for the present and planned future conduct of
their respective businesses substantially as now conducted, without any known
conflict with the rights of others which might result in a material adverse
effect on the Company or any Subsidiary.
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4.14 Full Disclosure. No information, exhibit or report furnished by the
Company or any Subsidiary to any Bank in connection with the negotiation or
execution of this Agreement contained any material misstatement of fact as of
the date when made or omitted to state a material fact or any fact necessary to
make the statements contained therein not misleading as of the date when made.
4.15 Fiscal Year. The fiscal year of the Company and each Subsidiary ends
on September 30 of each year.
4.16 Environmental Conditions. To the Company's knowledge after
reasonable investigation, there are no conditions existing currently or likely
to exist during the term of this Agreement which would subject the Company or
any Subsidiary to damages, penalties, injunctive relief or cleanup costs under
any Environmental Laws or which require or are likely to require cleanup,
removal, remedial action or other response pursuant to Environmental Laws by
the Company or any Subsidiary. Neither the Company nor any Subsidiary is
subject to any judgment, decree, order or citation related to or arising out of
Environmental Laws and neither the Company nor any Subsidiary has been named or
listed as a potentially responsible party by any governmental body or agency in
a matter arising under any Environmental Laws.
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ARTICLE V
NEGATIVE COVENANTS
While any part of the credit granted to the Company is available and while
any part of the principal of or interest on any Note remains unpaid, the
Company shall not do any of the following, or permit any Subsidiary to do any
of the following, without the prior written consent of the Required Banks:
5.1 Restriction of Indebtedness. Create, incur, assume or have
outstanding any indebtedness for borrowed money or the deferred purchase price
of any asset (including obligations under Capitalized Leases), except:
(a) the Notes issued under this Agreement;
(b) other indebtedness outstanding on September 30, 1996, and shown on the
financial statements referred to in section 4.5 above, including renewals,
extensions and refundings of such indebtedness, provided that the principal
amount of such indebtedness shall not be increased;
(c) indebtedness secured by liens described in section 9.1(w)(iv),
provided such indebtedness does not exceed an aggregate of $7,000,000
outstanding at any one time; and
(d) unsecured indebtedness which has been subordinated in right of payment
to the Company's obligations under this Agreement and the Notes in a manner
satisfactory to the Banks.
5.2 Restriction on Liens. Create or permit to be created or allow to
exist any mortgage, pledge, encumbrance or other lien upon or security interest
in any property or asset now owned or hereafter acquired by the Company or any
Subsidiary, except Permitted Liens.
5.3 Sale and Leaseback. Enter into any agreement providing for the
leasing by the Company or a Subsidiary of property which has been or is to be
sold or transferred by the Company or a Subsidiary to the lessor thereof, or
which is substantially similar in purpose to property so sold or transferred.
5.4 Dividends and Redemptions. Pay or declare any dividend, or make any
other distribution on account of any shares of any class of its stock, or
redeem, purchase or otherwise acquire directly or indirectly, any shares of any
class of its stock, except for:
(a) dividends payable in shares of stock of the Company;
(b) dividends paid to the Company by a wholly-owned Subsidiary;
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(c) redemptions of stock of the Company made with the proceeds of sales
of stock of the Company occurring within 30 days of the date of any such
redemption; and
(d) so long as no Default or Event of Default has occurred and is
continuing, cash dividends paid by the Company which do not exceed in the
aggregate for all such dividends paid after September 30, 1996, 40% of the
Consolidated Net Earnings of the Company and its Subsidiaries, after
subtracting all net losses, accumulated during the period after September 30,
1996 and prior to the payment of the dividend with respect to which the
determination is made, taken as a single accounting period.
5.5 Acquisitions and Investments. Acquire any other business or make any
loan, advance or extension of credit to, or investment in, any other person,
corporation, partnership or other entity, including investments acquired in
exchange for stock or other securities or obligations of any nature of the
Company or any Subsidiary, or create or participate in the creation of any
Subsidiary or joint venture, except:
(a) investments in accounts, chattel paper, and notes receivable, arising
or acquired in the ordinary course of business;
(b) investments in bank certificates of deposit (but only with FDICinsured
commercial banks having a combined capital and surplus in excess of $1
billion), open market commercial paper maturing within one year having the
highest rating of either Standard & Poors Corporation or Moody's Investors
Service, Inc., U.S. Treasury Bills subject to repurchase agreements and
shortterm obligations issued or guaranteed by the United States Government or
any agency thereof;
(c) Investments in openend diversified investment companies of recognized
financial standing investing solely in shortterm money market instruments
consisting of securities issued or guaranteed by the United States
Government, its agencies or instrumentalities, time deposits and certificates
of deposit issued by domestic banks or London branches of domestic banks,
bankers acceptances, repurchase agreements, high grade commercial paper and
the like;
(d) loans and advances made to suppliers, employees, officers and agents
of the Company and its Subsidiaries in the ordinary course of business,
consistent with the Company's past practices;
(e) investments in a Guarantor by the Company and investments in the
Company by a Subsidiary;
(f) cash investments in Plexus General Partnership Corp., a wholly-owned
subsidiary of the Company ("General Partner"), provided that (A)
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the General Partner shall not make any investments of the kind described
above in any Person except for a cash investment of up to $750,000 in
Plexus Home Automation Limited Partnership, a Wisconsin limited
partnership ("Partnership"), of which General Partner shall be the
managing general partner, or engage in any business other than through its
investment in the Partnership, and (B) such investments by Company in the
General Partner shall be limited to the amounts necessary to enable the
General Partner to make such permitted investments in the Partnership and
other amounts reasonably required by the General Partner in the ordinary
course of its business;
(g) other investments outstanding on September 30, 1996, and shown
on the financial statements referred to in section 4.5 above, provided
that such investments shall not be increased; and
(h) other investments which may not exceed $1,000,000 in the
aggregate in any fiscal year without the consent of the Required Banks.
5.6 Liquidation; Merger; Disposition of Assets. Liquidate or
dissolve; or merge with or into or consolidate with or into any other
corporation or entity except a merger of a wholly-owned Subsidiary into the
Company or another wholly-owned Subsidiary; or sell, lease, transfer or
otherwise dispose of all or any substantial part of its property, assets or
business (other than sales made in the ordinary course of business), or any
stock of any Subsidiary.
5.7 Accounts Receivable. Discount or sell with recourse, or sell for
less than the face amount thereof, any of its notes or accounts receivable,
whether now owned or hereafter acquired.
5.8 Contingent Liabilities. Guarantee or become a surety or
otherwise contingently liable (including, without limitation, liable by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in the debtor or otherwise to assure the
creditor against loss) for any obligations of others, except (i) the
Guaranties, (ii) pursuant to the deposit and collection of checks and similar
items in the ordinary course of business, and (iii) guaranties by the Company
of the trade obligations of the Guarantors incurred in the ordinary course of
business.
5.9 Affiliates. Suffer or permit any transaction with any Affiliate,
except on terms not less favorable to the Company or Subsidiary than would be
usual and customary in similar transactions with non-affiliated persons.
5.10 Fiscal Year. Change its fiscal year.
5.11 Derivatives. Enter into any interest rate, commodity or foreign
currency exchange, swap, collar, floor, cap, option or similar agreement except
to hedge against actual interest rate, foreign currency or commodity exposure.
Notwithstanding the foregoing or any other provision of this Agreement, the
Company may from time to time enter into hedging
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arrangements of the type described above with one or more of the Banks (or
their affiliates), provided that the Company's obligations in respect of such
hedging arrangements shall at all times be unsecured.
ARTICLE VI
AFFIRMATIVE COVENANTS
While any part of the credit granted to the Company is available and while
any part of the principal of or interest on any Note remains unpaid, and unless
waived in writing by the Required Banks, the Company shall:
6.1 Financial Status. Maintain:
(a) Consolidated Tangible Net Worth at all times in the amount of at
least $48,000,000; and
(b) Consolidated Debt to Worth Ratio at all times of not more than 1.50 to
1.0; and
(c) Consolidated Fixed Charge Coverage Ratio as of each fiscal quarter-end
of at least 2.00 to 1.0 for the four fiscal quarters then ended.
6.2 Insurance. Maintain insurance in such amounts and against such risks
as is customary by companies engaged in the same or similar businesses and
similarly situated.
6.3 Corporate Existence; Obligations. Do, and cause each Subsidiary to
do, all things necessary to: (i) maintain its corporate existence (except for
mergers permitted by section 5.6) and all rights and franchises necessary or
desirable for the conduct of its business; (ii) comply with all applicable
laws, rules, regulations and ordinances, and all restrictions imposed by
governmental authorities, including those relating to environmental standards
and controls; and (iii) pay, before the same become delinquent and before
penalties accrue thereon, all taxes, assessments and other governmental charges
against it or its property, and all of its other liabilities, except to the
extent and so long as the same are being contested in good faith by appropriate
proceedings in such manner as not to cause any material adverse effect upon its
property, financial condition or business operations, with adequate reserves
provided for such payments.
6.4 Business Activities. Continue to carry on its business activities in
substantially the manner such activities are conducted on the date of this
Agreement and not make any material change in the nature of its business.
6.5 Properties. Keep and cause each Subsidiary to keep its properties
(whether owned or leased) in good condition, repair and working order, ordinary
wear and tear and
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obsolescence excepted, and make or cause to be made from time to time all
necessary repairs thereto (including external or structural repairs) and
renewals and replacements thereof.
6.6 Accounting Records; Reports. Maintain and cause each Subsidiary to
maintain a standard and modern system for accounting in accordance with
generally accepted principles of accounting consistently applied throughout all
accounting periods and consistent with those applied in the preparation of the
financial statements referred to in section 4.5; and furnish to the Banks such
information respecting the business, assets and financial condition of the
Company and its Subsidiaries as any Bank may reasonably request and, without
request, furnish to the Banks:
(a) Within 45 days after the end of each of the first three quarters of
each fiscal year of the Company (i) consolidated balance sheets of the
Company and all of its Subsidiaries as of the close of such quarter and of
the comparable quarter in the preceding fiscal year; and (ii) consolidated
statements of income and cash flow of the Company and all of its Subsidiaries
for such quarter and for that part of the fiscal year ending with such
quarter and for the corresponding periods of the preceding fiscal year; all
in reasonable detail and certified as true and correct (subject to audit and
normal year-end adjustments) by the chief financial officer of the Company;
and
(b) As soon as available, and in any event within 90 days after the close
of each fiscal year of the Company, a copy of the audit report for such year
and accompanying consolidated financial statements of the Company and its
Subsidiaries, as prepared by independent public accountants of recognized
standing selected by the Company and satisfactory to the Required Banks,
which audit report shall be accompanied by an opinion of such accountants, in
form satisfactory to the Required Banks, to the effect that the same fairly
present the financial condition of the Company and its Subsidiaries and the
results of its and their operations as of the relevant dates thereof; and
(c) As soon as available, copies of all reports or materials submitted or
distributed to shareholders of the Company or filed with the SEC or other
governmental agency having regulatory authority over the Company or any
Subsidiary or with any national securities exchange; and
(d) Promptly after the furnishing thereof, copies of any statement or
report furnished to any other holder of obligations of the Company or any
Subsidiary pursuant to the terms of any indenture, loan or similar agreement
and not otherwise required to be furnished to the Banks pursuant to any other
clause of this section 6.6; and
(e) Promptly, and in any event within 10 days, after Company has knowledge
thereof a statement of the chief financial officer of the Company describing:
(i) any event which, either of itself or with the lapse of time or the
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giving of notice or both, would constitute a Default hereunder or a default
under any other material agreement to which the Company or any Subsidiary is
a party, together with a statement of the actions which the Company proposes
to take with respect thereto; (ii) any pending or threatened litigation or
administrative proceeding of the type described in section 4.10; and (iii)
any fact or circumstance which is materially adverse to the property,
financial condition or business operations of the Company or any Subsidiary;
and
(f)(i) Promptly, and in any event within 30 days, after the Company knows
that any Reportable Event with respect to any Plan has occurred, a statement
of the chief financial officer of the Company setting forth details as to
such Reportable Event and the action which the Company proposes to take with
respect thereto, together with a copy of any notice of such Reportable Event
given to the Pension Benefit Guaranty Corporation if a copy of such notice is
available to the Company, (ii) promptly after the filing thereof with the
Internal Revenue Service, copies of each annual report with respect to each
Plan administered by the Company and (iii) promptly after receipt thereof, a
copy of any notice (other than a notice of general application) the Company,
any Subsidiary or any member of the Controlled Group may receive from the
Pension Benefit Guaranty Corporation or the Internal Revenue Service with
respect to any Plan administered by the Company.
The financial statements referred to in (a) and (b) above shall be
accompanied by a certificate by the chief financial officer or controller of
the Company setting forth detailed computations demonstrating compliance with
Section 6.1 and further stating that, as of the close of the last period
covered in such financial statements, no condition or event had occurred which
constitutes a Default or an Event of Default hereunder (or if there was such a
condition or event, specifying the same).
6.7 Inspection of Records. Permit representatives of the Banks to visit
and inspect any of the properties and examine any of the books and records of
the Company and its Subsidiaries at any reasonable time and as often as may be
reasonably desired.
6.8 Compliance with Environmental Laws. Timely comply, and cause each
Subsidiary to comply, with all applicable Environmental Laws.
6.9 Orders, Decrees and Other Documents. Provide to the Banks,
immediately upon receipt, copies of any correspondence, notice, pleading,
citation, indictment, complaint, order, decree, or other document from any
source asserting or alleging a circumstance or condition which requires or may
require a financial contribution by Company or any Subsidiary or a cleanup,
removal, remedial action, or other response by or on the part of the Company or
any Subsidiary under Environmental Laws, or which seeks damages or civil,
criminal or punitive penalties from Company or any Subsidiary for an alleged
violation of Environmental Laws, which in any case might reasonably be expected
to have a material adverse effect on the business, assets or financial
condition of the Company or any Subsidiary.
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6.10 Agreement to Update. Advise the Banks in writing as soon as Company
becomes aware of any condition or circumstance which makes the environmental
warranties contained in this Agreement incomplete or inaccurate.
6.11 Environmental Audit. Upon the occurrence or existence of any event,
condition or circumstance which would require notification from the Company or
any Subsidiary pursuant to Section 6.9 or Section 6.10 hereof, at the request
of any Bank the Company shall permit, at its expense, an Environmental Audit
solely for the benefit of the Banks, to be conducted by the Banks or an
independent agent selected by the Banks; provided, however, that the initial
stage of such Environmental Audit shall be limited to those activities normally
included in a "Phase I" investigation, and if such initial investigation
discloses the possibility of a condition which, in the reasonable judgment of
the Banks, may subject the Company or any Subsidiary to a material liability,
cost or expense, then such Environmental Audit shall be expanded to include
those activities normally associated with a "Phase II" investigation.
ARTICLE VII
DEFAULTS
7.1 Defaults. The occurrence of any one or more of the following events
shall constitute an "Event of Default":
(a) The Company shall fail to pay (i) any interest due on any Note, or any
other amount payable hereunder (other than a principal payment on any Note)
by five days after the same becomes due; or (ii) any principal amount due on
any Note when due;
(b) The Company shall default in the performance or observance of any
agreement, covenant, condition, provision or term contained in Article V or
section 6.1 of this Agreement;
(c) The Company or other signatory other than any Bank shall default in
the performance or observance of any of the other agreements, covenants,
conditions, provisions or terms in this Agreement or any Loan Document
continuing for a period of thirty days after written notice thereof is given
to the Company by any of the Banks;
(d) Any representation or warranty made by the Company herein or any
certificate delivered pursuant hereto, or any financial statement delivered
to any Bank hereunder, shall prove to have been false in any material respect
as of the time when made or given;
(e) The Company or any Subsidiary shall fail to pay as and when due and
payable (whether at maturity, by acceleration or otherwise) all or any part
of the principal of or interest on any indebtedness of or assumed by it
having an
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outstanding principal balance of $100,000 or more, or of the rentals due
under any lease or sublease requiring aggregate rental payments of
$100,000 or more, or of any other obligation for the payment of money in
the amount of $100,000 or more, and such default shall not be cured within
the period or periods of grace, if any, specified in the instruments
governing such obligations; or default shall occur under any evidence of,
or any indenture, lease, sublease, agreement or other instrument governing
such obligations, and such default shall continue for a period of time
sufficient to permit the acceleration of the maturity of any such
indebtedness or other obligation or the termination of such lease or
sublease;
(f) A final judgment which, together with all other outstanding
final judgments against the Company and its Subsidiaries, or any of them,
exceeds an aggregate of $50,000 shall be entered against the Company or
any Subsidiary and shall remain outstanding and unsatisfied, unbonded,
unstayed or uninsured after 60 days from the date of entry thereof; or any
judgment which exceeds $1,000,000 shall be entered against the Company or
any Subsidiary and shall not be covered, for the benefit of the Company or
such Subsidiary, by insurance provided by a financially responsible
insurance carrier;
(g) The Company, any Subsidiary or any Guarantor shall: (i) become
insolvent; or (ii) be unable, or admit in writing its inability to pay its
debts as they mature; or (iii) make a general assignment for the benefit
of creditors or to an agent authorized to liquidate any substantial amount
of its property; or (iv) become the subject of an "order for relief"
within the meaning of the United States Bankruptcy Code; or (v) become the
subject of a creditor's petition for liquidation, reorganization or to
effect a plan or other arrangement with creditors; or (vi) apply to a
court for the appointment of a custodian or receiver for any of its
assets; or (vii) have a custodian or receiver appointed for any of its
assets (with or without its consent); or (viii) have any of its assets
garnished, seized or forfeited, or threatened with garnishment, seizure or
forfeiture; or (ix) otherwise become the subject of any insolvency
proceedings or propose or enter into any formal or informal composition or
arrangement with its creditors;
(h) This Agreement, any Note or any Loan Document shall, at any time
after their respective execution and delivery, and for any reason, cease
to be in full force and effect or be declared null and void, or be revoked
or terminated, or the validity or enforceability thereof or hereof shall
be contested by the Company or any shareholder of the Company, or the
Company shall deny that it has any or further liability or obligation
thereunder or hereunder, as the case may be; or
(i) Any Reportable Event, which the Required Banks determine in good
faith to constitute grounds for the termination of any Plan by the Pension
Benefit Guaranty Corporation or for the appointment by the appropriate
United
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States District Court of a trustee to administer any Plan, shall have
occurred, or any Plan shall be terminated within the meaning of
Title IV of ERISA, or a trustee shall be appointed by the
appropriate United States District Court to administer any Plan, or
the Pension Benefit Guaranty Corporation shall institute
proceedings to terminate any Plan or to appoint a trustee to
administer any Plan; or the Company or any Subsidiary shall become
a member of a Multiemployer Plan.
7.2 Termination of Commitment and Acceleration of Obligations. Upon
the occurrence of any Event of Default:
(a) As to any Event of Default (other than an Event of
Default under section 7.1(g)) and at any time thereafter, and in
each case, the Required Banks (or the Agent with the written
consent of the Required Banks) may, by written notice to the
Company, immediately terminate the obligation of the Banks to make
loans hereunder and/or declare the unpaid principal balance of the
Notes, together with all interest accrued thereon, to be
immediately due and payable; and the unpaid principal balance of
and accrued interest on such Notes shall thereupon be due and
payable without further notice of any kind, all of which are
hereby waived, and notwithstanding anything to the contrary herein
or in the Notes contained;
(b) As to any Event of Default under section 7.1(g), the
obligation of the Banks to make loans hereunder shall immediately
terminate and the unpaid principal balance of all Notes, together
with all interest accrued thereon, shall immediately and forthwith
be due and payable, all without presentment, demand, protest, or
further notice of any kind, all of which are hereby waived,
notwithstanding anything to the contrary herein or in the Notes
contained; and
(c) As to each Event of Default, the Banks shall have all the
remedies for default provided by the Loan Documents, as well as
applicable law.
7.3 Amendments, Etc. No waiver, amendment, settlement or
compromise of any of the rights of any Bank under this Agreement, any Note or
any of the Loan Documents shall be effective for any purpose unless it is in a
written instrument executed and delivered by the parties authorized to act by
this section 7.3. Subject to the provisions of this section 7.3, the Required
Banks (or the Agent with the written consent of the Required Banks) and the
Company may enter into agreements supplemental hereto for the purpose of adding
or modifying any provisions to this Agreement, the Notes, or the Loan Documents
or changing in any manner the rights of the Banks or the Company hereunder or
thereunder or waiving any Event of Default hereunder; provided, however, that
no such supplemental agreement shall, without the consent of all of the Banks:
(a) Extend the maturity of any Note or reduce the principal
amount thereof, or reduce the rate or amount or change the time of
payment of principal, interest or fees payable on any Note or
otherwise under this Agreement;
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(b) Amend the definition of Required Banks;
(c) Extend the Termination Date, or increase the amount of
the Commitment of any Bank hereunder, or permit the Company to
assign its rights under this Agreement;
(d) Alter the provisions of section 2.19 of this Agreement;
(e) Amend any provision of this Agreement requiring a pro
rata sharing among the Banks;
(f) Amend this section 7.3; or
(g) Release any of the Guaranties.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent.
ARTICLE VIII
THE AGENT
8.1 Appointment and Powers. Each of the Banks hereby appoints
Firstar Bank Milwaukee, National Association as Agent for the Banks hereunder,
and authorizes the Agent to take such action as Agent on its behalf and to
exercise such powers as are specifically delegated to the Agent by the terms
hereof, together with such powers as are reasonably incidental thereto. The
duties of the Agent shall be entirely ministerial; the Agent shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Agreement, the Notes or any related
document, or to enforce such performance, or to inspect the property (including
the books and records) of the Company or any of its Subsidiaries; and the Agent
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to this Agreement or the Notes or applicable
law. Firstar Bank Milwaukee, National Association agrees to act as Agent upon
the express terms and conditions contained in this Article VIII.
8.2 Responsibility. The Agent (i) makes no representation or
warranty to any Bank and shall not be responsible to any Bank for any oral or
written recitals, reports, statements, warranties or representations made in or
in connection with this Agreement or any Note; (ii) shall not be responsible
for the due execution, legality, validity, enforceability, genuineness,
sufficiency, collectibility or value of this Agreement or any Note or any other
instrument or document furnished pursuant thereto; (iii) may treat the payee of
any Note as the owner thereof until the Agent receives written notice of the
assignment or transfer thereof signed by such payee and in form satisfactory to
the Agent; (iv) may execute any of its duties under this Agreement by or
through employees, agents and attorneys in fact and shall not be answerable for
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the default or misconduct of any such employee, agent or attorney in fact
selected by it with reasonable care; (v) may (but shall not be required to)
consult with legal counsel (including counsel for the borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
advice of such counsel, accountants or experts; (vi) shall be entitled to rely
upon any Note, notice, consent, waiver, amendment, certificate, affidavit,
letter, telegram, telex, cable or other document or communication believed by
it to be genuine and signed or sent by the proper party or parties, and may
rely on statements contained therein without further inquiry or investigation.
Neither the Agent nor any of its directors, officers, agents, or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement or the Notes, except for its or their own
gross negligence or willful misconduct.
8.3 Agent's Indemnification. The Banks agree to indemnify and reimburse
the Agent (to the extent not reimbursed by the Company), ratably in accordance
with their respective Commitments from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Agent as such in any way relating to
or arising out of this Agreement or any action taken or omitted by the Agent
under this Agreement, provided that no Bank shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Bank agrees to reimburse the Agent promptly upon demand for its ratable share
of any out-of-pocket expenses (including counsel fees) incurred by the Agent in
connection with the preparation, execution, administration or enforcement of,
or the preservation of any rights under, this Agreement to the extent that the
Agent is not reimbursed for such expenses by the Company.
8.4 Rights as a Lender. With respect to its Commitment and the Notes
issued to it, Firstar Bank Milwaukee, National Association, in its individual
capacity as a Bank, shall have, and may exercise, the same rights and powers
under this Agreement and the Notes payable to it as any other Bank has under
this Agreement and Notes, and the terms "Bank" and "Banks", unless the context
otherwise requires, shall include Firstar Bank Milwaukee, National Association
in its individual capacity as a Bank. Firstar Bank Milwaukee, National
Association and its affiliates may accept deposits from, lend money to, act as
trustee under indentures of, and generally engage in any kind of banking or
trust business with, the Company or any of its Subsidiaries and any person,
firm or corporation who may do business with or own securities of the Company
or any Subsidiary, all as if it were not the Agent, and without any duty to
account therefor to the Banks.
8.5 Credit Investigation. Each of the Banks severally represents and
warrants to each of the other Banks and to the Agent that it has made its own
independent investigation and evaluation of the financial condition and affairs
of the Company and its Subsidiaries in connection with such Bank's execution
and delivery of this Agreement and the making of its loans and has not relied
on any information or evaluation provided by any other Bank or the Agent in
connection with any of the foregoing (other than information provided by
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the Company to the Agent for transmittal to the Banks in connection with the
foregoing); and each Bank represents and warrants to each other Bank and to the
Agent that it shall continue to make its own independent investigation and
evaluation of the credit-worthiness of the Company and its Subsidiaries while
the Commitments and/or the Notes are outstanding.
8.6 Resignation. The Agent may resign as such at any time upon ten
calendar days' prior written notice to the Company and the Banks, effective at
the end of said ten days or upon the earlier appointment of a successor. If
the Agent resigns, the Banks shall appoint a successor which shall be one of
the Banks, and such Bank, upon its acceptance of such appointment, shall become
the Agent upon the express conditions contained in this Article VIII. If at
any time there is no Agent acting hereunder, the Company shall make all
required payments to, and otherwise deal directly with, the Banks and/or the
holders of the Notes, as the case may be.
ARTICLE IX
MISCELLANEOUS
9.1 Accounting Terms; Definitions. Except as otherwise provided, all
accounting terms shall be construed in accordance with generally accepted
accounting principles consistently applied and consistent with those applied in
the preparation of the financial statements referred to in section 4.5, and
financial data submitted pursuant to this Agreement shall be prepared in
accordance with such principles. As used herein:
(a) the term "Adjusted LIBOR Rate" means, for any Interest Period with
respect to an Adjusted LIBOR Rate Loan, a rate per annum (rounded upward, if
necessary, to the nearest 1/16 of 1%) determined pursuant to the following
formula:
LIBOR Rate
Adjusted LIBOR Rate =
------------------------------------------ +
LIBOR Margin
1 - LIBOR Reserve Requirement
(b) the term "Adjusted LIBOR Rate Loan" means all or part of any loan
which bears interest at or by reference to the Adjusted LIBOR Rate.
(c) the term "Affiliate" means any person, firm or corporation, which,
directly or indirectly, controls, is controlled by, or is under common
control with, the Company or a Subsidiary.
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<PAGE> 26
(d) the term "Borrowing Date" means each date (which must be
a Business Day) on which a loan is made to the Company or on which
any loan bearing interest at one rate is converted into a loan
bearing interest at another interest rate or is continued.
(e) the term "Business Day" means any date other than a
Saturday, Sunday or other day on which banks in the States of
Wisconsin or Illinois are required or authorized to close;
provided, however, that for purposes of determining the applicable
Interest Period for an Adjusted LIBOR Rate Loan, references to
Business Day will include only those days on which dealings in
United States Dollar deposits are carried out by United States
financial institutions in the London interbank market.
(f) the term "Capitalized Lease" means any lease which is
capitalized on the books of the lessee, or should be so
capitalized under generally accepted accounting principles.
(g) the term "Consolidated Debt to Worth Ratio" means the
relationship, expressed as a numerical ratio, between:
(i) the total of all liabilities of the Company and its
Subsidiaries which would appear on a consolidated balance
sheet of the Company and its Subsidiaries in accordance with
generally accepted principles of accounting, including
capitalized lease obligations, but excluding liabilities or
obligations for payments made by customers of the Company or
any Subsidiary for goods to be purchased from the Company or
such Subsidiary, prior to the time of shipment by the
Company or such Subsidiary; and
(ii) Consolidated Tangible Net Worth.
(h) the term "Consolidated Fixed Charge Coverage Ratio" means,
for any period, the relationship, expressed as a numerical ratio,
between:
(i) the sum of (A) Consolidated Net Earnings of the Company
and its Subsidiaries for such period before payment or provision
for applicable income and other taxes, plus (B) depreciation,
amortization and all other non-cash deductions arising in the
normal course of operations and shown on the Company's financial
statements for such period, plus (C) net interest expense on
indebtedness of the Company and its Subsidiaries (including the
interest component of Capitalized Leases) for such period, plus (D)
rental expense under leases other than Capitalized Leases for such
period, and
(ii) the sum of (A) net interest expense on indebtedness of
the Company and its Subsidiaries (including the interest component
of Capitalized Leases) for such period, (B) scheduled principal
payments on indebtedness of the Company and its Subsidiaries during
such period, (C) the principal component of required payments in
respect of Capitalized Leases during such period and (D) rental
expense under leases other than Capitalized Leases for such period,
all as determined in accordance with generally accepted accounting
principles applied on a consolidated basis to the Company and its
Subsidiaries.
(i) the term "Consolidated Net Earnings" means:
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<PAGE> 27
(i) all revenues and income derived from operation in the
ordinary course of business (excluding extraordinary gains and
profits upon the disposition of investments and fixed assets),
Minus:
(ii) all expenses and other proper charges against income
(including payment or provision for all applicable income and other
taxes, but excluding extraordinary losses and losses upon the
disposition of investments and fixed assets),
all as determined in accordance with generally accepted accounting
principles as applied on a consolidated basis to the Company and
its Subsidiaries.
(j) the term "Consolidated Tangible Net Worth" means the
total of all assets properly appearing on the consolidated balance
sheet of the Company and its Subsidiaries in accordance with
generally accepted accounting principles, less the sum of the
following:
(i) the book amount of all such assets which would be treated
as intangibles under generally accepted accounting principles,
including, without limitation, all such items as good will,
trademarks, trademark rights, trade names, tradename rights,
brands, copyrights, patents, patent rights, licenses, deferred
charges and unamortized debt discount and expense;
(ii) anywrite-up in the book value of any such assets
resulting from a revaluation thereof subsequent to September 30,
1996;
(iii) all reserves (to the extent not already deducted from
assets), including reserves for depreciation, obsolescence,
depletion, insurance, and inventory valuation, but excluding
contingency reserves not allocated for any particular purpose and
not deducted from assets;
(iv) the amount, if any, at which any shares of stock of the
Company or any Subsidiary appear on the asset side of such
consolidated balance sheet;
(v) all liabilities of the Company and its Subsidiaries shown
on such balance sheet, other than liabilities subordinated to
obligations owed to the Banks by subordination agreements in form
and substance satisfactory to the Banks; and
(vi) all investments in foreign affiliates and nonconsolidated
domestic affiliates.
(k) the term "Controlled Group" means a controlled group of
corporations as defined in Section 1563 of the Internal Revenue Code of
1986, as amended, of which the Company is a part.
(l) the term "Default" means any condition or event which with the
passage of time or the giving of notice or both would constitute an Event
of Default.
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(m) the term "Environmental Audit" means a review for the purpose of
determining whether the Company and each Subsidiary complies with
Environmental Laws and whether there exists any condition or circumstance
which requires or will require a cleanup, removal, or other remedial
action under Environmental Laws on the part of the Company or any
Subsidiary including, but not limited to, some or all of the following:
(i) on site inspection including review of site geology,
hydrogeology, demography, land use and population;
(ii) taking and analyzing soil borings and installing ground
water monitoring wells and analyzing samples taken from such wells;
(iii) taking and analyzing of air samples and testing of
underground tanks;
(iv) reviewing plant permits, compliance records and
regulatory correspondence, and interviewing enforcement staff at
regulatory agencies;
(v) reviewing the operations, procedures and documentation of
the Company and its Subsidiaries; and
(vi) interviewing past and present employees of the Company
and its Subsidiaries.
(n) the term "Environmental Laws" means all federal, state and local
laws including rules of common law, statutes, regulations, ordinances,
codes, rules and other governmental restrictions and requirements
relating to the discharge of air pollutants, water pollutants or process
waste water or otherwise relating to the environment or hazardous
substances including, but not limited to, the Federal Solid Waste
Disposal Act, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976, the Federal
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, the Toxic Substances Control Act, the Hazardous Materials
Transportation Act, regulations of the Environmental Protection Agency,
regulations of the Nuclear Regulatory Agency, and regulations of any
state department of natural resources or state environmental protection
agency now or at any time hereafter in effect.
(o) the term "ERISA" means the Employee Retirement Income Security
Act of 1974, as the same may be in effect from time to time.
(p) the term "Federal Funds Rate" means, for any day, an interest
rate per annum equal to the weighted average of the rates on overnight
federal funds transactions conducted by brokers in federal funds, as
published for such day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by
the Agent from three federal funds brokers of recognized standing
selected by it. In the case of a day which is not a Business Day, the
Federal Funds Rate for such day shall be the Federal Funds Rate for the
preceding Business Day.
(q) the term "Interest Period" means with respect to each Adjusted
LIBOR Rate Loan, the period commencing on the applicable Borrowing Date
and ending one, two, three or six months thereafter, as specified by the
Company in the related notice of borrowing pursuant to section 2.2, and
with respect to a Variable Rate Loan converted to an Adjusted LIBOR Rate
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<PAGE> 29
Loan, or in the case of a continuation of an Adjusted LIBOR Rate Loan for an
additional Interest Period, the period commencing on the date of such
conversion or continuation and ending one, two, three or six months thereafter,
as specified by the Company in the related notice pursuant to section 2.5,
provided that:
(i) any Interest Period which would otherwise end on a day
which is not a Business Day will be extended to the next succeeding
Business Day unless such Business Day falls in another calendar
month, in which case such Interest Period will end on the
immediately preceding Business Day;
(ii) any Interest Period which begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in a calendar month at the end of such Interest
Period) will, subject to clause (iii) below, end on the last
Business Day of a calendar month; and
(iii) in no event may any Interest Period extend beyond the
Termination Date.
(r) the term "LIBOR Margin" means 7/8 of 1% per annum.
(s) the term "LIBOR Rate" means, for any Interest Period with
respect to an Adjusted LIBOR Rate Loan, the per annum rate of
interest determined by the Agent to be the arithmetic average
(rounded upward, if necessary, to the nearest 1/16 of 1%) of the
offered rates for deposits in United States Dollars for the
applicable Interest Period which appear on the Telerate Screen
Page 3750 (or such other page of Telerate or such other service on
which the appropriate information may be displayed), on the
electronic communications terminals in the Agent's money center,
as of 11 a.m., London time, on the Business Day which is two
Business Days before the applicable Borrowing Date ("Calculation
Date"), except as provided below. If fewer than two offered rates
appear for the applicable Interest Period or if the appropriate
screen is not accessible as of such time, the term "LIBOR Rate"
shall mean the per annum rate of interest determined by the Agent
to be the average (rounded up, if necessary, to the nearest 1/16
of 1%) of the rates at which deposits in U.S. dollars are offered
to the Agent by four major banks in the London interbank market,
as selected by the Agent ("Reference Banks"), at approximately 11
a.m., London time, on the Calculation Date for the applicable
Interest Period and in an amount equal to the principal amount of
the applicable Adjusted LIBOR Rate Loan. The Agent will request
the principal London office of each of such Reference Banks to
provide a quotation of its rate. If at least two such quotations
are provided, the applicable rate will be the arithmetic mean of
the quotations. If fewer than two quotations are provided as
requested, the applicable rate will be the arithmetic mean of the
rates quoted by major banks in New York City, selected by the
Agent, at approximately 11 a.m., New York City time, on the
Calculation Date for loans in United States Dollars to leading
European banks for the applicable Interest Period and in an amount
equal to the principal amount of the applicable Adjusted LIBOR
Rate Loan.
(t) the term "LIBOR Reserve Requirement" means, for any
Interest Period with respect to an Adjusted LIBOR Rate Loan, the
stated maximum rate of all reserve requirements (including all
basic, supplemental, marginal, emergency and other reserves and
taking into account any transitional adjustments or other
scheduled changes in reserve requirements during such Interest
Period) that is specified on the first day of
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<PAGE> 30
such Interest Period by the Board of Governors of the Federal Reserve
System for determining the maximum reserve requirement with respect
to eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board of Governors) applicable
to the class of banks of which any Bank is a member.
(u) the term "Loan Document" means each of this Agreement,
the Notes and the Guaranties, and the term "Loan Documents" means
this Agreement, the Notes and the Guaranties collectively.
(v) the term "Multiemployer Plan" means a multiemployer
pension plan within the meaning of the Multiemployer Pension Plan
Amendment Act, as amended from time to time.
(w) the term "Permitted Liens" means:
(i) liens outstanding on September 30, 1996, and
shown on the financial statements referred to in
section 4.5 above, and liens described on Schedule
9.1(w);
(ii) liens for taxes, assessments or governmental charges, and
liens incident to construction, which are either not delinquent or
are being contested in good faith by the Company or a Subsidiary by
appropriate proceedings which will prevent foreclosure of such
liens, and against which adequate reserves have been provided; and
easements, restrictions, minor title irregularities and similar
matters which have no adverse effect as a practical matter upon the
ownership and use of the affected property by the Company or any
Subsidiary;
(iii) liens or deposits in connection with worker's
compensation or other insurance or to secure customs' duties,
public or statutory obligations in lieu of surety, stay or appeal
bonds, or to secure performance of contracts or bids (other than
contracts for the payment of money borrowed), or deposits required
by law or governmental regulations or by any court order, decree,
judgment or rule as a condition to the transaction of business or
the exercise of any right, privilege or license; or other liens or
deposits of a like nature made in the ordinary course of business;
and
(iv) purchase money liens on property (other than inventory)
acquired in the ordinary course of business, to finance or secure a
portion of the purchase price thereof, and liens on property
acquired existing at the time of acquisition; provided that in each
case such lien shall be limited to the property so acquired and the
liability secured by such lien does not exceed either the purchase
price or the fair market value of the asset acquired.
(x) the term "Person" means an individual, partnership,
corporation, business trust, joint stock company, trust,
unincorporated association, limited liability company, joint
venture, governmental agency or authority or other entity of
whatever nature.
(y) the term "Plan" means any employee pension benefit plan
subject to Title IV of ERISA maintained by the Company, any of its
Subsidiaries, or any member of the Controlled Group, or any such
plan to which the Company, any of its Subsidiaries,
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<PAGE> 31
or any member of the Controlled Group is required to contribute on
behalf of any of its employees.
(z) the term "Prime Rate" means the rate of interest
announced by the Agent as its prime or reference rate for interest
rate calculations, as such rate may change from time to time. The
Prime Rate may not be the lowest interest rate charged by the
Agent.
(aa) the term "Regulatory Change" means any change enacted or
issued after the date of this Agreement of any (or the adoption
after the date of this Agreement of any new) federal or state law,
regulation, interpretation, direction, policy or guideline, or any
court decision, which affects the treatment of any extensions of
credit of the Banks.
(ab) the term "Reportable Event" means a reportable event as
that term is defined in Title IV of ERISA.
(ac) the term "Required Banks" means Banks holding at least
66 b% of the aggregate Commitment, or if the Commitments have been
terminated, Banks holding at least 66 b% of the aggregate
principal amount owed by the Company hereunder.
(ad) the term "Subsidiary" means a corporation, partnership
or other entity of which the Company owns, directly or through
another Subsidiary, at the date of determination, more than 50% of
the outstanding stock (or other shares of beneficial interest)
having ordinary voting power for the election of directors,
irrespective of whether or not at such time stock of any other
class or classes might have voting power by reason of the
happening of any contingency, or holds at least a majority of
partnership or similar interests, or is a general partner, and any
other Affiliate that is included in the Company's consolidated
financial statements furnished to the Bank pursuant to section 6.6
hereof.
(ae) the term "Unfunded Liabilities" means, with regard to
any Plan, the excess of the current value of the Plan's benefits
guaranteed under ERISA over the current value of the Plan's assets
allocable to such benefits.
(af) the term "Variable Rate" means the rate per annum equal
to the Prime Rate minus 1/4 of 1% per annum.
(ag) the term "Variable Rate Loan" means any loan which bears
interest at or by reference to the Variable Rate.
9.2 Expenses; Indemnity. () The Company shall pay or reimburse
each Bank and the Agent for all reasonable out-of-pocket costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) paid
or incurred by the Agent or such Bank in connection with (i) the negotiation,
preparation, execution, delivery, and administration of this Agreement, the
Notes, the Loan Documents and any other document required hereunder or
thereunder, including without limitation any amendment, supplement,
modification or waiver of or to any of the foregoing, (ii) the enforcement,
protection or preservation of its rights under this Agreement, the Notes, the
Loan Documents and any other document required hereunder or thereunder, before
and after judgment, including without limitation defending against any claim
made against the Agent or such Bank by the Company, any
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Subsidiary or any third party as a result of or in any way relating to any
matter referred to in subsection (i) or (ii) of this section; and (iii) any and
all taxes, other than taxes levied upon the net income of such Bank by the
federal government or the state (or political subdivision of a state) where
such Bank's principal office is located, which may be payable or determined to
be payable in connection with the negotiation, preparation, execution,
delivery, administration or enforcement of this Agreement, the Notes, the Loan
Documents or any other document required hereunder or thereunder or any
amendment, supplement, modification or waiver of or to any of the foregoing, or
consummation of any of the transactions contemplated hereby or thereby.
(b) The Company agrees to indemnify the Agent and each Bank against any
and all losses, claims, damages, liabilities and expenses (including, without
limitation, reasonable attorneys' fees and expenses) incurred by the Agent or
such Bank arising out of, in any way connected with, or as a result of (i) any
acquisition or attempted acquisition of stock or assets of another person or
entity by the Company or any Subsidiary, (ii) the use of any of the proceeds of
any loans made hereunder by the Company or any Subsidiary for the making or
furtherance of any such acquisition or attempted acquisition, (iii) any breach
or alleged breach by the Company of or any liability or alleged liability of
the Company under any Environmental Law, or any liability or alleged liability
incurred by the Agent or such Bank under any Environmental Law in connection
with this Agreement, any Loan Document or the transactions contemplated
hereunder or thereunder, (iv) the negotiation, preparation, execution,
delivery, administration, and enforcement of this Agreement, the Notes, the
Loan Documents and any other document required hereunder or thereunder,
including without limitation any amendment, supplement, modification or waiver
of or to any of the foregoing or the consummation or failure to consummate the
transactions contemplated hereby or thereby, or the performance by the parties
of their obligations hereunder or thereunder.
(c) The foregoing agreements and indemnities shall remain operative and in
full force and effect regardless of termination of this Agreement, the
consummation of or failure to consummate either the transactions contemplated
by this Agreement or any amendment, supplement, modification or waiver, the
repayment of any loans made hereunder, the invalidity or unenforceability of
any term or provision of this Agreement or any of the Notes or any Loan
Document, or any other document required hereunder or thereunder, any
investigation made by or on behalf of the Agent, any Bank, the Company or any
Subsidiary, or the content or accuracy of any representation or warranty made
under this Agreement, any Loan Document or any other document required
hereunder or thereunder.
9.3 Securities Act of 1933. Each Bank represents that it is acquiring the
Notes payable to it without any present intention of making a sale or other
distribution of such Notes, provided each Bank reserves the right to sell
participations in its Notes to the extent permitted by section 9.10.
9.4 No Agency. Except as expressly provided herein, nothing in this
Agreement and no action taken pursuant hereto shall cause any Bank to be
treated as the agent of any other Bank, or shall be deemed to constitute the
Banks a partnership, association, joint venture or other entity.
9.5 Successors. The provisions of this Agreement shall inure to the
benefit of any holder of one or more of the Notes, and shall inure to the
benefit of and be binding upon any successor to any of the parties hereto. No
delay on the part of any Bank or any holder of any of the Notes in exercising
any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein specified are cumulative
and are not exclusive of any rights or remedies which the Banks or the holder
of any of the Notes would otherwise have.
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9.6 Survival. All agreements, representations and warranties made herein
shall survive the execution of this Agreement, the making of the loans
hereunder and the execution and delivery of the Notes.
9.7 Wisconsin Law. This Agreement and the Notes issued hereunder shall be
governed by and construed in accordance with the internal laws of the State of
Wisconsin, except to the extent superseded by federal law.
9.8 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
9.9 Notices. All communications or notices required under this Agreement
shall be deemed to have been given on the date when deposited in the United
States mail, postage prepaid, and addressed as follows (unless and until any of
such parties advises the other in writing of a change in such address): (a) if
to the Company, with the full name and address of the Company as shown on this
Agreement below; and (b) if to any of the Banks with the full name and address
of such Bank as shown on this Agreement above, to the attention of the officer
of the Bank executing the form of acceptance of this Agreement.
9.10 Participations. Neither the Company nor any Bank may assign its
rights under this Agreement. The Company agrees that each Bank may, at its
option, sell participations in its Notes to another financial institution or
institutions, provided each such institution has been approved in writing by
the Company and the Agent, and, in connection with each such sale, and
thereafter, disclose to any such purchaser or potential purchaser of such
interest any financial information such Bank may have concerning such Company
and its Subsidiaries.
9.11 Entire Agreement; No Agency. This Agreement and the other documents
referred to herein contain the entire agreement between the Banks and the
Company with respect to the subject matter hereof, superseding all previous
communications and negotiations, and no representation, undertaking, promise or
condition concerning the subject matter hereof shall be binding upon the Banks
unless clearly expressed in this Agreement or in the other documents referred
to herein. Nothing in this Agreement or in the other documents referred to
herein and no action taken pursuant hereto shall cause the Company to be
treated as an agent of any Bank, or shall be deemed to constitute the Banks and
the Company a partnership, association, joint venture or other entity.
9.12 No Third Party Benefit. This Agreement is solely for the benefit of
the parties hereto and their permitted successors and assigns. No other person
or entity shall have any rights under, or because of the existence of, this
Agreement.
9.13 CONSENT TO JURISDICTION. THE COMPANY HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITUATED IN MILWAUKEE COUNTY,
WISCONSIN, AND WAIVES ANY OBJECTION BASED ON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS, WITH REGARD TO ANY ACTIONS, CLAIMS,
DISPUTES OR PROCEEDINGS RELATING TO THIS AGREEMENT, ANY NOTE, ANY OF THE LOAN
DOCUMENTS, OR ANY OTHER DOCUMENT DELIVERED HEREUNDER OR IN CONNECTION HEREWITH,
OR ANY TRANSACTION ARISING FROM OR CONNECTED TO ANY OF THE FOREGOING. THE
COMPANY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND CONSENTS TO
ALL SUCH SERVICE OF PROCESS MADE BY MAIL OR BY MESSENGER DIRECTED TO IT AT THE
ADDRESS SPECIFIED BELOW. Nothing herein shall affect the right of the Banks,
or any of them, to serve process in any manner permitted by law, or limit the
right of any Banks, or any of them, to bring proceedings against the Company or
its property or assets in the competent courts of any other jurisdiction or
jurisdictions.
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9.14 WAIVER OF JURY TRIAL. THE COMPANY AND THE BANKS HEREBY JOINTLY AND
SEVERALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT, ANY NOTE, ANY OF THE LOAN DOCUMENTS, OR ANY OTHER
DOCUMENT DELIVERED HEREUNDER OR IN CONNECTION HEREWITH, OR ANY TRANSACTION
ARISING FROM OR CONNECTED TO ANY OF THE FOREGOING. THE COMPANY AND THE BANKS
EACH REPRESENT THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.
9.15 LIMITATION OF LIABILITY. THE COMPANY, THE AGENT AND THE BANKS HEREBY
WAIVE ANY RIGHT ANY OF THEM MAY NOW OR HEREAFTER HAVE TO CLAIM OR RECOVER FROM
ANY OTHER PARTY HERETO ANY CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES.
If the foregoing is satisfactory to you, please sign the form of
acceptance below and return a signed counterpart hereof to the Company. When
this instrument has been executed nand delivered by all of the Banks, it will
evidence a binding agreement between the Banks and the Company.
Very truly yours,
(CORPORATE SEAL) PLEXUS CORP.
Address:55 Jewelers Park Drive
Neenah, Wisconsin 54956
By: /s/
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date
thereof.
FIRSTAR BANK MILWAUKEE,
NATIONAL ASSOCIATION,
as the Agent and as a Bank
By: /s/
Title:
HARRIS TRUST AND SAVINGS BANK
By: /s/
Title:
BANK ONE, WISCONSIN
By: /s/
Title:
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EXHIBIT 1.1
PROMISSORY NOTE
$____________ March 20, 1997
FOR VALUE RECEIVED, PLEXUS CORP., a Wisconsin corporation, promises to pay
to the order of ____________________ ________________________, without setoff
or counterclaim, the principal sum of __________________ Dollars
($____________) at the Main Office of Firstar Bank Milwaukee, National
Association, in Milwaukee, Wisconsin, on July 31, 2002. This Note shall bear
interest payable on the dates and at the rate or rates set forth in the Credit
Agreement referred to below. All amounts payable under this Note and the
Agreement shall be payable in lawful money of the United States of America.
This Note constitutes one of the Revolving Credit Notes issued under a
Credit Agreement dated as of March 20, 1997 (the "Credit Agreement"), among the
undersigned and Firstar Bank Milwaukee, National Association, for itself and as
Agent, and the other Banks from time to time party thereto, to which Credit
Agreement reference is hereby made for a statement of the terms and conditions
on which loans in part evidenced hereby were or may be made, and for a
description of the conditions upon which this Note may be prepaid, in whole or
in part, or its maturity accelerated.
This Note is entitled to the benefits of the Credit Agreement and all of
the Loan Documents referred to in the Credit Agreement.
This Note shall be construed in accordance with the laws (without regard
to principles of conflict of laws) of the State of Wisconsin. The undersigned
waives presentment, protest and notice of dishonor, and agrees, in the event of
default hereunder, to pay all costs and expenses of collection, including
reasonable attorneys' fees.
PLEXUS CORP.
By:
Name:
Title:
(CORPORATE SEAL)
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EXHIBIT 2.2
LOAN REQUEST
_______________, 19__
Firstar Bank Milwaukee,
National Association
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Re: Credit Agreement Dated as of March 20, 1997
(the "Agreement")
Gentlemen:
The undersigned hereby applies to you, as Agent, for a loan under the
above Agreement to be made on ____________, 19__ in the principal amount of
$_____________________.
The undersigned hereby certifies as follows:
() All of the representations and warranties set forth in Article IV of
such Agreement continue to be true on the date hereof.
() At the date hereof, no Default or Event of Default under said Agreement
has occurred and is continuing.
() There has been no material adverse change in the business operations or
financial condition of the undersigned and its Subsidiaries, taken as a whole,
since ________________, 19__.
The loans will bear interest at the:
[check appropriate box]
[_____] Variable Rate
[_____] Adjusted LIBOR Rate
If the loans will bear interest at the Adjusted LIBOR Rate, the Interest
Period shall be ____ months (one, two, three or six months).
Capitalized definitional terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Agreement.
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Very truly yours,
PLEXUS CORP.
By:
Title:
(CORPORATE SEAL)
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EXHIBIT 2.5
CONVERSION/CONTINUATION REQUEST
_______________, 19__
Firstar Bank Milwaukee, National Association
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Re: Credit Agreement Dated as of March 20, 1997
(the "Agreement")
Gentlemen:
The undersigned elects to convert/continue the following portion of the
outstanding loans under the Agreement:
. The type of loans to be converted/continued is currently:
[check appropriate box]
[_____] Variable Rate Loans
[_____] Adjusted LIBOR Rate Loans
. The amount of loans to be converted/continued:
$_________________________
. The type of loans into which the current loans shall be converted:
[check appropriate box]
[_____] Variable Rate Loans
[_____] Adjusted LIBOR Rate Loans
. Date of Conversion/Continuation: ________________
. Duration of Interest Period: _____ months [one, two, three or six
months] (applicable only to Adjusted LIBOR Rate Loans).
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<PAGE> 39
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
. The amount of the Adjusted LIBOR Rate Loans into which such loans are
converted/continued:
$_____________________ (applicable only to Adjusted LIBOR Rate Loans)
. Capitalized definitional terms used and not otherwise defined herein
shall have the meanings ascribed to them in the Agreement.
Very truly yours,
PLEXUS CORP.
By:
Title:
(Corporate Seal)
39
<PAGE> 40
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 4.1
SUBSIDIARIES
40
<PAGE> 41
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 9.1(w)
PERMITTED LIENS
41
<PAGE> 1
Exhibit 10.5(b)(i)
1997 Plexus 10-K
CORPORATE GUARANTEE AGREEMENT
THIS AGREEMENT is made as of March 20, 1997, by Electronic Assembly
Corporation, a Wisconsin corporation (hereinafter called "Guarantor").
R E C I T A L S :
A. Firstar Bank Milwaukee, National Association, Harris Trust and Savings
Bank and Bank One, Wisconsin (collectively, the "Banks"), and Firstar Bank
Milwaukee, National Association, as Agent (the "Agent") have entered into a
Credit Agreement dated as of the date hereof (the "Credit Agreement") with
Plexus Corp. (the "Company") providing for revolving credit loans to the
Company in an aggregate principal amount of up to $40,000,000.
B. The Banks have required, as a condition to making credit available to
the Company pursuant to the Credit Agreement, that the Guarantor guarantee the
Obligations (as hereinafter defined) on the terms stated herein.
C. It is necessary for the business purposes of the Guarantor that the
Company continue to obtain such credit from the Banks. The Guarantor is a
wholly-owned subsidiary of the Company. It is expected that substantially all
of the credit extended to the Company pursuant to the Credit Agreement will be
advanced to the Guarantor and Technology Group, Inc., another wholly-owned
subsidiary of the Company (the "Co-Guarantor") to meet the needs of the
Guarantor and the Co-Guarantor for working capital and other general corporate
purposes.
D. The term "Obligations" is used herein in its most comprehensive sense
and includes any and all debts, obligations, and liabilities of Company to the
Banks, or any of them, whether heretofore, now, or hereafter made, incurred, or
created, whether voluntary or involuntary and however arising, whether due or
not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, secured or unsecured, whether Company is liable individually or
jointly with others, whether for principal, interest or other debts,
obligations or liabilities, and whether or not any or all such debts,
obligations and liabilities are or
<PAGE> 2
become barred by any statute of limitations or otherwise unenforceable.
Without limitation of the foregoing, "Obligations" shall include all
indebtedness and other obligations of Company to the Banks under (i) the Credit
Agreement as from time to time in effect, including all extensions, renewals
and refundings thereof, and (ii) any agreements of Company with one or more of
the Banks (or their affiliates) relating to interest rate, currency or
commodity swaps, caps, floors, collars, options or similar hedging
arrangements.
C O V E N A N T S :
IN CONSIDERATION OF these premises and any credit or financial
accommodation now or hereafter granted by the Banks to Company, it is agreed
that:
1. Guarantee. The Guarantor hereby (a) unconditionally guarantees
the full and prompt payment and performance of the Obligations when
due, whether by acceleration or otherwise, or (if earlier) at the
time Company becomes the subject of bankruptcy or other insolvency
proceedings; (b) agrees to pay all costs, expenses and reasonable
attorneys' fees incurred by the Banks or the Agent in enforcing this
Agreement and the Obligations and realizing on any collateral for
either; and (c) agrees to pay to the Banks the amount of any payments
made to the Banks or another in connection with any of the
Obligations which are recovered from the Banks by a trustee,
receiver, creditor or other party pursuant to applicable law.
2. Guarantee of Payment. This is a guarantee of payment, and not
of collection. The Banks shall not be obligated to: (a) take any
steps whatsoever to collect from, or to file any claim of any kind
against, the Company, any other guarantor, or any other person or
entity liable for payment or performance of any of the Obligations;
or (b) take any steps whatsoever to protect, accept, obtain, enforce,
take possession of, perfect any interest in, foreclose or realize on
collateral or security, if any, for the payment or performance of any
of the Obligations or any guarantee of any of the Obligations; or (c)
in any other respect exercise any diligence whatever in collecting or
attempting to collect any of the Obligations by any means.
<PAGE> 3
3. Guarantee Absolute and Unconditional. The Guarantor's
liability for payment and performance of the Obligations shall be
absolute and unconditional; the Guarantor unconditionally and
irrevocably waives each and every defense which, under principles of
guarantee or suretyship law, would otherwise operate to impair or
diminish such liability; and nothing whatever except actual full
payment and performance to the Banks of the Obligations (and all
other debts, obligations and liabilities of Guarantor under this
Agreement) shall operate to discharge the Guarantor's liability
hereunder. Without limiting the generality of the foregoing, the
Banks shall have the exclusive right, which may be exercised from
time to time without diminishing or impairing the liability of the
Guarantor in any respect, and without notice of any kind to the
Guarantor, to: (a) extend any additional credit to Company; (b)
accept any collateral, security or guarantee for any Obligations or
any other credit; (c) determine how, when and what application of
payments, credits and collections, if any, shall be made on the
Obligations and any other credit and accept partial payments; (d)
determine what, if anything, shall at any time be done with respect
to any collateral or security; subordinate, sell, transfer,
surrender, release or otherwise dispose of all or any of such
collateral or security; and purchase or otherwise acquire any such
collateral or security at foreclosure or otherwise; and (e) with or
without consideration grant, permit or enter into any waiver,
amendment, extension, modification, refinancing, indulgence,
compromise, settlement, subordination, discharge or release of: (i)
any of the Obligations and any agreement relating to any of the
Obligations, (ii) any obligations of any guarantor or other person or
entity liable for payment or performance of any of the Obligations,
and any agreement relating to such obligations and (iii) any
collateral or security or agreement relating to collateral or
security for any of the foregoing.
4. Guarantor Waivers. The Guarantor hereby unconditionally waives
(a) presentment, notice of dishonor, protest, demand for payment and
all notices of any kind, including without limitation: notice of
acceptance hereof; notice of the creation of any of the Obligations;
notice of nonpayment, nonperformance or other default on any of the
Obligations; and notice of any action taken to collect
<PAGE> 4
upon or enforce any of the Obligations; (b) any subrogation to
the rights of the Banks against the Company, any other claim against
the Company which arises as a result of payments made by the
Guarantor pursuant to this Agreement, and any claim for contribution
against any co-guarantor, until the Obligations have been paid or
performed in full and such payments are not subject to any right of
recovery; and (c) any setoffs or counterclaims against the Banks
which would otherwise impair the Banks' rights against the Guarantor
hereunder.
5. Independent Investigation. Guarantor has made an independent
investigation and evaluation of the financial condition of the
Company and the value of any collateral, and has not relied (and will
not rely) on any information or evaluation provided by the Banks
regarding such condition or value.
6. Representations and Warranties. Guarantor represents and warrants
that:
a. The execution, delivery and performance of this Agreement by
the Guarantor are within the corporate powers of the Guarantor,
have been duly authorized by all necessary corporate action and
do not and will not (i) require any consent or approval of the
stockholders of the Guarantor which has not been obtained, (ii)
violate any provision of the articles of incorporation or
by-laws of the Guarantor or of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Guarantor or any
subsidiary of the Guarantor, (iii) require the consent or
approval of, or filing or registration with, any governmental
body, agency or authority, or (iv) result in a breach of or
constitute a default under, or result in the imposition of any
lien, charge or encumbrance upon any property of the Guarantor
or any subsidiary of the Guarantor pursuant to, any indenture or
other agreement or instrument under which the Guarantor or any
subsidiary of the Guarantor is a party or by which it or any of
its properties may be bound or affected.
<PAGE> 5
b. This Agreement constitutes the legal, valid and binding
obligation of the Guarantor enforceable in accordance with its
terms, except that such enforceability may be limited by
bankruptcy or similar laws affecting the enforceability of
creditors' rights generally.
c. The financial statements of the Guarantor furnished to the
Banks fairly present the financial condition of the Guarantor
for the periods shown therein, and since the dates covered by
the most recent of such financial statements, there has been no
material adverse change in the Guarantor's assets or the conduct
of its business. Except as expressly shown on such financial
statements, the Guarantor owns all of its assets free and clear
of all liens; is not a party to any litigation, nor is any
litigation threatened to the knowledge of the Guarantor which
would, if adversely determined, cause any material adverse
change in its business or assets; and has no delinquent tax
liabilities, nor have any tax deficiencies been proposed against
it.
7. Financial Information. The Guarantor shall provide to the
Banks such information regarding the financial condition of the
Guarantor as the Banks may reasonably request from time to time.
8. Continuing Guarantee. This Agreement shall inure to the
benefit of the Banks and their respective successors and assigns,
including every holder or owner of any of the Obligations, and shall
be binding upon the Guarantor and Guarantor's successors and assigns.
This is a continuing guarantee and shall continue in effect until the
Banks shall have received written notice of termination from
Guarantor; provided that this guarantee shall continue in effect
thereafter with respect to all Obligations which arise or are
committed for prior to Banks' receipt of such notice of termination
(including all subsequent extensions and renewals thereof, including
extensions and renewals at increased rates, and all subsequently
accruing interest and other charges thereon) until all such
Obligations and all obligations of Guarantor hereunder shall be paid
or performed in full and such payments are not subject to any right
of recovery.
<PAGE> 6
9. Miscellaneous. This Agreement constitutes the entire agreement
between the Banks and Guarantor with respect to the subject matter
hereof, superseding all previous communications and negotiations, and
no representation, understanding, promise or condition concerning the
subject matter hereof shall be binding upon the Banks unless
expressed herein. This Agreement shall be governed by the internal
laws of the State of Wisconsin.
ELECTRONIC ASSEMBLY CORPORATION
By:
Title:
(CORPORATE SEAL)
Attest:
Title:
<PAGE> 1
Exhibit 10.5(b)(ii)
1997 Plexus 10-K
CORPORATE GUARANTEE AGREEMENT
THIS AGREEMENT is made as of March 20, 1997, by Technology Group, Inc., a
Wisconsin corporation (hereinafter called "Guarantor").
R E C I T A L S :
A. Firstar Bank Milwaukee, National Association, Harris Trust and Savings
Bank and Bank One, Wisconsin (collectively, the "Banks"), and Firstar Bank
Milwaukee, National Association, as Agent (the "Agent") have entered into a
Credit Agreement dated as of the date hereof (the "Credit Agreement") with
Plexus Corp. (the "Company") providing for revolving credit loans to the
Company in an aggregate principal amount of up to $40,000,000.
B. The Banks have required, as a condition to making credit available to
the Company pursuant to the Credit Agreement, that the Guarantor guarantee the
Obligations (as hereinafter defined) on the terms stated herein.
C. It is necessary for the business purposes of the Guarantor that the
Company continue to obtain such credit from the Banks. The Guarantor is a
wholly-owned subsidiary of the Company. It is expected that substantially all
of the credit extended to the Company pursuant to the Credit Agreement will be
advanced to the Guarantor and Electronic Assembly Corporation, another
wholly-owned subsidiary of the Company (the "Co-Guarantor") to meet the needs
of the Guarantor and the Co-Guarantor for working capital and other general
corporate purposes. In addition, the Guarantor provides engineering and design
services to customers of the Company and the Co-Guarantor and expansion of the
business of the Company and the Co-Guarantor will indirectly benefit the
business of the Guarantor.
D. The term "Obligations" is used herein in its most comprehensive sense
and includes any and all debts, obligations, and liabilities of Company to the
Banks, or any of them, whether heretofore, now, or hereafter made, incurred, or
created, whether voluntary or involuntary and however arising, whether due or
not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, secured or unsecured, whether Company is liable individually or
jointly with others, whether for principal, interest or other debts,
obligations or liabilities, and whether or
<PAGE> 2
not any or all such debts, obligations and liabilities are or become barred by
any statute of limitations or otherwise unenforceable. Without limitation of
the foregoing, "Obligations" shall include all indebtedness and other
obligations of Company to the Banks under (i) the Credit Agreement as from
time to time in effect, including all extensions, renewals and refundings
thereof, and (ii) any agreements of Company with one or more of the Banks (or
their affiliates) relating to interest rate, currency or commodity swaps, caps,
floors, collars, options or similar hedging arrangements.
C O V E N A N T S :
IN CONSIDERATION OF these premises and any credit or financial
accommodation now or hereafter granted by the Banks to Company, it is agreed
that:
1. Guarantee. The Guarantor hereby (a) unconditionally guarantees
the full and prompt payment and performance of the Obligations when
due, whether by acceleration or otherwise, or (if earlier) at the
time Company becomes the subject of bankruptcy or other insolvency
proceedings; (b) agrees to pay all costs, expenses and reasonable
attorneys' fees incurred by the Banks or the Agent in enforcing this
Agreement and the Obligations and realizing on any collateral for
either; and (c) agrees to pay to the Banks the amount of any payments
made to the Banks or another in connection with any of the
Obligations which are recovered from the Banks by a trustee,
receiver, creditor or other party pursuant to applicable law.
2. Guarantee of Payment. This is a guarantee of payment, and not
of collection. The Banks shall not be obligated to: (a) take any
steps whatsoever to collect from, or to file any claim of any kind
against, the Company, any other guarantor, or any other person or
entity liable for payment or performance of any of the Obligations;
or (b) take any steps whatsoever to protect, accept, obtain, enforce,
take possession of, perfect any interest in, foreclose or realize on
collateral or security, if any, for the payment or performance of any
of the Obligations or any guarantee of any of the Obligations; or (c)
in any other respect exercise any diligence whatever in collecting or
attempting to collect any of the Obligations by any means.
<PAGE> 3
3. Guarantee Absolute and Unconditional. The Guarantor's
liability for payment and performance of the Obligations shall be
absolute and unconditional; the Guarantor unconditionally and
irrevocably waives each and every defense which, under principles of
guarantee or suretyship law, would otherwise operate to impair or
diminish such liability; and nothing whatever except actual full
payment and performance to the Banks of the Obligations (and all
other debts, obligations and liabilities of Guarantor under this
Agreement) shall operate to discharge the Guarantor's liability
hereunder. Without limiting the generality of the foregoing, the
Banks shall have the exclusive right, which may be exercised from
time to time without diminishing or impairing the liability of the
Guarantor in any respect, and without notice of any kind to the
Guarantor, to: (a) extend any additional credit to Company; (b)
accept any collateral, security or guarantee for any Obligations or
any other credit; (c) determine how, when and what application of
payments, credits and collections, if any, shall be made on the
Obligations and any other credit and accept partial payments; (d)
determine what, if anything, shall at any time be done with respect
to any collateral or security; subordinate, sell, transfer,
surrender, release or otherwise dispose of all or any of such
collateral or security; and purchase or otherwise acquire any such
collateral or security at foreclosure or otherwise; and (e) with or
without consideration grant, permit or enter into any waiver,
amendment, extension, modification, refinancing, indulgence,
compromise, settlement, subordination, discharge or release of: (i)
any of the Obligations and any agreement relating to any of the
Obligations, (ii) any obligations of any guarantor or other person or
entity liable for payment or performance of any of the Obligations,
and any agreement relating to such obligations and (iii) any
collateral or security or agreement relating to collateral or
security for any of the foregoing.
4. Guarantor Waivers. The Guarantor hereby unconditionally waives
(a) presentment, notice of dishonor, protest, demand for payment and
all notices of any kind, including without limitation: notice of
acceptance hereof; notice of the creation of any of the Obligations;
notice of nonpayment, nonperformance or other default on any of the
<PAGE> 4
Obligations; and notice of any action taken to collect upon or
enforce any of the Obligations; (b) any subrogation to the rights of
the Banks against the Company, any other claim against the Company
which arises as a result of payments made by the Guarantor pursuant
to this Agreement, and any claim for contribution against any
co-guarantor, until the Obligations have been paid or performed in
full and such payments are not subject to any right of recovery; and
(c) any setoffs or counterclaims against the Banks which would
otherwise impair the Banks' rights against the Guarantor hereunder.
5. Independent Investigation. Guarantor has made an independent
investigation and evaluation of the financial condition of the
Company and the value of any collateral, and has not relied (and will
not rely) on any information or evaluation provided by the Banks
regarding such condition or value.
6. Representations and Warranties. Guarantor represents and
warrants that:
a. The execution, delivery and performance of this Agreement by
the Guarantor are within the corporate powers of the Guarantor,
have been duly authorized by all necessary corporate action and
do not and will not (i) require any consent or approval of the
stockholders of the Guarantor which has not been obtained, (ii)
violate any provision of the articles of incorporation or
by-laws of the Guarantor or of any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Guarantor or any
subsidiary of the Guarantor, (iii) require the consent or
approval of, or filing or registration with, any governmental
body, agency or authority, or (iv) result in a breach of or
constitute a default under, or result in the imposition of any
lien, charge or encumbrance upon any property of the Guarantor
or any subsidiary of the Guarantor pursuant to, any indenture or
other agreement or instrument under which the Guarantor or any
subsidiary of the Guarantor is a party or by which it or any of
its properties may be bound or affected.
<PAGE> 5
b. This Agreement constitutes the legal, valid and binding
obligation of the Guarantor enforceable in accordance with its
terms, except that such enforceability may be limited by
bankruptcy or similar laws affecting the enforceability of
creditors' rights generally.
c. The financial statements of the Guarantor furnished to the
Banks fairly present the financial condition of the Guarantor
for the periods shown therein, and since the dates covered by
the most recent of such financial statements, there has been no
material adverse change in the Guarantor's assets or the conduct
of its business. Except as expressly shown on such financial
statements, the Guarantor owns all of its assets free and clear
of all liens; is not a party to any litigation, nor is any
litigation threatened to the knowledge of the Guarantor which
would, if adversely determined, cause any material adverse
change in its business or assets; and has no delinquent tax
liabilities, nor have any tax deficiencies been proposed against
it.
7. Financial Information. The Guarantor shall provide to the
Banks such information regarding the financial condition of the
Guarantor as the Banks may reasonably request from time to time.
8. Continuing Guarantee. This Agreement shall inure to the benefit of
the Banks and their respective successors and assigns, including
every holder or owner of any of the Obligations, and shall be binding
upon the Guarantor and Guarantor's successors and assigns. This is a
continuing guarantee and shall continue in effect until the Banks
shall have received written notice of termination from Guarantor;
provided that this guarantee shall continue in effect thereafter with
respect to all Obligations which arise or are committed for prior to
Banks' receipt of such notice of termination (including all
subsequent extensions and renewals thereof, including extensions
and renewals at increased rates, and all subsequently accruing
interest and other charges thereon) until all such Obligations and
all obligations of Guarantor
<PAGE> 6
hereunder shall be paid or performed in full and such payments
are not subject to any right of recovery.
9. Miscellaneous. This Agreement constitutes the entire agreement
between the Banks and Guarantor with respect to the subject matter
hereof, superseding all previous communications and negotiations, and
no representation, understanding, promise or condition concerning the
subject matter hereof shall be binding upon the Banks unless
expressed herein. This Agreement shall be governed by the internal
laws of the State of Wisconsin.
TECHNOLOGY GROUP, INC.
By: /s/
Title:
(CORPORATE SEAL)
Attest: /s/
Title:
<PAGE> 1
Exhibit 10.10
Plexus 1997 10-K
PLEXUS CORP.
1998
MANAGEMENT INCENTIVE COMPENSATION PLAN
- --------------------------------------------------------------------------------
PLAN OBJECTIVE
The underlying objectives of this Plan are to enhance the position of the
stockholders and assist the corporation to attract, retain and motivate
management personnel by providing annual incentive award opportunities. The
Plan provides annual variable incentive compensation opportunities to
participants who attain high levels of performance, thus contributing to the
overall success of the Corporation. Increasing sales growth and earnings are
the two essential elements of this Plan.
ELIGIBILITY FOR PLAN PARTICIPATION
Participation in this Plan is limited to the corporation's management
positions. Only listed employees are to be included in Plan Year 1998 (October
1, 1997 through September 30, 1998). Criteria for inclusion in the Plan
include, but are not limited to, the following:
1. Positions which have the ability to significantly influence
results.
2. Individuals who have demonstrated leadership and influencing
skills.
3. Sales personnel and others closely linked with customers.
4. Positions for which it is difficult to attract and retain
qualified candidates.
(See Exhibit A for a list of participants by participation level.)
Additions to or deletions from the attached list are to be made by the Chief
Executive Officer or the Chief Operating Officer, and will only be made for
prudent reasons. It is anticipated that additions will be made during the Plan
Year to accommodate new employees or promotions of existing employees.
LEAVING THE PLAN
Plan participants who leave the employ of the corporation (whether voluntarily
or involuntarily) and employees who cease to be full-time employees (defined as
regularly scheduled 40 hours per week) prior to the end of a Plan Year (except
in the case of an intracompany transfer, retirement, disability, death or
approval by either the CEO or the COO) forfeit all rights to incentive awards
<PAGE> 2
accrued during the Plan Year in which the termination or change in status
occurs. Participants who receive an intracompany transfer to a position
ineligible to participate under the Plan, and Participants terminated because
of retirement, disability or death will receive all accrued awards prorated by
length of service during the course of the Plan Year following the end of the
Plan year and based upon full year results. "Retirement" means eligible for
retirement under Plexus Corp.'s retirement guidelines. In the event of death,
any payable award will be paid to the participant's estate following the end of
the Plan Year and based upon full year results.
INCENTIVE COMPENSATION - LEVELS OF PARTICIPATION
The Plan will be divided into four categories of participation, each with a
different incentive level:
1. Level 1-CEO/COO/Executive Vice Presidents/Chief Financial
Officer at a target level of 40% of each participant's Annualized
Base Salary.
2. Level 2-Senior Management (e.g., Vice Presidents) at a target
level of 30% of each participant's Annualized Base Salary.
3. Level 3-Middle Management (e.g., directors, cost center
managers) at a target level of 20% of each participant's Annualized
Base Salary.
4. Level 4-Junior Management (e.g., selected managers) at a
target level of 10% of each participant's Annualized Base Salary.
The target goals of the two main elements of the Plan are Corporate Aftertax
Earnings Per Share of $2.89 [PRIOR TO THE 1997 STOCK SPLIT] and Corporate
Sales Growth of 23%. If these two targets are achieved, participants will be
entitled to receive the above percentage according to their Level (assuming
satisfactory individual performance). If these targets are exceeded,
participants could potentially double the above percentage consistent with
their Level (again, assuming satisfactory individual performance).
(See Exhibit A for a detailed list of participants by participation level and
Exhibit B for your individual matrix.)
INCENTIVE COMPENSATION - MEASUREMENTS
Each participant's incentive compensation is based on a combination of overall
corporate performance and individual performance, as follows:
A. Forty percent (40%) of each participant's incentive
compensation shall be based on Corporate Aftertax Earnings Per Share
growth (on a pre-bonus basis) as detailed in Exhibit B.
B. Forty percent (40%) of each participant's incentive
compensation shall be based on Corporate Sales Growth as detailed in
Exhibit B.
C. Twenty percent (20%) of each participant's incentive
compensation shall be based on the individual performance rating of
the manager as detailed in Exhibit B.
Note: any incentive distribution under this Plan is contingent upon the
Company's achieving an
<PAGE> 3
acceptable "ability to pay calculation" which is estimated to be approximately
$2.64 [pre-split] Corporate Aftertax Earnings Per Share (on a pre-bonus basis)
in fiscal 1998.
ADMINISTRATION
Overall policy direction shall be provided by the Board of Directors. Plan
administration shall be the responsibility of the Chief Executive Officer and
the Chief Operating Officer with support and guidance from the Compensation
Committee.
EXCEPTIONS AND REVISIONS
It is conceivable that there may be particular situations which are not
properly accommodated by the regular criteria and boundaries of the prevailing
incentive program, e.g. the effect an acquisition, a secondary offering, or the
like, may have on the corporation's financial performance. Should these occur,
they will be examined by the Compensation Committee, and if adjustments are
made, the reason for special treatment will be explicitly set forth in
Committee Minutes.
TIME OF PAYMENT
Payment will be made no later than two and one half (2.5) months after the
corporation's fiscal 1998 year end.
EFFECTIVE DATE
The effective date of this Plan is October 1, 1997, and it ends September 30,
1998.
<PAGE> 4
PLEXUS CORP.
MANAGEMENT INCENTIVE COMPENSATION PLAN
GLOSSARY OF TERMS
- --------------------------------------------------------------------------------
PLAN YEAR
In conjunction with the corporation's fiscal year, each Plan Year shall begin
on October 1 and end on September 30.
PARTICIPANT
Means any employee who is selected to participate in the Plan.
ANNUALIZED BASE SALARY
For incentive purposes means participant's annualized base salary (excluding
bonuses, paid commissions, reimbursed relocation expenses, 401(k) plan, or
other special pay) on September 30 of the Plan Year, or the last day worked in
the case of retirement, disability or death. Annualized Base Salary will be
calculated on a pro-rated basis for participants who are not in the Plan the
entire Plan Year.
AFTERTAX PRE-BONUS EARNINGS PER SHARE
Aftertax pre-bonus earnings per share is aftertax income for the current fiscal
year (excluding Plan accruals) divided by the weighted average number of common
shares outstanding on a fully diluted basis in accordance with GAAP.
SALES GROWTH
Sales growth is the year-to-year percentage increase in Net Sales.
<PAGE> 1
EXHIBIT 11
1997 10-K
PLEXUS CORP.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
for the year ended September 30, 1997
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Primary Fully Diluted
---------- -------------
<S> <C> <C>
Net income $ 16,400 $ 16,400
Adjustment for preferred
stock dividends earned 211 -
--------- -----------
Adjusted
net income $ 16,189 $ 16,400
========= ===========
Weighted average number of
common shares outstanding 13,989 13,989
Adjustments:
Assumed issuances under
stock option plan 1,025 1,340
Assumed conversion of
preferred stock - 462
--------- -----------
15,014 15,791
========= ===========
Net income per common share $ 1.08 $ 1.04
========= ===========
</TABLE>
<PAGE> 1
Exhibit 21
1997 10-K
Subsidiaries of Plexus Corp.
1. Electronic Assembly Corporation, a Wisconsin corporation
2. Technology Group, Inc., a Wisconsin corporation
3. PAC Acquisition Corp. (d/b/a in certain locations as "Plexus NEI Corp."),
a Wisconsin corporation
<PAGE> 1
EXHIBIT 23
1997 10-K
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Plexus Corp. and Subsidiaries on Form S-8 (File No.'s 333-06469, 33-23490,
33-28309, 33-56932, 33-89862 and 33-89864) of our reports dated October 30,
1997 on our audits of the consolidated financial statements and the financial
statement schedule of Plexus Corp. and Subsidiaries as of September 30, 1997
and 1996, and for each of the three years in the period ended September 30,
1997, which reports are included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
December 29, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
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0
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</TABLE>
