Document:

exv10w13

 

Exhibit 10.13

$ 75,000,000

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

Dated as of July 7, 2004

among

SUNTRON CORPORATION

as Company

and

K*TEC OPERATING CORP.

and

EFTC OPERATING CORP.

as Borrowers

and

THE LENDERS AND ISSUERS PARTY HERETO

and

CITICORP USA, INC.

as Administrative Agent and Collateral Agent

and

CONGRESS FINANCIAL CORPORATION (WESTERN)

as Syndication Agent

* * *

CITIGROUP GLOBAL MARKETS INC.

and

CONGRESS FINANCIAL CORPORATION (WESTERN)

as Joint Book Managers and Joint Lead Arrangers

WEIL, GOTSHAL & MANGES LLP

767 FIFTH AVENUE

NEW YORK, NEW YORK 10153-0119

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	Article I     Definitions, Interpretation And Accounting Terms
	 	 	1	 
	Section 1.1
	 	Defined Terms	 	 	1	 
	Section 1.2
	 	Computation of Time Periods	 	 	39	 
	Section 1.3
	 	Accounting Terms and Principles	 	 	39	 
	Section 1.4
	 	Certain Terms	 	 	40	 
	Article II     The Facility
	 	 	40	 
	Section 2.1
	 	The Revolving Credit Commitments	 	 	40	 
	Section 2.2
	 	Borrowing Procedures	 	 	42	 
	Section 2.3
	 	Swing Loans	 	 	43	 
	Section 2.4
	 	Letters of Credit	 	 	45	 
	Section 2.5
	 	Reduction and Termination of the Revolving Credit Commitments	 	 	49	 
	Section 2.6
	 	Repayment of Loans	 	 	49	 
	Section 2.7
	 	Evidence of Debt	 	 	49	 
	Section 2.8
	 	Optional Prepayments	 	 	50	 
	Section 2.9
	 	Mandatory Prepayments	 	 	50	 
	Section 2.10
	 	Interest	 	 	51	 
	Section 2.11
	 	Conversion/Continuation Option	 	 	52	 
	Section 2.12
	 	Fees	 	 	52	 
	Section 2.13
	 	Payments and Computations	 	 	53	 
	Section 2.14
	 	Special Provisions Governing Eurodollar Rate Loans	 	 	56	 
	Section 2.15
	 	Capital Adequacy	 	 	57	 
	Section 2.16
	 	Taxes	 	 	58	 
	Section 2.17
	 	Substitution of Lenders	 	 	60	 
	Article III     Conditions To Loans And Letters Of Credit
	 	 	61	 
	Section 3.1
	 	Conditions Precedent to the Effectiveness of this Agreement	 	 	61	 
	Section 3.2
	 	Conditions Precedent to Each Loan and Letter of Credit	 	 	63	 
	Article IV     Representations and Warranties
	 	 	64	 
	Section 4.1
	 	Corporate Existence; Compliance with Law	 	 	64	 
	Section 4.2
	 	Corporate Power; Authorization; Enforceable Obligations	 	 	65	 
	Section 4.3
	 	Ownership of Subsidiaries	 	 	65	 
	Section 4.4
	 	Financial Statements	 	 	66	 
	Section 4.5
	 	Material Adverse Change	 	 	66	 
	Section 4.6
	 	Solvency	 	 	66	 

i

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Page	 	 	 	 
	Section 4.7
	 	Litigation	 	 	67	 	 	 	 	 
	Section 4.8
	 	Taxes	 	 	67	 	 	 	 	 
	Section 4.9
	 	Full Disclosure	 	 	67	 	 	 	 	 
	Section 4.10
	 	Margin Regulations	 	 	68	 	 	 	 	 
	Section 4.11
	 	No Burdensome Restrictions; No Defaults	 	 	68	 	 	 	 	 
	Section 4.12
	 	Investment Company Act; Public Utility Holding Company Act	 	 	68	 	 	 	 	 
	Section 4.13
	 	Use of Proceeds	 	 	68	 	 	 	 	 
	Section 4.14
	 	Insurance	 	 	69	 	 	 	 	 
	Section 4.15
	 	Labor Matters	 	 	69	 	 	 	 	 
	Section 4.16
	 	ERISA	 	 	69	 	 	 	 	 
	Section 4.17
	 	Environmental Matters	 	 	70	 	 	 	 	 
	Section 4.18
	 	Intellectual Property	 	 	70	 	 	 	 	 
	Section 4.19
	 	Title; Real Property	 	 	71	 	 	 	 	 
	Section 4.20
	 	Bank Accounts	 	 	72	 	 	 	 	 
	Section 4.21
	 	Regulation H	 	 	72	 	 	 	 	 
	Section 4.22
	 	Interrelated Businesses	 	 	72	 	 	 	 	 
	Article V      Financial Covenants
	 	 	73	 	 	 	 	 
	Section 5.1
	 	Minimum EBITDA	 	 	73	 	 	 	 	 
	Article VI     Reporting Covenants
	 	 	73	 	 	 	 	 
	Section 6.1
	 	Financial Statements	 	 	73	 	 	 	 	 
	Section 6.2
	 	Default Notices	 	 	76	 	 	 	 	 
	Section 6.3
	 	Litigation	 	 	76	 	 	 	 	 
	Section 6.4
	 	Asset Sales	 	 	76	 	 	 	 	 
	Section 6.5
	 	Notices under Subordinated Debt Documents	 	 	76	 	 	 	 	 
	Section 6.6
	 	SEC Filings; Press Releases	 	 	76	 	 	 	 	 
	Section 6.7
	 	Labor Relations	 	 	76	 	 	 	 	 
	Section 6.8
	 	Tax Returns	 	 	77	 	 	 	 	 
	Section 6.9
	 	Insurance	 	 	77	 	 	 	 	 
	Section 6.10
	 	ERISA Matters	 	 	77	 	 	 	 	 
	Section 6.11
	 	Environmental Matters	 	 	77	 	 	 	 	 
	Section 6.12
	 	Borrowing Base Determination	 	 	78	 	 	 	 	 

ii

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Page	 	 	 	 
	Section 6.13
	 	Customer Contracts	 	 	80	 	 	 	 	 
	Section 6.14
	 	Other Information	 	 	80	 	 	 	 	 
	Article VII     Affirmative Covenants
	 	 	80	 	 	 	 	 
	Section 7.1
	 	Preservation of Corporate Existence, Etc	 	 	80	 	 	 	 	 
	Section 7.2
	 	Compliance with Laws, Etc	 	 	80	 	 	 	 	 
	Section 7.3
	 	Conduct of Business	 	 	80	 	 	 	 	 
	Section 7.4
	 	Payment of Taxes, Etc	 	 	81	 	 	 	 	 
	Section 7.5
	 	Maintenance of Insurance	 	 	81	 	 	 	 	 
	Section 7.6
	 	Access	 	 	81	 	 	 	 	 
	Section 7.7
	 	Keeping of Books	 	 	82	 	 	 	 	 
	Section 7.8
	 	Maintenance of Properties, Etc	 	 	82	 	 	 	 	 
	Section 7.9
	 	Application of Proceeds	 	 	82	 	 	 	 	 
	Section 7.10
	 	Environmental	 	 	82	 	 	 	 	 
	Section 7.11
	 	Additional Collateral and Guaranties	 	 	82	 	 	 	 	 
	Section 7.12
	 	Real Property	 	 	83	 	 	 	 	 
	Section 7.13
	 	Account Debtors	 	 	84	 	 	 	 	 
	Article VIII     Negative Covenants
	 	 	84	 	 	 	 	 
	Section 8.1
	 	Indebtedness	 	 	84	 	 	 	 	 
	Section 8.2
	 	Liens, Etc	 	 	85	 	 	 	 	 
	Section 8.3
	 	Investments	 	 	86	 	 	 	 	 
	Section 8.4
	 	Sale of Assets	 	 	87	 	 	 	 	 
	Section 8.5
	 	Restricted Payments	 	 	88	 	 	 	 	 
	Section 8.6
	 	Prepayment of Long-Term Indebtedness	 	 	89	 	 	 	 	 
	Section 8.7
	 	Restriction on Fundamental Changes; Permitted Acquisitions	 	 	89	 	 	 	 	 
	Section 8.8
	 	Change in Nature of Business	 	 	89	 	 	 	 	 
	Section 8.9
	 	Transactions with Affiliates	 	 	89	 	 	 	 	 
	Section 8.10
	 	Restrictions on Subsidiary Distributions; No New Negative Pledge	 	 	90	 	 	 	 	 
	Section 8.11
	 	Modification of Constituent Documents	 	 	90	 	 	 	 	 
	Section 8.12
	 	Modification of Subordinated Debt Documents	 	 	90	 	 	 	 	 
	Section 8.13
	 	Accounting Changes; Fiscal Year	 	 	91	 	 	 	 	 
	Section 8.14
	 	Margin Regulations	 	 	91	 	 	 	 	 

iii

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Page	 	 	 	 
	Section 8.15
	 	Sale/Leasebacks	 	 	91	 	 	 	 	 
	Section 8.16
	 	Cancellation of Indebtedness Owed to It	 	 	91	 	 	 	 	 
	Section 8.17
	 	No Speculative Transactions	 	 	91	 	 	 	 	 
	Section 8.18
	 	Compliance with ERISA	 	 	91	 	 	 	 	 
	Section 8.19
	 	Environmental	 	 	91	 	 	 	 	 
	Section 8.20
	 	Compliance with Blocked Account Provisions	 	 	92	 	 	 	 	 
	Section 8.21
	 	Post Closing Deliveries	 	 	92	 	 	 	 	 
	Article IX     Events of Default
	 	 	92	 	 	 	 	 
	Section 9.1
	 	Events of Default	 	 	92	 	 	 	 	 
	Section 9.2
	 	Remedies	 	 	94	 	 	 	 	 
	Section 9.3
	 	Actions in Respect of Letters of Credit	 	 	94	 	 	 	 	 
	Section 9.4
	 	Rescission	 	 	94	 	 	 	 	 
	Article X      The Agents
	 	 	95	 	 	 	 	 
	Section 10.1
	 	Authorization and Action	 	 	95	 	 	 	 	 
	Section 10.2
	 	Agent’s Reliance, Etc	 	 	96	 	 	 	 	 
	Section 10.3
	 	Posting of Approved Electronic Communications	 	 	96	 	 	 	 	 
	Section 10.4
	 	The Agent Individually	 	 	97	 	 	 	 	 
	Section 10.5
	 	Lender Credit Decision	 	 	98	 	 	 	 	 
	Section 10.6
	 	Indemnification	 	 	98	 	 	 	 	 
	Section 10.7
	 	Successor Administrative Agent	 	 	98	 	 	 	 	 
	Section 10.8
	 	Concerning the Collateral and the Collateral Documents	 	 	99	 	 	 	 	 
	Section 10.9
	 	Collateral Matters Relating to Related Obligations	 	 	100	 	 	 	 	 
	Article XI     Miscellaneous
	 	 	101	 	 	 	 	 
	Section 11.1
	 	Amendments, Waivers, Etc	 	 	101	 	 	 	 	 
	Section 11.2
	 	Assignments and Participations	 	 	103	 	 	 	 	 
	Section 11.3
	 	Costs and Expenses	 	 	106	 	 	 	 	 
	Section 11.4
	 	Indemnitees	 	 	107	 	 	 	 	 
	Section 11.5
	 	Limitation of Liability	 	 	108	 	 	 	 	 
	Section 11.6
	 	Right of Set-off	 	 	109	 	 	 	 	 
	Section 11.7
	 	Sharing of Payments, Etc	 	 	109	 	 	 	 	 
	Section 11.8
	 	Notices, Etc	 	 	109	 	 	 	 	 

iv

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Page	 	 	 	 
	Section 11.9
	 	No Waiver; Remedies	 	 	112	 	 	 	 	 
	Section 11.10
	 	Amendment and Restatement; Binding Effect	 	 	112	 	 	 	 	 
	Section 11.11
	 	Governing Law	 	 	113	 	 	 	 	 
	Section 11.12
	 	Submission to Jurisdiction; Service of Process	 	 	113	 	 	 	 	 
	Section 11.13
	 	Waiver of Jury Trial	 	 	114	 	 	 	 	 
	Section 11.14
	 	Marshaling; Payments Set Aside	 	 	114	 	 	 	 	 
	Section 11.15
	 	Section Titles	 	 	114	 	 	 	 	 
	Section 11.16
	 	Execution in Counterparts	 	 	114	 	 	 	 	 
	Section 11.17
	 	Entire Agreement	 	 	115	 	 	 	 	 
	Section 11.18
	 	Confidentiality	 	 	115	 	 	 	 	 

v

 

          This SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of July 7,
2004, among SUNTRON CORPORATION (as successor in interest by merger to Suntron
Intermediate Holding Corp.), a Delaware corporation (together with any
successor and permitted assign, the “Company”), K*TEC OPERATING CORP. (f/k/a
K*TEC Operating Company, L.L.C., a Delaware limited liability company, as
successor in interest by merger to K*TEC Electronics Holding Corporation (f/k/a
K*TEC Electronics Corporation)), a Delaware corporation (together with any
successor and permitted assign, “K*TEC”), EFTC OPERATING CORP. (as successor in
interest by merger to EFTC Corporation, Circuit Test, Inc. and CTLLC
Acquisition Corp., each a Florida corporation), a Delaware corporation
(together with any successor and permitted assign, “EFTC”), the Lenders (as
defined below), the Issuers (as defined below), CITICORP USA, INC. (“CUSA”), as
administrative agent and collateral agent for the Lenders and the Issuers (in
such capacity, the “Administrative Agent”) and CONGRESS FINANCIAL CORPORATION
(WESTERN) (“Congress”), in its capacity as syndication agent for the Lenders
and the Issuers (in such capacity, the “Syndication Agent”), amends and
restates in its entirety the Credit Agreement (the “Existing Credit
Agreement”), dated as of January 26, 2001, amended and restated as of April 11,
2003 and further amended as of March 23, 2004, among K*TEC, the lenders and
issuers from time to time party thereto and CUSA, as agent for such lenders and
issuers.

W I T N E S S E T H:

          WHEREAS, the Company, K*TEC, EFTC, CUSA and certain of the Lenders and
Issuers are the current parties to the Existing Credit Agreement;

          WHEREAS, the Borrowers and the Lenders have agreed to amend and restate
the Existing Credit Agreement, on the terms and subject to the conditions set
forth herein, to make the changes as set forth herein; and

          WHEREAS, it is the intent of the parties hereto that (a) this Agreement
not constitute a novation of the obligations and liabilities existing under the
Existing Credit Agreement or evidence payment of all or any of such obligations
and liabilities, (b) this Agreement amend and restate in its entirety the
Existing Credit Agreement and (c) from and after the Effective Date (as defined
below), the Existing Credit Agreement be of no further force or effect except
as to evidence the incurrence of the “Obligations” under and as defined
thereunder, the representations and warranties made and the actions or
omissions performed or required to be performed thereunder, in each case prior
to the Effective Date;

          NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS

          Section 1.1 Defined Terms

          As used in this Agreement, the following terms have the following meanings
(such meanings to be equally applicable to both the singular and plural forms
of the terms defined):

 

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Acceptable Appraiser” means an appraiser reasonably acceptable to each
Agent; provided, however, that, (a) with respect to Eligible Inventory and
Eligible Equipment, Emerald Technology Valuations, LLC (together with its
successors) shall be deemed to be acceptable to both Agents and (b) with
respect to Eligible Real Property, CB Richard Ellis, Inc. (together with its
successors) shall be deemed to be acceptable to both Agents.

          “Account” has the meaning specified in the Pledge and Security Agreement.

          “Account Debtor” has the meaning specified in the Pledge and Security
Agreement.

          “Administrative Agent” has the meaning specified in the preamble to this
Agreement.

          “Advance Rate” means, at any time,

          (a) in the case of any Class of Eligible Inventory, the lesser of (i) 85%
of the Net Recovery Percentage in effect at such time for such Class of
Eligible Inventory and (ii) the percentage set forth below opposite such Class:

	 	 	 	 	 
	CLASS OF ELIGIBLE INVENTORY
	 	PERCENTAGE

	Eligible Raw Materials
	 	 	34	%
	Eligible Work-in-Process Inventory
	 	 	50	%
	Eligible Finished Goods
	 	 	53	%
	Eligible Excess Inventory
	 	 	10	%;

provided, however, that each percentage set forth in this clause (ii) above is
subject to reduction (or, if so reduced, increase up to the percentages set
forth above) at the Administrative Agent’s sole discretion exercised
reasonably;

          (b) in the case of Eligible Receivables, the Applicable Receivables Rate
in effect at such time;

          (c) in the case of Eligible Equipment, the Applicable Equipment Advance
Rate in effect at such time; and

          (d) in the case of Eligible Real Property, the Applicable Real Property
Advance Rate in effect at such time.

          “Affected Lender” has the meaning specified in Section 2.17 (Substitution
of Lenders).

          “Affiliate” means, with respect to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person, each officer,
director, general partner or joint-venturer of such Person, and each other
Person who is the beneficial owner of 5% or more of any class of Voting Stock
of such Person. For the purposes of this definition, “control” means the
possession of the power to direct or cause the direction of management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.

2

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Aged Work-in-Process Reserve” means, at any time, a reserve against the
gross amount of Eligible Work-in-Process Inventory in an amount determined by
the Administrative Agent in its sole discretion exercised reasonably to reflect
the approximate Borrowing Base Value of Eligible Work-in-Process Inventory
that, at such time, has been or should have been classified as
“work-in-process” (using the classification applied by the Borrowers and the
Eligible Subsidiaries, consistent with past practice, as part of their
accounting system) for more than 90 days; provided, however, that, in any case,
the amount of such reserve shall at least equal the amount set forth in the
last certificate delivered by the Company pursuant to Section 6.1(i)(Financial
Statements).

          “Agent Affiliate” has the meaning specified in Section 10.3(c) (Posting of
Approved Electronic Communications).

          “Agent Indemnitee” has the meaning specified in Section 10.6
(Indemnification).

          “Agents” means, collectively, the Administrative Agent and the Syndication
Agent.

          “Agreement” means the Existing Credit Agreement, as amended and restated
to the date hereof and further amended and restated by this Second Amended and
Restated Credit Agreement.

          “Ancillary Obligation” means any Cash Management Obligation or Hedging
Contract Obligation.

          “Ancillary Obligation Notice” means, with respect to any Ancillary
Obligation, a notice given by the holder of such Ancillary Obligation with the
consent of either Borrower to the Administrative Agent and setting forth an
Ancillary Obligation Reserve for such Ancillary Obligation.

          “Ancillary Obligation Reserve” means, with respect to any Ancillary
Obligation at any time, the then most recent reserve set forth in any Ancillary
Obligation Notice for such Ancillary Obligation and for which, on the date of
receipt by the Administrative Agent of such Ancillary Obligation Notice and
after giving effect to each Loan to be made and each Letter of Credit to be
issued on such date, such reserve does not exceed the Available Credit in
effect at such time.

          “Applicable Equipment Advance Rate” means, at any time of determination in
the periods set forth below, the percentage set forth below opposite such
period:

	 	 	 	 	 
	TIME PERIOD
	 	PERCENTAGE

	From the Effective Date through December 31, 2004
	 	 	80	%
	From January 1, 2005 through June 30, 2005
	 	 	76	%
	From July 1, 2005 through December 31, 2005
	 	 	68	%
	From January 1, 2006 through June 30, 2006
	 	 	60	%
	From July 1, 2006 through December 31, 2006
	 	 	52	%
	From January 1, 2007 through June 30, 2007
	 	 	44	%
	From July 1, 2007 through December 31, 2007
	 	 	36	%
	From January 1, 2008 through June 30, 2008
	 	 	28	%
	From July 1, 2008 and thereafter
	 	 	20	%;

3

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

provided, however, that each percentage set forth above is subject to reduction
(or, if so reduced, increase up to the percentages set forth above) at the
Administrative Agent’s sole discretion exercised reasonably.

          “Applicable Lending Office” means, with respect to each Lender, its
Domestic Lending Office in the case of a Base Rate Loan, and its Eurodollar
Lending Office in the case of a Eurodollar Rate Loan.

          “Applicable Margin” means, (a) during the period commencing on the
Effective Date and ending December 31, 2004, with respect to (i) Base Rate
Loans, 0.75% per annum and (ii) Eurodollar Rate Loans, 2.75% per annum and (b)
thereafter, as of any date of determination, a per annum rate equal to the rate
set forth below opposite the applicable type of Loan and the EBITDA for the
then most recent four Fiscal Quarters for which Financial Statements have been
delivered pursuant to Section 6.1(b) or (c) (Financial Statements) (or the
corresponding sections of the Existing Credit Agreement) set forth below:

	 	 	 	 	 	 	 	 	 
	 	 	BASE RATE	 	EURODOLLAR RATE
	EBITDA
	 	LOANS
	 	LOANS

	Greater than $15,000,000
	 	 	0.50	%	 	 	2.50	%
	Less than or equal to $15,000,000 and greater than $10,000,000
	 	 	0.75	%	 	 	2.75	%
	Less than or equal to $10,000,000 and greater than $0
	 	 	1.00	%	 	 	3.00	%
	Less than or equal to $0
	 	 	1.25	%	 	 	3.25	%

Changes in the Applicable Margin resulting from a change in EBITDA for any four
Fiscal Quarter period shall become effective as to all Loans upon delivery by
the Company to the Administrative Agent of new Financial Statements for the
last Fiscal Quarter of such period pursuant to Section 6.1(b) or (c) (Financial
Statements), as applicable. Notwithstanding anything to the contrary set forth
in this Agreement (including the then current EBITDA), if the Company shall
fail to deliver such Financial Statements within any of the time periods
specified in Section 6.1(b) or (c) (Financial Statements), the Applicable
Margin from and including the 46th day after the end of such Fiscal Quarter or
the 91st day after the end of such Fiscal Year, as the case may be, to but not
including the date the Company delivers to the Administrative Agent such
Financial Statements shall equal the highest possible Applicable Margin
provided for by this definition.

          “Applicable Receivables Rate” means, at any time, (a) if the Dilution at
such time is less than or equal to 10%, the percentage set forth on Schedule
III (Applicable Receivables Rate) opposite the Dilution then in effect and (b)
otherwise, if the Dilution at such time exceeds 10%, the “Applicable
Receivables Rate” shall be equal to 80% less a percentage determined by the
Administrative Agent from time to time in its sole discretion exercised
reasonably; provided, however, that such percentage reduction shall, in any
case, at least equal the excess of the Dilution at such time over 10% rounded
to the next highest percent.

          “Applicable Real Property Advance Rate” means, at any time of
determination that is in the periods set forth below, the percentage set forth
below opposite such period:

4

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

	 	 	 	 	 
	TIME PERIOD
	 	PERCENTAGE

	From the Effective Date through December 31, 2004
	 	 	65.0	%
	From January 1, 2005 through June 30, 2005
	 	 	60.0	%
	From July 1, 2005 through December 31, 2005
	 	 	50.0	%
	From January 1, 2006 through June 30, 2006
	 	 	47.5	%
	From July 1, 2006 through December 31, 2006
	 	 	45.0	%
	From January 1, 2007 through June 30, 2007
	 	 	42.5	%
	From July 1, 2007 through December 31, 2007
	 	 	40.0	%
	From January 1, 2008 through June 30, 2008
	 	 	37.5	%
	From July 1, 2008 and thereafter
	 	 	35.0	%;

provided, however, that each percentage set forth above is subject to reduction
(or, if so reduced, increase up to the percentages set forth above) at the
Administrative Agent’s sole discretion exercised reasonably.

          “Appraisals” means, collectively, the Initial Appraisals, and each other
appraisal and “desktop review” received or conducted by the Administrative
Agent pursuant to and in accordance with the definition of Permitted
Acquisition or Section 6.12 (Borrowing Base Determination), in each case to the
extent such appraisal or “desktop review” is reasonably satisfactory in form
and substance to each Agent and, in the case of an appraisal, is from an
Acceptable Appraiser.

          “Approved Electronic Communications” means each notice, demand,
communication, information, document and other material that any Loan Party is
obligated to, or otherwise chooses to, provide to the Administrative Agent
pursuant to any Loan Document or the transactions contemplated therein,
including (a) any supplement to the Guaranty, any joinder to the Pledge and
Security Agreement and any other written Contractual Obligation in connection
with and related to the foregoing and (b) any Financial Statement, financial
and other report, notice, request, certificate and other information material;
provided, however, that, “Approved Electronic Communication” shall exclude (x)
any Notice of Borrowing, Letter of Credit Request, Swing Loan Request, Notice
of Conversion or Continuation, and any other notice, demand, communication,
information, document and other material relating to a request for a new, or a
conversion of an existing, Borrowing, (ii) any notice pursuant to Section 2.8
(Optional Prepayments) and Section 2.9 (Mandatory Prepayments) and any other notice
relating to the payment of any principal or other amount due under any Loan
Document prior to the scheduled date therefor, (iii) all notices of any Default
or Event of Default and (iv) any notice, demand, communication, information,
document and other material required to be delivered to satisfy any of the
conditions set forth in Article III (Conditions To Loans And Letters Of Credit)
or Section 2.4(a) (Letters of Credit) or any other condition to any Borrowing
or other extension of credit hereunder or any condition precedent to the
effectiveness of this Agreement.

          “Approved Electronic Platform” has the meaning specified in Section
10.3(a) (Posting of Approved Electronic Communications).

          “Approved Fund” means any Fund that is advised or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) an entity or Affiliate of an entity that
administers or manages a Lender.

5

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Arrangers” means each of Citigroup Global Markets Inc. and Congress, in
their capacities as joint book managers and joint lead arrangers.

          “Asset Sale” has the meaning specified in Section 8.4 (Sale of Assets).

          “Assignment and Acceptance” means an assignment and acceptance entered
into by a Lender and an Eligible Assignee, and accepted by the Administrative
Agent, in substantially the form of Exhibit A (Form of Assignment and
Acceptance).

          “Assumption Agreement” means an assumption agreement entered into by each
Agent and a Lender or an Eligible Assignee acceptable to the Administrative
Agent, in form and substance acceptable to the Administrative Agent and
pursuant to which each Lender or Eligible Assignee participating in the
Facility Increase has agreed (a) in the case of a Lender, to an increase in its
Revolving Credit Commitment in an amount equal to the participation of such
Lender in the Facility Increase and (b) in the case of an Eligible Assignee
that is not a Lender, to be bound by the terms of this Agreement as a Lender
with a Revolving Credit Commitment equal to the participation of such Eligible
Assignee in the Facility Increase.

          “Availability Reserve” means, effective upon receipt by the Company of
notice from the Administrative Agent of any determination thereof (which notice
may be given orally or in writing), such amounts as the Administrative Agent
may from time to time establish against the Facility, in the Administrative
Agent’s sole discretion exercised reasonably, in order either (a) to preserve
the value of the Collateral or the Administrative Agent’s Lien thereon or (b)
to provide for the payment of unanticipated liabilities of any of the Loan
Parties arising after the Effective Date.

          “Available Credit” means, at any time, an amount equal to (a) the lesser
of (i) the Revolving Credit Commitments in effect at such time and (ii) the
Borrowing Base at such time, minus (b) the sum of (i) the aggregate Revolving
Credit Outstandings at such time and (ii) any Availability Reserves in effect
at such time.

          “Bailee’s Letter” means a letter in form and substance reasonably
acceptable to the Administrative Agent executed by any Person (other than the
Borrowers) who is in possession of Inventory on behalf of any Borrower pursuant
to which such Person acknowledges, among other things, the Administrative
Agent’s Lien with respect thereto.

          “Bankruptcy Code” means title 11, United States Code, as amended from time
to time.

          “Base Rate” means, for any period, a fluctuating interest rate per annum
as shall be in effect from time to time, which rate per annum shall be equal at
all times to the highest of:

     (a) the rate of interest announced publicly by Citibank in New York,
New York, from time to time, as Citibank’s base rate;

     (b) the sum (adjusted to the nearest 0.25% or, if there is no
nearest 0.25%, to the next higher 0.25%) of (i) 0.5% per annum plus (ii)
the rate per annum obtained by dividing (A) the latest three-week moving
average of secondary market morning offering rates in the United States
for three-month certificates of deposit of major United States money
market banks, such three-week moving average being determined weekly on
each

6

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Monday (or, if any such day is not a Business Day, on the next succeeding
Business Day) for the three-week period ending on the previous Friday by
Citibank on the basis of such rates reported by certificate of deposit
dealers to and published by the Federal Reserve Bank of New York or, if
such publication shall be suspended or terminated, on the basis of
quotations for such rates received by Citibank from three New York
certificate of deposit dealers of recognized standing selected by
Citibank, by (B) a percentage equal to 100% minus the average of the
daily percentages specified during such three-week period by the Federal
Reserve Board for determining the maximum reserve requirement (including
any emergency, supplemental or other marginal reserve requirement) for
Citibank in respect of liabilities consisting of or including (among
other liabilities) three-month U.S. dollar nonpersonal time deposits in
the United States, plus (iii) the average during such three-week period
of the maximum annual assessment rates estimated by Citibank for
determining the then current annual assessment payable by Citibank to the
Federal Deposit Insurance Corporation (or any successor) for insuring
Dollar deposits in the United States; and

     (c) the sum of (i) 0.5% per annum plus (ii) the Federal Funds Rate.

          “Base Rate Loan” means any Loan during any period in which it bears
interest based on the Base Rate.

          “Blocked Account” has the meaning specified in the Pledge and Security
Agreement.

          “Blocked Account Bank” has the meaning specified in the Pledge and
Security Agreement.

          “Blocked Account Letter” has the meaning specified in the Pledge and
Security Agreement.

          “Borrowers” means each of K*TEC and EFTC.

          “Borrowing” means a borrowing consisting of Loans made on the same day by
the Lenders ratably according to their respective Revolving Credit Commitments.

          “Borrowing Base” means, at any time,

               (a) the sum of the following:

           (i) Eligible Inventory. the lesser of (A) $40,000,000 and
(B) the sum of the following:

               (1) Eligible Raw Materials. the product of the
Advance Rate then in effect for Eligible Raw Materials of
the Borrowers and the Eligible Subsidiaries and the
Borrowing Base Value of such Eligible Raw Materials;

               (2) Eligible Work-in-Process Inventory. the lesser of
(i) $13,000,000 and (ii) the product of the Advance Rate
then in effect for Eligible Work-in-Process Inventory of
the Borrowers and the Eligible

7

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Subsidiaries and the Borrowing Base Value of such Eligible
Work-in-Process Inventory;

               (3) Eligible Finished Goods. the product of the
Advance Rate then in effect for Eligible Finished Goods of
the Borrowers and the Eligible Subsidiaries and the
Borrowing Base Value of such Eligible Finished Goods;
provided, however, that such product shall be included only
to the extent such product does not exceed 20% of the
amount set forth in this clause (i); and

               (4) Eligible Excess Inventory. the lesser of (x)
$2,000,000 and (y) the product of the Advance Rate then in
effect for Eligible Excess Inventory of the Borrowers and
the Eligible Subsidiaries and the Borrowing Base Value of
such Eligible Excess Inventory;

           (ii) Eligible Receivables. the product of the Advance Rate
then in effect for Eligible Receivables and the Borrowing Base
Value of all Eligible Receivables of the Borrowers and the
Eligible Subsidiaries;

           (iii) Eligible Equipment. the lesser of (A) the net auction
sale value of such Eligible Equipment, as set forth in the then
most recent Appraisal, and (B) the product of the Advance Rate
then in effect for Eligible Equipment and the net orderly
liquidation value of Eligible Equipment of the Borrowers and
the Eligible Subsidiaries, as determined by the
Administrative Agent based on the then most recent Appraisal; and

           (iv) Eligible Real Property. the product of the Advance Rate
then in effect for Eligible Real Property and the Mortgage Value
of the Eligible Real Property of the Borrowers and the Eligible
Subsidiaries at such time;

provided, however, that the amounts set forth in clauses (iii) and
(iv) above shall be excluded from the calculation set forth in
this clause (a) to the extent the sum of such amounts exceeds the
Fixed Asset Sublimit then in effect;

               minus (b) any Eligibility Reserve then in effect.

          “Borrowing Base Value” means,

     (a) with respect to any Account, the face amount thereof, calculated
net of all finance charges, late fees and other fees that are unearned,
sales, excise or similar taxes, and credits or allowances granted at such
time; and

     (b) with respect to Inventory, the value of such Inventory,
determined at the lower of cost and market on a first-in, first-out
basis.

          “Borrowing Base Certificate” means a certificate of the Borrowers,
substantially in the form of Exhibit G (Form of Borrowing Base Certificate).

          “Business Day” means a day of the year on which banks are not required or
authorized to close in New York City and, if the applicable Business Day
relates to notices,

8

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

determinations, fundings and payments in connection with the Eurodollar Rate or
any Eurodollar Rate Loans, a day on which dealings in Dollar deposits are also
carried on in the London interbank market.

          “Business Plan” means the business plan in respect of the Company,
covering the Fiscal Years ending in calendar years 2004 through 2007 and
delivered to the Administrative Agent by the Company prior to the date hereof.

          “Capital Expenditures” means, with respect to any Person for any period,
the aggregate of amounts that would be reflected as additions to property,
plant or equipment on a Consolidated balance sheet of such Person and its
Subsidiaries prepared in conformity with GAAP, excluding interest capitalized
during construction.

          “Capital Lease” means, with respect to any Person, any lease of property
by such Person as lessee that would be accounted for as a capital lease on a
balance sheet of such Person prepared in conformity with GAAP.

          “Capital Lease Obligations” means, with respect to any Person, the
capitalized amount of all Consolidated obligations of such Person or any of its
Subsidiaries under Capital Leases, as determined in conformity with GAAP.

          “Cash Collateral Account” has the meaning specified in the Pledge and
Security Agreement.

          “Cash Equivalents” means (a) securities issued or fully guaranteed or
insured by the United States government or any agency thereof, (b) certificates
of deposit, eurodollar time deposits, overnight bank deposits and bankers’
acceptances of any Lender or any commercial bank organized under the laws of
the United States, any state thereof, the District of Columbia, any foreign
bank, or its branches or agencies (fully protected against currency
fluctuations) that, at the time of acquisition, are rated at least “A-1” by
Standard & Poor’s Rating Services (“S&P”) or “P-1” by Moody’s Investors
Services, Inc. (“Moody’s”), (c) commercial paper of an issuer rated at least
“A-1” by S&P or “P-1” by Moody’s and (d) shares of any money market fund that
(i) has at least 95% of its assets invested continuously in the types of
investments referred to in clauses (a) through (c) above, (ii) has net assets
of not less than $500,000,000 and (iii) is rated at least “A-1” by S&P or “P-1”
by Moody’s; provided, however, that the maturities of all obligations of the
type specified in clauses (a) through (c) above shall not exceed 180 days.

          “Cash Interest Expense” means, with respect to any Person for any period,
the Interest Expense of such Person for such period less the Non-Cash Interest
Expense of such Person for such period.

          “Cash Management Document” means any certificate, agreement or other
document executed by any Loan Party in respect of or in connection with the
Cash Management Obligations of any Loan Party.

          “Cash Management Obligation” means any direct or indirect liability,
contingent or otherwise, of any Loan Party in respect of cash management
services (including treasury, depository, overdraft, credit or debit card,
electronic funds transfer and other cash management arrangements) provided by
the Administrative Agent, any Lender or any Affiliate of any of them to any
Loan Party (unless such Loan Party and, as the case may be, the Administrative
Agent or

9

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

such Lender or Affiliate expressly specify in writing that such liability shall
not be considered a “Cash Management Obligation” hereunder), including
obligations for the payment of fees, interest, charges, expenses, attorneys’
fees and disbursements in connection therewith.

          “Change of Control” means any event, transaction or occurrence as a result
of which (a) the Investors shall cease to own and control (either directly or
indirectly through one or more persons (a “Holding Company”), taking into
account any dilution resulting from the interest of other holders of the Stock
of each Holding Company) at least 25% of the outstanding Voting Stock of all
classes of the Voting Stock of the Company and at least 25% of the economic and
voting rights associated with ownership of Stock of the Company on a fully
diluted basis, (b) any person or group of persons (within the meaning of the
Securities Exchange Act of 1934, as amended) other than the Investors or a
group of such persons composed principally of Investors shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934,
as amended) or otherwise own or control economic and voting rights associated
with ownership of a percentage of the outstanding Voting Stock of any class of
the Voting Stock of the Company on a fully diluted basis greater than the
percentage collectively held by the Investors (either directly or
indirectly through one or more Holding Companies, taking into account any
dilution resulting from the interest of other holders of the Voting Stock of
each Holding Company), (c) during any period of twelve consecutive calendar
months, individuals who at the beginning of such period constituted the board
of directors (or managing members) of the Company (together with any new
directors (or managing members) nominated by the Investors or whose election by
the board of directors (or managing members) of the Company or whose nomination
for election by the stockholders of the Company was approved by a vote of at
least a majority of the directors (or managing members) then still in office
who either were directors (or managing members) at the beginning of such period
or whose elections or nomination for election was previously so approved) cease
for any reason other than death or disability to constitute a majority of the
directors (or managing members) then in office or (d) any Borrower shall cease
to be a Wholly-Owned Subsidiary of the Company.

          “Citibank” means Citibank, N.A., a national banking association.

          “Class” means the classes of Eligible Inventory consisting of Eligible Raw
Materials, Eligible Work-in-Process Inventory, Eligible Finished Goods and
Eligible Excess Inventory.

          “Code” means the Internal Revenue Code of 1986 (or any successor
legislation thereto), as amended from time to time.

          “Collateral” means all property and interests in property and proceeds
thereof now owned or hereafter acquired by any Loan Party in or upon which a
Lien is granted under any of the Collateral Documents.

          “Collateral Documents” means, collectively, the Pledge and Security
Agreement, the Mortgages, the Blocked Account Letters and any other document
executed and delivered by a Loan Party granting a Lien on any of its property
to secure payment of the Secured Obligations.

          “Company” has the meaning specified in the preamble to this Agreement.

10

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Company’s Accountants” means KPMG LLP or any other independent,
nationally-recognized public accountant acceptable to the Administrative Agent.

          “Compliance Certificate” has the meaning specified in Section 6.1(d)
(Financial Statements).

          “Congress” has the meaning specified in the preamble to this Agreement.

          “Consolidated” means, with respect to any Person, the consolidation of
accounts of such Person and its Subsidiaries in accordance with GAAP.

          “Consolidated Net Income” means, for any Person for any period, the
Consolidated net income (or loss) of such Person and its Subsidiaries for such
period; provided, however, that (a) the net income of any other Person in which
such Person or one of its Subsidiaries has a joint interest with a third party
(which interest does not cause the net income of
such other Person to be Consolidated into the net income of such Person)
shall be included only to the extent of the amount of dividends or
distributions paid to such Person or Subsidiary, (b) the net income of any
Subsidiary of such Person that is subject to any restriction or limitation on
the payment of dividends or the making of other distributions shall be excluded
to the extent of such restriction or limitation, (c) the net income (or loss)
of any Person acquired in a purchase or pooling of interest transaction for any
period prior to the date of such acquisition and (d) extraordinary gains and
losses and any one-time increase or decrease to net income which is required to
be recorded because of the adoption of new accounting policies, practices or
standards in accordance with GAAP shall be excluded.

          “Constituent Documents” means, with respect to any Person, (a) the
articles of incorporation, certificate of incorporation or certificate of
formation (or the equivalent organizational documents) of such Person, (b) the
by-laws, operating agreement (or the equivalent governing documents) of such
Person and (c) any document setting forth the manner of election and duties of
the directors or managing members of such Person (if any) and the designation,
amount or relative rights, limitations and preferences of any class or series
of such Person’s Stock.

          “Contaminant” means any material, substance or waste that is classified,
regulated or otherwise characterized under any Environmental Law as hazardous,
toxic, a contaminant or a pollutant or by other words of similar meaning or
regulatory effect, including any petroleum or petroleum-derived substance or
waste, asbestos and polychlorinated biphenyls.

          “Contractual Obligation” of any Person means any obligation, agreement,
undertaking or similar provision of any Security issued by such Person or of
any agreement, undertaking, contract, lease, indenture, mortgage, deed of trust
or other instrument (excluding a Loan Document) to which such Person is a party
or by which it or any of its property is bound or to which any of its
properties is subject.

          “Control Account Letter” has the meaning specified in the Pledge and
Security Agreement.

          “Corporate Chart” means a corporate organizational chart, list or other
similar document in each case in form reasonably acceptable to the
Administrative Agent and setting forth, for each Person that is a Loan Party,
that is subject to Section 7.11 (Additional Collateral

11

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

and Guaranties) or that is a Subsidiary of any Loan Party, (a) the full legal
name of such Person (and any trade name, fictitious name or other name such
Person may have had or operated under), (b) the jurisdiction of organization,
the organizational number (if any) and the tax identification number (if any)
of such Person, (c) the location of such Person’s chief executive office (or
sole place of business) and (d) the number of shares of each class of such
Person’s Stock authorized (if applicable), the number outstanding as of the
date of delivery and the number and percentage of such outstanding shares for
each such class owned (directly or indirectly) by any Loan Party or any
Subsidiary of any Loan Party.

          “CUSA” has the meaning specified in the preamble to this Agreement.

          “Customary Permitted Liens” means, with respect to any Person, any of the
following Liens:

          (a) Liens with respect to the payment of taxes, assessments or
governmental charges in all cases that are not yet due or that are being
contested in good faith by appropriate proceedings and with respect to
which adequate reserves or other appropriate provisions are being
maintained to the extent required by GAAP;

          (b) Liens of landlords arising by statute and liens of suppliers,
mechanics, carriers, materialmen, warehousemen or workmen and other
liens imposed by law created in the ordinary course of business for
amounts not yet due or that are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained to the extent required
by GAAP;

          (c) deposits made in the ordinary course of business in connection
with workers’ compensation, unemployment insurance or other types of
social security benefits or to secure the performance of bids, tenders,
sales, contracts (other than for the repayment of borrowed money) and
surety, appeal, customs or performance bonds;

          (d) encumbrances arising by reason of zoning restrictions,
easements, licenses, reservations, covenants, rights-of-way, utility
easements, building restrictions and other similar encumbrances on the
use of real property not materially detracting from the value of such
real property or not materially interfering with the ordinary conduct of
the business conducted and proposed to be conducted at such real
property;

          (e) encumbrances arising under leases or subleases of real property
that do not, in the aggregate, materially detract from the value of such
real property or interfere with the ordinary conduct of the business
conducted and proposed to be conducted at such real property; and

          (f) financing statements of a lessor’s rights in and to personal
property leased to such Person in the ordinary course of such Person’s
business.

          “Debt Issuance” means the incurrence of Indebtedness of the type specified
in clause (a) or (b) of the definition of “Indebtedness” by the Company or any
of its Subsidiaries.

12

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Default” means any event that, with the passing of time or the giving of
notice or both, would become an Event of Default.

          “Dilution” means, at any given time in respect of all Accounts of the
Borrowers and the Eligible Subsidiaries, a quotient, expressed as a percentage,
(a) the numerator of which is the sum (for the most recent twelve months) of
any net credits, rebates, markdowns, freight charges, cash discounts, volume,
early payment and other discounts, cooperative advertising expenses, royalty
payments, warranties, cost of parts required to be maintained by Contractual
Obligation (whether express or implied), warehouse and other allowances,
disputes, chargebacks,
defective returns, other returned or repossessed goods, inventory
transfers, reductions in balance in respect of billing errors or adjustments to
estimated billing settlements for defective products or other reasons,
allowances for early payments and other similar allowances that are made or
coordinated with the usual practices of the Borrowers and the Eligible
Subsidiaries owning such Account, and (b) the denominator of which is the sum
(for the most recent twelve months) of the gross amount of any sales made on
account (including, without limitation, the original balances of such
Accounts).

          “Disqualified Stock” means with respect to any Person, any Stock that, by
its terms, by the terms of any security into which it is convertible or for
which it is exchangeable or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, is
exchangeable for Indebtedness of such Person or is redeemable at the option of
the holder thereof, in whole or in part, on or prior to the Scheduled
Termination Date.

          “Documentary Letter of Credit” means any Letter of Credit intended to be
drawn upon presentation of documents evidencing the sale or shipment of goods
purchased by the Borrowers or any of their respective Subsidiaries in the
ordinary course of their respective businesses.

          “Dollars” and the sign “$” each mean the lawful money of the United States
of America.

          “Domestic Lending Office” means, with respect to any Lender, the office of
such Lender specified as its “Domestic Lending Office” opposite its name on
Schedule II (Applicable Lending Offices and Addresses for Notices) or on the
Assignment and Acceptance by which it became a Lender or such other office of
such Lender as such Lender may from time to time specify to the Company and the
Administrative Agent.

          “Domestic Subsidiary” means any Subsidiary of the Company organized under
the laws of any state of the United States of America or the District of
Columbia.

          “EBITDA” means, with respect to any Person for any period, an amount equal
to (a) Consolidated Net Income of such Person for such period plus (b) the sum
of, in each case to the extent included in the calculation of such Consolidated
Net Income but without duplication, (i) any provision for income taxes, (ii)
Interest Expense, (iii) loss from extraordinary items (including (A) any loss
resulting from an Asset Sale by such Person or any of its Subsidiaries other
than in the ordinary course of business, and (B) restructuring charges and cash
non-recurring charges not to exceed $3,000,000 in any Fiscal Year (whether or
not incurred after the Effective Date), (iv) depreciation, depletion,
amortization and impairment of intangibles or financing or acquisition costs
and (v) all other non-cash charges and non-cash losses for such

13

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

period, including the amount of any compensation deduction as the result of any
grant of Stock or Stock Equivalents to employees, officers, directors or
consultants accrued during such period and not paid in cash during such period
minus (c) the sum of, in each case to the extent included in the calculation of
such Consolidated Net Income but without duplication, (i) any credit for income
tax, (ii) gains from extraordinary items for such period, (iii) any aggregate
net gain (but not any aggregate net loss) from the sale, exchange or other
disposition of capital assets by such Person and (iv) any other non-cash gains
or other items which have been added in determining Consolidated Net Income,
including any reversal of a charge referred to in clause (b)(v) above by reason
of a decrease in the value of any Stock or Stock Equivalent.

          “Effective Date” has the meaning specified in Section 3.1 (Conditions
Precedent to the Effectiveness of this Agreement).

          “EFTC” has the meaning specified in the preamble to this Agreement.

          “Eligibility Reserves” means, at any time, the sum of (a) the Minimum
Eligibility Reserve then in effect, (b) the Aged Work-in-Process Reserve then
in effect, (c) the amount of Ancillary Obligation Reserves then in effect for
all Ancillary Obligations and (d) effective upon receipt by the Company of
notice from the Administrative Agent of any determination thereof (which notice
may be given orally or in writing), such amounts as the Administrative Agent,
in its sole discretion exercised reasonably, may from time to time establish
against the gross amounts of Eligible Receivables, Eligible Equipment, Eligible
Real Property and any Class of Eligible Inventory to reflect risks or
contingencies arising after the Effective Date that may affect any one or Class
of such items and that have not already been taken into account in the
calculation of the Borrowing Base.

          “Eligible Assignee” means (a) a Lender or any Affiliate or Approved Fund
of such Lender, (b) a commercial bank having total assets in excess of
$5,000,000,000, (c) a finance company, insurance company, other financial
institution or fund reasonably acceptable to the Administrative Agent,
regularly engaged in making, purchasing or investing in loans and having a net
worth, determined in accordance with GAAP, in excess of $250,000,000 (or, to
the extent net worth is less than such amount, a finance company, insurance
company, other financial institution or fund, reasonably acceptable to the
Administrative Agent and the Company), (d) a savings and loan association or
savings bank organized under the laws of the United States or any State thereof
having a net worth, determined in accordance with GAAP, in excess of
$250,000,000 or (e) with the consent, each in their sole discretion, of each of
the Company and the Administrative Agent, any other financial institution.

          “Eligible Equipment” means Equipment of any Borrower or any Eligible
Subsidiary (a) that is owned solely by such Borrower (or, as the case may be,
such Eligible Subsidiary), (b) with respect to which the Administrative Agent
has a valid and perfected first-priority Lien, (c) as to which, at the time
they were made and at the time of the determination (except for representations
and warranties expressly referring to an earlier date that shall be measured as
of such date), all representations and warranties contained in any of the Loan
Documents are correct, (d) that is not, in the Administrative Agent’s sole
discretion exercised reasonably, obsolete or unmerchantable, (e) that the
Administrative Agent deems to be Eligible Equipment, based on such credit and
collateral considerations as the Administrative Agent may, in its sole
discretion, deem appropriate and (f) in respect of which the Administrative
Agent shall have received an Appraisal.

14

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Eligible Excess Inventory” means, at any time, a Class of Eligible Inventory
consisting of Eligible Inventory of any Borrower or any Eligible Subsidiary
that is not Eligible Work-in-Process Inventory and to which each of the
following applies:

               (a) if such Eligible Inventory is located at such time on the
Sugarland Property,

         (i) no additional quantities of such type of Eligible
Inventory have been received or manufactured (or were in the
process of being manufactured) by the Company or any of its
Subsidiaries in the 180 days immediately preceding such time; or

          (ii)(A) in the case of Eligible Finished Goods, that has been
produced more than 90 days prior to such time and (B) in the case
of Raw Materials, possession of which was acquired by any Borrower
or Eligible Subsidiary more than (1) 360 days prior to such time,
in the case of Eligible Inventory subject to the Global Supply
Agreement or (2) otherwise, 180 days prior to such time; and

               (b) otherwise, at such time, the Company is not forecasting (or is
unreasonably forecasting) any anticipated sale or other usage for such
Eligible Inventory in the 180 days following such time.

          “Eligible Finished Goods” means a Class of Eligible Inventory consisting
of the Eligible Inventory of any Borrower or any Eligible Subsidiary that is
not Eligible Excess Inventory and that is classified or should be classified,
consistent with past practice, on such Borrower’s (or, as the case may be, such
Eligible Subsidiary’s) accounting system as “finished goods”.

          “Eligible Inventory” means Inventory of any Borrower or any Eligible
Subsidiary (other than any Inventory that has been consigned by such Borrower
(or, as the case may be, such Eligible Subsidiary)) including raw materials,
work-in-process and finished goods:

               (a)
owned solely by such Borrower (or, as the case may be, such
Eligible Subsidiary);

               (b) with respect to which the Administrative Agent has a valid and
perfected first-priority Lien;

               (c) as to which, at the time they were made and at the time of the
determination (except for representations and warranties expressly
referring to an earlier date that shall be measured as of such date), all
representations and warranties contained in any of the Loan Documents are
correct;

               (d) that is not defective;

               (e) with respect to which (in respect of any Inventory labeled with
a brand name or trademark and sold by such Borrower (or, as the case may
be, such Eligible Subsidiary) pursuant to a trademark owned by such
Borrower (or, as the case
may be, such Eligible Subsidiary) or a license granted to such
Borrower (or, as the case may be, such Eligible Subsidiary)) the
Administrative Agent would have rights under

15

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

such trademark or license pursuant to the Pledge and Security Agreement
or other agreement satisfactory to the Administrative Agent to sell such
Inventory in connection with a liquidation thereof; and

               (f) that the Administrative Agent deems to be Eligible Inventory
based on such credit and collateral considerations as the Administrative
Agent may, in its sole discretion, deem appropriate.

No Inventory of any Borrower or any Eligible Subsidiary shall be Eligible
Inventory if such Inventory consists of (i) goods returned or rejected by
customers other than goods that are undamaged or are resaleable in the normal
course of business, (ii) goods to be returned to suppliers, (iii) goods in
transit, (iv) packaging material or (v) goods located, stored, used or held at
the premises of a third party unless (x)(A) the Administrative Agent shall have
received a Landlord Waiver or Bailee’s Letter or (B) in the case of Inventory
located at a leased premises, an Eligibility Reserve satisfactory to the
Administrative Agent shall have been established with respect thereto and (y)
an appropriate UCC-1 financing statement shall have been executed and properly
filed.

          “Eligible Raw Materials” means a Class of Eligible Inventory consisting of
all Eligible Inventory of any Borrower or any Eligible Subsidiary that is not
Eligible Excess Inventory and that is classified or should be classified,
consistent with past practice, on such Borrower’s (or, as the case may be, such
Eligible Subsidiary’s) accounting system as “raw materials”.

          “Eligible Real Property” means any parcel of Real Property in the United
States owned by any Borrower or any Eligible Subsidiary as to which each of the
following conditions has been satisfied at such time:

               (a) (i) a valid and enforceable first-priority Lien (subject to
Customary Permitted Liens) on such parcel of Real Property shall have
been granted by such Borrower (or, as the case may be, such Eligible
Subsidiary) in favor of the Administrative Agent pursuant to a Mortgage
and (ii) such Lien shall be in full force and effect in favor of the
Administrative Agent at such time;

               (b) except as otherwise permitted by the Administrative Agent
(including the actions set forth in Section 8.21 (Post Closing
Deliveries) authorized to be completed after the Effective Date, as set
forth therein), the Administrative Agent and the title insurance company
issuing the policy referred to in clause (c) below shall have received
maps or plats of an as-built survey of such parcel of Real Property
certified to the Administrative Agent and such title insurance company in
a manner reasonably satisfactory to them, dated a date reasonably
satisfactory to the Administrative Agent and such title insurance
company, by an independent professional licensed land surveyor reasonably
satisfactory to the Administrative Agent and such title insurance
company, which maps or plats and the surveys on which they are based
shall be made in form and substance satisfactory to the Administrative
Agent;

               (c) the Administrative Agent shall have received in respect of such
parcel of Real Property (i) a mortgagee’s title policy (or policies) or
marked-up unconditional binder (or binders) for such insurance (or other
evidence acceptable to the Administrative Agent proving ownership
thereof) (“Mortgagee’s Title Insurance

16

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Policy”), dated a date reasonably satisfactory to the Administrative
Agent, and such policy shall (A) be in an amount not less than the
Mortgage Value as of the Effective Date of such parcel of Real Property,
(B) be issued at ordinary rates, (C) insure that the Lien granted
pursuant to the Mortgage insured thereby creates a valid first-priority
Lien on such parcel of Real Property free and clear of all defects and
encumbrances, except such as may be approved by the Administrative Agent
and Customary Permitted Liens, (D) name the Administrative Agent for the
benefit of the Secured Parties as the insured thereunder, (E) be in the
form of ALTA Loan Policy — 1992 (or such local equivalent thereof as is
reasonably satisfactory to the Administrative Agent), (F) contain a
comprehensive lender’s endorsement (including, but not limited to, a
revolving credit endorsement and a floating rate endorsement) and such
other endorsements as the Administrative Agent shall require in its sole
discretion exercised reasonably and (G) be issued by Chicago Title
Insurance Company, First American Title Insurance Company, Lawyers Title
Insurance Corporation or any other title company reasonably satisfactory
to the Administrative Agent (including any such title companies acting as
co-insurers or reinsurers), (ii) evidence satisfactory to it that all
premiums in respect of each such policy, all recording fees and stamp,
documentary, intangible or mortgage recording taxes, if any, in
connection with the Mortgage have been paid and (iii) a copy of all
documents referred to, or listed as exceptions to title, in such title
policy (or policies);

               (d) the Administrative Agent shall have received an Appraisal with
respect to such parcel of Real Property;

               (e) a Phase I environmental report with respect to such parcel of
Real Property, dated a date not more than one year prior to the Effective
Date, showing no material condition of environmental concern shall have
been delivered to the Administrative Agent and in form reasonably
satisfactory to the Administrative Agent;

               (f) no uninsured casualty not reflected in an Eligibility Reserve or
an Availability Reserve shall have occurred affecting the use, operation
or value of such parcel of Real Property if such casualty has not been
restored or repaired by the mortgagor under the Mortgage encumbering such
parcel of Real Property;

               (g) no condemnation or taking by eminent domain shall have occurred
nor shall any notice of any pending or threatened condemnation or other
proceeding against such parcel of Real Property been delivered to the
owner or lessee of such parcel of Real Property that would materially
affect the use, operation or value of such parcel of Real Property; and

               (h) the mortgagor under the relevant Mortgage encumbering such
parcel of Real Property shall (i) make such representations and
warranties and covenants as are reasonably required by the Administrative
Agent, (ii) in all material respects comply with all Requirements of Law
of any Governmental Authority applicable to such parcel of Real Property
or to the use or occupancy thereof and (iii) pay and discharge all taxes
of every kind and nature, all assessments, all water and sewer rents and
charges and all other charges that may become a lien on the Real
Property.

Notwithstanding the foregoing (except in respect of the Sugarland Property),
“Eligible Real Property” shall include any parcel of Real Property of any
Borrower or any Eligible Subsidiary

17

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

(or any portion thereof) only to the extent agreed by each Agent in its
sole discretion exercised reasonably, and only for so long as such agreements
by each Agent shall continue.

          “Eligible Receivable” means the gross outstanding balance of those
Accounts of any Borrower or any Eligible Subsidiary arising out of sales of
merchandise, goods or services in the ordinary course of business, that are
made by such Borrower (or, as the case may be, such Eligible Subsidiary) to a
Person that is not an Affiliate of any Borrower or any Eligible Subsidiary,
that are not in dispute and that constitute Collateral in which the
Administrative Agent has a fully perfected first-priority Lien; provided,
however, that an Account shall in no event be an Eligible Receivable if:

               (a) such Account is more than (i) 60 days past due according to the
original terms of sale or (ii) 90 days past the original invoice date
thereof; or

               (b) any warranty contained in this Agreement or any other Loan
Document with respect to such specific Account is not true and correct
with respect to such Account; or

               (c) the Account Debtor on such Account has disputed liability or
made any claim with respect to any other Account due from such Account
Debtor to such Borrower (or, as the case may be, such Eligible
Subsidiary) but only to the extent of such dispute or claim; or

               (d) the Account Debtor on such Account has (i) filed a petition for
bankruptcy or any other relief under the Bankruptcy Code or any other law
relating to bankruptcy, insolvency, reorganization or relief of debtors,
(ii) made an assignment for the benefit of creditors, (iii) had filed
against it any petition or other application for relief under the
Bankruptcy Code or any such other law, (iv) has failed, suspended
business operations, become insolvent, called a meeting of its creditors
for the purpose of obtaining any financial concession or accommodation or
(v) had or suffered a receiver or a trustee to be appointed for all or a
significant portion of its assets or affairs; or

               (e) the Account Debtor on such Account or any of its Affiliates is
also a supplier to or creditor of such Borrower (or, as the case may be,
such Eligible Subsidiary) unless such supplier or creditor has executed a
no-offset letter either delivered to the Agents prior to the date hereof
or substantially in the form of Exhibit H (Form of No-Offset Letter);
provided, however, that, if such Account Debtor is also a supplier of
such Borrower (or, as the case may be, such Eligible Subsidiary), then
the Accounts owing by such Account Debtor (net of any amount owing by
such Borrower (or, as the case may be, such Eligible Subsidiary) to such
Account Debtor) shall be “Eligible Receivables” (unless otherwise deemed
ineligible pursuant to this definition); or

               (f) the sale represented by such Account is to an Account Debtor
located outside the United States, unless the sale is on letter of credit
or acceptance terms acceptable to the Administrative Agent or otherwise
on terms acceptable to the Administrative Agent, in each case, in its
sole discretion exercised reasonably; or

               (g) the sale to such Account Debtor on such Account (other than any
such sale to Emulex Corporation or any of its Subsidiaries in the
ordinary course of business as practiced on the Effective Date on
Accounts owing by Emulex Corporation or

18

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

any of its Subsidiaries having an original Borrowing Base Value not
exceeding $2,000,000 in the aggregate) is on a bill-and-hold, guaranteed
sale, sale-and-return, sale-on-approval or consignment basis; or

               (h) such Account is subject to a Lien in favor of any Person other
than the Administrative Agent for the benefit of the Secured Parties; or

               (i) such Account is subject, on account of any liquidated claim, to
any deduction, offset, counterclaim, return privilege or other conditions
other than volume sales discounts given in the ordinary course of such
Borrower’s (or, as the case may be, such Eligible Subsidiary’s) business
and discounts or other allowances for early payments; provided, however,
that, if such liquidated claim is for the benefit of the Account Debtor
for such Account and such Account Debtor is also a supplier of such
Borrower (or, as the case may be, such Eligible Subsidiary), then the
Accounts owing by such Account Debtor (net of any amount owing by such
Borrower (or, as the case may be, such Eligible Subsidiary) to such
Account Debtor) shall be “Eligible Receivables” (unless otherwise deemed
ineligible pursuant to this definition); or

               (j) the Account Debtor on such Account is located in any state of
the United States requiring the holder of such Account, as a precondition
to commencing or maintaining any action in the courts of such state
either to (i) receive a certificate of authorization to do business in
such state or be in good standing in such state or (ii) file a Notice of
Business Activities Report with the appropriate office or agency of such
state, in each case unless the holder of such Account has received such a
certificate of authority to do business, is in good standing or, as the
case may be, has duly filed such a notice in such state; or

               (k) the Account Debtor on such Account is a Governmental Authority,
unless such Borrower (or, as the case may be, such Eligible Subsidiary)
has assigned its rights to payment of such Account to the Administrative
Agent pursuant to the Assignment of Claims Act of 1940, as amended, in
the case of a federal Governmental Authority, and pursuant to applicable
law, if any, in the case of any other Governmental Authority, and such
assignment has been accepted and acknowledged by the appropriate
government officers; or

               (l) 50% or more of the outstanding Accounts of the Account Debtor
have become, or have been determined by the Administrative Agent, in
accordance with the provisions hereof, to be, ineligible; or

               (m) the sale represented by such Account is denominated in a
currency other than Dollars; or

               (n) such Account is not evidenced by an invoice or other writing in
form acceptable to the Administrative Agent, in its sole discretion
exercised reasonably; or

               (o) such Borrower (or, as the case may be, such Eligible
Subsidiary), in order to be entitled to collect such Account, is required
to perform any additional service for, or perform or incur any additional
obligation to, the Person to whom or to which it was made; or

19

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

               (p) unless approved by each Agent in its sole discretion exercised
reasonably, the aggregate Borrowing Base Value of all Accounts of such
Account Debtor that, without giving effect to this clause (p) or clause
(q) below, are Eligible Receivables, represent more than 10% (or, if such
Account Debtor is Applied Materials, Inc., Honeywell International Inc.
or Lam Research Corporation, 30%) of the aggregate Borrowing Base Value
of all Accounts that, without giving effect to this clause (p) or clause
(q) below, are Eligible Receivables; provided, however, that such
Accounts shall then be ineligible pursuant to this clause (p) only to the
extent of such excess; or

               (q) the sum of the three highest of the aggregate Borrowing Base
Values of the Accounts of any Account Debtor that, without giving effect
to this clause (q), are Eligible Receivables exceeds 50% of the aggregate
Borrowing Base Value of all Accounts that, without giving effect to this
clause (q), are Eligible Receivables; provided, however, that the
applicable Accounts shall then be ineligible pursuant to this clause (q)
solely to the extent of such excess.

          “Eligible Subsidiaries” means Suntron GCO, RMEI and any other Wholly-Owned
Subsidiary of any Borrower that is a Loan Party and whose designation as an
"Eligible Subsidiary” has been approved by the Administrative Agent in its sole
discretion exercised reasonably.

          “Eligible Work-in-Process Inventory” means a Class of Eligible Inventory
consisting of the Eligible Inventory of any Borrower or any Eligible Subsidiary
that is classified or should be classified, consistent with past practice, on
such Borrower’s (or, as the case may be, such Eligible Subsidiary) accounting
system as “work-in-process”.

          “Environmental Laws” means all applicable Requirements of Law now or
hereafter in effect, as amended or supplemented from time to time, relating to
pollution or the regulation and protection of human health, safety, the
environment or natural resources, including the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. § 9601
et seq.); the Hazardous Material Transportation Act, as amended (49 U.S.C. §
5101 et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as
amended (7 U.S.C. § 136 et seq.); the Resource Conservation and Recovery Act,
as amended (42 U.S.C. § 6901 et seq.); the Toxic Substance Control Act, as
amended (15 U.S.C. § 2601 et seq.); the Clean Air Act, as amended (42 U.S.C. §
7401 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C. §
1251 et seq.); the Occupational Safety and Health Act, as amended (29 U.S.C. §
651 et seq.); the Safe Drinking Water Act, as amended (42 U.S.C. § 300f et
seq.); and their state and local counterparts or equivalents and any transfer
of ownership notification or approval statute, including the Industrial Site
Recovery Act (N.J. Stat. Ann. § 13:1K-6 et seq.).

          “Environmental Liabilities and Costs” means, with respect to any Person,
all liabilities, obligations, responsibilities, Remedial Actions, losses,
damages, punitive damages, consequential damages, treble damages, costs and
expenses (including all fees, disbursements and expenses of counsel, experts
and consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand
by any other Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including any thereof
arising under any Environmental Law, Permit, order or agreement with any
Governmental Authority or other Person, relating to any environmental, health
or safety condition or a Release or threatened Release, and result from the
past, present or future operations of, or ownership of property by, such Person
or any of its Subsidiaries.

20

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Environmental Lien” means any Lien in favor of any Governmental Authority
for Environmental Liabilities and Costs.

          “Equipment” has the meaning specified in the Pledge and Security
Agreement.

          “Equity Issuance” means the issue and the sale of any Stock of the Company
or any of its Subsidiaries by the Company or any of such Subsidiaries to any
Person other than the Company or any of such Subsidiaries or any cash
contribution to the equity capital of the Company or any Subsidiary thereof,
except for the issue of Stock in a Permitted Acquisition for consideration
other than cash and Cash Equivalents.

          “ERISA” means the Employee Retirement Income Security Act of 1974 (or any
successor legislation thereto), as amended from time to time.

          “ERISA Affiliate” means any trade or business (whether or not
incorporated) under common control or treated as a single employer with the
Company or any of its Subsidiaries within the meaning of Section 414 (b), (c),
(m) or (o) of the Code.

          “ERISA Event” means (a) a reportable event described in Section 4043(b) or
4043(c)(1), (2), (3), (5), (6), (8) or (9) of ERISA with respect to a Title IV
Plan or a Multiemployer Plan, (b) the withdrawal of the Company, any of its
Subsidiaries or any ERISA Affiliate from a Title IV Plan subject to Section
4063 of ERISA during a plan year in which it was a substantial employer, as
defined in Section 4001(a)(2) of ERISA, (c) the complete or partial withdrawal
of the Company, any of its Subsidiaries or any ERISA Affiliate from any
Multiemployer Plan, (d) notice of reorganization or insolvency of a
Multiemployer Plan, (e) the filing of a notice of intent to terminate a Title
IV Plan or the treatment of a plan amendment as a termination under Section
4041 of ERISA, (f) the institution of proceedings to terminate a Title IV Plan
or Multiemployer Plan by the PBGC, (g) the failure to make any required
contribution to a Title IV Plan or Multiemployer Plan, (h) the imposition of a
lien under Section 412 of the Code or Section 302 of ERISA on the Company or
any of its Subsidiaries or any ERISA Affiliate or (i) any other event or
condition that might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan or Multiemployer Plan or the imposition of any
liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA.

          “Eurocurrency Liabilities” has the meaning assigned to that term in
Regulation D of the Federal Reserve Board, as in effect from time to time.

          “Eurodollar Base Rate” means, with respect to any Interest Period for any
Eurodollar Rate Loan, the rate of interest determined by the Administrative
Agent to be the rate per annum at which deposits in Dollars are offered by the
principal office of Citibank in London to major banks in the London interbank
market at 11:00 A.M. (London time) two Business Days before the first day of
such Interest Period in an amount substantially equal to the Eurodollar Rate
Loan of Citibank for a period equal to such Interest Period.

          “Eurodollar Lending Office” means, with respect to any Lender, the office
of such Lender specified as its “Eurodollar Lending Office” opposite its name
on Schedule II (Applicable Lending Offices and Addresses for Notices) or on
the Assignment and Acceptance by which it became a Lender (or, if no such
office is specified, its Domestic Lending Office) or such

21

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

other office of such
Lender as such Lender may from time to time specify to the Company and the
Administrative Agent.

          “Eurodollar Rate” means, with respect to any Interest Period for any
Eurodollar Rate Loan, an interest rate per annum equal to the rate per annum
obtained by dividing (a) the Eurodollar Base Rate by (b) a percentage equal to
100% minus the reserve percentage applicable two Business Days before the first
day of such Interest Period under regulations issued from time to time by the
Federal Reserve Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve requirement)
for a member bank of the Federal Reserve System in New York City with respect
to liabilities or assets consisting of or including Eurocurrency Liabilities
(or with respect to any other category of liabilities that includes deposits by
reference to which the Eurodollar Rate is determined) having a term equal to
such Interest Period.

          “Eurodollar Rate Loan” means any Loan that, for an Interest Period, bears
interest based on the Eurodollar Rate.

          “Event of Default” has the meaning specified in Section 9.1 (Events of
Default).

          “Excess Availability” means, at any time, the excess of the Borrowing Base
(without giving effect to the Minimum Eligibility Reserve) in effect at such
time over the sum of (a) the Revolving Credit Outstandings at such time and (b)
the Availability Reserves then in effect.

          “Existing Credit Agreement” has the meaning ascribed to such term in the
preamble to this Agreement.

          “Existing Lenders” means the “Lenders” under and as defined in the
Existing Credit Agreement on the date hereof.

          “Existing Letters of Credit” means the “Letters of Credit” under and as
defined in the Existing Credit Agreement on the date hereof.

          “Existing Loans” means the “Loans” under and as defined in the Existing
Credit Agreement on the date hereof.

          “Existing Obligations” means the “Obligations” under and as defined in the
Existing Credit Agreement on the date hereof.

          “Facility” means the Revolving Credit Commitments and the provisions
herein related to the Revolving Loans, Swing Loans and Letters of Credit.

          “Facility Increase” has the meaning specified in clause (b) of Section 2.1
(The Revolving Credit Commitments).

          “Facility Increase Effective Date” has the meaning specified in clause (b)
of Section 2.1 (The Revolving Credit Commitments).

          “Fair Market Value” means (a) with respect to any asset or group of assets
(other than a marketable Security) of any Person at any date, the value of the
consideration obtainable in

22

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

a sale of such asset at such date assuming a sale
by a willing seller to a willing purchaser dealing at arm’s length and arranged
in an orderly manner over a reasonable period of time having regard to the
nature and characteristics of such asset, as reasonably determined by the Board
of Directors of such Person, or, if such asset shall have been the subject of a
relatively contemporaneous appraisal by an independent third party appraiser,
for which the basic underlying assumptions have not materially changed since
its date, the value set forth in such appraisal and (b) with
respect to any marketable Security of any Person at any date, the closing
sale price of such Security on the Business Day next preceding such date, as
appearing in any published list of any national securities exchange or the
NASDAQ Stock Market or, if there is no such closing sale price of such
Security, the final price for the purchase of such Security at face value
quoted on such business day by a financial institution of recognized standing
regularly dealing in securities of such type selected by the Administrative
Agent.

          “Federal Funds Rate” means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average of the quotations for such day on
such transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

          “Federal Reserve Board” means the Board of Governors of the Federal
Reserve System or any successor thereto.

          “Fee Letters” means, collectively, (a) the letter dated as of the date
hereof, addressed to the Borrowers from the Administrative Agent and accepted
by the Borrowers on the date hereof, and (b) the letter, dated as of the date
hereof, addressed to the Borrowers from the Syndication Agent and accepted by
the Borrowers on the date hereof, with respect to certain fees to be paid from
time to time to the Agents.

          “Financial Covenant Debt” of any Person means Indebtedness of such Person
and its Subsidiaries of the type specified in clauses (a), (b), (d), (e), (f)
and (h) of the definition of “Indebtedness” determined on a Consolidated basis
at the amount of the liability therefor required to be shown on a balance sheet
prepared in accordance with GAAP.

          “Financial Statements” means the financial statements of the Company and
its Subsidiaries delivered in accordance with Section 4.4 (Financial
Statements) and Section 6.1 (Financial Statements).

          “Fiscal Quarter” means each of the periods starting on January 1 or on the
next succeeding calendar day after the end of the previous period and ending on
the dates set forth on Schedule 8.13 (Fiscal Quarter).

          “Fiscal Year” means the twelve month period ending on December 31.

          “Fixed Asset Sublimit” means, at any time, the amount set forth as such
opposite such time on Schedule IV (Fixed Assets Sublimit).

23

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Fund” means any Person (other than a natural Person) that is or will be
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.

          “GAAP” means generally accepted accounting principles in the United States
of America as in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board, or in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession, that are applicable to the circumstances as of the date of
determination.

          “Global Supply Agreement” means the Global Supply Agreement, dated as of
August 14, 2003, by and between Applied Materials, Inc. and the Company, as
amended, restated, supplemented or otherwise modified (including any changes to
any attachment thereto) with the approval of the Administrative Agent.

          “Governmental Authority” means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

          “Guarantor” means each party to the Guaranty other than CUSA.

          “Guaranty” means the Amended and Restated Guaranty, dated as of April 11,
2003, among CUSA, the Company, each Borrower and each Subsidiary Guarantor from
time to time party thereto.

          “Guaranty Obligation” means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
Indebtedness of another Person, if the purpose or intent of such Person in
incurring the Guaranty Obligation is to provide assurance to the obligee of
such Indebtedness that such Indebtedness will be paid or discharged, that any
agreement relating thereto will be complied with or that any holder of such
Indebtedness will be protected (in whole or in part) against loss in respect
thereof including, (a) the direct or indirect guaranty, endorsement (other than
for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of Indebtedness
of another Person and (b) any liability of such Person for Indebtedness of
another Person through any agreement (contingent or otherwise) (i) to purchase,
repurchase or otherwise acquire such Indebtedness or any security therefor or
to provide funds for the payment or discharge of such Indebtedness (whether in
the form of a loan, advance, stock purchase, capital contribution or
otherwise), (ii) to maintain the solvency or any balance sheet item, level of
income or financial condition of another Person, (iii) to make take-or-pay or
similar payments, if required, regardless of non-performance by any other party
or parties to an agreement, (iv) to purchase, sell or lease (as lessor or
lessee) property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Indebtedness or to assure the
holder of such Indebtedness against loss or (v) to supply funds to, or in any
other manner invest in, such other Person (including to pay for property or
services irrespective of whether such property is received or such services are
rendered), if in the case of any agreement described under clause (b)(i), (ii),
(iii), (iv) or (v) above the primary purpose or intent thereof is to provide
assurance that Indebtedness of another Person will be paid or discharged, that
any agreement relating thereto will be complied with or that any holder of such
Indebtedness will be protected (in whole or in part) against loss in respect
thereof. The amount of any Guaranty Obligation shall

24

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

be equal to the amount of
the Indebtedness so guaranteed or otherwise supported or, if the amount of the
maximum liability under such Guaranty Obligation is less than the amount of
such Indebtedness, then the amount of such maximum liability.

          “Hedging Contract Documents” means any certificate, agreement or other
document executed by any Loan Party in respect of or in connection with the
Hedging Contract Obligations of any Loan Party.

          “Hedging Contract Obligations” means all amounts, obligations, covenants
and duties owing by any Loan Party to the Administrative Agent, any Lender, any
Issuer, any Affiliate of any of them or any Indemnitee, of every type and
description, present or future, arising under any Hedging Contract between any
Loan Party and any Person that was a Lender or an Affiliate of a Lender at the
time it entered into such Hedging Contract (unless the parties to such Hedging
Contract expressly specify in writing that none of the obligations thereunder
shall
be considered “Hedging Contract Obligations” hereunder), whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising and however acquired and
whether or not evidenced by any note, guaranty or other instrument or for the
payment of money, including all fees, interest, charges, expenses, attorneys’
fees and disbursements and other sums chargeable to any Loan Party under such
Hedging Contract or any certificate, waiver, consent, agreement or document
executed by any Loan Party in connection with or pursuant to any of the
foregoing.

          “Hedging Contracts” means all Interest Rate Contracts, foreign exchange
contracts, currency swap or option agreements, forward contracts, commodity
swap, purchase or option agreements, other commodity price hedging
arrangements, and all other similar agreements or arrangements designed to
alter the risks of any Person arising from fluctuations in interest rates,
currency values or commodity prices.

          “Holding Company” has the meaning specified in the definition of “Change
of Control” in this Section 1.1.

          “Indebtedness” of any Person means without duplication (a) all
indebtedness of such Person for borrowed money, (b) all obligations of such
Person evidenced by notes, bonds, debentures or similar instruments or that
bear interest, (c) all reimbursement and all obligations with respect to
letters of credit, bankers’ acceptances, and any amount funded under surety
bonds and performance bonds, whether or not matured, (d) all indebtedness for
the deferred purchase price of property or services, other than trade payables,
deferred compensation and other accrued liabilities incurred in the ordinary
course of business, (e) all indebtedness of such Person created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (f) all Capital Lease Obligations of
such Person, (g) all Guaranty Obligations of such Person, (h) all obligations
of such Person to purchase, redeem, retire, defease or otherwise acquire for
value any Stock or Stock Equivalents of such Person, valued, in the case of
redeemable preferred stock, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends (but excluding any
such obligations if the payment thereof is not required as a result of a
prohibition contained in this Agreement or any other agreement evidencing
Indebtedness of the Company or any of its Subsidiaries), (i) all payments that
such Person would have to make in the event of an early termination on the date
Indebtedness of such Person is being determined in respect of Hedging Contracts
of such Person and (j) all Indebtedness of the type referred to above

25

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including Accounts and general intangibles) owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness.

          “Indemnitees” has the meaning specified in Section 11.4 (Indemnitees).

          “Improvements” has the meaning specified in Section 4.19(d) (Title; Real
Property).

          “Initial Appraisals” means (a) with respect to Eligible Equipment, the
appraisal prepared by Emerald Technology Valuations, LLC and delivered to the
Administrative Agent prior to the Effective Date and (b) with respect to
Eligible Real Property, the appraisal prepared by CB Richard Ellis, Inc. and
delivered to the Administrative Agent prior to the Effective Date.

          “Interest Coverage Ratio” means, with respect to any Person on any date,
the ratio of (a) EBITDA of such Person for the then most recent four Fiscal
Quarters for which
Financial Statements have been delivered pursuant to Section 6.1(b) or (c)
(Financial Statements) (or, if such date occurs in Fiscal Year 2004, for all
Fiscal Quarters in Fiscal Year 2004 ended on or prior to such date for which
Financial Statements have been delivered pursuant to Section 6.1(b) or (c)
(Financial Statements)) to (b) Cash Interest Expense of such Person for such
Fiscal Quarters; provided, however, that, if the Company shall fail to deliver
such Financial Statements within any of the time periods specified in Section
6.1(b) or (c) (Financial Statements), the Interest Coverage Ratio determined at
any date from and including the 46th day after the end of such Fiscal Quarter
or the 91st day after the end of such Fiscal Year, as the case may be, to but
not including the date the Company deliver to the Administrative Agent such
Financial Statements, shall equal zero.

          “Interest Expense” means, for any Person for any period, (a) total
Consolidated interest expense of such Person and its Subsidiaries for such
period including, in any event, interest capitalized during construction for
such period and net costs under Interest Rate Contracts for such period minus
(b) Consolidated net gains of such Person and its Subsidiaries under Interest
Rate Contracts for such period and minus (c) any Consolidated interest income
of such Person and its Subsidiaries for such period.

          “Interest Period” means, in the case of any Eurodollar Rate Loan, (a)
initially, the period commencing on the date such Eurodollar Rate Loan is made
or on the date of conversion of a Base Rate Loan to such Eurodollar Rate Loan
(or, for any Loans outstanding under the Existing Credit Agreement on the
Effective Date, on the Effective Date) and ending one, two, three or six months
thereafter, as selected by any Borrower in its Notice of Borrowing or Notice of
Conversion or Continuation given to the Administrative Agent pursuant to
Section 2.2 (Borrowing Procedures) or Section 2.11 (Conversion/Continuation
Option) and (b) thereafter, if such Loan is continued, in whole or in part, as
a Eurodollar Rate Loan pursuant to Section 2.11 (Conversion/Continuation
Option), a period commencing on the last day of the immediately preceding
Interest Period therefor and ending one, two, three or six months thereafter,
as selected by any Borrower in its Notice of Conversion or Continuation given
to the Administrative Agent pursuant to Section 2.11 (Conversion/Continuation
Option); provided, however, that all of the foregoing provisions relating to
Interest Periods in respect of Eurodollar Rate Loans are subject to the
following:

26

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

               (i) if any Interest Period would otherwise end on a day that is not
a Business Day, such Interest Period shall be extended to the next
succeeding Business Day, unless the result of such extension would be to
extend such Interest Period into another calendar month, in which event
such Interest Period shall end on the immediately preceding Business Day;

               (ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month;

               (iii) no Borrower may select any Interest Period that ends after the
Scheduled Termination Date;

               (iv) no Borrower may select any Interest Period in respect of Loans
having an aggregate principal amount of less than $5,000,000; and

               (v) there shall be outstanding at any one time no more than seven
Interest Periods in the aggregate.

          “Interest Rate Contracts” means all interest rate swap agreements,
interest rate cap agreements, interest rate collar agreements and interest rate
insurance.

          “Inventory” has the meaning specified in the Pledge and Security
Agreement.

          “Inventory Sale Agreement” means an unconditional, written Contractual
Obligation of a third party purchaser (in form and substance and with a third
party acceptable to the Administrative Agent in its sole discretion exercised
reasonably) to a Borrower or Eligible Subsidiary, pursuant to which such
purchaser is obligated to purchase from such Borrower or such Eligible
Subsidiary specifically designated Inventory in the possession of such Borrower
or Eligible Subsidiary, within a specified period (or at a specified date), for
a determined price and pursuant to specific payment terms.

          “Investment” means, with respect to any Person, (a) any purchase or other
acquisition by that Person of (i) any Security issued by, (ii) a beneficial
interest in any Security issued by, or (iii) any other equity ownership
interest in, any other Person, (b) any purchase by that Person of all or a
significant part of the assets of a business conducted by another Person and
(c) any loan, advance (other than deposits with financial institutions
available for withdrawal on demand, prepaid expenses, accounts receivable and
similar items made or incurred in the ordinary course of business as presently
conducted) or capital contribution by that Person to any other Person,
including all Indebtedness of any other Person to that Person arising from a
sale of property by that Person other than in the ordinary course of its
business and (d) any Guaranty Obligation incurred by that Person in respect of
Indebtedness of any other Person.

          “Investor” means each of Thayer Equity Investors IV, L.P., a Delaware
limited partnership, TCK Co. L.L.C., a Delaware limited liability company, and
RCBA Strategic Partners L.P., a Delaware limited partnership (the “Specified
Funds”) and any other Person directly or indirectly in control of, controlled
by, or under common control with, any such Specified Fund or that is organized
by any other Person primarily for the purpose of making equity or debt
investments in one or more companies and any investment fund or investment
partnership

27

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

principally managed or principally advised by any Permitted
Advisor. For purposes of this definition, (a) “control” of a Person means the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise, and
(b) “Permitted Advisor” means the principal manager or principal advisor of any
Specified Fund or any Subsidiary of the principal manager or principal advisor
of any Specified Fund.

          “IRS” means the Internal Revenue Service of the United States or any
successor thereto.

          “Issuer” means each Lender or Affiliate of a Lender that (a) is listed on
the signature pages hereof as an “Issuer” or (b) hereafter becomes an Issuer
with the approval of the Administrative Agent and the Company by agreeing
pursuant to an agreement with and in form and substance satisfactory to the
Administrative Agent and the Company to be bound by the terms hereof applicable
to Issuers.

          “K*TEC” has the meaning specified in the preamble to this Agreement.

          “Land” of any Person means all of those plots, pieces or parcels of land
now owned, leased or hereafter acquired or leased or purported to be owned,
leased or hereafter acquired or leased (including, in respect of the Loan
Parties, as reflected in the most recent Financial Statements) by such Person.

          “Landlord Waiver” means a letter in form and substance acceptable to the
Administrative Agent, executed by a landlord in respect of Inventory of any
Borrower or any Eligible Subsidiary located at any leased premises of such
Borrower or such Eligible Subsidiary pursuant to which such landlord, among
other things, waives any Lien such landlord may have in respect of such
Inventory.

          “Leases” means, with respect to any Person, all of those leasehold estates
in real property of such Person, as lessee, as such may be amended,
supplemented or otherwise modified from time to time.

          “Lender” means each financial institution or other entity that (a) is
listed on the signature pages hereof as a “Lender” or (b) from time to time
becomes a party hereto by execution of an Assignment and Acceptance or an
Assumption Agreement.

          “Letter of Credit” means any letter of credit issued pursuant to Section
2.4 (Letters of Credit) or pursuant to the Existing Credit Agreement.

          “Letter of Credit Obligations” means, at any time, the aggregate of all
liabilities at such time of the Borrowers to all Issuers with respect to
Letters of Credit, whether or not any such liability is contingent, including
the sum of (a) the Reimbursement Obligations at such time and (b) the Letter of
Credit Undrawn Amounts at such time.

          “Letter of Credit Reimbursement Agreement” has the meaning specified in
Section 2.4(e) (Letters of Credit).

          “Letter of Credit Request” has the meaning specified in Section 2.4(c)
(Letters of Credit).

28

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Letter of Credit Undrawn Amounts” means, at any time, the aggregate
undrawn face amount of all Letters of Credit outstanding at such time.

          “Lien” means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge, deposit arrangement, encumbrance, lien (statutory or
other), security interest or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever intended to assure
payment of any Indebtedness or other obligation, including any conditional sale
or other title retention agreement, the interest of a lessor under a Capital
Lease, any financing lease having substantially the same economic effect as any
of the foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction naming the owner of the
asset to which such Lien relates as debtor.

          “Loan” means any loan made by any Lender pursuant to this Agreement.

          “Loan Documents” means, collectively, this Agreement, the Notes (if any),
the Guaranty, each Fee Letter, each Letter of Credit Reimbursement Agreement,
each Hedging Contract Document, each Cash Management Document and each
Collateral Document and each certificate, waiver, consent, agreement or
document executed by a Loan Party and delivered to the Administrative Agent or
any Lender in connection with or pursuant to any of the foregoing.

          “Loan Party” means each of the Company, each Borrower, each Subsidiary
Guarantor and each other Subsidiary of the Company that executes and delivers a
Loan Document.

          “Material Adverse Change” means a material adverse change in any of (a)
the condition (financial or otherwise), business, performance, prospects,
operations or properties of the Company and its Subsidiaries taken as a whole,
(b) the legality, validity or enforceability of any Loan Document, (c) the
perfection or priority of the Liens granted pursuant to the Collateral
Documents, (d) the ability of the Borrowers to repay the Obligations or of the
Loan Parties to perform their obligations under the Loan Documents or (e) the
rights and remedies of the Administrative Agent or the Lenders under the Loan
Documents.

          “Material Adverse Effect” means an effect that results in or causes, or
could reasonably be expected to result in or cause, a Material Adverse Change.

          “Material Subsidiary” means any Wholly-Owned Subsidiary of the Company.

          “Maximum Credit” means, at any time, (a) the lesser of (i) the Revolving
Credit Commitments in effect at such time and (ii) the Borrowing Base at such
time minus (b) the aggregate amount of any Availability Reserve in effect at
such time.

          “Minimum Eligibility Reserve” means, (a) at any time after Fiscal Year
2005 for which the EBITDA for the then most recently ended Fiscal Year exceeds
$10,000,000, $2,500,000 and (b) at any other time, $5,000,000. Changes in the
Minimum Eligibility Reserve resulting from a change in EBITDA for any Fiscal
Year shall become effective upon delivery by the Company to the Administrative
Agent of new audited Financial Statements for such Fiscal Year pursuant to
Section 6.1(c) (Financial Statements). Notwithstanding anything to the
contrary set forth in this Agreement (including the then current EBITDA), if
the Company shall fail to deliver such Financial Statements within any of the
time periods specified in Section 6.1(c) (Financial Statements), the Minimum
Eligibility Reserve from and including the 91st day after the

29

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

end of such Fiscal Year to but not including the date the Company delivers to the
Administrative Agent such Financial Statements shall equal $5,000,000.

          “Mortgagee’s Title Insurance Policy” has the meaning specified in the
definition of Eligible Real Property.

          “Mortgages” means the mortgages, deeds of trust or other real estate
security documents made or required herein to be made by any Borrower or any
other Loan Party.

          “Mortgage Value” means, with respect to any parcel of Eligible Real
Property, the lesser of (a) the maximum stated amount secured by the Lien on
such parcel of Eligible Real Property granted in favor of the Administrative
Agent pursuant to the relevant Mortgage and (b) the fair market value of such
parcel of Eligible Real Property as determined by the Agents jointly based on
the then most recent Appraisal.

          “Multiemployer Plan” means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which any Borrower, any of its Subsidiaries or any
ERISA Affiliate has any obligation or liability, contingent or otherwise.

          “Net Cash Proceeds” means proceeds received by any Loan Party after the
Effective Date in cash or Cash Equivalents from any (a) Asset Sale, other than
an Asset Sale permitted under clauses (a) and (c) through (e) of Section 8.4
(Sale of Assets), net of (i) the reasonable cash costs of sale, assignment or
other disposition, (ii) taxes paid or payable as a result thereof and (iii) any
amount required to be paid or prepaid on Indebtedness (other than the
Obligations) secured by the assets subject to such Asset Sale; provided,
however, that the evidence of each of (i), (ii) and (iii) are provided to the
Administrative Agent in form and substance satisfactory to it; (b) Property
Loss Event or (c)(i) Equity Issuance (other than any such
issuance of common Stock of the Company occurring in the ordinary course
of business to any director, member of the management or employee of the
Company or any of its Subsidiaries) or (ii) any Debt Issuance permitted under
clause (h) of Section 8.1 (Indebtedness), in each case net of brokers’ and
advisors’ fees and other costs incurred in connection with such transaction;
provided, however, that, in the case of this clause (c), evidence of such costs
is provided to the Administrative Agent in form and substance satisfactory to
it.

          “Net Recovery Percentage” means, at any time, a quotient expressed as a
percentage,

               (a) with respect to Eligible Raw Materials, (i) the numerator of
which is the sum of (A) the “Net Orderly Liquidation Value — Existing
Channels” set forth on the then most recent Appraisal for the Eligible
Raw Materials of the Borrowers and the Eligible Subsidiaries appraised in
such Appraisal and (B) the product of (1) the net orderly liquidation
value recovery percentage set forth in such Appraisal for Eligible Raw
Materials and (2) the Borrowing Base Value as of the date of such
Appraisal of the Eligible Raw Materials of the Borrowers and the Eligible
Subsidiaries not appraised in such Appraisal and (ii) the denominator of
which is the aggregate Borrowing Base Value as of the date of such
Appraisal of all Eligible Raw Materials of the Borrowers and the Eligible
Subsidiaries;

               (b) with respect to Eligible Work-in-Process Inventory, (i) the
numerator of which is the “Net Orderly Liquidation Value — Existing
Channels” set forth on the then

30

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

most recent Appraisal for the Eligible
Work-in-Process Inventory of the Borrowers and the Eligible Subsidiaries
appraised in such Appraisal and (ii) the denominator of which is the
aggregate Borrowing Base Value as of the date of such Appraisal of all
Eligible Work-in-Process Inventory of the Borrowers and the Eligible
Subsidiaries appraised in such Appraisal;

               (c) with respect to Eligible Finished Goods, (i) the numerator of
which is the “Net Orderly Liquidation Value — Existing Channels” set
forth on the then most recent Appraisal for the Eligible Finished Goods
of the Borrowers and the Eligible Subsidiaries appraised in such
Appraisal and (ii) the denominator of which is the aggregate Borrowing
Base Value as of the date of such Appraisal of all Eligible Finished
Goods of the Borrowers and the Eligible Subsidiaries; and

               (d) with respect to Eligible Excess Inventory, (i) the numerator of
which is the net orderly liquidation value (as of the date of the then
most recent Appraisal for Eligible Inventory of the Borrowers and the
Eligible Subsidiaries) of the “ineligible inventory” (as defined in such
Appraisal) of the Borrowers and the Eligible Subsidiaries and (ii) the
denominator of which is the aggregate Borrowing Base Value as of the date
of such Appraisal of all such “ineligible inventory” of the Borrowers and
the Eligible Subsidiaries.

          “Non-Cash Interest Expense” means, with respect to any Person for any
period, the sum of the following amounts to the extent included in the
definition of Interest Expense: (a) the amount of debt discount and debt
issuance costs amortized, (b) charges relating to write-ups or write-downs in
the book or carrying value of existing Financial Covenant Debt, (c) interest
payable in evidences of Indebtedness or by addition to the principal of the
related Indebtedness and (d) other non-cash interest.

          “Non-Funding Lender” has the meaning specified in Section 2.2(d)
(Borrowing Procedures).

          “Non-U.S. Lender” means each Lender or Administrative Agent that is not a
United States person as defined in Section 7701(a)(30) of the Code.

          “Note” means any Revolving Credit Note.

          “Notice of Borrowing” has the meaning specified in Section 2.2(a)
(Borrowing Procedures).

          “Notice of Conversion or Continuation” has the meaning specified in
Section 2.11 (Conversion/Continuation Option).

          “Obligations” means the Loans, the Letter of Credit Obligations and all
Ancillary Obligations and all other amounts, obligations, covenants and duties
owing by any Borrower to the Administrative Agent, any Lender, any Issuer, any
Affiliate of any of them or any Indemnitee, of every type and description
(whether by reason of an extension of credit, opening or amendment of a letter
of credit or payment of any draft drawn thereunder, loan, guaranty,
indemnification, foreign exchange or currency swap transaction, interest rate
hedging transaction or otherwise), present or future, arising under this
Agreement, any other Loan Document (including Cash Management Documents and
Hedging Contract Documents), whether direct or indirect (including

31

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising and however acquired and whether or not evidenced
by any note, guaranty or other instrument or for the payment of money,
including all letter of credit, cash management and other fees, interest
(whether or not allowed in any bankruptcy, insolvency, reorganization or any of
the other proceedings set forth in Section 9.1(f)(ii) (Events of Default)),
charges, expenses, fees, attorneys’ fees and disbursements and other sums
chargeable to any Borrower under this Agreement, any other Loan Document
(including Cash Management Documents and Hedging Contract Documents) and all
obligations of any Borrower to provide cash collateral for Letter of Credit
Obligations.

          “PBGC” means the Pension Benefit Guaranty Corporation or any successor
thereto.

          “Permit” means any permit, approval, authorization, license, variance or
permission required from a Governmental Authority under an applicable
Requirement of Law.

          “Permitted Acquisition” means any Proposed Acquisition subject to each of
the following conditions:

               (a) the Administrative Agent shall receive at least 10 Business
Days’ prior written notice of such Proposed Acquisition, which notice
shall include, without limitation, a reasonably detailed description of
such Proposed Acquisition;

               (b) such Proposed Acquisition shall comprise a business, or those
assets of a business, of the type engaged in by the Company and its
Subsidiaries as of the Effective Date and, after giving effect to such
Proposed Acquisition, the book value of the assets of the Proposed
Acquisition Target located outside of the United States and acquired in
such Proposed Acquisition shall not exceed 15% of the Consolidated total
assets of the Company and its Subsidiaries;

               (c) such Proposed Acquisition shall be consensual and shall have
been approved by the Proposed Acquisition Target’s board of directors;

               (d) no additional Indebtedness or other liabilities shall be
incurred, assumed or otherwise be reflected on a Consolidated balance
sheet of the Company and the Proposed Acquisition Target after giving
effect to such Proposed Acquisition, except (i) Loans made hereunder,
(ii) ordinary course trade payables, accrued expenses, (iii) Indebtedness
of the Proposed Acquisition Target that would be permitted under Section
8.1 (Indebtedness) after giving effect to such Proposed Acquisition and
(iv) other cash liabilities that would be permitted to be outstanding
hereunder after giving effect to such Proposed Acquisition;

               (e) the sum of all amounts payable in connection with all Proposed
Acquisitions from and after the Effective Date shall not exceed
$20,000,000 in the aggregate, including all transaction costs, fees and
expenses incurred or assumed in connection with all such Proposed
Acquisitions or otherwise reflected in a Consolidated balance sheet of
the Company and the Target of a Proposed Acquisition but not reflected on
a Consolidated balance sheet of the Company prior to giving effect to
such Proposed Acquisition;

32

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

               (f) the Available Credit (after giving effect to such Proposed
Acquisition but without giving effect to the Minimum Eligibility Reserve)
shall not be less than $35,000,000;

               (g) at or prior to the closing of any Proposed Acquisition, the
Company (or the Subsidiary making such Proposed Acquisition) and the
Proposed Acquisition Target shall have executed such documents and taken
such actions as may be required under Section 7.11 (Additional Collateral
and Guaranties) and Section 7.12 (Real Property);

               (h) on or prior to the date of such Proposed Acquisition, the
Administrative Agent shall have received copies of the acquisition
agreement, related agreements and instruments and all opinions and
certificates; and

               (i) at the time of such Proposed Acquisition and after giving effect
thereto, (A) no Default or Event of Default shall have occurred and be
continuing (and the Company shall have demonstrated compliance with the
covenants set forth in Article V (Financial Covenants) on a Pro Forma
Basis), (B) all representations and warranties contained in Article IV
(Representations and Warranties) and in the other Loan Documents shall be
true and correct in all material respects and (C) all conditions
precedent set forth in Section 3.2 (Conditions Precedent to Each Loan and
Letter of Credit) shall have been met.

          “Person” means an individual, partnership, corporation (including a
business trust), joint stock company, estate, trust, limited liability company,
unincorporated association, joint venture or other entity or a Governmental
Authority.

          “Pledge and Security Agreement” means the Amended and Restated Pledge and
Security Agreement, dated as of April 11, 2003, among CUSA, each Borrower and
each Subsidiary Guarantor.

          “Pledged Notes” has the meaning specified in the Pledge and Security
Agreement.

          “Pledged Stock” has the meaning specified in the Pledge and Security
Agreement.

          “Process Agent” has the meaning specified in Section 11.12(b) (Submission
to Jurisdiction; Service of Process).

          “Pro Forma Basis” means, with respect to any determination for any period,
that such determination shall be made giving pro forma effect to each Permitted
Acquisition consummated during such period, together with all transactions
relating thereto consummated during such period (including any incurrence,
assumption, refinancing or repayment of Indebtedness), as if such Permitted
Acquisition and related transactions had been consummated on the first day of
such period, in each case based on historical results accounted for in
accordance with GAAP and, to the extent applicable, reasonable assumptions that
are specified in details in the relevant Compliance Certificate, Financial
Statement or other document provided to the Administrative Agent or any Lender
in connection herewith in accordance with Regulation S-X of the Securities Act
of 1933.

33

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Property Loss Event” means any loss of or damage to property of any Loan
Party that results in the receipt by such Person of proceeds of insurance
(other than business interruption insurance) in excess of $1,000,000 or any
taking of property of any Loan Party that results in the receipt by such Person
of a compensation payment in respect thereof in excess of $1,000,000.

          “Proposed Acquisition” means the proposed acquisition by any Borrower or
any of its Wholly-Owned Subsidiaries of all or substantially all of the assets
or all the Stock of any Proposed Acquisition Target, or the merger of any
Proposed Acquisition Target with or into any Borrower or any Wholly-Owned
Subsidiary of any Borrower, with such Borrower or Wholly-Owned Subsidiary being
the surviving corporation.

          “Proposed Acquisition Target” means any Person or any operating division
thereof subject to a Proposed Acquisition.

          “Protective Advances” means all expenses, disbursements and advances
incurred by the Administrative Agent pursuant to the Loan Documents after the
occurrence and during the continuance of an Event of Default that the
Administrative Agent, in its sole discretion, deems necessary or desirable to
preserve or protect the Collateral or any portion thereof or to enhance the
likelihood or maximize the amount of repayment of the Obligations; provided,
however, that, “Protective Advances” shall exclude any such expense,
disbursement or advance made without the consent of the Syndication Agent to
the extent such expenses, disbursements and advances made without the consent
of the Syndication Agent exceed $10,000,000 in the aggregate.

          “Purchasing Lender” has the meaning specified in Section 11.7 (Sharing of
Payments, Etc.).

          “Ratable Portion” or “ratably” means, with respect to any Lender, the
percentage obtained by dividing (a) the Revolving Credit Commitment of such
Lender by (b) the aggregate Revolving Credit Commitments of all Lenders (or, at
any time after the Revolving Credit Termination Date, the percentage obtained
by dividing the aggregate outstanding principal balance of the Revolving Credit
Outstandings owing to such Lender by the aggregate outstanding principal
balance of the Revolving Credit Outstandings owing to all Lenders).

          “Real Property” of any Person means the Land of such Person, together with
the right, title and interest of such Person, if any, in and to the streets,
the Land lying in the bed of any streets, roads or avenues, opened or proposed,
in front of, the air space and development rights pertaining to the Land and
the right to use such air space and development rights, all rights of way,
privileges, liberties, tenements, hereditaments and appurtenances belonging or
in any way
appertaining thereto, all fixtures, all easements now or hereafter
benefiting the Land and all royalties and rights appertaining to the use and
enjoyment of the Land, including all alley, vault, drainage, mineral, water,
oil and gas rights, together with all of the buildings and other improvements
now or hereafter erected on the Land and any fixtures appurtenant thereto.

          “Reduced Liquidity Month” means any calendar month for which, at any time
during such calendar month, Excess Availability failed to exceed $15,000,000.

          “Register” has the meaning specified in Section 11.2(c)(Assignments and
Participations).

34

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Reimbursement Obligations” means all matured reimbursement or repayment
obligations of any Borrower to any Issuer with respect to amounts drawn under
Letters of Credit.

          “Release” means, with respect to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration, in each case, of any Contaminant into the indoor or outdoor
environment or into or out of any property owned by such Person, including the
movement of Contaminants through or in the air, soil, surface water, ground
water or property.

          “Remedial Action” means all actions required to (a) clean up, remove,
treat or in any other way address any Contaminant in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release so that a Contaminant does not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment or
(c) perform pre-remedial studies and investigations and post-remedial
monitoring and care.

          “Requirement of Law” means, with respect to any Person, the common law and
all federal, state, local and foreign laws, rules and regulations, orders,
judgments, decrees and other determinations of any Governmental Authority or
arbitrator, applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.

          “Requisite Lenders” means, collectively, Lenders having more than fifty
percent (50%) of the aggregate outstanding amount of the Revolving Credit
Commitments or, after the Revolving Credit Termination Date, fifty percent
(50%) of the aggregate Revolving Credit Outstandings. A Non-Funding Lender
shall not be included in the calculation of “Requisite Lenders.”

          “Reserved Ancillary Obligations” means, with respect to any Ancillary
Obligation subject to any Ancillary Obligation Reserve, all Secured Obligations
owing to any holder of such Ancillary Obligation in an aggregate amount not to
exceed such Ancillary Obligation Reserve.

          “Responsible Officer” means, with respect to any Person, any of the
principal executive officers, managing members or general partners of such
Person, but in any event, with respect to financial matters, the chief
financial officer, treasurer or controller of such Person.

          “Restricted Payment” means (a) any dividend or other distribution, direct
or indirect, on account of any Stock or Stock Equivalents of the Company or any
of its Subsidiaries now or hereafter outstanding, except a dividend payable
solely in Stock or Stock Equivalents, (b) any redemption, retirement, sinking
fund or similar payment, purchase or other acquisition for value, direct or
indirect, of any Stock or Stock Equivalents of the Company or any of its
Subsidiaries now or hereafter outstanding other than one payable solely to the
Company or one or
more Subsidiary Guarantors and (c) any payment or prepayment of principal,
premium (if any), interest, fees (including fees to obtain any waiver or
consent in connection with any Security) or other charges on, or redemption,
purchase, retirement, defeasance, sinking fund or similar payment with respect
to, any subordinated Indebtedness of the Company (including Subordinated Debt)
or any of its Subsidiaries or any other Loan Party, other than any required
payment, prepayment, redemption, retirement, purchases or other payments, in
each case to the extent permitted to be made by the terms of such Indebtedness
after giving effect to any applicable subordination provisions.

35

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Revolving Credit Borrowing” means Revolving Loans made on the same day by
the Lenders ratably according to their respective Revolving Credit Commitments.

          “Revolving Credit Commitment” means, with respect to each Lender, the
commitment of such Lender to make Revolving Loans and acquire interests in
other Revolving Credit Outstandings in the aggregate principal amount
outstanding not to exceed the amount set forth opposite such Lender’s name on
Schedule I (Revolving Credit Commitments) under the caption “Revolving Credit
Commitment,” as may be amended by the Administrative Agent to reflect each
Assignment and Acceptance and Assumption Agreement executed by such Lender and
as such amount may be adjusted pursuant to this Agreement.

          “Revolving Credit Note” means a promissory note of a Borrower payable to
the order of any Lender in a principal amount equal to the amount of such
Lender’s Revolving Credit Commitment evidencing the aggregate Indebtedness of
such Borrower to such Lender resulting from the Revolving Loans owing to such
Lender by such Borrower.

          “Revolving Credit Outstandings” means, at any time, the sum of (a) the
principal amount of the Revolving Loans outstanding at such time, (b) the
Letter of Credit Obligations outstanding at such time and (c) the principal
amount of the Swing Loans outstanding at such time.

          “Revolving Credit Termination Date” shall mean the earliest of (a) the
Scheduled Termination Date, (b) the date of termination of the Revolving Credit
Commitments pursuant to Section 2.5 (Reduction and Termination of the Revolving
Credit Commitments) and (c) the date on which the Obligations become due and
payable pursuant to Section 9.2 (Remedies).

          “Revolving Loan” has the meaning specified in Section 2.1 (The Revolving
Credit Commitments).

          “RMEI” means RM Electronics, Inc., a New Hampshire corporation.

          “Scheduled Termination Date” means July 7, 2008.

          “Secured Obligations” means, in the case of any Borrower, the Obligations
of such Borrower and, in the case of any other Loan Party, the amounts,
obligations, covenants and duties owing by such Loan Party under the Guaranty
and the other Loan Documents to which it is a party.

          “Secured Parties” means the Lenders, the Issuers, the Administrative Agent
and any other holder of any of the Obligations.

          “Security” means any Stock, Stock Equivalent, voting trust certificate,
bond, debenture, note or other evidence of Indebtedness, whether secured,
unsecured, convertible or subordinated, or any certificate of interest, share
or participation in, any temporary or interim
certificate for the purchase or acquisition of, or any right to subscribe
to, purchase or acquire, any of the foregoing, but shall not include any
evidence of the Obligations.

          “Selling Lender” has the meaning specified in Section 11.7 (Sharing of
Payments, Etc.).

36

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Solvent” means, with respect to any Person, that the value of the assets
of such Person (both at fair value and present fair saleable value) is, on the
date of determination, greater than the total amount of liabilities (including
contingent and unliquidated liabilities) of such Person as of such date and
that, as of such date, such Person is able to pay all liabilities of such
Person as such liabilities mature and does not have unreasonably small capital.
In computing the amount of contingent or unliquidated liabilities at any time,
such liabilities shall be computed at the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.

          “Specified Funds” has the meaning specified in the definition of
“Investor” in this Section 1.1.

          “Standby Letter of Credit” means any Letter of Credit that is not a
Documentary Letter of Credit.

          “Stock” means shares of capital stock (whether denominated as common stock
or preferred stock), beneficial, partnership or membership interests,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity,
whether voting or non-voting.

          “Stock Equivalents” means all securities convertible into or exchangeable
for Stock and all warrants, options or other rights to purchase or subscribe
for any Stock, whether or not presently convertible, exchangeable or
exercisable.

          “Subordinated Debt” means unsecured Indebtedness of the Company (i) that
is not due and does not provide for cash payment of principal at any time prior
to the first anniversary of the Scheduled Termination Date, (ii) all of the Net
Cash Proceeds of which are invested as a contribution to the capital of either
Borrower and used to repay the Obligations to the extent set forth in Section
2.9 (Mandatory Prepayments), (iii) that is subordinated to the payment in full
in cash of the Obligations on terms reasonably satisfactory to each Agent and
(iv) that is otherwise in form and substance reasonably satisfactory to each
Agent.

          “Subordinated Debt Document” means each note, indenture, credit agreement
and each other agreement, certificate, instrument, power of attorney or other
document related to any of the foregoing.

          “Subsidiary” means, with respect to any Person, any corporation,
partnership, limited liability company or other business entity of which an
aggregate of more than 50% of the outstanding Voting Stock is, at the time,
directly or indirectly, owned or controlled by such Person or one or more
Subsidiaries of such Person.

          “Subsidiary Guarantor” means each Subsidiary of any Borrower party to the
Guaranty.

          “Sugarland Property” means the parcel of Real Property that is located in
Sugarland, Texas, owned by any Borrower or Eligible Subsidiary and subject to a
Mortgage in favor of the Administrative Agent.

          “Suntron GCO” means Suntron GCO, L.P. (formerly known as K*TEC Electronics
L.P.), a Delaware limited partnership and a Wholly-Owned Subsidiary of K*TEC.

37

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Swing Loan” has the meaning specified in Section 2.3 (Swing Loans).

          “Swing Loan Borrowing” means a borrowing consisting of a Swing Loan.

          “Swing Loan Lender” means Citicorp or any other Lender who becomes the
Administrative Agent or who agrees with the approval of the Administrative
Agent and the Company to act as the Swing Loan Lender hereunder.

          “Swing Loan Request” has the meaning specified in Section 2.3(b) (Swing
Loans).

          “Syndication Agent” has the meaning specified in the preamble to this
Agreement.

          “Tax Affiliate” means, with respect to any Person, (a) any Subsidiary of
such Person and (b) any Affiliate of such Person with which such Person files
or is eligible to file Consolidated, combined or unitary tax returns.

          “Tax Return” has the meaning specified in Section 4.8(a) (Taxes).

          “Taxes” has the meaning specified in Section 2.16(a) (Taxes).

          “Title IV Plan” means a pension plan, other than a Multiemployer Plan,
that is covered by Title IV of ERISA to which the Company, any of its
Subsidiaries or any ERISA Affiliate has any obligation or liability (contingent
or otherwise).

          “UCC” means “Uniform Commercial Code,” as such term is defined in the
Pledge and Security Agreement.

          “Unfunded Pension Liability” means, with respect to the Company at any
time, the sum of (a) the amount, if any, by which the present value of all
accrued benefits under each Title IV Plan (other than any Title IV Plan subject
to Section 4063 of ERISA) exceeds the fair market value of all assets of such
Title IV Plan allocable to such benefits in accordance with Title IV of ERISA,
as determined as of the most recent valuation date for such Title IV Plan using
the actuarial assumptions in effect under such Title IV Plan and (b) the
aggregate amount of withdrawal liability that could be assessed under Section
4063 with respect to each Title IV Plan subject to such Section, separately
calculated for each such Title IV Plan as of its most recent valuation date and
(c) for a period of five years following a transaction reasonably likely to be
covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that
could be avoided by the Company, any of its Subsidiaries or any ERISA Affiliate
as a result of such transaction.

          “Unused Commitment” means, with respect to any Lender on any day, the
difference between (a) such Lender’s Revolving Credit Commitment and (b) the
sum of (i) such Lender’s Ratable Portion of the sum of (A) the outstanding
principal amount of Revolving Loans and (B) the outstanding amount of the
Letter of Credit Obligations and (ii) if such Lender is the Swing Loan Lender,
the aggregate principal amount of Swing Loans outstanding.

          “Unused Commitment Fee” has the meaning specified in Section 2.12(a)
(Fees).

38

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          “Unused Ratable Portion” means, with respect to any Lender, the percentage
obtained by dividing (a) the Unused Commitment of such Lender by (b) the
aggregate Unused Commitments of all Lenders.

          “Voting Stock” means Stock of any Person having ordinary power to vote in
the election of members of the board of directors, managers, trustees or other
controlling Persons, of such Person (irrespective of whether, at the time,
Stock of any other class or classes of such entity shall have or might have
voting power by reason of the happening of any contingency).

          “Wholly-Owned Subsidiary” of any Person, means any other Person all of the
Stock of which (other than director’s qualifying shares, as may be required by
law) is owned by such Person directly or by other Wholly-Owned Subsidiaries of
such Person.

          “Withdrawal Liability” means, with respect to the Company at any time, the
aggregate liability incurred (whether or not assessed) with respect to all
Multiemployer Plans pursuant to Section 4201 of ERISA or for increases in
contributions required to be made pursuant to Section 4243 of ERISA.

          Section 1.2 Computation of Time Periods

          In this Agreement, in the computation of periods of time from a specified
date to a later specified date, the word “from” means “from and including” and
the words “to” and “until” each mean “to but excluding” and the word “through”
means “to and including.”

          Section 1.3 Accounting Terms and Principles

          (a) Except as set forth below, all accounting terms not specifically
defined herein shall be construed in conformity with GAAP and all accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in conformity with GAAP.

          (b) If any change in the accounting principles used in the preparation of
the most recent Financial Statements referred to in Section 6.1 (Financial
Statements) is hereafter required or permitted by the rules, regulations,
pronouncements and opinions of the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or any successors thereto)
and such change is adopted by the Company with the agreement of the Company’s
Accountants and results in a change in any of the calculations required by
Article V (Financial Covenants) or Article VIII (Negative Covenants) had such
accounting change not occurred, the parties hereto agree to enter into
negotiations in order to amend such provisions so as to equitably reflect such
change with the desired result that the criteria for evaluating compliance with
such covenants by the Company shall be the same after such change as if such
change had not been made; provided, however, that no change in GAAP that would
affect a calculation that measures compliance with any covenant contained in
Article V (Financial Covenants) or Article VIII (Negative Covenants) shall be
given effect until such provisions are amended to reflect such changes in GAAP.

39

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          Section 1.4 Certain Terms

          (a) The words “herein,” “hereof” and “hereunder” and similar words refer
to this Agreement as a whole and not to any particular Article, Section,
subsection or clause in, this Agreement.

          (b) References in this Agreement to an Exhibit, Schedule, Article,
Section, clause or subclause refer to the appropriate Exhibit or Schedule to,
or Article, Section, clause or subclause in this Agreement. References in this
Agreement to numbered clauses and subclauses immediately followed by the words
"above” and “below” refer respectively to the clauses and subclauses with the
corresponding numbers immediately preceding or following such reference.

          (c) Each agreement defined in this Article I shall include all appendices,
exhibits and schedules thereto. Unless otherwise expressly stated therein and
unless the prior written consent of the Administrative Agent or the Requisite
Lenders or is required hereunder for an amendment, restatement, supplement or
other modification to any such agreement and such consent is not obtained, if
such agreement is duly amended, restated, supplemented or otherwise modified,
references in this Agreement to such agreement shall be to such agreement as so
amended, restated, supplemented or modified.

          (d) References in this Agreement to any statute shall be to such statute
as amended or modified and in effect at the time any such reference is
operative.

          (e) The term “including” when used in any Loan Document means “including
without limitation” except when used in the computation of time periods.

          (f) The terms “Lender,” “Issuer” and “Administrative Agent” include,
without limitation, their respective successors.

          (g) Upon the appointment of any successor Administrative Agent pursuant to
Section 10.7 (Successor Administrative Agent), references to CUSA in Section
10.4 (Each Agent Individually) and to Citibank in the definitions of Base Rate,
and Eurodollar Rate shall be deemed to refer to the financial institution then
acting as the Administrative Agent or one of its Affiliates if it so
designates.

ARTICLE II

The Facility

          Section 2.1 The Revolving Credit Commitments

          (a) On the terms and subject to the conditions contained in this
Agreement, each Lender severally agrees to continue to make loans (each,
together with each “Revolving Loan” as defined in and made under the Existing
Credit Agreement, a “Revolving Loan”) to the Borrowers from time to time on any
Business Day during the period from the Effective Date until the Revolving
Credit Termination Date in an aggregate amount not to exceed at any time
outstanding for all Revolving Loans by such Lender such Lender’s Revolving
Credit Commitment; provided, however, that at no time shall any Lender be
obligated to make a Revolving Loan in excess of such Lender’s Ratable Portion
of the Available Credit. Within the limits of each Lender’s

40

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Revolving Credit Commitment, amounts of Revolving Loans repaid may be reborrowed under this
Section 2.1.

          (b) The Borrowers may, at any time, deliver a request to the
Administrative Agent for the Lenders to provide additional Revolving Credit
Commitments in an amount up to $25,000,000 (the “Facility Increase”): provided,
however, that only one Facility Increase may be effected pursuant to this
clause (b). The Borrowers shall have the right to offer the opportunity to
participate in the Facility Increase to any Lender and any Eligible Assignee;
provided, however, that (x) the minimum additional Revolving Credit Commitment
of each such Lender or Eligible Assignee participating in the Facility Increase
shall equal or exceed $5,000,000, (y) no Lender or
Eligible Assignee shall be obligated to participate in such Facility
Increase and (z) in the event Lenders and Eligible Assignees have committed in
writing to participating in the Facility Increase in an aggregate amount in
excess of the maximum amount requested by any Borrower or permitted hereunder,
the Administrative Agent shall then have the right to allocate such
commitments, first to Lenders and then to Eligible Assignees, on whatever basis
the Administrative Agent determines is appropriate in consultation with the
Borrowers. On the effective date for the Facility Increase, which shall be the
first Business Day on which all of the conditions precedent set forth in
clauses (i) through (vii) below shall have been satisfied (the “Facility
Increase Effective Date”), the Revolving Credit Commitments shall be increased
by the amount committed to by each Lender or Eligible Assignee on the Facility
Increase Effective Date, subject to the satisfaction of the following
conditions:

               (i) the Company have given the Administrative Agent at least 30 days
prior written notice of its intention to effect the Facility Increase and
the desired amount of such Facility Increase;

               (ii) the Administrative Agent shall have received from each Lender
or Eligible Assignee that is part of the Facility Increase, an Assumption
Agreement duly executed by such Lender or Eligible Assignee and each Loan
Party; provided, however, that the aggregate Revolving Credit Commitments
(or, in the case of a Lender, increase in Revolving Credit Commitments)
set forth in such Assumption Agreements, shall equal the amount of such
Facility Increase;

               (iii) the conditions precedent to a Borrowing set forth in clauses
(b) and (e) of Section 3.2 (Conditions Precedent to Each Loan and Letter
of Credit) shall be satisfied as of the Facility Increase Effective Date
for such Facility Increase, both before and after giving effect to such
Facility Increase;

               (iv) the Administrative Agent shall have received an opinion of
counsel to the Loan Parties in form and substance and from counsel
reasonably satisfactory to the Administrative Agent and addressed to the
Agents, the Issuers and the Lenders and addressing such matters as the
Administrative Agent may reasonably request (including an opinion as to
no conflicts with other Indebtedness) has been delivered to the
Administrative Agent;

               (v) the effectiveness of such Facility Increase on such Facility
Increase Effective Date shall not violate any Requirement of Law and
shall not be enjoined, temporarily, preliminary or permanently;

41

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

               (vi) there shall have been paid to each Lender and Eligible Assignee
participating in such Facility Increase all fees and expenses due and
payable to such Person on or before the Facility Increase Effective Date;
and

               (vii) there shall have been paid to the Administrative Agent, for
the account of the Agents, the Issuers and the Lenders, as applicable,
all fees and expenses (including reasonable fees and expenses of counsel)
due and payable pursuant to any Loan Document on or before the Facility
Increase Effective Date.

          Section 2.2 Borrowing Procedures

          (a) Each Revolving Credit Borrowing shall be made on notice given by any
Borrower to the Administrative Agent not later than 11:00 A.M. (New York City
time) (i) one Business Day, in the case of a Borrowing of Base Rate Loans and
(ii) three Business Days, in the
case of a Borrowing of Eurodollar Rate Loans, prior to the date of the
proposed Revolving Credit Borrowing. Each such notice shall be in
substantially the form of Exhibit C (Form of Notice of Borrowing) (a “Notice of
Borrowing”), specifying (A) the date of such proposed Revolving Credit
Borrowing, (B) the aggregate amount of such proposed Revolving Credit
Borrowing, (C) whether any portion of the proposed Revolving Credit Borrowing
will be of Base Rate Loans or Eurodollar Rate Loans, (D) the initial Interest
Period or Periods for any such Eurodollar Rate Loans and (E) the Available
Credit (after giving effect to such proposed Revolving Credit Borrowing). The
Revolving Loans shall be made as Base Rate Loans unless, subject to Section
2.14 (Special Provisions Governing Eurodollar Rate Loans), the Notice of
Borrowing specifies that all or a portion thereof shall be Eurodollar Rate
Loans. Notwithstanding anything to the contrary contained in clause (a) of
Section 2.3 (Swing Loans), if any Notice of Borrowing requests a Revolving
Credit Borrowing of Base Rate Loans, the Administrative Agent may, in its sole
discretion, make a Swing Loan available to the applicable Borrower in an
aggregate amount not to exceed such proposed Revolving Credit Borrowing, and
the aggregate amount of the corresponding proposed Revolving Credit Borrowing
shall be reduced accordingly by the principal amount of such Swing Loan. Each
Revolving Credit Borrowing shall be in an aggregate amount of not less than
$3,000,000 or an integral multiple of $1,000,000 in excess thereof.

          (b) The Administrative Agent shall give to each Lender prompt notice of
the Administrative Agent’s receipt of a Notice of Borrowing and, if Eurodollar
Rate Loans are properly requested in such Notice of Borrowing, the applicable
interest rate determined pursuant to Section 2.14(a) (Determination of Interest
Rate). Each Lender shall, before 11:00 A.M. (New York City time) on the date
of the proposed Borrowing, make available to the Administrative Agent at its
address referred to in Section 11.8 (Notices, Etc.), in immediately available
funds, such Lender’s Ratable Portion of such proposed Borrowing. After the
Administrative Agent’s receipt of such funds and upon fulfillment of the
applicable conditions set forth in Section 3.1 (Conditions Precedent to the
Effectiveness of this Agreement) and Section 3.2 (Conditions Precedent to Each
Loan and Letter of Credit), the Administrative Agent shall make such funds
available to the applicable Borrower.

          (c) Unless the Administrative Agent shall have received notice from a
Lender prior to the date of any proposed Borrowing by any Borrower that such
Lender shall not make available to the Administrative Agent such Lender’s
Ratable Portion of such Borrowing, the Administrative Agent may assume that
such Lender has made such Ratable Portion available to the Administrative Agent
on the date of such Borrowing in accordance with this Section 2.2 and the
Administrative Agent may, in reliance upon such assumption, make available to
such

42

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Borrower on such date a corresponding amount. If and to the extent that
such Lender shall not have so made such Ratable Portion available to the
Administrative Agent, such Lender and such Borrower severally agree to repay to
the Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made available
to such Borrower until the date such amount is repaid to the Administrative
Agent, at (i) in the case of such Borrower, the interest rate applicable at the
time to the Loans comprising such Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate for the first Business Day and thereafter at the
interest rate applicable at the time to the Loans comprising such Borrowing.
If such Lender shall repay to the Administrative Agent such corresponding
amount, such amount so repaid shall constitute such Lender’s Loan as part of
such Borrowing for purposes of this Agreement. If such Borrower shall repay to
the Administrative Agent such corresponding amount, such payment shall not
relieve such Lender of any obligation it may have hereunder to such Borrower.

          (d) The failure of any Lender to make the Loan or any payment required by
it on the date specified (a “Non-Funding Lender”), including any payment in
respect of its participation in Swing Loans and Letter of Credit Obligations,
shall not relieve any other Lender
of its obligations to make such Loan or payment on such date but no such
other Lender shall be responsible for the failure of any Non-Funding Lender to
make a Loan or payment required under this Agreement.

          Section 2.3 Swing Loans

          (a) On the terms and subject to the conditions contained in this
Agreement, the Swing Loan Lender may, in its sole discretion, make loans (each,
together with each “Swing Loan” as defined in and made under the Existing
Credit Agreement, a “Swing Loan”) otherwise available to the Borrowers under
the Facility from time to time on any Business Day during the period from the
Effective Date until the Revolving Credit Termination Date in an aggregate
amount at any time outstanding at any time not to exceed $10,000,000; provided,
however, that the Swing Loan Lender shall not make any Swing Loan to the extent
that, after giving effect to such Swing Loan, the aggregate Revolving Credit
Outstandings would exceed the Maximum Credit. The Swing Loan Lender shall be
entitled to rely on the most recent Borrowing Base Certificate delivered to the
Administrative Agent. Each Swing Loan shall be a Base Rate Loan and must be
repaid in full upon any Revolving Credit Borrowing hereunder and shall in any
event mature no later than, (i) the 15th day after the date such Swing Loan is
made or (ii) the Revolving Credit Termination Date. Within the limits set
forth in the first sentence of this clause (a), amounts of Swing Loans repaid
may be reborrowed under this clause (a). Swing Loans shall be Base Rate Loans.

          (b) In order to request a Swing Loan, a Borrower shall telecopy (or
forward by electronic mail or similar means) to the Administrative Agent a duly
completed request setting forth the date, the requested amount and date of the
Swing Loan (a “Swing Loan Request”), to be received by the Administrative Agent
not later than 1:00 P.M. (New York City time) on the day of the proposed
borrowing. The Administrative Agent shall promptly notify the Swing Loan
Lender of the details of the requested Swing Loan. Subject to the terms of
this Agreement, the Swing Loan Lender may make a Swing Loan available to the
Administrative Agent in an amount up to the amount requested and, in turn, the
Administrative Agent shall make such amounts available to such Borrower on the
date of the relevant Swing Loan Request. The Swing Loan Lender shall not make
any Swing Loan in the period commencing on the first Business Day after it
receives written notice from any Lender that one or more of the conditions
precedent contained

43

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

in Section 3.2 (Conditions Precedent to Each Loan and
Letter of Credit) shall not on such date be satisfied, and ending when such
conditions are satisfied. The Swing Loan Lender shall not otherwise be
required to determine that, or take notice whether, the conditions precedent
set forth in Section 3.2 (Conditions Precedent to Each Loan and Letter of
Credit) have been satisfied in connection with the making of any Swing Loan.

          (c) The Swing Loan Lender shall notify the Administrative Agent in writing
(which writing may be a telecopy or electronic mail) weekly, by no later than
10:00 A.M. (New York City time) on the first Business Day of each week, of the
aggregate principal amount of its Swing Loans then outstanding.

          (d) The Swing Loan Lender may demand at any time that each Lender pay to
the Administrative Agent, for the account of the Swing Loan Lender, in the
manner provided in clause (e) below, such Lender’s Ratable Portion of all or a
portion of the outstanding Swing Loans, which demand shall be made through the
Administrative Agent, shall be in writing and shall specify the outstanding
principal amount of Swing Loans demanded to be paid.

          (e) The Administrative Agent shall forward each notice referred to in
clause (c) above and each demand referred to in clause (d) above to each Lender
on the day such notice or such demand is received by the Administrative Agent
(except that any such notice or demand
received by the Administrative Agent after 2:00 P.M. (New York City time)
on any Business Day or any such demand received on a day that is not a Business
Day shall not be required to be forwarded to the Lenders by the Administrative
Agent until the next succeeding Business Day), together with a statement
prepared by the Administrative Agent specifying the amount of each Lender’s
Ratable Portion of the aggregate principal amount of the Swing Loans stated to
be outstanding in such notice or demanded to be paid pursuant to such demand,
and, notwithstanding whether or not the conditions precedent set forth in
Section 3.2 (Conditions Precedent to Each Loan and Letter of Credit) shall have
been satisfied (which conditions precedent the Lenders hereby irrevocably
waive), each Lender shall, before 11:00 A.M. (New York City time) on the
Business Day next succeeding the date of such Lender’s receipt of such written
statement, make available to the Administrative Agent, in immediately available
funds, for the account of the Swing Loan Lender, the amount specified in such
statement. Upon such payment by a Lender, such Lender shall, except as
provided in clause (f) below, be deemed to have made a Revolving Loan to the
applicable Borrower. The Administrative Agent shall use such funds to repay
the Swing Loans to the Swing Loan Lender. To the extent that any Lender fails
to make such payment available to the Administrative Agent for the account of
the Swing Loan Lender, such Borrower shall repay such Swing Loan on demand.

          (f) Upon the occurrence of a Default under Section 9.1(f) (Events of
Default), each Lender shall acquire, without recourse or warranty, an undivided
participation in each Swing Loan otherwise required to be repaid by such Lender
pursuant to clause (e) above, which participation shall be in a principal
amount equal to such Lender’s Ratable Portion of such Swing Loan, by paying to
the Swing Loan Lender on the date on which such Lender would otherwise have
been required to make a payment in respect of such Swing Loan pursuant to
clause (e) above, in immediately available funds, an amount equal to such
Lender’s Ratable Portion of such Swing Loan. If such amount is not in fact
made available by such Lender to the Swing Loan Lender on such date, the Swing
Loan Lender shall be entitled to recover such amount on demand from such Lender
together with interest accrued from such date at the Federal Funds Rate for the
first Business Day after such payment was due and thereafter at the rate of
interest then applicable to Base Rate Loans.

44

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          (g) From and after the date on which any Lender is deemed to have made a
Revolving Loan pursuant to clause (e) above with respect to any Swing Loan or
purchases an undivided participation interest in a Swing Loan pursuant to
clause (f) above, the Swing Loan Lender shall promptly distribute to such
Lender such Lender’s Ratable Portion of all payments of principal of and
interest received by the Swing Loan Lender on account of such Swing Loan other
than those received from a Lender pursuant to clause (e) or (f) above.

          Section 2.4 Letters of Credit

          (a) On the terms and subject to the conditions contained in this
Agreement, each Issuer agrees to issue one or more Letters of Credit
denominated in Dollars at the request of a Borrower for the account of such
Borrower from time to time during the period commencing on the Effective Date
and ending on the earlier of the Revolving Credit Termination Date and 30 days
prior to the Scheduled Termination Date; provided, however, that no Issuer
shall be under any obligation to issue any Letter of Credit if:

               (i) any order, judgment or decree of any Governmental Authority or
arbitrator shall purport by its terms to enjoin or restrain such Issuer
from issuing such Letter of Credit or any Requirement of Law applicable
to such Issuer or any request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over such
Issuer shall prohibit, or request that such Issuer refrain from, the
issuance of letters of credit generally or such Letter of Credit in
particular or shall impose
upon such Issuer with respect to such Letter of Credit any
restriction or reserve or capital requirement (for which such Issuer is
not otherwise compensated) not in effect on the date of this Agreement or
result in any unreimbursed loss, cost or expense that was not applicable,
in effect or known to such Issuer as of the date of this Agreement and
that such Issuer in good faith deems material to it;

               (ii) such Issuer shall have received written notice from the
Administrative Agent, any Lender or any Borrower, on or prior to the
requested date of issuance of such Letter of Credit, that one or more of
the applicable conditions contained in Section 3.1 (Conditions Precedent
to the Effectiveness of this Agreement) or Section 3.2 (Conditions
Precedent to Each Loan and Letter of Credit) is not then satisfied;

               (iii) after giving effect to the issuance of such Letter of Credit,
the aggregate Revolving Credit Outstandings would exceed the Maximum
Credit at such time;

               (iv) after giving effect to the issuance of such Letter of Credit,
the sum of (i) the Letter of Credit Undrawn Amounts at such time and (ii)
the Reimbursement Obligations at such time would exceed $5,000,000; or

               (v) any fees due in connection with a requested issuance have not
been paid.

None of the Lenders (other than the Issuers in their capacity as such) shall
have any obligation to issue any Letter of Credit.

45

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          (b) In no event shall the expiration date of any Letter of Credit (i) be
more than one year after the date of issuance thereof or (ii) be less than
thirty days prior to the Scheduled Termination Date; provided, however, that
any Letter of Credit with a one-year term may provide for the renewal thereof
for additional one-year periods (which shall in no event extend beyond the
expiry date referred to in clause (ii) above).

          (c) In connection with the issuance of each Letter of Credit for the
account of any Borrower, such Borrower shall give the relevant Issuer and the
Administrative Agent at least two Business Days’ prior written notice, in
substantially the form of Exhibit D (Form of Letter of Credit Request) (or in
such other written or electronic form as is acceptable to the Issuer), of the
requested issuance of such Letter of Credit (a “Letter of Credit Request”).
Such notice shall be irrevocable and shall specify the Issuer of such Letter of
Credit, the stated amount of the Letter of Credit requested, which stated
amount shall not be less than $50,000, the date of issuance of such requested
Letter of Credit (which day shall be a Business Day), the date on which such
Letter of Credit is to expire (which date shall be a Business Day), and the
Person for whose benefit the requested Letter of Credit is to be issued. Such
notice, to be effective, must be received by the relevant Issuer and the
Administrative Agent not later than 11:00 A.M. (New York City time) on the
second Business Day prior to the requested issuance of such Letter of Credit.

          (d) Subject to the satisfaction of the conditions set forth in this
Section 2.4, the relevant Issuer shall, on the requested date, issue a Letter
of Credit on behalf of the applicable Borrower in accordance with such Issuer’s
usual and customary business practices. No Issuer shall issue any Letter of
Credit in the period commencing on the first Business Day after it receives
written notice from any Lender that one or more of the conditions precedent
contained in Section 3.2 (Conditions Precedent to Each Loan and Letter of
Credit) shall not on such date be satisfied, and ending when such conditions
are satisfied. The relevant Issuer shall not otherwise
be required to determine that, or take notice whether, the conditions
precedent set forth in Section 3.2 (Conditions Precedent to Each Loan and
Letter of Credit) have been satisfied in connection with the issuance of any
Letter of Credit.

          (e) If requested by the relevant Issuer, prior to the issuance of each
Letter of Credit for the account of any Borrower by such Issuer, and as a
condition of such issuance and of the participation of each Lender in the
Letter of Credit Obligations arising with respect thereto, such Borrower shall
have delivered to such Issuer a letter of credit reimbursement agreement, in
such form as the Issuer may employ in its ordinary course of business for its
own account (a “Letter of Credit Reimbursement Agreement”), signed by such
Borrower, and such other documents or items as may be required pursuant to the
terms thereof. In the event of any conflict between the terms of any Letter of
Credit Reimbursement Agreement and this Agreement, the terms of this Agreement
shall govern.

          (f) Each Issuer shall:

               (i) give the Administrative Agent written notice (or telephonic
notice confirmed promptly thereafter in writing), which writing may be a
telecopy or electronic mail, of the issuance or renewal of a Letter of
Credit issued by it for the account of any Borrower, of all drawings
under a Letter of Credit issued by it and the payment (or the failure to
pay when due) by such Borrower of any Reimbursement Obligation when due
(which notice the Administrative Agent shall promptly transmit by
telecopy, electronic mail or similar transmission to each Lender);

46

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

               (ii) upon the request of any Lender, furnish to such Lender copies
of any Letter of Credit Reimbursement Agreement to which such Issuer is a
party and such other documentation as may reasonably be requested by such
Lender; and

               (iii) no later than 10 Business Days following the last day of each
calendar month, provide to the Administrative Agent (and the
Administrative Agent shall provide a copy to each Lender requesting the
same) and the Company separate schedules for Documentary and Standby
Letters of Credit issued by it, in form and substance reasonably
satisfactory to the Administrative Agent, setting forth the aggregate
Letter of Credit Obligations outstanding at the end of each month and any
information requested by the Company or the Administrative Agent relating
thereto.

          (g) Immediately upon the issuance by an Issuer of a Letter of Credit for
the account of any Borrower in accordance with the terms and conditions of this
Agreement, such Issuer shall be deemed to have sold and transferred to each
Lender, and each Lender shall be deemed irrevocably and unconditionally to have
purchased and received from such Issuer, without recourse or warranty, an
undivided interest and participation, to the extent of such Lender’s Ratable
Portion, in such Letter of Credit and the obligations of such Borrower with
respect thereto (including all Letter of Credit Obligations with respect
thereto) and any security therefor and guaranty pertaining thereto.

          (h) Each Borrower for whose account a Letter of Credit has been issued
agrees to pay to the Issuer of such Letter of Credit the amount of all
Reimbursement Obligations owing to such Issuer under such Letter of Credit when
such amounts are due and payable, irrespective of any claim, set-off, defense
or other right that any Borrower may have at any time against such Issuer or
any other Person. In the event that any Issuer makes any payment under any
Letter of Credit and no Borrower shall have repaid such amount to such Issuer
pursuant to this clause (h) or such payment is rescinded or set aside for any
reason, such Reimbursement Obligation shall bear interest computed from the
date on which such Reimbursement Obligation arose to the date
of repayment in full at the rate of interest applicable to Revolving Loans
bearing interest at a rate based on the Base Rate during such period, and such
Issuer shall promptly notify the Administrative Agent, that shall promptly
notify each Lender of the failure to repay such Reimbursement Obligation, and
each Lender shall promptly and unconditionally pay to the Administrative Agent
for the account of such Issuer the amount of such Lender’s Ratable Portion of
such payment in Dollars and in immediately available funds. If the
Administrative Agent so notifies such Lender prior to 11:00 A.M. (New York City
time) on any Business Day, such Lender shall make available to the
Administrative Agent for the account of such Issuer its Ratable Portion of the
amount of such payment on such Business Day in immediately available funds.
Upon such payment by a Lender, such Lender shall, except during the continuance
of a Default or Event of Default under Section 9.1(f) (Events of Default) and
notwithstanding whether or not the conditions precedent set forth in Section
3.2 (Conditions Precedent to Each Loan and Letter of Credit) shall have been
satisfied (which conditions precedent the Lenders hereby irrevocably waive) be
deemed to have made a Revolving Loan to the Borrowers in the principal amount
of such payment. Whenever any Issuer receives from any Borrower a payment of a
Reimbursement Obligation as to which the Administrative Agent has received for
the account of such Issuer any payment from a Lender pursuant to this clause
(h), such Issuer shall pay to the Administrative Agent and the Administrative
Agent shall promptly pay to each Lender, in immediately available funds, an
amount equal to such Lender’s Ratable Portion of the amount of such payment
adjusted,

47

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

if necessary, to reflect the respective amounts the Lenders have paid
in respect of such Reimbursement Obligation.

          (i) Each Borrower’s obligation to pay each Reimbursement Obligation and
the obligations of the Lenders to make payments to the Administrative Agent for
the account of the Issuers with respect to Letters of Credit issued for the
account of such Borrower shall be absolute, unconditional and irrevocable and
shall be performed strictly in accordance with the terms of this Agreement,
under any and all circumstances whatsoever, including the occurrence of any
Default or Event of Default, and irrespective of:

               (i) any lack of validity or enforceability of any Letter of Credit
or any Loan Document, or any term or provision therein;

               (ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit or any Loan Document;

               (iii) the existence of any claim, set off, defense or other right
that any Borrower, any other party guaranteeing, or otherwise obligated
with, any Borrower, any Subsidiary or other Affiliate thereof or any
other Person may at any time have against the beneficiary under any
Letter of Credit, any Issuer, the Administrative Agent or any Lender or
any other Person, whether in connection with this Agreement, any other
Loan Document or any other related or unrelated agreement or transaction;

               (iv) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;

               (v) payment by the Issuer under a Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such Letter of Credit; and

               (vi) any other act or omission to act or delay of any kind of the
Issuer, the Lenders, the Administrative Agent or any other Person or any
other event or circumstance whatsoever, whether or not similar to any of
the foregoing, that might, but
for the provisions of this Section 2.4, constitute a legal or
equitable discharge of any Borrower’s obligations hereunder.

Any action taken or omitted to be taken by the relevant Issuer under or in
connection with any Letter of Credit, if taken or omitted in the absence of
gross negligence or willful misconduct, shall not put such Issuer under any
resulting liability to any Borrower or any Lender. In determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof, the Issuer may accept documents that appear on their face to be
in order, without responsibility for further investigation, regardless of any
notice or information to the contrary and, in making any payment under any
Letter of Credit the Issuer may rely exclusively on the documents presented to
it under such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary thereunder equals the
amount of such draft and whether or not any document presented pursuant to such
Letter of Credit proves to be insufficient in any respect, if such document on
its face appears to be in order, and whether or not any other statement or any
other document presented pursuant to such Letter of Credit proves to be forged

48

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

or invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever, and any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the terms thereof shall,
in each case, be deemed not to constitute willful misconduct or gross
negligence of the Issuer.

          (j) If and to the extent such Lender shall not have so made its Ratable
Portion of the amount of the payment required by clause (i) above available to
the Administrative Agent for the account of such Issuer, such Lender agrees to
pay to the Administrative Agent for the account of such Issuer forthwith on
demand such amount together with interest thereon, for the first Business Day
after payment was first due at the Federal Funds Rate and, thereafter until
such amount is repaid to the Administrative Agent for the account of such
Issuer, at the rate per annum applicable to Base Rate Loans under the Facility.
The failure of any Lender to make available to the Administrative Agent for
the account of such Issuer its Ratable Portion of any such payment shall not
relieve any other Lender of its obligation hereunder to make available to the
Administrative Agent for the account of such Issuer its Ratable Portion of any
payment on the date such payment is to be made, but no Lender shall be
responsible for the failure of any other Lender to make available to the
Administrative Agent for the account of the Issuer such other Lender’s Ratable
Portion of any such payment.

          Section 2.5 Reduction and Termination of the Revolving Credit Commitments

          The Company may, upon at least three Business Days’ prior notice to the
Administrative Agent, terminate in whole or reduce in part ratably the unused
portions of the respective Revolving Credit Commitments of the Lenders;
provided, however, that each partial reduction shall be in the aggregate amount
of not less than $5,000,000 or an integral multiple of $1,000,000 in excess
thereof.

          Section 2.6 Repayment of Loans

          Each Borrower promises to repay the entire unpaid principal amount of the
Revolving Loans and the Swing Loans owing by it on the Scheduled Termination
Date.

          Section 2.7 Evidence of Debt

          (a) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing Indebtedness of each Borrower to such Lender
resulting from each Loan
of such Lender from time to time, including the amounts of principal and
interest payable and paid to such Lender from time to time under this
Agreement.

          (b) The Administrative Agent shall maintain accounts in accordance with
its usual practice in which it shall record (i) the amount of each Loan made
and, if a Eurodollar Rate Loan, the Interest Period applicable thereto, (ii)
the amount of any principal or interest due and payable by any Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder from any Borrower and each Lender’s share thereof, if
applicable.

          (c) The entries made in the accounts maintained pursuant to clauses (a)
and (b) above shall, to the extent permitted by applicable law, be prima facie
evidence of the existence and amounts of the obligations recorded therein;
provided, however, that the failure of any Lender

49

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

or the Administrative Agent
to maintain such accounts or any error therein shall not in any manner affect
the obligations of any Borrower to repay the Loans in accordance with their
terms.

          (d) Notwithstanding any other provision of the Agreement, in the event
that any Lender requests that a Borrower execute and deliver a promissory note
or notes payable to such Lender in order to evidence the Indebtedness owing to
such Lender by such Borrower hereunder, such Borrower shall promptly execute
and deliver a Revolving Credit Note or Revolving Credit Notes to such Lender
evidencing any Revolving Loans of such Lender, substantially in the form of
Exhibit B (Form of Revolving Credit Note).

          Section 2.8 Optional Prepayments

          Any Borrower may prepay the outstanding principal amount of the Revolving
Loans or Swing Loans owing by it at any time in whole or in part, without
premium or penalty; provided, however, that if any prepayment of any Eurodollar
Rate Loan is made by any Borrower other than on the last day of an Interest
Period for such Loan, such Borrower shall also pay any amounts owing pursuant
to Section 2.14(e) (Breakage Costs). Upon the giving of such notice of
prepayment, the principal amount of Revolving Loans specified to be prepaid
shall become due and payable on the date specified for such prepayment.

          Section 2.9 Mandatory Prepayments

          (a) The Borrowers shall, without any reduction in the Revolving Credit
Commitments, prepay or cause to be prepaid the Loans (or provide cash
collateral in respect of Letters of Credit) immediately upon receipt by the
Company, any Borrower or any of their Subsidiaries of Net Cash Proceeds arising
from (i) an Asset Sale, (ii) a Property Loss Event, (iii) an Equity Issuance or
(iv) a Debt Issuance, in each case in an amount equal to 100% of such Net Cash
Proceeds. All such prepayments shall be applied in accordance with clause (b)
below.

          (b) Any prepayment made by or on behalf of any Borrower and required to be
applied in accordance with this clause (b) shall be applied as follows: first,
to repay the outstanding principal balance of the Swing Loans until such Swing
Loans shall have been repaid in full; second, to repay the outstanding
principal balance of the Revolving Loans until such Revolving Loans shall have
been paid in full; and then, to provide cash collateral for any Letter of
Credit Obligations in the manner set forth in Section 9.3 (Actions in Respect
of Letters of Credit) until all such Letter of Credit Obligations have been
cash collateralized in the manner and up to the amounts set forth therein.

          (c) If at any time, the aggregate Revolving Credit Outstandings owing by
the Borrowers exceed the Maximum Credit at such time, the Borrowers shall
forthwith prepay the
Swing Loans first and then the Revolving Loans of the Borrowers or such
Borrower, as applicable, then outstanding in an amount equal to such excess.
If any such excess remains after repayment in full of the aggregate outstanding
Swing Loans and Revolving Loans of the Borrowers or such Borrower (as the case
may be), the Borrowers shall provide cash collateral for the Letter of Credit
Obligations in the manner set forth in Section 9.3 (Actions in Respect of
Letters of Credit) to the extent required to eliminate such excess.

          (d) The Borrowers hereby irrevocably waive the right to direct the
application of all funds in the Cash Collateral Account and agree that the
Administrative Agent may, and, upon the written direction of the Requisite
Lenders, shall, except as provided in Section 2.13(f)

50

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

(Payments and Computations), apply all payments in respect of any Obligations and all
available funds in the Cash Collateral Account on a daily basis as follows:
first, to repay the outstanding principal amount of the Swing Loans until such
Swing Loans have been repaid in full; second, to repay the outstanding
principal balance of the Revolving Loans until such Revolving Loans shall have
been repaid in full; and then, to any other Obligation then due and payable.
The Administrative Agent agrees so to apply such funds and the Borrowers
consent to such application. If, following such application, there are no
Loans outstanding and no other Obligations that are then due and payable (and
cash collateral has been provided in the amount of 105% of all outstanding
Letter of Credit Obligations), then the Administrative Agent shall cause any
remaining funds in the Cash Collateral Account to be paid at the written
direction of the Company.

          Section 2.10 Interest

          (a) Rate of Interest. All Loans and the outstanding amount of all other
Obligations shall bear interest, in the case of Loans, on the unpaid principal
amount thereof from the date such Loans are made and, in the case of such other
Obligations, from the date such other Obligations are due and payable until, in
all cases, paid in full, except as otherwise provided in clause (c) below, as
follows:

               (i) if a Base Rate Loan or such other Obligation, at a rate per
annum equal to the sum of (A) the Base Rate as in effect from time to
time, plus (B) the Applicable Margin; and

               (ii) if a Eurodollar Rate Loan, at a rate per annum equal to the sum
of (A) the Eurodollar Rate determined for the applicable Interest Period,
plus (B) the Applicable Margin in effect from time to time during such
Eurodollar Interest Period.

          (b) Interest Payments. (i) Interest accrued on each Base Rate Loan (other
than Swing Loans) shall be payable in arrears (A) on the last Business Day of
each calendar month, commencing on the first such day following the making of
such Base Rate Loan and (B) if not previously paid in full, at maturity
(whether by acceleration or otherwise) of such Base Rate Loan; (ii) interest
accrued on Swing Loans shall be payable in arrears on the first Business Day of
the immediately succeeding calendar month; (iii) interest accrued on each
Eurodollar Rate Loan shall be payable in arrears (A) on the last day of each
Interest Period applicable to such Loan and if such Interest Period has a
duration of more than three months, on each day during such Interest Period
occurring exactly three months or an integral multiple thereof after the first
day of such Interest Period, (B) upon the payment or prepayment thereof in full
or in part and (C) if not previously paid in full, at maturity (whether by
acceleration or otherwise) of such Eurodollar Rate Loan; and (iv) interest
accrued on the amount of all other Obligations shall be payable on demand from
and after the time such Obligation becomes due and payable (whether by
acceleration or otherwise).

          (c) Default Interest. Notwithstanding the rates of interest specified in
clause (a) above or elsewhere herein, except as otherwise agreed by the
Requisite Lenders, effective immediately upon the occurrence of an Event of
Default and for as long thereafter as such Event of Default shall be
continuing, the principal balance of all Loans and the amount of all other
Obligations shall bear interest at a rate that is two percent per annum in
excess of the rate of interest applicable to such Obligations from time to
time.

51

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          Section 2.11 Conversion/Continuation Option

          (a) A Borrower may elect (i) at any time to convert Base Rate Loans (other
than Swing Loans) owing by it or any portion thereof to Eurodollar Rate Loans
or (ii) at the end of any applicable Interest Period, to convert Eurodollar
Rate Loans owing by it or any portion thereof into Base Rate Loans or to
continue such Eurodollar Rate Loans or any portion thereof for an additional
Interest Period; provided, however, that the aggregate amount of the Eurodollar
Loans for each Interest Period must be in the amount of $3,000,000 or an
integral multiple of $1,000,000 in excess thereof. Each conversion or
continuation shall be allocated among the Loans of each Lender in accordance
with its Ratable Portion. Each such election shall be in substantially the
form of Exhibit E (Form of Notice of Conversion or Continuation) (a “Notice of
Conversion or Continuation”) and shall be made by giving the Administrative
Agent at least three Business Days’ prior written notice specifying (A) the
amount and type of Loan being converted or continued, (B) in the case of a
conversion to or a continuation of Eurodollar Rate Loans, the applicable
Interest Period and (C) in the case of a conversion, the date of conversion
(which date shall be a Business Day and, if a conversion from Eurodollar Rate
Loans, shall also be the last day of the applicable Interest Period).

          (b) The Administrative Agent shall promptly notify each Lender of its
receipt of a Notice of Conversion or Continuation and of the options selected
therein. Notwithstanding the foregoing, no conversion in whole or in part of
Base Rate Loans to Eurodollar Rate Loans, and no continuation in whole or in
part of Eurodollar Rate Loans upon the expiration of any applicable Interest
Period, shall be permitted at any time at which (i) an Event of Default shall
have occurred and be continuing or (ii) the continuation of, or conversion
into, would violate any of the provisions of Section 2.14 (Special Provisions
Governing Eurodollar Rate Loans). If, within the time period required under
the terms of this Section 2.11, the Administrative Agent does not receive a
Notice of Conversion or Continuation from the applicable Borrower containing a
permitted election to continue any Eurodollar Rate Loans for an additional
Interest Period or to convert any such Loans, then, upon the expiration of the
applicable Interest Period, such Loans shall be automatically converted to Base
Rate Loans. Each Notice of Conversion or Continuation shall be irrevocable.

          Section 2.12 Fees

          (a) Unused Commitment Fee. The Borrowers, jointly and severally, agree to
pay to each Lender from the Effective Date until the Revolving Credit
Termination Date a commitment fee (the “Unused Commitment Fee”) payable in
arrears (x) on the last Business Day of each calendar month, commencing on the
first such Business Day following the Effective Date and (y) on the Revolving
Credit Termination Date and, in each case, calculated daily to equal 0.5% per
annum of such Lender’s Unused Commitment.

          (b) Letter of Credit Fees. Each Borrower agrees to pay the following
amounts with respect to Letters of Credit issued by any Issuer for its account:

               (i) to the Administrative Agent for the account of each Issuer of a
Letter of Credit issued for the account of such Borrower, with respect to
each such Letter
of Credit issued by such Issuer, an issuance fee equal to 0.25% per
annum of the maximum amount available from time to time to be drawn under
such Letter of Credit, payable in arrears (A) on the last Business Day of
each calendar month, commencing on

52

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

the first such Business Day following
the issuance of such Letter of Credit and (B) on the Revolving Credit
Termination Date;

               (ii) to the Administrative Agent for the ratable benefit of the
Lenders, with respect to each Letter of Credit issued for the account of
such Borrower, a fee accruing at a rate per annum equal to the Applicable
Margin for Revolving Loans that are Eurodollar Rate Loans on the maximum
amount available from time to time to be drawn under such Letter of
Credit, payable in arrears (A) on the last Business Day of each calendar
month, commencing on the first such Business Day following the issuance
of such Letter of Credit and (B) on the Revolving Credit Termination
Date; provided, however, that, except as otherwise agreed by the
Requisite Lenders, during the continuance of an Event of Default, such
fee shall be increased by two percent per annum and shall be payable on
demand; and

               (iii) to the Issuer of any Letter of Credit, with respect to the
issuance, amendment or transfer of each Letter of Credit and each drawing
made thereunder, documentary and processing charges in accordance with
such Issuer’s standard schedule for such charges in effect at the time of
issuance, amendment, transfer or drawing, as the case may be.

          (c) Additional Fees. The Company has agreed to pay to the Agents and the
Arrangers additional fees, the amount and dates of payment of which are set
forth in the Fee Letters.

          Section 2.13 Payments and Computations

          (a) Each Borrower shall make each payment hereunder (including fees and
expenses) not later than 11:00 A.M. (New York City time) on the day when due,
in Dollars, to the Administrative Agent at its address referred to in Section
11.8 (Notices, Etc.) in immediately available funds without set-off or
counterclaim. The Administrative Agent shall promptly thereafter cause to be
distributed immediately available funds relating to the payment of principal or
interest or fees to the Lenders, in accordance with the application of payments
set forth in clauses (e) and (f) below, as applicable, for the account of their
respective Applicable Lending Offices; provided, however, that amounts payable
pursuant to Section 2.15 (Capital Adequacy), Section 2.16 (Taxes) or clause (c)
or (d) of Section 2.14 (Special Provisions Governing Eurodollar Rate Loans)
shall be paid only to the affected Lender or Lenders and amounts payable with
respect to Swing Loans shall be paid only to the Swing Loan Lender. Payments
received by the Administrative Agent after 11:00 A.M. (New York City time)
shall be deemed to be received on the next Business Day.

          (b) All computations of interest and of fees shall be made by the
Administrative Agent on the basis of a year of 360 days, in each case for the
actual number of days (including the first day but excluding the last day)
occurring in the period for which such interest and fees are payable. Each
determination by the Administrative Agent of an interest rate hereunder shall
be conclusive and binding for all purposes, absent manifest error.

          (c) Whenever any payment hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest or fees, as the case may be; provided,
however, that if such extension would cause payment of interest on

53

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

any Eurodollar Rate Loan to be made in the next calendar month, such
payment shall be made on the immediately preceding Business Day. All
repayments of any Revolving Loan shall be applied as follows: first, to repay
such Loans outstanding as Base Rate Loans; and then, to repay such Loans
outstanding as Eurodollar Rate Loans with those Eurodollar Rate Loans that have
earlier expiring Eurodollar Interest Periods being repaid prior to those that
have later expiring Eurodollar Interest Periods.

          (d) Unless the Administrative Agent shall have received notice from the
Company to the Lenders prior to the date on which any payment is due hereunder
that the applicable Borrower will not make such payment in full, the
Administrative Agent may assume that such Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent may,
in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to
the extent that such Borrower shall not have made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon (at the Federal Funds Rate for the first Business Day and
thereafter at the rate applicable to Base Rate Loans) for each day from the
date such amount is distributed to such Lender until the date such Lender
repays such amount to the Administrative Agent.

          (e) Subject to the provisions of clause (f) below (and except as otherwise
provided in Section 2.9 (Mandatory Prepayments)), all payments and any other
amounts received by the Administrative Agent from or for the benefit of any
Borrower shall be applied as follows: first, to pay principal of and interest
on any portion of the Loans that the Administrative Agent may have advanced
pursuant to the express provisions of this Agreement on behalf of any Lender,
for which the Administrative Agent has not then been reimbursed by such Lender
or any Borrower; second, to pay all other Obligations then due and payable; and
then, as the Company so designates. Payments in respect of Swing Loans
received by the Administrative Agent shall be distributed to the Swing Loan
Lender; payments in respect of Revolving Loans received by the Administrative
Agent shall be distributed to each Lender in accordance with such Lender’s
Ratable Portion; and all payments of fees and all other payments in respect of
any other Obligation shall be allocated among such of the Lenders and Issuers
as are entitled thereto and, for such payments allocated to the Lenders, in
proportion to their respective Ratable Portions.

          (f) Each Borrower hereby irrevocably waives the right to direct the
application of any and all payments in respect of the Secured Obligations and
any proceeds of Collateral after the occurrence and during the continuance of
an Event of Default and agrees that the Administrative Agent may, and, upon
either (A) the written direction of the Requisite Lenders or (B) the
acceleration of the Obligations pursuant to Section 9.2 (Remedies), shall,
apply all payments in respect of any Secured Obligations and all funds on
deposit in any Cash Collateral Account and all other proceeds of Collateral in
the following order:

               (i) first, to pay interest on and then principal of any portion of
the Revolving Loans that the Administrative Agent may have advanced on
behalf of any Lender for which the Administrative Agent has not then been
reimbursed by such Lender or any Borrower;

               (ii) second, to pay interest on and then principal of any Swing
Loan;

54

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

               (iii) third, to pay Secured Obligations in respect of any expense
reimbursements or indemnities then due to any Agent;

               (iv) fourth, to pay Secured Obligations in respect of any expense
reimbursements or indemnities then due to the Lenders and the Issuers;

               (v) fifth, to pay Secured Obligations in respect of any fees then
due to the Administrative Agent, the Lenders and the Issuers;

               (vi) sixth, to pay interest (whether or not allowed in any
bankruptcy, insolvency, reorganization or any of the other proceedings
set forth in Section 9.1(f)(ii) (Events of Default)) then due and payable
in respect of the Loans and Reimbursement Obligations;

               (vii) seventh, to pay or prepay principal payments on the Loans and
Reimbursement Obligations, to pay or prepay all Reserved Ancillary
Obligations and to provide cash collateral for outstanding Letter of
Credit Undrawn Amounts in the manner described in Section 9.3 (Actions in
Respect of Letters of Credit), ratably to the aggregate principal amount
of such Loans and the amounts of such Reimbursement Obligations, Letter
of Credit Undrawn Amounts and Reserved Ancillary Obligations; and

               (viii) eighth, to the ratable payment of all other Secured
Obligations (including Ancillary Obligations not constituting Reserved
Ancillary Obligations);

provided, however, that if sufficient funds are not available to fund all
payments to be made in respect of any of the Secured Obligations described in
any of clauses first through eighth above, the available funds being applied
with respect to any such Secured Obligation (unless otherwise specified in such
clause) shall be allocated to the payment of such Secured Obligations ratably,
based on the proportion of the Administrative Agent’s and each Lender’s or
Issuer’s interest in the aggregate outstanding Secured Obligations described in
such clauses. The order of priority set forth in clauses first through eighth
above may at any time and from time to time be changed by the agreement of the
Requisite Lenders without necessity of notice to or consent of or approval by
any Borrower, any Secured Party that is not a Lender or Issuer or by any other
Person that is not a Lender or Issuer. The order of priority set forth in
clauses first through eighth above may be changed only with the prior written
consent of each Agent in addition to the Requisite Lenders.

          (g) At the option of the Administrative Agent, principal on the Swing
Loans, Reimbursement Obligations, interest, fees, expenses and other sums due
and payable in respect of the Revolving Loans and Protective Advances may be
paid from the proceeds of Swing Loans or Revolving Loans. Each Borrower hereby
authorizes the Swing Loan Lender to make Swing Loans pursuant to Section 2.3(a)
(Swing Loans) and the Lenders to make Revolving Loans pursuant to Section
2.2(a) (Borrowing Procedures) from time to time in the Swing Loan Lender’s or
such Lender’s discretion, that are in the amounts of any and all principal
payable with respect to the Swing Loans and interest, fees, expenses and other
sums payable in respect of the Revolving Loans, and further authorizes the
Administrative Agent to give the Lenders notice of any Borrowing with respect
to such Swing Loans and Revolving Loans and to distribute the proceeds of such
Swing Loans and Revolving Loans to pay such amounts. Each Borrower agrees that
all such Swing Loans and Revolving Loans so made shall be deemed to have been
requested by it (irrespective of the satisfaction of the conditions in Section
3.2 (Conditions Precedent to

55

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Each Loan and Letter of Credit), which conditions
the Lenders irrevocably waive) and directs that all proceeds thereof shall be
used to pay such amounts.

          Section 2.14 Special Provisions Governing Eurodollar Rate Loans

          (a) Determination of Interest Rate

          The Eurodollar Rate for each Interest Period for Eurodollar Rate Loans
shall be determined by the Administrative Agent pursuant to the procedures set
forth in the definition of “Eurodollar Rate.” The Administrative Agent’s
determination shall be presumed to be correct absent manifest error and shall
be binding on the Borrowers.

          (b) Interest Rate Unascertainable, Inadequate or Unfair

          In the event that: (i) the Administrative Agent determines that adequate
and fair means do not exist for ascertaining the applicable interest rates by
reference to which the Eurodollar Rate then being determined is to be fixed or
(ii) the Requisite Lenders notify the Administrative Agent that the Eurodollar
Rate for any Interest Period will not adequately reflect the cost to the
Lenders of making or maintaining such Loans for such Interest Period, the
Administrative Agent shall forthwith so notify the Company and the Lenders,
whereupon each Eurodollar Loan shall automatically, on the last day of the
current Interest Period for such Loan, convert into a Base Rate Loan and the
obligations of the Lenders to make Eurodollar Rate Loans or to convert Base
Rate Loans into Eurodollar Rate Loans shall be suspended until the
Administrative Agent shall notify the Company that the Requisite Lenders have
determined that the circumstances causing such suspension no longer exist.

          (c) Increased Costs

          If at any time any Lender shall determine that, after the Effective Date,
because of the introduction of or any change in or in the interpretation of any
law, treaty or governmental rule, regulation or order (other than any change by
way of imposition or increase of reserve requirements included in determining
the Eurodollar Rate) or the compliance by such Lender with any guideline,
request or directive promulgated or given after the Effective Date by or on
behalf of any central bank or other Governmental Authority (whether or not
having the force of law), there shall be any increase in the cost to such
Lender of agreeing to make or making, funding or maintaining any Eurodollar
Rate Loans, then the Borrowers shall from time to time, upon demand by such
Lender (with a copy of such demand to the Administrative Agent), pay, jointly
and severally, to the Administrative Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased
cost; provided, however, that no Borrower shall be liable for increased costs
relating to periods up to but excluding the date 180 days before the initial
demand is made hereunder by such Lender with respect to the change that would
otherwise justify such liability. If any Lender becomes entitled to claim any
additional amount pursuant to this clause (c), it shall promptly notify the
Company (with a copy to the Administrative Agent) of the event by reason of
which it has become so entitled. A certificate as to the amount of such
increased cost, submitted to the Company and the Administrative Agent by such
Lender, shall be conclusive and binding for all purposes, absent manifest
error.

          (d) Illegality

          Notwithstanding any other provision of this Agreement, if any Lender
determines that the introduction of or any change in or in the interpretation
of any law, treaty or governmental rule, regulation or order after the date of
this Agreement shall make it unlawful, or

56

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender or its
Eurodollar Lending Office to make Eurodollar Rate Loans or to continue to fund
or maintain Eurodollar Rate Loans, then, on notice thereof and demand therefor
by such Lender to the Company through the Administrative Agent, (i) the
obligation of such Lender to make or to continue Eurodollar Rate Loans and to
convert Base Rate Loans into Eurodollar Rate Loans shall be suspended, and each
such Lender shall make a Base Rate Loan as part of any requested Borrowing of
Eurodollar Rate Loans and (ii) if the affected Eurodollar Rate Loans are then
outstanding, the applicable Borrower shall immediately convert each such Loan
into a Base Rate Loan. If at any time after a Lender gives notice under this
clause (d) such Lender determines that it may lawfully make Eurodollar Rate
Loans, such Lender shall promptly give notice of that
determination to the Company and the Administrative Agent, and the
Administrative Agent shall promptly transmit the notice to each other Lender.
The Borrowers’ right to request, and such Lender’s obligation, if any, to make
Eurodollar Rate Loans shall thereupon be restored.

          (e) Breakage Costs

          In addition to all amounts required to be paid by any Borrower pursuant to
Section 2.10 (Interest), each Borrower shall compensate each Lender, upon
demand, for all losses, expenses and liabilities (including any loss or expense
incurred by reason of the liquidation or reemployment of deposits or other
funds acquired by such Lender to fund or maintain such Lender’s Eurodollar Rate
Loans to such Borrower but excluding any loss of the Applicable Margin on the
relevant Loans) that such Lender may sustain (i) if for any reason a proposed
Borrowing, conversion into or continuation of Eurodollar Rate Loans does not
occur on a date specified therefor in a Notice of Borrowing or a Notice of
Conversion or Continuation given by such Borrower or in a telephonic request by
it for borrowing or conversion or continuation or a successive Interest Period
does not commence after notice therefor is given pursuant to Section 2.11
(Conversion/Continuation Option), (ii) if for any reason any Eurodollar Rate
Loan is prepaid (including mandatorily pursuant to Section 2.9 (Mandatory
Prepayments)) on a date that is not the last day of the applicable Interest
Period, (iii) as a consequence of a required conversion of a Eurodollar Rate
Loan to a Base Rate Loan as a result of any of the events indicated in clause
(d) above or (iv) as a consequence of any failure by such Borrower to repay
Eurodollar Rate Loans when required by the terms hereof. The Lender making
demand for such compensation shall deliver to the Company concurrently with
such demand a written statement as to such losses, expenses and liabilities,
and this statement shall be conclusive as to the amount of compensation due to
that Lender, absent manifest error.

          Section 2.15 Capital Adequacy

          If at any time any Lender determines that (a) the adoption of or any
change in or in the interpretation of any law, treaty or governmental rule,
regulation or order after the date of this Agreement regarding capital
adequacy, (b) compliance with any such law, treaty, rule, regulation or order
or (c) compliance with any guideline or request or directive from any central
bank or other Governmental Authority (whether or not having the force of law)
shall have the effect of reducing the rate of return on such Lender’s (or any
corporation controlling such Lender’s) capital as a consequence of its
obligations hereunder or under or in respect of any Letter of Credit to a level
below the level that such Lender or such corporation could have achieved but
for such adoption, change, compliance or interpretation, then, upon demand from
time to time by such Lender (with a copy of such demand to the Administrative
Agent), the Borrowers, jointly and severally, agree that they shall pay to the
Administrative Agent for the account of such Lender, from time to time as
specified by such Lender, additional amounts

57

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

sufficient to compensate such
Lender for such reduction; provided, however, that no Borrower shall be liable
for reductions in rates of return relating to periods up to but excluding the
date 180 days before the initial demand is made hereunder by such Lender with
respect to the event in clauses (a), (b) or (c) above relating to such
reduction. A certificate as to such amounts submitted to the Company and the
Administrative Agent by such Lender shall be conclusive and binding for all
purposes absent manifest error.

          Section 2.16 Taxes

          (a) Any and all payments by any Borrower under each Loan Document shall be
made free and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding (i) in the case of each Lender and
the Administrative Agent (A) taxes measured by its net income
(including branch profits tax, alternative minimum tax and other taxes
imposed in lieu of net income tax), and franchise taxes imposed on it, by the
jurisdiction (or any political subdivision thereof) under the laws of which
such Lender or the Administrative Agent (as the case may be) is organized or in
which it is engaged in business and (B) any United States withholding taxes
payable with respect to payments under the Loan Documents under laws (including
any statute, treaty or regulation) in effect on the Effective Date (or, in the
case of an Eligible Assignee, the date of the Assignment and Acceptance)
applicable to such Lender or the Administrative Agent, as the case may be, but
not excluding any United States withholding payable as a result of any change
in such laws occurring after the Effective Date (or the date of such Assignment
and Acceptance) and (C) Taxes resulting from the failure of any Non-U.S. Lender
to comply with clause (f) of this Section 2.16 and (ii) in the case of each
Lender, taxes measured by its net income (including branch profits tax,
alternative minimum tax and other taxes imposed in lieu of net income tax), and
franchise taxes imposed on it, by the jurisdiction in which such Lender’s
Applicable Lending Office is located or in which it is engaged in business (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as “Taxes”). If any Taxes shall be
required by law to be deducted from or in respect of any sum payable under any
Loan Document to any Lender or the Administrative Agent (w) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.16) such Lender or the Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (x) the relevant Borrower shall make such deductions, (y)
the Borrowers shall pay the full amount deducted to the relevant taxing
authority or other authority in accordance with applicable law and (z) the
Borrowers shall deliver to the Administrative Agent evidence of such payment.

          (b) In addition, the Borrowers hereby, jointly and severally, agree to pay
any present or future stamp or documentary taxes or any other excise taxes,
charges or similar levies of the United States or any political subdivision
thereof or any applicable foreign jurisdiction, and all liabilities with
respect thereto, arising from any payment made under any Loan Document or from
the execution, delivery or registration of, or otherwise with respect to, any
Loan Document (collectively, “Other Taxes”).

          (c) The Borrowers hereby, jointly and severally, agree to indemnify each
Lender and the Administrative Agent for the full amount of Taxes and Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.16) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including for
penalties, interest and expenses) arising therefrom or with respect thereto
other than any such

58

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

liabilities attributable to any gross negligence of such
Lender or, as the case may be, the Administrative Agent. This indemnification
shall be made within 30 days from the date such Lender or the Administrative
Agent (as the case may be) makes written demand therefor.

          (d) Within 30 days after the date of any payment of Taxes or Other Taxes,
the Borrowers shall furnish to the Administrative Agent, at its address
referred to in Section 11.8 (Notices, Etc.), the original or a certified copy
of a receipt evidencing payment thereof (or, if such original or certified copy
is not available, any other proof of payment reasonably satisfactory to the
Administrative Agent).

          (e) Without prejudice to the survival of any other agreement of any
Borrower hereunder, the agreements and obligations of the Borrowers contained
in this Section 2.16 shall survive the payment in full of the Obligations.

          (f) Prior to the Effective Date in the case of each Non-U.S. Lender that
is a signatory hereto, and on the date of the Assignment and Acceptance
pursuant to which it becomes
a Lender in the case of each other Non-U.S. Lender and from time to time
thereafter if requested by the Company or the Administrative Agent, each
Non-U.S. Lender that is entitled at such time to an exemption from United
States withholding tax, or that is subject to such tax at a reduced rate under
an applicable tax treaty, shall provide the Administrative Agent and the
Company with two completed copies of (i) Form W-8ECI (claiming exemption from
withholding because the income is effectively connected with a U.S. trade or
business) or any successor form, (ii) Form W-8BEN (claiming exemption from, or
a reduction of, withholding tax under an income tax treaty) or any successor
form, (iii) in the case of a Non-U.S. Lender claiming exemption under Sections
871(h) or 881(c) of the Code, a Form W-8BEN (claiming exemption from
withholding under the portfolio interest exemption) or any successor form,
together with a certificate satisfactory to the Company and the Administrative
Agent executed by such Non-U.S. Lender stating that it meets all conditions for
the portfolio interest exemption, including the statement as to its non-bank
status or (iv) or any other applicable form, certificate or document prescribed
by the IRS certifying as to such Non-U.S. Lender’s entitlement to such
exemption from United States withholding tax or reduced rate with respect to
all payments to be made to such Non-U.S. Lender under the Loan Documents.
Unless the Company and the Administrative Agent have received forms or other
documents satisfactory to them indicating that payments under any Loan Document
to or for a Non-U.S. Lender are not subject to United States withholding tax or
are subject to such tax at a rate reduced by an applicable tax treaty, the
Borrowers or the Administrative Agent shall withhold taxes from such payments
at the applicable statutory rate.

          (g) Any Lender claiming any additional amounts payable pursuant to this
Section 2.16 shall use its reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
Applicable Lending Office if the making of such a change would avoid the need
for, or reduce the amount of, any such additional amounts that would be payable
or may thereafter accrue and would not, in the sole determination of such
Lender, be otherwise disadvantageous to such Lender.

          (h) If any Lender receives a refund or credit against its tax that, in the
reasonable judgment of the Lender, is attributable to the additional amount
paid by any Borrower under this Section 2.16, such Lender shall promptly pay to
such Borrower the amount of such refund or credit.

59

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          (i) Each Lender selling participations relating to the Loan Document shall
be responsible for complying with any registration requirement and withholding
requirement (including the receipt of any applicable forms, certificates and
documents) as they relate to such participations, pursuant to the Code and the
regulations thereunder.

          Section 2.17 Substitution of Lenders

          In the event that (a) (i) any Lender makes a claim under Section 2.14(c)
(Increased Costs) or Section 2.15 (Capital Adequacy), (ii) it becomes illegal
for any Lender to continue to fund or make any Eurodollar Rate Loan and such
Lender notifies the Company pursuant to Section 2.14(d) (Illegality) or Section
2.15 (Capital Adequacy) or (iii) any Borrower is required to make any payment
pursuant to Section 2.16 (Taxes), that is attributable to any Lender, or any
Lender is a Non-Funding Lender, (b) in the case of subclause (a)(i) above, as a
consequence of increased costs in respect of which such claim is made, the
effective rate of interest payable to such Lender under this Agreement with
respect to its Loans materially exceeds the effective average annual rate of
interest payable to the Requisite Lenders under this Agreement and (c) Lenders
holding at least 75% of the Revolving Credit Commitments are not subject to
such increased costs or illegality, payment or proceedings (any such Lender, an
"Affected Lender”), the Company may substitute another financial institution
for such Affected Lender hereunder, upon reasonable prior written notice (which
written notice must be given
within 90 days following the occurrence of any of the events described in
subclauses (a)(i), (ii), (iii) or (iv) above) by the Company to the
Administrative Agent and the Affected Lender that the Company intends to make
such substitution, which substitute financial institution must be an Eligible
Assignee and, if not a Lender, reasonably acceptable to the Administrative
Agent; provided, however, that if more than one Lender claims increased costs,
illegality or right to payment arising from the same act or condition and such
claims are received by the Company within 30 days of each other then the
Company may substitute all, but not (except to the extent the Company has
already substituted one of such Affected Lenders before the Company’s receipt
of the other Affected Lenders’ claim) less than all, Lenders making such
claims. In the event that the proposed substitute financial institution or
other entity is reasonably acceptable to the Administrative Agent and the
written notice was properly issued under this Section 2.17, the Affected Lender
shall sell and the substitute financial institution or other entity shall
purchase, pursuant to an Assignment and Acceptance, all rights and claims of
such Affected Lender under the Loan Documents and the substitute financial
institution or other entity shall assume and the Affected Lender shall be
relieved of its Revolving Credit Commitments and all other prior unperformed
obligations of the Affected Lender under the Loan Documents (other than in
respect of any damages (other than exemplary or punitive damages, to the extent
permitted by applicable law) in respect of any such unperformed obligations).
Upon the effectiveness of such sale, purchase and assumption (that, in any
event, shall be conditioned upon the payment in full by the Borrowers to the
Affected Lender in cash of all fees, unreimbursed costs and expenses and
indemnities accrued and unpaid through such effective date), the substitute
financial institution or other entity shall become a “Lender” hereunder for all
purposes of this Agreement having a Revolving Credit Commitment in the amount
of such Affected Lender’s Revolving Credit Commitment assumed by it and such
Revolving Credit Commitment of the Affected Lender shall be terminated,
provided, however, that all indemnities under the Loan Documents shall continue
in favor of such Affected Lender.

60

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

ARTICLE III

CONDITIONS TO LOANS AND LETTERS OF CREDIT

          Section 3.1 Conditions Precedent to the Effectiveness of this Agreement

          This Agreement, including the obligation of each Lender to make the Loans
requested to be made by it on the Effective Date and the obligation of each
Issuer to issue Letters of Credit on the Effective Date, shall not become
effective until the date (the “Effective Date”) that all of the following
conditions precedent are satisfied:

          (a) Certain Documents. The Administrative Agent shall have received on
the Effective Date each of the following, each dated the Effective Date unless
otherwise indicated or agreed to by the Administrative Agent, in form and
substance satisfactory to the Administrative Agent and in sufficient copies for
each Lender:

               (i) this Agreement, duly executed and delivered by each Borrower
signatory hereto;

               (ii) an Affirmation of Obligations and Release, in substantially the
form of Exhibit F (Form of Affirmation of Obligations and Release), duly
executed by the Company and each Subsidiary Guarantor;

               (iii) an amendment to the Mortgage over the Sugarland Property,
together with (A) title insurance policies (or marked-up unconditional
binders for such insurance or other evidence acceptable to the
Administrative Agent proving ownership
thereof), zoning letters and certificates of occupancy, and evidence
that current as-built surveys and a surveyor’s certificate therefor have
been ordered for such parcel, in each case satisfactory in form and
substance to the Administrative Agent, in its sole discretion exercised
reasonably, (B) evidence that the recording of counterparts of such
amendment in the recording offices specified in such amendment will
create a valid and enforceable first-priority lien, subject, to the
extent permitted in such Mortgage, to Customary Permitted Liens, on
property described therein in favor of the Administrative Agent for the
benefit of the Secured Parties (or in favor of such other trustee as may
be required or desired under local law) and (C) an opinion of Texas
counsel in form and substance and from counsel satisfactory to each Agent
in its sole discretion exercised reasonably;

               (iv) a favorable opinion of counsel to the Loan Parties covering
matters of New York, Delaware, Texas, Oregon and New Hampshire law, in
each case addressed to the Administrative Agent and the Lenders and
addressing such matters as any Lender through the Administrative Agent
may reasonably request;

               (v) a copy of the articles or certificate of incorporation (or
equivalent organizational documents) of each Loan Party, certified as of
a recent date by the Secretary of State of the state of incorporation of
such Loan Party, together with certificates of such official attesting to
the good standing of each such Loan Party;

               (vi) a certificate of the Secretary or an Assistant Secretary or
other authorized signatory of each Loan Party certifying (A) the names
and true signatures of each officer or authorized signatory of such Loan
Party who has been authorized to

61

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

execute and deliver any Loan Document or
other document required hereunder to be executed and delivered by or on
behalf of such Loan Party, (B) the by-laws (or equivalent Constituent
Document) of such Loan Party as in effect on the date of such
certification (or that there was no change thereto since the by-laws last
delivered to Administrative Agent in connection with the Existing Credit
Agreement), (C) the resolutions of such Loan Party’s Board of Directors
(or equivalent governing body) approving and authorizing the execution,
delivery and performance of this Agreement and the other Loan Documents
to which it is a party and (D) that there have been no changes in the
certificate of incorporation (or equivalent Constituent Document) of such
Loan Party from the certificate of incorporation (or equivalent
Constituent Document) delivered pursuant to clause (v) above;

          (vii) a certificate of a Responsible Officer of each Borrower,
stating that each Borrower is Solvent after giving effect to the initial
Loans and Letters of Credit, the application of the proceeds thereof in
accordance with Section 7.9 (Application of Proceeds) and the payment of
all estimated legal, accounting and other fees related hereto and
thereto;

          (viii) a certificate of a Responsible Officer to the effect that (A)
the condition set forth in Section 3.2(b) (Conditions Precedent to Each
Loan and Letter of Credit) has been satisfied and (B) no litigation not
listed on Schedule 4.7 (Litigation) shall have been commenced against any
Loan Party or any of its Subsidiaries that, would have a Material Adverse
Effect or can reasonably be expected to impose materially adverse
conditions upon the Facility or the transactions contemplated hereby;

          (ix) evidence satisfactory to the Administrative Agent that the
insurance policies required by Section 7.5 (Maintenance of Insurance) and
any Collateral Document are in full force and effect, together with
endorsements naming the Administrative Agent, on behalf of the Secured
Parties, as an additional insured or loss
payee under all insurance policies to be maintained with respect to
the properties of Holdings, the Company and its Subsidiaries; and

          (x) such other certificates, documents, agreements and information
respecting any Loan Party as any Lender through the Administrative Agent
may reasonably request.

          (b) Fees and Expenses Paid. The Borrowers shall have paid to the
Administrative Agent, (i) for the account of the Administrative Agent and the
Lenders, as applicable, all fees due and payable on or before the Effective
Date (including all such fees described in the Fee Letters), all expenses due
and payable on or before the Effective Date and all fees, expenses, interest
and other Existing Obligations (other than the principal amount of any existing
Loan and contingent obligations in respect of Existing Letters of Credit) owing
under the Existing Credit Agreement and (ii) for the account of the Syndication
Agent, all reasonable fees, expenses and disbursements incurred by Syndication
Agent’s counsel, Otterbourg, Steindler, Houston & Rosen, P.C., in connection
with the preparation, negotiation and execution of this Agreement, in an amount
not to exceed $75,000.

          (c) Assignment of Existing Loans. All Lenders on the Effective that are
not Existing Lenders shall have purchased, for a purchase price equal to the
principal amount thereof, from the Existing Lenders their Ratable Portion of
the Existing Loans and other Existing

62

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Obligations. Upon such purchase, such
Existing Loans shall be assigned to such Lenders. The purchase price shall be
allocated among such Existing Lenders according to their “Ratable Portion”
thereof, under and as defined in the Existing Credit Agreement.

          (d) Consents, Etc. Each of the Company, each Borrower and each Subsidiary
of the Company shall have received all consents and authorizations required
pursuant to any material Contractual Obligation with any other Person and shall
have obtained all Permits of, and effected all notices to and filings with, any
Governmental Authority, in each case, as may be necessary to allow each of the
Company, each Borrower and each Subsidiary thereof lawfully (i) to execute,
deliver and perform, in all material respects, their respective obligations
hereunder and under the Loan Documents to which each of them, respectively, is,
or shall be, a party and each other agreement or instrument to be executed and
delivered by each of them, respectively, pursuant thereto or in connection
therewith and (ii) to create and perfect (or to confirm the creation and
perfection) the Liens on the Collateral to be owned by each of them in the
manner and for the purpose contemplated by the Loan Documents.

          (e) Excess Available Credit. Available Credit on the Effective Date,
after giving effect to each Loan to be made and each Letter of Credit to be
issued on such Effective Date but without giving effect to the Minimum
Eligibility Reserve, shall exceed $10,000,000.

          Section 3.2 Conditions Precedent to Each Loan and Letter of Credit

          The obligation of each Lender on any date (including the Effective Date)
to make any Loan and of each Issuer on any date (including the Effective Date)
to issue any Letter of Credit is subject to the satisfaction of all of the
following conditions precedent:

          (a) Request for Borrowing or Issuance of Letter of Credit. With respect
to any Loan, the Administrative Agent shall have received a duly executed
Notice of Borrowing (or, in the case of Swing Loans, a duly executed Swing Loan
Request), and, with respect to any Letter of Credit, the Administrative Agent
and the Issuer shall have received a duly executed Letter of Credit Request.

          (b) Representations and Warranties; No Defaults. The following statements
shall be true on the date of such Loan or issuance, both before and after
giving effect thereto and, in the case of such Loan, to the application of the
proceeds therefrom:

               (i) The representations and warranties set forth in Article IV
(Representations and Warranties) and in the other Loan Documents shall be
true and correct on and as of the Effective Date and shall be true and
correct in all material respects on and as of any such date after the
Effective Date with the same effect as though made on and as of such
date, except to the extent such representations and warranties expressly
relate to an earlier date; and

               (ii) no Default or Event of Default shall have occurred and be
continuing.

          (c) Borrowing Base. The Borrowers shall have delivered the Borrowing Base
Certificate required to be delivered by Section 6.12(a) (Borrowing Base
Determination). After giving effect to the Loans or Letters of Credit
requested to be made or issued on any such date

63

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

and the use of proceeds
thereof, the aggregate Revolving Credit Outstandings shall not exceed the
Maximum Credit at such time.

          (d) No Legal Impediments. The making of the Loans or the issuance of such
Letter of Credit on such date shall not violate any Requirement of Law on the
date of or immediately following such Loan or issuance and shall not be
enjoined, temporarily, preliminarily or permanently.

          (e) Additional Matters. The Administrative Agent shall have received such
additional documents, information and materials as any Lender, through the
Administrative Agent, may reasonably request.

Each submission by any Borrower to the Administrative Agent of a Notice of
Borrowing or a Swing Loan Request and the acceptance by such Borrower of the
proceeds of each Loan requested therein, and each submission by any Borrower to
an Issuer of a Letter of Credit Request, and the issuance of each Letter of
Credit requested therein, shall be deemed to constitute a representation and
warranty by the Borrowers as to the matters specified in clause (b) above on
the date of the making of such Loan or the issuance of such Letter of Credit.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

          To induce the Lenders, the Issuers and the Administrative Agent to enter
into this Agreement, each of the Company and each Borrower represents and
warrants to the Lenders, the Issuers and the Administrative Agent that, (x) on
and as of the Effective Date and (y) on and as of each date as required by
subclause (i) of clause (b) of Section 3.2 (Conditions Precedent to Each Loan
and Letter of Credit):

          Section 4.1 Corporate Existence; Compliance with Law

          Each of the Company and its Subsidiaries (a) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (b) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where such qualification is
necessary, except where the failure to be so qualified or in good standing
would not have a Material Adverse Effect, (c) has all requisite power and
authority and the legal right to
own, pledge, mortgage and operate its properties, to lease the property it
operates under lease and to conduct its business as now or currently proposed
to be conducted, (d) is in compliance with its Constituent Documents, (e) is in
compliance with all applicable Requirements of Law except where the failure to
be in compliance would not, in the aggregate, have a Material Adverse Effect
and (f) has all necessary licenses, permits, consents or approvals from or by,
has made all necessary filings with, and has given all necessary notices to,
each Governmental Authority having jurisdiction, to the extent required for
such ownership, operation and conduct, except for licenses, permits, consents,
approvals or filings that can be obtained or made by the taking of ministerial
action to secure the grant or transfer thereof or the failure to obtain or make
would not, in the aggregate, have a Material Adverse Effect.

64

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          Section 4.2 Corporate Power; Authorization; Enforceable Obligations

          (a) The execution, delivery and performance by each Loan Party of the Loan
Documents to which it is a party and the consummation of the transactions
contemplated thereby:

               (i) are within such Loan Party’s corporate, limited liability
company, partnership or other powers;

               (ii) have been or, at the time of delivery thereof pursuant to
Article III (Conditions To Loans And Letters Of Credit) will have been,
duly authorized by all necessary corporate action, including the consent
of shareholders where required;

               (iii) do not and will not (A) contravene any Loan Party’s or any of
its Subsidiaries’ respective Constituent Documents, (B) violate any other
Requirement of Law applicable to any Loan Party (including Regulations T,
U and X of the Federal Reserve Board), or any order or decree of any
Governmental Authority or arbitrator applicable to any Loan Party, (C)
conflict with or result in the breach of, or constitute a default under,
or result in or permit the termination or acceleration of, any
Contractual Obligation of any Loan Party or any of its Subsidiaries or
(D) result in the creation or imposition of any Lien upon any of the
property of any Loan Party or any of its Subsidiaries, other than those
in favor of the Secured Parties pursuant to the Collateral Documents; and

               (iv) do not require the consent of, authorization by, approval of,
notice to, or filing or registration with, any Governmental Authority or
any other Person, other than those listed on Schedule 4.2 (Consents) and
that have been or will be, prior to the Effective Date, obtained or made,
copies of which have been or will be delivered to the Administrative
Agent pursuant to Section 3.1 (Conditions Precedent to the Effectiveness
of this Agreement), and each of which on the Effective Date will be in
full force and effect and, with respect to the Collateral, filings
required to perfect the Liens created by the Collateral Documents.

          (b) This Agreement has been, and each of the other Loan Documents will
have been upon delivery thereof pursuant to the terms of this Agreement, duly
executed and delivered by each Loan Party party thereto. This Agreement is,
and the other Loan Documents are or, as the case may be will be when delivered
hereunder, the legal, valid and binding obligation of each Loan Party party
thereto, enforceable against such Loan Party in accordance with its terms.

          Section 4.3 Ownership of Subsidiaries

          Set forth on Schedule 4.3 (Ownership of Subsidiaries) hereto is a complete
and accurate list showing, as of the Effective Date, all Subsidiaries of the
Company and, as to each
such Subsidiary, the jurisdiction of its incorporation, the number of
shares of each class of Stock authorized (if applicable), the number
outstanding on the Effective Date and the number and percentage of the
outstanding shares of each such class owned (directly or indirectly) by the
Company. All of the outstanding Stock of each Subsidiary of the Company has
been validly issued, is fully paid and non-assessable and (a) in the case of
the Borrowers, is owned by the Company directly and (b) otherwise, is owned by
a Borrower or a Wholly-Owned Subsidiary of a Borrower, in each case, free and
clear of all Liens (other than the Lien in favor of the Secured Parties created
pursuant to the Pledge and Security Agreement). No Stock of any Subsidiary of

65

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

the Company is subject to any option, warrant, right of conversion or purchase
or any similar right. There are no agreements or understandings to which the
Company is a party with respect to the voting, sale or transfer of any shares
of Stock of any Borrower. The Company has no direct Subsidiaries other than
the Borrowers and owns no other Stock other than that of the Borrowers. No
Subsidiary of the Company is a party to, or has knowledge of, any agreement
restricting the transfer or hypothecation of any share of Stock of any
Subsidiary of the Company, other than the Loan Documents. Neither the Company
nor any of its Subsidiaries owns or holds, directly or indirectly, any Stock of
any Person other than such Subsidiaries and Investments permitted by Section
8.3 (Investments).

          Section 4.4 Financial Statements

          (a) The Consolidated balance sheets of the Company and its Subsidiaries as
at December 31, 2003, and the related Consolidated statements of income,
retained earnings and cash flows of the Company and its Subsidiaries for the
fiscal year then ended, certified by the Company’s Accountants, copies of which
have been furnished to each Lender, fairly present the Consolidated financial
condition of the Company and its Subsidiaries as at such dates and the
Consolidated results of the operations of the Company and its Subsidiaries for
the period ended on such dates, all in conformity with GAAP. The Consolidated
balance sheet of the Company and its Subsidiaries as at May 30, 2004, and the
related Consolidated statements of income, retained earnings and cash flows of
the Company and its Subsidiaries for the five months then ended, copies of
which have been furnished to each Lender, fairly present, subject to the
absence of footnote disclosure and normal recurring year-end audit adjustments,
the Consolidated financial condition of the Company and its Subsidiaries as at
such date and the Consolidated results of the operations of the Company and its
Subsidiaries for the period ended on such date, all in conformity with GAAP.

          (b) Neither the Borrower nor any of its Subsidiaries has any material
obligation, contingent liability or liability for taxes, long-term leases or
unusual forward or long-term commitment that is not reflected in the Financial
Statements referred to in clause (a) above or in the notes thereto and not
otherwise permitted by this Agreement.

          (c) The Business Plan has been prepared by the Company in light of the
past operations of its business, and reflects the Company’s business plan for
the period set forth in such Business Plan beginning on January 1, 2004 on a
month by month basis for the first year, on a quarter by quarter basis for the
second year and on a year by year basis thereafter. The Business Plan was, as
of the date thereof, based upon estimates and assumptions stated therein, all
of which each of the Company and each Borrower believed to be reasonable and
fair in light of current conditions and current facts known to it as of the
date of the Business Plan.

          Section 4.5 Material Adverse Change

          Since December 31, 2003, there has been no Material Adverse Change and
there have been no events or developments that, in the aggregate, have had a
Material Adverse Effect.

          Section 4.6 Solvency

          Both before and after giving effect to (a) the Loans and Letter of Credit
Obligations to be made or extended on the Effective Date (together with any
Loans and Letter of Credit Obligations made or extended under the Existing
Credit Agreement) or such other date as

66

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Loans and Letter of Credit Obligations
requested hereunder are made or extended, (b) the disbursement of the proceeds
of such Loans pursuant to the instructions of any Borrower, (c) the
consummation of the transactions contemplated hereby and (d) the payment and
accrual of all transaction costs in connection with the foregoing, each Loan
Party is Solvent.

          Section 4.7 Litigation

          There are no pending or, to the knowledge of the Company and the
Borrowers, threatened actions, investigations or proceedings affecting the
Company or any of its Subsidiaries before any court, Governmental Authority or
arbitrator other than those that, in the aggregate, would not have a Material
Adverse Effect. The performance of any action by any Loan Party required or
contemplated by any of the Loan Documents is not restrained or enjoined (either
temporarily, preliminarily or permanently). Schedule 4.7 (Litigation) lists
all litigation pending against any Loan Party at the date hereof that, if
adversely determined, would have a Material Adverse Effect.

          Section 4.8 Taxes

          (a) All federal, state, local and foreign income and franchise and other
material tax returns, reports and statements (collectively, the “Tax Returns”)
required to be filed by the Company or any of its Tax Affiliates have been
filed with the appropriate Governmental Authorities in all jurisdictions in
which such Tax Returns are required to be filed, all such Tax Returns are true
and correct in all material respects, and all taxes, charges and other
impositions reflected therein or otherwise due and payable have been paid prior
to the date on which any fine, penalty, interest, late charge or loss may be
added thereto for non-payment thereof except where contested in good faith and
by appropriate proceedings if adequate reserves therefor have been established
on the books of the Company or such Tax Affiliate in conformity with GAAP. No
Tax Return is under audit or examination by any Governmental Authority and no
notice of such an audit or examination or any assertion of any claim for Taxes
has been given or made by any Governmental Authority. Proper and accurate
amounts have been withheld by the Company and each of its Tax Affiliates from
their respective employees for all periods in full and complete compliance with
the tax, social security and unemployment withholding provisions of applicable
Requirements of Law and such withholdings have been timely paid to the
respective Governmental Authorities.

          (b) Neither the Company or any of its Tax Affiliates has (i) executed or
filed with the IRS or any other Governmental Authority any agreement or other
document extending, or having the effect of extending, the period for the
filing of any Tax Return or the assessment or collection of any charges, (ii)
incurred any obligation under any tax sharing agreement or arrangement other
than those of which the Administrative Agent has received a copy prior to the
Effective Date or (iii) been a member of an affiliated, combined or unitary
group other than the group of which the Company (or, as the case may be, its
Tax Affiliate) is the common parent.

          Section 4.9 Full Disclosure

          The information prepared or furnished by or on behalf of the Company or
any Borrower in connection with this Agreement or the consummation of the
transactions contemplated hereunder and thereunder taken as a whole does not
contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements contained therein or herein not misleading.

67

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          Section 4.10 Margin Regulations

          No Borrower is engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation U of
the Federal Reserve Board), and no proceeds of any Borrowing will be used to
purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock in contravention of
Regulation T, U or X of the Federal Reserve Board.

          Section 4.11 No Burdensome Restrictions; No Defaults

          (a) Neither the Company nor any of its Subsidiaries (i) is a party to any
Contractual Obligation the compliance with which would have a Material Adverse
Effect or the performance of which by any thereof, either unconditionally or
upon the happening of an event, would result in the creation of a Lien (other
than a Lien permitted under Section 8.2 (Liens, Etc.)) on the property or
assets of any thereof or (ii) is subject to any charter or corporate
restriction that would have a Material Adverse Effect.

          (b) Neither the Company nor any of its Subsidiaries is in default under or
with respect to any Contractual Obligation owed by it and, to the knowledge of
the Company and the Borrowers, no other party is in default under or with
respect to any Contractual Obligation owed to any Loan Party or to any
Subsidiary of a Loan Party, other than, in either case, those defaults that, in
the aggregate, would not have a Material Adverse Effect.

          (c) No Default or Event of Default has occurred and is continuing.

          (d) To the best knowledge of the Company and the Borrowers, there is no
Requirement of Law applicable to any Loan Party the compliance with which by
such Loan Party would have a Material Adverse Effect.

          (e) Each of the Company and each of its Subsidiaries has paid its accounts
payable and all amounts due under any other Contractual Obligation in a timely
manner in the ordinary course of business in accordance with the business
practices of the Company and its Subsidiaries in effect on the date hereof.

          Section 4.12 Investment Company Act; Public Utility Holding Company Act

          Neither the Company nor any of its Subsidiaries is (a) an “investment
company” or an “affiliated person” of, or “promoter” or “principal underwriter”
for, an “investment company,” as such terms are defined in the Investment
Company Act of 1940, as amended or (b) a “holding company,” or an “affiliate”
or a “holding company” or a “subsidiary company” of a “holding company,” as
each such term is defined and used in the Public Utility Holding Act of 1935,
as amended.

          Section 4.13 Use of Proceeds

          The proceeds of the Loans and the Letters of Credit have been, are and
will be used by each Borrower solely to fund the working capital of the
Borrowers and their Subsidiaries and for general corporate purposes of the
Company and its Subsidiaries, in each case to the extent permitted hereunder.

68

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          Section 4.14 Insurance

          All policies of insurance of any kind or nature of the Company or any of
its Subsidiaries, including policies of life, fire, theft, product liability,
public liability, property damage, other casualty, employee fidelity, workers’
compensation and employee health and welfare insurance, are in full force and
effect and are of a nature and provide such coverage as is sufficient and as is
customarily carried by businesses of the size and character of such Person.
None of the Company or any of its Subsidiaries has been refused insurance for
any material coverage for which it had applied or had any policy of insurance
terminated (other than at its request).

          Section 4.15 Labor Matters

          (a) There are no strikes, work stoppages, slowdowns or lockouts pending or
threatened against or involving the Company or any of its Subsidiaries, other
than those that, in the aggregate, would not have a Material Adverse Effect.

          (b) There are no unfair labor practices, grievances or complaints pending,
or, to the Company’s and the Borrowers’ knowledge, threatened, against or
involving the Company or any of it Subsidiaries, nor is there any arbitration
or grievance threatened involving the Company or any of its Subsidiaries, other
than those that, in the aggregate, would not have a Material Adverse Effect.

          (c) Except as set forth on Schedule 4.15 (Labor Matters), as of the
Effective Date, there is no collective bargaining agreement covering any of the
employees of the Company or its Subsidiaries.

          (d) Schedule 4.15 (Labor Matters) sets forth, as of the Effective Date,
all material consulting agreements, executive employment agreements, executive
compensation plans, deferred compensation agreements, employee stock purchase
and stock option plans and severance plans of the Company and any of its
Subsidiaries.

          Section 4.16 ERISA

          (a) Schedule 4.16 (List of Plans) separately identifies as of the
Effective Date all Title IV Plans, all Multiemployer Plans and all of the
employee benefit plans within the meaning of Section 3(3) of ERISA to which the
Company or any of its Subsidiaries has any obligation or liability, contingent
or otherwise.

          (b) Each employee benefit plan of the Company or any of its Subsidiaries
that is intended to qualify under Section 401 of the Code does so qualify, and
any trust created thereunder is exempt from tax under the provisions of Section
501 of the Code, except where such failures, in the aggregate, would not have a
Material Adverse Effect.

          (c) Each Title IV Plan is in compliance in all material respects with
applicable provisions of ERISA, the Code and other Requirements of Law except
for non-compliances that, in the aggregate, would not have a Material Adverse
Effect.

          (d) There has been no, nor is there reasonably expected to occur, any
ERISA Event that would have a Material Adverse Effect.

69

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          (e) Except to the extent set forth on Schedule 4.16 (List of Plans), none
of the Company, any of the Company’s Subsidiaries or any ERISA Affiliate would
have any
Withdrawal Liability as a result of a complete withdrawal as of the date
hereof from any Multiemployer Plan.

          Section 4.17 Environmental Matters

          (a) The operations of the Company and each of its Subsidiaries have been
and are in compliance with all Environmental Laws, including obtaining and
complying with all required environmental, health and safety Permits, other
than non-compliances that, in the aggregate, would not have a reasonable
likelihood of the Company and its Subsidiaries incurring Environmental
Liabilities and Costs after the date hereof in excess of $2,000,000.

          (b) None of the Company or any of its Subsidiaries or any Real Property
currently or, to the knowledge of the Company and the Borrowers, previously
owned, operated or leased by or for the Company or any of its Subsidiaries is
subject to any pending or, to the knowledge of the Company and the Borrowers,
threatened, claim, order, agreement, notice of violation, notice of potential
liability or is the subject of any pending or threatened proceeding or
governmental investigation under or pursuant to Environmental Laws other than
those that, in the aggregate, are not reasonably likely to result in the
Company and its Subsidiaries incurring Environmental Liabilities and Costs in
excess of $1,000,000.

          (c) Except as disclosed on Schedule 4.17 (Environmental Matters), none of
the Company or any of its Subsidiaries is a treatment, storage or disposal
facility requiring a permit under the Resource Conservation and Recovery Act,
42 U.S.C. § 6901 et seq., the regulations thereunder or any state analog.

          (d) To the knowledge of the Company and the Borrowers and each of their
respective Subsidiaries after due inquiry, there are no facts, circumstances or
conditions arising out of or relating to the operations or ownership of the
Company or any of its Subsidiaries or of real property owned, operated or
leased by the Company or any of its Subsidiaries that are not specifically
disclosed in the information furnished to the Administrative Agent or the
Lenders other than those that, in the aggregate, would not have a reasonable
likelihood of the Company and its Subsidiaries incurring Environmental
Liabilities and Costs in excess of $2,000,000.

          (e) As of the Effective Date, (i) no Environmental Lien has attached to
any property of the Company or any of its Subsidiaries and (ii) to the
knowledge of the Company and the Borrowers, no facts, circumstance or
conditions exist that could reasonably be expected to result in any such Lien
attaching to any such property.

          (f) The Company and each of its Subsidiaries has provided the
Administrative Agent with copies of all environmental, health or safety audits,
studies, assessments, inspections, investigations or other environmental health
and safety reports relating to the operations of the Company or any of its
Subsidiaries or any of their real property that were completed in the last five
years and are in the possession, custody or control of the Company or any of
its Subsidiaries.

          Section 4.18 Intellectual Property

          Each of the Company and each of its Subsidiaries owns or licenses or
otherwise has the right to use all licenses, permits, patents, patent
applications, trademarks, trademark

70

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

applications, service marks, trade names,
copyrights, copyright applications, franchises, authorizations and other
intellectual property rights (including all “Intellectual Property,” as defined
in the Pledge and Security Agreement) that are necessary for the operations of
its businesses, without infringement upon or conflict with the rights of any
other Person with respect thereto, including all trade names associated with
any private label brands of the Company or any
of its Subsidiaries. To the Company’s and each Borrowers’ knowledge, no
slogan or other advertising device, product, process, method, substance, part
or component, or other material now employed, or now contemplated to be
employed, by the Company or any of its Subsidiaries infringes upon or conflicts
with any rights owned by any other Person except where such infringement or
conflict would not have a Material Adverse Effect, and no claim or litigation
regarding any of the foregoing is pending or threatened that would have a
Material Adverse Effect.

          Section 4.19 Title; Real Property

          (a) Each of the Company and its Subsidiaries has good and marketable title
to, or valid leasehold interests in, all Real Property and good title to all
personal property purported to be owned by it, including those reflected on the
most recent Financial Statements delivered by the Company, and none of such
properties and assets is subject to any Lien, except Liens permitted under
Section 8.2 (Liens, Etc.). The Company and its Subsidiaries have received all
deeds, assignments, waivers, consents, non-disturbance and recognition or
similar agreements, bills of sale and other documents and have duly effected
all recordings, filings and other actions necessary to establish, protect and
perfect the Company’s and its Subsidiaries’ right, title and interest in and to
all such property.

          (b) Set forth on Schedule 4.19 (Real Property) hereto is a complete and
accurate list of all Real Property owned by each Loan Party and its
Subsidiaries as of the Effective Date, showing the street address, county or
other relevant jurisdiction, state and record owner.

          (c) As of the Effective Date, no Loan Party nor any of its Subsidiaries
owns or holds, or is obligated under or a party to, any lease, option, right of
first refusal or other contractual right to purchase, acquire, sell, assign or
dispose of any real property owned or leased by such Loan Party or any of its
Subsidiaries.

          (d) All components of all improvements included within the Real Property
owned or leased by any Loan Party or any of its Subsidiaries (collectively,
"Improvements”), including the roofs and structural elements thereof and the
heating, ventilation, air conditioning, plumbing, electrical, mechanical,
sewer, waste water, storm water, paving and parking equipment, systems and
facilities included therein, are in all material respects in good working order
and repair. All water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and systems and other
similar systems serving the real property owned or leased by any Loan Party or
any of its Subsidiaries are installed and operating and are sufficient to
enable the Real Property owned or leased by such Loan Party or Subsidiary of
any Loan Party to continue to be used and operated in the manner currently
being used and operated, and no Loan Party nor any of its Subsidiaries has any
knowledge of any factor or condition that could result in the termination or
material impairment of the furnishing thereof. No Improvement or portion
thereof is dependent for its access or the operation of the business conducted
thereon on any land, building or other Improvement not included in the Real
Property owned or leased by any Loan Party or any of its Subsidiaries.

71

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          (e) As of the Effective Date, no portion of any Real Property owned or
leased by any Loan Party or any of its Subsidiaries has suffered any material
damage by fire or other casualty loss that has not heretofore been completely
repaired and restored to its original condition. No portion of any Real
Property owned or leased by any Loan Party or any of its Subsidiaries and
subject to a Mortgage is located in a special flood hazard area as designated
by any federal Governmental Authority, unless all required or appropriate flood
insurance has been maintained.

          (f) All Permits required to have been issued or appropriate to enable all
real property owned or leased by the Company or any of its Subsidiaries to be
lawfully occupied and used for all of the purposes for which they are currently
occupied and used have been lawfully issued and are in full force and effect,
other than those that, in the aggregate, would not have a Material Adverse
Effect.

          (g) As of the Effective Date, none of the Company or any of its
Subsidiaries has received any notice, or has any knowledge, of any pending,
threatened or contemplated condemnation proceeding affecting any Real Property
owned or leased by the Company or any of its Subsidiaries or any part thereof,
except those that, in the aggregate, would not have a Material Adverse Effect.

          Section 4.20 Bank Accounts

          Schedule 4.20 (Bank Accounts) contains a complete and accurate list, as of
the Effective Date, of each bank account of each Loan Party specifying the
nature of such account and whether any proceeds of Collateral are deposited
therein.

          Section 4.21 Regulation H

          No Mortgage encumbers improved Real Property that is located in an area
that has been identified by the Secretary of Housing and Urban Development as
an area having special flood hazards and in which flood insurance has been made
available under the National Flood Insurance Act of 1968.

          Section 4.22 Interrelated Businesses

          The Loan Parties are part of one organization constituting a single
economic and business enterprise and share an identity of interests such that
any benefit received by any Loan Party benefits the others. The Loan Parties
render services to or for the benefit of other Loan Parties, purchase or sell
and supply goods to or from or for the benefit of other Loan Parties and make
loans, advances and provides other financial accommodations to or for the
benefit of other Loan Parties, including entering into Guaranty Obligations for
the Indebtedness of other Loan Parties and providing administrative, marketing,
payroll and management services to or for the benefit of other Loan Parties.
The Loan Parties have the same chief executive office, centralized accounting
and legal services, certain common officers and directors and generally do not
provide consolidating financial statements to creditors.

72

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

ARTICLE V

FINANCIAL COVENANTS

          As long as any of the Obligations (other than indemnities not then due) or
the Revolving Credit Commitments remain outstanding, unless the Requisite
Lenders otherwise consent in writing, each of the Company and each Borrower
agrees with the Lenders, the Issuers and the Administrative Agent that:

          Section 5.1 Minimum EBITDA

          (a) As of the last day of any Fiscal Quarter occurring in Fiscal Year
2004, the Company shall have EBITDA for the Fiscal Quarters in such Fiscal Year
ended on or prior to such day of not less than negative $2,500,000.

          (b) As of the last day of any Fiscal Quarter occurring in any Fiscal Year
on and after 2005, the Company shall have EBITDA for the four Fiscal Quarter
period ended on such day of not less than zero.

          (c) In addition to complying with all other covenants set forth in this
Section 5.1, as of the last day of any Reduced Liquidity Month in any Fiscal
Year set forth below, the Company shall have EBITDA for the three calendar
month period ended on such day of not less than the amount set forth below
opposite such Fiscal Year:

	 	 	 
	Fiscal Years
	 	Minimum EBITDA
	
 
	 	
 
	2004 and 2005
	 	$2,000,000
	2006 and thereafter
	 	$2,500,000

ARTICLE VI

REPORTING COVENANTS

          As long as any of the Obligations (other than indemnities not then due) or
the Revolving Credit Commitments remain outstanding, unless the Requisite
Lenders otherwise consent in writing, each of the Company and each Borrower
agrees with the Lenders, the Issuers and the Administrative Agent that:

          Section 6.1 Financial Statements

          The Company shall furnish to the Administrative Agent (with sufficient
copies for each of the Lenders) the following:

          (a) Monthly Reports. Within 30 days after the end of each fiscal month in
each Fiscal Year (other than any fiscal month ending on the last day of any of
the first three Fiscal Quarters in any Fiscal Year), financial information
regarding the Company and its Subsidiaries consisting of Consolidated and
consolidating unaudited balance sheets as of the close of such month and the
related statements of income and cash flow for such month and that portion of
the current Fiscal Year ending as of the close of such month, together with an
analysis thereof by the management of the Company and setting forth in
comparative form the figures for the

73

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

corresponding period in the prior year (if
applicable) and the figures contained in the business plan provided pursuant to
clause (e) of Section 6.1 (Financial Statements) for the current Fiscal Year,
in each case certified by a Responsible Officer of the Company as fairly
presenting the Consolidated and consolidating financial position of the Company
and its Subsidiaries as at the dates indicated and the results of their
operations and cash flow for the periods indicated in accordance with GAAP
(subject to the absence of footnote disclosure and normal year-end audit
adjustments).

          (b) Quarterly Reports. Within 45 days after the end of each of the first
three Fiscal Quarters of each Fiscal Year, financial information regarding the
Company and its Subsidiaries consisting of Consolidated and consolidating
unaudited balance sheets as of the close of such Fiscal Quarter and the related
statements of income and cash flow for such Fiscal Quarter and that portion of
the Fiscal Year ending as of the close of such Fiscal Quarter, together with an
analysis thereof by the management of the Company and setting forth in
comparative form the figures for the corresponding period in the prior Fiscal
Year (if available) and the figures contained in the business plan provided
pursuant to clause (e) of Section 6.1 (Financial Statements) for the current
Fiscal Year, in each case certified by a Responsible Officer of the Company as
fairly presenting the Consolidated and consolidating financial position of the
Company and its Subsidiaries as at the dates indicated and the results of
their operations and cash flow for the periods indicated in accordance with
GAAP (subject to the absence of footnote disclosure and normal year-end audit
adjustments).

          (c) Annual Reports. Within 90 days after the end of each Fiscal Year,
financial information regarding the Company and its Subsidiaries consisting of
Consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the end of such year and related statements of income and
cash flows of the Company and its Subsidiaries for such Fiscal Year, all
prepared in conformity with GAAP, together with an analysis thereof by the
management of the Company and setting forth in comparative form the figures for
the corresponding period in the prior Fiscal Year (if available) and the
figures contained in the business plan provided pursuant to clause (e) of
Section 6.1 (Financial Statements) for such Fiscal Year, and certified, in the
case of such Consolidated financial statements, without qualification as to the
scope of the audit or as to the Company or any of its Subsidiaries being a
going concern by the Company’s Accountants, together with the report of such
accounting firm stating that (i) such financial statements fairly present the
Consolidated financial position of the Company and its Subsidiaries as at the
dates indicated and the results of their operations and cash flow for the
periods indicated in conformity with GAAP applied on a basis consistent with
prior years (except for changes with which such Company’s Accountants shall
concur and that shall have been disclosed in the notes to the financial
statements) and (ii) the examination by such Company’s Accountants in
connection with such Consolidated financial statements has been made in
accordance with generally accepted auditing standards, and accompanied by a
certificate stating that in the course of the regular audit of the business of
the Company and its Subsidiaries such accounting firm has obtained no knowledge
that a Default or Event of Default has occurred and is continuing under the
financial or debt covenants, or, if such accounting firm has knowledge that any
such Default or Event of Default has occurred and is continuing, a statement as
to the nature thereof.

          (d) Compliance Certificate. Together with each delivery of any financial
statement pursuant to clause (b) or (c) above, a certificate of a Responsible
Officer of the Company (each, a “Compliance Certificate”) (i) demonstrating
compliance with each of the

74

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

financial covenants contained in Article V
(Financial Covenants) that is tested on a quarterly basis and (ii) stating that
no Default or Event of Default has occurred and is continuing or, if a Default
or an Event of Default has occurred and is continuing, stating the nature
thereof and the action the Company proposes to take with respect thereto.

          (e) Business Plan. Not later than 30 days after the end of each Fiscal
Year, and containing substantially the types of financial information contained
in the Business Plan, the annual business plan of the Company and its
Subsidiaries for the next succeeding Fiscal Year approved by the Board of
Directors of the Company, which shall include (i) forecasts prepared by
management of the Company for each fiscal month in the next succeeding Fiscal
Year and (ii) forecasts prepared by management of the Company for each of the
succeeding Fiscal Years through the Fiscal Year in which the Scheduled
Termination Date is scheduled to occur, including, in each instance described
in clauses (i) and (ii) above, (A) a projected year-end Consolidated balance
sheet and income statement and statement of cash flows and (B) a statement of
all of the material assumptions on which such forecasts are based.

          (f) Management Letters, Etc. Within five Business Days after receipt
thereof by any Loan Party, copies of each management letter, exception report
or similar letter or report received by such Loan Party from the Company’s
Accountants or any other certified public accountants;

          (g) Intercompany Loan Balances. Together with each delivery of any
financial statement pursuant to clause (a) above, a summary of the outstanding
balance of all intercompany Indebtedness as of the last day of the fiscal month
covered by such financial statement, certified by a Responsible Officer.

          (h) Corporate Chart and Other Collateral Updates. Together with each
delivery of any Financial Statement pursuant to clause (b) or (c) above, (i) a
certificate of a Responsible Officer of each Borrower certifying that the
Corporate Chart attached thereto (or the last Corporate Chart delivered
pursuant to this clause (h)) is true, correct, complete and current as of the
date of such Financial Statement and (ii) a certificate of a Responsible
Officer of the Company in form and substance reasonably satisfactory to the
Administrative Agent that, to the best of the knowledge of the Company and
each Borrower, all certificates, statements, updates and other documents
(including updated schedules) required to be delivered pursuant to the Pledge
and Security Agreement by any Loan Party in the preceding Fiscal Quarter have
been delivered thereunder (or such delivery requirement was otherwise duly
waived or extended). The reporting requirements set forth in this clause (h)
are in addition to, and are not intended to and shall not replace or otherwise
modify, any obligation of any Loan Party under any Loan Document (including
other notice or reporting requirements). Compliance with the reporting
obligations in this clause (h) shall only provide notice to the Administrative
Agent and shall not, by itself, modify any obligation of any Loan Party under
any Loan Document, update any Schedule to this Agreement or any schedule to any
other Loan Document or cure, or otherwise modify in any way, any failure to
comply with any covenant, or any breach of any representation or warranty,
contained in any Loan Document or any other Default or Event of Default.

          (i) Aged Work-in-Process Reserve. Together with each delivery of any
Financial Statement pursuant to clause (b) or (c) above, a certificate of a
Responsible Officer of the Company setting forth the Borrowing Base Value of
Eligible Work-in-Process Inventory that has been or should have been, as of the
time of delivery of such Financial Statements, classified

75

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

as “work-in-process”
for more than 90 days, using the classification applied by the Borrowers and
the Eligible Subsidiaries, consistent with past practice, as part of their
accounting system.

          Section 6.2 Default Notices

          As soon as practicable, and in any event within five Business Days after a
Responsible Officer of any Loan Party has actual knowledge of the existence of
any Default, Event of Default or other event having had a Material Adverse
Effect, the Company shall give the Administrative Agent notice specifying the
nature of such Default or Event of Default or other event, including the
anticipated effect thereof, which notice, if given by telephone, shall be
promptly confirmed in writing on the next Business Day.

          Section 6.3 Litigation

          Promptly after the commencement thereof, the Company shall give the
Administrative Agent written notice of the commencement of all actions, suits
and proceedings before any domestic or foreign Governmental Authority or
arbitrator affecting the Company or any of its Subsidiaries and that, in the
reasonable judgment of the Company or such Subsidiary, expose the Company or
such Subsidiary to liability in an amount aggregating $500,000 or more or that,
if adversely determined, would have a Material Adverse Effect.

          Section 6.4 Asset Sales

          Prior to any Asset Sale anticipated to generate Net Cash Proceeds in
excess of $1,000,000, the Company shall send the Administrative Agent a notice
(a) describing such Asset
Sale or the nature and material terms and conditions of such transaction
and (b) stating the estimated Net Cash Proceeds anticipated to be received by
the Company or any of its Subsidiaries.

          Section 6.5 Notices under Subordinated Debt Documents

          Promptly after the sending or filing thereof, the Company shall send the
Administrative Agent copies of all material notices, certificates or reports
delivered pursuant to any Subordinated Debt Document.

          Section 6.6 SEC Filings; Press Releases

          Promptly after the sending or filing thereof, the Company shall send the
Administrative Agent copies of (a) all reports that the Company sends to its
security holders generally, (b) all reports and registration statements, if
any, that the Company or any of its Subsidiaries (if they are public companies)
files with the Securities and Exchange Commission or any national or foreign
securities exchange or the National Association of Securities Dealers, Inc.,
(c) all press releases and (d) all other statements concerning material changes
or developments in the business of such Loan Party made available by any Loan
Party to the public.

          Section 6.7 Labor Relations

          Promptly after becoming aware of the same, the Company shall give the
Administrative Agent written notice of (a) any material labor dispute to which
the Company or any of its Subsidiaries is or may become a party, including any
strikes, lockouts or other disputes

76

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

relating to any of such Person’s plants and
other facilities and (b) any Worker Adjustment and Retraining Notification Act
or related liability incurred with respect to the closing of any plant or other
facility of any of such Person.

          Section 6.8 Tax Returns

          Upon the request of any Lender, through the Administrative Agent, the
Company shall provide copies of all federal, state and local tax returns and
reports filed by the Company or any of its Subsidiaries in respect of taxes
measured by income (excluding sales, use and like taxes).

          Section 6.9 Insurance

          As soon as is practicable and in any event within 90 days after the end of
each Fiscal Year, the Company shall furnish the Administrative Agent (in
sufficient copies for each of the Lenders) with (a) a report in form and
substance satisfactory to the Administrative Agent and the Lenders outlining
all material insurance coverage maintained as of the date of such report by the
Company and its Subsidiaries and the duration of such coverage and (b) an
insurance broker’s statement that all premiums then due and payable with
respect to such coverage have been paid and confirming that the Administrative
Agent has been named as loss payee or additional insured, as applicable.

          Section 6.10 ERISA Matters

          The Company shall furnish the Administrative Agent (with sufficient copies
for each of the Lenders):

          (a) promptly and in any event within 30 days after the Company, any of its
Subsidiaries or any ERISA Affiliate knows or has reason to know that any ERISA
Event has occurred, written notice describing such event;

          (b) promptly and in any event within 10 days after the Company, any of its
Subsidiaries or any ERISA Affiliate knows or has reason to know that a request
for a minimum funding waiver under Section 412 of the Code has been filed with
respect to any Title IV Plan or Multiemployer Plan, a written statement of a
Responsible Officer of the Company describing such ERISA Event or waiver
request and the action, if any, the Company, its Subsidiaries and ERISA
Affiliates propose to take with respect thereto and a copy of any notice filed
with the PBGC or the IRS pertaining thereto; and

          (c) simultaneously with the date that the Company, any of its Subsidiaries
or any ERISA Affiliate files a notice of intent to terminate any Title IV Plan,
if such termination would require material additional contributions in order to
be considered a standard termination within the meaning of Section 4041(b) of
ERISA, a copy of each notice.

          Section 6.11 Environmental Matters

          The Company shall provide the Administrative Agent promptly and in any
event within 10 days of the Company or any Subsidiary learning of any of the
following, written notice of any of the following:

77

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          (a) that any Loan Party is or may be liable to any Person as a result of a
Release or threatened Release that could reasonably be expected to subject such
Loan Party to Environmental Liabilities and Costs of $1,000,000 or more;

          (b) the receipt by any Loan Party of notification that any real or
personal property of such Loan Party is or is reasonably likely to be subject
to any Environmental Lien;

          (c) the receipt by any Loan Party of any notice of violation of or
potential liability under, or knowledge by such Loan Party that there exists a
condition that could reasonably be expected to result in a violation of or
liability under, any Environmental Law, except for violations and liabilities
the consequence of which, in the aggregate, would not be reasonably likely to
subject the Loan Parties collectively to Environmental Liabilities and Costs of
$1,000,000 or more;

          (d) the commencement of any judicial or administrative proceeding or
investigation alleging a violation of or liability under any Environmental Law,
that, in the aggregate, if adversely determined, would have a reasonable
likelihood of subjecting the Loan Parties collectively to Environmental
Liabilities and Costs of $1,000,000 or more;

          (e) any proposed acquisition of stock, assets or real estate, any proposed
leasing of property or any other action by any Loan Party or any of its
Subsidiaries other than those the consequences of which would, in the
aggregate, have reasonable likelihood of subjecting the Loan Parties
collectively to Environmental Liabilities and Costs of less than $1,000,000;

          (f) any proposed action by any Loan Party or any of its Subsidiaries or
any change in Environmental Laws that, in the aggregate, have a reasonable
likelihood of requiring the Loan Parties to obtain additional environmental,
health or safety Permits or make additional capital improvements to obtain
compliance with Environmental Laws that, in the aggregate, would cost
$1,000,000 or more or subject the Loan Parties to additional Environmental
Liabilities and Costs of $1,000,000 or more; and

          (g) upon written request by any Lender through the Administrative Agent, a
report providing an update of the status of any environmental, health or safety
compliance, hazard or liability issue identified in any notice or report
delivered pursuant to this Agreement (whether or not delivered before the
Effective Date).

          Section 6.12 Borrowing Base Determination

          (a) Borrowing Base Certificates. The Borrowers shall deliver, no later
than the third Business Day of each calendar week (which calendar week shall be
deemed to start on each Sunday), a Borrowing Base Certificate setting forth the
Borrowing Base as of the end of the previous calendar week (which calendar week
shall be deemed to start on each Sunday) executed by a Responsible Officer of
each Borrower.

          (b) Information, Investigations and Reviews. Each Borrower shall conduct,
or shall cause to be conducted, at its expense and upon request of the
Administrative Agent, and present to the Administrative Agent for approval,
such investigations and reviews as the Administrative Agent shall request for
the purpose of determining the Borrowing Base, all upon notice and at such
times during normal business hours and as often as may be reasonably requested.
The Administrative Agent may conduct or cause to be conducted, at the
Borrowers’

78

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

expense, investigation and reviews for the purpose of determining
the Borrowing Base, all upon notice and during normal business hours; provided,
however, that the Administrative Agent shall conduct or cause to be conducted
(i) at least three such investigations or reviews in each Fiscal Year and (ii)
disregarding such investigations and reviews conducted during the continuance
of a Default or Event of Default, not more than four such investigations and
reviews in any Fiscal Year; and provided, further, that, subject to the
limitations on the reimbursement of the expenses thereof set forth in Section
11.3 (Costs and Expenses), the Syndication Agent may designate one examiner to
participate in each such investigation or review. Each Borrower shall furnish
to the Administrative Agent any information that the Administrative Agent may
reasonably request regarding the determination and calculation of the Borrowing
Base, including correct and complete copies of any invoices, underlying
agreements, instruments or other documents and the identity of all Account
Debtors in respect of Accounts referred to therein.

          (c) Notifications. Each Borrower shall promptly notify the Administrative
Agent in writing in the event that at any time such Borrower receives or
otherwise gains knowledge that (i) the Borrowing Base is less than 90% of the
Borrowing Base reflected in the most recent Borrowing Base Certificate
delivered pursuant to clause (a) above or (ii) the sum of (A) the aggregate
Revolving Credit Outstandings and (B) the Availability Reserves exceeds the
Borrowing Base as a result of a decrease therein, in which case such notice
shall also include, without limitation, the amount of such excess.

          (d) Verifications. The Administrative Agent may, at the Borrowers’ sole
cost and expense, make test verifications of the Accounts and physical
verifications of the Inventory in any manner and through any medium that the
Administrative Agent considers advisable, and the Company and each Borrower
shall, and shall cause its Subsidiaries to, furnish all such assistance and
information as the Administrative Agent may require in connection therewith.

          (e) Equipment and Real Estate Appraisals. The net orderly liquidation
value of Eligible Equipment and the Mortgage Value of Eligible Real Property on
the Effective Date shall be determined using the results of the Initial
Appraisals with respect thereto. After the Effective Date, such values of
Eligible Equipment and Eligible Real Property may be adjusted downward based on
new appraisals in form and substance and from an Acceptable Appraiser (to the
extent such appraisals show a decline in the value of such Eligible Equipment
or Eligible Real Property) obtained as follows at the Borrowers’ own expense,
(i) on or about each anniversary of the date of
the applicable Initial Appraisal by the Borrowers; and (ii) during the
continuance of any Event of Default, at any time either Agent so requests. If
any Eligible Equipment is sold by any Borrower or any Eligible Subsidiary in
accordance with clause (b) of Section 8.4 (Sale of Assets), then, the net
orderly liquidation value of the remaining Eligible Equipment shall be
determined (until the next appraisal, investigation, “desktop review” or other
review conducted in accordance with this Agreement in respect of such Eligible
Equipment) by subtracting from the net orderly liquidation value of the
Eligible Equipment of such Borrower or such Eligible Subsidiary prior to such
sale the Net Cash Proceeds of such sale.

          (f) Inventory Appraisals and Reviews. The Administrative Agent may conduct
or ask the Borrowers to conduct, in each case at the Borrowers’ expense, from
time to time, “desktop reviews” and appraisals of Eligible Inventory (which, in
the case of appraisals, shall be with an Acceptable Appraiser); provided,
however, that, disregarding such reviews and appraisals conducted during the
continuance of a Default or Event of Default, (i) the Borrowers shall reimburse
the Administrative Agent for (or conduct at their expense) no more than three
such reviews and appraisals in each calendar year and (ii) such Appraisals made
at the Borrowers’

79

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

expense shall be conducted so as to ensure that each review
shall be followed by an appraisal and each appraisal by a review.

          Section 6.13 Customer Contracts

          If any material Contractual Obligation of the Company or any of its
Subsidiaries with any of its customers or other customer arrangement is
cancelled terminated, lost or materially amended, the Company shall, promptly
after the Company or any Borrower becoming aware of the same, give the
Administrative Agent notice of the same.

          Section 6.14 Other Information

          Each of the Company and each Borrower shall, and shall cause each of their
respective Subsidiaries to, provide the Administrative Agent or any Lender with
such other information respecting the business, properties, condition,
financial or otherwise, or operations of the Company or any of its Subsidiaries
as any Lender through the Administrative Agent may from time to time reasonably
request.

ARTICLE VII

AFFIRMATIVE COVENANTS

          As long as the Obligations (other than indemnities not then due) or the
Revolving Credit Commitments remain outstanding, unless the Requisite Lenders
otherwise consent in writing, each of the Company and each Borrower agrees with
the Lenders, the Issuers and the Administrative Agent that:

          Section 7.1 Preservation of Corporate Existence, Etc.

          Each of the Company and each Borrower shall, and shall cause each of its
Subsidiaries to, preserve and maintain its corporate existence, rights (charter
and statutory) and franchises, except as permitted by Section 8.3
(Investments), Section 8.4 (Sale of Assets) and Section 8.7 (Restriction on
Fundamental Changes; Permitted Acquisitions).

          Section 7.2 Compliance with Laws, Etc.

          Each of the Company and each Borrower shall, and shall cause each of its
Subsidiaries to, comply with all applicable Requirements of Law, Contractual
Obligations and Permits, except where the failure so to comply would not, in
the aggregate, have a Material Adverse Effect. Each of the Company and each
Borrower shall, and shall cause each of its Subsidiaries to, pay its accounts
payable and all amounts due under any other Contractual Obligation in a timely
manner in the ordinary course of business in accordance with the business
practices of the Company and its Subsidiaries in effect on the date hereof.

          Section 7.3 Conduct of Business

          (a) Each of the Company and each Borrower shall, and shall cause each of
its Subsidiaries to, (i) conduct its business in the ordinary course consistent
with past practice and (ii) use its reasonable efforts, in the ordinary course
and consistent with past practice, to preserve

80

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

its business and the goodwill
and business of the customers, advertisers, suppliers and others having
business relations with the Company or such Borrower or any of its
Subsidiaries, except in each case where the failure to comply with the
covenants in each of clauses (i) and (ii) above would not, in the aggregate,
have a Material Adverse Effect.

          (b) Neither RodniC LLC nor CathiO LLC shall conduct any business other
than holding a general partnership interest and limited partnership interest
respectively in Suntron GCO. The Company shall not conduct any business other
than holding the Stock of the Borrowers. For purposes of this clause (b),
"conduct business” shall include holding any asset and incurring any liability
(other than tax liabilities incurred in the ordinary course of business).

          Section 7.4 Payment of Taxes, Etc.

          Each of the Company and each Borrower shall, and shall cause each of its
Subsidiaries to, pay and discharge before the same shall become delinquent, all
lawful governmental claims, taxes, assessments, charges and levies, except
where contested in good faith, by proper proceedings and adequate reserves
therefor have been established on the books of such Borrower or the appropriate
Subsidiary in conformity with GAAP.

          Section 7.5 Maintenance of Insurance

          Each of the Company and each Borrower shall (i) maintain, and cause to be
maintained for each of its Subsidiaries, insurance with responsible and
reputable insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses and
owning similar properties in the same general areas in which the Company, such
Borrower or such Subsidiary operates, and such other insurance as may be
reasonably requested by the Requisite Lenders, and, in any event, all insurance
required by any Collateral Documents and (ii) cause all such insurance to name
the Administrative Agent on behalf of the Secured Parties as additional insured
or loss payee, as appropriate, and to provide that no cancellation, material
addition in amount or material change in coverage shall be effective until
after 30 days’ written notice thereof to the Administrative Agent.

          Section 7.6 Access

          Each of the Company and each Borrower shall, or shall cause each of its
Subsidiaries to, from time to time permit the Administrative Agent and the
Lenders, or any agents or representatives thereof, on the next Business Day
after notification of the same, whether orally or in writing (except that
during the continuance of an Event of Default, no such notice shall be
required), to (a) examine and make copies of and abstracts from the
records and books of account of the Company or such Borrower and, in each case,
each of their respective Subsidiaries, (b) visit the properties of the Company
or such Borrower and, in each case, each of their respective Subsidiaries, (c)
discuss the affairs, finances and accounts of the Company or such Borrower and,
in each case, each of their respective Subsidiaries with any of their
respective officers or directors and (d) communicate directly with the
Company’s Accountants and any other certified public accountants of the Company
or such Borrower. Each of the Company and each Borrower shall authorize its
certified public accountants (including the Company’s Accountants) to disclose
to the Administrative Agent or any Lender any and all financial statements and
other information of any kind, as the Administrative Agent or any Lender
reasonably requests from the Company and that such accountants may have with
respect to the business, financial condition, results of operations or other
affairs of the Company or any of its Subsidiaries.

81

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          Section 7.7 Keeping of Books

          Each of the Company and each Borrower shall, and shall cause each of its
Subsidiaries to keep, proper books of record and account, in which full and
correct entries shall be made in conformity with GAAP of all financial
transactions and the assets and business of such Borrower and each such
Subsidiary.

          Section 7.8 Maintenance of Properties, Etc.

          Each of the Company and each Borrower shall, and shall cause each of its
Subsidiaries to, maintain and preserve, (a) all of those of its properties
necessary in the conduct of its business in good working order and condition,
(b) all rights, permits, licenses, approvals and privileges (including all
Permits) used or useful or necessary in the conduct of its business and (c) all
registered patents, trademarks, trade names, copyrights and service marks with
respect to its business; except where failure to so maintain and preserve the
items set forth in clauses (a) through (c) above would not, in the aggregate,
have a Material Adverse Effect.

          Section 7.9 Application of Proceeds

          The Borrowers shall use the entire amount of the proceeds of the Loans as
provided in Section 4.13 (Use of Proceeds).

          Section 7.10 Environmental

          Each of the Company and each Borrower shall, and shall cause each of its
Subsidiaries to, comply in all material respects with Environmental Laws and,
without limiting the foregoing, each of the Company and each Borrower shall,
and shall cause of its Subsidiaries to, in each case at the sole cost and
expense of the Company, such Borrower or such Subsidiary, upon receipt of any
notification or otherwise obtaining knowledge of any Release or other event
that has any reasonable likelihood of the Company or its Subsidiaries incurring
Environmental Liabilities and Costs in excess of $1,000,000, (a) conduct, pay
for consultants to conduct or ensure that a responsible party conducts, tests
or assessments of environmental conditions at such operations or properties,
including the investigation and testing of subsurface conditions and (b) take
such Remedial Action and undertake such investigation or other action (or, to
the extent applicable, ensure that a responsible party take such Remedial
Action, investigation or other action) as required by Environmental Laws or any
Governmental Authority or as is reasonable and prudent to address the Release
or event and otherwise ensure compliance with Environmental Laws.

          Section 7.11 Additional Collateral and Guaranties

          To the extent any of the following documents shall not have been delivered
to the Administrative Agent or any of the following actions shall not have been
taken on or before the Effective Date (regardless of whether such documents
could not have been delivered or such actions could not have been taken as of
the Effective Date), each of the Company and each Borrower agrees to do, and to
cause each of its Subsidiaries to do, promptly all of the following:

          (a) execute and deliver to the Administrative Agent such amendments to the
Collateral Documents or such further Collateral Documents as the Administrative
Agent deems necessary or advisable in order to grant to the Administrative
Agent, for the benefit of the

82

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Secured Parties, a perfected first-priority
security interest in the Stock and Stock Equivalents and other debt Securities
of the Borrowers or any Material Subsidiary that are owned by the Company, any
Borrower or any of their respective Subsidiaries and requested to be pledged by
the Administrative Agent; provided, however, that in no event shall the
Company, the Borrowers or any of their respective Subsidiaries be required to
pledge in excess of 65% of the outstanding Stock of any Material Subsidiary
that is not a Domestic Subsidiary or any of the Stock of any Subsidiary of any
such Material Subsidiary;

          (b) deliver to the Administrative Agent the certificates (if any)
representing such Stock and Stock Equivalents and other debt Securities,
together with (i) in the case of such certificated Stock and Stock Equivalents,
undated stock powers endorsed in blank and (ii) in the case of such
certificated debt Securities, endorsed in blank, in each case executed and
delivered by a Responsible Officer of the Company, such Borrower or such
Subsidiary, as the case may be;

          (c) cause the Company, any Borrower and any Material Subsidiary that is a
Domestic Subsidiary (i) to become a party to the Guaranty and the applicable
Collateral Documents and (ii) to take such or actions necessary or advisable to
(A) ensure the continued validity of the guaranties given in the Guaranty by
the Company, the Borrowers and the Material Subsidiaries that are Domestic
Subsidiaries or (B) grant to the Administrative Agent for the benefit of the
Secured Parties, or ensure the continued validity, perfection or priority of, a
valid, perfected and enforceable first-priority security interest (subject to
Customary Permitted Liens) in the Collateral described in the Collateral
Documents with respect to each of the Company, the Borrowers and the Material
Subsidiaries that are Domestic Subsidiaries, including the filing of Uniform
Commercial Code financing statements in such jurisdictions as may be required
by the Collateral Documents or by law or as may be reasonably requested by the
Administrative Agent; and

          (d) if requested by the Administrative Agent, deliver to the
Administrative Agent legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Agent.

          Section 7.12 Real Property

          (a) Each of the Company and each Borrower shall, and shall cause each of
its Subsidiaries to, (i) comply in all material respects with of its
obligations under all of its Leases now or hereafter held by it with respect to
Real Property, including the Leases identified on Schedule 4.19 (Real Property)
as held by it, (ii) not modify, amend, cancel, extend or otherwise change in
any materially adverse manner any of the terms, covenants or conditions of any
such Lease, (iii) not assign or sublet any other Lease if such assignment or
sublet would have a Material Adverse Effect and (iv) provide the Administrative
Agent with a copy of each notice of material default under any Lease received
by the Company or any Subsidiary thereof immediately upon receipt thereof and
deliver to the Administrative Agent a copy of each notice of default sent
by any Borrower or any Subsidiary thereof under any Lease simultaneously
with its delivery of such notice under such Lease.

          (b) At least 15 Business Days prior to (i) entering into any Lease (other
than a renewal of an existing Lease) for the principal place of business and
chief executive office of the Company any Borrower or any Subsidiary Guarantor
or any other Lease (including any renewal) in which the annual rental payments
are anticipated to equal or exceed $1,000,000 or (ii) acquiring of any material
owned Real Property, the Company or such Borrower shall, or shall

83

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

cause such Subsidiary Guarantor to, provide the Administrative Agent
written notice thereof. Upon written request of the Administrative Agent, the
Company or such Borrower shall, or shall cause such Subsidiary Guarantor to,
(x) provide Phase I environmental reports showing no condition that could give
rise to material Environmental Costs and Liabilities and (y) execute and
deliver to the Administrative Agent, for the benefit of the Secured Parties,
immediately upon the acquisition of any such Lease or owned Real Property, a
mortgage, deed of trust, assignment or other appropriate instrument evidencing
a Lien upon any such Lease or Real Property, together with such title policies,
certified surveys and local counsel opinions with respect thereto and such
other agreements, documents and instruments as the Administrative Agent deems
necessary or desirable, the same to be in form and substance satisfactory to
the Administrative Agent and to be subject only to (A) Liens permitted under
Section 8.2 (Liens, Etc.) and (B) such other Liens as the Administrative Agent
may reasonably approve.

          Section 7.13 Account Debtors

          Each Borrower shall instruct each Account Debtor or other Person obligated
to make a payment to any Loan Party to make payment or to continue to make
payment to a Blocked Account. Each Borrower shall deposit in a Blocked Account
immediately upon receipt all proceeds of Collateral received by it or any of
its Subsidiaries that are Subsidiary Guarantors from any other Person.

ARTICLE VIII

Negative Covenants

          As long as any of the Obligations (other than indemnities not then due) or
the Revolving Credit Commitments remain outstanding, without the written
consent of the Requisite Lenders, each of the Company and each Borrower agrees
with the Lenders, the Issuers and the Administrative Agent that:

          Section 8.1 Indebtedness

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, directly or indirectly create, incur, assume
or otherwise become or remain directly or indirectly liable with respect to any
Indebtedness except:

          (a) the Secured Obligations;

          (b) Indebtedness existing on the Effective Date and disclosed on Schedule
8.1 (Existing Indebtedness);

          (c) Guaranty Obligations incurred by any Borrower or any Subsidiary
Guarantor in respect of any obligation of any Borrower or any Subsidiary
Guarantor otherwise permitted by this Section 8.1;

          (d) Capital Lease Obligations and purchase money Indebtedness incurred by
any Borrower or any Subsidiary of any Borrower to finance the acquisition of
fixed assets in an aggregate outstanding principal amount not to exceed
$15,000,000 at any time;

84

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          (e) Renewals, extensions, refinancings and refundings of Indebtedness
permitted by clause (b) or (d) above; provided, however, that any such renewal
extension, refinancing or refunding is in an aggregate principal amount not
greater than the principal amount of, and is on terms no less favorable to any
Borrower or any Subsidiary of any Borrower, including as to weighted average
maturity (which maturity shall be deemed to be on terms not less favorable to
any Borrower or any Subsidiary of any Borrower so long as such maturity shall
exceed six years), than the Indebtedness being renewed, extended, refinanced or
refunded;

          (f) Indebtedness arising from intercompany loans from any Borrower to any
Wholly-Owned Subsidiary of the Company that is a Borrower or a Subsidiary
Guarantor; provided, however, that (i) the Investment in the intercompany loan
to such Subsidiary is permitted under Section 8.3(e) (Investments) and (ii)
such Indebtedness is expressly subordinate and junior in right of payment to
the prior payment in full in cash of such Wholly-Owned Subsidiary’s obligations
under the Guaranty and on terms and conditions reasonably satisfactory to the
Administrative Agent;

          (g)
Indebtedness arising under any performance or surety bond entered into in
the ordinary course of business;

          (h) Subordinated Debt of the Company; provided, however, that (i) the
aggregate principal amount of all such Subordinated Debt incurred in reliance
upon this clause (h) shall not exceed $50,000,000 and (ii) on each date any
such Subordinated Debt is incurred by the Company, (A) no Default or Event of
Default is continuing and (B) the Interest Coverage Ratio of the Company, as
determined as of such date after giving effect to the incurrence of such
Subordinated Debt (pro forma as if such Subordinated Debt had been incurred on
the first day of the four Fiscal Quarter period most recently ended and had
remained outstanding for such four Fiscal Quarter period) and any use of the
proceeds thereof to be made on such date, shall at least equal 1.00 to 1.00;
and

          (i) unsecured Indebtedness not otherwise permitted under this Section 8.1
in an aggregate outstanding principal amount not to exceed $1,000,000 at any
time.

          Section 8.2 Liens, Etc.

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, create or suffer to exist, any Lien upon or
with respect to any of its properties or assets, whether now owned or hereafter
acquired, or assign, or permit any of its Subsidiaries to assign, any right to
receive income, except for:

          (a) Liens created pursuant to the Loan Documents (including Liens in favor
of any Blocked Account Bank provided for in any Blocked Account Letter);

          (b) Liens existing on the Effective Date and disclosed on Schedule 8.2
(Existing Liens);

          (c) Customary Permitted Liens;

          (d) purchase money Liens granted by any Borrower or any Subsidiary of any
Borrower (including the interest of a lessor under a Capital Lease and Liens to
which any property is subject at the time of such Borrower’s or such
Subsidiary’s acquisition thereof)

85

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

securing Indebtedness permitted under Section 8.1(d) (Indebtedness) and
limited in each case to the property purchased with the proceeds of such
purchase money Indebtedness or subject to such Capital Lease;

          (e) any Lien securing the renewal, extension, refinancing or refunding of
any Indebtedness secured by any Lien permitted by clause (b) or (d) above
without any change in the assets subject to such Lien;

          (f) Liens in favor of lessors securing operating leases; and

          (g) Liens not otherwise permitted by the foregoing clauses of this Section
8.2 securing obligations or other liabilities (other than Indebtedness) of any
Loan Party; provided, however, that the aggregate outstanding amount of such
obligations and liabilities secured by such Liens shall not exceed $500,000 at
any time.

          Section 8.3 Investments

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, directly or indirectly make or maintain any
Investment except:

          (a) Investments existing on the Effective Date and disclosed on Schedule
8.3 (Existing Investments);

          (b) Investments in cash and Cash Equivalents held in a Cash Collateral
Account or a Control Account with respect to which the Administrative Agent for
the benefit of the Secured Parties has a first-priority perfected Lien or in
the accounts permitted to be maintained pursuant to the Pledge and Security
Agreement;

          (c) Investments by any Borrower or any Subsidiary of any Borrower in
accounts, contract rights and chattel paper (each as defined in the Uniform
Commercial Code), notes receivable and similar items arising or acquired in the
ordinary course of business consistent with the past practice of the Company
and its Subsidiaries;

          (d) Investments received in settlement of amounts due to any Borrower or
any Subsidiary of any Borrower effected in the ordinary course of business;

          (e) Investments by (i) the Company in the Borrowers, (ii) any Borrower or
Subsidiary Guarantor in any other Borrower or Subsidiary Guarantor, (iii) any
Borrower or any Wholly-Owned Subsidiary of any Borrower in connection with a
Permitted Acquisition, (iv) any Subsidiary of any Borrower that is not a
Subsidiary Guarantor in any Borrower or any Subsidiary of any Borrower and (v)
any Borrower or any Subsidiary Guarantor in any Subsidiary of any Borrower that
is not a Subsidiary Guarantor; provided, however, that the aggregate
outstanding amount of such Investments pursuant to this clause (v) shall not
exceed $5,000,000 at any time;

          (f) loans or advances to employees, officers or directors of the Company
or any of its Subsidiaries in the ordinary course of business as presently
conducted other than any loans or advances that would be in violation of
Section 402 of the Sarbanes-Oxley Act, which loans and advances shall not
exceed the aggregate outstanding principal amount of $1,500,000 at any time;

86

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          (g) Investments constituting Guaranty Obligations permitted by Section 8.1
(Indebtedness);

          (h) Investments constituting Restricted Payments permitted by Section 8.5
(Restricted Payments); and

          (i) Investments not otherwise permitted hereby in an aggregate outstanding
amount (reduced by amounts received as a return or recovery of any such
Investment) not to exceed $250,000 at any time.

          Section 8.4 Sale of Assets

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, sell, convey, transfer, lease or otherwise
dispose of, any of its assets or any interest therein (including the sale or
factoring at maturity or collection of any accounts) to any Person, or permit
or suffer any other Person to acquire any interest in any of its assets or, in
the case of any Subsidiary of the Company, issue or sell any shares of such
Subsidiary’s Stock or Stock Equivalent (any such disposition being an “Asset
Sale”), except:

          (a) the sale or disposition of inventory in the ordinary course of
business;

          (b) as long as no Default or Event of Default is continuing or would
result therefrom, the sale or disposition of equipment of any Borrower or any
Subsidiary of any Borrower that has become obsolete or is replaced in the
ordinary course of business; provided, however, that the aggregate Fair Market
Value of all such equipment shall not exceed $5,000,000 in any Fiscal Year; and
provided, further, that the Net Cash Proceeds of any such Asset Sale are used
to prepay the Loans to the extent required by clause (a) of Section 2.9
(Mandatory Prepayments).

          (c) the lease or sublease of real property by any Borrower or any
Subsidiary of any Borrower not constituting a sale and leaseback, to the extent
not otherwise prohibited by this Agreement;

          (d) assignments and licenses of intellectual property of the Company and
its Subsidiaries in the ordinary course of business;

          (e) any Asset Sale by any Borrower or any Subsidiary of any Borrower to
any Borrower or any Subsidiary Guarantor; and

          (f) as long as no Default or Event of Default is continuing or would
result therefrom, any other Asset Sale for Fair Market Value, payable in cash
upon such sale; provided, however, that with respect to all Asset Sales
pursuant to this clause (f), (i) the aggregate consideration received for all
such Asset Sales (and portions thereof) occurring during any Fiscal Year
(whether or not such Asset Sales occurring prior to the Effective Date) shall
not exceed $250,000, (ii) all Net Cash Proceeds of such Asset Sale are applied
to the prepayment of the Obligations to the extent required by Section 2.9
(Mandatory Prepayments).

87

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          Section 8.5 Restricted Payments

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, directly or indirectly, declare, order, pay,
make or set apart any sum for any Restricted Payment except:

          (a) Restricted Payments by any Subsidiary of any Borrower to such Borrower
or a Wholly-Owned Subsidiary of any Borrower;

          (b) cash dividends on the Stock of the Borrowers to the Company (if
applicable) paid and declared solely for the purpose of funding the following:

               (i) ordinary operating expenses of the Company not in excess of
$2,000,000 in any Fiscal Year (whether or not such expenses or dividends
are made prior to the Effective Date);

               (ii) payments by the Company in respect of foreign, federal, state
or local taxes owing by the Company in respect of the Company and its
Subsidiaries; or

               (iii) payments of interest when due in cash on other Subordinated
Debt of the Company permitted to be incurred or maintained by Section
8.1(h) (Indebtedness) to the extent such interest is permitted to be paid
under the terms of such Subordinated Debt;

          (c) Restricted Payments in respect of any adjustment to the exercise price
of any warrants or options; and

          (d) Restricted Payments in respect of the repurchase of Stock or Stock
Equivalents of the Company from employees or directors pursuant to the terms of
any operative shareholder agreement to which the Company is a party; provided,
however, that (i) the cash consideration payable in respect of all such
repurchases shall not exceed $1,000,000 in any Fiscal Year (including amounts
paid under the promissory notes referred to in clause (ii) below) and (ii) the
balance of the consideration payable in respect of all such repurchases shall
be in the form of promissory notes of the Company subordinate and junior in
right of payment to the Obligations and otherwise in form and substance
satisfactory to the Administrative Agent;

provided, however, that the Restricted Payments described in clauses (b) and
(d) above shall not be permitted if (A) a Default or Event of Default shall
have occurred and be continuing at the date of declaration or payment thereof
or would result therefrom, (B) such Restricted Payment is prohibited under the
terms of any Indebtedness (other than the Obligations) of the Company or any of
its Subsidiaries or (C) in respect of any Restricted Payment described in
subclause (iii) of clause (b) above, either before or after giving effect to
such Restricted Payment and any Loans and Letters of Credit to be made or
issued on the date thereof, the sum of the Revolving Credit Outstandings and
the Availability Reserves in effect at such time exceeds the lesser of (1) 80%
of the aggregate Revolving Credit Commitments in effect at such time and (2)
80% of the Borrowing Base in effect at such time; and provided, further, that a
Restricted Payment may be made pursuant to clause (b)(i) above to pay the
management fees authorized under clause (ii) of Section 8.9 (Transactions with
Affiliates), irrespective of whether any Default or Event of Default shall have
occurred solely by reason of a breach of Article VI (Reporting Covenants) or
Article VII (Affirmative Covenants) (but such Restricted Payment shall not be
made if any Default

88

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

or Events of Default shall have occurred and be continuing as a result of a
breach of any other provision of the Credit Agreement or would occur as a
result of such Restricted Payment).

          Section 8.6 Prepayment of Long-Term Indebtedness

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, make any optional prepayment of principal,
premium (if any), interest, fees (including fees to obtain any waiver or
consent in connection with any Security) or other charges on, or optional
redemption, purchase, retirement, defeasance, sinking fund or similar payment
with respect to, any long-term Indebtedness of any Borrower or any of their
respective Subsidiaries or any other Loan Party other than Indebtedness
permitted under clause (e), (f) or (h) of Section 8.1 (Indebtedness).

          Section 8.7 Restriction on Fundamental Changes; Permitted Acquisitions

          Except, in respect of clauses (a) through (d) below, in connection with a
Permitted Acquisition, neither the Company nor any Borrower shall, nor shall
they permit any of their respective Subsidiaries to, (a) merge with any Person,
(b) consolidate with any Person, (c) acquire all or substantially all of the
Stock or Stock Equivalents of any Person, (d) acquire all or substantially all
of the assets of any Person or all or substantially all of the assets
constituting the business of a division, branch or other unit operation of any
Person, (e) enter into any joint venture or partnership with any Person or (f)
acquire or create any Subsidiary unless, after giving effect thereto, such
Subsidiary is a Wholly-Owned Subsidiary of any Borrower, the Company is in
compliance with Section 7.11 (Additional Collateral and Guaranties) and the
Investment in such Subsidiary is permitted under Section 8.3(e)(Investments).

          Section 8.8 Change in Nature of Business

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, make any material change in the nature or
conduct of its business as carried on at the Effective Date, whether in
connection with a Permitted Acquisition or otherwise.

          Section 8.9 Transactions with Affiliates

          Except as set forth on Schedule 8.9 (Transactions with Affiliates),
neither the Company nor any Borrower shall, nor shall they permit any of their
respective Subsidiaries to, except as otherwise expressly permitted herein, do
any of the following: (a) make any Investment in an Affiliate of any Borrower
that is not a Subsidiary of any Borrower, (b) transfer, sell, lease, assign or
otherwise dispose of any asset to any Affiliate of any Borrower that is not a
Subsidiary of any Borrower, (c) merge into or consolidate with or purchase or
acquire assets from any Affiliate of any Borrower that is not a Subsidiary of
the Company, (d) repay any Indebtedness to any Affiliate of any Borrower that
is not a Subsidiary of any Borrower or (e) enter into any other transaction
directly or indirectly with or for the benefit of any Affiliate of any Borrower
that is not a Subsidiary Guarantor (including guaranties and assumptions of
obligations of any such Affiliate), except for (i) transactions in the ordinary
course of business on a basis no less favorable to such Borrower or such
Subsidiary Guarantor as would be obtained in a comparable arm’s length
transaction with a Person not an Affiliate and (ii) management fees, salaries
and other director or employee compensation to officers or directors of the
Company or any of its Subsidiaries commensurate with current compensation
levels and, in the case of the Company and

89

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

in the case of management fees, not to exceed $750,000 per annum in the
aggregate in any event plus any expense reimbursements.

          Section 8.10 Restrictions on Subsidiary Distributions; No New Negative
Pledge

          Other than pursuant to the Loan Documents and any agreements governing any
purchase money Indebtedness or Capital Lease Obligations permitted by clause
(b), (d) or (e) of Section 8.1 (Indebtedness) (in which latter case, any
prohibition or limitation shall only be effective against the assets financed
thereby), neither the Company nor any Borrower shall, and neither the Company
nor any Borrower shall permit any of its Subsidiaries to, (a) agree to enter
into or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of such Subsidiary to pay dividends or
make any other distribution or transfer of funds or assets or make loans or
advances to or other Investments in, or pay any Indebtedness owed to, any
Borrower or any other Subsidiary thereof or (b) enter into or suffer to exist
or become effective any agreement prohibiting or limiting the ability of the
Company, any Borrower or any Subsidiary thereof to create, incur, assume or
suffer to exist any Lien upon any of its property, assets or revenues, whether
now owned or hereafter acquired, to secure the Secured Obligations, including
any agreement requiring other Indebtedness or Contractual Obligation to be
equally and ratably secured with any Secured Obligation.

          Section 8.11 Modification of Constituent Documents

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, change its capital structure (including in
the terms of its outstanding Stock) or otherwise amend its Constituent
Documents, except for changes and amendments that do not materially affect the
rights and privileges of any Borrower, or any of their respective Subsidiaries,
or the interests of the Administrative Agent, the Lenders and the Issuers under
the Loan Documents or in the Collateral.

          Section 8.12 Modification of Subordinated Debt Documents

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, change or amend the terms (including by
adding any new terms or entering into any new agreement in respect thereof) of
any Subordinated Debt (or any indenture or agreement or other material
Subordinated Debt Document entered into in connection therewith) if the effect
of such change or amendment is to (a) increase the interest rate on such
Subordinated Debt, (b) grant a security interest or provide any other Lien to
secure any such Subordinated Debt, (c) change the dates upon which payments of
principal or interest are due on such Subordinated Debt other than to extend
such dates, (d) change any default or event of default other than to delete or
make less restrictive any default provision therein, or add any covenant with
respect to such Subordinated Debt, (e) change the redemption or prepayment
provisions of such Subordinated Debt other than to extend the dates therefor or
to reduce the premiums payable in connection therewith or (f) materially
increase the obligations of the obligor or confer additional material rights to
the holder of such Subordinated Debt in a manner adverse to the Company, any
Borrower, any of their respective Subsidiaries or any Agent or Lender.

90

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          Section 8.13 Accounting Changes; Fiscal Year

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, change its (a) accounting treatment and
reporting practices or tax reporting treatment, except as required or permitted
by GAAP or any Requirement of Law and disclosed to the Lenders and the
Administrative Agent or (b) Fiscal Year.

          Section 8.14 Margin Regulations

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, use all or any portion of the proceeds of any
credit extended hereunder to purchase or carry margin stock.

          Section 8.15 Sale/Leasebacks

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, enter into any sale and leaseback transaction
covering any property with a total Fair Market Value for such transaction in
excess of $1,000,000.

          Section 8.16 Cancellation of Indebtedness Owed to It

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, cancel any claim or Indebtedness owed to it
except in the ordinary course of business consistent with past practice.

          Section 8.17 No Speculative Transactions

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, engage in any speculative transaction or in
any transaction involving Hedging Contracts except for the sole purpose of
hedging in the normal course of business and consistent with industry
practices.

          Section 8.18 Compliance with ERISA

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries or ERISA Affiliates to cause or permit to occur,
(a) an event that could result in the imposition of a Lien under Section 412 of
the Code or Section 302 or 4068 of ERISA in an amount exceeding $1,000,000 or
(b) an ERISA Event that would have a Material Adverse Effect.

          Section 8.19 Environmental

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries to, allow a Release of any Contaminant in
violation of any Environmental Law; provided, however, that neither the Company
nor any Borrower shall be deemed in violation of this Section 8.19 if, as the
consequence of all such Releases, neither the Company nor any Borrower shall
and shall not permit any of their respective Subsidiaries to collectively incur
Environmental Liabilities and Costs after the Effective Date in excess of
$2,000,000 in the aggregate.

91

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          Section 8.20 Compliance with Blocked Account Provisions

          Neither the Company nor any Borrower shall, nor shall they permit any of
their respective Subsidiaries (to the extent bound thereby) to, fail to comply
with Section 4.5 (Control Accounts; Blocked Accounts) of the Pledge and
Security Agreement or any amendment thereto or successor or replacement
provision thereof.

          Section 8.21 Post Closing Deliveries

          Unless otherwise agreed by the Administrative Agent, the Administrative
Agent shall have received each item set forth on Schedule 8.21 (Post Closing
Deliveries) on or before the date set forth opposite such item on such Schedule
(or such later date as may be agreed by the Administrative Agent), each in form
and substance reasonably satisfactory to the Administrative Agent and with
sufficient copies for each Lender.

ARTICLE IX

Events of Default

          Section 9.1 Events of Default

          Each of the following events shall be an Event of Default:

          (a) any Borrower shall fail to pay any principal of any Loan or any
Reimbursement Obligation when the same becomes due and payable; or

          (b) any Borrower shall fail to pay any interest on any Loan, any fee under
any of the Loan Documents or any other Obligation (other than one referred to
in clause (a) above) and such non-payment continues for a period of three
Business Days after the due date therefor; or

          (c) any representation or warranty made or deemed made by any Loan Party
in any Loan Document or by any Loan Party (or any of its officers) in
connection with any Loan Document shall prove to have been incorrect in any
material respect when made or deemed made; or

          (d) any Loan Party shall fail to perform or observe (i) any term, covenant
or agreement contained in Article V (Financial Covenants), Section 6.1
(Financial Statements), Section 6.2 (Default Notices), Section 7.1
(Preservation of Corporate Existence, Etc.), Section 7.6 (Access), Section 7.11
(Additional Collateral and Guaranties), Section 7.13 (Account Debtors) or
Article VIII (Negative Covenants) or (ii) any other term, covenant or agreement
contained in this Agreement or in any other Loan Document if such failure under
this clause (ii) shall remain unremedied for 30 days after the earlier of the
date on which (A) a Responsible Officer of any Loan Party acknowledges such
failure in writing or (B) written notice thereof shall have been given to any
Loan Party by the Administrative Agent or any Lender; or

          (e) (i) any Loan Party or any Subsidiary of any Loan Party shall fail to
make any payment on any Indebtedness (other than the Obligations) of such Loan
Party or any such Subsidiary (or any Guaranty Obligation in respect of
Indebtedness of any other Person) having a principal amount of $1,000,000 or
more, when the same becomes due and payable (whether by

92

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

scheduled maturity, required prepayment, acceleration, demand or
otherwise), (ii) any other event shall occur or condition shall exist under any
agreement or instrument relating to any such Indebtedness, if the effect of
such event or condition is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness (after giving effect to any grace period therefor
in such agreement or instrument) or (iii) any such Indebtedness shall become or
be declared to be due and payable, or required to be prepaid or repurchased
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof; or

          (f) (i) any Loan Party or any Subsidiary of any Loan Party shall generally
not pay its debts as such debts become due, shall admit in writing its
inability to pay its debts generally or shall make a general assignment for the
benefit of creditors, (ii) any proceeding shall be instituted by or against any
Loan Party or any Subsidiary of any Loan Party seeking to adjudicate it
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts,
under any Requirement of Law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a custodian, receiver, trustee or other similar
official for it or for any substantial part of its property; provided, however,
that, in the case of any such proceedings instituted against any Loan Party or
any of its Subsidiaries (but not instituted by such Loan Party or any of its
Subsidiaries), either such proceedings shall remain undismissed or unstayed for
a period of 30 days or more or any of the actions sought in such proceedings
shall occur or (iii) any Loan Party or any Subsidiary of any Loan Party shall
take any corporate action to authorize any of the actions set forth in clause
(i) and (ii) above; or

          (g) one or more judgments or orders (or other similar process) involving,
in any single case or in the aggregate, an amount in excess of $500,000 in the
case of a money judgment, to the extent not covered by insurance, shall be
rendered against one or more of any Loan Party and its Subsidiaries and shall
remain unpaid and either (i) enforcement proceedings shall have been commenced
by any creditor upon such judgment or order or (ii) there shall be any period
of 20 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; or

          (h) an ERISA Event shall occur and the amount of all liabilities and
deficiencies resulting therefrom, whether or not assessed, exceeds $500,000 in
the aggregate; or

          (i) any material provision of any Collateral Document, the Guaranty or any
other Loan Document after delivery thereof pursuant to this Agreement or any
other Loan Document shall for any reason cease to be valid and binding, or
enforceable against, any Loan Party party thereto, or any Loan Party shall so
state in writing; or

          (j) any Collateral Document shall for any reason cease to create a valid
Lien on any material Collateral or any material portion of the Collateral
purported to be covered thereby or except as permitted by the Loan Documents,
such Lien shall cease to be a valid, perfected and enforceable first-priority
Lien on any material Collateral or any material portion of the Collateral or
any Loan Party shall so state in writing; or

          (k) there shall occur any Change of Control; or

          (l) there shall have occurred a Material Adverse Change or any event or
circumstances that would have a Material Adverse Effect and the Administrative
Agent shall have given notice thereof to the Company or any Borrower; or

93

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          (m) one or more of the Loan Parties and their respective Subsidiaries
shall have entered into one or more consent or settlement decrees or agreements
or similar arrangements with a Governmental Authority or one or more judgments,
orders, decrees or similar actions shall have been entered against one or more
of the Loan Parties and their respective Subsidiaries based on or arising from
the violation of or pursuant to any Environmental Law, or the generation,
storage, transportation, treatment, disposal or Release of any Contaminant and,
in connection with all the foregoing, any Loan Party or any of its Subsidiaries
are likely to incur Environmental Liabilities and Costs in excess of $1,000,000
in the aggregate that were not reflected in the Business Plan or the Financial
Statements delivered pursuant to Section 4.4 (Financial Statements).

          Section 9.2 Remedies

          During the continuance of any Event of Default, the Administrative Agent
(a) may, and, at the request of the Requisite Lenders, shall, by notice to any
Borrower declare that all of the Revolving Credit Commitments be terminated,
whereupon the obligation of each Lender to make any Loan and each Issuer to
issue any Letter of Credit shall immediately terminate and (b) may and shall at
the request of the Requisite Lenders, by notice to any Borrower, declare the
Loans, all interest thereon and all other amounts and Obligations payable under
this Agreement to be forthwith due and payable, whereupon the Loans, all such
interest and all such amounts and Obligations shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by each Borrower; provided,
however, that upon the occurrence of the Events of Default specified in Section
9.1(f) (Events of Default), (x) the Revolving Credit Commitments of each Lender
to make Loans and of each Lender and Issuer to issue or participate in Letters
of Credit shall automatically be terminated and (y) the Loans, all such
interest and all such amounts and Obligations shall automatically become and be
due and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by each Borrower. In addition
to the remedies set forth above, the Administrative Agent may exercise any
remedies provided for by the Collateral Documents in accordance with the terms
thereof or any other remedies provided by applicable law.

          Section 9.3 Actions in Respect of Letters of Credit

          Upon the Revolving Credit Termination Date or as required by clause (b) or
(d) of Section 2.9 (Mandatory Prepayments) the Borrowers shall pay, jointly and
severally, to the Administrative Agent in immediately available funds at the
Administrative Agent’s office referred to in Section 11.8 (Notices, Etc.), for
deposit in a Cash Collateral Account, an amount equal to 105% of the sum of all
outstanding Letter of Credit Obligations. The Administrative Agent may, from
time to time after funds are deposited in any Cash Collateral Account, apply
funds then held in such Cash Collateral Account to the payment of any amounts,
in accordance with Section 2.13(f) (Payments and Computations), as shall have
become or shall become due and payable by any Borrower to the Issuers or
Lenders in respect of the Letter of Credit Obligations. The Administrative
Agent shall promptly give written notice of any such application; provided,
however, that the failure to give such written notice shall not invalidate any
such application.

          Section 9.4 Rescission

          If at any time after termination of the Revolving Credit Commitments or
acceleration of the maturity of the Loans, the Borrowers shall pay, jointly and
severally, all

94

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

arrears of interest and all payments on account of principal of the Loans
and Reimbursement Obligations that shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law,
on overdue interest, at the rates specified herein) and all Events of Default
and Defaults (other than non-payment of principal of and accrued interest on
the Loans due and payable solely by virtue of acceleration) shall be remedied
or waived pursuant Section 11.1 (Amendments, Waivers, Etc.), then upon the
written consent of the Requisite Lenders and written notice to any Borrower,
the termination of the Revolving Credit Commitments or the acceleration and
their consequences may be rescinded and annulled; provided, however, that such
action shall not affect any subsequent Event of Default or Default or impair
any right or remedy consequent thereon. The provisions of the preceding
sentence are intended merely to bind the Lenders and the Issuers to a decision
that may be made at the election of the Requisite Lenders; they are not
intended to benefit any Loan Party and do not give any Loan Party the right to
require the Lenders to rescind or annul any acceleration hereunder, even if the
conditions set forth herein are met.

ARTICLE X

The Agents

          Section 10.1 Authorization and Action

          (a) Each Lender and each Issuer hereby appoints CUSA as the Administrative
Agent hereunder and each Lender and each Issuer authorizes the Administrative
Agent to take such action as agent on its behalf and to exercise such powers
under this Agreement and the other Loan Documents as are delegated to the
Administrative Agent under such agreements and to exercise such powers as are
reasonably incidental thereto. Without limiting the foregoing, each Lender and
each Issuer hereby authorizes the Administrative Agent to execute and deliver,
and to perform its obligations under, each of the Loan Documents to which the
Administrative Agent is a party and to exercise all rights, powers and remedies
that the Administrative Agent may have under such Loan Documents and that under
the Collateral Documents the Administrative Agent is acting as agent for the
Lenders, Issuers and the other Secured Parties.

          (b) As to any matters not expressly provided for by this Agreement and the
other Loan Documents (including enforcement or collection), the Administrative
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Requisite Lenders, and such instructions shall be binding upon all Lenders and
each Issuer; provided, however, that the Administrative Agent shall not be
required to take any action that (i) the Administrative Agent in good faith
believes exposes it to personal liability unless the Administrative Agent
receives an indemnification satisfactory to it from the Lenders and the Issuers
with respect to such action or (ii) is contrary to this Agreement or applicable
law. The Administrative Agent agrees to give to each Lender and each Issuer
prompt notice of each notice given to it by any Loan Party pursuant to the
terms of this Agreement or the other Loan Documents.

          (c) In performing its functions and duties hereunder and under the other
Loan Documents, the Administrative Agent is acting solely on behalf of the
Lenders and the Issuers and its duties are entirely administrative in nature.
The Administrative Agent does not assume and shall not be deemed to have
assumed any obligation other than as expressly set forth herein

95

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

and in the other Loan Documents or any other relationship as the agent,
fiduciary or trustee of or for any Lender, Issuer or holder of any other
Obligation. The Administrative Agent may perform any of its duties under any
of the Loan Documents by or through its agents or employees.

          (d) Each Lender and each Issuer hereby appoints Congress as Syndication
Agent and hereby authorizes it to act in such capacity on behalf of each such
Lender and each such Issuer in accordance with the terms of this Agreement and
the other Loan Documents. Notwithstanding anything to the contrary contained
in this Agreement, the Syndication Agent is a Lender designated as “Syndication
Agent” for title purposes only and in such capacity shall have no obligations
or duties whatsoever under this Agreement or any other Loan Document to any
Loan Party, any Lender or any Issuer and shall have no rights separate from its
rights as a Lender except as expressly provided in this Agreement.

          Section 10.2 Agents’ Reliance, Etc.

          No Agent, no Affiliate of any Agent and no director, officer, agent or
employee of any of them shall be liable for any action taken or omitted to be
taken by it, him, her or them under or in connection with this Agreement or the
other Loan Documents, except for its, his, her or their own gross negligence or
willful misconduct. Without limiting the foregoing, the Administrative Agent
(a) may treat the payee of any Revolving Credit Note as its holder until such
Revolving Credit Note has been assigned in accordance with Section 11.2
(Assignments and Participations), (b) may rely on the Register to the extent
set forth in Section 11.2(c) (Assignments and Participations), (c) may consult
with legal counsel (including counsel to the Company or any other Loan Party),
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts, (d) makes
no warranty or representation to any Lender or Issuer and shall not be
responsible to any Lender or Issuer for any statements, warranties or
representations made by or on behalf of any Borrower or any Subsidiary thereof
in or in connection with this Agreement or any of the other Loan Documents, (e)
shall not have any duty to ascertain or to inquire either as to the performance
or observance of any of the terms, covenants or conditions of this Agreement or
any of the other Loan Documents or the financial condition of any Loan Party,
or the existence or possible existence of any Default or Event of Default, (f)
shall not be responsible to any Lender or Issuer for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of, or
the attachment, perfection or priority of any Lien created or purported to be
created under or in connection with, this Agreement or any of the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto and (g) shall incur no liability under or in respect of this Agreement
or any of the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which writing may be a telecopy or
electronic mail) or any telephone message believed by it to be genuine and
signed or sent by the proper party or parties.

          Section 10.3 Posting of Approved Electronic Communications

          (a) Each of the Agents, the Lenders, the Issuers and the Company and each
Borrower agrees, and the Company and each Borrower shall cause each Subsidiary
Guarantor to agree, that the Administrative Agent may, but shall not be
obligated to, make the Approved Electronic Communications available to the
Lenders and Issuers by posting such Approved Electronic Communications on
“e-Disclosure”, the Administrative Agent’s internet delivery system that is
part of SSB Direct, Global Fixed Income’s primary web portal, IntraLinksTM or a

96

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

successor electronic platform chosen by the Administrative Agent to be its
internet delivery system (the “Approved Electronic Platform”).

          (b) Although the Approved Electronic Platform and its primary web portal
is secured with generally-applicable security procedures and policies
implemented or modified by the Administrative Agent (including, as of the
Effective Date, a dual firewall and a User ID/Password Authorization System)
and the Approved Electronic Platform is secured through a single-user-per-deal
authorization method whereby each user may access the Approved Electronic
Platform only on a deal-by-deal basis, each of the Agents, the Lenders, the
Issuers, the Company and each Borrower acknowledges and agrees, and each
Borrower shall cause each Subsidiary Guarantor to acknowledge and agree, that
the distribution of material through an electronic medium is not necessarily
secure and that there are confidentiality and other risks associated with such
distribution. In consideration for the convenience and other benefits afforded
by such distribution and for the other consideration provided hereunder, the
receipt and sufficiency of which is hereby acknowledged, each of the Lenders,
the Issuers, the Company and each Borrower hereby approves, distribution of the
Approved Electronic Communications through the Approved Electronic Platform and
understands and assumes, and the Company and each Borrower shall cause each
Subsidiary Guarantor to understand and assume, the risks of such distribution.

          (c) THE APPROVED ELECTRONIC COMMUNICATIONS AND THE APPROVED ELECTRONIC
PLATFORM ARE PROVIDED “AS IS” AND “AS AVAILABLE”. NONE OF THE ADMINISTRATIVE
AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (THE “AGENT AFFILIATES”)
WARRANTS THE ACCURACY, ADEQUACY OR COMPLETENESS OF THE APPROVED ELECTRONIC
COMMUNICATIONS AND THE APPROVED ELECTRONIC PLATFORM AND EACH OF THEM EXPRESSLY
DISCLAIMS LIABILITY FOR ERRORS OR OMISSIONS IN THE APPROVED ELECTRONIC
COMMUNICATIONS AND THE APPROVED ELECTRONIC COMMUNICATIONS. NO WARRANTY OF ANY
KIND, EXPRESS, IMPLIED OR STATUTORY (INCLUDING ANY WARRANTY OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR
FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS) IS MADE BY THE AGENT AFFILIATES IN
CONNECTION WITH THE APPROVED ELECTRONIC COMMUNICATIONS OR THE APPROVED
ELECTRONIC PLATFORM.

          (d) Each of the Agents, the Lenders, the Issuers, the Company and each
Borrower agrees, and each Borrower shall cause each Subsidiary Guarantor to
agree, that the Administrative Agent may, but (except as required by applicable
law) shall not be obligated to, store the Approved Electronic Communications on
the Approved Electronic Platform in accordance with the Administrative Agent’s
generally-applicable document retention procedures and policies.

          Section 10.4 Each Agent Individually

          With respect to their respective Ratable Portion, each of CUSA and
Congress shall have and may exercise the same rights and powers hereunder and
is subject to the same obligations and liabilities as and to the extent set
forth herein for any other Lender. The terms “Lenders” and “Requisite Lenders”
and any similar terms shall, unless the context clearly otherwise indicates,
include, without limitation, each Agent in its individual capacity as a Lender
or as one of the Requisite Lenders. Each of CUSA and Congress and their
respective Affiliates may accept deposits from, lend money to, and generally
engage in any kind of banking, trust or

97

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

other business with, any Loan Party as if CUSA and Congress were not
acting as the Administrative Agent and the Syndication Agent, respectively.

          Section 10.5 Lender Credit Decision

          Each Lender and each Issuer acknowledges that it shall, independently and
without reliance upon any Agent or any other Lender conduct its own independent
investigation of the financial condition and affairs of each Borrower and each
other Loan Party in connection with the making and continuance of the Loans and
with the issuance of the Letters of Credit. Each Lender and each Issuer also
acknowledges that it shall, independently and without reliance upon any Agent
or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and other Loan Documents.

          Section 10.6 Indemnification

          Each Lender agrees to indemnify each Agent and each Agent’s respective
Affiliates, and each director, officer, employee, agent and advisor of any of
them (each an “Agent Indemnitee”) (in each case to the extent not reimbursed by
any Borrower), from and against such Lender’s aggregate Ratable Portion of any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements (including fees and
disbursements of legal counsel) of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against, such Agent Indemnitee in any way
relating to or arising out of this Agreement or the other Loan Documents or any
action taken or omitted by such Agent Indemnitee under this Agreement or the
other Loan Documents; provided, however, that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from such Agent
Indemnitee gross negligence or willful misconduct. Without limiting the
foregoing, each Lender agrees to reimburse the Administrative Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including fees
and disbursements of legal counsel) incurred by the Administrative Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of its rights or
responsibilities under, this Agreement or the other Loan Documents, to the
extent that the Administrative Agent is not reimbursed for such expenses by any
Borrower or any other Loan Party.

          Section 10.7 Successor Administrative Agent

          The Administrative Agent may resign at any time by giving written notice
thereof to the Lenders and the Company. Upon any such resignation, the
Requisite Lenders shall have the right to appoint a successor Administrative
Agent. If no successor Administrative Agent shall have been so appointed by
the Requisite Lenders, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent’s giving of notice of resignation, then
the retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent, selected from among the Lenders. In either
case, such appointment shall be subject to the prior written approval of the
Company (which approval may not be unreasonably withheld and shall not be
required upon the occurrence and during the continuance of an Event of
Default). Upon the acceptance of any appointment as Administrative Agent by a
successor Administrative Agent, such successor Administrative Agent shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring

98

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Administrative Agent shall be discharged from its duties and obligations
under this Agreement and the other Loan Documents. Prior to any retiring
Administrative Agent’s resignation hereunder as Administrative Agent, the
retiring Administrative Agent shall take such action as may be reasonably
necessary to assign to the successor Administrative Agent its rights as
Administrative Agent under the Loan Documents. After such resignation, the
retiring Administrative Agent shall continue to have the benefit of this
Article X as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.

          Section 10.8 Concerning the Collateral and the Collateral Documents

          (a) Each Lender and each Issuer agrees that any action taken by the
Administrative Agent, the Requisite Lenders (or, where required by the express
terms of this Agreement, a greater proportion of the Lenders) in accordance
with the provisions of this Agreement or of the other Loan Documents, and the
exercise by the Administrative Agent, the Requisite Lenders (or, where so
required, such greater proportion) of the powers set forth herein or therein,
together with such other powers as are reasonably incidental thereto, shall be
authorized and binding upon all of the Lenders, Issuers and other Secured
Parties. Without limiting the generality of the foregoing, the Administrative
Agent shall have the sole and exclusive right and authority to (i) act as the
disbursing and collecting agent for the Lenders and the Issuers with respect to
all payments and collections arising in connection herewith and with the
Collateral Documents, (ii) execute and deliver each Collateral Document and
accept delivery of each such agreement delivered by the Borrowers or any of
their Subsidiaries, (iii) act as collateral agent for the Lenders, the Issuers
and the other Secured Parties for purposes of the perfection of all security
interests and Liens created by such agreements and all other purposes stated
therein, provided, however, that the Administrative Agent hereby appoints,
authorizes and directs each Lender and Issuer to act as collateral sub-agent
for the Administrative Agent, the Lenders and the Issuers for purposes of the
perfection of all security interests and Liens with respect to the Borrowers’
and their Subsidiaries’ respective deposit accounts maintained with, and cash
and Cash Equivalents held by, such Lender or such Issuer, (iv) manage,
supervise and otherwise deal with the Collateral, (v) take such action as is
necessary or desirable to maintain the perfection and priority of the security
interests and Liens created or purported to be created by the Collateral
Documents and (vi) except as may be otherwise specifically restricted by the
terms hereof or of any other Loan Document, exercise all remedies given to the
Administrative Agent, the Lenders, the Issuers and the other Secured Parties
with respect to the Collateral under the Loan Documents relating thereto,
applicable law or otherwise.

          (b) Each of the Lenders and the Issuers hereby directs, in accordance with
the terms hereof, the Administrative Agent to release (or, in the case of
clause (ii) below, release or subordinate), and the Administrative Agent hereby
agrees to release, any Lien held by the Administrative Agent for the benefit of
the Lenders and the Issuers:

               (i) against all of the Collateral, upon termination of the Revolving
Credit Commitments and payment and satisfaction in full of all Loans,
Reimbursement Obligations and all other mature Secured Obligations that
the Administrative Agent has been notified in writing are then due and
payable (and, in respect of contingent Letter of Credit Obligations, with
respect to which cash collateral has been deposited or a back-up letter
of credit has been issued, in either case on terms satisfactory to the
Administrative Agent and the applicable Issuers);

99

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

               (ii) against any assets that are subject to a Lien permitted by
clause (d) or (e) of Section 8.2 (Liens, Etc.); and

               (iii) (A) against any part of the Collateral sold or disposed of by
a Loan Party if such sale or disposition is permitted by this Agreement
(or permitted pursuant to a waiver or consent of a transaction otherwise
prohibited by this Agreement), (B) if not pursuant to such sale or
disposition, against Collateral with a book value of up to $1,000,000, if
such release is consented to by the Administrative Agent, (C) otherwise,
against any part of the Collateral with a book value in excess of
$1,000,000 but not in excess of $5,000,000, if such release is consented
to by the Requisite Lenders or (D) against any part of the Collateral in
excess of $5,000,000, other than Collateral that is sold or otherwise
disposed of in a transaction permitted hereby or consented to by the
Requisite Lenders, if such release is consented to by all the Lenders.

Each of the Lenders and the Issuers hereby directs the Administrative Agent,
and the Administrative Agent hereby agrees, to execute and deliver or file such
termination and partial release statements and do such other things as are
necessary to release Liens to be released pursuant to this Section 10.8.

          Section 10.9 Collateral Matters Relating to Related Obligations

          The benefit of the Loan Documents and of the provisions of this Agreement
relating to the Collateral shall extend to and be available in respect of any
Secured Obligation that is an Ancillary Obligation or any other obligation owed
to Persons other than the Administrative Agent, the Lenders and the Issuers
(collectively, “Related Obligations”) solely on the condition and
understanding, as among the Administrative Agent and all Secured Parties, that
(i) the Related Obligations shall be entitled to the benefit of the Loan
Documents and the Collateral to the extent expressly set forth in this
Agreement and the other Loan Documents and to such extent the Administrative
Agent shall hold, and have the right and power to act with respect to, the
Guaranty and the Collateral on behalf of and as agent for the holders of the
Related Obligations, but the Administrative Agent is otherwise acting solely as
agent for the Lenders and the Issuers and shall have no fiduciary duty, duty of
loyalty, duty of care, duty of disclosure or other obligation whatsoever to any
holder of Related Obligations, (ii) all matters, acts and omissions relating in
any manner to the Guaranty, the Collateral (including the distribution of
proceeds thereof), or the omission, creation, perfection, priority, abandonment
or release of any Lien, shall be governed solely by the provisions of this
Agreement and the other Loan Documents and no separate Lien, right, power or
remedy shall arise or exist in favor of any Secured Party under any separate
instrument or agreement or in respect of any Related Obligation, (iii) each
Secured Party shall be bound by all actions taken or omitted, in accordance
with the provisions of this Agreement and the other Loan Documents, by the
Administrative Agent and the Requisite Lenders, each of whom shall be entitled
to act at its sole discretion and exclusively in its own interest given its own
Revolving Credit Commitments and its own interest in the Loans, Letter of
Credit Obligations and other Obligations to it arising under this Agreement or
the other Loan Documents, without any duty or liability to any other Secured
Party or as to any Related Obligation and without regard to whether any Related
Obligation remains outstanding or is deprived of the benefit of the Collateral
or becomes unsecured or is otherwise affected or put in jeopardy thereby, (iv)
no holder of Related Obligations and no other Secured Party (except the
Administrative Agent, the Lenders and the Issuers, to the extent set forth in
this Agreement) shall have any right to be notified of, or to direct, require
or be heard with respect to, any action taken or omitted in respect of the
Collateral or under this Agreement or the Loan Documents and (v) no

100

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

holder of any Related Obligation shall exercise any right of setoff,
banker’s lien or similar right except as expressly provided in Section 11.6
(Right of Set-off).

ARTICLE XI

Miscellaneous

          Section 11.1 Amendments, Waivers, Etc.

          (a) No amendment or waiver of any provision of this Agreement (other than
amendments to Schedule I (Revolving Credit Commitments) to reflect any
Assignment and Acceptance or any Assumption Agreement, each of which may be
made by the Administrative Agent) or any other Loan Document nor consent to any
departure by any Loan Party therefrom shall in any event be effective unless
the same shall be in writing and signed by the Requisite Lenders; provided,
however, that no such amendment, waiver or consent shall, unless in writing and
signed by each Lender directly affected thereby, in addition to the Requisite
Lenders (and, in the case of any amendment, the Borrowers), do any of the
following:

               (i) waive or modify any of the conditions specified in Section 3.1
(Conditions Precedent to the Effectiveness of this Agreement) or Section
3.2 (Conditions Precedent to Each Loan and Letter of Credit), except with
respect to a condition based upon another provision hereof the waiver or
modification of which requires only the concurrence of the Requisite
Lenders;

               (ii) increase the Revolving Credit Commitment of such Lender,
subject such Lender to any additional obligations or increase the
aggregate Revolving Credit Commitments (except in connection with the
Facility Increase);

               (iii) extend the scheduled final maturity of any Loan due to such
Lender, or waive, reduce or postpone any scheduled date fixed for the
payment or reduction of principal on such Loan (it being understood that
Section 2.9 (Mandatory Prepayments) does not provide for scheduled dates
fixed for payment) or of the Revolving Credit Commitments;

               (iv) reduce the principal amount of any Loan or Reimbursement
Obligation due to such Lender (other than by the payment or prepayment
thereof);

               (v) reduce the rate of interest on any Loan or Reimbursement
Obligations outstanding to such Lender or any fee payable hereunder to
such Lender;

               (vi) postpone any scheduled date fixed for payment of such interest
or fees due to such Lender;

               (vii) modify the definition of “Borrowing Base” to increase the
Borrowing Base or otherwise increase any of the advance rates above the
maximum percentages set forth in the definitions of “Advance Rate” and
“Applicable Receivables Rate”, for Eligible Receivables, Eligible
Equipment, Eligible Real Property or any Class of Eligible Inventory;

101

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

               (viii) change the aggregate Ratable Portions of Lenders required for
any or all Lenders to take any action hereunder;

               (ix) except as provided in Section 10.8(b) (Concerning the
Collateral and the Collateral Documents), release substantially all of
the Collateral or release any Borrower or Guarantor from its obligations
hereunder or under the Guaranty except in connection with sale or other
disposition permitted by this Agreement (or permitted pursuant to a
waiver or consent of a transaction otherwise prohibited by this
Agreement); or

               (x) amend Section 10.8(b) (Concerning the Collateral and the
Collateral Documents) or this Section 11.1, Schedule III (Applicable
Receivables Rate) or Schedule IV (Fixed Assets Sublimit) or the
definitions of any of the terms “Requisite Lenders” or “Ratable Portion”;

provided, further, that

          (w) amendments (other than amendments to Schedule I (Revolving Credit
Commitments) to reflect any Assignment and Acceptance or any Assumption
Agreement, each of which may be made by the Administrative Agent) shall not be
valid unless signed by the Borrowers;

          (x) any amendment, waiver or consent of any provision of this Agreement or
any other Loan Document shall be effective only in the specific instance and
for the specific purpose for which given;

          (y) no amendment, waiver or consent shall, unless in writing and signed by
the Administrative Agent in addition to the signature of the Lenders that may
be required above, affect the rights or duties of the Administrative Agent
under this Agreement or the other Loan Documents; and

          (z) no amendment, waiver or consent shall, unless in writing and signed by
each Agent in addition to the signature of the Lenders that may be required
above, amend Schedule III (Applicable Receivables Rate) or Schedule IV (Fixed
Assets Sublimit) or the definition of any of the following terms: “Eligible
Equipment”, “Eligible Receivables”, “Eligible Real Property, “Eligible
Inventory”, “Eligible Raw Materials”, “Eligible Work-in-Process Inventory”,
“Eligible Finished Goods”, “Eligible Excess Inventory”, “Availability Reserve”,
“Eligibility Reserve”, “Minimum Eligibility Reserve”, “Aged Work-in-Process
Reserve”, “Fixed Asset Sublimit”, “Borrowing Base Value” or “Mortgage Value”;

and provided, further, that the Administrative Agent may, with the consent of
the Borrowers, amend, modify or supplement this Agreement to cure any
typographical error, defect or inconsistency, so long as such amendment,
modification or supplement does not adversely affect the right of any Lender or
any Issuer.

          (b) The Administrative Agent may, but shall have no obligation to, with
the written concurrence of any Lender, execute amendments, modifications,
waivers or consents on behalf of such Lender. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on the Company or the

102

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Borrowers in any case shall entitle any Borrower to any other or further
notice or demand in similar or other circumstances.

          (c) If, in connection with any proposed amendment, modification, waiver or
termination (a “Proposed Change”) requiring the consent of all affected
Lenders, the consent of Requisite Lenders is obtained but the consent of other
Lenders whose consent is required is not obtained (any such Lender whose
consent is not obtained as described in this Section 11.1 being referred to as
a “Non-Consenting Lender”), then, as long as the Lender acting as the
Administrative Agent is not a Non-Consenting Lender, at the Company’s request,
the Administrative Agent or an Eligible Assignee acceptable to the
Administrative Agent shall have the right with the Administrative Agent’s
consent and in the Administrative Agent’s sole discretion (but shall have no
obligation) to purchase from such Non-Consenting Lender, and such
Non-Consenting Lender agrees that it shall, upon the Administrative Agent’s
request, sell and assign to the Lender acting as the Administrative Agent or
such Eligible Assignee, all of the Revolving Credit Commitments and Revolving
Credit Outstandings of such Non-Consenting Lender in exchange for an amount
equal to the principal balance of all Loans held by the Non-Consenting Lender
and all accrued and unpaid interest and fees with respect thereto through the
date of sale; provided, however, that such purchase and sale shall not be
effective until (x) the Administrative Agent shall have received from such
Eligible Assignee an agreement in form and substance satisfactory to the
Administrative Agent and the Company whereby such Eligible Assignee shall agree
to be bound by the terms hereof and (y) such Non-Consenting Lender shall have
received payments of all Loans held by it and all accrued and unpaid interest
and fees with respect thereto through the date of the sale. Each Lender agrees
that, if it becomes a Non-Consenting Lender, it shall execute and deliver to
the Administrative Agent an Assignment an Acceptance to evidence such sale and
purchase and shall deliver to the Administrative Agent any Note (if the
assigning Lender’s Loans are evidenced by a Note) subject to such Assignment
and Acceptance; provided, however, that the failure of any Non-Consenting
Lender to execute an Assignment and Acceptance shall not render such sale and
purchase (and the corresponding assignment) invalid.

          Section 11.2 Assignments and Participations

          (a) Each Lender may sell, transfer, negotiate or assign to one or more
Eligible Assignees all or a portion of its rights and obligations hereunder
(including all of its rights and obligations with respect to the Revolving
Loans, the Swing Loans and the Letters of Credit); provided, however, that

               (i) if any such assignment shall be of the assigning Lender’s
Revolving Credit Outstandings and Revolving Credit Commitment, such
assignment shall cover the same percentage of such Lender’s Revolving
Credit Outstandings and Revolving Credit Commitment;

               (ii) the aggregate amount being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance
with respect to such assignment) shall in no event (if less than the
Assignor’s entire interest) be less than $5,000,000 or an integral
multiple of $1,000,000 in excess thereof, except, in either case, (A)
with the consent of the Company and the Administrative Agent or (B) if
such assignment is being made to a Lender or an Affiliate or Approved
Fund of such Lender; and

103

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

               (iii) if such Eligible Assignee is not, prior to the date of such
assignment, a Lender or an Affiliate or Approved Fund of a Lender, such
assignment shall be subject to the prior consent of the Administrative
Agent and the Company (which consent shall not be unreasonably withheld
or delayed);

and provided, further, that, notwithstanding any other provision of this
Section 11.2, the consent of the Company shall not be required (x) for any
assignment occurring when any Event of Default shall be continuing or (y) for
any assignment by any Lender as part of the merger, consolidation, sale,
transfer or other disposition of all or any substantial portion of such
Lender’s business, assets or loan portfolio.

          (b) The parties to each assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording, an Assignment and
Acceptance, together with any Note (if the assigning Lender’s Loans are
evidenced by a Note) subject to such assignment. Upon such execution,
delivery, acceptance and recording and the receipt by the Administrative Agent
from the assignee of an assignment fee in the amount of $3,500 from and after
the effective date specified in such Assignment and Acceptance, (i) the
assignee thereunder shall become a party hereto and, to the extent that rights
and obligations under the Loan Documents have been assigned to such assignee
pursuant to such Assignment and Acceptance, have the rights and obligations of
a Lender and, if such Lender were an Issuer, of such Issuer hereunder and
thereunder and (ii) the assignor thereunder shall, to the extent that rights
and obligations under this Agreement have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights (except those that survive the
payment in full of the Obligations) and be released from its obligations under
the Loan Documents, other than those relating to events or circumstances
occurring prior to such assignment (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s
rights and obligations under the Loan Documents, such Lender shall cease to be
a party hereto).

          (c) The Administrative Agent shall maintain at its address referred to in
Section 11.8 (Notices, Etc.) a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recording of the names and
addresses of the Lenders and the Revolving Credit Commitments of and principal
amount of the Loans and Letter of Credit Obligations owing to each Lender from
time to time (the “Register”). Any assignment pursuant to this Section 11.2
shall not be effective until such assignment is recorded in the Register. The
entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Loan Parties, the Administrative Agent and the
Lenders may treat each Person whose name is recorded in the Register as a
Lender for all purposes of this Agreement. The entries in the Register
applicable to any Lender shall be available for inspection by the Company, the
Administrative Agent or such Lender at any reasonable time and from time to
time upon reasonable prior notice.

          (d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee, the Administrative Agent shall, if such
Assignment and Acceptance has been completed, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Company. Within five Business Days
after its receipt of such notice, the Borrowers, at their own expense, shall,
if requested by such assignee, execute and deliver to the Administrative Agent,
new Notes to the order of such assignee in an amount equal to the Revolving
Credit Commitments assumed by it pursuant to such Assignment and Acceptance
and, if the assigning Lender has surrendered any Note for exchange in
connection with the assignment and has retained Revolving Credit

104

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Commitments hereunder, new Notes to the order of the assigning Lender in
an amount equal to the Revolving Credit Commitments retained by it hereunder.
Such new Notes shall be dated the same date as the surrendered Notes and be in
substantially the form of Exhibit B (Form of Revolving Credit Note).

          (e) In addition to the other assignment rights provided in this Section
11.2, each Lender may assign, as collateral or otherwise, any of its rights
under this Agreement (including rights to payments of principal or interest on
the Loans) to (i) any Federal Reserve Bank pursuant to Regulation A of the
Federal Reserve Board without notice to or consent of the Borrowers or the
Administrative Agent or (ii) any trustee for the benefit of the holders of such
Lender’s Securities; provided, however, that no such assignment shall release
the assigning Lender from any of its obligations hereunder.

          (f) Each Lender may sell participations to one or more Persons in or to
all or a portion of its rights and obligations under the Loan Documents
(including all its rights and obligations with respect to the Revolving Loans
and Letters of Credit). The terms of such participation shall not, in any
event, require the participant’s consent to any amendments, waivers or other
modifications of any provision of any Loan Documents, the consent to any
departure by any Loan Party therefrom, or to the exercising or refraining from
exercising any powers or rights such Lender may have under or in respect of the
Loan Documents (including the right to enforce the obligations of the Loan
Parties), except if any such amendment, waiver or other modification or consent
would (i) reduce the amount, or postpone any date fixed for, any amount
(whether of principal, interest or fees) payable to such participant under the
Loan Documents, to which such participant would otherwise be entitled under
such participation or (ii) result in the release of all or substantially all of
the Collateral other than in accordance with Section 10.8(b) (Concerning the
Collateral and the Collateral Documents). In the event of the sale of any
participation by any Lender, (A) such Lender’s obligations under the Loan
Documents shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties for the performance of such obligations, (C)
such Lender shall remain the holder of such Obligations for all purposes of
this Agreement and (D) the Borrowers, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement.
Each participant shall be entitled to the benefits of Section 2.14(d)
(Illegality), Section 2.15 (Capital Adequacy) and Section 2.16 (Taxes) as if it
were a Lender; provided, however, that anything herein to the contrary
notwithstanding, no Borrower shall, at any time, be obligated to make under
Section 2.14(d) (Illegality), Section 2.15 (Capital Adequacy) or Section 2.16
(Taxes) to the participants in the rights and obligations of any Lender
(together with such Lender) any payment in excess of the amount such Borrower
would have been obligated to pay to such Lender in respect of such interest had
such participation not been sold.

          (g) Any Issuer may at any time assign its rights and obligations hereunder
to any other Lender by an instrument in form and substance satisfactory to the
Company, the Administrative Agent, such Issuer and such Lender. If any Issuer
ceases to be a Lender hereunder by virtue of any assignment made pursuant to
this Section 11.2, then, as of the effective date of such cessation, such
Issuer’s obligations to issue Letters of Credit pursuant to Section 2.4
(Letters of Credit) shall terminate and such Issuer shall be an Issuer
hereunder only with respect to outstanding Letters of Credit issued prior to
such date.

105

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          Section 11.3 Costs and Expenses

          (a) The Borrowers hereby agree to pay, jointly and severally, or reimburse
upon demand the Administrative Agent for, all of the Administrative Agent’s
reasonable internal and external audit, legal, appraisal, valuation, filing,
document duplication and reproduction and investigation expenses and for all
other reasonable out-of-pocket costs and expenses of every type and nature
(including, without limitation, the reasonable fees, expenses and disbursements
of the Administrative Agent’s counsel, Weil, Gotshal & Manges LLP, local legal
counsel, auditors, accountants, appraisers, printers, insurance and
environmental advisers and other consultants and agents) incurred by such Agent
in connection with (i) the Administrative Agent’s audit and investigation of
the Borrowers and their Subsidiaries in connection with the preparation,
negotiation and execution of the Loan Documents and the Administrative Agent’s
periodic audits of the Borrowers and their Subsidiaries, as the case may be,
(ii) the preparation, negotiation, execution and interpretation of this
Agreement (including the satisfaction or attempted satisfaction of any of the
conditions set forth in Article III (Conditions To Loans And Letters Of Credit)
of this Agreement and the Existing Credit Agreement), the Loan Documents and
any proposal letter or commitment letter issued in connection therewith and the
making of the Loans hereunder, (iii) the creation, perfection or protection of
the Liens under the Loan Documents (including, without limitation, any
reasonable fees and expenses for local counsel in various jurisdictions), (iv)
the ongoing administration of this Agreement and the Loans, including
consultation with attorneys in connection therewith and with respect to the
Administrative Agent’s rights and responsibilities hereunder and under the
other Loan Documents; (v) the protection, collection or enforcement of any of
the Obligations or the enforcement of any of the Loan Documents, (vi) the
commencement, defense or intervention in any court proceeding relating in any
way to the Obligations, any Loan Party, any of the Borrowers’ Subsidiaries, the
Subordinated Debt Documents, this Agreement or any of the other Loan Documents,
(vii) the response to, and preparation for, any subpoena or request for
document production with which the Administrative Agent is served or deposition
or other proceeding in which the Administrative Agent is called to testify, in
each case, relating in any way to the Obligations, any Loan Party, any of the
Borrowers’ Subsidiaries, the Subordinated Debt Documents, this Agreement or any
of the other Loan Documents and (viii) any amendments, consents, waivers,
assignments, restatements or supplements to any of the Loan Documents and the
preparation, negotiation, and execution of the same.

          (b) The Borrowers further agree to pay or reimburse, jointly and
severally, the Administrative Agent and the Lenders and Issuers upon demand for
all reasonable out-of-pocket costs and expenses, including, reasonable
attorneys’ fees (including allocated costs of internal counsel and costs of
settlement), incurred by the Administrative Agent or such Lenders and Issuers
(i) in enforcing any Loan Document or Obligation or any security therefor or
exercising or enforcing any other right or remedy available by reason of an
Event of Default, (ii) in connection with any refinancing or restructuring of
the credit arrangements provided hereunder in the nature of a “work-out” or in
any insolvency or bankruptcy proceeding, (iii) in commencing, defending or
intervening in any litigation or in filing a petition, complaint, answer,
motion or other pleadings in any legal proceeding relating to the Obligations,
any Loan Party, any of the Borrowers’ Subsidiaries and related to or arising
out of the transactions contemplated hereby or by any of the other Loan
Documents or the Subordinated Debt Documents and (iv) in taking any other
action in or with respect to any suit or proceeding (bankruptcy or otherwise)
described in clauses (i) through (iii) above.

106

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          (c) The Borrowers further agree to pay or reimburse, jointly and
severally, the Syndication Agent upon demand for all reasonable costs and
expenses incurred by the Syndication Agent in connection with the designation
of one examiner to participate, in accordance with Section 6.12(b) (Borrowing
Base Determination), in investigations and reviews conducted by any Borrower or
the Administrative Agent in accordance with such Section 6.12(b); provided,
however, that the Borrowers shall be required to reimburse the Syndication
Agent pursuant to this clause (c) solely for the costs and expenses of one
examiner participating in one such investigation or review in each Fiscal Year
in an amount not to exceed $850 for each day such examiner participates in such
investigation or review plus the reasonable out-of-pocket expenses incurred by
such examiner in connection with such investigation or review.

          Section 11.4 Indemnitees

          (a) The Borrowers shall, jointly and severally, indemnify and hold
harmless each Agent, each Arranger, each Lender, each Issuer and each of their
respective Affiliates, and each of the respective officers, directors,
employees, agents, advisors, attorneys and representatives of each of the
foregoing (each an “Indemnitee”) from and against any and all claims, damages,
losses, liabilities and expenses (including reasonable fees and disbursements
of counsel), joint or several, that may be incurred by or asserted or awarded
against any such Indemnitee (including in connection with or relating to any
investigation, litigation or proceeding or the preparation of any defense in
connection therewith), in each case arising out of or in connection with or by
reason of this Agreement, any other Loan Document, any Obligation, any Letter
of Credit, any Subordinated Debt Document or any of the transactions
contemplated hereby or thereby or any actual or proposed used of the proceeds
of the Loans or Letters of Credit (collectively, the “Indemnified Matters”),
except to the extent such claim, damage, loss, liability or expense is found,
in a final non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnitee’s gross negligence or willful misconduct. In the
case of an investigation, litigation or other proceeding to which the indemnity
in this Section 11.4 applies, such indemnity shall be effective whether or not
such investigation, litigation or proceeding is brought by any Borrower, any of
its directors, security holders or creditors, an Indemnitee or any other
Person, or an Indemnitee is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated. Without limiting the
foregoing, “Indemnified Matters” shall include (i) all Environmental
Liabilities and Costs arising from or connected with the past, present or
future operations of any Borrower or any Subsidiary thereof involving any
property subject to a Collateral Document, or damage to real or personal
property or natural resources or harm or injury alleged to have resulted from
any Release of Contaminants on, upon or into such property or any contiguous
real estate; (ii) any costs or liabilities incurred in connection with any
Remedial Action concerning any Borrower or any Subsidiary thereof; (iii) any
costs or liabilities incurred in connection with any Environmental Lien; and
(iv) any costs or liabilities incurred in connection with any other matter
under any Environmental Law, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 49 U.S.C. §§ 9601 et seq. and
applicable state property transfer laws, whether, with respect to any of such
matters, such Indemnitee is a mortgagee pursuant to any leasehold mortgage, a
mortgagee in possession, the successor in interest to any Borrower or any
Subsidiary thereof, or the owner, lessee or operator of any property of any
Borrower or any Subsidiary thereof by virtue of foreclosure, except, with
respect to those matters referred to in clauses (i), (ii), (iii) and (iv)
above, to the extent (A) incurred following foreclosure (or transfer of title
to in lieu of foreclosure) by the Administrative Agent, any Lender or any
Issuer, or the Administrative Agent, any Lender or any Issuer having become the
successor in interest to any Borrower or any Subsidiary thereof and

107

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

(B) attributable solely to acts of the Administrative Agent, such Lender
or such Issuer or any agent on behalf of the Administrative Agent or such
Lender.

          (b) The Borrowers shall, jointly and severally, indemnify the
Administrative Agent, the Lenders and each Issuer for, and hold the
Administrative Agent, the Lenders and each Issuer harmless from and against,
any and all claims for brokerage commissions, fees and other compensation made
against the Administrative Agent, the Lenders and the Issuers for any broker,
finder or consultant with respect to any agreement, arrangement or
understanding made by or on behalf of any Loan Party or any of its Subsidiaries
in connection with the transactions contemplated by this Agreement.

          (c) The Administrative Agent, each Lender and each Issuer agree that in
the event that any such investigation, litigation or proceeding set forth in
clause (b) above is asserted or threatened in writing or instituted against it
or any other Indemnitee, or any Remedial Action, is requested of it or any of
its officers, directors, agents and employees, for which any Indemnitee may
desire indemnity or defense hereunder, such Indemnitee shall promptly notify
the Company in writing.

          (d) Each Borrower, at the request of any Indemnitee, shall have the
obligation to defend against such investigation, litigation or proceeding or
requested Remedial Action and such Borrower, in any event, may participate in
the defense thereof with legal counsel of such Borrower’s choice. In the event
that such Indemnitee requests any Borrower to defend against such
investigation, litigation or proceeding or requested Remedial Action, such
Borrower shall promptly do so and such Indemnitee shall have the right to have
legal counsel of its choice participate in such defense. No action taken by
legal counsel chosen by such Indemnitee in defending against any such
investigation, litigation or proceeding or requested Remedial Action, shall
vitiate or in any way impair the Borrowers’ obligation and duty hereunder to
indemnify and hold harmless such Indemnitee.

          (e) Each Borrower agrees that any indemnification or other protection
provided to any Indemnitee pursuant to this Agreement (including pursuant to
this Section 11.4) or any other Loan Document shall (i) survive payment in full
of the Obligations and (ii) inure to the benefit of any Person who was at any
time an Indemnitee under this Agreement or any other Loan Document.

          Section 11.5 Limitation of Liability

          (a) Each Borrower agrees that no Indemnitee shall have any liability
(whether direct or indirect, in contract, tort or otherwise) to any Borrower or
any of its security holders or creditors for or in connection with the
transactions contemplated hereby, except for direct damages (as opposed to
special, indirect, consequential or punitive damages (including, without
limitation, any loss of profits, business or anticipated savings)) determined
in a final non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnitee’s breach of contract, gross negligence or willful
misconduct.

          (b) In no event shall any Agent Affiliate have any liability to any Loan
Party, Lender, Issuer or any other Person for damages of any kind, including
direct or indirect, special, incidental or consequential damages, losses or
expenses (whether in tort or contract or otherwise) arising out of any Loan
Party or any Agent Affiliate’s transmission of Approved Electronic
Communications through the Internet or any use of the Approved Electronic
Platform,

108

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

except to the extent such liability of any Agent Affiliate is found in a
final non-appealable judgment by a court of competent jurisdiction to have
resulted from such Agent Affiliate’s gross negligence or willful misconduct.

          Section 11.6 Right of Set-off

          Upon the occurrence and during the continuance of any Event of Default
each Lender and each Affiliate of a Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender or its
Affiliates to or for the credit or the account of any Borrower against any and
all of the Obligations now or hereafter existing whether or not owing by such
Borrower and whether or not such Lender shall have made any demand under this
Agreement or any other Loan Document and although such Obligations may be
unmatured. Each Lender agrees promptly to notify the Company after any such
set-off and application made by such Lender or its Affiliates; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender under this Section
11.6 are in addition to the other rights and remedies (including other rights
of set-off) that such Lender may have.

          Section 11.7 Sharing of Payments, Etc.

          (a) If any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off or otherwise) of the
Loans owing to it, any interest thereon, fees in respect thereof or amounts due
pursuant to Section 11.3 (Costs and Expenses) or Section 11.4 (Indemnitees)
(other than payments made pursuant to Section 2.14 (Special Provisions
Governing Eurodollar Rate Loans), Section 2.15 (Capital Adequacy) or Section
2.16 (Taxes)) in excess of its Ratable Portion of all payments of such
Obligations obtained by all the Lenders, such Lender (a “Purchasing Lender”)
shall forthwith purchase from the other Lenders (each, a “Selling Lender”) such
participations in their Loans or other Obligations as shall be necessary to
cause such Purchasing Lender to share the excess payment ratably with each of
them.

          (b) If all or any portion of any payment received by a Purchasing Lender
is thereafter recovered from such Purchasing Lender, such purchase from each
Selling Lender shall be rescinded and such Selling Lender shall repay to the
Purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Selling Lender’s ratable share (according to the
proportion of (i) the amount of such Selling Lender’s required repayment to
(ii) the total amount so recovered from the Purchasing Lender) of any interest
or other amount paid or payable by the purchasing Lender in respect of the
total amount so recovered.

          (c) Each Borrower agrees that any Purchasing Lender so purchasing a
participation from a Selling Lender pursuant to this Section 11.7 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Lender were the direct creditor of any Borrower in the amount of such
participation.

          Section 11.8 Notices, Etc.

          (a) Addresses for Notices. All notices, demands, requests and other
communications provided for in this Agreement shall be given in writing, or by
any

109

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

telecommunication device capable of creating a written record (including
electronic mail), and addressed to the party to be notified as follows:

	 	(i)	 	if to the Company, any Borrower or any
Subsidiary of any of them:
	 
	 	 	 	Suntron Corporation

2401 West Grandview Road

Phoenix, AZ 85023

Attention: Peter W. Harper

Telecopy no: (602) 282-5201

Electronic Mail Address: pete.harper@suntroncorp.com
	 
	 	 	 	with a copy to:
	 
	 	 	 	Thayer Equity Investors IV, L.P.

c/o Thayer Capital Partners

1455 Pennsylvania Ave., N.W., Suite 350

Washington, D.C. 20004

Attention: Douglas P. McCormick

Telecopy no: (202) 371-0391

Electronic Mail Address: dmccormick@thayercapital.com
	 
	 	 	 	with a copy to:
	 
	 	 	 	RCBA Strategic Partners, L.P.

c/o BLUM Capital Partners, L.P.

909 Montgomery Street,

Suite 400

San Francisco, CA 94133

Attention: John Walker

Telecopy no: (415) 434-3130

Electronic Mail Address: jwalker@blumcapital.com
	 
	 	 	 	with a copy to:
	 
	 	 	 	Greenberg Traurig, LLP

2375 E. Camelback Road, Suite 700

Phoenix, Arizona 85016

Attention: Jeffrey H. Verbin, Esq.

(602) 445-8202

(602) 445-8630 (Fax)

Electronic Mail Address: verbinj@gtlaw.com;

          (ii) if to any Lender, at its Domestic Lending Office specified opposite
its name on Schedule II (Applicable Lending Offices and Addresses for Notices)
or on the signature page of any applicable Assignment and Acceptance;

          (iii) if to any Issuer, at the address set forth under its name on
Schedule II (Applicable Lending Offices and Addresses for Notices); and

110

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

	 	(iv)	 	if to the Administrative Agent:
	 
	 	 	 	Citicorp USA, Inc.

388 Greenwich Street, 19th Floor

New York, New York 10013

Attention: Keith Gerding

Telecopy no: (212) 816-2513

Electronic Mail Address: keith.r.gerding@citigroup.com
	 
	 	 	 	with a copy to:
	 
	 	 	 	Weil, Gotshal & Manges LLP

767 Fifth Avenue,

New York, New York 10153-0119

Attention: Daniel S. Dokos, Esq.

Telecopy no: (212) 310-8007

Electronic Mail Address: daniel.dokos@weil.com

or at such other address as shall be notified in writing (x) in the case of the
Company and the Administrative Agent, to the other parties and (y) in the case
of all other parties, to the Company and the Administrative Agent.

          (b) Effectiveness. All notices, demands, requests, consents and other
communications described in clause (a) above shall be effective (i) if
delivered by hand, including any overnight courier service, upon personal
delivery, (ii) if delivered by mail, when deposited in the mails, (iii) if
delivered by posting to an Approved Electronic Platform, an Internet website or
a similar telecommunication device requiring that a user have prior access to
such Approved Electronic Platform, website or other device, in each case to the
extent otherwise permitted in clause (c) below or Section 10.3 (Posting of
Approved Electronic Communications), when such notice, demand, request, consent
and other communication shall have been made generally available on such
Approved Electronic Platform, Internet website or similar device to the class
of Person being notified (regardless of whether any such Person must
accomplish, and whether or not any such Person shall have accomplished, any
action prior to obtaining access to such items, including registration,
disclosure of contact information, compliance with a standard user agreement or
undertaking a duty of confidentiality) and (iv) if delivered by electronic mail
or any other telecommunications device, when transmitted to an electronic mail
address (or by another means of electronic delivery) as provided in clause (a)
above; provided, however, that notices and communications to the Administrative
Agent pursuant to Article II (The Facility) or Article X (The Agents) shall not
be effective until received by the Administrative Agent.

          (c) Use of Electronic Platform. Notwithstanding clauses (a) and (b) above
(unless the Administrative Agent requests that the provisions of clauses (a)
and (b) above be followed) and any other provision in this Agreement or any
other Loan Document providing for the delivery of, any Approved Electronic
Communication by any other means, the Loan Parties shall deliver all Approved
Electronic Communications to the Administrative Agent by transmitting such
Approved Electronic Communications electronically (in a format reasonably
acceptable to the Administrative Agent) to oploanswebadmin@citigroup.com or
such other electronic mail address (or similar means of electronic delivery) as
the Administrative Agent may notify the Company. Nothing in this clause (c)
shall prejudice the right of the Administrative

111

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

Agent or any other Agent or any Lender or Issuer to deliver any Approved
Electronic Communication in any manner authorized in this Agreement.

          Section 11.9 No Waiver; Remedies

          No failure on the part of any Lender, Issuer or the Administrative Agent
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.

          Section 11.10 Amendment and Restatement; Binding Effect

          (a) This Agreement shall become effective on the Effective Date after it
shall have been executed by the Company, each Borrower and the Administrative
Agent and after the Administrative Agent shall have been notified by each
Lender and Issuer that such Lender or Issuer has executed it and thereafter
shall be binding upon and inure to the benefit of the Company, each Borrower,
the Administrative Agent and each Lender and Issuer and, in each case, their
respective successors and assigns; provided, however, that neither the Company
nor any Borrower shall have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Lenders.

          (b) On the Effective Date, the Existing Credit Agreement shall be amended
and restated in its entirety by this Agreement and the Existing Credit
Agreement shall thereafter be of no further force and effect except to evidence
(i) the incurrence by any Borrower of the “Obligations” under and as defined
therein (whether or not such “Obligations” are contingent as of the Effective
Date), (ii) the representations and warranties made by any Borrower prior to
the Effective Date and (iii) any action or omission performed or required to be
performed pursuant to such Existing Credit Agreement prior to the Effective
Date (including any failure, prior to the Effective Date, to comply with the
covenants contained in such Existing Credit Agreement). The amendments and
restatements set forth herein (including deletion of financial covenants
applicable to previous Fiscal Quarters) shall not cure any breach thereof or
any “Default” or “Event of Default” under and as defined in the Existing Credit
Agreement existing prior to the date hereof. This Agreement is not in any way
intended to constitute a novation of the obligations and liabilities existing
under the Existing Credit Agreement or evidence payment of all or any portion
of such obligations and liabilities.

          (c) The terms and conditions of this Agreement and the Administrative
Agent’s, the Lenders’ and the Issuers’ rights and remedies under this Agreement
and the other Loan Documents, shall apply to all of the Obligations incurred
under the Existing Credit Agreement, the Notes issued thereunder and the
Letters of Credit Issued thereunder; provided, however, that any Eurodollar
Rate Loans made under the Existing Credit Agreement shall have Interest Periods
hereunder starting on the Effective Date (with the same length as such Interest
Period under the Existing Credit Agreement) but the Borrowers shall not owe any
amounts pursuant to Section 2.14(e) (Breakage Costs) by reason of such change
in Interest Period.

          (d) Each Borrower reaffirms the Liens granted pursuant to the Collateral
Documents to the Administrative Agent for the benefit of the Lenders and the
Issuers, which Liens shall continue in full force and effect during the term of
this Agreement and any renewals or extensions thereof and shall continue to
secure the Obligations.

112

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          (e) On and after the Effective Date, (i) all references to the Existing
Credit Agreement (or to any amendment, supplement, modification or amendment
and restatement thereof) in the Loan Documents (other than this Agreement)
shall be deemed to refer to the Existing Credit Agreement as amended and
restated hereby, (ii) all references to any section (or subsection) of the
Existing Credit Agreement in any Loan Document (but not herein) shall be
amended to become, mutatis mutandis, references to the corresponding provisions
of this Agreement and (iii) except as the context otherwise provides, on or
after the Effective Date, all references to this Agreement herein (including
for purposes of indemnification and reimbursement of fees) shall be deemed to
be reference to the Existing Credit Agreement as amended and restated hereby.

          (f) This amendment and restatement is limited as written and is not a
consent to any other amendment, restatement, waiver or other modification,
whether or not similar, and, except as expressly provided herein or in any
other Loan Document, all terms and conditions of the Loan Documents remain in
full force and effect unless otherwise specifically amended by this Agreement
or any other Loan Document.

          Section 11.11 Governing Law

          This Agreement and the rights and obligations of the parties hereto shall
be governed by, and construed and interpreted in accordance with, the law of
the State of New York.

          Section 11.12 Submission to Jurisdiction; Service of Process

          (a) Any legal action or proceeding with respect to this Agreement or any
other Loan Document may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, each Borrower hereby accept for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The parties hereto hereby irrevocably
waive any objection, including any objection to the laying of venue or based on
the grounds of forum non conveniens, that any of them may now or hereafter have
to the bringing of any such action or proceeding in such respective
jurisdictions.

          (b) Each Borrower hereby irrevocably designates, appoints and empowers CT
Corporation System (telephone no: (212) 894-8400) (telecopy no: (212) 894-8490)
(electronic mail address: info@ctadvantage.com) (the “Process Agent”), in the
case of any suit, action or proceeding brought in the State of New York as its
designee, appointee and agent to receive, accept and acknowledge for and on its
behalf, and in respect of its property, service of any and all legal process,
summons, notices and documents that may be served in any action or proceeding
arising out of or in connection with this Agreement or any Loan Document. Such
service may be made by mailing (by registered or certified mail, postage
prepaid) or delivering a copy of such process to such Borrower in care of the
Process Agent at the Process Agent’s above address, and each Borrower hereby
irrevocably authorizes and directs the Process Agent to accept such service on
its behalf. As an alternative method of service, each Borrower irrevocably
consents to the service of any and all process in any such action or proceeding
by the mailing (by registered or certified mail, postage prepaid) of copies of
such process to the Process Agent or such Borrower at its address specified in
Section 11.8 (Notices, Etc.). Each Borrower agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

113

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

          (c) Nothing contained in this Section 11.12 shall affect the right of the
Administrative Agent or any Lender to serve process in any other manner
permitted by law or commence legal proceedings or otherwise proceed against any
Borrower or any other Loan Party in any other jurisdiction.

          (d) If for the purposes of obtaining judgment in any court it is necessary
to convert a sum due hereunder in Dollars into another currency, the parties
hereto agree, to the fullest extent that they may effectively do so, that the
rate of exchange used shall be that at which in accordance with normal banking
procedures the Administrative Agent could purchase Dollars with such other
currency at the spot rate of exchange quoted by the Administrative Agent at
11:00 a.m. (New York time) on the Business Day preceding that on which final
judgment is given, for the purchase of Dollars, for delivery two Business Days
thereafter.

          Section 11.13 Waiver of Jury Trial

          Each of the Agents, the Lenders, the Issuers and each Borrower irrevocably
waives trial by jury in any action or proceeding with respect to this Agreement
or any other Loan Document.

          Section 11.14 Marshaling; Payments Set Aside

          None of the Administrative Agent, any Lender or any Issuer shall be under
any obligation to marshal any assets in favor of any Borrower or any other
party or against or in payment of any or all of the Obligations. To the extent
that any Borrower makes a payment or payments to the Administrative Agent, the
Lenders or the Issuers or any of such Persons receives payment from the
proceeds of the Collateral or exercise their rights of setoff, and such payment
or payments or the proceeds of such enforcement or setoff or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, receiver or any other party, then
to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied, and all Liens, right and remedies therefor, shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

          Section 11.15 Section Titles

          The section titles contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of the
agreement between the parties hereto, except when used to reference such
section. If a numbered reference to a clause, subclause or subsection hereof
is immediately followed by a reference in parenthesis to the title of a section
hereof containing such clause, subclause or subsection, the reference is only
to such clause, subclause or subsection and not to the section generally. If a
numbered reference to a section hereof is immediately followed by a reference
in parenthesis to a section hereof, the title reference shall govern in case of
direct conflict.

          Section 11.16 Execution in Counterparts

          This Agreement may be executed in any number of counterparts and by
different parties in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Signature pages may be detached from
multiple separate counterparts and attached to a single counterpart

114

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

SUNTRON CORPORATION

so that all signature pages are attached to the same document. Delivery
of an executed signature page of this Agreement by facsimile transmission shall
be as effective as delivery of a manually executed counterpart hereof. A set
of the copies of this Agreement signed by all parties shall be lodged with the
Company and the Administrative Agent.

          Section 11.17 Entire Agreement

          This Agreement, together with all of the other Loan Documents and all
certificates and documents delivered hereunder or thereunder, embodies the
entire agreement of the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof. In the event of any
conflict between the terms of this Agreement and any other Loan Document, the
terms of this Agreement shall govern.

          Section 11.18 Confidentiality

          Each Lender, Issuer and each Agent agrees to keep information obtained by
it pursuant hereto and the other Loan Documents confidential in accordance with
such Lender’s, Issuer’s or Agent’s, as the case may be, customary practices and
agrees that it shall only use such information in connection with the
transactions contemplated by this Agreement and not disclose any of such
information other than (a) to such Lender’s or to such Agent’s, as the case may
be, employees, representatives and agents who are or are expected to be
involved in the evaluation of such information in connection with the
transactions contemplated by this Agreement and who are advised of the
confidential nature of such information, (b) to the extent such information
presently is or hereafter becomes available to such Lender or to such Agent, as
the case may be, on a non-confidential basis from a source other than the
Borrowers, (c) to the extent disclosure is required by law, regulation or
judicial order or requested or required by bank regulators or auditors, in each
case and to the extent such assignees, participants, grantees or counterparties
agree to be bound by, and to cause their advisors to comply with, the
provisions of this Section 11.18 and (d) to current or prospective assignees
(including for collateral purposes), participants and contractual
counterparties to any Hedging Contract permitted hereunder and, in each case,
to their respective legal and financial advisors, in each case to the extent
such assignees, participants and counterparties agree to be bound by, and to
cause their advisors to comply with, the provisions of this Section 11.18.
Notwithstanding any other provision in this Agreement, the Company, each
Borrower, each Lender, each Issuer and each Agent hereby agrees, and each
Borrower shall cause each Subsidiary Guarantor to agree, that each Lender and
each Agent (and each of their respective officers, directors, employees,
accountants, attorneys and other advisors) may disclose to any and all Persons,
without limitation of any kind, the U.S. tax treatment and U.S. tax structure
of the transaction and all materials of any kind (including opinions and other
tax analyses) that are provided to each of them relating to such U.S. tax
treatment and U.S. tax structure.

[SIGNATURE PAGES FOLLOW]

115

 

          In Witness Whereof, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

	 	 	 	 	 
	

	 	SUNTRON CORPORATION
	 
	 	 	 	 
	

	 	By:
	 	/s/ Peter W. Harper

	

	 	 	 	Name: Peter W. Harper
	

	 	 	 	Title: CFO
	 
	 	 	 	 
	

	 	K*TEC OPERATING CORP.,
	

	 	 	as Borrower
	 
	 	 	 	 
	

	 	By:
	 	/s/ Peter W. Harper

	

	 	 	 	Name: Peter W. Harper
	

	 	 	 	Title: CFO
	 
	 	 	 	 
	

	 	EFTC OPERATING CORP.,
	

	 	 	as Borrower
	 
	 	 	 	 
	

	 	By:
	 	/s/ Peter W. Harper

	

	 	 	 	Name: Peter W. Harper
	

	 	 	 	Title: CFO

[SIGNATURE PAGE TO SUNTRON’S SECOND AMENDED AND RESTATED CREDIT AGREEMENT]

 

 

	 	 	 	 	 
	

	 	CITICORP USA, INC.,
	

	 	 	as Administrative Agent and Lender
	 
	 	 	 	 
	

	 	By:
	 	/s/ Keith R. Gerding

	

	 	 	 	Name: Keith R. Gerding
	

	 	 	 	Title: Vice President
	 
	 	 	 	 
	

	 	CITIBANK, N.A.,
	

	 	 	as Issuer
	 
	 	 	 	 
	

	 	By:
	 	/s/ Keith R. Gerding

	

	 	 	 	Name: Keith R. Gerding
	

	 	 	 	Title: Vice President

[SIGNATURE PAGE TO SUNTRON’S SECOND AMENDED AND RESTATED CREDIT AGREEMENT]

 

 

	 	 	 	 	 
	

	 	CONGRESS FINANCIAL CORPORATION
	

	 	 	(WESTERN),
	

	 	 	as Syndication Agent and Lender
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Vicki Balmont

	

	 	 	 	Name: Vicki Balmont
	

	 	 	 	Title: Executive Vice President

[SIGNATURE PAGE TO SUNTRON’S SECOND AMENDED AND RESTATED CREDIT AGREEMENT]EXHIBIT 4.1

                          AMERICAN FIRE RETARDANT CORP.
              EMPLOYEE STOCK INCENTIVE PLAN FOR THE YEAR 2004 NO. 5

     1.     General  Provisions.
            -------------------

     1.1     Purpose.  This  Stock  Incentive  Plan  (the "Plan") is intended to
             -------
allow  designated officers and employees (all of whom are sometimes collectively
referred  to  herein  as  the "Employees," or individually as the "Employee") of
American  Fire  Retardant  Corp.,  a  Nevada corporation (the "Company") and its
Subsidiaries  (as  that  term is defined below) which they may have from time to
time (the Company and such Subsidiaries are referred to herein as the "Company")
to receive certain options (the "Stock Options") to purchase common stock of the
Company,  par value $0.001 per share (the "Common Stock"), and to receive grants
of  the Common Stock subject to certain restrictions (the "Awards").  As used in
this  Plan,  the  term  "Subsidiary"  shall  mean  each  corporation  which is a
"subsidiary  corporation" of the Company within the meaning of Section 424(f) of
the Internal Revenue Code of 1986, as amended (the "Code").  The purpose of this
Plan  is  to  provide  the  Employees,  who  make  significant and extraordinary
contributions  to  the  long-term  growth  and  performance of the Company, with
equity-based  compensation  incentives, and to attract and retain the Employees.

     1.2     Administration.
             --------------

     1.2.1     The Plan shall be administered by the Compensation Committee (the
"Committee")  of,  or  appointed  by, the Board of Directors of the Company (the
"Board").  The  Committee  shall select one of its members as Chairman and shall
act  by  vote  of  a  majority  of a quorum, or by unanimous written consent.  A
majority  of  its  members  shall  constitute  a quorum.  The Committee shall be
governed  by the provisions of the Company's Bylaws and of Nevada law applicable
to  the  Board,  except as otherwise provided herein or determined by the Board.

     1.2.2     The  Committee  shall  have  full  and complete authority, in its
discretion,  but  subject  to the express provisions of this Plan (a) to approve
the Employees nominated by the management of the Company to be granted Awards or
Stock  Options;  (b)  to  determine  the number of Awards or Stock Options to be
granted  to  an  Employee; (c) to determine the time or times at which Awards or
Stock Options shall be granted; to establish the terms and conditions upon which
Awards  or  Stock  Options  may  be  exercised;  (d)  to  remove  or  adjust any
restrictions and conditions upon Awards or Stock Options; (e) to specify, at the
time  of  grant,  provisions  relating to exercisability of Stock Options and to
accelerate  or otherwise modify the exercisability of any Stock Options; and (f)
to  adopt such rules and regulations and to make all other determinations deemed
necessary or desirable for the administration of this Plan.  All interpretations
and  constructions  of  this  Plan  by  the  Committee,  and  all of its actions
hereunder,  shall  be  binding  and  conclusive on all persons for all purposes.

     1.2.3     The  Company  hereby  agrees  to indemnify and hold harmless each
Committee  member  and each Employee, and the estate and heirs of such Committee
member  or  Employee,  against  all  claims,  liabilities,  expenses, penalties,
damages  or  other  pecuniary losses, including legal fees, which such Committee
member  or  Employee,  his  estate  or  heirs  may  suffer  as  a  result of his
responsibilities,  obligations  or  duties  in connection with this Plan, to the
extent  that  insurance,  if  any, does not cover the payment of such items.  No
member  of  the  Committee  or  the  Board  shall  be  liable  for any action or
determination made in good faith with respect to this Plan or any Award or Stock
Option  granted  pursuant  to  this  Plan.

     1.3     Eligibility  and  Participation.  The Employees eligible under this
             -------------------------------
Plan shall be approved by the Committee from those Employees who, in the opinion
of  the  management  of  the Company, are in positions which enable them to make
significant  contributions  to  the  long-term  performance  and  growth  of the
Company.  In  selecting  the  Employees  to  whom  Award or Stock Options may be
granted,  consideration  shall  be given to factors such as employment position,
duties  and  responsibilities, ability, productivity, length of service, morale,
interest  in  the  Company  and  recommendations  of  supervisors.

     1.4     Shares  Subject  to this Plan.  The maximum number of shares of the
             -----------------------------
Common  Stock  that  may be issued pursuant to this Plan shall be 1,600,000,000,
subject to adjustment pursuant to the provisions of Paragraph 4.1.  If shares of
the Common Stock awarded or issued under this Plan are reacquired by the Company
due  to  a

                                        1
<PAGE>
forfeiture  or  for  any  other  reason,  such  shares  shall  be  cancelled and
thereafter  shall  again  be  available  for  purposes of this Plan.  If a Stock
Option  expires,  terminates  or is cancelled for any reason without having been
exercised in full, the shares of the Common Stock not purchased thereunder shall
again be available for purposes of this Plan.  In the event that any outstanding
Stock  Option  or Award under this Plan for any reason expires or is terminated,
the  shares  of  Common  Stock allocable to the unexercised portion of the Stock
Option  or  Award  shall  be  available  for  issuance  under  the American Fire
Retardant  Corp.  Non-Employee Directors and Consultants Retainer Stock Plan for
the  Year  2004  No.  5.  The Compensation Committee of the Board shall have the
authority,  in  its  discretion,  to increase the number of shares available for
issuance  under this Plan, while correspondingly decreasing the number of shares
available  for  issuance  under  the  American Fire Retardant Corp. Non-Employee
Directors  and  Consultants  Retainer  Stock  Plan  for  the  Year  2004  No. 5.

     2.     Provisions  Relating  to  Stock  Options.
            ----------------------------------------

     2.1     Grants  of Stock Options.  The Committee may grant Stock Options in
             ------------------------
such amounts, at such times, and to the Employees nominated by the management of
the  Company  as the Committee, in its discretion, may determine.  Stock Options
granted  under  this  Plan shall constitute "incentive stock options" within the
meaning  of  Section  422  of the Code, if so designated by the Committee on the
date  of  grant.  The  Committee  shall  also have the discretion to grant Stock
Options  which  do  not  constitute  incentive stock options, and any such Stock
Options  shall be designated non-statutory stock options by the Committee on the
date  of  grant.  The  aggregate Fair Market Value (determined as of the time an
incentive  stock  option  is  granted) of the Common Stock with respect to which
incentive  stock  options  are  exercisable  for  the first time by any Employee
during  any  one calendar year (under all plans of the Company and any parent or
subsidiary  of  the  Company)  may not exceed the maximum amount permitted under
Section  422  of the Code (currently, $100,000.00).  Non-statutory stock options
shall  not  be  subject  to  the limitations relating to incentive stock options
contained  in the preceding sentence.  Each Stock Option shall be evidenced by a
written  agreement (the "Option Agreement") in a form approved by the Committee,
which shall be executed on behalf of the Company and by the Employee to whom the
Stock  Option is granted, and which shall be subject to the terms and conditions
of  this  Plan.  In  the  discretion of the Committee, Stock Options may include
provisions  (which  need  not  be  uniform),  authorized by the Committee in its
discretion,  that  accelerate  an  Employee's  rights  to exercise Stock Options
following  a  "Change in Control," upon termination of the Employee's employment
by  the  Company  without  "Cause" or by the Employee for "Good Reason," as such
terms  are  defined in Paragraph 3.1 hereof.  The holder of a Stock Option shall
not  be  entitled  to  the privileges of stock ownership as to any shares of the
Common  Stock  not  actually  issued  to  such  holder.

     2.2     Purchase  Price.  The  purchase  price  (the  "Exercise  Price") of
             ---------------
shares  of  the  Common Stock subject to each Stock Option (the "Option Shares")
shall  not  be less than 85 percent of the Fair Market Value of the Common Stock
on the date of the grant of the option.  For an Employee holding greater than 10
percent  of the total voting power of all stock of the Company, either Common or
Preferred, the Exercise Price of an incentive stock option shall be at least 110
percent of the Fair Market Value of the Common Stock on the date of the grant of
the  option.  As  used  herein,  "Fair  Market Value" means the mean between the
highest  and  lowest  reported  sales prices of the Common Stock on the New York
Stock  Exchange  Composite Tape or, if not listed on such exchange, on any other
national  securities  exchange  on  which  the  Common Stock is listed or on The
Nasdaq  Stock  Market,  or,  if  not  so listed on any other national securities
exchange  or  The  Nasdaq Stock Market, then the average of the bid price of the
Common  Stock  during  the  last  five  trading  days  on the OTC Bulletin Board
immediately  preceding  the  last  trading day prior to the date with respect to
which  the  Fair  Market  Value is to be determined.  If the Common Stock is not
then  publicly  traded,  then the Fair Market Value of the Common Stock shall be
the  book value of the Company per share as determined on the last day of March,
June,  September,  or  December  in  any  year  closest  to  the  date  when the
determination  is  to  be  made.  For  the  purpose  of  determining  book value
hereunder,  book  value  shall be determined by adding as of the applicable date
called  for  herein  the capital, surplus, and undivided profits of the Company,
and after having deducted any reserves theretofore established; the sum of these
items  shall  be divided by the number of shares of the Common Stock outstanding
as  of  said date, and the quotient thus obtained shall represent the book value
of  each  share  of  the  Common  Stock  of  the  Company.

     2.3     Option Period.  The Stock Option period (the "Term") shall commence
             -------------
on  the  date of grant of the Stock Option and shall be 10 years or such shorter
period  as is determined by the Committee.  Each Stock Option shall provide that
it  is  exercisable over its term in such periodic installments as the Committee
may  determine,  subject to the provisions of Paragraph 2.4.1.  Section 16(b) of
the  Securities  Exchange  Act  of  1934,  as  amended  (the

                                        2
<PAGE>
"Exchange  Act")  exempts persons normally subject to the reporting requirements
of  Section  16(a)  of  the  Exchange  Act  (the "Section 16 Reporting Persons")
pursuant  to  a qualified employee stock option plan from the normal requirement
of  not  selling  until  at least six months and one day from the date the Stock
Option  is  granted.

     2.4     Exercise  of  Options.
             ---------------------

     2.4.1     Each  Stock  Option may be exercised in whole or in part (but not
as  to  fractional  shares) by delivering it for surrender or endorsement to the
Company,  attention  of  the Corporate Secretary, at the principal office of the
Company,  together with payment of the Exercise Price and an executed Notice and
Agreement of Exercise in the form prescribed by Paragraph 2.4.2.  Payment may be
made  (a)  in  cash,  (b)  by  cashier's or certified check, (c) by surrender of
previously owned shares of the Common Stock valued pursuant to Paragraph 2.2 (if
the Committee authorizes payment in stock in its discretion), (d) by withholding
from  the  Option  Shares which would otherwise be issuable upon the exercise of
the Stock Option that number of Option Shares equal to the exercise price of the
Stock  Option,  if  such  withholding  is  authorized  by  the  Committee in its
discretion,  or  (e)  in the discretion of the Committee, by the delivery to the
Company  of the optionee's promissory note secured by the Option Shares, bearing
interest  at  a  rate  sufficient  to  prevent  the imputation of interest under
Sections  483 or 1274 of the Code, and having such other terms and conditions as
may  be  satisfactory  to  the  Committee.  Subject  to  the  provisions of this
Paragraph  2.4  and Paragraph 2.5, the Employee has the right to exercise his or
her  Stock  Options  at the rate of at least 20 percent per year over five years
from  the  date  the  Stock  Option  is  granted.

     2.4.2     Exercise  of  each Stock Option is conditioned upon the agreement
of  the  Employee  to  the  terms  and conditions of this Plan and of such Stock
Option  as  evidenced  by  the Employee's execution and delivery of a Notice and
Agreement  of  Exercise  in  a  form  to  be  determined by the Committee in its
discretion.  Such Notice and Agreement of Exercise shall set forth the agreement
of  the Employee that (a) no Option Shares will be sold or otherwise distributed
in violation of the Securities Act of 1933, as amended (the "Securities Act") or
any  other  applicable  federal  or state securities laws, (b) each Option Share
certificate  may be imprinted with legends reflecting any applicable federal and
state  securities  law  restrictions  and conditions, (c) the Company may comply
with  said securities law restrictions and issue "stop transfer" instructions to
its  Transfer  Agent  and  Registrar without liability, (d) if the Employee is a
Section  16 Reporting Person, the Employee will furnish to the Company a copy of
each  Form  4  or Form 5 filed by said Employee and will timely file all reports
required  under  federal  securities  laws, and (e) the Employee will report all
sales  of  Option  Shares  to the Company in writing on a form prescribed by the
Company.

     2.4.3     No  Stock  Option  shall  be  exercisable  unless  and  until any
applicable  registration  or  qualification  requirements  of  federal and state
securities  laws,  and  all  other  legal requirements, have been fully complied
with.  At no time shall the total number of securities issuable upon exercise of
all  outstanding  options  under  this  Plan, and the total number of securities
provided  for under any bonus or similar plan or agreement of the Company exceed
a  number  of  securities  which  is equal to 30 percent of the then outstanding
securities  of  the  Company,  unless  a  percentage  higher  than 30 percent is
approved  by at least two-thirds of the outstanding securities entitled to vote.
The  Company  will  use  reasonable  efforts  to maintain the effectiveness of a
Registration  Statement  under  the  Securities  Act  for  the issuance of Stock
Options  and  shares  acquired  thereunder,  but there may be times when no such
Registration  Statement  will  be  currently  effective.  The  exercise of Stock
Options  may  be  temporarily  suspended without liability to the Company during
times  when  no  such  Registration  Statement is currently effective, or during
times  when,  in  the  reasonable  opinion  of the Committee, such suspension is
necessary  to  preclude  violation  of  any  requirements  of  applicable law or
regulatory  bodies  having  jurisdiction  over the Company.  If any Stock Option
would expire for any reason except the end of its term during such a suspension,
then  if  exercise  of such Stock Option is duly tendered before its expiration,
such  Stock  Option  shall  be  exercisable  and exercised (unless the attempted
exercise  is  withdrawn)  as  of the first day after the end of such suspension.
The Company shall have no obligation to file any Registration Statement covering
resales  of  Option  Shares.

     2.5     Continuous  Employment.  Except as provided in Paragraph 2.7 below,
             ----------------------
an Employee may not exercise a Stock Option unless from the date of grant to the
date of exercise the Employee remains continuously in the employ of the Company.
For  purposes  of  this Paragraph 2.5, the period of continuous employment of an
Employee with the Company shall be deemed to include (without extending the term
of the Stock Option) any period during which the Employee is on leave of absence
with  the  consent of the Company, provided that such leave of absence shall not
exceed  three  months and that the Employee returns to the employ of the Company
at  the

                                        3
<PAGE>
expiration  of  such  leave  of absence.  If the Employee fails to return to the
employ of the Company at the expiration of such leave of absence, the Employee's
employment with the Company shall be deemed terminated as of the date such leave
of absence commenced.  The continuous employment of an Employee with the Company
shall also be deemed to include any period during which the Employee is a member
of  the Armed Forces of the United States, provided that the Employee returns to
the  employ  of  the  Company  within  90  days (or such longer period as may be
prescribed  by  law)  from  the  date  the  Employee first becomes entitled to a
discharge  from  military service.  If an Employee does not return to the employ
of  the  Company  within  90 days (or such longer period as may be prescribed by
law)  from  the  date  the  Employee  first becomes entitled to a discharge from
military  service, the Employee's employment with the Company shall be deemed to
have  terminated  as  of  the  date  the  Employee's  military  service  ended.

     2.6     Restrictions  on  Transfer.  Each  Stock  Option granted under this
             --------------------------
Plan shall be transferable only by will or the laws of descent and distribution.
No  interest  of  any  Employee  under this Plan shall be subject to attachment,
execution, garnishment, sequestration, the laws of bankruptcy or any other legal
or  equitable  process.  Each  Stock  Option  granted  under  this Plan shall be
exercisable  during  an  Employee's  lifetime  only  by  the  Employee or by the
Employee's  legal  representative.

     2.7     Termination  of  Employment.
             ---------------------------

     2.7.1     Upon  an  Employee's  Retirement,  Disability  (both  terms being
defined  below)  or  death,  (a)  all Stock Options to the extent then presently
exercisable  shall remain in full force and effect and may be exercised pursuant
to  the  provisions thereof, and (b) unless otherwise provided by the Committee,
all  Stock  Options to the extent not then presently exercisable by the Employee
shall  terminate  as of the date of such termination of employment and shall not
be  exercisable  thereafter.  Unless  employment  is  terminated  for  cause, as
defined  by applicable law, the right to exercise in the event of termination of
employment,  to the extent that the optionee is entitled to exercise on the date
the  employment  terminates  as  follows:

          (i)     At  least  six  months  from  the  date  of  termination  if
termination  was  caused  by  death  or  disability.

          (ii)     At  least 30 days from the date of termination if termination
was  caused  by  other  than  death  or  disability.

     2.7.2     Upon  the  termination  of  the employment of an Employee for any
reason other than those specifically set forth in Paragraph 2.7.1, (a) all Stock
Options  to  the  extent then presently exercisable by the Employee shall remain
exercisable  only  for a period of 90 days after the date of such termination of
employment  (except that the 90 day period shall be extended to 12 months if the
Employee  shall die during such 90 day period), and may be exercised pursuant to
the  provisions  thereof,  including  expiration  at  the  end of the fixed term
thereof,  and  (b) unless otherwise provided by the Committee, all Stock Options
to  the extent not then presently exercisable by the Employee shall terminate as
of  the  date  of  such  termination  of employment and shall not be exercisable
thereafter.

     2.7.3     For  purposes  of  this  Plan:

          (a)     "Retirement"  shall  mean  an  Employee's  retirement from the
employ of the Company on or after the date on which the Employee attains the age
of  65  years;  and

          (b)     "Disability"  shall  mean total and permanent incapacity of an
Employee, due to physical impairment or legally established mental incompetence,
to perform the usual duties of the Employee's employment with the Company, which
disability  shall  be determined (i) on medical evidence by a licensed physician
designated  by  the  Committee, or (ii) on evidence that the Employee has become
entitled  to  receive  primary  benefits as a disabled employee under the Social
Security  Act  in  effect  on  the  date  of  such  disability.

                                        4
<PAGE>
     3.     Provisions  Relating  to  Awards.
            --------------------------------

     3.1     Grant  of  Awards.  Subject  to  the  provisions  of this Plan, the
             -----------------
Committee shall have full and complete authority, in its discretion, but subject
to  the  express  provisions  of this Plan, to (1) grant Awards pursuant to this
Plan,  (2)  determine  the  number of shares of the Common Stock subject to each
Award  (the  "Award Shares"), (3) determine the terms and conditions (which need
not be identical) of each Award, including the consideration (if any) to be paid
by the Employee for such Common Stock, which may, in the Committee's discretion,
consist  of  the  delivery  of  the  Employee's  promissory  note  meeting  the
requirements  of  Paragraph 2.4.1, (4) establish and modify performance criteria
for  Awards,  and (5) make all of the determinations necessary or advisable with
respect  to Awards under this Plan.  Each Award under this Plan shall consist of
a  grant  of  shares  of the Common Stock subject to a restriction period (after
which  the  restrictions shall lapse), which shall be a period commencing on the
date  the  Award  is  granted  and  ending  on  such date as the Committee shall
determine  (the  "Restriction Period").  The Committee may provide for the lapse
of  restrictions  in installments, for acceleration of the lapse of restrictions
upon  the  satisfaction  of  such  performance  or  other  criteria  or upon the
occurrence  of  such  events as the Committee shall determine, and for the early
expiration  of  the  Restriction  Period upon an Employee's death, Disability or
Retirement  as  defined  in  Paragraph 2.7.3, or, following a Change of Control,
upon  termination  of an Employee's employment by the Company without "Cause" or
by  the  Employee  for  "Good  Reason,"  as those terms are defined herein.  For
purposes  of  this  Plan:

     "Change  of  Control"  shall be deemed to occur (a) on the date the Company
first  has  actual  knowledge  that any person (as such term is used in Sections
13(d)  and  14(d)(2)  of  the  Exchange Act) has become the beneficial owner (as
defined  in  Rule  13(d)-3  under  the Exchange Act), directly or indirectly, of
securities of the Company representing 40 percent or more of the combined voting
power  of  the  Company's  then  outstanding  securities, or (b) on the date the
stockholders of the Company approve (i) a merger of the Company with or into any
other  corporation  in  which the Company is not the surviving corporation or in
which  the  Company  survives  as  a  subsidiary  of another corporation, (ii) a
consolidation  of  the  Company with any other corporation, or (iii) the sale or
disposition  of  all  or  substantially all of the Company's assets or a plan of
complete  liquidation.

     "Cause,"  when  used  with reference to termination of the employment of an
Employee  by  the  Company  for  "Cause,"  shall  mean:

               (a)     The  Employee's continuing willful and material breach of
his duties to the Company after he receives a demand from the Chief Executive of
the  Company  specifying  the  manner  in  which he has willfully and materially
breached  such  duties, other than any such failure resulting from Disability of
the  Employee  or  his  resignation  for  "Good  Reason,"  as defined herein; or

               (b)     The  conviction  of  the  Employee  of  a  felony;  or

               (c)     The  Employee's  commission of fraud in the course of his
employment  with  the  Company,  such  as  embezzlement  or  other  material and
intentional  violation  of  law  against  the  Company;  or

               (d)     The  Employee's gross misconduct causing material harm to
the  Company.

     "Good  Reason"  shall  mean  any  one  or  more of the following, occurring
following  or in connection with a Change of Control and within 90 days prior to
the  Employee's resignation, unless the Employee shall have consented thereto in
writing:

               (a)     The  assignment  to  the  Employee of duties inconsistent
with his executive status prior to the Change of Control or a substantive change
in  the  officer  or officers to whom he reports from the officer or officers to
whom  he  reported  immediately  prior  to  the  Change  of  Control;  or

               (b)     The  elimination  or  reassignment  of  a majority of the
duties and responsibilities that were assigned to the Employee immediately prior
to  the  Change  of  Control;  or

                                        5
<PAGE>
               (c)     A  reduction by the Company in the Employee's annual base
salary  as  in  effect  immediately  prior  to  the  Change  of  Control;  or

               (d)     The  Company  requiring the Employee to be based anywhere
outside  a  35-mile radius from his place of employment immediately prior to the
Change  of  Control,  except for required travel on the Company's business to an
extent  substantially consistent with the Employee's business travel obligations
immediately  prior  to  the  Change  of  Control;  or

               (e)     The  failure  of  the  Company  to  grant  the Employee a
performance  bonus  reasonably  equivalent  to the same percentage of salary the
Employee  normally  received  prior  to  the Change of Control, given comparable
performance  by  the  Company  and  the  Employee;  or

               (f)     The  failure  of  the  Company  to  obtain a satisfactory
Assumption  Agreement  (as  defined  in  Paragraph  4.13  of  this  Plan) from a
successor,  or  the  failure  of  such  successor  to  perform  such  Assumption
Agreement.

     3.2     Incentive  Agreements.  Each Award granted under this Plan shall be
             ---------------------
evidenced  by  a written agreement (an "Incentive Agreement") in a form approved
by  the Committee and executed by the Company and the Employee to whom the Award
is  granted.  Each  Incentive  Agreement  shall  be  subject  to  the  terms and
conditions of this Plan and other such terms and conditions as the Committee may
specify.

     3.3     Amendment,  Modification and Waiver of Restrictions.  The Committee
             ---------------------------------------------------
may  modify  or  amend  any  Award  under this Plan or waive any restrictions or
conditions  applicable  to  the Award; provided, however, that the Committee may
not  undertake  any  such  modifications,  amendments  or  waivers if the effect
thereof  materially increases the benefits to any Employee, or adversely affects
the  rights  of  any  Employee  without  his  consent.

     3.4     Terms and Conditions of Awards.  Upon receipt of an Award of shares
             ------------------------------
of  the  Common  Stock  under  this Plan, even during the Restriction Period, an
Employee  shall  be  the  holder  of record of the shares and shall have all the
rights  of  a  stockholder with respect to such shares, subject to the terms and
conditions  of  this  Plan  and  the  Award.

     3.4.1     Except  as otherwise provided in this Paragraph 3.4, no shares of
the  Common  Stock  received  pursuant  to  this  Plan shall be sold, exchanged,
transferred,  pledged,  hypothecated  or  otherwise  disposed  of  during  the
Restriction Period applicable to such shares.  Any purported disposition of such
Common  Stock  in  violation  of  this  Paragraph  3.4  shall  be null and void.

     3.4.2     If  an Employee's employment with the Company terminates prior to
the expiration of the Restriction Period for an Award, subject to any provisions
of  the Award with respect to the Employee's death, Disability or Retirement, or
Change  of Control, all shares of the Common Stock subject to the Award shall be
immediately  forfeited  by  the  Employee and reacquired by the Company, and the
Employee  shall  have  no  further  rights  with  respect  to the Award.  In the
discretion  of  the Committee, an Incentive Agreement may provide that, upon the
forfeiture  by  an  Employee  of  Award  Shares,  the Company shall repay to the
Employee the consideration (if any) which the Employee paid for the Award Shares
on  the  grant  of  the Award.  In the discretion of the Committee, an Incentive
Agreement  may also provide that such repayment shall include an interest factor
on  such  consideration  from  the date of the grant of the Award to the date of
such  repayment.

     3.4.3     The  Committee  may require under such terms and conditions as it
deems  appropriate  or  desirable that (a) the certificates for the Common Stock
delivered  under  this Plan are to be held in custody by the Company or a person
or  institution  designated by the Company until the Restriction Period expires,
(b)  such  certificates shall bear a legend referring to the restrictions on the
Common Stock pursuant to this Plan, and (c) the Employee shall have delivered to
the  Company  a  stock  power  endorsed  in  blank relating to the Common Stock.

                                        6
<PAGE>
     4.     Miscellaneous  Provisions.
            -------------------------

     4.1     Adjustments  Upon  Change  in  Capitalization.
             ---------------------------------------------

     4.1.1     The  number and class of shares subject to each outstanding Stock
Option,  the Exercise Price thereof (and the total price), the maximum number of
Stock  Options that may be granted under this Plan, the minimum number of shares
as  to which a Stock Option may be exercised at any one time, and the number and
class  of shares subject to each outstanding Award, shall not be proportionately
adjusted  in  the  event of any increase or decrease in the number of the issued
shares  of  the  Common  Stock which results from a split-up or consolidation of
shares,  payment  of  a  stock  dividend  or dividends exceeding a total of five
percent  for  which  the  record  dates  occur  in  any  one  fiscal  year,  a
recapitalization  (other than the conversion of convertible securities according
to  their  terms),  a combination of shares or other like capital adjustment, so
that  (a)  upon  exercise  of  the  Stock Option, the Employee shall receive the
number  and  class  of shares the Employee would have received prior to any such
capital adjustment becoming effective, and (b) upon the lapse of restrictions of
the  Award Shares, the Employee shall receive the number and class of shares the
Employee  would  have  received  prior  to  any such capital adjustment becoming
effective.

     4.1.2     Upon  a  reorganization,  merger  or consolidation of the Company
with  one  or  more  corporations  as  a  result of which the Company is not the
surviving  corporation  or  in  which  the  Company  survives  as a wholly-owned
subsidiary of another corporation, or upon a sale of all or substantially all of
the  property  of  the  Company  to  another  corporation,  or  any  dividend or
distribution  to  stockholders  of more than 10 percent of the Company's assets,
adequate  adjustment  or  other provisions shall be made by the Company or other
party  to  such transaction so that there shall remain and/or be substituted for
the  Option  Shares and Award Shares provided for herein, the shares, securities
or assets which would have been issuable or payable in respect of or in exchange
for  such  Option Shares and Award Shares then remaining, as if the Employee had
been  the  owner  of  such  shares as of the applicable date.  Any securities so
substituted  shall  be  subject  to  similar  successive  adjustments.

     4.2     Withholding Taxes.  The Company shall have the right at the time of
             -----------------
exercise  of  any  Stock  Option,  the  grant  of  an  Award,  or  the  lapse of
restrictions on Award Shares, to make adequate provision for any federal, state,
local  or  foreign  taxes  which it believes are or may be required by law to be
withheld  with  respect  to  such  exercise (the "Tax Liability"), to ensure the
payment  of  any such Tax Liability.  The Company may provide for the payment of
any  Tax Liability by any of the following means or a combination of such means,
as  determined  by  the  Committee  in  its  sole and absolute discretion in the
particular  case  (1)  by requiring the Employee to tender a cash payment to the
Company,  (2) by withholding from the Employee's salary, (3) by withholding from
the  Option  Shares which would otherwise be issuable upon exercise of the Stock
Option,  or  from  the  Award  Shares  on  their  grant  or  date  of  lapse  of
restrictions,  that  number of Option Shares or Award Shares having an aggregate
Fair  Market  Value (determined in the manner prescribed by Paragraph 2.2) as of
the  date  the  withholding tax obligation arises in an amount which is equal to
the  Employee's  Tax  Liability or (4) by any other method deemed appropriate by
the  Committee.  Satisfaction  of  the  Tax  Liability of a Section 16 Reporting
Person  may  be made by the method of payment specified in clause (3) above only
if  the  following  two  conditions  are  satisfied:

               (a)     The  withholding of Option Shares or Award Shares and the
exercise  of  the  related  Stock  Option  occur at least six months and one day
following  the  date  of  grant  of  such  Stock  Option  or  Award;  and

               (b)     The  withholding of Option Shares or Award Shares is made
either (i) pursuant to an irrevocable election (the "Withholding Election") made
by  the  Employee  at  least six months in advance of the withholding of Options
Shares  or  Award  Shares,  or  (ii)  on  a  day within a 10-day "window period"
beginning  on  the  third  business  day  following  the  date of release of the
Company's  quarterly  or  annual  summary  statement  of  sales  and  earnings.

     Anything herein to the contrary notwithstanding, a Withholding Election may
be  disapproved  by  the  Committee  at  any  time.

                                        7
<PAGE>
     4.3     Relationship  to  Other  Employee Benefit Plans.  Stock Options and
             -----------------------------------------------
Awards  granted hereunder shall not be deemed to be salary or other compensation
to  any  Employee  for  purposes  of  any pension, thrift, profit-sharing, stock
purchase  or any other employee benefit plan now maintained or hereafter adopted
by  the  Company.

     4.4     Amendments and Termination.  The Board of Directors may at any time
             --------------------------
suspend,  amend  or  terminate  this  Plan.  No amendment, except as provided in
Paragraph  3.3,  or  modification of this Plan may be adopted, except subject to
stockholder  approval, which would (1) materially increase the benefits accruing
to  the  Employees  under  this  Plan,  (2)  materially  increase  the number of
securities  which may be issued under this Plan (except for adjustments pursuant
to  Paragraph  4.1  hereof),  or  (3)  materially  modify the requirements as to
eligibility  for  participation  in  this  Plan.

     4.5     Successors  in  Interest.  The  provisions  of  this  Plan  and the
             ------------------------
actions of the Committee shall be binding upon all heirs, successors and assigns
of  the  Company  and  of  the  Employees.

     4.6     Other  Documents.  All documents prepared, executed or delivered in
             ----------------
connection  with this Plan (including, without limitation, Option Agreements and
Incentive  Agreements)  shall  be,  in  substance  and  form, as established and
modified  by  the Committee; provided, however, that all such documents shall be
subject in every respect to the provisions of this Plan, and in the event of any
conflict between the terms of any such document and this Plan, the provisions of
this  Plan  shall  prevail.

     4.7     Fairness  of  the  Repurchase Price.  In the event that the Company
             -----------------------------------
repurchases  securities  upon  termination  of employment pursuant to this Plan,
either:  (a)  the  price  will  not  be  less  than the fair market value of the
securities  to  be repurchased on the date of termination of employment, and the
right to repurchase will be exercised for cash or cancellation of purchase money
indebtedness  for the securities within 90 days of termination of the employment
(or  in the case of securities issued upon exercise of options after the date of
termination,  within  90  days  after  the  date of the exercise), and the right
terminates  when the Company's securities become publicly traded, or (b) Company
will  repurchase  securities  at  the original purchase price, provided that the
right  to  repurchase  at  the  original purchase price lapses at the rate of at
least  20  percent  of the securities per year over five years from the date the
option  is  granted  (without  respect  to  the date the option was exercised or
became  exercisable)  and  the right to repurchase must be exercised for cash or
cancellation of purchase money indebtedness for the securities within 90 days of
termination  of  employment  (or  in  case of securities issued upon exercise of
options  after  the  date  of  termination, within 90 days after the date of the
exercise).

     4.8     No  Obligation  to  Continue  Employment.  This Plan and the grants
             ----------------------------------------
which  might be made hereunder shall not impose any obligation on the Company to
continue  to  employ  any  Employee.  Moreover, no provision of this Plan or any
document executed or delivered pursuant to this Plan shall be deemed modified in
any  way  by any employment contract between an Employee (or other employee) and
the  Company.

     4.9     Misconduct  of an Employee.  Notwithstanding any other provision of
             --------------------------
this  Plan,  if  an  Employee  commits fraud or dishonesty toward the Company or
wrongfully  uses  or  discloses  any  trade  secret,  confidential data or other
information  proprietary to the Company, or intentionally takes any other action
which  results  in material harm to the Company, as determined by the Committee,
in  its  sole and absolute discretion, the Employee shall forfeit all rights and
benefits  under  this  Plan.

     4.10     Term  of  Plan.  No  Stock  Option  shall be exercisable, or Award
              --------------
granted,  unless  and until the Directors of the Company have approved this Plan
and  all  other  legal requirements have been met.  This Plan was adopted by the
Board  effective July 29, 2004.  No Stock Options or Awards may be granted under
this Plan after July 29, 2014.

     4.11     Governing  Law.  This  Plan and all actions taken thereunder shall
              --------------
be  governed  by,  and  construed  in  accordance with, the laws of the State of
Nevada.

     4.12     Assumption  Agreements.  The  Company will require each successor,
              ----------------------
(direct  or  indirect, whether by purchase, merger, consolidation or otherwise),
to  all  or substantially all of the business or assets of the Company, prior to
the  consummation  of  each such transaction, to assume and agree to perform the
terms  and  provisions

                                        8
<PAGE>
remaining  to  be  performed  by  the Company under each Incentive Agreement and
Stock  Option  and  to  preserve the benefits to the Employees thereunder.  Such
assumption  and  agreement shall be set forth in a written agreement in form and
substance  satisfactory  to the Committee (an "Assumption Agreement"), and shall
include  such  adjustments,  if any, in the application of the provisions of the
Incentive  Agreements  and Stock Options and such additional provisions, if any,
as  the  Committee shall require and approve, in order to preserve such benefits
to  the  Employees.  Without  limiting  the  generality  of  the  foregoing, the
Committee  may  require  an  Assumption  Agreement  to  include  satisfactory
undertakings  by  a  successor:

               (a)     To  provide  liquidity to the Employees at the end of the
Restriction  Period  applicable  to  the Common Stock awarded to them under this
Plan,  or  on  the  exercise  of  Stock  Options;

               (b)     If  the  succession  occurs  before the expiration of any
period  specified  in  the  Incentive Agreements for satisfaction of performance
criteria  applicable  to  the  Common  Stock awarded thereunder, to refrain from
interfering  with  the Company's ability to satisfy such performance criteria or
to  agree  to  modify  such  performance criteria and/or waive any criteria that
cannot  be  satisfied  as  a  result  of  the  succession;

               (c)     To  require  any  future  successor  to  enter  into  an
Assumption  Agreement;  and

               (d)     To  take or refrain from taking such other actions as the
Committee  may  require  and  approve,  in  its  discretion.

     4.13     Compliance  with  Rule  16b-3.  Transactions  under  this Plan are
              -----------------------------
intended  to  comply  with  all  applicable conditions of Rule 16b-3 promulgated
under the Exchange Act.  To the extent that any provision of this Plan or action
by  the  Committee  fails to so comply, it shall be deemed null and void, to the
extent  permitted  by  law  and  deemed  advisable  by  the  Committee.

     4.14     Information to Shareholders.  The Company shall furnish to each of
              ---------------------------
its  stockholders  financial  statements  of  the  Company  at  least  annually.

     IN  WITNESS  WHEREOF,  this Plan has been executed effective as of July 29,
2004.

                                        AMERICAN FIRE RETARDANT CORP.

                                        ----------------------------------------
                                        By /s/ Stephen F. Owens
                                           Stephen F. Owens, President

                                        9
<PAGE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}]]