<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- -----
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-14824
PLEXUS CORP.
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1344447
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
55 JEWELERS PARK DRIVE, NEENAH, WISCONSIN 54957-0156
(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
Preferred Stock Purchase Rights
(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 reports(s)) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of December 11, 1998, 14,980,948 shares of Common Stock were outstanding, and
the aggregate market value of the shares of Common Stock (based upon the
$29.8125 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 $416 million.
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K Into Which
Document Portions of Document are Incorporated
-------- -------------------------------------
Proxy Statement for 1999 Annual
Meeting of Shareholders Part III
Page 1
<PAGE> 2
"SAFE HARBOR" CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995:
The statements contained in the Form 10-K which are not historical
facts (such as statements in the future tense and statements including
"believe", "expect", "intend", "plan", "look forward to", "anticipate" and
similar terms) are forward-looking statements that involve risks and
uncertainties, including, but not limited to, the level of overall growth in the
electronics industry, the Company's ability to integrate acquired operations,
the Company's ability to secure new customers and maintain its current customer
base, the result of cost reduction efforts, material cost fluctuations and the
adequate availability of components and related parts for production, the risk
of customer delays or cancellations in both on-going and new programs, the
timing and mix of production, the effect of start-up costs of new programs and
facilities, capacity utilization, the effect of economic conditions, 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 I
ITEM 1. BUSINESS
GENERAL
Plexus Corp., through its subsidiaries (together "Plexus" or the
"Company"), provides product realization services to original equipment
manufacturers ("OEMs") in the medical, computer (primarily mainframes, servers
and peripherals), industrial, telecommunications and transportation electronics
industries. Plexus offers a full range of services including product development
and design, material procurement and management, prototyping, manufacturing and
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 than 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 Plexus Electronic Assembly Corporation and Plexus 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.
ELECTRONIC PRODUCT SERVICES
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
Page 2
<PAGE> 3
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 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 according to the customer or type of service involved.
Product Design. The Company, primarily through its Plexus Technology
Group, Inc. subsidiary, provides product design and engineering services. These
services include project management, product specifications, circuit design,
software design, custom integrated circuit design, printed circuit board layout,
product housing design, and product validation testing. The Company's design
services provide customers with a complete product design 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 use of computer assisted
electronic design automation tools to shorten the design cycle and improve
design quality. The Company's personnel use a variety of these advanced design
automation tools in the development of electronic products. Custom integrated
circuit design is assisted by circuit synthesis and simulation tools. Software
design is assisted by structured design tools and microprocessor emulation
technologies. Automated component placement and signal routing tools assist
printed circuit board design of complex multi-layered circuit boards. Solids
modeling and structure analysis tools assist product housing design.
The Company's design services may include initial feasibility studies,
product concept definition, development of specifications for product features
and functions, product engineering specifications, microprocessor design,
development, prototype production and testing, and development of test
specifications and procedures.
Product Development Engineering And Testing. The Company believes that
its product development engineering and testing capabilities are significant
factors in the success of its business. The Company maintains a staff of more
than 230 employees in its engineering services subsidiary, including some 200
engineers and technologists involved in project management, hardware, software,
mechanical, printed circuit board design, test and validation of electronic
products and systems. The Company believes this comprehensive capability
provides significant value to its customers by providing one-stop-shopping for
product design, prototyping, test and
Page 3
<PAGE> 4
manufacturing. The Company believes this comprehensive service lowers the
overall development cost to the customer and accelerates the time-to-market of
the customers' products.
To supplement its internal capabilities, Plexus has formed several
strategic alliances with independent research and development organizations for
cooperative design and marketing programs. The Company believes these alliances
provide complementary technologies and expertise to customers.
Prototyping. The Company provides rapid assembly of prototype products
within dedicated assembly facilities. The prototype assembly service is
supplemented by value-added services including materials management,
manufacturing defects analysis, design for manufacturability analysis, design
for testability analysis, and printed circuit board design. This service
provides a bridge between the Company's engineering organization, the customer's
engineering organization, and the Company's manufacturing organization. This
bridge facilitates efficient transitions into manufacturing. The Company
believes the higher-level engineering services offered by the prototyping
organization provide significant value to its customers by accelerating
time-to-production.
Product Manufacture And Assembly. The Company, primarily through its
Plexus Electronic Assembly Corporation subsidiary, manufactures electronic
products and assemblies for use in a wide variety of industries and
applications.
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 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 systems box build into the final product housing.
While the Company has automated various aspects of many processes, the assembly
of components into electronic products still requires some labor-intensive
processes generally requiring a high degree of precision and dexterity in the
assembly stage and integration of quality assurance checks into the
manufacturing processes. The final systems box build process is a mostly manual
process with little opportunity for automation. The Company utilizes specially
designed equipment and techniques to maintain its ability to assemble
efficiently a wide variety of electronic products. Additionally, the Company has
developed special processes and tools to enable the assembly of finished medical
devices to meet the US Food and Drug Administration Quality System Regulation
(QSR) requirements.
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
assemblies. Such test equipment includes functional test fixtures for
Page 4
<PAGE> 5
testing product assemblies, sub-assemblies or printed circuit assemblies;
in-circuit component measurement testers for testing printed circuit board
assemblies; and intelligent burn-in chambers, which temperature cycle products
during functional test. The Company designs and assembles test systems 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.
MATERIALS AND COMPONENTS
The Company purchases electronic components from component
manufacturers and electronic component distribution companies. Key commodities
purchased include: printed circuit boards (PCBs), specialized components such as
application specific integrated circuits (ASICs), semi-conductors (i.e.,
integrated circuits, primarily memory and logic devices, and discrete devices),
interconnect products, electronic sub-assemblies (including memory modules,
power supply modules, and cable and wire harnesses), resistors, and capacitors.
In addition to electronic components, the Company purchases components
for consumption in its higher level assembly and box-build manufacturing. These
components include: sheet metal fabrications, plastic injection molded parts,
aluminum extrusions, die castings, and various other hardware and fastener
components. The components purchased range from standard to highly custom and
cover the spectrums of market volatility and price.
The Company has strategic suppliers for these components and, as a
result, has not generally experienced difficulties in obtaining the components
needed for its assemblies during fiscal 1998 and currently does not expect
difficulties in the near future. However, no assurance can be given that such
shortages could occur which would have a material adverse effect on the results
of the Company.
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 and representative agencies covering selected
customer accounts. The representatives are paid commissions based upon sales.
Additionally, the Company markets its services through advertisements, technical
articles, trade shows, press releases, the Internet and dissemination of Company
brochures.
Page 5
<PAGE> 6
During fiscal 1998, the Company's services were sold to approximately
120 customers. Only one customer represented over 10% of the Company's fiscal
1998 net sales, and with three customers representing over 10% of the Company's
fiscal 1997 net sales, as follows:
<TABLE>
<CAPTION>
Fiscal Year % of Net Sales
-----------------------------
Customer 1998 1997 1996
-------- ---- ---- ----
<S> <C> <C> <C>
General Electric Company 11% 13% 13%
International Business Machines Corporation * 12% 26%
Motorola, Inc. * 10% *
*represents sales less than 10%
</TABLE>
Many large customers, including those above, contract independently
through multiple divisions, subsidiaries, production facilities or locations.
The Company believes that in many cases its sales to one such subsidiary,
division, facility, or location 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, facilities, or locations 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.
In fiscal 1998, the Company sold its minority interest in a small
engineering/product company. The sale transaction included a five-year earnout
based on a defined formula that may generate future non-operating income.
Currently the Company does not expect these amounts, if any, to be material.
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.
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, technological capabilities and the capacity for
responsiveness, 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 market in which the Company's customers compete are
characterized by rapidly changing technology, evolving industry standards and
continuous improvements in products and services. The average
Page 6
<PAGE> 7
product designed and assembled by the Company may have a technological useful
life ranging from 18 months to over five years, dependent on the product and the
industry. 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. In addition, the
Company competes against foreign low-labor cost manufacturers. However, this
competition tends to focus on commodity and consumer related products, which is
not a focus market for Plexus. 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 outsource electronics manufacturing services industry.
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."
ENVIRONMENTAL COMPLIANCE
The Company is subject to a variety of environmental regulations
relating to the use, storage, discharge and disposal of hazardous chemicals used
during its manufacturing process. Although 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, there can
be no assurances that violations will not occur which could have a material
adverse effect on the results of the Company.
EMPLOYEES
As of December 1, 1998, the Company employed full time approximately
2345 persons. These employees included approximately 990 professional, technical
and engineering employees and approximately 1355 employees who work in assembly.
The Company also employed 150 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, although labor markets have been
tight in the areas surrounding its primary facilities. The Company's success
depends to a large extent upon the continued services of key managerial and
technical employees. The loss of such personnel could have a material adverse
effect on the Company and its results of operations.
Page 7
<PAGE> 8
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.
The facilities in the original Neenah complex built in the period from
1980 to 1985 are owned by the Company and contain an aggregate of approximately
80,000 square feet of assembly and office space.
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 1990, the Company occupied an assembly facility in Neenah,
Wisconsin, with approximately 110,000 square feet of assembly and office space
providing additional capacity. The Company leases this facility under a fifteen
year operating lease.
In 1994, the Company occupied a newly constructed 175,000 square feet
surface mount assembly and office facility in Neenah, Wisconsin designated the
"Advanced Manufacturing Center" as a result of its design by the Company to
incorporate advanced assembly processes. The Company leases this facility under
a twenty year operating lease.
In 1997, the Company occupied an approximately 110,000 square foot
leased manufacturing facility located in Green Bay, Wisconsin. Annual lease
payments by the Company for the building and equipment is based on the
profitability of the facility pursuant to a formula defined in the lease
agreement. There are no required minimum lease payments, although it does
involve a sharing of potential future profits (if any) from the facility.
In 1996 and 1997, the Company occupied additional office buildings,
with approximately 32,000 square feet of office space, in Neenah, Wisconsin. The
Company leases these office buildings under individual ten-year operating
leases.
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 operating lease. The Company will be
moving from this existing facility into a 15,000 square foot facility in
February 1999. The Company will either sublease or terminate its existing lease
and replace it with a seven year operating lease for this new 15,000 square foot
facility.
In November 1997, the Company purchased an approximately 14,000 square
foot manufacturing and office facility in Minneapolis, Minnesota. Also, in
November 1997, the Company entered into an operating lease for a manufacturing
and office facility, with approximately 5,000 square feet, in Milpitas,
California for a five-year term.
The Company uses specialized equipment in its operations. The Company
leases a substantial amount of this equipment.
Page 8
<PAGE> 9
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 of or 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 1998.
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>
Peter Strandwitz 61 Chairman, Chief Executive Officer, Director 1979
John L. Nussbaum 56 President, Chief Operating Officer, Director 1996 (1)
Charles C. Williams 62 Vice President 1989
Thomas B. Sabol 39 Vice President-Finance and Chief Financial Officer 1996 (2)
Joseph D. Kaufman 41 Vice President, Secretary and General Counsel 1990
William F. Denney 65 Vice President 1990 (3)
Lisa M. Kelley 32 Treasurer and Controller 1998 (4)
</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.
(3) Mr. Denney has served as the Vice President of the Company since 1990. He
was the Company's Controller from 1990 to 1997 and the Company's Treasurer
from 1995 to 1997.
(4) Ms. Kelley joined the Company in September 1992. Positions held within the
Company included Manager, Subsidiary Controller, and Assistant Corporate
Controller. Beginning in 1997, she became the Corporate Controller. In
1998, Ms. Kelley became Treasurer.
Page 9
<PAGE> 10
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, 1998 and 1997, 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.
Price Range of Common Stock (restated to reflect the Company's 1997 two-for-one
stock split)
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended
September 30, 1998 September 30, 1997
High Low High Low
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First Quarter 35 1/8 13 1/8 First Quarter 10 3/8 6 7/8
Second Quarter 22 1/2 12 3/8 Second Quarter 17 5/8 8 3/8
Third Quarter 24 16 1/4 Third Quarter 28 12 1/2
Fourth Quarter 22 3/4 13 3/4 Fourth Quarter 38 1/4 23 1/2
Year 35 1/8 12 3/8 Year 38 1/4 6 7/8
</TABLE>
As of September 30, 1998, there were approximately 6,000 shareholders
of record.
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.
Issuance of Securities
Each Plexus shareholder of record as of August 27, 1998 was issued, in
a dividend, one Preferred Stock Purchase Right, as reported in Plexus' Report on
Form 8-K dated August 13, 1998. As a dividend, the transaction was not subject
to registration under the Securities Act of 1933.
Page 10
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
FINANCIAL HIGHLIGHTS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the years ended September 30,
OPERATING STATEMENT DATA 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net sales $ 396,815 $ 386,431 $ 316,124 $ 283,134 $ 242,483
Gross profit 49,946 44,016 27,333 23,696 16,170
Gross margin 12.6% 11.4% 8.6% 8.4% 6.7%
Operating income 30,922 27,009 14,016 12,435 7,926
Operating margin 7.8% 7.0% 4.4% 4.4% 3.3%
Net income 19,235 16,400 7,431 6,343 3,057
Earnings per share (diluted) $ 1.21 $ 1.05 $ 0.52 $ 0.45 $ 0.23
CASH FLOW STATEMENT DATA
Cash flows provided by operations $ 29,745 $ 20,361 $ 29,243 $ 4,188 ($11,171)
Capital equipment additions 9,376 10,738 4,144 2,106 5,288
BALANCE SHEET DATA
Working capital $ 68,296 $ 53,258 $ 51,425 $ 71,302 $ 62,784
Total assets 143,665 121,817 107,374 115,088 122,021
Long-term debt 152 3,516 15,372 41,734 40,691
Stockholders' equity 89,339 67,583 48,017 41,009 34,879
Return on average assets 14.5% 14.3% 6.7% 5.4% 2.8%
Return on average equity 24.5% 28.4% 16.7% 16.7% 10.2%
Inventory turnover ratio 7.5x 6.7x 5.6x 4.8x 4.1x
</TABLE>
Note: All per share information reported throughout this annual report has been
restated for Statement of Financial Accounting Standard No. 128, "Earnings Per
Share." In addition, all share and per share information reported throughout
this annual report has been restated (except where noted) to give effect to the
Company's two-for-one stock split effective August 25, 1997.
Page 11
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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, are forward-looking
statements (such as statements in the future tense and statements including
"believe", "expect", "intend", "plan", "look forward to", "anticipate" and
similar terms) that 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" and "Year 2000
Issues").
GENERAL
Plexus Corp. is a contract service provider of design, manufacturing
and testing services to the electronics industry, headquartered in Neenah,
Wisconsin. Through its wholly owned subsidiaries, Plexus Technology Group, Inc.,
and Plexus Electronic Assembly Corporation, the Company provides product
realization services to original equipment manufacturers in the medical,
computer (primarily mainframes, servers and peripherals), industrial,
telecommunications and transportation electronics industries. 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.
The Company has operations in Wisconsin, Kentucky, North Carolina,
Minnesota and California. The Company continues to look for 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. However, a change in component costs can directly
impact the average selling price, gross margins and the Company's net sales. Due
to the nature of turnkey manufacturing, the Company's quarterly and annual
results are affected by the level and timing of customer orders, fluctuations in
materials costs, and the degree of automation used in the assembly process.
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
Page 12
<PAGE> 13
set-up and restart inefficiencies. From time to time, allocations of components
can be an integral part of the electronics industry. 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.
Many of the industries for which the Company currently provides
electronic products are subject to rapid technological changes, product
obsolescence, increased competition, and pricing pressures. In fiscal 1998,
approximately 4 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.
Although the Company obtains firm purchase orders from its customers, they
typically do not make firm orders for delivery of products more than 30 to 90
days in advance. The Company does not believe that the backlog of expected
product sales covered by firm purchase orders is a meaningful measure of future
sales since orders may 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 historical sales growth rate will
continue. 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 15 to 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 rate will continue.
Page 13
<PAGE> 14
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 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, year
2000 compliance issues discussed below, 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.
YEAR 2000 ISSUES
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 Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's manufacturing, design and testing equipment, computer programs or
computer hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather that the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to operate
equipment, process transactions or engage in similar normal business activities.
Page 14
<PAGE> 15
The Company has developed a Year 2000 compliance strategy and
methodology to assure the Company can continue to provide engineering and
manufacturing services in the year 2000 and beyond. The Company's A/S400
hardware and software system, which handles virtually all production data
processing and accounting, has been tested and documented to be Year 2000
compliant. Final compliancy approval is expected to be completed by December 31,
1998. The Company is targeting June 30, 1999 to be compliant on all other
mission critical items.
The Company's Year 2000 strategy defines focus teams responsible for
information systems including hardware and software; production and facility
equipment and systems; test equipment and software; engineering development
systems; component and inventory issues; customer and supplier issues; and third
party agents and extended enterprises. Each team will complete four phases to
assure Year 2000 compliance which include a complete inventory and risk
assessment of items or issues (risk assessment defined as mission critical, non
mission critical, or not date sensitive); a strategy plan including
contingencies or remediation; the actual conversion or remediation including
testing and documentation; and compliancy approval.
The first phase of the plan (inventory and risk assessment) was
completed by mid December of 1998. The strategy and initial contingency plan is
expected to be completed by the end of January, 1999. The actual conversion,
remediation and testing will occur between February and May, 1999. Final
compliancy approval is expected to be completed by the end of June, 1999. Final
contingency plans are scheduled to be in place by September, 1999 for any
remaining or unexpected items.
The Company believes the costs associated with the Year 2000 compliancy
plan will be mostly current internal labor expenses and are not expected to
materially increase. Future compliancy costs have not been determined, but are
not expected to be material. Other non-Year 2000 efforts have not been
materially delayed or impacted by Year 2000 compliancy plan initiatives. There
can be no assurance that these estimates will prove to be accurate and actual
results could differ materially from those currently anticipated.
The Company presently believes that the Year 2000 issue will not pose
significant operational problems for the Company. However, if all Year 2000
issues are not properly identified, or assessment, remediation and testing are
not effected timely with respect to Year 2000 problems that are identified,
there can be no assurance that the Year 2000 issue will not materially adversely
impact the Company's results of operations or adversely affect the Company's
relationships with customers, vendors or others. The most reasonably likely
worst case scenario could cause a production shut down in one or more
facilities. The Company has not yet completed a contingency plan for such
occurrence, but has included completion of a contingency plan in its Year 2000
planning as discussed above. There can be no assurance that the Year 2000 issues
of other entities will not have a material adverse impact on the Company's
systems or results of operations. Additionally, there can be no assurance that
potential future costs of defending and resolving claims will not have a
material adverse impact on the Company's results of operations.
Page 15
<PAGE> 16
RESULTS OF OPERATIONS
Net Sales
In fiscal 1998, net sales were $397 million, an increase of $11
million, or 3 percent, over the previous year. Net sales in fiscal 1997 were
$386 million, an increase of $70 million, or 22 percent, over fiscal 1996. Sales
for fiscal 1998 increased due to the addition of new programs and new customers,
primarily Ascend Communications, Inc. (Ascend). Sales to Ascend exceeded 10% of
total sales for the second half of fiscal 1998. This increase was offset by
several factors including (1) the decision by certain customers to transition
manufacturing into their own in-house manufacturing facilities, primarily
Motorola, Inc. (Motorola), (2) the Company's decision to exit from certain
automotive and other commodity-oriented markets, primarily computer peripherals,
whose businesses are no longer compatible with the Company's long-term growth
plans, (3) decreasing component pricing with related decreases in average
selling prices, (4) a general weakening of certain markets, primarily
industrial-semiconductors, in which the Company operates, and (5) the negative
effects of the strong U.S. dollar and the Southeast Asian market's unfavorable
economic conditions and the impact of such on a few customers. Such items could
continue to impact the Company's sales growth rate.
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.
Sales for fiscal 1998 to the industries the Company services remained
fairly consistent with fiscal 1997, except for the increase in the
telecommunications industry from 11 percent to 18 percent of total sales which
was somewhat offset by a decline in the computer industry to 27 percent from 31
percent of total sales. The large increase in the telecommunications industry
was primarily a result of sales to a new customer, Ascend, in fiscal 1998. Sales
for fiscal 1998 for the other industries were as follows: Medical 21 percent (21
percent in fiscal 1997), Industrial 20 percent (21 percent in fiscal 1997),
Transportation 12 percent (12 percent in fiscal 1997), and Other 2 percent (4
percent in fiscal 1997). Automotive sales, included in Transportation, decreased
from 6 percent in fiscal 1997 to less than 3 percent in fiscal 1998, which was
offset by gains in sales to Avionics customers. For fiscal 1999, the Company
currently expects the telecommunications, medical and industrial markets to
increase in percentage terms, offset by decreases in the computer and
transportation markets.
The Company's largest customer for fiscal 1998 was General Electric
Company (GE) (including up to four subsidiaries or divisions) which accounted
for 11 percent of total sales compared to 13 percent of total sales for fiscal
1997 and 1996. No other customers accounted for more than 10 percent of the
Company's total sales for fiscal 1998, although sales to Unisys were slightly
less than 10 percent of the Company's total sales for fiscal 1998 and 1997.
Sales to IBM
Page 16
<PAGE> 17
(including up to six subsidiaries or divisions) were 12 percent and
26 percent of total sales for fiscal 1997 and 1996, respectively. Sales to IBM
continue to decrease due to the items noted above. Sales to Motorola (including
up to five subsidiaries, divisions or locations) were 10 percent of total sales
in fiscal 1997. These results reflect the Company's dedication to continue to
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 have resulted in a reduced
dependency on IBM and GE. Currently the Company expects sales from GE and Unisys
to remain steady in fiscal 1999. However, their percentage of total Company
sales could continue to decline as other customers grow. Sales to Ascend are
currently expected to exceed 10 percent in fiscal 1999.
Sales to the Company's ten largest customers accounted for 70 percent,
68 percent, and 70 percent of total revenues in fiscal 1998, 1997, and 1996,
respectively. While the Company expects similar results for the total percent of
sales accounted for by the ten largest customers, the continuation of a
diversified customer base is expected to change the customer mix. The Company
remains dependent upon continued sales to GE, Ascend, Motorola, Unisys, IBM 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 $5.9 million, or 13 percent, in fiscal 1998
compared to fiscal 1997, and by $16.7 million, or 61 percent, during fiscal 1997
compared to fiscal 1996. The gross margin increased to 12.6 percent in fiscal
1998, from 11.4 percent in fiscal 1997. The gross margin in fiscal 1996 was 8.6
percent.
The improved gross margin in fiscal 1998 compared to fiscal 1997
reflects the Company's focus on business mix, leading-technology products and
markets, continued operating efficiencies and better component pricing which
were partially offset by increased costs for expansion of engineering and
technical manufacturing capabilities to meet customer demands.
The increase in gross margin in fiscal 1997 compared to fiscal 1996
reflects the leverage generated by higher sales volumes, continued cost-savings
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.
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.
Page 17
<PAGE> 18
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, product life cycles, sales volumes, capacity utilization of surface
mount and other equipment, labor costs and efficiencies, the management of
inventories, component pricing and shortages, average sales prices, the mix of
turnkey and consignment business, fluctuations and timing of customer orders,
changing demand for 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 $19.0 million in
fiscal 1998, compared to $17.0 million in fiscal 1997, and $13.3 million in
fiscal 1996. As a percentage of sales, S&A expenses were 4.8 percent, 4.4
percent and 4.2 percent in fiscal 1998, 1997 and 1996, 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. The Company
anticipates that future S&A expenses will increase in absolute dollars but
remain between 4.7 percent and 5.0 percent of sales, as the Company continues to
expand these support areas.
Other Income (Expense)
Interest expense was $13,000 in fiscal 1998, compared to $0.8 million
in fiscal 1997 and $2.1 million in fiscal 1996. The continual decrease in
interest expense is primarily due to reduced borrowings required to support
working capital. See "Liquidity and Capital Resources." As a result of reduced
borrowings and cash investments, interest income was $0.7 million in fiscal
1998, compared to $0.1 million in fiscal 1997 and 1996. Other miscellaneous
income in fiscal 1997 included approximately $0.6 million in gains from the
buyout and sale of certain leased manufacturing equipment.
Income Taxes
Income taxes increased to $12.4 million in fiscal 1998, from $10.7
million in fiscal 1997, and $4.9 million in fiscal 1996, as a result of
increased earnings. The Company's effective income tax rate has remained
constant at rates between 39 percent to 40 percent in fiscal 1998, 1997, and
1996. These rates approximate the blended Federal and state statutory rate as a
result of the Company's operations being located within the United States.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities were $29.7 million in fiscal 1998,
compared to $20.4 million in fiscal 1997. Cash from operations was provided
primarily by improved net profits. Inventory turnover improved to 7.5 turns as
of September 30, 1998, from 6.7 turns as of September 30, 1997.
Page 18
<PAGE> 19
The cash generated from operating activities in fiscal 1998 was
utilized primarily to purchase additional manufacturing equipment. Borrowings
under the Company's $40 million long-term revolving credit agreement have been
reduced to zero from approximately $3 million as of September 30, 1997. The
Company also obtained approximately $4 million in net capital as a result of
stock option exercises and related tax benefit, which was offset by the purchase
of treasury stock by the Company. On December 19, 1997, the Company's Board of
Directors authorized the repurchase of up to 2,000,000 shares, or a maximum of
$25,000,000, of the Company's common stock on the open market. Through December
1998, 204,200 shares have been repurchased.
Capital additions of $9.4 million for fiscal 1998 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 1997 and 1996 were $10.7
million and $4.1 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 1999 to be
similar to fiscal 1998 at approximately $8 to $10 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. 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. There are no
required minimum lease payments, although it involves a sharing of potential
future profits (if any) from the facility.
The ratio of total debt-to-equity as of September 30, 1998, was 0.6 to
1, compared to 0.8 to 1 as of September 30, 1997.
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 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.
Page 19
<PAGE> 20
NEW ACCOUNTING PRINCIPLES
The Company adopted 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. 131, "Disclosure about Segments of an
Enterprise and Related Information," in fiscal 1999 and the American Institute
of Certified Public Accountants ("AICPA") Statement of Position ("SOP") 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," in fiscal 2000. (See footnotes 1, 6 and 9 to the Company's
consolidated financial statements.)
Additional standards the Company will be required to adopt but are not
expected to have a material impact on the Company are SFAS No. 130, "Reporting
Comprehensive Income," and SFAS No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits," in fiscal 1999; SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," and AICPA SOP 98-5,
"Reporting on the Costs of Start-up Activities," in fiscal 2000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The following discussion about the Company's risk-management activities
may include forward-looking statements that involve risk and uncertainties.
Actual results could differ materially from those discussed.
The Company has financial instruments, including short-term cash
investments and long-term debt, which are sensitive to changes in interest
rates. However, the Company does not use any interest-rate swaps or other types
of derivative financial instruments to limit its sensitivity to changes in
interest rates because of the relatively short-term nature of its cash
investments and immaterial amount of its long-term debt.
The Company does not believe there has been any material changes in the
reported market risks faced by the Company since the end of its most recent
fiscal year September 30, 1998.
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. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
Page 20
<PAGE> 21
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
1999 Annual Meeting of Shareholders ("1999 Proxy Statement") and from "Security
Ownership of Certain Beneficial Owners and Management--Section 16(a) Beneficial
Ownership Reporting Compliance" in the 1999 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 1999
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated herein by reference to "Security Ownership of Certain
Beneficial Owners and Management" in the 1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION
Incorporated herein by reference to "Certain Transactions" in the 1999
Proxy Statement.
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
page of this report, which index is incorporated
herein by reference.
(b) Reports on Form 8-K.
A report on Form 8-K dated August 13, 1998 was filed by Plexus during
the last quarter of 1998. The report related to Plexus' adoption of its
Shareholder Rights Plan.
Page 21
<PAGE> 22
PLEXUS CORP. 10-K
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
SEPTEMBER 30, 1998
CONTENTS
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Report of Independent Accountants F-2
Consolidated Statements of Operations for the three years ended F-3
September 30, 1998, 1997 and 1996
Consolidated Balance Sheets as of September 30, 1998 and 1997 F-4
Consolidated Statements of Stockholders' Equity for the three years
ended September 30, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows for the three years ended
September 30, 1998, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-7 to F-15
Financial Statement Schedule:
Report of Independent Accountants F-16
Schedule II - Valuation and Qualifying Accounts F-17
</TABLE>
F-1
<PAGE> 23
[PRICEWATERHOUSECOOPERS LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors
Plexus Corp.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Plexus Corp.
and subsidiaries as of September 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1998, in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Milwaukee, Wisonsin
October 27, 1998
F-2
<PAGE> 24
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended September 30, 1998, 1997 and 1996
(in thousands, except share data)
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 396,815 $ 386,431 $ 316,124
Cost of sales 346,869 342,415 288,791
---------- ----------- ----------
Gross profit 49,946 44,016 27,333
Selling and administrative expenses 19,024 17,007 13,317
---------- ----------- ----------
Operating income 30,922 27,009 14,016
Other income (expense):
Interest expense (13) (823) (2,087)
Miscellaneous 775 894 448
---------- ----------- ----------
Income before income taxes 31,684 27,080 12,377
Income taxes 12,449 10,680 4,946
---------- ----------- ----------
Net income $ 19,235 $ 16,400 $ 7,431
========== =========== ==========
Earnings per share:
Basic $ 1.31 $ 1.16 $ 0.53
========== =========== ==========
Diluted $ 1.21 $ 1.05 $ 0.52
========== =========== ==========
Weighted average shares outstanding:
Basic 14,712,299 13,987,504 12,993,516
Diluted 15,840,641 15,578,078 14,408,961
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 25
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
as of September 30, 1998 and 1997
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS 1998 1997
----------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 23,195 $ 3,655
Accounts receivable, net of allowance of $505 and $360, respectively 48,433 47,648
Inventories 44,303 47,931
Deferred income taxes 3,344 2,571
Prepaid expenses and other 1,976 981
--------- --------
Total current assets 121,251 102,786
Property, plant and equipment, net 21,355 18,687
Other 1,059 344
--------- --------
Total assets $ 143,665 $ 121,817
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 114 $ 214
Accounts payable 36,948 35,099
Customer deposits 3,787 3,414
Accrued liabilities:
Salaries and wages 5,161 5,908
Other 6,945 4,893
--------- ---------
Total current liabilities 52,955 49,528
Long-term debt 152 3,516
Deferred income taxes 700 998
Other liabilities 519 192
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized,
none issued or outstanding -- --
Common stock, $.01 par value, 60,000,000 shares authorized,
14,830,689 and 14,739,914 issued and outstanding, respectively 148 147
Additional paid-in capital 21,776 17,675
Retained earnings 67,920 49,761
Treasury stock, at cost, 28,944 and 0 shares, respectively (505) --
--------- ---------
89,339 67,583
--------- ---------
$ 143,665 $ 121,817
Total liabilities and stockholders' equity ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 26
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended September 30, 1998, 1997 and 1996
(in thousands, except share data)
<TABLE>
<CAPTION>
Series A
Preferred Stock Common Stock Additional
-------------------------------------------------------------- Paid-In
Shares Amount Shares Amount Capital
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances, October 1, 1995 7,000 $ 0 6,491,332 $ 65 $ 14,160
Exercise of stock options - - 9,864 - 93
Net income - - - - -
Preferred stock dividends
($73.71 per share) - - - - -
---------- ------------ ---------- --------- ----------
Balances, September 30, 1996 7,000 0 6,501,196 65 14,253
Exercise of stock options - - 346,049 3 3,501
-
Net income - - - - -
Preferred stock dividends
($48.33 per share) - - - - -
Preferred stock conversion (7,000) 0 554,454 - (6)
Two-for-one common stock split - - 7,338,215 73 (73)
---------- ------------ ---------- --------- ----------
Balances, September 30, 1997 - - 14,739,914 147 17,675
Treasury stock purchased - - - - -
Exercise of stock options,
including tax benefit - - 90,775 1 4,101
Other treasury stock issuances - - - - -
Net income - - - - -
---------- ------------ ---------- ---------- ----------
Balances, September 30, 1998 - - 14,830,689 $ 148 $ 21,776
========== ============ ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Total
Retained Treasury Stock Stockholders'
Earnings Shares Amount Equity
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances, October 1, 1995 26,784 - $ - $ 41,009
Exercise of stock options - - - 93
Net income 7,431 - - 7,431
Preferred stock dividends
($73.71 per share) (516) - - (516)
---------- ------- --------- ----------
Balances, September 30, 1996 33,699 - - 48,017
Exercise of stock options - - - 3,504
Net income 16,400 - - 16,400
Preferred stock dividends
($48.33 per share) (338) - - (338)
Preferred stock conversion - - - 0
Two-for-one common stock split - - - 0
---------- ------- --------- ----------
Balances, September 30, 1997 49,761 - - 67,583
Treasury stock purchased - (213,700) (3,442) (3,442)
Exercise of stock options,
including tax benefit (1,024) 131,656 2,059 5,137
Other treasury stock issuances (52) 53,100 878 826
Net income 19,235 - - 19,235
---------- ------- --------- ----------
Balances, September 30, 1998 67,920 (28,944) (505) 89,339
========== ======= ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 27
PLEXUS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended September 30, 1998, 1997 and 1996
(in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 19,235 $ 16,400 $ 7,431
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization 6,582 4,487 3,653
Provision for inventories and accounts
receivable allowances 2,164 2,253 2,145
Deferred income taxes (1,071) (481) (906)
Non-operating gains -- (620) --
Changes in assets and liabilities:
Accounts receivable (1,025) (12,432) 12,060
Inventories 1,704 4,298 (7,377)
Prepaid expenses and other (995) 470 479
Accounts payable 1,849 7,341 4,479
Customer deposits 373 (5,200) 5,084
Accrued liabilities 1,305 3,912 2,178
Other (376) (67) 17
-------- -------- --------
Cash flows provided by
operating activities 29,745 20,361 29,243
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment (9,376) (10,738) (4,144)
Proceeds on sale of property, plant and equipment 114 724 8
-------- -------- --------
Cash flows used in investing activities (9,262 (10,014) (4,136)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt -- 96,442 196,300
Payments on debt (3,464 (108,147) (222,706)
Proceeds from exercise of stock options 425 3,504 93
Tax benefit from stock options exercised 3,677 -- --
Treasury stock purchased (3,442) -- --
Treasury stock reissued 1,861 -- --
Payments of preferred stock dividends -- (338) (516)
-------- -------- --------
Cash flows used in financing activities (943) (8,539) (26,829)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 19,540 1,808 (1,722)
Cash and cash equivalents, beginning of year 3,655 1,847 3,569
-------- -------- --------
Cash and cash equivalents, end of year $ 23,195 $ 3,655 $ 1,847
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-6
<PAGE> 28
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. 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,
North Carolina, Minnesota and California.
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 is 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.
F-7
<PAGE> 29
PLEXUS CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Earnings Per Share: The computation of basic earnings per common share
is based upon the weighted average number of common shares outstanding
and net income reduced for preferred stock dividends. The computation
of diluted earnings per common share reflects additional dilution from
stock options and convertible preferred shares using the if-converted
method.
New Accounting Pronouncements: In March 1998, the American Institute of
Certified Public Accountants ("AICPA") issued Statement of Position
("SOP") 98-1, "Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use", which specifies the accounting treatment
provided to computer software costs depending upon the type of costs
incurred. This Statement is effective for the Company's fiscal year
2000 financial statements and restatement of prior years will not be
required. The Company does not believe the adoption of this Statement
will have a significant impact on its financial position or results of
operations.
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.
Reclassifications: Certain amounts in prior years' consolidated
financial statements have been reclassified to conform to the 1998
presentation.
2. INVENTORIES
Inventories as of September 30, 1998 and 1997 consist of (in
thousands):
1998 1997
--------------------
Assembly parts $25,165 $28,828
Work-in-process 18,089 18,557
Finished goods 1,049 546
------- -------
$44,303 $47,931
======= =======
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment as of September 30, 1998 and 1997 consist
of (in thousands):
1998 1997
----------------------
Land, buildings and improvements $ 9,564 $ 8,583
Machinery and equipment 42,571 35,439
------- -------
52,135 44,022
Less accumulated depreciation 30,780 25,335
------- -------
$21,355 $18,687
======= =======
F-8
<PAGE> 30
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. DEBT
Long-term debt as of September 30, 1998 and 1997 consists of (in
thousands):
1998 1997
-----------------
Revolving credit arrangement $ - $3,250
Other notes and obligations with a weighted
average interest rate of 3.2% and 3.0%,
respectively 266 480
------ -----
266 3,730
Less current portion
114 214
------ ------
$ 152 $3,516
====== ======
The Company's revolving credit arrangement 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%. The
credit arrangement is unsecured, 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.
Cash paid for interest in fiscal 1998, 1997 and 1996 was $13,000, $0.9
million and $2.0 million, respectively.
5. INCOME TAXES
Income tax expense (benefit) consists of (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------
Currently payable:
<S> <C> <C> <C>
Federal $ 11,274 $ 9,422 $ 4,983
State 2,244 1,739 869
------ -------- --------
13,518 11,161 5,852
------ -------- --------
Deferred:
Federal (949) (422) (800)
State (120) (59) (106)
------ -------- --------
(1,069) (481) (906)
------ -------- --------
$ 12,449 $ 10,680 $ 4,946
======== ======== ========
</TABLE>
F-9
<PAGE> 31
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------
<S> <C> <C> <C>
Federal statutory income tax rate 34.0% 34.0% 34.0%
Increase resulting from:
State income taxes, net of Federal
income tax benefit 4.6 4.2 4.1
Other, net 0.7 1.2 1.9
---------- --------- -------
Effective income tax rate 39.3% 39.4% 40.0%
========== ======== =======
</TABLE>
The components of the net deferred income tax asset as of September 30,
1998 and 1997, consist of (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------------- ---------------
<S> <C> <C>
Deferred tax assets:
Inventories $ 1,622 $ 1,423
Accrued benefits 871 753
Loss carryforwards 154 160
Other 968 395
---------- ----------
3,615 2,731
Less valuation allowance (21) (160)
---------- ----------
3,594 2,571
Deferred tax liabilities:
Property, plant and equipment 950 998
---------- -----------
Net deferred income tax asset $ 2,644 $ 1,573
========= ===========
</TABLE>
The Company records a valuation allowance to reflect the estimated
amount of deferred income tax assets which relate to loss carryforwards
that are not expected to be realized.
Cash paid for income taxes in fiscal 1998, 1997 and 1996 was $10.6
million, $11.1 million and $5.0 million, respectively.
6. STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE
During 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 128 "Earnings Per Share," that establishes a new
standard for reporting earnings per share. The earnings per share
computations for prior periods have been restated to conform with the
provisions of SFAS No. 128.
F-10
<PAGE> 32
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a reconciliation of the amounts utilized in the
computation of basic and diluted earnings per share (in thousands
except per share amounts):
<TABLE>
<CAPTION>
September 30,
----------------------------------
1998 1997 1996
------------- -------- ---------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Net income $19,235 $16,400 $ 7,431
Less: Preferred stock dividends -- 211 512
------- ------- -------
Income available to common stockholders $19,235 $16,189 $ 6,919
======= ======= =======
Weighted average shares outstanding 14,712 13,988 12,994
======= ======= =======
BASIC EARNINGS PER SHARE $ 1.31 $ 1.16 $ 0.53
======= ======= =======
DILUTED EARNINGS PER SHARE:
Net income $19,235 $16,400 $ 7,431
======= ======= =======
Weighted average shares outstanding 14,712 13,988 12,994
Effect of dilutive securities:
Stock options 1,129 1,128 306
Convertible preferred stock -- 462 1,109
------- ------- -------
Diluted weighted average shares outstanding 15,841 15,578 14,409
======= ======= =======
DILUTED EARNINGS PER SHARE $ 1.21 $ 1.05 $ 0.52
======= ======= =======
</TABLE>
On December 19, 1997, the Company's Board of Directors authorized the
repurchase of up to 2,000,000 shares, or a maximum of $25,000,000, of
the Company's common stock on the open market. The Company expects that
repurchases will occur from time to time. The Company anticipates the
shares held in treasury to be used for various purposes in the future,
including satisfaction of requirements for shares under the Company's
Employee Stock Savings Plan (401k plan) and its stock option incentive
program. When the treasury shares are reissued, any difference between
the acquisition cost of the shares and the proceeds from reissuance is
credited or charged to stockholders' equity.
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 common 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.
On February 28, 1997, the holders of the Series A 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.
F-11
<PAGE> 33
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income tax benefits attributable to stock options exercised are
recorded as an increase in additional paid-in capital.
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 non-cancelable and expire on
various dates through 2014. Rent expense under all operating leases for
fiscal 1998, 1997 and 1996 was approximately $8.3 million, $10.2
million and $13.5 million, respectively. Renewal and purchase options
are available on certain of these leases. The 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):
1999 $ 6,093
2000 4,784
2001 2,238
2002 1,926
2003 1,926
Thereafter 13,847
--------
$ 30,814
========
8. BENEFIT PLANS
401(k) Savings Plan: The Company's 401(k) savings plan covers all
eligible employees. 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 fiscal 1998, 1997
and 1996 totaled $1.1 million, $1.0 million and $0.8 million,
respectively.
Stock Option Plans: The Company has reserved 6.0 million shares of
common stock for grant to officers and key employees under an employee
stock option plan. The exercise price of each option granted shall not
be less than the fair market value on the date of grant and options
vest over a three year period from date of grant. The plan also
authorizes 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
F-12
<PAGE> 34
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 the directors' 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>
1998 1997 1996
----------------------------------- ------------------------------ ------------------------------
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 2,033 $ 8.30 2,029 $ 6.16 1,501 $ 5.90
Granted 366 $ 21.01 668 $ 12.25 563 $ 6.80
Canceled (38) $ 10.43 (32) $ 6.68 (16) $ 6.40
Exercised
($1.27 - $12.31 per share) (230) $ 7.02 (632) $ 5.57 (19) $ 4.69
-------- -------- --------
Options outstanding at
end of year 2,131 $ 10.61 2,033 $ 8.30 2,029 $ 6.16
======== ======== ========
Options exercisable at
end of year 1,189 $ 7.40 883 $ 6.23 1,061 $ 5.72
======== ======== ========
Shares available for future
options at end of year 2,449 576 1,212
======== ======== ========
</TABLE>
The following table summarizes outstanding stock option information at
September 30, 1998 (shares in thousands):
<TABLE>
<CAPTION>
Number of Weighted
Range of Shares Weighted Average Weighted Average Number of Shares Average
Exercise Prices Outstanding Exercise Price Remaining Life Exercisable Exercise Price
--------------- ----------- ------------------ ------------------ ------------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
$2.40 - $2.50 75 $ 2.46 2.7 years 75 $ 2.46
$5.20 - $7.50 989 $ 6.49 6.8 years 818 $ 6.44
$8.30 - $12.45 707 $11.80 7.9 years 292 $11.06
$19.90 - $29.00 360 $21.26 9.5 years 4 $27.06
$2.40 - $29.00 2,131 $10.61 7.5 years 1,189 $7.40
</TABLE>
The Company has elected 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 plans has been
recognized in the consolidated statements 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 1998, 1997 and 1996 would have been
reduced by approximately $2.5 million, $1.4 million and $0.2 million,
respectively. Basic earnings per share would have been reduced by
$0.17, $0.10 and $0.01 in fiscal 1998, 1997 and 1996, 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.
F-13
<PAGE> 35
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted average fair value of options granted per share during
fiscal 1998, 1997 and 1996 is $13.21, $6.62, $3.67, respectively. 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 assumption ranges: 41% to 61% volatility, 0% annual dividend
yield, and risk free interest rates ranging from 5.5% to 6.6% based on
expected terms and grant dates.
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 $343,000 and
$315,000 in fiscal 1998 and 1997, 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 and its subsidiaries operate in one business segment, the
production and sale of electronic products including the designing,
manufacturing 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 1998, 1997 and
1996:
1998 1997 1996
----------------------------------------
General Electric 11% 13% 13%
IBM * 12% 26%
Motorola * 10% *
(* represents sales less than 10%)
Accounts receivable related to General Electric represents 7% of the
Company's trade accounts receivable as of September 30, 1998.
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.
F-14
<PAGE> 36
PLEXUS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for fiscal 1998 and 1997 consists
of (in thousands, except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth
1998 Quarter Quarter Quarter Quarter Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 95,905 $ 97,689 $ 98,563 $104,658 $396,815
Gross profit 10,294 11,842 13,164 14,646 49,946
Net income 3,745 4,338 5,202 5,950 19,235
Earnings per share
Basic $ 0.25 $ 0.29 $ 0.35 $ 0.40 $ 1.31
Diluted $ 0.23 $ 0.28 $ 0.33 $ 0.38 $ 1.21
First Second Third Fourth
1997 Quarter Quarter Quarter Quarter Total
- -------------------------------------------------------------------------------------------------------
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
Earnings per share
Basic $ 0.21 $ 0.26 $ 0.30 $ 0.38 $ 1.16
Diluted $ 0.19 $ 0.23 $ 0.28 $ 0.34 $ 1.05
</TABLE>
Earnings per share is computed independently for each quarter. The annual per
share amount may not equal the sum of the quarterly amounts due to rounding.
F-15
<PAGE> 37
[PRICEWATERHOUSECOOPERS LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors
Plexus Corp.:
Our audits of the consolidated financial statements of Plexus Corp. and
subsidiaries referred to in our report dated October 27, 1998 (which is included
on page F-2 of the Form 10-K) also included an audit of the financial schedule
listed in the index on page F-1 of this form 10-K. In our opinion, this
financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
October 27, 1998
F-16
<PAGE> 38
Plexus Corp. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
For the years ended September 30, 1998, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
ADDITIONS CHARGED
BALANCE AT BEGINNING TO COSTS AND
OF PERIOD EXPENSES BALANCE AT END
DESCRIPTIONS DEDUCTIONS OF PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998:
Allowance for losses on accounts receivable (deducted
from the asset to which it relates) $ 360 $ 240 $ 95 $ 505
Allowance for inventory obsolescence (deducted from
the asset to which it relates)
3,034 1,924 1,453 3,505
--------------------------------------------------------------------------
$3,394 $2,164 $1,548 $4,010
==========================================================================
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
==========================================================================
</TABLE>
F-17
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
By: PLEXUS CORP. (Registrant)
/s/ Peter Strandwitz
--------------------
Peter Strandwitz, Chairman
December 28, 1998
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 will 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 al intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirement of the Security Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the date indicated.*
<TABLE>
<CAPTION>
SIGNATURE AND TITLE
<S> <C> <C>
/s/ Peter Strandwitz /s/ Rudolph T. Hoppe
- ------------------------------------------------------------ --------------------------------------------------
Peter Strandwitz, Chairman and Chief Executive Officer, Rudolph T. Hoppe, Director
and Director
/s/ John L. Nussbaum /s/ Harold R. Miller
- ------------------------------------------------------------ --------------------------------------------------
John L. Nussbaum, President and Chief Operating Officer, Harold R. Miller, Director
and Director
/s/ Thomas B. Sabol /s/ Gerald A. Pitner
- ------------------------------------------------------------ --------------------------------------------------
Thomas B. Sabol, Vice President-Finance and Chief Gerald A. Pitner, Director
Financial Officer
/s/ Lisa M. Kelley /s/ Thomas J. Prosser
- ------------------------------------------------------------ --------------------------------------------------
Lisa M. Kelley, Treasurer and Controller Thomas J. Prosser, Director
/s/ David J. Drury
--------------------------------------------------
David J. Drury, Director
</TABLE>
* Each of the above signatures is affixed as of December 28, 1998.
Page 22
<PAGE> 40
EXHIBIT INDEX
PLEXUS CORP.
10-K FOR YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INCORPORATED BY FILED
EXHIBIT NO. EXHIBIT REFERENCE TO HEREWITH
----------- ------ --------------- --------
<S> <C> <C> <C> <C>
3(i) Restated Articles of Plexus Corp., as X
amended through August 13, 1998
3(ii) Bylaws of Plexus Corp., as amended Exhibit 3(ii) to Plexus' Report on
through November 14, 1996 Form 10-K for the year ended
September 30, 1996 ("1996 10-K")
4.1 Restated Articles of Incorporation of Exhibit 3(i) above
Plexus Corp.
4.2 Shareholder Rights Agreement, dated as Exhibit 4.1 to Plexus' Report on
of August 13, 1998 between Plexus and Form 8-K dated August 13, 1998 (the
Firstar Trust Company as Rights Agent "8/13/98 8-K")
4.3 Form of Rights Certificate Exhibit 4.2 to 8/13/98 8-K
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 Exhibit 10.1(c) to Plexus'Report on
Form 10-K for the year ended
September 30, 1997 ("1997 10-K")
</TABLE>
Page 23
<PAGE> 41
<TABLE>
<S> <C> <C> <C> <C>
10.2 Change of Control Agreements dated
August 1, 1998 with **
(a) Peter Strandwitz X
John L. Nussbaum
Thomas B. Sabol
Charles C. Williams
Joseph D. Kaufman
(b) Lisa M. Kelley X
10.3 Employee Savings Plan and Trust**:
(a) Plan Document Exhibit 10.3(a) to 1996 10-K
(b) Non-Standardized Form Adoption Agreement Exhibit 10.3(b) to 1996 10-K
10.4 Plexus Corp. 1998 Option Plan** Exhibit A to the Registrant's
definitive proxy statement for its
1998 Annual Meeting of Shareholder
10.5(a) Credit Agreement dated as of March 20, Exhibit 10.5(a) to 1997 10-K
1997 among Firstar Bank Milwaukee,
National Association, Harris Trust and
Savings Bank, and Bank One, Wisconsin
(the "Credit Agreement")*
(b) Corporate Guarantee Agreements related Exhibits 10.5(b)(i) and (ii) to
thereto dated as of March 20, 1997 by 1997 10-K
EAC and Technology Group, Inc.
</TABLE>
Page 24
<PAGE> 42
<TABLE>
<S> <C> <C> <C> <C>
10.6(a) Lease Agreement between Neenah (WI) QRS Exhibit 10.8(a) to 1994 10-K
11-31, Inc. ("QRS: 11-31") and EAC,
dated August 11, 1994*
(b) Bill of Sale of EAC to QRS: 11-31 dated Exhibit 10.8(b) to 1994 10-K
August 31, 1994, together with related
Seller's/Lessee's Certificate of EAC
(c) Guaranty and Suretyship Agreement Exhibit 10.8(c) to 1994 10-K
between Plexus Corp. and QRS: 11-31
dated August 11, 1994, together with
related Guarantor's Certificate of
Plexus Corp.
10.7 Plexus Corp. 1995 Directors' Stock Exhibit 10.10 to 1994 10-K
Option Plan**
10.8 Plexus Corp. 1998 Management Incentive Exhibit 10.10 to 1997 10-K
Compensation Plan**
10.9 Lease Agreement dated February 12, 1996 Exhibit 10.16 to 3/31/96 10-Q
between Plexus and Oneida Nation
Electronics
21 List of Subsidiaries X
23 Consent of PricewaterhouseCoopers LLP X
24 Power of Attorney (Signature Page
Hereto)
27 Financial Data Schedule X
- ----------------------
* Excludes certain schedules and/or exhibits, which will be furnished to the Commission upon request.
** Designates management compensatory plans or agreements.
</TABLE>
Page 25
<PAGE> 1
EXHIBIT 3(i)
Plexus 1998 10-K
- --------------------------------------------------------------------------------
COMPOSITE
RESTATED ARTICLES OF INCORPORATION
OF
PLEXUS CORP.,
as amended through
August 13, 1998
- --------------------------------------------------------------------------------
ARTICLE I
NAME
The name of the corporation is PLEXUS CORP.
ARTICLE II
PURPOSES
The purposes for which the corporation is organized are to engage in
any lawful activity within the purposes for which corporations may be organized
under the Wisconsin Business Corporation Law.
ARTICLE III
CAPITAL STOCK
A. AUTHORIZED STOCK
The authorized capital stock of the Corporation shall consist of
Sixty-Five Million Shares (65,000,000), itemized by classes as follow:
1. Sixty Million (60,000,000) Shares of Common Stock, one cent
($.01) par value (the "Common Stock").
2. Five Million (5,000,000) Shares of Preferred Stock, one cent
($.01) par value (the "Preferred Stock").
<PAGE> 2
B. CONVERSION OF COMMON STOCK
[This section refers to a 1985 conversion of shares which occurred upon
the filing of Restated Articles of Incorporation in that year.] Upon the
effectiveness of these Restated Articles of Incorporation [refers to the 1985
restatement], and without any action on the part of the holders thereof, each
heretofore existing share of Common Stock, $1.00 par value, of the corporation
shall be converted into 230 shares of Common Stock, one cent ($.01) par value of
the corporation.
C. PREFERRED STOCK
The Preferred Stock may be issued in series, and authority is vested in
the Board of Directors, from time to time, to establish and designate series and
to fix the variations in the powers, preferences, rights, qualifications,
limitations or restrictions of any series of the Preferred Stock, but only with
respect to:
1. the rate of dividend;
2. the price and terms and conditions on which shares may be
redeemed;
3. the amount payable upon shares in the event of voluntary or
involuntary liquidation;
4. sinking fund provisions for the redemption or purchase of
shares;
5. the terms and conditions on which shares may be
converted into shares of any other class or series of
the same or any other class of stock of the
corporation, if the shares of any series are issued
with the privilege of conversion; and
6. voting rights, if any.
Except as to the matters expressly set forth above, all series of the
Preferred Stock shall have the same preferences, limitations and relative rights
and shall rank equally, share ratably and be identical in all respects as to all
matters. All shares of any one series of the Preferred Stock shall be alike in
every particular.
2
<PAGE> 3
ARTICLE IV
REGISTERED OFFICE
The corporation's registered office and registered agent at such office
are:
Registered Office: 55 Jewelers Park Drive
P.O. Box 156
Neenah WI 54956
Registered Agent: Joseph D. Kaufman
ARTICLE V
DIRECTORS
The number of directors, which shall be not less than three (3), shall
be fixed by, or in the manner provided in, the By-laws.
ARTICLE VI
DENIAL OF PREEMPTIVE RIGHTS
The shareholders of the corporation are denied all preemptive rights.
ARTICLE VII
RIGHT TO PURCHASE OWN SHARES
The corporation shall have the right to acquire its own shares from
time to time, upon such terms and conditions as the Board of Directors shall
fix.
* * * * *
3
<PAGE> 4
Exhibit A to Article 3
FORM
OF
CERTIFICATE OF DESIGNATION, PREFERENCES, RIGHTS AND LIMITATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
PLEXUS CORP.
(Pursuant to Section 180.0602 of the Wisconsin Business Corporation Law)
Plexus Corp., a corporation organized and existing under the Wisconsin
Business Corporation Law (the "Corporation"), does hereby certify that, pursuant
to authority conferred upon its Board of Directors by its Restated Articles of
Incorporation and by the provisions of 180.0602 of the Wisconsin Business
Corporation Law, the following resolution was adopted by its Board of Directors
at a meeting duly held on August 13, 1998:
RESOLVED, that pursuant to the authority conferred upon the Board of
Directors of the Corporation (the "Board") by the provisions of the Restated
Articles of Incorporation of the Corporation and the provisions of Section
180.0602 of the Wisconsin Business Corporation Law, there is hereby created a
series of Preferred Stock of the Corporation, which series shall have the
following powers, designations, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations or
restrictions thereof, in addition to those set forth in the Restated Articles of
Incorporation of the Corporation:
Section 1. Designation of Series A Junior Participating
Preferred Stock: Number of Shares.
There is designated a series of Preferred Stock titled as "Series A
Junior Participating Preferred Stock," no par value per share (the "Series A
Preferred Stock"), and the authorized number of shares constituting the Series A
Preferred Stock shall be 1,000,000. Such number of authorized shares may be
increased or decreased, from time to time, by resolution of the Board; provided,
however, that no such decrease shall reduce the number of authorized shares of
the Series A Preferred Stock to a number less than the number of shares of the
Series A Preferred
4
<PAGE> 5
Stock then outstanding, plus the number of such shares then
reserved for issuance upon the exercise of any outstanding options, warrants or
rights or the exercise of any conversion or exchange privilege contained in any
outstanding security issued by the Corporation.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of shares of any other series
of Preferred Stock (or shares of any other class of capital stock of the
Corporation) ranking senior to the Series A Preferred Stock with respect to
dividends, the holders of shares of the Series A Preferred Stock, in preference
to the holders of shares of Common Stock and of any other class of capital stock
of the Corporation ranking junior to the Series A Preferred Stock with respect
to dividends, shall be entitled to receive, when, as and if declared by the
Board out of funds legally available therefor, such dividends, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the aggregate
per share amount of all cash dividends, and 100 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions other
than a dividend payable in shares of Common Stock or subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock. In the event the Company shall at any time after August 13,
1998 (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the amount
to which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Board shall declare, out of funds legally available therefor, a
dividend or distribution on the Series A Preferred Stock, as provided in
paragraph (A) of this Section 2, immediately after it has declared a dividend or
distribution on the Common Stock (other than a dividend payable in shares of
Common Stock).
Section 3. Voting Rights. In addition to any other voting
rights required by applicable law, the holders of shares of the Series A
Preferred Stock shall have the following voting rights:
(A) Each share of the Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the shareholders of
the Corporation. The multiple of 100 (the "Voting Multiple") set forth in the
preceding sentence shall be adjusted from time to time as hereinafter provided
in this paragraph (A). In the event that the Corporation shall at any time after
the effective date of this Resolution of the Board ("Resolution") (i) declare or
pay any dividend on Common Stock payable in shares of Common Stock, or (ii)
effect a subdivision, combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser
5
<PAGE> 6
number of shares of Common Stock, then, in each such case, the Voting Multiple
thereafter applicable to the determination of the number of votes per share to
which the holders of shares of the Series A Preferred Stock shall be entitled
shall be the Voting Multiple in effect immediately prior to such event
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which shall be the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) Except as otherwise provided in this Resolution, in any other
resolution establishing another series of Preferred Stock (or any series of any
other class of capital stock of the Corporation) or by applicable law, the
holders of the Series A Preferred Stock, the holders of Common Stock and the
holders of any other class of capital stock of the Corporation having general
voting rights shall vote together as a single class on all matters submitted to
a vote of the shareholders of the Corporation.
(C) Except as otherwise provided in this Resolution or by applicable
law, the holders of the Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent provided in
paragraph (B) of this Section 3 for the taking of any corporate action).
Section 4. Certain Restrictions.
(A) Whenever dividends or other distributions payable on the Series A
Preferred Stock as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
outstanding shares of the Series A Preferred Stock shall have been paid in full,
the Corporation shall not:
(i) Declare or pay dividends or make any other distributions
on any shares of any class of capital stock of the Corporation ranking junior
(either as to dividends or upon liquidation, dissolution or winding up of the
Corporation) to the Series A Preferred Stock;
(ii) Declare or pay dividends, or make any other
distributions, on any shares of any class of capital stock of the Corporation
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up of the Corporation) with the Series A Preferred Stock, except
dividends paid ratably on the Series A Preferred Stock and all such parity stock
on which dividends are accrued and unpaid in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) Redeem, purchase or otherwise acquire for consideration
any shares of any class of capital stock of the Corporation ranking junior
(either as to dividends or upon liquidation, dissolution or winding up of the
Corporation) to the Series A Preferred Stock, except that the Corporation may at
any time redeem, purchase or otherwise acquire any shares of such junior stock
in exchange for other shares of any class of capital stock of the Corporation
ranking
6
<PAGE> 7
junior (both as to dividends and upon dissolution, liquidation or winding up of
the Corporation) to the Series A Preferred Stock; or
(iv) Purchase or otherwise acquire for consideration any
shares of the Series A Preferred Stock or any shares of any class of capital
stock of the Corporation ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up of the Corporation) with the Series A
Preferred Stock, or redeem any shares of such parity stock, except in accordance
with a purchase offer made in writing or by publication to the holders of all
such shares upon such terms and conditions as the Board, after taking into
consideration the respective annual dividend rates and the other relative
powers, preferences and rights of the respective series and classes of such
shares, shall determine in good faith will result in fair and equitable
treatment among the respective holders of shares of all such series and classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of any
class of capital stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such shares at
such time and in such manner.
Section 5. Reacquired Shares. Any shares of the Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after such purchase or
acquisition. All such canceled shares shall thereupon become authorized and
unissued shares of Preferred Stock and may be reissued as part of any new series
of Preferred Stock, subject to the conditions and restrictions on issuance set
forth in the Restated Articles of Incorporation of the Corporation, from time to
time, in any other resolution establishing another series of Preferred Stock (or
any series of any other class of capital stock of the Corporation) or in any
applicable law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation
(whether voluntary or otherwise), dissolution or winding up of the Corporation,
no distribution shall be made (a) to the holders of shares of any class of
capital stock of the Corporation ranking junior (either as to dividends or upon
liquidation, dissolution or winding up of the Corporation) to the Series A
Preferred Stock unless, prior thereto, the holder of each outstanding share of
the Series A Preferred Stock shall have received an amount equal to the accrued
and unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment, plus an amount equal to the greater of (i) $1.00, and (ii)
an aggregate amount, subject to adjustment as hereinafter provided in this
Section 6, equal to 100 times the aggregate per share amount to be distributed
to the holders of Common Stock, or (b) to the holders of shares of any class of
capital stock of the Corporation ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up of the Corporation) with the Series
A Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event that the Corporation shall at any time after the
effective date of this Resolution (a) declare or pay any dividend on Common
Stock payable in shares of Common
7
<PAGE> 8
Stock, or (b) effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the aggregate amount per
share to which the holders of shares of the Series A Preferred Stock would have
been entitled to receive immediately prior to such event pursuant to clause
(a)(ii) of the preceding sentence shall be adjusted by multiplying such
aggregate per share amount by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which shall be the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In the event that the
Corporation shall be a party to any consolidation, merger, combination or other
transaction in which the outstanding shares of Common Stock are converted or
changed into or exchanged for other capital stock, securities, cash or other
property, or any combination thereof, then, in each such case, each share of the
Series A Preferred Stock shall at the same time be similarly converted or
changed into or exchange for an aggregate amount, subject to adjustment as
hereinafter provided in this Section 7, equal to 100 times the aggregate amount
of capital stock, securities, cash and/or other property (payable in kind), as
the case may be, into which or for which each share of Common Stock is being
converted or changed or exchanged. In the event that the Corporation shall at
any time after the effective date of this Resolution declare or pay any dividend
on Common Stock payable in shares of Common Stock or effect a subdivision,
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then, in each
such case, the aggregate amount per share to which the holders of shares of the
Series A Preferred Stock would have been entitled to receive immediately prior
to such event pursuant to the preceding sentence shall be adjusted by
multiplying such aggregate per share amount by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
after such event and the denominator of which shall be the number of shares of
Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of the Series A Preferred Stock
shall not be redeemable at any time.
Section 9. Rank. Unless otherwise provided in the resolution
establishing another series of Preferred Stock after the effective date of this
Resolution, the Series A Preferred Stock shall rank, as to the payment of
dividends and the making of any other distribution of assets of the Corporation,
senior to the Common Stock, but junior to all other series of the Preferred
Stock.
Section 10. Amendments. The Restated Articles of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences and rights of the Series A Preferred Stock so as
to adversely affect any rights of the holders thereof without the affirmative
vote of the holders of at least two-thirds of the outstanding shares of the
Series A Preferred Stock, voting separately as a single class.
8
<PAGE> 9
Section 11. Fractional Shares. Fractional shares of the Series A
Preferred Stock may be issued, but, unless the Board shall otherwise determine,
only in multiples of one one-hundredth of a share. The holder of any fractional
share of the Series A Preferred Stock shall be entitled to receive dividends,
participate in distributions, exercise voting rights and have the benefit of all
other powers, preferences and rights relating to the Series A Preferred Stock in
the same proportion as such fractional share bears to a whole share.
9
<PAGE> 1
EXHIBIT 10.2 (A) PLEXUS CORP. 1998 10-K
PLEXUS CORP.
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between PLEXUS CORP., a Wisconsin corporation (the
"Company") and <FirstName> <LastName> (the "Executive",) dated as of the 1st
day of August, 1998.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section 1(b)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company or this Agreement is terminated prior to the date on which the
Change of Control occurs, and if it is reasonably demonstrated by the Executive
that such termination of employment or of this Agreement (i) was at the request
of a third party who has taken steps reasonably calculated to effect a Change of
Control or (ii) otherwise arose in connection with or anticipation of a Change
of Control, then for all purposes of this Agreement the "Effective Date" shall
mean the date immediately prior to the date of such termination of employment or
purported termination of this Agreement.
(b) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
-1-
<PAGE> 2
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) any cash tender exchange offer; or
(b) merger or other business combination; or
(c) a sale of assets or contested election; or
(d) any combination of the foregoing transactions (a
"Transaction"), and either or both of the following
events occur:
(i) the persons who constituted the top
management of the Company (the Chief
Executive Officer and the President) no
longer serve in their former capacity or
no longer retain the authority to make
decisions concerning the employment of the
Executive, and/or
(ii) the persons who were directors of the
Company before the Transaction shall cease
to constitute a majority of the Board of
Directors of the Company (which term as
used herein shall include any successor of
the Company).
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date; provided, however, that on each anniversary of the Effective Date the
term of the Agreement shall automatically be extended for an additional one-year
period (restoring the initial three-year term), unless either party notifies the
other party in writing at least 60 days prior to such anniversary. The term of
employment under this Agreement as effective from time to time shall be referred
to as the "Employment Period."
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, [a] the Executive's
position (including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and
assigned at any time during the 120-day period immediately preceding the
Effective Date and [b] the Executive's services shall be performed at the
location where the Executive was employed immediately preceding the Effective
Date or any office or location less than 45 miles from such location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
-2-
<PAGE> 3
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to [a] serve on corporate, civic or charitable
boards or committees, [b] deliver lectures, fulfill speaking engagements or
teach at educational institutions and [c] manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") at least
equal to base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the 12-month period immediately preceding the month in
which the Effective Date occurs. During the Employment Period, the Annual Base
Salary shall be reviewed at least annually for possible increase. Any increase
in Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be eligible to participate in any bonus plan sponsored by
the Company, on a basis consistent with that of other comparable employees.
(iii) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date.
(iv) Other Benefits. During the Employment Period,
the Executive shall be entitled to participate in all fringe benefits, expense
reimbursements, vacation, company car or car allowance, as applicable (if
Executive was receiving such benefit prior to the Change of Control), incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated companies,
but in no event shall such plans,
-3-
<PAGE> 4
practices, policies and programs provide the Executive with less favorable
benefits, in the aggregate, than the most favorable of those provided by the
Company and its affiliated companies for the Executive under such plans,
practices, policies and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For the sole and exclusive
purposes of this Agreement, "Cause" shall mean:
(i) The willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Executive by the Board, the Chief Executive Officer of the
Company or the President of the Company which specifically identifies the manner
in which the Board, the Chief Executive Officer or the President believes that
the Executive has not substantially performed the Executive's duties, or
(ii) The willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there
-4-
<PAGE> 5
shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For the sole and exclusive purposes of this
Agreement, "Good Reason" shall mean:
(i) The assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(ii) Any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) The Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(b) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the Effective
Date;
-5-
<PAGE> 6
(iv) Any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) Any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following each anniversary of the Effective Date
shall be deemed to be a termination for Good Reason for all purposes of this
Agreement.
(d) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated, and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause, death or Disability or the Executive shall
terminate employment for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
-6-
<PAGE> 7
[a] The sum of [i] the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, [ii] the product of (x)
the higher of [A] a good faith estimate of the bonus that would have been paid
to Executive for the fiscal year in which the Date of Termination occurs
(assuming Executive remained employed for the entire fiscal year and such bonus
were calculated in a manner consistent with that of other comparable employees)
and [B] the annual bonus paid or payable, including any bonus or portion thereof
which has been earned but deferred for the most recently completed fiscal year
during the Employment Period, if any (the higher of [A] or [B] being referred to
as the "Termination Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of Termination, and
the denominator of which is 365 and [iii] any compensation previously deferred
by the Executive (together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not theretofore paid (the
sum of the amounts described in clauses [i], [ii] and [iii] shall be hereinafter
referred to as the "Accrued Obligations"); and
[b] An amount equal to the sum of (i) the product of three times
the Executive's Annual Base Salary and (ii) one times the Termination Bonus; and
[c] An amount equal to the difference between [i] the actuarial
equivalent of the benefit (utilizing actuarial assumptions no less favorable to
the Executive than those in effect under the Retirement Plan (as defined below)
immediately prior to the Effective Date) under any qualified retirement plan in
which the Executive participates (the "Retirement Plan") and any excess or
supplemental retirement plan or nonqualified deferred compensation plan in which
the Executive participates (together, the "SERP") which the Executive would
receive if the Executive's employment continued for three years after the Date
of Termination assuming for this purpose that all accrued benefits are fully
vested, and, assuming that Executive's compensation in each of the three years
is equal to Executive's compensation in the last full fiscal year prior to the
Date of Termination, and [ii] the actuarial equivalent of the Executive's actual
benefit (paid or payable), if any, under any Retirement Plan and the SERP as of
the Date of Termination;
(ii) For three years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iii) of this Agreement if the Executive's employment had not been
terminated in accordance with the most favorable plans, practices, programs or
policies of the Company and its affiliated companies applicable generally to
other peer executives and their families during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies and their families, provided, however,
that if the Executive becomes reemployed with another employer and is eligible
to receive medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein shall be secondary
to those provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the
-7-
<PAGE> 8
Executive shall be considered to have remained employed until two and one-half
years after the Date of Termination and to have retired on the last day of such
period;
(iii) The Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider of which shall
be selected by the Executive in his sole discretion; and
(iv) To the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
under any plan, program, deferred compensation plan, policy or practice or
contract or agreement of the Company and its affiliated companies (such other
amounts and benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company and its affiliated companies to
disabled executives and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families.
-8-
<PAGE> 9
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (i) his Annual Base Salary through the Date of
Termination, (ii) the amount of any compensation previously deferred by the
Executive, and (iii) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
7. Nonexclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program, or deferred compensation plan, or contract or
agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. The Executive shall not be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement. However, any
amounts actually received by Executive from other employment in the three years
following Executive's Date of Termination shall reduce the amount payable to
Executive under this Agreement. The Company agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code or any interest or penalties are incurred by the
Executive with respect to such
-9-
<PAGE> 10
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by such
certified public accounting firm as may be designated by the Executive (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) Give the Company any information reasonably requested by the
Company relating to such claim,
(ii) Take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation,
-10-
<PAGE> 11
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) Cooperate with the Company in good faith in order effectively
to contest such claim, and
(iv) Permit the Company to participate in any proceedings relating
to such claim; provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 9(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the
-11-
<PAGE> 12
Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the Executive's
employment by the Company or any of its affiliated companies and which shall not
be or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
In no event shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
FirstName LastName
Address1
City, State PostalCode
-12-
<PAGE> 13
If to the Company:
PLEXUS CORP.
55 Jewelers Park Drive
Neenah, WI 54956-0156
Attn: Joseph D. Kaufman
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, prior to the Effective Date, the Executive's employment and this Agreement
may be terminated by either the Executive or the Company at any time prior to
the Effective Date, in which case the Executive shall have no further rights
under this Agreement. From and after the Effective Date this Agreement shall
supersede any other Change of Control agreement between the parties with respect
to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
-----------------------------------
[Executive]
PLEXUS CORP.
BY
---------------------------------
-13-
<PAGE> 1
EXHIBIT 10.2 (b) PLEXUS CORP. 1998 10-K
PLEXUS CORP.
CHANGE OF CONTROL AGREEMENT
AGREEMENT by and between PLEXUS CORP., a Wisconsin corporation (the
"Company") and "FirstName" "LastName" (the "Executive",) dated as of the 1st day
of August, 1998.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during the Change of
Control Period (as defined in Section 1(b)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company or this Agreement is terminated prior to the date on which the
Change of Control occurs, and if it is reasonably demonstrated by the Executive
that such termination of employment or of this Agreement (i) was at the request
of a third party who has taken steps reasonably calculated to effect a Change of
Control or (ii) otherwise arose in connection with or anticipation of a Change
of Control, then for all purposes of this Agreement the "Effective Date" shall
mean the date immediately prior to the date of such termination of employment or
purported termination of this Agreement.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate two years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
-1-
<PAGE> 2
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) any cash tender exchange offer; or
(b) merger or other business combination; or
(c) a sale of assets or contested election; or
(d) any combination of the foregoing transactions (a
"Transaction"), and either or both of the following
events occur:
(i) the persons who constituted the top
management of the Company (the Chief
Executive Officer and the President) no
longer serve in their former capacity or
no longer retain the authority to make
decisions concerning the employment of the
Executive, and/or
(ii) the persons who were directors of the
Company before the Transaction shall cease
to constitute a majority of the Board of
Directors of the Company (which term as
used herein shall include any successor of
the Company).
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the second anniversary of
such date; provided, however, that on each anniversary of the Effective Date the
term of the Agreement shall automatically be extended for an additional one-year
period (restoring the initial two-year term), unless either party notifies the
other party in writing at least 60 days prior to such anniversary. The term of
employment under this Agreement as effective from time to time shall be referred
to as the "Employment Period."
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, [a] the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 120-day period immediately preceding the Effective Date and [b]
the Executive's services shall be performed at the location where the Executive
was employed immediately preceding the Effective Date or any office or location
less than 45 miles from such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the
-2-
<PAGE> 3
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to [a] serve on corporate, civic or charitable
boards or committees, [b] deliver lectures, fulfill speaking engagements or
teach at educational institutions and [c] manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive shall
receive an annual base salary ("Annual Base Salary") at least equal to base
salary paid or payable, including any base salary which has been earned but
deferred, to the Executive by the Company and its affiliated companies in
respect of the 12-month period immediately preceding the month in which the
Effective Date occurs. During the Employment Period, the Annual Base Salary
shall be reviewed at least annually for possible increase. Any increase in
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase and the term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased. As used in this
Agreement, the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
shall be eligible to participate in any bonus plan sponsored by the Company, on
a basis consistent with that of other comparable employees.
(iii) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date.
(iv) Other Benefits. During the Employment Period, the Executive
shall be entitled to participate in all fringe benefit, expense reimbursement,
vacation, company car or car allowance, as applicable (if Executive was
receiving such benefit prior to the Change of Control), incentive, savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but in no event
shall such plans, practices, policies and programs provide the Executive with
less favorable benefits, in the aggregate,
-3-
<PAGE> 4
than the most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately preceding the
Effective Date.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
-4-
<PAGE> 5
(b) Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For the sole and exclusive purposes of this
Agreement, "Cause" shall mean:
(i) The willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Executive by the Board, the Chief Executive Officer of the Company or the
President of the Company which specifically identifies the manner in which the
Board, the Chief Executive Officer or the President believes that the Executive
has not substantially performed the Executive's duties, or
(ii) The willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For the sole and exclusive purposes of this
Agreement, "Good Reason" shall mean:
(i) The assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a) of this Agreement, or any other action by the Company which
results in a diminution in such position, authority, duties or responsibilities,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt
of notice thereof given by the Executive;
(ii) Any failure by the Company to comply with any of the provisions of
Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not
-5-
<PAGE> 6
occurring in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) The Company's requiring the Executive to be based at any office
or location other than as provided in Section 4(a)(i)(b) hereof or the Company's
requiring the Executive to travel on Company business to a substantially greater
extent than required immediately prior to the Effective Date;
(iv) Any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) Any failure by the Company to comply with and satisfy Section 11(c)
of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following each anniversary of the Effective Date
shall be deemed to be a termination for Good Reason for all purposes of this
Agreement.
(d) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 12(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated, and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
-6-
<PAGE> 7
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If, during
the Employment Period, the Company shall terminate the Executive's employment
other than for Cause, death or Disability or the Executive shall terminate
employment for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash within
30 days after the Date of Termination the aggregate of the following amounts:
[a] The sum of [i] the Executive's Annual Base Salary through the
Date of Termination to the extent not theretofore paid, [ii] the product of (x)
the higher of [A] a good faith estimate of the bonus that would have been paid
to Executive for the fiscal year in which the Date of Termination occurs
(assuming Executive remained employed for the entire fiscal year and such bonus
were calculated in a manner consistent with that of other comparable employees)
and [B] the annual bonus paid or payable, including any bonus or portion thereof
which has been earned but deferred for the most recently completed fiscal year
during the Employment Period, if any (the higher of [A] or [B] being referred to
as the "Termination Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of Termination, and
the denominator of which is 365 and [iii] any compensation previously deferred
by the Executive (together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not theretofore paid (the
sum of the amounts described in clauses [i], [ii] and [iii] shall be hereinafter
referred to as the "Accrued Obligations"); and
[b] An amount equal to the sum of (i) the product of two times the
Executive's Annual Base Salary and (ii) one times the Termination Bonus; and
[c] An amount equal to the difference between [i] the actuarial
equivalent of the benefit (utilizing actuarial assumptions no less favorable to
the Executive than those in effect under the Retirement Plan (as defined below)
immediately prior to the Effective Date) under any qualified retirement plan in
which the Executive participates (the "Retirement Plan") and any excess or
supplemental retirement plan or nonqualified deferred compensation plan in which
the Executive participates (together, the "SERP") which the Executive would
receive if the Executive's employment continued for two years after the Date of
Termination assuming for this purpose that all accrued benefits are fully
vested, and, assuming that Executive's compensation in each of the two years is
equal to Executive's compensation the last full fiscal year prior to the Date of
Termination, and [ii] the actuarial equivalent of the Executive's actual benefit
(paid or payable), if any, under any Retirement Plan and the SERP as of the Date
of Termination;
(ii) For two years after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the appropriate plan, program,
practice or policy, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(iii) of this Agreement if the Executive's employment had not been
terminated in accordance with the most favorable plans, practices, programs or
policies of the Company and its affiliated companies applicable generally to
other peer executives and their families during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
-7-
<PAGE> 8
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining eligibility (but
not the time of commencement of benefits) of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the Executive shall be
considered to have remained employed until one and one-half years after the Date
of Termination and to have retired on the last day of such period;
(iii) The Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive in his sole discretion; and
(iv) To the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible to receive under any
plan, program, deferred compensation plan, policy or practice or contract or
agreement of the Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company and its affiliated companies to
disabled executives and/or their families in accordance with such plans,
programs, practices and
-8-
<PAGE> 9
policies relating to disability, if any, as in effect generally with respect to
other peer executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its affiliated
companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (i) his Annual Base Salary through the Date of
Termination, (ii) the amount of any compensation previously deferred by the
Executive, and (iii) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
of the Date of Termination.
7. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor shall anything herein limit or
otherwise affect such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program, or deferred compensation plan, or contract or agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. The Executive shall not be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement. However, any
amounts actually received by Executive from other employment in the two years
following Executive's Date of Termination shall reduce the amount payable to
Executive under this Agreement. The Company agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expenses which the Executive
may reasonably incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
-9-
<PAGE> 10
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by such
certified public accounting firm as may be designated by the Executive (the
"Accounting Firm") which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of
-10-
<PAGE> 11
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) Give the Company any information reasonably requested by the
Company relating to such claim,
(ii) Take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) Cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) Permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 9(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not
-11-
<PAGE> 12
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Wisconsin, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
-12-
<PAGE> 13
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
"FirstName" "LastName"
"Address1"
"City", "State" "PostalCode"
If to the Company:
PLEXUS CORP.
55 Jewelers Park Drive
Neenah, WI 54956-0156
Attn: Joseph D. Kaufman
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, prior to the Effective Date, the Executive's employment and this Agreement
may be terminated by either the Executive or the Company at any time prior to
the Effective Date, in which case the Executive shall have no further rights
under this Agreement. From and after the Effective Date this Agreement shall
supersede any other Change of Control agreement between the parties with respect
to the subject matter hereof.
-13-
<PAGE> 14
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
-----------------------------------
[Executive]
PLEXUS CORP.
BY
---------------------------------
-14-
<PAGE> 1
EXHIBIT 21
PLEXUS 1998 10-K
Subsidiaries of Plexus Corp.
1. Electronic Assembly Corporation, a Wisconsin corporation
2. Technology Group Inc., a Wisconsin corporation
3. Plexus General Partner Corp., a Wisconsin corporation
4. PAC Acquisition Corp., a Wisconsin corporation
<PAGE> 1
EXHIBIT 23
PLEXUS 1998 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 27, 1998
on our audits of the consolidated financial statements and the financial
statement schedule of Plexus Corp. and subsidiaries as of September 30, 1998 and
1997, and for each of the three years ended September 30, 1998, 1997 and 1996,
which reports are included in this Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 28, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 23,195
<SECURITIES> 0
<RECEIVABLES> 48,433
<ALLOWANCES> 505
<INVENTORY> 44,303
<CURRENT-ASSETS> 121,251
<PP&E> 52,135
<DEPRECIATION> 30,780
<TOTAL-ASSETS> 143,665
<CURRENT-LIABILITIES> 52,955
<BONDS> 0
0
0
<COMMON> 148
<OTHER-SE> 89,191
<TOTAL-LIABILITY-AND-EQUITY> 143,665
<SALES> 396,815
<TOTAL-REVENUES> 396,815
<CGS> 346,869
<TOTAL-COSTS> 346,869
<OTHER-EXPENSES> 18,249
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13
<INCOME-PRETAX> 31,684
<INCOME-TAX> 12,449
<INCOME-CONTINUING> 19,235
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,235
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.21
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 3,655
<SECURITIES> 0
<RECEIVABLES> 47,648
<ALLOWANCES> 360
<INVENTORY> 47,931
<CURRENT-ASSETS> 102,786
<PP&E> 44,022
<DEPRECIATION> 25,335
<TOTAL-ASSETS> 121,817
<CURRENT-LIABILITIES> 49,528
<BONDS> 0
0
0
<COMMON> 147
<OTHER-SE> 67,436
<TOTAL-LIABILITY-AND-EQUITY> 121,817
<SALES> 386,431
<TOTAL-REVENUES> 386,431
<CGS> 342,415
<TOTAL-COSTS> 342,415
<OTHER-EXPENSES> 16,113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 823
<INCOME-PRETAX> 27,080
<INCOME-TAX> 10,680
<INCOME-CONTINUING> 16,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,400
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,847
<SECURITIES> 0
<RECEIVABLES> 35,312
<ALLOWANCES> 275
<INVENTORY> 54,386
<CURRENT-ASSETS> 94,749
<PP&E> 33,676
<DEPRECIATION> 21,253
<TOTAL-ASSETS> 107,374
<CURRENT-LIABILITIES> 43,324
<BONDS> 0
0
0
<COMMON> 65
<OTHER-SE> 47,952
<TOTAL-LIABILITY-AND-EQUITY> 107,374
<SALES> 316,124
<TOTAL-REVENUES> 316,124
<CGS> 288,791
<TOTAL-COSTS> 288,791
<OTHER-EXPENSES> 12,869
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,087
<INCOME-PRETAX> 12,377
<INCOME-TAX> 4,946
<INCOME-CONTINUING> 7,431
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,431
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.52
</TABLE>
