10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 1, 2007
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission file number 1-11098

SOLECTRON CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization) 94-2447045
(I.R.S. Employer
Identification Number)

847 Gibraltar Drive
Milpitas, California 95035
(Address of principal executive offices including zip code)

(408) 957-8500

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ     Accelerated filer o     Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

At July 6, 2007, 913,919,916 shares of Common Stock of the Registrant were outstanding (including 13,570,929 shares of Solectron Global Services Canada, Inc., which are exchangeable on a one-to-one basis for the Registrant’s common stock).

SOLECTRON CORPORATION

INDEX TO FORM 10-Q

PART I. FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)	4
		Condensed Consolidated Balance Sheets at June 1, 2007 and at August 25, 2006	4
		Condensed Consolidated Statements of Operations for the three and nine months ended June 1, 2007 and May 26, 2006	5
		Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended June 1, 2007 and May 26, 2006	6
		Condensed Consolidated Statements of Cash Flows for the nine months ended June 1, 2007 and May 26, 2006	7
		Notes to Condensed Consolidated Financial Statements (unaudited)	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
	Item 4.	Controls and Procedures	45
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	45
	Item 1a.	Risk Factors	46
	Item 6.	Exhibits	55
Signatures			56
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.4
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

2

Cautionary Statement Regarding Forward-Looking Statements

With the exception of historical facts, the statements contained in this quarterly report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are subject to the safe harbor provisions set forth in the Exchange Act. The forward-looking statements are generally accompanied by words such as “may,” “will,” “could,” “should,” “intend,” “anticipate,” “believe,” “estimate,” “expect,” “continue” and other similar words and statements. These forward-looking statements relate to matters including, but not limited to:

•  anticipated sales and future operating results;

•  our anticipation of the timing and amounts of our future obligations and commitments and our ability to meet those commitments;

•  the calculations of taxes due and the adequacy of our reserves for potential tax liabilities and credits for open periods;

•  our ability to successfully defend against proposed IRS adjustments to prior year income tax returns;

•  the amount of available future cash and our belief that our cash and cash equivalents, short-term investments, lines of credit and cash to be generated from continuing operations will be sufficient for us to meet our obligations for the next twelve months;

•  the adequacy of our restructuring provisions and adequacy and timing of our restructuring activities and their impact on our business or results of operations;

•  the anticipated financial impact of recent and future acquisitions and divestitures and the adequacy of our provisions for indemnification obligations pursuant to such transactions;

•  our ability to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002;

•  our exposure to foreign currency exchange rate fluctuations;

•  our belief that our current or future environmental liability exposure related to our facilities will not be material to our business, financial condition or results of operations;

•  the impact of any litigation;

•  the impact of customer defaults or bankruptcies;

•  our ability to implement our enterprise resource planning system and the impact of deficiencies in our IT systems;

•  our characterization of the markets in which we do business, including our ability to earn increased margins in certain growth markets; and

•  various other forward-looking statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our forward-looking statements are based on current expectations, forecasts and assumptions and are subject to risks, uncertainties and changes in condition, significance, value and effect, including those discussed under the heading “Risk Factors” in this report and in our other reports filed with the Securities and Exchange Commission. Such risks, uncertainties and changes in condition, significance, value and effect could cause our actual results to differ materially from our anticipated outcomes. Although we believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate. Therefore, we can give no assurance that the results implied by these forward-looking statements will be realized. The inclusion of forward-looking information should not be regarded as a representation by our company or any other person that the future events, plans or expectations contemplated by Solectron will be achieved. Furthermore, past performance in operations and share price is not necessarily indicative of future performance. We disclaim any intention or obligation to update or revise any forward-looking statements contained herein, whether as a result of new information, future events or otherwise.

3

PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements

SOLECTRON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 1,			August 25,
	2007			2006
	(In millions)
	(Unaudited)
ASSETS
Current assets:
Cash, cash equivalents and short-term investments*	$	1,195.1		$	1,180.5
Accounts receivable, net		1,493.6			1,429.3
Inventories		1,830.8			1,516.1
Prepaid expenses and other current assets		366.3			225.8
Total current assets		4,885.8			4,351.7
Property and equipment, net		737.4			673.4
Goodwill		159.1			155.2
Other assets		120.8			193.3
Total assets	$	5,903.1		$	5,373.6
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	64.0		$	89.5
Accounts payable		2,070.2			1,616.7
Accrued employee compensation		156.8			170.4
Accrued expenses and other current liabilities		483.0			427.6
Total current liabilities		2,774.0			2,304.2
Long-term debt		609.8			619.4
Other long-term liabilities		36.2			36.3
Total liabilities		3,420.0			2,959.9
Commitments and contingencies
Stockholders’ equity:
Common stock		0.9			1.0
Additional paid-in capital		7,599.7			7,585.2
Accumulated deficit		(5,039.9	)		(5,073.3	)
Accumulated other comprehensive loss		(77.6	)		(99.2	)
Total stockholders’ equity		2,483.1			2,413.7
Total liabilities and stockholders’ equity	$	5,903.1		$	5,373.6

* Includes $16.8 million and $31.6 million of restricted cash balances as of June 1, 2007 and August 25, 2006, respectively, and $0 million and $22.9 million of short-term investments as of June 1, 2007 and August 25, 2006, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

4

SOLECTRON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended						Nine Months Ended
	June 1,			May 26,			June 1,			May 26,
	2007			2006			2007			2006
	(In millions,
	except per share data)
	(Unaudited)						(In millions,
							except per share data)
							(Unaudited)
Net sales	$	2,985.3		$	2,702.6		$	8,886.3		$	7,658.6
Cost of sales		2,833.9			2,560.4			8,432.7			7,261.8
Gross profit		151.4			142.2			453.6			396.8
Operating expenses:
Selling, general and administrative		112.1			112.2			338.6			323.9
Restructuring and impairment costs		29.6			2.6			80.7			9.1
Operating income		9.7			27.4			34.3			63.8
Interest income		7.5			12.3			25.1			36.7
Interest expense		(5.5	)		(7.2	)		(17.9	)		(20.8	)
Other income (expense) — net		8.7			(0.8	)		5.9			(0.8	)
Operating income from continuing operations before income taxes		20.4			31.7			47.4			78.9
Income tax expense (benefit)		8.2			(10.7	)		13.0			(0.8	)
Income from continuing operations		12.2			42.4			34.4			79.7
Discontinued operations:
(Loss) income from discontinued operations before income taxes of $0		(0.1	)		(0.4	)		(1.0	)		16.7
(Loss) income from discontinued operations		(0.1	)		(0.4	)		(1.0	)		16.7
Net income	$	12.1		$	42.0		$	33.4		$	96.4
Basic net income per share:
Continuing operations	$	0.01		$	0.05		$	0.04		$	0.09
Discontinued operations		—			—			—			0.02
Basic net income per share	$	0.01		$	0.05		$	0.04		$	0.11
Diluted net income per share:
Continuing operations	$	0.01		$	0.05		$	0.04		$	0.09
Discontinued operations		—			—			—			0.02
Diluted net income per share	$	0.01		$	0.05		$	0.04		$	0.11
Shares used to compute basic net income per share		898.6			908.1			895.6			916.2
Shares used to compute diluted net income per share		904.7			909.6			899.4			917.2

See accompanying notes to unaudited condensed consolidated financial statements.

5

SOLECTRON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended				Nine Months Ended
	June 1,		May 26,		June 1,		May 26,
	2007		2006		2007		2006
	(In millions)
	(Unaudited)
Net income	$	12.1	$	42.0	$	33.4	$	96.4
Other comprehensive income:
Net gain on derivative instruments		0.3		—		0.4		—
Foreign currency translation adjustments, net		16.2		22.7		21.1		31.7
Comprehensive income	$	28.6	$	64.7	$	54.9	$	128.1

Accumulated unrealized foreign currency translation losses were $68.0 million at June 1, 2007 and $89.1 million at August 25, 2006. Foreign currency translation adjustments consist of adjustments to consolidate subsidiaries that use the local currency as their functional currency and gains and losses related to intercompany dollar-denominated debt that is not expected to be repaid in the foreseeable future.

See accompanying notes to unaudited condensed consolidated financial statements.

6

SOLECTRON CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended
	June 1,			May 26,
	2007			2006
	(In millions)
	(Unaudited)
Cash flows from operating activities:
Net income	$	33.4		$	96.4
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss (income) from discontinued operations		1.0			(16.7	)
Depreciation and amortization		124.5			130.4
Impairment of property, equipment, goodwill and other long-term assets		3.5			10.3
Stock-based compensation		20.1			16.9
Changes in operating assets and liabilities:
Accounts receivable, net of allowance		(64.3	)		(168.2	)
Inventories		(314.7	)		(371.7	)
Prepaid expenses and other assets		(133.6	)		(65.6	)
Accounts payable		453.6			246.6
Accrued expenses and other current liabilities		60.8			16.7
Net cash provided by (used) in operating activities of continuing operations		184.3			(104.9	)
Net cash used in operating activities of discontinued operations		(2.5	)		(8.2	)
Net cash provided by (used in) operating activities		181.8			(113.1	)
Cash flows from investing activities:
Change in restricted cash and cash equivalents		14.8			(18.2	)
Sale of “available for sale” securities		22.9			1.6
Purchase of facilities previously held under synthetic lease		(13.2	)		—
Acqisitions, net of cash received		(18.1	)		(5.7	)
Capital expenditures		(125.8	)		(155.6	)
Proceeds from sale of property and equipment		24.7			8.4
Receipts from discontinued operations		—			8.9
Net cash used in investing activities of continuing operations		(94.7	)		(160.6	)
Net cash provided by investing activities of discontinued operations		—			17.1
Net cash used in investing activities		(94.7	)		(143.5	)
Cash flows from financing activities of continuing operations:
Proceeds (borrowings) on bank lines of credit and other debt arrangements		29.1			(1.4	)
Proceeds from issuance of debt		—			147.4
Payments made to redeem ACES/Senior Notes		(64.3	)		(150.0	)
Common stock repurchase		(10.1	)		(205.7	)
Proceeds from stock issued under option and employee purchase plans		4.5			5.4
Net cash used in financing activities of continuing operations		(40.8	)		(204.3	)
Net cash provided by (used in) financing activities of discontinued operations		2.5			(8.9	)
Net cash used in financing activities		(38.3	)		(213.2	)
Effect of exchange rate changes on cash and cash equivalents		3.5			—
Net increase (decrease) in cash and cash equivalents		52.3			(469.8	)
Total cash and cash equivalents at beginning of period		1,126.0			1,682.8
Total cash and cash equivalents at end of period	$	1,178.3		$	1,213.0
SUPPLEMENTAL SCHEDULE OF
Non-cash investing activities:
Purchase price of facilities previously under synthetic lease	$	81.1		$	—
Cancellation of receivable as payment for facilities	$	(74.5	)	$	—

See accompanying notes to unaudited condensed consolidated financial statements.

7

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1 — Basis of Presentation and Recent Accounting Pronouncements

Basis of Presentation

The accompanying financial data as of June 1, 2007 and for the three and nine months ended June 1, 2007 and May 26, 2006 has been prepared by the management of Solectron, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The August 25, 2006 condensed consolidated balance sheet was derived from audited consolidated financial statements, but does not include all disclosures required by generally accepted accounting principles. However, the management of Solectron believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Solectron’s Annual Report on Form 10-K for the fiscal year ended August 25, 2006.

In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair consolidated statement of financial position as of June 1, 2007, the results of operations and comprehensive income for the three and nine months ended June 1, 2007 and May 26, 2006 and cash flows for the nine months ended June 1, 2007 and May 26, 2006 have been made. The consolidated results of operations for the three and nine months ended June 1, 2007 are not necessarily indicative of the operating results for the full fiscal year or any future periods.

In past filings, for clarity of presentation, Solectron’s third quarter of fiscal 2006 was presented as having ended on May 31, 2006 rather than the actual close date of May 26, 2006. In these condensed consolidated financial statements, the third quarter of fiscal 2006 is presented as having ended on the actual close date of May 26, 2006. Solectron uses a 52- to 53-week fiscal year ending on the last Friday in August. The Company’s second quarters of fiscal 2007 and 2006 ended on March 2, 2007 and February 24, 2006 and contained 14 weeks and 13 weeks, respectively. The additional week is reflected in the nine months results presented for the fiscal period ended June 1, 2007. It is not possible to quantify the impact of this additional week on the fiscal period ended June 1, 2007.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Research and Development Expenses

Selling, general and administrative expense includes $6.6 million and $19.6 million of research and development expenses for the three and nine months ended June 1, 2007, respectively and $6.2 million and $21.9 million for the three and nine months ended May 26, 2006, respectively.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value accounting but does not affect existing standards, which require assets or liabilities to be carried at fair value. Under SFAS 159, a company may elect to use fair value to measure accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guarantees and issued debt. Other eligible items include firm commitments for financial instruments that otherwise would not be recognized at inception and non-cash warranty obligations where a warrantor is permitted to pay a third party to provide the warranty goods or services. If the use of fair value is elected,

8

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

any upfront costs and fees related to the item must be recognized in earnings and cannot be deferred, e.g., debt issue costs. The fair value election is irrevocable and generally made on an instrument-by-instrument basis, even if a company has similar instruments that it elects not to measure based on fair value. At the adoption date, unrealized gains and losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings. Subsequent to the adoption of SFAS 159, changes in fair value are recognized in earnings. SFAS 159 is effective for fiscal years beginning after November 15, 2007, which will be in the first quarter of the Company’s fiscal year 2009. The Company is currently evaluating the requirements of SFAS 159 and has not yet determined the impact of adoption, if any, on its financial position, results of operations or cash flows.

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation 48, “Accounting for Income Tax Uncertainties” (“FIN 48”). FIN 48 defines the threshold for recognizing the benefits of uncertain tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. The recently issued literature also provides guidance on the derecognition, measurement and classification of income tax uncertainties, along with any related interest and penalties. FIN 48 also includes guidance concerning accounting for income tax uncertainties in interim periods and increases the level of disclosures associated with any recorded income tax uncertainties. FIN 48 is effective for fiscal years beginning after December 15, 2006. Any differences between the amounts recognized in the statements of financial position prior to the adoption of FIN 48 and the amounts reported after adoption will be accounted for as a cumulative-effect adjustment recorded to the beginning balance of retained earnings. The Company is currently in the process of determining the impact, if any, of adopting the provisions of FIN 48 on its financial position, results of operations and cash flows.

In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108, (“SAB 108”). The interpretations in SAB 108 are being issued to address diversity in practice in quantifying financial statement misstatements and the potential under current practice for the build up of improper amounts on the balance sheet. SAB 108 is effective for the first fiscal year ending after November 15, 2006 and must be adopted by the fourth quarter of such fiscal year. Solectron has not yet completed its analysis of the impact of adopting the provisions of SAB 108 on its financial position, results of operations and cash flows; however, the company currently estimates that the expected net reduction to opening retained earnings will be approximately $13.7 million as a result of adopting SAB 108. The Company is continuing to evaluate the impact of adopting SAB 108 and, as a result, the actual reduction to the opening retained earnings balance could be different than the $13.7 million estimate.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 replaces the different definitions of fair value in the accounting literature with a single definition. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for fair-value measurements already required or permitted by other standards for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The Company is currently in the process of determining the impact, if any, of adopting the provisions of SFAS 157 on its financial position, results of operations and cash flows.

NOTE 2 — Stock-Based Compensation

Effective September 1, 2005, Solectron began recording compensation expense associated with stock options and other forms of equity compensation in accordance with Statement of Financial Accounting Standards No. 123R, “Share-Based Payment,” (“SFAS 123R”) as interpreted by SEC Staff Accounting Bulletin No. 107. Solectron adopted the modified prospective transition method provided under SFAS 123R. Under this transition method, compensation cost associated with stock options now includes 1) quarterly amortization related to the remaining unvested portion of all stock option awards granted prior to September 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123; and 2) quarterly amortization related to all stock option awards granted subsequent to September 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. In addition, Solectron records expense over the offering period and the vesting

9

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

term, respectively, in connection with 1) shares issued under its employee stock purchase plan and 2) discounted stock options. The compensation expense for stock based compensation awards includes an estimate for forfeitures and is recognized over the expected term of the options using the straight-line method. Under SFAS 123R, benefits of tax deductions in excess of recognized compensation costs are to be recorded as a financing cash inflow rather than as a reduction of taxes paid. For the three and nine months ended June 1, 2007, no excess tax benefits were generated from option exercises. The Company has recorded no amount for excess tax benefits in additional paid-in capital since the adoption of SFAS 123R. To determine excess tax benefits, the Company used the alternative transition method (short-cut method) as set forth in the FASB Staff Position No. FAS 123R-3 “Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards.”

Total stock compensation expense for the three months ended June 1, 2007 of $6.3 million was included in cost of sales and selling, general and administrative expense in the amounts of $0.6 million and $5.7 million, respectively. Total stock compensation expense for the nine months ended June 1, 2007 of $20.1 million was included in cost of sales and selling, general and administrative expense in the amounts of $3.1 million and $17.0 million, respectively. Total stock compensation expense for the three months ended May 26, 2006, of $6.7 million was included in cost of sales and selling, general and administrative expense in the amounts of $1.5 million and $5.2 million, respectively. Total stock compensation expense for the nine months ended May 26, 2006, of $16.9 million was included in cost of sales and selling, general and administrative expense in the amounts of $5.1 million and $11.8 million, respectively. There is no tax benefit recorded for this expense due to full valuation allowances in the jurisdictions for which these options are deductible for tax purposes.

Stock Options

Solectron’s stock option plans provide for grants of options to employees to purchase common stock at the fair market value of such shares on the grant date. The options vest monthly over a four-year period beginning on the grant date. The term of the options is seven years for options granted between January 12, 1994 and September 20, 2001, and ten years for options granted thereafter. Options assumed under past acquisitions generally vest over periods ranging from immediately to five years from the original grant date and have terms ranging from two to ten years. Solectron’s 2002 Stock Plan, as amended, also provides for grants of discounted stock options at a price below the market value on the day of the stock option grant and are deemed exercised on the date of grant.

The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model and the assumptions noted in the following table. The expected life of options is based on observed historical exercise patterns. For the three and nine months ended June 1, 2007 and May 26, 2006 respectively, the expected volatility of stock options is based upon equal weightings of the historical volatility of Solectron stock and, for fiscal periods in which there is sufficient trading volume in options on Solectron’s stock, the implied volatility of traded options on Solectron stock having a life of more than six months. The expected volatility of Employee Share Purchase Plan shares is based on the implied volatility of traded options on the Company’s stock in periods in which there is sufficient trading volume in those options. Otherwise, historical volatility is utilized. The risk-free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the option. The dividend yield reflects that Solectron has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future.

	Three Months Ended		Nine Months Ended
	June 1,	May 26,	June 1,	May 26,
Stock Optionstu	2007	2006	2007	2006
Expected volatility	58%	59%	58%	52% - 59%
Dividend yield	zero	zero	zero	zero
Expected life	5.1	4.4 years	4.4 years to 5.1 years	4.3 years to 4.9 years
Risk-free rate	4.38%	4.90%	4.38% to 4.95%	4.43% to 4.95%

10

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

	Three Months Ended		Nine Months Ended
	June 1,	May 26,	June 1,	May 26,
Employee Stock Purchase Plan	2007	2006	2007	2006
Weighted-average volatility	30% - 58%	30%	30% - 58%	30% - 44%
Dividend yield	zero	zero	zero	zero
Expected life	6 - 12 months	6 - 12 months	6 - 12 months	6 - 12 months
Risk-free rate	4.95%	4.43%	4.95% - 5.10%	3.94% - 4.43%

The Company has recorded $2.1 million and $8.1 million of compensation expenses relative to stock options (other than discounted stock options) for the three and nine months ended June 1, 2007, respectively, in accordance with SFAS 123R. As of June 1, 2007, there was $21.6 million of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted-average period of 1.5 years. A summary of stock option activity under the plans for the nine months ended June 1, 2007 is presented as follows:

			Weighted
	Stock Option		Average
	Awards Outstanding		Exercise Price
Balance, August 25, 2006		45,012,363	$	9.09
Granted		718,233	$	3.21
Exercised		13,700	$	2.09
Forfeited		334,327	$	3.80
Cancelled		1,902,567	$	28.73
Balance, November 24, 2006		43,480,002	$	8.17
Exercisable at November 24, 2006		35,139,930	$	9.22
Balance, November 24, 2006		43,480,002	$	8.17
Granted		7,389,068	$	3.49
Exercised		7,740	$	2.35
Forfeited		429,754	$	3.97
Cancelled		1,295,618	$	10.80
Balance, March 2, 2007		49,135,958	$	7.44
Exercisable at March 2, 2007		35,501,315	$	8.91
Balance, March 2, 2007		49,135,958	$	7.44
Granted		353,900	$	3.11
Exercised		51,504	$	2.11
Forfeited		796,676	$	3.94
Cancelled		8,514,012	$	6.74
Balance, June 1, 2007		40,127,666	$	7.62
Exercisable at June 1, 2007		28,110,916	$	9.36

The weighted-average fair value of stock options granted during the three and nine months ended June 1, 2007 was $1.70 and $1.89, respectively. The total intrinsic value of stock options exercised during the three and nine months ended June 1, 2007 was not material.

At June 1, 2007, an aggregate of 52.9 million shares were authorized for future issuance under our stock plans, which cover stock options (including discounted stock options) and shares available for purchase under our, Employee Stock Purchase Plans. A total of 45.2 million shares of common stock were available for grant under

11

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

Solectron’s stock option plans as of June 1, 2007. Awards that expire or are cancelled without delivery of shares generally become available for issuance under the plans.

An initial option is granted to each new outside member of Solectron’s Board of Directors to purchase 40,000 shares of common stock at the fair value on the date of the grant. On December 1 of each year, each outside member is granted an additional option to purchase 40,000 shares of common stock at the fair market value on such date. These options vest over one year and have a term of seven years.

Employee Stock Purchase Plan

Under Solectron’s Employee Stock Purchase Plan, employees meeting specific employment qualifications are eligible to participate and can purchase shares semi-annually through payroll deductions at the lower of 85% of the fair market value of the stock at the commencement or end of the purchase period. The Employee Stock Purchase Plan permits eligible employees to purchase common stock through payroll deductions for up to 10% of qualified compensation, with an annual maximum of $25,000 in retail value. Solectron has treated the Employee Stock Purchase Plan as a compensatory plan. The Company has recorded compensation expense relative to the Employee Stock Purchase Plan in the three and nine months ended June 1, 2007 of zero and $2.6 million, respectively and $0.7 million and $2.4 million for the three and nine months ended May 26, 2006.

Restricted Stock Awards and Discounted Stock Options

During fiscal 2005 and 2004, Solectron issued discounted stock options under its 2002 Stock Plan of 1.5 million and 0.7 million shares, respectively, to certain eligible executives and employees at a price below the market value of the Company’s common stock on the day of the stock option grant. During the fiscal year ended August 25, 2006, 7.0 million discounted options were granted to certain eligible employees and during the first quarter of fiscal year 2007, 1.2 million discounted options were granted to certain eligible employees. During the second quarter of fiscal 2007, under Solectron’s 2002 Stock Plan, 4.0 million discounted options were granted to certain eligible employees and 1.8 million discounted options were granted to certain executive officers. During the third quarter of fiscal 2007, under Solectron’s 2002 Stock Plan, 4.9 million discounted options were granted to certain eligible employees and to certain executive officers. Compensation expense under the fair value method for the three and nine months ended June 1, 2007, is being amortized over the vesting period and was $4.2 million and $9.4 million, respectively and for the three and nine months ended May 26, 2006 was $2.0 million and $4.4 million, respectively. For compensation expense purposes, the intrinsic value of restricted stock awards and discounted stock options equals the fair market value of these awards on the date of grant.

The weighted-average fair value of the discounted stock options granted in the three and nine months ended June 1, 2007 was $3.14 per share and $3.26 per share, respectively and for the three and nine months ended May 26, 2006 was $4.01 and $3.84, respectively. At June 1, 2007, unrecognized costs related to restricted stock awards and discounted stock options totaled approximately $39.4 million and is expected to be recognized over a weighted-average period of 2.7 years. The total fair value of restricted stock and discounted stock options vested was zero during the three and nine months ended June 1, 2007 and $1.0 million during the three and nine months ended May 26, 2006, respectively.

NOTE 3 — Stock Repurchase

On November 1, 2005, Solectron’s Board of Directors approved a stock repurchase program whereby the Company was authorized to repurchase up to $250 million of the Company’s common stock pursuant to a 10b5-1 trading plan. Solectron commenced this $250 million repurchase program at the end of the quarter ended February 24, 2006. In October 2006, the Board of Directors approved a twelve-month extension to the stock repurchase program. As of June 1, 2007, Solectron had repurchased and retired a total of 17.8 million shares under the repurchase program for approximately $61.6 million. During the third quarter of fiscal 2007, Solectron made no repurchases under the plan.

12

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

NOTE 4 — Inventories

Inventories related to continuing operations as of June 1, 2007 and August 25, 2006, consisted of the following (in millions):

	June 1,		August 25,
	2007		2006
Raw materials	$	1,212.9	$	1,127.0
Work-in-process		209.1		202.2
Finished goods		408.8		186.9
Total	$	1,830.8	$	1,516.1

On March 9, 2007, Solectron launched the Cisco Systems Lean Initiative. This initiative required us to purchase PCBA boards that were previously sold to Cisco Systems. As a result, the Company had a net reduction of revenue of $240.7 million and an increase to inventories of $260.3 million for the second quarter of fiscal 2007. In addition, during the third quarter of fiscal 2007, the Company purchased $74.4 million of inventory from third party suppliers in connection with the initiative. Under the Cisco Systems Lean Initiative, Solectron is required to complete the building of systems and boxes. Systems and boxes require PCBA boards and third party built parts. Under the previous arrangement with Cisco Systems, the Company was required only to manufacture PCBA boards and if required by Cisco subsequently, the Company built systems and boxes on a consignment basis.

NOTE 5 — Accounts Receivable, Net

Accounts receivable, net related to continuing operations as of June 1, 2007 and August 25, 2006 consisted of the following (in millions):

	June 1,		August 25,
	2007		2006
Accounts receivable	$	1,500.8	$	1,443.8
Less: Allowance for doubtful accounts		7.2		14.5
Accounts receivable, net	$	1,493.6	$	1,429.3

NOTE 6 — Property and Equipment, Net

Property and equipment, net related to continuing operations as of June 1, 2007 and August 25, 2006, consisted of the following (in millions):

	June 1,		August 25,
	2007		2006
Land	$	61.0	$	43.5
Buildings and improvements		429.6		367.1
Leasehold improvements		90.1		100.8
Furniture, fixtures, equipment and other		1,047.9		1,040.0
Computer equipment and software		350.8		338.3
		1,979.4		1,889.7
Less: Accumulated depreciation and amortization		1,242.0		1,216.3
Property and equipment, net	$	737.4	$	673.4

13

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

NOTE 7 — Debt

8.00% Senior Subordinated Notes due 2016

On February 14, 2006, Solectron’s wholly owned subsidiary Solectron Global Finance Ltd (“Solectron Global Finance”) issued $150 million of senior subordinated notes due 2016 (the “Subordinated Notes”). The Subordinated Notes are unconditionally guaranteed by Solectron on a senior subordinated basis, will mature on March 15, 2016, and bear interest at the rate of 8% annually. Cash interest payments on the Subordinated Notes will be made semiannually in arrears on March 15 and September 15 of each year. The Subordinated Notes will be redeemable, in whole or in part, at any time on or after March 15, 2011 at specified redemption prices plus accrued and unpaid interest. Prior to March 15, 2011, Solectron Global Finance or Solectron will have the option to redeem the Subordinated Notes, in whole or in part at a price equal to the greater of (1) 100% of the principal amount of the Subordinated Notes redeemed plus accrued and unpaid interest or (2) the make-whole premium plus accrued and unpaid interest. In addition, subject to certain conditions, prior to March 15, 2009, Solectron Global Finance or Solectron may redeem up to 35% of the aggregate principal amount of the Subordinated Notes with the net proceeds of a qualified public common stock offering by Solectron at a redemption price of 108% of the principal amount of the Subordinated Notes, plus any accrued and unpaid interest to the redemption date. On September 5, 2006, pursuant to a Registration Rights Agreement, Solectron Global Finance and Solectron completed an exchange offer of $150 million in aggregate principal amount of Solectron Global Finance’s 8.00% Senior Subordinated Notes due 2016 (the “Exchange Notes”) that have been registered under the Securities Act for the same principal amount of its outstanding unregistered Subordinated Notes. 100% of the outstanding unregistered Subordinated Notes were exchanged for the registered Exchange Notes. The Exchange Notes are guaranteed by Solectron on a senior subordinated basis and the guarantee with respect to the Exchange Notes has been registered under the Securities Act. At June 1, 2007, the aggregate carrying amount of the Exchange Notes of $150 million is classified as long-term debt.

0.5% Convertible Senior Notes due 2034

On February 17, 2004, Solectron issued $450 million of 0.5% convertible senior notes (the “Original Notes”). The Original Notes are unsecured and unsubordinated indebtedness of Solectron and will mature on February 15, 2034. Upon conversion of the Original Notes, Solectron will deliver shares of its common stock at the applicable conversion rate. The Original Notes do not provide an adjustment to the conversion rate upon a change in control.

On February 10, 2005, Solectron completed an exchange offer with respect to the Original Notes for an equal amount of its newly issued 0.5% convertible senior notes, Series B due 2034 (the “New Notes”) and cash. Solectron accepted for exchange $447.3 million aggregate principal amount of outstanding notes, representing approximately 99.4% of the total outstanding notes. Upon conversion of the New Notes, Solectron will deliver $1,000 in cash for the principal amount, and at its election, either common stock or cash, for the conversion value above the principal amount. Holders electing to convert upon a change of control, prior to February 15, 2011, unless the consideration consists of at least 90% in the form of listed shares (excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights), shall be eligible for an increase in the conversion rate in accordance with the terms of the New Notes.

On or after February 20, 2011, Solectron will have the option to redeem all or a portion of the New Notes that have not been previously purchased, repurchased or converted, at 100% of the principal amount of the New Notes to be redeemed plus accrued and unpaid interest and liquidated damages owed, if any, up to, but excluding, the date of the purchase. Holders of the New Notes may require Solectron to purchase all or a portion of the convertible notes for cash on each of February 15, 2011, 2014, 2019, 2024, and 2029 at a price equal to 100% of the principal amount of the convertible notes to be repurchased plus accrued and unpaid interest, up to, but excluding, the date of repurchase. Holders will have the option, subject to certain conditions, to require Solectron to repurchase any New Notes held by such holder in the event of a “change in control”, as defined, at a price of 100% of the principal amount of the convertible notes plus accrued and unpaid interest up to, but excluding, the date of repurchase. The

14

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

New Notes are convertible into cash and either common stock or cash at any time prior to maturity, subject to the terms of the notes.

After the exchange offer was completed, there were approximately $2.7 million aggregate principal amount of Original Notes outstanding. Interest on both the Original Notes and the New Notes (together, the “convertible notes”) will be paid on February 15 and on August 15 of each year. The conversion rate for the convertible notes is 103.4468 per $1,000 principal amount, subject to certain adjustments in certain circumstances. This is equivalent to a conversion price of $9.67 per share. At June 1, 2007, the aggregate carrying amount of the convertible notes is $450 million, and classified as long-term debt.

Adjustable Conversion-Rate Equity Securities (ACES)

On August 31, 2004, there were 2.6 million ACES units remaining. Each ACES unit has a stated amount of $25.00 and consisted of (a) a contract requiring the holder to purchase, for $25.00, a number of shares of Solectron common stock (subject to certain anti-dilution adjustments); and (b) a $25 principal amount of 7.97% subordinated debenture due 2006.

On November 15, 2004, Solectron issued 6.6 million shares of its common stock at a settlement rate of 2.5484 shares per ACES unit as defined above. Solectron received cash proceeds of $64.3 million which resulted in a corresponding increase in additional paid in capital. The equity component of the ACES was settled, and the remaining obligation of the original ACES was the 7.97% debentures.

Solectron repaid the remaining $64.3 million of the 7.97% subordinated debentures at maturity on November 15, 2006.

Liquid Yield Option Notes (LYONs^tm)

On June 1, 2007, Solectron has $8.2 million aggregate accreted value of LYONs^tm outstanding with an interest rate of 2.75%. These notes are unsecured and unsubordinated indebtedness of Solectron. Solectron will pay no interest prior to maturity. Each note has a yield of 2.75% with a maturity value of $1,000 on May 8, 2020. Each note is convertible at any time by the holder to common shares at a conversion rate of 12.3309 shares per note. Holders will be able to require Solectron to purchase all or a portion of their notes on May 8, 2010, at a price of $761.00 per note. Solectron, at its option, may redeem all or a portion of the notes at any time. As of June 1, 2007, the accreted value of the 2.75% LYONs^tm is classified as long-term debt on the consolidated balance sheet.

On June 1, 2007, Solectron had $0.9 million aggregate accreted value of LYONs^tm outstanding with an interest rate of 3.25%. These notes are unsecured and unsubordinated indebtedness of Solectron. Solectron will pay no interest prior to maturity. Each note has a yield of 3.25% with a maturity value of $1,000 on November 20, 2020. Each note is convertible at any time by the holder to common shares at a conversion rate of 11.7862 shares per note. Holders will be able to require Solectron to purchase all or a portion of their notes on November 20, 2010, at a price of $724.42 per note. Solectron, at its option, may redeem all or a portion of the notes at any time on or after May 20, 2004. As of June 1, 2007, the accreted value of the 3.25% LYONs^tm is classified as long-term debt.

Credit Facility

On August 28, 2006, Solectron entered into a $350 million Credit Agreement (“the Credit Agreement”) that amends and replaces a $500 million secured revolving facility. The Credit Agreement provides for a revolving, multicurrency, secured-credit facility, which may be used to borrow revolving loans or issue standby letters of credit, subject to a $100 million letter of credit sub-limit. The Company may request an increase in the credit facility of up to an additional $150 million, to provide for an aggregate commitment of up to $500 million. There are currently no revolving loans outstanding and approximately $0.6 million in letters of credit outstanding under the Credit Agreement. The revolving loans under the Credit Agreement bear interest, at the Company’s option, at either (i) the base rate, which is defined as a fluctuating rate per annum equal to the greater of (A) Bank of America N.A.’s

15

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

prime rate, or (B) the average rate on overnight federal funds plus one-half of one percent, or (ii) a rate equal to (A) the London Inter-bank Offered Rate (LIBOR) plus (B) an applicable margin ranging from 1.0% to 2.0% based on Solectron’s non-credit-enhanced senior unsecured long-term debt ratings. The Credit Agreement matures on August 28, 2009 and may be prepaid at any time without penalty or premium at the option of the Company.

NOTE 8 — Derivative Instruments

Solectron enters into foreign exchange forward contracts intended to reduce the short-term impact of foreign currency fluctuations on foreign currency receivables, investments, payables and indebtedness. The gains and losses on the foreign exchange forward contracts are intended largely to offset the transaction gains and losses on the foreign currency receivables, investments, payables, and indebtedness recognized in operating results. Solectron does not enter into foreign exchange forward contracts for speculative purposes. Solectron’s foreign exchange forward contracts related to current assets and liabilities are generally nine months or less in original maturity. The majority of the forward contracts are not designated as hedges under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”). The changes in the values of these forward contracts are included in other expense, net and were immaterial for the three and nine months ended June 1, 2007.

During the second quarter of fiscal 2007, the Company entered into certain foreign exchange forward contracts, with a total notional amount approximating $12.2 million. These foreign exchange forward contracts are designated as a “cash flow hedge” under SFAS No. 133. These contracts have various maturity dates that coincide with the occurrence of the exposure being hedged. The change in the fair value of these contracts representing the effective portion of the hedge is recorded to other comprehensive income. The ineffective portion of these contracts was recorded to earnings. The amount recorded in other comprehensive income will be recognized in net earnings when the underlying hedged exposure occurs. As of June 1, 2007, the deferred foreign exchange gain expected to be reclassified to earnings in the next three months was $0.4 million.

As of June 1, 2007, Solectron had outstanding foreign exchange forward contracts with a total notional amount of approximately $423.7 million related to continuing operations, including the $12.2 million of “cash flow hedges” discussed previously.

For all derivative transactions, Solectron is exposed to counterparty credit risk to the extent that the counterparties may not be able to meet their obligations towards Solectron. To manage the counterparty risk, Solectron limits its derivative transactions to those with major financial institutions. Solectron does not expect to experience any material adverse financial consequences as a result of default by Solectron’s counterparties.

Financial instruments that potentially subject Solectron to concentrations of credit risk consist of cash, cash equivalents and trade accounts receivable. Concentrations of credit risk in accounts receivable resulting from sales to major customers are discussed in Note 11, “Segment Information and Geographic Information.”

NOTE 9 — Commitments and Contingencies

Future Minimum Lease Obligations

Future minimum payments for operating lease obligations related to continuing operations are as follows:

	Payments Due by Period
			Short-
	Total		Term		Q4 ’08		FY09		FY10		FY11		FY12		Thereafter
	(In millions)
Operating leases	$	148.7	$	37.9	$	8.5	$	30.4	$	23.0	$	14.5	$	12.0	$	22.4

Legal Proceedings

Solectron is from time to time involved in various litigation and legal matters arising in the normal course of its business operations. Management believes that the final resolution of these matters will not have a material adverse

16

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

effect on the Company’s consolidated financial position, cash flows or results of operations. By describing any particular matter, Solectron does not intend to imply that it or its legal advisors have concluded or believe that the outcome of any of those particular matters is or is not likely to have a material adverse impact upon Solectron’s consolidated financial position, cash flows or results of operations.

On June 4, 2007, a purported class action complaint has been filed alleging breach of fiduciary duty of the directors of Solectron in the Superior Court of the State of California, County of Santa Clara, seeking to enjoin the proposed merger between Solectron and Flextronics International Ltd. (“Flextronics”) described in Note 17 below. While this case is in the early stages, Solectron believes that it is without merit. Any judgments, however, in respect of this or similar lawsuits that are adverse to Flextronics and Solectron may adversely affect Flextronics and Solectron’s ability to consummate the merger.

Environmental Liability

Solectron has potential environmental liabilities, largely related to (i) our acquisition of sites with potential pre-existing environmental issues and (ii) our indemnification obligations set forth in sale agreements for sites we have divested. Internal and external legal and environmental expertise are utilized to evaluate such past environmental remediation exposures, as well as issues related to continuing operations.

Solectron has an accrued liability balance for environmental remediation of $35.8 million, as of June 1, 2007 and August 25, 2006.

This environmental remediation liability represents known exposures, which have been disclosed to Solectron’s insurance carriers, and identified as self-insured retention. No additional site exposures are known to be probable or reasonably possible, in the context of SFAS 5 “Contingencies” and SOP 96-1 “Environmental Remediation Liabilities” for the aforementioned balance sheet dates.

Additionally, routine environmental clean-ups required upon future disposal of Solectron facilities are recorded in accordance with SFAS 143 “Accounting for Asset Retirement Obligations” and its interpretation under FIN 47 “Accounting for Conditional Asset Retirement Obligations.”

NOTE 10 — Taxes

SFAS No. 109, “Accounting for Income Taxes,” requires that a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the Company’s performance, the market environment in which the Company operates, the utilization of past tax credits, length of carryback and carryforward periods, and existing contracts or sales backlog that will result in future profits, among other factors. It further states that forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years in the jurisdictions to which the deferred tax assets relate. Therefore, cumulative losses weigh heavily in the overall assessment. As a result of the review undertaken after the end of the third quarter of fiscal 2003, Solectron concluded that it was appropriate to establish a full valuation allowance for most of the net deferred tax assets arising from its operations in the jurisdictions to which the deferred tax assets relate. The total valuation allowance is approximately $1.6 billion as of June 1, 2007. In addition, Solectron expects to continue to provide a full valuation allowance on future tax benefits until it can demonstrate a sustained level of profitability that establishes its ability to utilize the assets in the jurisdictions to which the assets relate. Solectron incurred tax expense in certain countries that are not subject to the aforementioned valuation allowance during the three and nine months ended June 1, 2007.

Certain of Solectron’s non-US operations are reporting taxable profits, mostly arising in the same low-cost locations where the majority of our manufacturing capabilities are found. Solectron will not be able to offset any tax expense associated with these taxable profits with the unrecognized deferred tax assets described above, because, for the most part, those assets did not arise in the same jurisdictions where Solectron is realizing taxable profits.

17

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

The income tax provision for the interim periods is based on the best estimate of the effective tax rate expected to be applicable for the full fiscal year. Changes in the interim period for the tax (or benefit) related to items other than ordinary income are individually computed and recognized when the items occur. Included in the computation of three foreign entities’ estimated annual effective tax rate is the income tax benefits associated with a refund of taxes paid on the reinvested earnings of the foreign subsidiaries. During the nine months ended June 1, 2007, the Company recorded income tax benefits of $4.4 million associated with the refund of taxes paid on the reinvested earnings, of which $2.5 million of the tax benefit was included in the computation of the foreign entities’ estimated annual effective tax rate. The remaining portion of the refund of taxes paid on reinvested earnings in the amount of $1.9 million was individually computed and recognized in the three months ended November 24, 2006. Beginning January 1, 2007, the Company has decided to no longer apply for reinvestment of earnings, as a result, the amount of the tax benefit included in the foreign entities’ estimated annual effective tax rate during the nine months ended June 1, 2007 is lower than the amount reported for the first quarter of fiscal 2007.

The Internal Revenue Service (“IRS”) and other tax authorities regularly examine the Company’s income tax returns. During the fourth quarter of fiscal 2006, the IRS completed its field examination of the Company’s federal income tax returns for fiscal years 2001 and 2002 and issued a Revenue Agent’s Report (“RAR”). The RAR is not a final Statutory Notice of Deficiency, and the Company has protested certain of the proposed adjustments with the Appeals Office of the IRS. The most significant of the disputed adjustments relates to transfer pricing arrangements that the Company has with its foreign subsidiaries. The Company believes that the proposed IRS adjustments are inconsistent with applicable tax laws, and that it has meritorious defenses to the proposed adjustments. The Company has accrued an amount determined to be a reasonable estimate of the loss. Although there is a reasonable possibility that additional amounts will be paid or incurred, an estimate of the possible loss or range of loss cannot be made.

During the quarter ended March 2, 2007, the IRS issued a final Statutory Notice of Deficiency for the disallowance of a loss associated with a transaction entered into by a domestic subsidiary in a tax year prior to the subsidiary’s acquisition by Solectron. The Company did not record an additional accrual related to this item during the quarter, as it believes that adequate amounts of tax and interest have already been recorded. On April 30, 2007, the Company filed a petition with the U.S. Tax Court for redetermination of the deficiency set forth by the IRS.

A domestic state jurisdiction is currently conducting a sales and use tax audit for the period from January 1, 1999, through December 31, 2001. Solectron filed an application to participate in an amnesty program in order to protect itself from any penalties that may arise as a result of a potential audit assessment. Although there is a reasonable possibility that a loss may be incurred, no estimate of the possible loss can be made at this time.

In addition, Solectron has established contingency reserves for income taxes in various jurisdictions. The estimate of appropriate tax reserves is based upon the amount of prior tax benefit that is at risk upon audit and upon the reasonable estimate of the amount at risk. Solectron periodically reassesses the amount of such reserves and adjusts reserve balances as necessary.

Significant judgment is required in determining Solectron’s provision for income taxes. The calculation of Solectron’s tax liabilities involves dealing with uncertainties in the application of complex tax rules and regulations. In determining the adequacy of its provision for income taxes, Solectron has assessed the likelihood of adverse outcomes resulting from these examinations, including the IRS RAR for fiscal years 2001 and 2002. Although the ultimate outcome of tax examinations cannot be predicted with certainty, including the total amount payable and the timing of such payments, the Company believes that adequate amounts of tax and interest have been provided for any adjustments that are expected to result. Solectron, however, cannot be certain that such amounts will not be materially different than what is reflected in its historical income tax provisions and accruals. Should the tax authorities assess additional taxes as a result of any current or future examinations, Solectron may be required to record changes to operations in future periods that could have a material adverse effect on its results of operations, financial position or cash flows in the period or periods recorded.

18

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

NOTE 11 — Segment Information and Geographic Information

SFAS No. 131 “Disclosure about Segments of an Enterprise and Related Information” established standards for reporting information about operating segments in annual consolidated financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products and services, geographic areas and major customers. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.

Solectron’s Chief Operating Decision Maker is the Interim Chief Executive Officer. The Interim Chief Executive Officer evaluates financial information on a company-wide basis for purposes of making decisions and assessing financial performance. Accordingly, Solectron has one operating segment.

Geographic information for continuing operations as of and for the periods presented is as follows (in millions):

	Three Months Ended				Nine Months Ended
	June 1,		May 26,		June 1,		May 26,
	2007		2006		2007		2006
Geographic net sales:
United States	$	910.6	$	787.4	$	2,655.8	$	2,392.5
Other North and Latin America		458.6		403.9		1,439.8		1,147.6
Europe		376.2		306.6		1,128.2		909.3
Malaysia		515.8		568.7		1,595.8		1,580.8
China		404.7		398.2		1,131.8		936.8
Other Asia Pacific		319.4		237.8		934.9		691.6
	$	2,985.3	$	2,702.6	$	8,886.3	$	7,658.6

Geographic net sales are attributable to the country in which the product is manufactured.

	June 1,		August 25,
	2007		2006
Long-lived assets:
United States	$	190.6	$	110.0
Other North and Latin America		161.6		162.3
Europe		119.3		118.2
Asia Pacific		265.9		282.9
	$	737.4	$	673.4

19

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

The following table depicts, for the periods indicated, revenue by market expressed as a percentage of net sales. The distribution of revenue across our markets has fluctuated, and will continue to fluctuate, as a result of numerous factors, including but not limited to increased business from new and existing customers; fluctuations in customer demand; seasonality of our customers’ markets; and growth in market outsourcing.

	Three Months Ended						Nine Months Ended
	June 1,			May 26,			June 1,			May 26,
	2007			2006			2007			2006
Computing & Storage		32.6	%		32.4	%		32.8	%		33.0	%
Networking		25.6	%		23.6	%		24.2	%		25.4	%
Communications		19.3	%		19.3	%		19.9	%		18.6	%
Consumer		9.9	%		11.6	%		10.9	%		10.0	%
Industrial		8.4	%		9.1	%		8.2	%		8.5	%
Automotive		2.1	%		2.0	%		1.9	%		2.7	%
Other		2.1	%		2.0	%		2.1	%		1.8	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

Certain customers accounted for 10% or more of our net sales. The following table includes those customers and the percentage of net sales attributed to them for the periods indicated:

	Three Months Ended						Nine Months Ended
	June 1,			May 26,			June 1,			May 26,
	2007			2006			2007			2006
Cisco Systems		19.7	%		16.3	%		17.6	%		17.1	%
Nortel Networks		*			*			*			10.3	%
Hewlett-Packard		10.2	%		*			10.1	%		*

(*) Less than 10%

Solectron has concentrations of credit risk due to sales to the customers listed above as well as to Solectron’s other significant customers. As of June 1, 2007, Hewlett-Packard accounted for approximately 17.2% of total accounts receivable related to continuing operations.

NOTE 12 — Restructuring and Impairment

Over the past few years, Solectron has recorded restructuring and impairment costs to optimize its global footprint, reduce its cost structure and to respond to declines in customer demands. The measures, which included reducing the workforce, consolidating facilities and changing the strategic focus of a number of sites, was largely intended to align Solectron’s capacity and infrastructure to anticipated customer demand and transition its operations to lower cost regions. The restructuring and impairment costs include employee severance and benefit costs, costs related to leased facilities abandoned and subleased, impairment of owned facilities no longer used by Solectron which will be disposed, costs related to leased equipment that has been abandoned, and impairment of owned equipment that will be disposed. For owned facilities and equipment, the impairment loss recognized was based on the fair value less costs to sell, with fair value estimated based on existing market prices for similar assets. Severance and benefit costs are recorded in accordance with SFAS No. 112, “Employer’s Accounting for Postemployment Benefits,” as Solectron has concluded that it had a substantive severance plan. In accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” the estimated lease loss accrued for leased facilities abandoned and subleased after December 31, 2002 represents the fair value of the lease liability as measured by the present value of future lease payments subsequent to abandonment, less the present value of any estimated sublease income. For those facilities abandoned and subleased before January 1, 2003, as part of restructuring activities under EITF Issue No. 94-3, the estimated lease loss represents

20

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

payments subsequent to abandonment less any estimated sublease income. In order to estimate future sublease income, Solectron works with real estate brokers to estimate the length of time until it can sublease a facility and the amount of rent it can expect to receive. Estimates of expected sublease income could change based on factors that affect Solectron’s ability to sublease those facilities such as general economic conditions and the real estate market, among others. At each reporting date, the Company evaluates its accruals for exit costs and employee separation costs to ensure the accruals are still appropriate. In certain circumstances, accruals are no longer required because of efficiencies in carrying out the plans or because employees previously identified for separation resigned from the Company and did not receive severance or were redeployed due to circumstances not foreseen when the original plans were initiated. The Company reverses accruals through the income statement line item where the original charges were recorded when it is determined that they are no longer required.

Overview of Restructuring Plans

Fiscal Year 2007 Phase II Restructuring Plan

On March 26, 2007, the Solectron Board of Directors approved the Fiscal Year 2007 Phase II Restructuring Plan, pursuant to Solectron’s phased approach to restructuring announced in the first quarter of fiscal 2007, to further optimize its global footprint and reduce its cost structure. Solectron estimates that total charges related to this phase of restructuring will be between $35 million to $45 million, of which approximately 90% represents cash expenditures. Total estimated charges primarily consist of (i) $23 million to $30 million related to severance costs, (ii) $9 million to $12 million related to leased facility liabilities and transfer and other exit costs and (iii) an estimated non-cash charge of $3 million related to disposition or impairment of facilities and equipment, $1.3 million of which was impaired at the end of the second quarter of fiscal 2007. The restructuring plan consists of the following measures:

•  Close or consolidate approximately 400,000 square feet of facilities in Western Europe and North America.

•  Reduce approximately 1,300 to 1,500 employees at the facilities being closed or consolidated.

•  Impair certain long-lived assets (primarily buildings and leasehold improvements) in connection with the facilities being vacated and equipment made excess or obsolete to the extent that we would be unable to recover their carrying value upon sales to third parties.

Cumulative restructuring costs recorded under the Fiscal 2007 Phase II Restructuring Plan as of June 1, 2007 were $25.4 million. This consists of $23.7 million in severance, $1.3 million in impairment charges on facilities and equipment (impaired at the end of the second quarter of fiscal 2007) and $0.4 million of transfer costs, other expenses and leased facilities expenses.

As of June 1, 2007, Solectron has reduced its workforce by 90 personnel in connection with this plan and expects to reduce headcount by an additional 1,200 to 1,400 personnel prior to the completion of this plan. The remaining accrual balance of $22.4 million consists primarily of existing severance commitments for 1,200 to 1,400 personnel, the majority of which will be paid by December 31, 2007.

In certain circumstances, severance accruals may not be required. This may result from re-employment outside of Solectron or failure to file for severance benefits. When it is determined that accruals are no longer required in these situations, the Company reverses the accruals through the income statement line item originally charged. The Fiscal Year 2007 Phase II Restructuring Plan is expected to be completed within twelve months of the Board’s approval of the plan.

Fiscal Year 2007 Phase I Restructuring Plan

On October 2, 2006, the Solectron Board of Directors approved the Fiscal Year Phase I 2007 Restructuring Plan to optimize its global footprint and reduce its cost structure. Solectron anticipates that total charges related to this restructuring plan will be between $50 million to $60 million. Total estimated charges consist of (i) $32 million to $39 million related to severance costs, (ii) $10 million to $13 million related to leased facility liabilities and

21

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

transfer and other exit costs and (iii) an estimated non-cash charge of $8 million related to disposition or impairment of facilities and equipment. The restructuring plan consists of the following measures:

•  Close or consolidate approximately 700,000 square feet of facilities in Western Europe and North America.

•  Reduce approximately 1,200 to 1,400 employees at the facilities being closed or consolidated. Although there may be a potential decrease from the original plan estimate of 1,400 employees, severance costs will still be in the range provided.

•  Impair certain long-lived assets (primarily buildings and leasehold improvements) in connection with the facilities being vacated and equipment made excess or obsolete to the extent that we would be unable to recover their carrying value upon sales to third parties.

Cumulative restructuring costs recorded under the Fiscal 2007 Phase I Restructuring Plan as of June 1, 2007 were $50.0 million. This consists of $39.1 million in severance, $5.1 million in impairment charges on facilities and equipment (which includes $3.1 million recorded in the fourth quarter of fiscal year 2006), and $5.8 million of transfer costs, other expenses and leased facilities expenses.

As of June 1, 2007, Solectron has reduced its workforce by 1,050 personnel in connection with this plan and expects to reduce headcount by an additional 150 to 350 personnel prior to the completion of this plan. The remaining accrual balance of $13.1 million is primarily related to existing severance commitments for 150 to 350 personnel, the majority of which will be paid by November 30, 2007.

In certain circumstances, severance accruals may not be required. This may result from re-employment outside of Solectron or failure to file for severance benefits. When it is determined that accruals are no longer required in these situations, the Company reverses the accruals through the income statement line item originally charged. The Fiscal Year 2007 Phase I Restructuring Plan is expected to be completed within twelve months of the Board’s approval of the plan.

Fiscal Year 2005 Restructuring Plan

During fiscal year 2005, in response to a decline in revenues from fiscal year 2004 levels, Solectron reviewed its cost structure and geographic footprint and determined that cost savings could be realized by moving certain activities from high-cost facilities in Europe and North America to facilities in low-cost geographies. During fiscal 2006, the Company had lowered its total anticipated restructuring costs for the Fiscal Year 2005 Restructuring Plan from $80-$95 million to $55-$65 million. The original anticipated costs were based on the occurrence of certain future events. Due to non-occurrence of some events and changes in business conditions, the Company lowered its total anticipated costs. However, for the restructuring items that were executed, the Company expects cost savings to be in line with the original estimates. This restructuring plan as amended will result in restructuring charges of approximately $55 million to $65 million, and includes the following measures:

•  Closing the Company’s facilities in Hillsboro, Oregon; Winnipeg, Canada; Lincoln, California; Turnhout, Belgium; and Munich, Germany.

•  Eliminating approximately 2,500 positions (1) at the facilities being closed; (2) at the Company’s facilities in Bordeaux, France; Dunfermline, Scotland; Guadalajara, Mexico; Jaguariuna, Brazil; and other facilities; and (3) within the Company’s material procurement and sales organizations in Europe and North America. These actions included the elimination of certain positions, the migration of certain functional activities to facilities in lower cost geographies and the outsourcing of certain activities.

•  Impairing certain long-lived assets (primarily building and leasehold improvement) in connection with the facilities being vacated and equipment made obsolete to the extent that Solectron would be unable to recover their carrying value upon sales to third parties.

22

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

Cumulative restructuring costs recorded under the Fiscal Year 2005 Restructuring Plan as of June 1, 2007 were $59.5 million. As of June 1, 2007, Solectron has reduced its workforce by 2,506 personnel in connection with this plan and expects to reduce headcount by an additional 16 personnel prior to the completion of this plan. The remaining accrual balance of $1.2 million is primarily related to expenses associated with taxes, leased facilities and severance payouts. The Company expects to pay out a substantial portion of these costs during the next two fiscal quarters. This plan was substantially completed as of the end of fiscal 2006.

Fiscal Year 2004 Restructuring Plan

In the fourth quarter of fiscal 2004, in order to drive savings in its human resources and information technology functions, as well as reduce labor costs in certain high-cost facilities, Solectron committed to a plan to eliminate approximately 2,100 full-time positions primarily in Europe and North America, consolidate certain facilities, and impair certain long-lived assets.

The Fiscal Year 2004 Restructuring Plan was expected to result in total restructuring charges of $20.0 million. Through June 1, 2007, Solectron had recorded restructuring charges of approximately $26.1 million related to this plan. This amount consisted of $9.8 million of severance charges, $10.2 million relating to the impairment of certain long-lived assets, and $6.1 million of facility lease obligation and other expenses. This restructuring plan is substantially complete. The remaining accrual balance of $2.4 million as of June 1, 2007 is primarily related to an ongoing facility lease obligation, which expires in 2011. However, Solectron may incur additional restructuring costs as it revises estimates due to changes in assumptions used for the facility lease loss accrual.

Legacy Restructuring Plans

From 2001 through 2003, a significant economic downturn adversely impacted Solectron’s business, resulting in a decline in revenues from $17.4 billion in fiscal year 2001 to $9.8 billion in fiscal year 2003. In response to these trends, Solectron initiated a series of restructuring measures to align its capacity and infrastructure with anticipated customer demand. These actions included significant reductions in the Company’s workforce, the closure and consolidation of facilities, and the impairment of certain long-lived assets. These restructuring activities are substantially complete, as the remaining accrual is almost entirely attributable to ongoing facility lease obligations, which are currently leased through 2014. However, Solectron may incur future restructuring costs as it continues to sell restructured long-lived assets and revise previous estimates in connection with these plans. Revisions to estimates will primarily be due to changes in assumptions used for the facility lease loss accrual.

Solectron incurred restructuring charges in the third quarter of fiscal 2007 in accordance with previously announced plans. Total net restructuring and impairment costs of $29.6 million were charged against continuing operations as a result of these planned actions as well as revisions to previous estimates.

23

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

The following table summarizes restructuring charges and impairment included in the accompanying condensed consolidated statements of operations (in millions):

	Three Months Ended					Nine Months Ended
	June 1,		May 26,			June 1,		May 26,
	2007		2006			2007		2006			Nature
Loss on disposal of and impairment of equipment and facilities, net	$	0.8	$	0.2		$	5.5	$	8.7		non-cash
Intangible asset impairment charge, net				—					1.9		non-cash
Total impairment of equipment, facilities and intangibles		0.8		0.2			5.5		10.6
Severance and benefit costs (reversal)		25.9		(0.2	)		63.4		(10.1	)	cash
Net adjustment to facility lease loss accrual		0.9		1.8			8.8		6.3		cash
Net adjustment to equipment lease loss accrual		—		—			—		0.1		cash
Other exit costs		2.0		0.8			3.0		2.2		cash
Total cash restructuring		28.8		2.4			75.2		(1.5	)
Total cash and non-cash restructuring	$	29.6	$	2.6		$	80.7	$	9.1

Restructuring Accrual

The following table summarizes the restructuring accrual balance for continuing operations as of June 1, 2007 (in millions). The amounts presented include remaining obligations under both the Fiscal Year 2007 Restructuring Plans and prior plans.

	Severance			Lease Facilities
	and Benefits			and Equipment			Other			Total
Balance of accrual at August 25, 2006	$	7.1		$	23.1		$	0.1		$	30.3
Q1 FY07 Provision		29.8			2.9			0.4			33.1
Q1 FY07 Provision adjustments		(0.2	)								(0.2	)
Q1 FY07 Cash payments		(3.3	)		(9.7	)		(0.5	)		(13.5	)
Balance of accrual at November 24, 2006		33.4			16.3			—			49.7
Q2 FY07 Provision		8.4			4.2			0.6			13.2
Q2 FY07 Provision adjustments		(0.5	)		0.4			—			(0.1	)
Q2 FY07 Cash payments		(12.0	)		(4.1	)		(0.5	)		(16.6	)
Balance of accrual at March 2, 2007		29.3			16.8			0.1			46.2
Q3 FY07 Provision		26.5			1.0			2.0			29.5
Q3 FY07 Provision adjustments		(0.5	)		(0.4	)		—			(0.9	)
Q3 FY07 Cash payments		(22.1	)		(3.8	)		(2.1	)		(28.0	)
Balance of accrual at June 1, 2007	$	33.2		$	13.6		$	—		$	46.8

Accruals related to restructuring activities were recorded in accrued expenses in the accompanying condensed consolidated balance sheets. Solectron expects to pay amounts related to severance and benefits within the next 12 months. The remaining balance, primarily consisting of lease commitment costs on facilities, is expected to be paid out through 2014.

24

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

Restructuring Activity by Plan

The restructuring and impairment charges incurred by restructuring plan during the nine months ended June 1, 2007 (in millions) were as follows:

	Fiscal 2007			Fiscal 2007
	Phase II			Phase I			Fiscal			Fiscal			Legacy
	Plan			Plan			2005 Plan			2004 Plan			Plans			Total
Balance of accrual at August 25, 2006	$	—		$	—		$	7.1		$	2.1		$	21.1		$	30.3
Q1 FY 2007 Provision		—			29.6			0.7			0.7			2.1			33.1
Q1 FY 2007 Provision adjustments		—			—			(0.1	)		—			(0.1	)		(0.2	)
Q1 FY 2007 Cash payments		—			(3.1	)		(0.8	)		(0.2	)		(9.4	)		(13.5	)
Balance of accrual at November 24, 2006	$	—		$	26.5		$	6.9		$	2.6		$	13.7		$	49.7
Q1 2007 Non-cash items																$	1.4
Q2 FY 2007 Provision		—			11.8			0.9			0.3			0.2			13.2
Q2 FY 2007 Provision adjustments		—			0.4			(0.1	)		(0.1	)		(0.3	)		(0.1	)
Q2 FY 2007 Cash payments		—			(6.8	)		(6.3	)		(0.5	)		(3.0	)		(16.6	)
Balance of accrual at March 2, 2007	$	—		$	31.9		$	1.4		$	2.3		$	10.6		$	46.2
Q2 2007 Non-cash items																$	3.3
Q3 FY 2007 Provision	$	24.1		$	4.3		$	0.3		$	0.3		$	0.5			29.5
Q3 FY 2007 Provision adjustments		—			(0.8	)		—			—			(0.1	)		(0.9	)
Q3 FY 2007 Cash payments		(1.7	)		(22.3	)		(0.5	)		(0.2	)		(3.3	)		(28.0	)
Balance of accrual at June 1, 2007	$	22.4		$	13.1		$	1.2		$	2.4		$	7.7		$	46.8
Q3 2007 Non-cash items																$	0.8

NOTE 13 — Goodwill and Intangible Assets

Goodwill information is as follows (in millions):

	Goodwill
Balance at August 25, 2006	$	155.2
Acquisitions		3.4
Goodwill adjustments		0.5
Balance at June 1, 2007	$	159.1

25

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

Solectron’s intangible assets are classified as other assets on the condensed consolidated balance sheets and categorized into three main classes: supply agreements, intellectual property and contractual and non-contractual customer relationships obtained in asset purchases or business combinations. The following table summarizes the intangible asset balance at June 1, 2007 and August 25, 2006 (in millions):

				Intellectual			Customer
	Supply			Property			Relationships
	Agreements			Agreements			and Other			Total
June 1, 2007
Gross amount	$	95.9		$	81.9		$	75.3		$	253.1
Accumulated amortization		(85.6	)		(75.3	)		(65.5	)		(226.4	)
Carrying value	$	10.3		$	6.6		$	9.8		$	26.7
August 25, 2006
Gross amount	$	85.5		$	80.3		$	72.6		$	238.4
Accumulated amortization		(85.4	)		(73.3	)		(63.4	)		(222.1	)
Carrying value	$	0.1		$	7.0		$	9.2		$	16.3

In January 2007, Solectron acquired NCR’s North American manufacturing business responsible for producing ATMs and payment solutions in the Americas and self-checkout systems globally. The acquisition resulted in acquiring identifiable intangible assets of approximately $12.9 million. The identifiable intangible assets acquired included a supply agreement valued at $11.0 million and intellectual property valued at $1.5 million. Both categories of identifiable intangible assets will be amortized over five years. The remaining balance of $0.4 million was allocated to goodwill.

During the three months ended June 1, 2007, Solectron acquired Software Remodeling, Inc., a business that provides software, electronic, mechanical, industrial design, and user interface design and engineering services to its customers for the production of electromechanical and software driven products. The purchase price of the acquisition was approximately $6.0 million, of which $0.8 million will be paid on the termination date, net of claims. The identifiable intangible assets acquired were comprised of customer relationships valued at $1.4 million and a noncompete agreement valued at $1.4 million. The amount allocated to goodwill was $3.0 million and the amount allocated to fixed assets was $0.2 million. The Company may be required to pay an additional amount of $1.9 million after the 12 month anniversary of the closing date as a retention award to certain key employees.

Amortization expense for the three and nine months ended June 1, 2007 was approximately $2.2 million and $4.7 million, respectively. Amortization expense for the three and nine months ended May 26, 2006 was approximately $1.0 million and $5.0 million, respectively. The Company anticipates that annual amortization expense for these intangibles over the next five years to be approximately $7.8 million, $6.6 million, $5.2 million, $3.8 million and $2.8 million, respectively.

NOTE 14 — Discontinued Operations

During fiscal 2004, as a result of a full review of our portfolio of businesses, we committed to a plan to divest a number of business operations that were no longer part of our strategic plan for the future. In accordance with SFAS No. 144, we have reported the results of operations and financial position of these businesses in discontinued operations within the consolidated statements of operations and balance sheets for all periods presented. The companies that we have divested and that are currently included in discontinued operations are Solectron’s MicroTechnology division, Stream International Inc. and Force Computers, Inc.

These businesses each qualify as a discontinued operation component of Solectron under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Solectron has reported the results of operations

26

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

and consolidated financial position of these businesses in discontinued operations within the consolidated statements of operations and the balance sheets for all periods presented.

The results from discontinued operations were as follows (in millions):

	Three Months Ended						Nine Months Ended
	June 1,			May 26,			June 1,			May 26,
	2007			2006			2007			2006
Net sales	$	—		$	—		$	—		$	—
Cost of sales		—			—			—			—
Gross profit		—			—			—			—
Operating expense (income) — net		0.1			0.4			1.0			(7.8	)
Operating (loss) income		(0.1	)		(0.4	)		(1.0	)		7.8
Other income — net		—			—			—			8.9
(Loss) income before income taxes, income taxes of $0		(0.1	)		(0.4	)		(1.0	)		16.7
(Loss) income from discontinued operations, net of tax	$	(0.1	)	$	(0.4	)	$	(1.0	)	$	16.7

During the first quarter of fiscal 2007, Solectron recorded $0.6 million of costs related to a sales tax assessment and ongoing facility carrying costs. During the second quarter of fiscal 2007, Solectron recorded $0.3 million of costs related to a foreign tax assessment formerly associated with a discontinued operation. During the third quarter of fiscal 2007, Solectron recorded $0.1 million of costs related to a foreign tax assessment formerly associated with a discontinued operation.

During the second quarter of fiscal 2007, Solectron paid $1.9 million related to a foreign tax assessment formerly associated with a discontinued operation.

During the first quarter of fiscal 2006, Solectron recorded a $2.1 million gain on sale of assets of discontinued operations having no remaining book value and $1.7 million associated with the favorable resolution of certain contingencies. During the second quarter of fiscal 2006, Solectron recorded a $2.1 million gain on the sale of assets formerly associated with a discontinued operation and a gain of $1.8 million associated with the favorable resolution of certain contingencies.

The sale agreements for all the divestitures contain certain indemnification provisions pursuant to which Solectron may be required to indemnify the buyer of the divested business for a limited period subsequent to the completion of the sale for liabilities, losses, or expenses arising out of breaches of covenants and certain breaches of representations and warranties relating to the condition of the business prior to and at the time of sale. As of June 1, 2007, most of these indemnification provisions have expired, and there were no significant liabilities recorded under these indemnification obligations. Additionally, Solectron may be required to indemnify a buyer for certain environmental remediation costs until 2014, such indemnification not to exceed $13 million. Solectron maintains an insurance policy to cover environmental remediation liabilities in excess of reserves previously established upon the acquisition of these properties. Solectron did not record any environmental charges upon disposition of these properties.

NOTE 15 — Net Income Per Share Calculation

Basic net income per share is computed using the weighted average number of common shares outstanding during the period.

The computation of diluted net income per share includes the effect of dilutive securities on weighted average shares. Dilutive securities include options to purchase common stock and shares issuable upon conversion of

27

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

Solectron’s LYONs and Series A Convertible Senior Notes and are excluded in all periods as their effect was anti-dilutive.

Net income per share data from continuing operations were computed as follows (in millions, except per share amounts):

	Three Months Ended				Nine Months Ended
	June 1,		May 26,		June 1,		May 26,
	2007		2006		2007		2006
Basic earnings per share:
Income from continuing operations	$	12.2	$	42.4	$	34.4	$	79.7
Shares used in computation:
Weighted average ordinary shares outstanding		898.6		908.1		895.6		916.2
Basic earnings per share	$	0.01	$	0.05	$	0.04	$	0.09
Diluted earnings per share:
Income from continuing operations	$	12.2	$	42.4	$	34.4	$	79.7
Shares used in computation:
Weighted average ordinary shares outstanding		898.6		908.1		895.6		916.2
Employee stock options		0.1		0.2		0.1		0.2
Restricted stock		6.0		0.8		3.7		0.7
Shares issuable upon conversion of convertible securities		—		0.5		—		0.1
Weighted average number of shares		904.7		909.6		899.4		917.2
Diluted earnings per share	$	0.01	$	0.05	$	0.04	$	0.09

The following table summarizes the weighted average dilutive securities that were excluded from the above computation of diluted earnings per share because their inclusion would have an anti-dilutive effect (in millions):

	Three Months Ended				Nine Months Ended
	June 1,		May 26,		June 1,		May 26,
	2007		2006		2007		2006
Anti-dilutive securities:
Employee stock options		44.3		48.7		45.9		36.6
Shares issuable upon conversion of LYONS		0.2		—		0.2		—
Shares issuable upon conversion of 0.5% notes		0.3		—		0.3		—
Total anti-dilutive shares		44.8		48.7		46.4		36.6

NOTE 16 — Related Party Transactions

In January 2006, Paul Tufano became Executive Vice President and Chief Financial Officer of Solectron and is currently serving as interim President and Chief Executive Officer and principal executive officer. Mr. Tufano is also a member of the Board of Directors of Teradyne, a customer of Solectron. Solectron has for the past 10 years, in the ordinary course of business, sold printed circuit board assemblies and sub-system assemblies to Teradyne and purchased in-circuit testers from Teradyne. During the quarter ended June 1, 2007, Solectron had sales of $55.3 million to Teradyne, all of which were made on an arms-length basis.

28

SOLECTRON CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements — (Continued)

NOTE 17 — Subsequent and Other Events

On June 4, 2007, it was announced that Solectron and Flextronics International Ltd. (“Flextronics”) entered into a definitive agreement for Flextronics to acquire Solectron. Under the terms of the definitive agreement, unanimously approved by the Boards of Directors of both companies, stockholders of Solectron will receive total consideration currently valued at approximately $3.7 billion, based on the closing price of Flextronics ordinary shares on June 1, 2007.

Upon consummation of the merger, each share of common stock of Solectron will be converted into the right to receive, at the election of each of the individual holders of Solectron shares, either, but not a combination of (i) 0.3450 shares of Flextronics or (ii) a cash payment of $3.89 per share, subject to the limitation that not more than 70% in the aggregate and no less than 50% in the aggregate of Solectron shares will be converted into shares of Flextronics. Completion of the merger is subject to customary conditions, including the approval of the stockholders of Solectron and Flextronics and the receipt of applicable regulatory approvals and clearances. Upon consummation, each outstanding option to purchase shares with an exercise price equal to or less than $5.00, whether or not exercisable, would be assumed by Flextronics. All other outstanding options to purchase shares will accelerate and become immediately exercisable for a period of at least 30 days prior to the effective time.

On February 27, 2007, in connection with the departure of the then Chief Executive Officer (“CEO”), the Executive Compensation and Management Resources Committee of the Board of Directors (the “Committee”) of Solectron approved retention arrangements for certain senior executives. On March 14, 2007, in connection with his appointment as Interim President and Chief Executive Officer to replace the former CEO, Board of Directors (the “Board”) of the Company entered into an Amended and Restated Executive Employment Agreement with Paul Tufano (the “Restated Agreement”). On April 16, 2007, in connection with the appointment of Roop Lakkaraju as Senior Vice President and Interim Chief Financial Officer to replace Mr. Tufano, who had been the Company’s Chief Financial Officer prior to being named the Company’s Interim President and Chief Executive Officer, the Committee approved the terms of the executive employment agreement to be entered into with Mr. Lakkaraju, which included a retention arrangement.

On June 3, 2007, the Committee approved the contribution and crediting of the Company contributions to be made to the Deferred Compensation Plan pursuant to the Retention Arrangements for Mr. Tufano, Mr. Lakkaraju and the senior executives to each individual’s deferred compensation account as of June 3, 2007, subject to the terms and conditions of the Deferred Compensation Plan. The Committee also approved accelerated vesting of all Company contributions to the Deferred Compensation Plan, including Company contributions credited to each executive’s account under the Deferred Compensation Plan pursuant to the Retention Arrangements, if the Deferred Compensation Plan is terminated. The Committee approved these changes to the Retention Arrangements to reflect the importance to the Company and its stockholders of retaining these executives, in light of the fact that the contribution trigger for the executives (other than Mr. Lakkaraju), namely the appointment of a new Chief Executive Officer, might not occur in light of the pending merger with Flextronics, and that the Deferred Compensation Plan could be terminated in connection with the merger prior to the vesting of the contributed amounts. Also, on June 3, 2007, the Board approved the contribution and crediting of the Company contributions to be made to the Deferred Compensation Plan pursuant to the Retention Arrangement for Mr. Tufano to Mr. Tufano’s deferred compensation account as of June 3, 2007, subject to the terms and conditions of the Deferred Compensation Plan. The Board also approved accelerated vesting of all Company contributions to the Deferred Compensation Plan, including Company contributions credited to Mr. Tufano’s account under the Deferred Compensation Plan pursuant to the Retention Arrangement, if the Deferred Compensation Plan is terminated. The Board approved these changes to Mr. Tufano’s Retention Arrangement to reflect the importance to the Company and its stockholders of retaining Mr. Tufano, in light of the fact that the contribution trigger, namely the appointment of a new Chief Executive Officer, might not occur in light of the pending merger with Flextronics and that the Deferred Compensation Plan could be terminated in connection with the merger prior to the vesting of the contributed amounts. In addition, the Committee adopted resolutions to clarify its original intent when it adopted the Retention Arrangements for Mr. Tufano and the senior executives, namely that such contribution amounts and the equity awards made or to be made to each individual pursuant to the Retention Arrangements would vest in full upon a termination of such individual’s employment under circumstances that would otherwise entitle the individual to severance payments pursuant to his employment agreement.

29

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We provide a range of worldwide manufacturing and integrated supply-chain services to companies who design and market electronic products. Our revenue is generated from sales of our services primarily to customers in the Computing & Storage, Networking, Communications, Consumer, Industrial, Automotive, Medical and other markets. As a result of the services we perform for our customers, we are impacted by our customers’ ability to appropriately predict market demand for their products. While we work with our customers to understand their demand needs, we are removed from the actual end-market served by our customers. Consequently, determining future trends and estimates of activity can be difficult.

On March 9, 2007, Solectron launched the Cisco Systems Lean Initiative. This initiative required us to purchase PCBA boards that were previously sold to Cisco Systems. As a result, the Company had a net reduction of revenue of $240.7 million and an increase to inventories of $260.3 million for the second quarter of fiscal 2007. In addition, during the third quarter of fiscal 2007, the Company purchased $74.4 million of inventory from third party suppliers in connection with the initiative. Under the Cisco Systems Lean Initiative, Solectron is required to complete the building of systems and boxes. Systems and boxes require PCBA boards and third party built parts. Under the previous arrangement with Cisco Systems, the Company was required only to manufacture PCBA boards and if required by Cisco subsequently, the Company built systems and boxes on a consignment basis.

On June 4, 2007, it was announced that Solectron and Flextronics International Ltd. (“Flextronics”) entered into a definitive agreement for Flextronics to acquire Solectron. Under the terms of the definitive agreement, unanimously approved by the Boards of Directors of both companies, stockholders of Solectron will receive total consideration currently valued at approximately $3.7 billion, based on the closing price of Flextronics ordinary shares on June 1, 2007. Upon consummation of the merger each share of common stock of Solectron will be converted into the right to receive, at the election of each of the individual holders of Solectron shares, either, but not a combination of (i) 0.3450 shares of Flextronics or (ii) a cash payment of $3.89 per share, subject to the limitation that not more than 70% in the aggregate and no less than 50% in the aggregate of Solectron shares will be converted into shares of Flextronics. Completion of the merger is subject to customary conditions, including the approval of the stockholders of Solectron and Flextronics and the receipt of applicable regulatory approvals and clearances.

Summary of Results and Key Performance Indicators

The following table sets forth, for the three and nine month periods indicated, certain key operating results and other financial information (in millions):

	Three Months Ended				Nine Months Ended
	June 1,		May 26,		June 1,		May 26,
	2007		2006		2007		2006
Net sales	$	2,985.3	$	2,702.6	$	8,886.3	$	7,658.6
Gross profit		151.4		142.2		453.6		396.8
Selling, general and administrative expense		112.1		112.2		338.6		323.9
Income from continuing operations		12.2		42.4		34.4		79.7

Management regularly reviews financial and non-financial performance indicators to assess the Company’s operating results. The following table sets forth, for the quarterly periods indicated, certain of management’s key financial performance indicators.

	Three Months Ended
	June 1,		March 2,		November 24,		August 25,		May 26,
	2007		2007		2006		2006		2006
Inventory turns		6.2 turns		6.5 turns		7.3 turns		7.3 turns		7.2 turns
Days sales outstanding (DSO)		44 days		45 days		44 days		43 days		42 days
Days payable outstanding (DPO)		63 days		59 days		52 days		53 days		54 days
Cash-to-cash cycle (C2C)		38 days		42 days		41 days		39 days		38 days
Capital expenditures (in millions)	$	42.4	$	50.0	$	33.4	$	40.9	$	46.0

30

Inventory turns are calculated as the ratio of cost of sales compared to the average inventory for the quarter. DSO is calculated as the ratio of average accounts receivable, net, for the quarter compared to average daily net sales for the quarter. DPO is calculated as the ratio of average accounts payable during the quarter compared to average daily cost of sales for the quarter. The decrease in inventory turns and the increase in DPO for the three months ended June 1, 2007 and March 2, 2007 compared to the three months ended November 24, 2006 were a result of the Cisco Systems Lean Initiative launched in the second quarter of fiscal 2007, in which the Company repurchased $260.3 million of inventory in the second quarter of fiscal 2007 and purchased $74.4 million of inventory from third-party suppliers in the third quarter of fiscal 2007. The C2C cycle is determined by taking the ratio of 360 days compared to inventory turns plus DSO minus DPO. The calculation of the C2C cycle for the three months ended June 1, 2007 used 90 days rather than the number of days in the 14-week period that ended on March 2, 2007. Capital expenditures are primarily related to building and improvements, equipment purchases supporting replacement of aged equipment, increased demand in certain products, new programs and information technology projects.

Critical Accounting Policies and Estimates

Management is required to make judgments, assumptions and estimates that affect the amounts reported when we prepare consolidated financial statements and related disclosures in conformity with generally accepted accounting principles in the United States. Note 1, “Summary of Significant Accounting Policies,” to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended August 25, 2006, describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Estimates are used for, but not limited to, our accounting for revenue recognition, inventory valuation, allowance for doubtful accounts, goodwill, intangible assets, restructuring and related impairment costs, income taxes, loss contingencies and stock-based compensation. Actual results could differ from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Solectron principally generates revenues from the manufacture of products for customers, the repair of both in-warranty and out-of-warranty products, and the provision of supply chain services. The Company also derives revenues from sales of certain inventory, including raw materials, to customers who reschedule, amend or cancel purchase orders after we have procured inventory to fulfill their purchase orders. The Company recognizes manufacturing revenue, net of estimated product return costs, when it ships goods or the goods are received by its customer, title and risk of ownership have passed, the price to the buyer is fixed or determinable and recoverability is reasonably assured. Generally, there are no formal customer acceptance requirements related to manufacturing services. If such requirements or obligations exist, then the Company recognizes revenues at the time when such requirements are completed and the obligations are fulfilled. The Company recognizes service revenue when the services have been performed, and the related costs are expensed as incurred.

We record reductions to revenue for customer incentive programs in accordance with the provisions of Emerging Issues Task Force (EITF) Issue No. 01-09, “Accounting for Consideration Given from a Vendor to a Customer (Including a Reseller of the Vendor’s Products).” Such incentive programs include premium payments and rebates. Premium payments are up-front payments to customers at program inception, made as a part of a competitive bidding arrangement, and sometimes in lieu of acquiring manufacturing assets and workforce from the customer. Premium payments are recognized either up-front or over time based on the terms of the customer agreement. In order to recognize a premium over time, the customer agreement must clearly state that we are entitled to a refund of the premium payment from the customer, either pro rata or otherwise, if certain production levels are not achieved. Where such contractual recovery provisions exist, we believe that a probable future economic benefit exists and, thus, establish an asset, which is amortized against revenue as product or service delivery occurs under the contract. When the contractual recovery provisions do not exist, we record the premium payment as an immediate up-front reduction of revenues. For those incentives that require the estimation of future sales, such as for rebates, we use historical experience and internal and customer data to estimate the sales incentive

31

at the time revenue is recognized. In the event that the actual results of these items differ from the estimates, adjustments to the sales incentive accruals are recorded. To date, these adjustments have not been material.

From time to time, Solectron includes an extended warranty at the time of product shipment. The revenue associated with the extended warranty is deferred and recognized over the extended warranty period.

Certain customer arrangements require evaluation of the criteria outlined in EITF Issue No. 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent,” in determining whether it is appropriate to record the gross amount of sales and related costs or the net amount earned as commissions. Generally, when Solectron is primarily obligated in a transaction, is subject to general and physical inventory risk, has latitude in establishing prices, has discretion in selecting suppliers, changes the product or performs the service, is involved in the determination of product or service specifications, and has credit risk, or has several but not all of these indicators, revenue is recorded gross. If several of these indicators are not present, Solectron generally records the net amounts as commissions earned. For example, in a situation where a customer retains ownership of the materials utilized in their products, Solectron would generally only recognize revenue on a net basis.

In June 2006, the EITF reached a consensus on EITF Issue No. 06-03, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)” (“EITF 06-03”). EITF 06-03 provides that the presentation of taxes assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer on either a gross basis (included in revenues and costs) or on a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. The provisions of EITF 06-03 were adopted by Solectron in the third quarter of fiscal 2007. Taxes assessed by a governmental authority on revenue transactions between Solectron and its customers are presented on a net basis.

Inventory Valuation

Our inventories are stated at the lower of weighted average cost or market. Our industry is characterized by rapid technological change, short-term customer commitments and rapid changes in demand, as well as other factors that may influence the recoverability of inventories. We make provisions for estimated excess and obsolete inventory based on our regular reviews of inventory quantities on hand and the latest forecasts of product demand and production requirements from our customers. Our provisions for excess and obsolete inventory are also impacted by our contractual arrangements with our customers including our ability or inability to re-sell such inventory to them. If actual market conditions or our customers’ product demands are less favorable than those projected or if our customers are unwilling or unable to comply with any contractual arrangements related to excess and obsolete inventory, additional provisions may be required. If an additional 0.2% to 0.5% of our inventory were determined to be excess and obsolete at June 1, 2007, our gross profit and operating income from continuing operations before income taxes for the three months ended June 1, 2007 would have each decreased by $3.7 million to $9.2 million.

Allowance for Doubtful Accounts

Another area of judgment affecting reported revenue and net income is management’s estimate of receivables that will ultimately be collected. We evaluate the collectibility of our accounts receivable based on a combination of factors. This risk is mitigated by (i) sales to well-established companies, (ii) ongoing credit evaluation of our customers, and (iii) frequent contact with our customers, especially our most significant customers, which enables us to monitor current changes in business operations and to respond accordingly. When we are aware of circumstances that may impair a specific customer’s ability to meet its financial obligations to us, we record a specific allowance against amounts due to us and thereby reduce the net receivable to the amount we reasonably believe is likely to be collected. For all other customers, we recognize allowances for doubtful accounts based on the length of time the receivables are outstanding, industry and geographic concentrations, the current business environment and our historical experience. If the financial condition of our customers deteriorates or if economic conditions worsen, additional allowances may be required. Using this information, management reserves an amount that is believed to be uncollectible. Based on management’s analysis of uncollectible accounts, reserves totaling

32

$7.2 million or 0.5% of the gross accounts receivable balance were established at June 1, 2007, compared with $14.5 million or 1.0% of the gross accounts receivable balance at August 25, 2006.

Goodwill

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), we review the carrying amount of goodwill for impairment on an annual basis during the fourth quarter (as of June 1). Additionally, we perform an impairment assessment of goodwill whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. Significant changes in circumstances can be both internal to our strategic and financial direction, as well as changes to the competitive and economic landscape. We have determined that there is a single reporting unit for the purpose of goodwill impairment tests under SFAS No. 142. For purposes of assessing the impairment of our goodwill, we estimate the value of the reporting unit using our market capitalization as the best evidence of fair value. This fair value is then compared to the carrying value of the reporting unit. If the fair value of the reporting unit is less than its carrying value, we then allocate the fair value of the unit to all the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit’s fair value was the purchase price to acquire the reporting unit. The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of the goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The process of evaluating the potential impairment of goodwill is subjective and requires judgment at many points during the test including future revenue forecasts, discount rates and various reporting unit allocations.

Impairment of Long-Lived and Intangible Assets

Solectron evaluates long-lived assets, such as property, plant and equipment and intangible assets obtained in acquisitions such as supply agreements, intellectual property, and contractual and non-contractual customer relationships for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). When conducting our impairment analysis, assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets or liabilities. Intangible assets subject to impairment testing whenever events or changes in circumstances indicate total $26.7 million as of June 1, 2007. We assess the fair value of the assets based on the undiscounted future cash flow the assets are expected to generate and recognize an impairment loss when estimated undiscounted future cash flow expected to result from the use of the asset plus net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When we identify an impairment, we reduce the carrying amount of the asset to its estimated fair value based on a discounted cash flow approach, or, when available and appropriate, to comparable market values. There is significant judgment involved in determining these cash flows.

Restructuring and Related Impairment Costs

Over the past few years, we have recorded restructuring and impairment costs as we rationalized our operations in light of customer demand declines and the economic downturn. These measures, which included reducing the workforce, consolidating facilities and changing the strategic focus of a number of sites, were largely intended to align our capacity and infrastructure to anticipated customer demand and transition our operations to lower cost regions. These restructuring measures were undertaken in accordance with restructuring plans that were reasonable, probable and unlikely of significant change at the time of plan establishment. These restructuring and impairment costs include employee severance and benefit costs, costs related to leased facilities abandoned and subleased, impairment of owned facilities no longer used by us which will be disposed, costs related to leased equipment that has been abandoned, and impairment of owned equipment that will be disposed. For owned facilities and equipment, the impairment loss recognized was based on the fair value less costs to sell, with fair value estimated based on existing market prices for similar assets.

Severance and benefit costs have been recorded in accordance with SFAS No. 112, “Employer’s Accounting for Postemployment Benefits,” as we concluded that we had a substantive severance plan based on past

33

restructuring actions in many of the geographies in which we operate. These costs are recognized when Solectron management has committed to a formal restructuring plan and the severance costs are probable and estimable. We apply the provisions of SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” relating to one-time termination benefits to both (1) severance activities in geographies where we do not have a substantive severance plan and (2) situations in which the severance benefits offered to employees within a given geography are in excess of those offered under prior restructuring plans. Severance costs accounted for under SFAS No. 146 are recognized when Solectron management having the appropriate authorization has committed to a restructuring plan and communicated those actions to employees. Our estimate of severance and benefit costs assumptions are subjective as they are based on estimates of employee attrition and assumptions about future business opportunities.

In accordance with SFAS No. 146, the estimated lease loss accrued for leased facilities abandoned and subleased after December 31, 2002 represents the fair value of the lease liability as measured by the present value of future lease payments subsequent to abandonment less the present value of any estimated sublease income. For those facilities abandoned and subleased before January 1, 2003, as part of restructuring activities under EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity”, the estimated lease loss represents payments subsequent to abandonment less any estimated sublease income. In order to estimate future sublease income, we work with real estate brokers to estimate the length of time until we can sublease a facility and the amount of rent we can expect to receive. Estimates of expected sublease income could change based on factors that affect our ability to sublease those facilities such as general economic conditions and the real estate market, among others.

Other exit costs include costs to consolidate facilities or close facilities and relocate employees. A liability for such costs is recorded at its fair value in the period in which the liability is incurred.

At each reporting date, we evaluate our accruals for exit costs and employee separation costs to ensure the accruals are still appropriate. In certain circumstances, accruals are no longer required because of efficiencies in carrying out the plans or because employees previously identified for separation resigned and did not receive severance or were redeployed due to circumstances not foreseen when the original plans were initiated. If necessary, we reverse accruals through the income statement line item entitled “restructuring and impairment costs”, where the original charges were recorded, when it is determined that they are no longer required.

Income Taxes

We currently have significant deferred tax assets in certain jurisdictions resulting from tax credit carry forwards, net operating losses and other deductible temporary differences, which will reduce taxable income in such jurisdictions in future periods. We have provided valuation allowances for future tax benefits resulting from U.S. and certain foreign net operating loss carry-forwards and for certain other U.S. and foreign deductible temporary differences where we believe future realizability is in doubt. SFAS No. 109 requires a valuation allowance be established when it is “more likely than not” that all or a portion of deferred tax assets will not be realized, and further provides that it is difficult to conclude that a valuation allowance is not needed when there is negative evidence in the form of cumulative losses in recent years. Therefore, cumulative losses weigh heavily in the overall assessment. In the third quarter of fiscal year 2003, we established a valuation allowance for most of our deferred tax assets. This was primarily due to cumulative losses from prior years and uncertainty regarding our ability to generate certain minimum levels of taxable income within the next three years. We have not yet established a sustained level of profitability since that time in those countries in which the deferred tax assets arose and thus expect to record a full valuation allowance on future tax benefits. Our ability to realize sustained profitability in those jurisdictions in the near term is uncertain as Solectron derives the majority of its revenue from low-cost locations. It is these low-cost locations where Solectron anticipates reporting taxable profits. Solectron will not be able to offset any tax expense associated with these taxable profits with the unrecognized deferred tax assets described above. As a result of our assessment, our total valuation allowance on deferred tax assets arising from continuing operations is approximately $1.6 billion as of June 1, 2007.

We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide income tax provision and evaluating tax positions. There are many transactions and calculations where the ultimate tax determination is uncertain and we are regularly under audit by tax authorities.

34

Accordingly, we have established contingency reserves for income taxes in various jurisdictions in accordance with SFAS No. 5 “Accounting for Contingencies.”

We believe that our accruals for tax liabilities are adequate for all open years, based on our assessment of many factors, including past experience and interpretations of tax law applied to the facts of each matter. Although we believe that our accruals for tax liabilities are reasonable, tax regulations are subject to interpretation and the tax controversy process is inherently uncertain; therefore, our assessments can involve both a series of complex judgments about future events and rely heavily on estimates and assumptions. To the extent that the probable tax outcome of these matters changes, such changes in estimates will impact the income tax provision in the period in which such determination is made.

In the quarter ended May 26, 2006, the IRS completed its field examination of the Company’s federal income tax returns for fiscal years 2001 and 2002 and issued a Revenue Agent’s Report (“RAR”). The RAR is not a final Statutory Notice of Deficiency, and we filed a protest during the quarter ended August 25, 2006 to protest certain of the proposed adjustments with the Appeals Office of the IRS. The most significant of the disputed adjustments relates to transfer pricing arrangements that the Company has with its foreign subsidiaries. We believe that the proposed IRS adjustments are inconsistent with applicable tax laws, and that we have meritorious defenses to the proposed adjustments.

Loss Contingencies

We are subject to the possibility of various loss contingencies arising in the ordinary course of business (for example, environmental and legal matters). We consider the likelihood of the loss occurring and our ability to reasonably estimate the amount of loss in determining the necessity for, and amount of, any loss contingencies. Estimated loss contingencies are accrued when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate information available to us to determine whether any such accruals should be adjusted. Such revisions in the estimates of the potential loss contingencies could have a material impact on our consolidated results of operations and financial position.

Stock-Based Compensation

We account for stock-based compensation in accordance with SFAS No. 123R (revised 2004), “Share-Based Payment” (“SFAS 123R”). Under the fair value recognition provisions of this statement, share-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the vesting period. Determining the fair value of share-based awards at the grant date requires judgment, including estimating our stock price volatility and employee stock option exercise behaviors.

Our expected volatility is based upon equal weightings of the historical volatility of Solectron’s stock and, for fiscal periods in which there is sufficient trading volume in options on Solectron’s stock, the implied volatility of traded options on Solectron stock having a life of more than 6 months.

The expected life of options is based on observed historical exercise patterns, which can vary over time.

As stock-based compensation expense recognized in the Consolidated Statement of Operations is based on awards ultimately expected to vest, the amount of expense has been reduced for estimated forfeitures. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on historical experience.

If factors change and we employ different assumptions in the application of SFAS No. 123R, the compensation expense that we record in future periods may differ significantly from what we have recorded in the current period.

Results of Operations

In past filings, for clarity of presentation, Solectron’s third quarter of fiscal 2006 was presented as having ended on May 31, 2006 rather than the actual close date of May 26, 2006. In these condensed consolidated financial statements, the third quarter of fiscal 2006 is presented as having ended on the actual close date of May 26, 2006. Solectron uses a 52- to 53-week fiscal year ending on the last Friday in August. The Company’s second quarters of

35

fiscal 2007 and 2006 ended on March 2, 2007 and February 24, 2006 and contained 14 weeks and 13 weeks, respectively. The additional week is reflected in the nine months results presented for the fiscal period ended June 1, 2007. It is not possible to quantify the impact of this additional week on the fiscal period ended June 1, 2007.

The following table summarizes certain items in the condensed consolidated statements of operations as a percentage of net sales. The financial information and the discussion below should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto. The discussion following the table is provided separately for continuing and discontinued operations. For all periods presented, our condensed consolidated statements of operations exclude the results from certain operations we plan to divest which have been classified as discontinued operations. Information related to the discontinued operations results is provided separately following the continuing operations discussion below.

	Three Months Ended						Nine Months Ended
	June 1,			May 26,			June 1,			May 26,
	2007			2006			2007			2006
Net sales		100.0	%		100.0	%		100.0	%		100.0	%
Cost of sales		94.9			94.7			94.9			94.8
Gross profit		5.1			5.3			5.1			5.2
Operating expenses:
Selling, general and administrative		3.8			4.2			3.8			4.2
Restructuring and impairment costs		1.0			0.1			0.9			0.1
Operating income		0.3			1.0			0.4			0.9
Interest income		0.3			0.5			0.2			0.5
Interest expense		(0.2	)		(0.3	)		(0.2	)		(0.3	)
Other income (expense) — net		0.3			—			0.1			—
Operating income from continuing operations before income taxes		0.7			1.2			0.5			1.1
Income tax expense		0.3			(0.4	)		0.1			—
Income from continuing operations		0.4	%		1.6	%		0.4	%		1.1	%
Discontinued operations:
Income from discontinued operations, income taxes of $0		—			—			—			0.2
Income from discontinued operations		—	%		—	%		—	%		0.2	%
Net income		0.4	%		1.6	%		0.4	%		1.3	%

Net Sales — Continuing Operations

Net sales increased $282.7 million, or 10.5%, and $1,227.7 million, or 16.0%, for the three and nine months ended June 1, 2007, respectively, as compared to the three and nine months ended May 26, 2006. The consumer market decreased by $19.6 million, or 6.2% for the three months ended June 1, 2007 and increased $201.2 million, or 26.4%, for the nine months ended June 1, 2007, as compared to the corresponding periods in fiscal 2006. The decrease in consumer end market revenue experienced in the three months ended June 1, 2007 primarily resulted from a decrease in seasonal demand and transitions to newer models. Consumer end market revenue grew in the nine months ended June 1, 2007 primarily due to new program wins and increases with existing customers in set-top boxes. Computing and storage end market revenues increased by $96.1 million, or 11.0%, and $387.9 million, or 15.4%, respectively, in the three and nine months June 1, 2007 as compared to the corresponding periods in fiscal 2006. The increase in computing and storage revenues was largely related to the new product-program wins with existing customers for both periods under comparison. Communication market revenues increased by $54.1 million, or 10.4%, and $338.7 million, or 23.7%, respectively, in the three and nine months ended June 1, 2007 as compared to the corresponding periods in fiscal 2006. Revenue increases in the communications market were primarily due to new program wins experienced during both periods. Industrial and other revenues increased by $27.3 million, or

36

7.7%, and $90.4 million, or 9.1%, respectively, in the three and nine months ended June 1, 2007, as compared to the corresponding periods of fiscal 2006. The increase in industrial and other revenues was primarily due to new customer wins and organic demand growth with existing customers. Networking revenues increased $124.7 million or 19.5%, and $209.3 million or 10.8%, respectively, for the three and nine months ended June 1, 2007, as compared to the corresponding periods in 2006. The increase in networking revenues for the three- and nine-month periods under comparison was attributable to growth in Cisco’s existing programs with us.

The following table depicts, for the periods indicated, revenue by market expressed as a percentage of net sales. The distribution of revenue across our markets has fluctuated, and will continue to fluctuate, as a result of customer demand.

	Three Months Ended						Nine Months Ended
	June 1,			May 26,			June 1,			May 26,
	2007			2006			2007			2006
Computing & Storage		32.6	%		32.4	%		32.8	%		33.0	%
Networking		25.6	%		23.6	%		24.2	%		25.4	%
Communications		19.3	%		19.3	%		19.9	%		18.6	%
Consumer		9.9	%		11.6	%		10.9	%		10.0	%
Industrial		8.4	%		9.1	%		8.2	%		8.5	%
Automotive		2.1	%		2.0	%		1.9	%		2.7	%
Other		2.1	%		2.0	%		2.1	%		1.8	%
Total		100.0	%		100.0	%		100.0	%		100.0	%

International Sales — Continuing Operations

In the three and nine months ended June 1, 2007, our international locations contributed approximately 69.5% and 70.1% of net sales compared to approximately 70.9% and 68.8% for the corresponding periods of fiscal 2006.

Major Customers — Continuing Operations

Certain customers accounted for 10% or more of our net sales. The following table includes these customers and the percentage of net sales attributed to them in the periods presented:

	Three Months Ended						Nine Months Ended
	June 1,			May 26,			June 1,			May 26,
	2007			2006			2007			2006
Cisco Systems		19.7	%		16.3	%		17.6	%		17.1	%
Nortel Networks		*			*			*			10.3	%
Hewlett-Packard		10.2	%		*			10.1	%		*

(*) Less than 10%

Our top ten customers accounted for approximately 64.1% and 63.1% of net sales for the three and nine months ended June 1, 2007, compared to approximately 61.4% and 61.1% of net sales in the corresponding periods of fiscal 2006. We cannot guarantee that these or any other customers will not increase or decrease as a percentage of our consolidated net sales either individually or as a group. Consequently, any material decrease in sales to these or other customers could materially harm our consolidated results of operations.

We believe our ability to grow depends on increasing sales to existing customers and on successfully attracting new customers. Customer contracts can be canceled and volume levels can be changed or delayed by our customers. The timely replacement of delayed, canceled or reduced orders with new business cannot be assured. In addition, we have no assurance that any of our current customers will continue to utilize our services. Consequently, in the event one or more of our current customers terminate or reduce their use of our services, our consolidated results of operations may be materially adversely affected.

37

Gross Profit — Continuing Operations

Gross profit varies from period to period and is affected by a number of factors, including product mix, production efficiencies, component costs and delivery linearity, product life cycles, unit volumes, expansion and consolidation of manufacturing facilities, utilization of manufacturing capacity, pricing, competition, and anticipated restructuring or inventory charges.

Our gross profit percentage decreased to 5.1% for the three months ended June 1, 2007 as compared to 5.3% for the corresponding period in fiscal 2006. The decrease in the three months ended June 1, 2007 in gross profit percentage is primarily attributable to execution and supply chain issues at certain services sites. Our gross profit percentage of 5.1% for the nine months ended June 1, 2007, is comparable to the corresponding period in fiscal 2006.

Sales of inventory previously written down or written off have not been significant and have not had any material impact on our gross profit for the three or nine months ended June 1, 2007.

Selling, General and Administrative (SG&A) Expenses — Continuing Operations

SG&A expenses amounted to $112.1 million and $112.2 million for the three months ended June 1, 2007 and 2006, respectively. SG&A expenses increased $14.7 million, or 4.5%, for the nine months ended June 1, 2007, compared to the corresponding period in fiscal 2006. As a percentage of net sales, SG&A expenses decreased to 3.8% and 3.8% for the three and nine months ended June 1, 2007 as compared to 4.2% for the three months ended May 26, 2006 and 4.3% for the nine months ended May 26, 2006. The decrease as a percentage of net sales was primarily attributable to an increase in net sales for the three and nine months ended June 1, 2007.

Restructuring and Impairment — Continuing Operations

Total restructuring and impairment charges were $29.6 million and $80.7 million during the three and nine months ended June 1, 2007, respectively.

During the third quarter of fiscal 2007, the Company incurred restructuring costs of approximately $29.6 million primarily related to $25.9 million of severance expenses resulting from the adoption of the Fiscal Year 2007 Phase I and Phase II Restructuring Plans. In addition, restructuring costs included the following: $0.9 million of charges arising from the disposition of a leased facility and changes in estimates for lease termination costs on restructured facilities; $2.0 million of transfer and other exit costs; and $0.8 million of equipment and facilities impairment charges.

The restructuring and impairment charges of $2.6 million incurred during the third quarter of fiscal 2006 primarily related to Fiscal Year 2005 Restructuring Plan consisted of $1.8 million of charges arising from the abandonment of a leased facility and changes in lease estimates relative to restructured facilities; $0.8 million of transfer and other exit costs; $0.2 million of equipment and facilities impairment charges; and a net reduction to the severance provision of $0.2 million due to changes in planned severance actions. Included in these amounts is a $0.7 million reversal related to a release of an accrual established under acquisition accounting that is no longer required.

Fiscal Year 2007 Phase II Restructuring Plan

On March 26, 2007, the Solectron Board of Directors approved the Fiscal Year 2007 Phase II Restructuring Plan, pursuant to Solectron’s phased approach to restructuring announced in the first quarter of fiscal 2007, to further optimize its global footprint and reduce its cost structure. Solectron estimates that total charges related to this phase of restructuring will be between $35 million to $45 million, of which approximately 90% represents cash expenditures. The restructuring plan consists of the following measures:

•  Close or consolidate approximately 400,000 square feet of facilities in Western Europe and North America.

•  Reduce approximately 1,300 to 1,500 employees at the facilities being closed or consolidated.

38

•  Impair certain long-lived assets (primarily buildings and leasehold improvements) in connection with the facilities being vacated and equipment made excess or obsolete to the extent that we would be unable to recover their carrying value upon sales to third parties.

Total estimated charges consist of (i) $23 million to $30 million related to severance costs, (ii) $9 million to $12 million related to leased facility liabilities and transfer and other exit costs and (iii) an estimated non-cash charge of $3 million related to disposition or impairment of facilities and equipment, $1.3 million of which was impaired at the end of the second quarter of fiscal 2007.

Cumulative restructuring costs recorded under the Fiscal 2007 Phase II Restructuring Plan as of June 1, 2007 were $25.4 million. This consisted of $23.7 million in severance, $1.3 million in impairment charges on facilities and equipment (impaired at the end of the second quarter of fiscal 2007) and $0.4 million of transfer costs, other expenses and leased facilities expenses.

As of June 1, 2007, Solectron has reduced its workforce by 90 personnel in connection with this plan and expects to reduce headcount by an additional 1,200 to 1,400 personnel prior to the completion of this plan. The remaining accrual balance of $22.4 million consists primarily of existing severance commitments for 1,200 to 1,400 personnel, the majority of which will be paid by December 31, 2007.

Currently, Solectron estimates that the Fiscal Year 2007 Phase II Restructuring Plan will realize a savings of approximately $0.005 per share quarterly once fully implemented due to reductions in workforce, facility, lease and depreciation expenses. Cash payments associated with the Fiscal Year 2007 Phase II Restructuring Plan scheduled in the next 12 months, which have already been accrued for, are expected to be $22 million

Fiscal Year 2007 Phase I Restructuring Plan

On October 2, 2006, the Solectron Board of Directors approved the Fiscal Year 2007 Phase I Restructuring Plan to optimize its global footprint and reduce its cost structure. Solectron anticipates that total charges related to this restructuring plan will be between $50 million to $60 million. Total estimated charges consist of (i) $32 million to $39 million related to severance costs, (ii) $10 million to $13 million related to leased facility liabilities and transfer and other exit costs and (iii) an estimated non-cash charge of $8 million related to disposition of facilities and equipment. The restructuring plan consists of the following measures:

•  Closing or consolidating approximately 700,000 square feet of facilities in Western Europe and North America.

•  Reducing approximately 1,200 to 1,400 employees at the facilities being closed or consolidated. Although there may be a potential decrease from the original plan estimate of 1,400 employees, severance costs will still be in the range provided.

•  Impair certain long-lived assets (primarily buildings and leasehold improvements) in connection with the facilities being vacated and equipment made excess or obsolete to the extent that we would be unable to recover their carrying value upon sales to third parties.

Cumulative restructuring costs recorded under the Fiscal 2007 Phase I Restructuring Plan as of June 1, 2007 were $50.0 million. This consists of $39.1 million in severance, $5.1 million in impairment charges on facilities and equipment (which includes $3.1 million recorded in the last quarter of fiscal year 2006), and $5.8 million of transfer costs, other expenses and leased facilities expenses.

As of June 1, 2007, Solectron has reduced its workforce by 1,050 personnel in connection with this plan and expects to reduce headcount by an additional 150 to 350 personnel prior to the completion of this plan. The remaining accrual balance of $13.1 million is primarily related to existing severance commitments for 150 to 350 personnel, the majority of which will be paid by November 30, 2007.

In certain circumstances, severance accruals may not be required. This may result from re-employment outside of Solectron or failure to file for severance benefits. When it is determined that accruals are no longer required in these situations, the Company reverses the accruals through the income statement line item originally charged. The restructuring plan is expected to be complete within 12 months of the October 2006 Board approval of the plan.

39

Currently, Solectron estimates that the Fiscal Year 2007 Phase I Restructuring Plan will realize a savings of approximately $0.01 per share quarterly once fully implemented due to reductions in workforce, facility, lease and depreciation expenses. Cash payments associated with the Fiscal Year 2007 Phase I Restructuring Plan scheduled in the next 6 months, which have already been accrued for, are expected to be $11 million.

We continue to evaluate our operations and we may propose future restructuring actions as a result of changes in market conditions and footprint alignment with our customers’ production needs.

Interest Income — Continuing Operations

Interest income decreased $4.8 million to $7.5 million for the three months ended June 1, 2007 from $12.3 million in the corresponding period in fiscal 2006 as a result of the Company liquidating its short-term investments during the second quarter of fiscal 2007. Interest income decreased $11.6 million to $25.1 million for the nine months ended June 1, 2007 from $36.7 million in the corresponding period in fiscal year 2006. For the nine months ended June 1, 2007, the decrease in interest income was primarily due to lower cash balances and lower effective yield in the first, second and third quarter of fiscal 2007, when compared to the corresponding periods in fiscal 2006.

Interest Expense — Continuing Operations

Interest expense decreased $1.7 million to $5.5 million for the three months ended June 1, 2007 from $7.2 million in the corresponding period in fiscal 2006. For the nine months ended June 1, 2007, interest expense decreased $2.9 million to $17.9 million from $20.8 million in the corresponding period in fiscal 2006. The decreases were primarily due to the Company’s redemption of its ACES debentures in the first quarter of fiscal 2007.

Other Income (Expense) — net — Continuing Operations

Other income (expense) — net amounted to income of $8.7 million and $5.9 million for the three and nine months ended June 1, 2007, respectively. Other income (expense) — net amounted to expense of $0.8 million for the three and nine months ended June 1, 2006. Other income (expense) — net, for the three months ended June 1, 2007 consisted primarily of foreign currency gains of $10.9 million due to the favorable fluctuations in the foreign currencies of certain regions where the Company does not hedge; offset by $2.2 million of miscellaneous items.

Income Taxes — Continuing Operations

Our income tax expense was $8.2 million and $13.0 million for the three and nine months ended June 1, 2007, respectively, as compared to $10.7 million income tax benefit and $0.8 million income tax benefit for the three and nine months ended May 26, 2006, respectively. We incurred net tax expense in certain countries in which we had profitable operations during the periods ended June 1, 2007 and May 26, 2006. Income tax expense for the nine months ended June 1, 2007 includes the recognition of benefits of $4.4 million associated with a refund of taxes paid on the earnings by reinvesting the earnings of a foreign subsidiary.

The effective income tax rate is largely a function of the balance between income and losses from international and domestic operations. Our international operations, taken as a whole, have been subject to tax at a lower rate than operations in the United States, primarily due to tax holidays granted to certain of our overseas sites in Malaysia and Singapore and from benefits resulting from reinvesting the earnings of three of our international operations. The Malaysian tax holiday is effective through January 2012, and the Singapore tax holiday is effective through March 2011. Both tax holidays are subject to certain conditions, including maintaining levels of research and development expenditures, incremental fixed asset expenditures, or qualifying headcount. During the nine months ended June 1, 2007, the Company included in its computation of its estimated annual effective income tax rate for fiscal 2007, $1.9 million of discrete benefit resulting from taxes refunded on previously taxed earnings by reinvesting such earnings of one of the international operations. Beginning January 1, 2007, the Company has decided to no longer apply for reinvestment of earnings, as a change in tax law eliminates the reinvestment tax refund provision for tax years beyond calendar year 2006.

40

Certain of our offshore operations are reporting taxable profits, mostly arising in low-cost locations. Accordingly, we are recognizing some tax expense related to those operations. We will not be able to offset this tax expense with unrecognized deferred tax assets, because, for the most part, those assets did not arise in the jurisdictions where we are realizing taxable profits.

In addition, Solectron has established contingency reserves for income taxes in various jurisdictions. The estimate of appropriate tax reserves is based upon the probable amount of prior tax benefit that is at risk upon audit and upon the reasonable estimate of the amount at risk. Solectron periodically reassesses the amount of such reserves and adjusts reserve balances as necessary.

In the three months ended May 26, 2006, the IRS completed its field examination of the Company’s federal income tax returns for fiscal years 2001 and 2002 and issued a Revenue Agent’s Report (“RAR”). The RAR is not a final Statutory Notice of Deficiency, and the Company filed a protest during the quarter ended August 25, 2006 to protest certain of the proposed adjustments with the Appeals Office of the IRS. Although the outcome of the Appeals process is always uncertain, the Company believes that adequate amounts of tax and interest have been provided for any adjustments that are expected to result for these years.

During the second quarter of fiscal 2007, the IRS issued a final Statutory Notice of Deficiency for the disallowance of a loss associated with a transaction entered into by a domestic subsidiary in a tax year prior to the subsidiary’s acquisition by Solectron. The Company did not record an additional accrual related to this item during the quarter, as it believes that adequate amounts of tax and interest have already been provided for. During the three months ended June 1, 2007, the Company filed a petition with the US Tax Court for redetermination of the deficiency set forth by the IRS.

In the three months ended March 2, 2007, the Company recorded an additional accrual for a potential penalty assessment by a foreign tax authority related to the late payment of withholding taxes. The recorded amount represents management’s best estimate of the cost it will incur in relation to the exposure, but there is a reasonable possibility that the amounts that may be assessed will differ from the estimate.

Liquidity and Capital Resources

Cash

Cash, cash equivalents and short-term investments remained unchanged at approximately $1.2 billion at June 1, 2007 as compared to the balance at August 25, 2006. The table below, for the periods indicated, provides selected condensed consolidated cash flow information (in millions):

	Nine Months Ended
	June 1,			May 26,
	2007			2006
Net cash provided by (used) in operating activities of continuing operations	$	184.3		$	(104.9	)
Net cash used in operating activities of discontinued operations		(2.5	)		(8.2	)
Net cash provided by (used) in operating activities	$	181.8		$	(113.1	)
Net cash used in investing activities of continuing operations	$	(94.7	)	$	(160.6	)
Net cash provided by investing activities of discontinued operations		—			17.1
Net cash used in investing activities	$	(94.7	)	$	(143.5	)
Net cash used in financing activities of continuing operations	$	(40.8	)	$	(204.3	)
Net cash provided by (used in) financing activities of discontinued operations		2.5			(8.9	)
Net cash used in financing activities	$	(38.3	)	$	(213.2	)

Net cash provided by operating activities of continuing operations was $184.3 million during the nine months ended June 1, 2007. The change in net cash from operating activities was primarily due to a $453.6 million increase in accounts payable; non-cash depreciation and amortization charges of $124.5 million; and a $60.8 million increase in accrued expenses and other current liabilities. This was partially offset by a $314.7 million increase in inventories, a $133.6 million increase in prepaid expenses and other assets and a $64.3 million increase in accounts

41

receivable. The inventory and accounts payable increase was primarily attributable to the inventory purchase resulting from the launch of the Cisco Systems Lean Initiative.

Net cash used in operating activities of continuing operations was $104.9 million during the nine months ended May 26, 2006, which was generated by a $371.7 million increase in inventories and a $168.2 million increase in accounts receivable. This was partially offset by non-cash depreciation and amortization charges of $130.4 million and a $246.6 million increase in accounts payable. The inventory and accounts payable increases were attributable to new program ramps, certain program launch delays and the creation of buffer stock to accommodate both program transfers between sites and the go-live date of a new ERP system at one of our facilities.

Net cash used in investing activities of continuing operations of $94.7 million during the nine months ended June 1, 2007 primarily consisted of $125.8 million in capital expenditures; $18.1 million of acquisitions, net of cash received; and a $13.2 million purchase of facilities previously under synthetic lease. This was offset by proceeds from the sale of property and equipment of $24.7 million and cash provided of $22.9 million from the sale of “available for sale” securities.

Net cash used in investing activities of continuing operations was $160.6 million during the nine months ended May 26, 2006 which primarily consisted of $155.6 million in capital expenditures.

Net cash used in financing activities of continuing operations of $40.8 million during the nine months ended June 1, 2007 primarily consisted of $64.3 million of payments made to redeem the 7.97% Adjustable Conversion-Rate Equity Securities (ACES) and $10.0 million of share repurchases.

Net cash used in financing activities of continuing operations was $204.3 million during the nine months ended May 26, 2006 and primarily consisted of $205.7 million of share repurchases and $150 million of payments to redeem the 7.375% Senior Notes, partially offset by $147.4 million in net proceeds from the issuance of our 8% senior subordinated notes due 2016.

Net cash used in operating activities of discontinued operations during the nine months ended June 1, 2007 primarily relate to $1.9 million of ongoing facility carrying costs and a payment of $0.6 million for a sales tax assessment made on behalf of a discontinued operation.

Debt

On August 28, 2006, Solectron entered into a $350 million Credit Agreement (“the Credit Agreement”) that amends and replaces a $500 million secured revolving facility. The Credit Agreement provides for a revolving, multicurrency, secured-credit facility, which may be used to borrow revolving loans or issue standby letters of credit, subject to a $100 million letter of credit sub-limit. The Company may request an increase in the credit facility of up to an additional $150 million, to provide for an aggregate commitment of up to $500 million. There are currently no revolving loans outstanding and approximately $0.6 million in letters of credit outstanding under the Credit Agreement. The revolving loans under the Credit Agreement bear interest, at the Company’s option, at either (i) the base rate, which is defined as a fluctuating rate per annum equal to the greater of (A) Bank of America N.A.’s prime rate, or (B) the average rate on overnight federal funds plus one-half of one percent, or (ii) a rate equal to (A) the London Inter-bank Offered Rate (LIBOR) plus (B) an applicable margin ranging from 1.0% to 2.0% based on Solectron’s non-credit-enhanced senior unsecured long-term debt ratings. The Credit Agreement matures on August 28, 2009 and may be prepaid at any time without penalty or premium at the option of the Company.

The obligations under the Credit Agreement are guaranteed by the Company’s existing and future material domestic subsidiaries, and such obligations, including the guarantees, are secured by: (i) the Company’s and its domestic subsidiaries’ accounts receivable, equipment and inventory, (ii) a pledge of the capital stock of the Company’s material domestic subsidiaries, (iii) a pledge of 65% of the capital stock of the Company’s material first-tier foreign subsidiaries, and (iv) a pledge of certain inter-company indebtedness among the Company and certain of its subsidiaries. In the event that the Company’s issuer credit rating of BB/Ba3 (stable/stable) or BB-/Ba2 (stable/stable) or higher from Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc., respectively, the liens on the collateral described in clause (i) above will be released. Solectron is subject to compliance with certain financial covenants set forth in this facility including, but not limited to, capital expenditures, cash interest coverage ratio and leverage ratio. Solectron was in compliance with all applicable covenants as of June 1, 2007.

42

In addition, we had no committed foreign lines of credit and $150.0 million in uncommitted foreign lines of credit and other bank facilities as of June 1, 2007. These lines of credit are guaranteed by Solectron. A committed line of credit obligates a lender to loan us amounts under the credit facility as long as we adhere to the terms of the credit agreement. An uncommitted line of credit is extended to us at the sole discretion of a lender. The interest rates range from the bank’s prime lending rate to the bank’s prime rate plus 1.0%. As of June 1, 2007, we had $63.3 million of borrowings under uncommitted foreign lines of credit and $2.1 million of guaranteed amounts under uncommitted foreign lines of credit.

$64.3 million aggregate principal amount of our 7.97% ACES debentures was due November 15, 2006 and repaid per the terms of the indenture.

Restricted Cash

During the first quarter of fiscal 2006, Solectron elected to put in place a line of credit for the issuance of standby letters of credit. The letters of credit are principally related to self-insurance for workers compensation liability coverage. These standby letters of credit were previously issued under Solectron’s revolving credit facility. Solectron opted to post cash collateral totaling 105% of the standby letter of credit balances in order to reduce annual issuance commissions of the standby letters of credit. Total cash collateral of $16.8 million at June 1, 2007, is classified as restricted cash and cash equivalents in the condensed consolidated balance sheets.

Off-Balance Sheet Arrangements and Contractual Obligations

Our off-balance sheet arrangements consist of operating leases, our foreign exchange contracts (described in the “We are exposed to fluctuations in foreign currency exchange rates and interest rate fluctuations” Risk Factor), and certain indemnification provisions related to our divestitures (described in the “Discontinued Operations” section below).

A tabular presentation of our contractual obligations is provided below under “Contractual Obligations and Commitments.”

Contractual Obligations and Commitments

We believe that our current cash, cash equivalents, short-term investments, lines of credit and cash anticipated to be generated from continuing operations will satisfy our expected working capital, capital expenditures, debt service and investment requirements through at least the next 12 months.

The following is a summary of certain contractual obligations and commitments as of June 1, 2007 for continuing operations:

	Payment Due by Period
			Short-
	Total		Term		Q4 ’08		FY09		FY10		FY11		FY12		Thereafter
	(In millions)
Debt(1)	$	673.8	$	64.0	$	0.1	$	0.5	$	8.2	$	451.0	$	—	$	150.0
Interest expense on long-term debt		118.1		14.7		1.3		14.5		14.5		13.1		12.0		48.0
Operating lease		148.7		37.9		8.5		30.4		23.0		14.5		12.0		22.4
Operating leases for restructured facilities and equipment		18.5		8.4		1.2		3.6		3.1		1.4		0.4		0.4
Purchase obligations(2)		362.8		362.3		—		—		0.5		—		—		—
	$	1,321.9	$	487.3	$	11.1	$	49.0	$	49.3	$	480.0	$	24.4	$	220.8

(1)	Total debt includes capital lease commitments of $1.6 million.
(2)	We have various purchase commitments for materials, supplies and services incurred during the normal course of business.

43

Other long-term liabilities of $36.2 million disclosed in the condensed consolidated balance sheet include deferred tax liabilities related to timing differences and non-US pension liabilities, which due to their nature are not projected.

Discontinued Operations

During fiscal 2004, as a result of a full review of our portfolio of businesses, we committed to a plan to divest a number of business operations that were no longer part of our strategic plan for the future. In accordance with SFAS No. 144, we have reported the results of operations and financial position of these businesses in discontinued operations within the consolidated statements of operations and balance sheets for all periods presented. The companies that we have divested and that are currently included in discontinued operations are Solectron’s MicroTechnology division, Stream International Inc. and Force Computers, Inc.

The collective results from all discontinued operations for all periods presented were as follows (in millions):

	Three Months Ended						Nine Months Ended
	June 1,			May 26,			June 1,			May 26,
	2007			2006			2007			2006
Net sales	$	—		$	—		$	—		$	—
Cost of sales		—			—			—			—
Gross profit		—			—			—			—
Operating expense (income) — net		0.1			0.4			1.0			(7.8	)
Operating (loss) income		(0.1	)		(0.4	)		(1.0	)		7.8
Other income — net		—			—			—			8.9
(Loss) income before income taxes, income taxes of $0		(0.1	)		(0.4	)		(1.0	)		16.7
(Loss) income from discontinued operations, net of tax	$	(0.1	)	$	(0.4	)	$	(1.0	)	$	16.7

During the first quarter of fiscal 2007, Solectron recorded $0.6 million of costs related to a sales tax assessment and ongoing facility carrying costs. During the second quarter of fiscal 2007, Solectron recorded $0.3 million of costs related to a foreign tax assessment formerly associated with a discontinued operation. During the third quarter of fiscal 2007, Solectron recorded $0.1 million of costs related to a foreign tax assessment formerly associated with a discontinued operation.

During the first quarter of fiscal 2006, Solectron recorded a $2.1 million gain on the sale of assets of discontinued operations having no remaining book value and $1.7 million associated with the favorable resolution of certain contingencies. During the second quarter of fiscal 2006, Solectron recorded a $2.1 million gain on the sale of assets formerly associated with a discontinued operation and a $1.8 million gain associated with the favorable resolution of certain contingencies.

The sale agreements for all the divestitures contain certain indemnification provisions pursuant to which Solectron may be required to indemnify the buyer of the divested business for liabilities, losses, or expenses arising out of breaches of covenants and certain breaches of representations and warranties relating to the condition of the business prior to and at the time of sale. In aggregate, Solectron is contingently liable for up to $94.8 million for claims submitted within a period of 12 to 24 months subsequent to the completion of the sale. As of June 1, 2007, most of these indemnification provisions have expired, and there were no significant claims received or significant liabilities recorded under these indemnification obligations. Additionally, Solectron may be required to indemnify a buyer for certain environmental remediation costs until 2014, such indemnification not to exceed $13 million. Solectron maintains an insurance policy to cover environmental remediation liabilities in excess of reserves previously established upon the acquisition of these properties. Solectron did not record any environmental charges upon disposition of these properties.

44

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

We have currency exposure arising from both sales and purchases denominated in currencies other than the functional currency of our sites. Fluctuations in the rate of exchange between the currency of the exposure and the functional currency of our sites could seriously harm our business, operating results and consolidated financial condition.

As of June 1, 2007, we had outstanding foreign exchange forward contracts with a total notional amount of approximately $423.7 million related to continuing operations. The change in value of the foreign exchange forward contracts resulting from a hypothetical 10% change in foreign exchange rates would be offset by the remeasurement of the related balance sheet items, the result of which would not be significant.

The primary objective of our investment activities is to preserve principal, while at the same time maximize yields without significantly increasing risk. To achieve this objective, we maintain our portfolio of cash equivalents in a variety of securities, including government and corporate obligations, certificates of deposit and money market funds. As of June 1, 2007, substantially our entire portfolio was scheduled to mature in less than three months. A hypothetical 10% change in interest rates would not have a material effect on the fair value of our investment portfolios.

Item 4.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures.  Based on their evaluation as of the end of the period covered by this Report, Solectron’s principal executive officer and principal financial officer have concluded that Solectron’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective to ensure that information required to be disclosed by Solectron in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in internal control over financial reporting.  There were no changes in Solectron’s internal control over financial reporting during the third quarter of fiscal 2007 or in other factors that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

Solectron is from time to time involved in various litigation and legal matters arising in the normal course of its business operations. Management believes that the final resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, cash flows, or results of operations. By describing any particular matter, Solectron does not intend to imply that it or its legal advisors have concluded or believe that the outcome of any of those particular matters is or is not likely to have a material adverse impact upon Solectron’s consolidated financial position, cash flows or results of operations.

On June 4, 2007, a purported class action complaint has been filed alleging breach of fiduciary duty of the directors of Solectron in the Superior Court of the State of California, County of Santa Clara, seeking to enjoin the proposed merger between Solectron and Flextronics. While this case is in the early stages, Solectron believes that it is without merit. Any judgments, however, in respect of this or similar lawsuits that are adverse to Flextronics and Solectron may adversely affect Flextronics and Solectron’s ability to consummate the merger.

45

Item 1a.   Risk factors

The following risk factors should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that our management currently deems immaterial also may impair our business operations. If any of the risks described below were to occur, our business, operating results and consolidated financial condition could be materially adversely affected.

Risks Relating to our Business

Most of our sales come from a small number of customers; if we lose any of these customers, our net sales could decline significantly.

Most of our annual net sales come from a small number of our customers. Our ten largest customers accounted for approximately 64.1% and 61.4% of net sales from continuing operations in the third quarter of fiscal 2007 and 2006, respectively. During the third quarter of fiscal 2007, two of these customers individually accounted for more than ten percent of our net sales. Any material delay, cancellation or reduction of orders from these or other major customers could cause our sales to decline significantly, and we may not be able to reduce the accompanying expenses at the same time. We cannot guarantee that we will be able to retain any of our largest customers or any other accounts, or that we will be able to realize the expected revenues under existing or anticipated supply agreements with these customers. Our earnings per share, cash flow and results of operations will continue to depend significantly on our ability to obtain orders from new customers, retain existing customers, realize expected revenues under existing and anticipated agreements, as well as on the financial condition and success of our customers and their customers.

Our customers may cancel their orders, change production quantities or locations, or delay production.

To remain competitive, EMS companies must provide their customers increasingly rapid product turnaround, at increasingly competitive prices. We generally do not have long-term contractual commitments from our top customers. As a result, we cannot guarantee that we will continue to receive any orders or revenues from our customers. Customers may cancel orders at their sole discretion, change production quantities or delay production for a number of reasons outside of our control. Many of our customers have experienced from time to time significant decreases in demand for their products and services, as well as continual material price competition and sales price erosion. This volatility has resulted, and will continue from time to time to result, in our customers delaying purchases on the products we manufacture for them, and placing purchase orders for lower volumes of products than previously anticipated. Cancellations, reductions or delays by a significant customer or by a group of customers would seriously harm our results of operations by lowering, eliminating or deferring revenue without substantial offsetting reductions in our costs thereby reducing our profitability. In addition, customers may require that manufacturing of their products be transitioned from one of our facilities to another of our facilities to achieve cost reductions and other objectives. Such transfers, if unanticipated or not properly executed, could result in various inefficiencies and increased costs, including excess capacity and overhead at one facility and capacity constraints and related strains on our resources at the other, disruption and delays in product deliveries and sales, deterioration in product quality and customer satisfaction, and increased manufacturing and scrap costs all of which would have the effect of reducing our profits.

Our business has low operating margins and any increase in cost of sales or operating expenses could have a material adverse effect on our profitability.

Our business generates low operating margins. Increases in cost of sales or operating expenses without corresponding increases in net sales would have a material adverse effect on the profitability of the Company on a consolidated basis.

We may not be able to sell excess or obsolete inventory to customers or third parties, which could have a material adverse impact on our consolidated financial condition.

The majority of our inventory purchases and commitments are based upon demand forecasts that our customers provide to us. The customers’ forecasts, and any changes to the forecasts, including cancellations,

46

may lead to on-hand inventory quantities and on-order purchase commitments that are in excess of the customers’ revised needs, or on-hand inventory that becomes obsolete. If our contracts with customers do not require our customers to purchase, or our customers do not comply with contractual obligations to purchase, excess or obsolete inventory, our results of operations could be materially harmed. In recent years some of our OEM customers have experienced declining revenue, large losses, negative cash flows, and bankruptcies or defaults on borrowing arrangements. There is a risk that, in the future, these or other customers may not purchase inventory back from us despite contractual obligations, which could harm our results of operations. In addition, enforcement of these supply agreements may result in material expenses, delays in payment for inventory or disruptions in our customer relationships.

In addition, we are generally responsible for excess and obsolete inventory resulting from inventory purchases in excess of inventory needed to meet customer demand forecasts at the time the purchase commitments were made, as well as any inventory purchases outside those provided for in our agreements. For inventory which is not the customer’s responsibility, provisions are made when required to reduce any such excess or obsolete inventory to its estimated net realizable value, based on the quantity of such inventory on hand, our customers’ latest forecasts of production requirements, and our assessment of available disposition alternatives such as use of components on other programs, the ability and cost to return components to the vendor, and our estimates of resale values and opportunities. These assessments are based upon various assumptions and market conditions which are subject to rapid change, or which may ultimately prove to be inaccurate. Any material changes in our assumptions or market conditions could have a significant effect on our estimates of net realizable value, could necessitate material changes in our provisions for excess and obsolete inventory, and could have a material adverse impact on our consolidated financial condition. In addition, in the normal course of business, bona fide disagreements may arise over the amount or timing of such claims, and in order to avoid litigation expenses, collection risks, or disruption of customer relationships, we may elect to settle such disputes for lesser amounts than we believe we should be entitled to recover. In these instances, we must bear the economic loss of any such excess or obsolete inventory, which could have a material adverse impact on our consolidated financial condition.

We are exposed to risks associated with operating internationally.

Approximately 69.5% and 70.9% of our net sales from continuing operations are the result of services and products manufactured in countries outside the United States during the third quarter of fiscal 2007 and 2006, respectively. As a result of our foreign sales and facilities, our operations are subject to a variety of risks and costs that are unique to international operations, including the following:

•  adverse movement of foreign currencies against the U.S. dollar in which our results are reported;

•  import and export duties, and value added taxes;

•  import and export regulation changes that could erode our profit margins or restrict exports or imports;

•  potential restrictions on the transfer of funds;

•  government and license requirements governing the transfer of technology and products abroad;

•  disruption of local labor supply or transportation services;

•  inflexible employee contracts in the event of business downturns;

•  potential disruption related to organized labor stoppages;

•  the burden and cost of compliance with import and export regulations and foreign laws;

•  economic and political risks in emerging or developing economies;

•  risks of conflict and terrorism that could disrupt our or our customers’ and suppliers’ businesses; and

•  increased risk of improper payments or inappropriate business activities.

We have been granted tax holidays, which are effective through 2012 and 2011, subject to some conditions, for our Malaysian and Singapore sites, respectively. It is possible that the current tax holidays will be terminated or

47

modified or that future tax holidays that we may seek will not be granted. If the current tax holidays are terminated or modified, or if additional tax holidays are not granted in the future or when our current tax holidays expire, our future effective income tax rate could increase.

Possible fluctuation of operating results from quarter to quarter and factors out of our control could affect the market price of our securities.

Our quarterly earnings or stock price may fluctuate in the future due to a number of factors including the following:

•  differences in the profitability of the types of manufacturing services we provide. For example, high velocity and low complexity printed circuit boards and systems assembly services have typically lower gross profit than low volume/complex printed circuit boards and systems assembly services;

•  our ability to maximize the hours of use of our equipment and facilities is dependent on the duration of the production run time for each job and customer;

•  the amount of automation that we can use in the manufacturing process for cost reduction varies, depending upon the complexity of the product being made;

•  our customers’ demand for our products and their ability to take delivery of our products and to make timely payments for delivered products;

•  our ability to optimize the ordering of inventory as to timing and amount to avoid holding inventory in excess of immediate production needs;

•  our ability to offer technologically advanced, cost-effective, quick response manufacturing services;

•  our ability to drive down manufacturing costs in accordance with customer and market requirements, which is dependent upon our ability to apply Lean Six Sigma operating principles;

•  fluctuations in the availability and pricing of components;

•  timing of expenditures in anticipation of increased sales;

•  cyclicality in our target markets;

•  fluctuations in our market share;

•  fluctuations in currency exchange rates;

•  expenses and disruptions associated with acquisitions and divestitures;

•  announcements of operating results and business conditions by our customers;

•  announcements by our competitors relating to new customers, technological innovation or new services;

•  economic developments in the electronics industry as a whole;

•  credit rating and stock analyst downgrades;

•  our ability to successfully implement changes to our enterprise resource planning systems;

•  political and economic developments in countries in which we have operations; and

•  general market conditions.

If our operating results in the future are below the expectations of securities analysts and investors, the market price of our outstanding securities could be harmed.

48

If we incur more restructuring-related charges than currently anticipated, our consolidated financial condition and results of operations may suffer.

We incurred approximately $29.6 million of restructuring and impairment costs relating to continuing operations in the third quarter of fiscal 2007 and approximately $2.6 million during the third quarter of fiscal 2006, and we anticipate incurring approximately $16.0 million to $24.0 million of restructuring and impairment costs in total under the Fiscal 2007 Phase I and Fiscal 2007 Phase II Restructuring Plans during the next twelve months. If our estimates about previous and currently contemplated restructuring charges prove to be incorrect, our consolidated financial condition and results of operations may suffer. While we believe our capacity is appropriate for current revenue levels, we continue to evaluate our cost structure relative to future financial results and customer demand. If our estimates about future financial results and customer demand prove to be incorrect, our consolidated financial condition and consolidated results of operations may suffer.

Failure to attract and retain key personnel and skilled associates could hurt our operations.

Our continued success depends to a large extent upon the efforts and abilities of key managerial and technical associates. Losing the services of key personnel could harm us. Our business also depends upon our ability to continue to attract and retain key executives, senior managers and skilled associates. Our failure to attract and retain key personnel, a high rate of turnover and the loss of key employees in recent quarters could harm our business. The difficult business environment associated with the EMS industry in general and the results generated by the Company in particular have made it increasingly difficult to attract and retain key personnel at compensation levels proportionate to the return provided to the Company’s shareholders. This risk is particularly high as we compete for talent from a broad range of industries. While the Company established an executive retention program in the second quarter of fiscal 2007, there can be no assurance that this program will be successful in retaining the targeted executive officers. In addition, there is no guarantee that the Company will be able to attract and retain the necessary personnel in the future in a manner that does not impact the Company’s profitability.

We depend on limited or sole source suppliers for critical components. The inability to obtain sufficient components as required, and under favorable purchase terms, would harm our business.

We are dependent on certain suppliers, including limited and sole source suppliers, to provide key components used in our products. We have experienced, and may continue to experience, delays in component deliveries, which in turn could cause delays in product shipments and require the redesign of certain products. In addition, if we are unable to procure necessary components under favorable purchase terms, including at favorable prices and with the order lead-times needed for the efficient and profitable operation of our factories, our results of operations could suffer. The electronics industry has experienced in the past, and may experience in the future, shortages in semiconductor devices, including application-specific integrated circuits, DRAM, SRAM, flash memory, certain passive devices such as tantalum capacitors, and other commodities that may be caused by such conditions as overall market demand surges or supplier production capacity constraints. The inability to continue to obtain sufficient components as and when required, or to develop alternative sources as and when required, could cause delays, disruptions or reductions in product shipments or require product redesigns which could damage relationships with current or prospective customers, and increase inventory levels and costs, thereby causing harm to our business.

We potentially bear the risk of price increases associated with shortages in electronics components.

At various times, there have been shortages of components in the electronics industry leading to increased component prices. One of the services that we perform for many customers is purchasing electronics components used in the manufacturing of the customers’ products. As a result of this service, we potentially bear the risk of price increases for these components if we are unable to purchase components at the pricing level anticipated to support the margins assumed in our agreements with our customers.

49

Our net sales could decline if our competitors provide comparable manufacturing services and improved products at a lower cost.

We compete with a number of different contract manufacturers, depending on the type of service we provide or the geographic locale of our operations. Our industry is intensely competitive and many of our competitors may have greater manufacturing, financial, R&D or marketing resources than we have. In order to compete, we may have to provide our manufacturing and other services at lower margins, or we may lose customers. In addition, we may not be able to offer prices as low as some of our competitors because those competitors may have lower cost structures as a result of their geographic location or the services they provide, or because such competitors are willing to accept business at lower margins in order to utilize more of their excess capacity. In that event, our net sales would decline. We also expect our competitors to continue to improve the performance of their current products or services, to reduce their current products or service sales prices and to introduce new products or services that may offer greater value-added performance and improved pricing. If we are unable to improve our capabilities substantially, any of these could cause a decline in sales, loss of market acceptance of our products or services and corresponding loss of market share, or profit margin compression. We have experienced instances in which customers have transferred all or certain portions of their business to competitors in response to more attractive pricing quotations than we have been willing to offer to retain such customers, and there can be no assurance that we will not lose business in the future in response to such competitive pricing or other inducements which may be offered by our competitors.

We depend on the continuing trend of OEMs to outsource.

A substantial factor in our past revenue growth was attributable to the transfer of manufacturing and supply-based management activities from our OEM customers. Future growth is partially dependent on new outsourcing opportunities. To the extent that these opportunities are not available, our future growth would be unfavorably impacted.

Our strategic relationships with major customers create risks.

In the past several years, we completed several strategic transactions with OEM customers. Under these arrangements, we generally acquired inventory, equipment and other assets from the OEM, and leased (or in some cases acquired) their manufacturing facilities, while simultaneously entering into multi-year supply agreements for the production of their products. There has been strong competition among EMS companies for these transactions, and this competition may continue to be a factor in customers’ selection of their EMS providers. These transactions contributed to a significant portion of our past revenue growth, as well as to a significant portion of our more recent restructuring charges and goodwill and intangible asset impairments. While we do not anticipate our acquisitions of OEM plants and equipment in the near future to return to the levels at which they occurred in the recent past, there may be occasions on which we determine it to be advantageous to complete acquisitions in selected geographic or industry markets. As part of such arrangements, we would typically enter into supply agreements with the divesting OEMs, but such agreements generally do not require any minimum volumes of purchases by the OEM and the actual volume of purchases may be less than anticipated. Arrangements, which may be entered into with divesting OEMs typically would involve many risks, including the following:

•  we may pay a purchase price to the divesting OEMs that exceeds the value we are ultimately able to realize from the future business of the OEM;

•  the integration into our business of the acquired assets and facilities may be time-consuming and costly;

•  we, rather than the divesting OEM, would bear the risk of excess capacity;

•  we may not achieve anticipated cost reductions and efficiencies;

•  we may be unable to meet the expectations of the OEM as to volume, product quality, timeliness and cost reductions; and

•  if demand for the OEM’s products declines, the OEM may reduce its volume of purchases, and we may not be able to sufficiently reduce the expenses of operating the facility or use the facility to provide services to

50

other OEMs, and we might find it appropriate to close, rather than continue to operate, the facility, and any such actions would require us to incur significant restructuring and/or impairment charges.

As a result of these and other risks, we may be unable to achieve anticipated levels of profitability under such arrangements and they may not result in material revenues or contribute positively to our earnings. Additionally, other OEMs may not wish to obtain logistics or operations management services from us.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our worldwide operations could be subject to natural disasters and other business disruptions, which could seriously harm our revenue and financial condition and increase our costs and expenses. We are predominantly self-insured for losses and interruptions caused by earthquakes, power shortages, telecommunications failures, water shortages, tsunamis, floods, typhoons, hurricanes, fires, extreme weather conditions and other natural or manmade disasters.

If we are unable to manage future acquisitions, and cost-effectively run our operations, our profitability could be adversely affected.

Our ability to manage and integrate future acquisitions will require successful integration of such acquisitions into our manufacturing and logistics infrastructure, and may require enhancements or upgrades of accounting and other internal management systems and the implementation of a variety of procedures and controls. We cannot guarantee that significant problems in these areas will not occur. Any failure to enhance or expand these systems and implement such procedures and controls in an efficient manner and at a pace consistent with our business activities could harm our consolidated financial condition and results of operations. In addition, we may experience inefficiencies from the management of geographically dispersed facilities and incur substantial infrastructure and working capital costs. We incurred approximately $29.6 million of restructuring and impairment costs relating to continuing operations in the third quarter of fiscal 2007 and approximately $2.6 million in the corresponding period of fiscal 2006. See also the Risk Factor entitled “If we incur more restructuring-related charges than currently anticipated, our consolidated financial condition and results of operations may suffer.”

If we have a material weakness in our internal controls over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our securities.

One or more material weaknesses in our internal controls over financial reporting could occur or be identified in the future. In addition, because of inherent limitations, our internal controls over financial reporting may not prevent or detect misstatements, and any projections of any evaluation of effectiveness of internal controls to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with our policies or procedures may deteriorate. If we fail to maintain the adequacy of our internal controls, including any failure or difficulty in implementing required new or improved controls, our business and results of operations could be harmed, we may not be able to provide reasonable assurance as to our financial results or meet our reporting obligations and there could be a material adverse effect on the price of our securities.

If our products are subject to warranty or liability claims, we may incur significant costs.

Our customers may experience defects in our designs or deficiencies with respect to our manufacturing services. We may be exposed to warranty or manufacturers’ liability claims as a result of these defects or deficiencies, and some claims may relate to customer product recalls. A claim for damages arising as a result of such defects or deficiencies could have a material adverse effect on our business, results of operations and financial condition. A claim for such damages, or a product recall conducted by one of our customers, also could have an adverse effect on our business reputation.

In addition, as we increase our engagements with customers in the medical device and automotive industries, we may have greater exposure to product and personal injury liability claims, as well as to liabilities relating to

51

product recalls. Any claim, regardless of merit, may be time-consuming and expensive to resolve, and a successful claim could have a material adverse effect on our results of operations and financial condition.

We may not have sufficient insurance coverage for certain of the risks and liabilities we assume in connection with the products and services we provide to our customers.

We carry various forms of business and liability insurance that we believe are typical for companies in our industry. However, we may not have sufficient insurance coverage for certain risks and liabilities we assume in connection with the products and services we provide to our customers, such as potential warranty, product liability and product recall claims. Such liability claims may only be partially covered under our insurance policies. We continue to monitor the insurance marketplace to evaluate the need to obtain additional insurance coverage in the future. Costs associated with potential claims and liabilities for which we do not have sufficient insurance coverage could have a material adverse effect on our results of operations, financial condition and liquidity.

Our design and engineering services may result in additional exposure to product liability, intellectual property infringement and other claims.

We are offering more design services, primarily those relating to products that we manufacture for our customers, and we offer design services related to collaborative design manufacturing and turnkey solutions. Providing such services can expose us to different or greater potential liabilities than those we face when providing our regular manufacturing services. With the growth of our design services business, we have increased exposure to potential product liability claims resulting from injuries caused by defects in products we design, as well as potential claims that products we design infringe third-party intellectual property rights. Such claims could subject us to significant liability for damages and, regardless of their merits, could be time-consuming and expensive to resolve. We also may have greater potential exposure from warranty claims, and from product recalls due to problems caused by product design. Costs associated with possible product liability claims, intellectual property infringement claims, and product recalls could have a material adverse effect on our results of operations.

Notwithstanding our divestiture of certain businesses in recent years, we remain subject to certain indemnification obligations for a period of time after completion of the divestitures.

The sale agreements for the businesses we divested in recent years contain indemnification provisions pursuant to which we may be required to indemnify the buyer of the divested business for liabilities, losses, or expenses arising out of breaches of covenants and certain breaches of representations and warranties relating to the condition of the business prior to and at the time of sale. While we believe, based upon the facts presently known to us, that we have made adequate provision for any such potential indemnification obligations, it is possible that other facts may become known in the future which may subject us to claims for additional liabilities or expenses beyond those presently anticipated and provided for. Should any such unexpected liabilities or expenses be of a material amount, our finances could be adversely affected.

We are exposed to fluctuations in foreign currency exchange rates and interest rate fluctuations.

We have currency exposure arising from both sales and purchases denominated in currencies other than the functional currency of our sites. Fluctuations in the rate of exchange between the currency of the exposure and the functional currency of our sites could seriously harm our business, operating results and consolidated financial condition.

Failure to comply with environmental regulations could harm our business.

As a company in the electronics manufacturing services industry, we are subject to a variety of environmental regulations, including those relating to the use, storage, discharge and disposal of hazardous chemicals used during our manufacturing process as well as air quality and water quality regulations, restrictions on water use, and storm water regulations. We are also required to comply with laws and regulations relating to occupational safety and health, product disposal and product content and labeling. Although we have never sustained any significant loss as a result of non-compliance with such regulations, any failure by us to comply with environmental laws and

52

regulations could result in liabilities or the suspension of production. In addition, these laws and regulations could restrict our ability to expand our facilities or require us to acquire costly equipment or incur other significant costs to comply with regulations.

We own and lease some contaminated sites (for some of which we have been indemnified by third parties for required remediation), sites for which there is a risk of the presence of contamination, and sites with some levels of contamination for which we may be liable and which may or may not ultimately require any remediation. We have obtained environmental insurance to reduce potential environmental liability exposures posed by some of our operations and facilities. We believe, based on our current knowledge, that the cost of any groundwater or soil clean up that may be required at our facilities would not materially harm our business, consolidated financial condition and results of operations. Nevertheless, the process of remediating contamination in soil and groundwater at facilities is costly and cannot be estimated with high levels of confidence, and there can be no assurance that the costs of such activities would not harm our business, consolidated financial condition and results of operations in the future.

In general, we are not directly responsible for compliance with laws like Waste Electrical and Electronic Equipment (WEEE) and Restrictions of Hazardous Substances (RoHS). However, some customers may require that we take responsibility for the non-compliance risk of some or all of the components we procure for the customer product. Solectron requires all of its suppliers to comply with all hazardous substance laws and regulations and employs inventory management processes to mitigate non-compliance risk. Failure to have the capability of delivering the products which comply with these present and future environmental laws and regulations could restrict our ability to expand facilities, or could require us to acquire costly equipment or to incur other significant expenses to comply with environmental regulations, and could impair our relations with our customers. Moreover, to the extent we are found non-compliant with any environmental laws and regulations applicable to our activities, we may incur substantial fines and penalties.

Our ongoing implementation of new enterprise resource planning (ERP) software and systems may cause disruptions in our business operations.

The ongoing implementation of new ERP software and systems at various Solectron sites domestically and internationally is a technically intensive process, requiring extensive testing, modifications, customization and project coordination. We may experience disruptions in our business operations from time to time relating to these implementation efforts or as a result of complications with the software or systems, and such disruptions may have a material adverse effect on our business, consolidated financial condition and results of operations.

We may not be able to adequately protect or enforce our intellectual property rights and could become involved in intellectual property disputes.

In the past we have been and may from time to time continue to be notified of claims that we may be infringing patents, copyrights or other intellectual property rights owned by other parties. In the event of an infringement claim, we may be required to spend a significant amount of money to develop a non-infringing alternative, to obtain licenses, or to defend against the claim. We may not be successful in developing such an alternative or obtaining a license on reasonable terms, if at all. Any litigation, even where an infringement claim is without merit, could result in substantial costs and diversion of resources. Accordingly, the resolution or adjudication of intellectual property disputes could have a material adverse effect on our business, consolidated financial condition and results of operations.

Our ability to effectively compete may be affected by our ability to protect our proprietary information. We hold a number of patents, patent applications, and various trade secrets and license rights. These patents, trade secrets, and license rights may not provide meaningful protection for our proprietary manufacturing processes, equipment innovations and products, or we might find it necessary to initiate litigation proceedings to protect our intellectual property rights. Any such litigation could be lengthy and costly and could harm our consolidated financial condition.

53

Rating downgrades may make it more expensive for us to borrow money.

Our senior unsecured debt was recently rated as “BB−” with a stable outlook by Standard and Poor’s and as “B1” with a positive outlook by Moody’s. These credit ratings are subject to change at the discretion of the rating agencies. If our credit ratings were downgraded, it would increase our cost of capital should we borrow under our revolving lines of credit, and it may make it more expensive for us to raise additional capital in the future. Such capital raising may be on terms that may not be acceptable to us or otherwise not available. Any future adverse rating agency actions with respect to our ratings could have an adverse effect on the market price of our securities, our ability to compete for new business, our cost of capital, and our ability to access capital markets.

Unanticipated changes in our tax rates or in our exposure to additional tax liabilities could affect our operating results and financial condition.

We are subject to income taxes both in the United States and various foreign jurisdictions. Our effective tax rates could be adversely affected by changes in tax laws and increases in the percentages of our earnings from countries with higher tax rates, as well as other factors. If any of these changes were to occur, our income tax provision, operating results and financial condition could be adversely affected.

We have received an examination report from the Internal Revenue Service proposing a tax deficiency in certain of our tax returns, and the outcome may have a material adverse effect on our results of operations and cash flows.

The Internal Revenue Service (“IRS”) and other tax authorities regularly examine our income tax returns. In the three months ended May 31, 2006, the IRS completed its field examination of the Company’s federal income tax returns for fiscal years 2001 and 2002 and issued a Revenue Agent’s Report (“RAR”). The RAR is not a final Statutory Notice of Deficiency, and we filed a protest during the quarter ended August 25, 2006 to protest certain of the proposed adjustments with the Appeals Office of the IRS. The most significant of the disputed adjustments relates to transfer pricing arrangements that the Company has with its foreign subsidiaries. We believe that the proposed IRS adjustments are inconsistent with applicable tax laws, and that it has meritorious defenses to the proposed adjustments.

In determining the adequacy of our provision for income taxes, we regularly assess the likelihood of adverse outcomes resulting from tax examinations, including the IRS RAR for the fiscal years 2001 and 2002. Based upon that assessment, Solectron may establish contingency reserves for income taxes in various jurisdictions. The estimate of appropriate tax reserves is based upon the amount of prior tax benefit that might be at risk upon audit and the reasonable estimate of the amount at risk. However, the ultimate outcome of the tax examination process is always uncertain, including the total amount payable or the timing of any such payments upon resolution of these issues. In addition, we cannot assure you that such amount will not be materially different than that which is reflected in our historical income tax provisions and accruals. Should the IRS or other tax authorities assess additional taxes as a result of current or future examinations, we may be required to record charges to operations in future periods that could have a material impact on the results of operations, financial position or cash flows in the applicable period or periods recorded.

Risks Relating to the Proposed Merger with Flextronics

Failure to complete the merger could materially and adversely affect our results of operations and stock price.

Completion of the merger is subject to customary conditions, including the approval of the stockholders of Solectron and Flextronics and the receipt of applicable regulatory approvals and clearances. There can be no assurance that these conditions will be met or waived, that the necessary approvals will be obtained, or that we will be able to successfully consummate the merger as currently contemplated under the merger agreement or at all.

If the merger is not consummated:

•  we will remain liable for significant transaction costs, including legal, accounting, financial advisory and other costs relating to the merger;

54

•  under specified circumstances, we may have to pay a termination fee in the amount of $100 million to Flextronics;

•  any operational investments that we may delay due to the pending transaction would need to be made, potentially on an accelerated timeframe, which could then prove costly and more difficult to implement; and

•  the market price of our common stock may decline to the extent that the current market price reflects a belief by investors that the merger will be completed.

Additionally, the announcement of the pending merger may lead to uncertainty for our employees and some of our customers and suppliers. This uncertainty may mean:

•  the attention of our management and employees may be diverted from day-to-day operations as the integration activities become more intense;

•  our customers and suppliers may seek to modify or terminate existing agreements, or prospective customers may delay entering into new agreements or purchasing our products as a result of the announcement of the merger; and

•  our ability to attract new employees and retain existing employees may be harmed by uncertainties associated with the prospective merger.

The occurrence of any of these events individually or in combination could materially and adversely affect our results of operations and the price of our common stock.

Item 6.   Exhibits

INDEX TO EXHIBITS

Exhibit
No			Exhibit Description
	3	.1*	Certificate of Incorporation of the Registrant, as amended
	3	.2**	Amended and Restated Bylaws of the Registrant
	10	.1	Employment Agreement dated April 17, 2007 by and between Registrant and Roop Kaylan Lakkaraju
	10	.2****	Manufacturing and Product Purchase Agreement dated as of March 9, 2007 by and among Cisco Systems International B.V., Solectron Corporation and certain signing affiliates
	10	.3***	Executive Retention Arrangement
	10	.4****	Inventory Purchase and Transfer Agreement dated as of March 11, 2007 by and between Cisco Systems International B.V. and Solectron Corporation
	31	.1	Certification of Chief Executive Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
	31	.2	Certification of Chief Financial Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
	32	.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*	Incorporated by reference from Exhibit 3.1 filed with Registrant’s Form 10-Q for the quarter ended February 28, 2001, Exhibit 3.1 filed with Registrant’s Form 10-Q for the quarter ended February 25, 2000, and Exhibit 3.1 filed with Registrant’s Form 10-Q for the quarter ended February 26, 1999.
**	Incorporated by reference from Exhibit 3.2 filed with Registrant’s Form 10-Q for the quarter ended November 28, 2003.
***	Incorporated by reference from Registrant’s Report on Form 8-K filed on March 2, 2007.
****	Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted from the publicly filed document and have been furnished separately to the Securities and Exchange Commission as required by Rule 24b-2 under the Securities Exchange Act of 1934.

55

SOLECTRON CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SOLECTRON CORPORATION

(Registrant)

By:  /s/  ROOP LAKKARAJU

Roop Lakkaraju

Senior Vice President and

Interim Chief Financial Officer

(Principal Financial Officer)

By:  /s/  WARREN J. LIGAN

Warren J. Ligan

Senior Vice President
and Corporate Controller
(Principal Accounting Officer)

Date: July 11, 2007

56

INDEX TO EXHIBITS

Exhibit
No			Exhibit Description
	3	.1*	Certificate of Incorporation of the Registrant, as amended
	3	.2**	Amended and Restated Bylaws of the Registrant
	10	.1	Employment Agreement dated April 17, 2007 by and between Registrant and Roop Kaylan Lakkaraju
	10	.2****	Manufacturing and Product Purchase Agreement dated as of March 9, 2007 by and among Cisco Systems International B.V., Solectron Corporation and certain signing affiliates
	10	.3***	Executive Retention Arrangement
	10	.4****	Inventory Purchase and Transfer Agreement dated as of March 11, 2007 by and between Cisco Systems International B.V. and Solectron Corporation
	31	.1	Certification of Chief Executive Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
	31	.2	Certification of Chief Financial Officer Pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002
	32	.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32	.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*	Incorporated by reference from Exhibit 3.1 filed with Registrant’s Form 10-Q for the quarter ended February 28, 2001, Exhibit 3.1 filed with Registrant’s Form 10-Q for the quarter ended February 25, 2000, and Exhibit 3.1 filed with Registrant’s Form 10-Q for the quarter ended February 26, 1999.
**	Incorporated by reference from Exhibit 3.2 filed with Registrant’s Form 10-Q for the quarter ended November 28, 2003.
***	Incorporated by reference from Registrant’s Report on Form 8-K filed on March 2, 2007.
****	Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted from the publicly filed document and have been furnished separately to the Securities and Exchange Commission as required by Rule 24b-2 under the Securities Exchange Act of 1934.

57

EX-10.1

Exhibit 10.1

SOLECTRON CORPORATION

ROOP KAYLAN LAKKARAJU EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”) is made by and between Solectron Corporation (the “Company”), and Roop Kaylan Lakkaraju (“Executive”) as of April 17, 2007 (the “Effective Date”).

     1. Duties and Scope of Employment.

          (a) Positions and Duties. Executive will serve as the Company’s Senior Vice President & Interim Chief Financial Officer, reporting to the Company’s Interim President and Chief Executive Officer (the “CEO”). Executive will render such business and professional services in the performance of Executive’s duties, consistent with Executive’s position within the Company, as will reasonably be assigned to Executive by the CEO or the CEO’s designate or successor. The period of Executive’s employment under this Agreement is referred to herein as the “Employment Term.”

          (b) Obligations. During the Employment Term, Executive will devote Executive’s full business efforts and time to the Company. For the duration of the Employment Term, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Board of Directors of the Company (the “Board”) (which approval will not be unreasonably withheld); provided, however, that Executive may, without the approval of the Board, serve in any capacity with any civic, educational or charitable organization, provided such services do not interfere with Executive’s obligations to Company.

     2. Employee Benefits. During the Employment Term, Executive will be eligible to participate in accordance with the terms of all Company employee benefit plans, policies and arrangements that are applicable to other senior executives of the Company, as such plans, policies and arrangements and terms may exist from time to time.

     3. At-Will Employment. Executive and the Company agree that Executive’s employment with the Company constitutes “at-will” employment. Executive and the Company acknowledge that this employment relationship may be terminated at any time, upon written notice to the other party, with or without good cause or for any or no cause, at the option either of the Company or Executive. However, as described in this Agreement, Executive may be entitled to severance benefits depending upon the circumstances of Executive’s termination of employment.

     4. Compensation.

          (a) Base Salary. During the Employment Term, the Company will pay Executive an annual salary of $385,008 commencing as of April 14, 2007 as compensation for his services (the “Base Salary”). The Base Salary will be paid through payroll periods that are consistent with the Company’s normal payroll practices, but in all events will not be less frequent than once per month.

Executive’s salary will be subject to review and adjustments will be made based upon the Company’s normal performance review practices.

          (b) Bonuses. Executive may participate in any bonus plan or similar arrangement the Company may have in place that is applicable to other senior executives of the Company, on such terms and conditions as the Executive Compensation and Management Resources Committee of the Board (the “Committee”) may determine from time to time in its discretion. Executive’s target annual bonus shall be 100 percent of Executive’s Base Salary, payable upon achievement of goals and objectives established by the CEO and subject to Committee review, adjustment and approval. In addition, Executive will receive a one-time performance bonus in the amount of $150,000 (the “Special Bonus”) on April 18, 2007; provided; however, Executive shall repay a prorated portion of the Special Bonus to the Company if Executive’s employment with the Company is terminated for Cause or Executive voluntarily terminates his employment relationship with the Company (other than for Good Reason, death or disability) prior to September 1, 2008. Such prorated portion shall equal: (i) $150,000 multiplied by (ii) the quotient of (x) the number of days between Executive’s termination date and September 1, 2008 and (y) the total number of days between April 18, 2007 and September 1, 2008.

          (c) Deferred Compensation. Unless Executive’s employment has been terminated, the Company shall contribute $100,000 (the “Contribution Amount”) to the account of Executive under the Company’s Executive Deferred Compensation Plan on October 15, 2007. This contribution shall fully vest and shall be no longer subject to forfeiture upon the earlier to occur of (i) Executive’s employment termination pursuant to the provisions of Sections 5(a) or 5(b) or (ii) October 15, 2008. If Executive’s employment is terminated pursuant to Section 5(b), prior to October 15, 2007, the Contribution Amount will be added to the severance amounts payable to Executive under Section 5(b)(i).

          (d) Stock Options. Executive will be eligible to receive options to purchase the Company’s common stock pursuant to any plans or arrangements it may have in effect from time to time. The Committee will determine in its discretion whether Executive will be granted any such option or options and the terms of any such option or options in accordance with the terms of any applicable plan or arrangement that may be in effect from time to time. Subject to the approval of the Executive Compensation and Management Resources Committee, on April 17, 2007, Executive will be entitled to receive a discounted option grant to purchase 300,000 shares of the Company’s common stock with an exercise price of $0.001 per share, and such exercise price will be waived in lieu of services to be provided by Executive. Such discounted option shall be deemed exercised on the date of grant and the restricted shares of common stock shall vest 50% on April 10, 2008 and 50% on April 10, 2009. .

     5. Severance.

          (a) Involuntary Termination other than for Cause, Death or Disability Prior to a Change of Control or After Twelve Months Following a Change of Control. If the Company terminates Executive’s employment with the Company without Executive’s consent and for a reason other than Cause, Executive becoming Disabled or Executive’s death, any of which occur prior to a Change of Control or after twelve (12) months following a Change of Control and Executive signs

and delivers to the Company a separation agreement and release of claims in a form satisfactory to the Company, then promptly following such termination of employment, or, if later, the effective date of the separation agreement and release of claims, Executive will receive the following severance from the Company:

          (i) Accrued Compensation. Executive will be entitled to receive all accrued vacation, expense reimbursements and any other benefits due to Executive through the date of termination of employment in accordance with the Company’s then existing employee benefit plans, policies and arrangements.

          (ii) Severance Payment. Executive will be paid continuing payments of severance pay at a rate equal to Executive’s Base Salary rate, as then in effect, and Executive’s target bonus for the year of termination, for a period of twelve (12) months plus one additional month for every full year Executive has been employed with the Company as of the date of such termination, not to exceed twenty-four (24) months (the “Severance Payment Period”), from the date of such termination, to be paid periodically in accordance with the Company’s normal payroll policies; provided, however, that if during the Severance Payment Period Executive engages in Competition or breaches the covenants in Section 12 or in the separation agreement, all payments pursuant to this subsection will immediately cease

          (iii) Continued Employee Benefits. Executive will receive Company-paid coverage during the Severance Payment Period for Executive and Executive’s eligible dependents under the Company’s Benefit Plans; provided, however, that if during the Severance Payment Period Executive engages in Competition or breaches the covenants in Section 12 or in the separation agreement, all Company-paid coverage pursuant to this subsection will immediately cease.

          (iv) Payments or Benefits Required by Law. Executive will receive such other compensation or benefits from the Company as may be required by law (for example, “COBRA” coverage under Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”)).

     (b) Involuntary Termination other than for Cause or Resignation for Good Reason within Twelve Months of a Change of Control. If within twelve (12) months following a Change of Control (i) Executive resigns from his or her employment with the Company (or any parent or subsidiary of the Company) for Good Reason or (ii) the Company (or any parent or subsidiary of the Company) terminates Executive’s employment for other than Cause, and Executive signs and delivers to the Company a separation agreement and release of claims in a form satisfactory to the Company, then promptly following such termination of employment, or, if later, the effective date of the separation agreement and release of claims, Executive will receive the following severance from the Company:

          (i) Severance Payment. For a period of twenty-four (24) months following Executive’s termination of employment (the “Change of Control Severance Payment Period”), Executive will be paid continuing payments of severance pay equal to Executive’s average Base Salary rate for the two years prior to such termination, and Executive’s average annual target bonus for the two years prior to such termination, to be paid in equal installments periodically in

accordance with the Company’s normal payroll practices; provided, however, that if Executive has been employed in this position for less than two years prior to such termination, for a period of twenty-four (24) months following such termination, Executive will be paid continuing payments of severance pay equal to Executive’s average Base Salary rate for the period Executive was actually employed with the Company in this position, and Executive’s average annual target bonus for the period Executive was actually employed with the Company in this position, to be paid in equal installments periodically in accordance with the Company’s normal payroll practices; provided, further, that in the event Executive engages in Competition or breaches the covenants in Section 12 or in the separation agreement during the Change of Control Severance Payment Period, all payments pursuant to this subsection will immediately cease.

          (ii) Equity Awards. Executive’s then outstanding options to purchase shares of the Company’s Common Stock (whether granted on, before or after the date of this Agreement) (the “Options”) will immediately vest and become exercisable as to 100% of the shares subject to such Options. Additionally, shares of the Company’s Common Stock then held by Executive subject to a Company repurchase or reacquisition right (whether issued on, before or after the date of this Agreement) (the “Restricted Stock”) will immediately vest and have such Company right of repurchase or reacquisition lapse as to 100% of such shares. Additionally, Executive will have a period of three (3) months following such termination of employment to exercise Executive’s Options, but in no event beyond the original maximum term of the Option. In all other respects the Options and Restricted Stock will continue to be bound by and subject to the terms of their respective agreements.

          (iii) Continued Employee Benefits. Executive will receive Company-paid coverage for a period of thirty-six (36) months for Executive and Executive’s eligible dependents under the Company’s Benefit Plans; provided, however, that in the event Executive engages in Competition or breaches the covenants in Section 12 or in the separation agreement during the thirty-six month period following such termination, all Company-paid coverage pursuant to this subsection will immediately cease.

          (iv) Payments or Benefits Required by Law. Executive will receive such other compensation or benefits from the Company as may be required by law (for example, “COBRA” coverage under Section 4980B of the Code).

     (c) Other Terminations. If Executive voluntarily terminates Executive’s employment with the Company (other than for Good Reason within twelve (12) months of a Change of Control) or if the Company terminates Executive employment with the Company for Cause, then Executive will (i) receive the Base Salary through the date of termination of employment, (ii) receive all accrued vacation, expense reimbursements and any other benefits due to Executive through the date of termination of employment in accordance with established Company plans, policies and arrangements, and (iii) not be entitled to any other compensation or benefits (including, without limitation, accelerated vesting of stock options) from the Company except to the extent provided under the applicable stock option agreement(s) or as may be required by law (for example, “COBRA” coverage under Section 4980B of the Code).

          (d) Termination due to Death or Disability. If Executive’s employment with the Company is terminated due to Executive’s death or Executive’s becoming Disabled, then Executive or Executive’s estate (as the case may be) will (i) receive the Base Salary through the date of termination of employment, (ii) receive all accrued vacation, expense reimbursements and any other benefits due to Executive through the date of termination of employment in accordance with Company-provided or paid plans, policies and arrangements, and (iii) not be entitled to any other compensation or benefits from the Company except to the extent required by law (for example, “COBRA” coverage under Section 4980B of the Code).

          (e) Section 409A. Any cash severance to be paid pursuant to Sections 4(b), 5(a)(ii) and 5(b)(i) will not be paid during the six-month period following Executive’s termination of employment, unless the Company reasonably determines that paying such amounts immediately following Executive’s termination of employment would not result the imposition of additional tax under Section 409A of the Code (“Section 409A”), in which case such amounts shall be paid in accordance with normal payroll practices. If no cash severance is paid to Executive as a result of the previous sentence, on the first day following such six-month period, the Company will pay Executive a lump-sum amount equal to the cumulative amounts that would have otherwise been paid to Executive pursuant to Sections 5(a)(ii) and 6(b)(i). Thereafter, Executive will receive his cash severance payments pursuant to Sections 5(a)(ii) and 6(b)(i) in accordance with the Company’s normal payroll practices.

     6. Golden Parachute Excise Tax.

          (a) In the event it will be determined that any payment or distribution by the Company or other amount with respect to the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 6 (a “Payment”), is (or will be) subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) or any interest or penalties are (or will be) incurred by Executive with respect to the excise tax imposed by Section 4999 of the Code with respect to the Company (the excise tax, together with any interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), Executive will be entitled to receive an additional cash payment (a “Gross-Up Payment”) from the Company in an amount equal to the sum of the Excise Tax and an amount sufficient to pay the cumulative Excise Tax and all cumulative income taxes (including any interest and penalties imposed with respect to such taxes) relating to the Gross-Up Payment so that the net amount retained by Executive is equal to all payments to which Employee is entitled pursuant to the terms of this Agreement (excluding the Gross-Up Payment) or otherwise less income taxes (but not reduced by the Excise Tax or by income taxes attributable to the Gross-Up Payment).

          (b) Subject to the provisions of Section 6(c), all determinations required to be made under this Section 6, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at the determination, will be made by a nationally recognized certified public accounting firm selected by the Company with the consent of Executive, which should not unreasonably be withheld (the “Accounting Firm”) which will provide detailed supporting calculations both to the Company and Executive within 30 days after the receipt of notice from Executive that there has been a Payment, or

such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm will be borne solely by the Company. The Company, as determined in accordance with this Section 6, will pay any Gross-Up Payment to Executive within five days after the receipt of the Accounting Firm’s determination. If the Accounting Firm determines that no Excise Tax is payable by Executive, it will so indicate to Executive in writing. Any determination by the Accounting Firm will be binding upon the Company and Executive. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm, it is possible that Gross-Up Payments that the Company should have made will not have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies in accordance with Section 6(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of Underpayment that has occurred and the Underpayment will be promptly paid by the Company to or for the benefit of Executive.

          (c) Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require a Gross-Up Payment (that has not already been paid by the Company). The notification will be given as soon as practicable but no later than ten business days after Executive is informed in writing of the claim and will apprise the Company of the nature of the claim and the date on which the claim is requested to be paid. Executive will not pay the claim prior to the expiration of the 30-day period following the date on which Executive gives notice to the Company or any shorter period ending on the date that any payment of taxes with respect to the claim is due. If the Company notifies Executive in writing prior to the expiration of the 30-day period that it desires to contest the claim, Executive will:

               (i) give the Company any information reasonably requested by the Company relating to the claim;

               (ii) take any action in connection with contesting the claim as the Company will reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to the claim by an attorney reasonably selected by the Company;

               (iii) cooperate with the Company in good faith in order effectively to contest the claim; and

               (iv) permit the Company to participate in any proceedings relating to the claim.

          (d) The Company will bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with the contest and will indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of the representation and payment of costs and expenses. Without limitation of the forgoing provisions of this Section 6, the Company will control all proceedings taken in connection with the contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings, and conferences with the taxing authority in respect of the claim and may, at its sole option, either direct Executive to pay the tax claimed and

sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute the contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine. If the Company directs Executive to pay the claim and sue for a refund, the Company will advance the amount of the payment to Executive, on an interest-free basis, and will indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to the advance or with respect to any imputed income with respect to the advance; and any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which the contested amount is claimed to be due will be limited solely to the contested amount. The Company’s control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

          If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 6(d), Executive becomes entitled to receive any refund with respect to the claim, Executive will, subject to the Company’s compliance with the requirements of Section 6(d), promptly pay to the Company the amount of the refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to this Section 6(d), a determination is made that Executive will not be entitled to any refund with respect to the claim and the Company does not notify Executive in writing of its intent to contest the denial of refund prior to the expiration of 30 days after the determination, then the advance will be forgiven and will not be required to be repaid and the amount of the advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

     7. Definition of Terms. The following terms referred to in this Agreement will have the following meanings:

          (a) Benefit Plans. “Benefit Plans” means plans, policies or arrangements that the Company sponsors (or participates in) and that immediately prior to Executive’s termination of employment provide Executive and/or Executive’s eligible dependents with medical, dental, vision and/or financial counseling benefits. Benefit Plans do not include any other type of benefit (including, but not by way of limitation, disability, life insurance or retirement benefits). A requirement that the Company provide Executive and Executive’s eligible dependents with coverage under the Benefit Plans will not be satisfied unless the coverage is no less favorable than that provided to Executive and Executive’s eligible dependents immediately prior to Executive’s termination of employment. Notwithstanding any contrary provision of this Section 7, but subject to the immediately preceding sentence, the Company may, at its option, satisfy any requirement that the Company provide coverage under any Benefit Plan by instead providing coverage under a separate plan or plans providing coverage that is no less favorable or by paying Executive a lump sum payment sufficient to provide Executive and Executive’s eligible dependents with equivalent coverage under a third party plan that is reasonably available to Executive and Executive’s eligible dependents.

          (b) Cause. “Cause” means (i) a willful failure by Executive to substantially perform Executive’s duties as an employee, other than a failure resulting from the Executive’s

complete or partial incapacity due to physical or mental illness or impairment, (ii) a willful act by Executive that constitutes gross misconduct and that is injurious to the Company, (iii) circumstances where Executive willfully imparts material confidential information relating to the Company or its business to competitors or to other third parties other than in the course of carrying out Executive’s duties, (iv) a material and willful violation by Executive of a federal or state law or regulation applicable to the business of the Company or (v) Executive’s conviction or plea of guilty or no contest to a felony. No act or failure to act by Executive will be considered “willful” unless committed without good faith and without a reasonable belief that the act or omission was in the Company’s best interest.

          (c) Change of Control. “Change of Control” means the occurrence of any of the following:

               (i) the sale, lease, conveyance or other disposition of all or substantially all of the Company’s assets to any “person” (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as amended), entity or group of persons acting in concert;

               (ii) any person or group of persons becoming the “beneficial owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 30% or more of the total voting power represented by the Company’s then outstanding voting securities;

               (iii) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its controlling entity) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity (or its controlling entity) outstanding immediately after such merger or consolidation; or

               (iv) a contest for the election or removal of members of the Board that results in the removal from the Board of at least 33% of the incumbent members of the Board.

          (d) Competition. “Competition” will mean Executive’s direct or indirect engagement in (whether as an employee, consultant, agent, proprietor, principal, partner, stockholder, corporate officer, director or otherwise), or ownership interest in or participation in the financing, operation, management or control of, any person, firm, corporation or business that competes with Company or is a customer of the Company.

          (e) Disability. “Disability” will mean that Executive has been unable to perform the principal functions of Executive’s duties due to a physical or mental impairment, but only if such inability has lasted or is reasonably expected to last for at least six months. Whether Executive has a Disability will be determined by the Board based on evidence provided by one or more physicians selected by the Board.

          (f) Good Reason. “Good Reason” means (without Executive’s consent) (i) a material reduction in Executive’s title, authority, status, or responsibilities, (ii) a material breach by

the Company of its obligations as an employee, or (iii) a relocation of Executive’s principal place of employment by more than twenty five (25) miles. With respect to a termination of employment that occurs during the six (6) month period immediately following a Change of Control, clause (i) of the preceding sentence will be applied by replacing the word “reduction” with the word “change.”

     8. Term of Agreement. This Agreement will have an initial term of two (2) years commencing on the Effective Date. On the second anniversary of the Effective Date and on each annual anniversary of the Effective Date thereafter, this Agreement automatically will renew for an additional term of one year unless at least three (3) months prior to such anniversary, Executive or the Company gives the other party written notice that the Agreement will not be renewed. Notwithstanding the foregoing provisions of this paragraph, in the event of a Change of Control, the term of this Agreement will extend through the one-year anniversary of such Change of Control. Additionally, on the anniversary of such Change of Control and each annual anniversary of the Change of Control thereafter, this Agreement automatically will renew for an additional term of one year unless at least three (3) months prior to such anniversary, Executive or the Company gives the other party written notice that the Agreement will not be renewed.

     If Executive incurs a termination of employment that entitles Executive to receive the payments and benefits described in Section 5, this Agreement will not terminate until all of Executive’s and the Company’s obligations under the Agreement have been satisfied. For avoidance of doubt, the expiration of this Agreement upon the provision of notice as provided in this Section 8 by either party will not by itself entitle Executive to any payments or benefits described in Section 5(a) or (b).

     9. Successors.

          (a) The Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets will assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” will include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 9(a) or which becomes bound by the terms of this Agreement by operation of law.

          (b) Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

     10. Notices. All notices, requests, demands and other communications called for hereunder will be in writing and will be deemed given (i) on the date of delivery if delivered personally, (ii) one (1) day after being sent by a well established commercial overnight service, or (iii) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:

If to the Company:

Solectron Corporation
847 Gibraltar Drive
Milpitas, CA 95035

Attn: Chairman, Executive Compensation and Management Resources Committee of the Board of Directors

If to Executive:

Roop Kaylan Lakkaraju

at the last residential address known by the Company.

     11. Severability. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.

     12. Non-Solicitation. For a period beginning on the Effective Date and ending one year after the Executive ceases to be employed by the Company or, if longer, upon the completion of the Severance Payment Period if Executive is entitled to severance under Section 5(a) or the Change of Control Severance Payment Period if Executive is entitled to receive severance under Section 5(b), Executive, directly or indirectly, whether as employee, owner, sole proprietor, partner, director, member, consultant, agent, founder, co-venturer or otherwise, will: (i) not solicit, induce or influence any person to leave employment with the Company; or (ii) not directly or indirectly solicit business from any of the Company’s customers and users on behalf of any business that directly competes with the principal business of the Company.

     13. Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. No future agreements between the Company and Executive may supersede this Agreement, unless they are in writing and specifically mention this Section 13.

     14. Arbitration.

          (a) General. In consideration of Executive’s service to the Company, its promise to arbitrate all employment related disputes and Executive’s receipt of the compensation, pay raises and other benefits paid to Executive by the Company, at present and in the future, Executive agrees that any and all controversies, claims, or disputes with anyone (including the Company and any employee, officer, director, shareholder or benefit plan of the Company in their capacity as such or otherwise) arising out of, relating to, or resulting from Executive’s service to the Company under this Agreement or otherwise or the termination of Executive’s service with the Company, including any breach of this Agreement, will be subject to binding arbitration under the Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2, including Section 1283.05 (the “Rules”) and pursuant to California law. Disputes which Executive agrees to arbitrate, and

thereby agrees to waive any right to a trial by jury, include any statutory claims under state or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the California Fair Employment and Housing Act, the California Labor Code, claims of harassment, discrimination or wrongful termination and any statutory claims. Executive further understands that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

          (b) Procedure. Executive agrees that any arbitration will be administered by the American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner consistent with its National Rules for the Resolution of Employment Disputes. The arbitration proceedings will allow for discovery according to the rules set forth in the National Rules for the Resolution of Employment Disputes or California Code of Civil Procedure. Executive agrees that the arbitrator will have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication and motions to dismiss and demurrers, prior to any arbitration hearing. Executive agrees that the arbitrator will issue a written decision on the merits. Executive also agrees that the arbitrator will have the power to award any remedies, including attorneys’ fees and costs, available under applicable law. Executive understands the Company will pay for any administrative or hearing fees charged by the arbitrator or AAA except that Executive will pay the first $125.00 of any filing fees associated with any arbitration Executive initiates. Executive agrees that the arbitrator will administer and conduct any arbitration in a manner consistent with the Rules and that to the extent that the AAA’s National Rules for the Resolution of Employment Disputes conflict with the Rules, the Rules will take precedence.

          (c) Remedy. Except as provided by the Rules, arbitration will be the sole, exclusive and final remedy for any dispute between Executive and the Company. Accordingly, except as provided for by the Rules, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator will not order or require the Company to adopt a policy not otherwise required by law, which the Company has not adopted.

          (d) Availability of Injunctive Relief. In addition to the right under the Rules to petition the court for provisional relief, Executive agrees that any party may also petition the court for injunctive relief where either party alleges or claims a violation of this Agreement or the Confidentiality Agreement or any other agreement regarding trade secrets, confidential information, nonsolicitation or Labor Code §2870. In the event either party seeks injunctive relief, the prevailing party will be entitled to recover reasonable costs and attorneys’ fees.

          (e) Administrative Relief. Executive understands that this Agreement does not prohibit Executive from pursuing an administrative claim with a local, state or federal administrative body such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission or the workers’ compensation board. This Agreement does, however, preclude Executive from pursuing court action regarding any such claim.

          (f) Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is executing this Agreement voluntarily and without any duress or undue influence by the Company or anyone else. Executive further acknowledges and agrees that Executive has carefully read this Agreement and that Executive has asked any questions needed for Executive to understand the terms, consequences and binding effect of this Agreement and fully understand it, including that Executive is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this Agreement.

     15. No Oral Modification, Cancellation or Discharge. This Agreement may be changed or terminated only in writing (signed by Executive and the Company).

     16. Waiver of Breach. The waiver of a breach of any term or provision of this Agreement, which must be in writing, will not operate as or be construed to be a waiver of any other previous or subsequent breach of this Agreement.

     17. Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

     18. Withholding. The Company is authorized to withhold, or cause to be withheld, from any payment or benefit under this Agreement the full amount of any applicable withholding taxes.

     19. Governing Law. This Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).

     20. Acknowledgment. Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from Executive’s private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.

     21. Counterparts. This Agreement may be executed in counterparts, and each counterpart will have the same force and effect as an original and will constitute an effective, binding agreement on the part of each of the undersigned.

[Signature Page to Follow]

     IN WITNESS WHEREOF, the undersigned have executed this Agreement on the respective dates set forth below:

EXECUTIVE
	Date:
Roop Kaylan Lakkaraju
SOLECTRON CORPORATION
	Date:
Kevin O’Connor
Executive Vice President & Chief Administrative Officer

EX-10.2

Exhibit 10.2

MANUFACTURING AND PRODUCT PURCHASE AGREEMENT

This Manufacturing and Product Purchase Agreement (“PPA”) is made as of March 9, 2007 (“Effective Date”) by and among Cisco Systems International B.V., a Netherlands corporation, having its principal place of business at Haalerbergpark, Haalerbergweg 13-19, 1101 CH, Amsterdam, The Netherlands (“Cisco BV”), and Solectron Corporation, a corporation organized under the laws of Delaware and having a place of business at 847 Gibraltar Drive, Milpitas, CA 95035 (“CM”), and each Signing Affiliate (as defined below). CM and each Signing Affiliate are referred to herein individually as a “Supplier” and collectively as the “Suppliers”. Cisco BV, CM and each Signing Affiliate are referred to herein individually as a “party” and collectively as the “parties”.

This PPA has the following attachments, which are incorporated into this PPA by this reference and made a part hereof:

Exhibit A	Service Level Addendum
Exhibit B	Cisco BV Proprietary Technology
Exhibit C	Approved Third Parties
Exhibit D	CM Affiliates and Sites
Exhibit E	Form of Authorized Sublicense Agreement
Exhibit F	Split Suppliers at United States Sites

PRELIMINARY UNDERSTANDING

A. Suppliers are engaged in the business of manufacturing products and providing related manufacturing, assembly, test, materials purchasing, materials management and packaging services for others.

B. Suppliers have provided manufacturing, assembly, test, materials purchasing, materials management, packaging, delivery and new product introduction services on behalf of, and under the direction and oversight of, Cisco BV pursuant to the terms and conditions of that certain Master Manufacturing Agreement dated effective as of January 31, 2006 between Cisco BV and CM (together with any amendments thereto, the “Prior MMA”) and that certain Service Level Addendum dated effective as of July 29, 2002 between Cisco BV and CM (together with any amendments thereto, the “Prior SLA”).

C. This PPA is intended to supersede and replace in its entirety all prior agreements and understandings between Cisco BV and the Suppliers with respect to its subject matter, including without limitation the Prior MMA the Prior SLA, and all exhibits thereto.

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 1
CONFIDENTIAL

D. Cisco BV desires to have Suppliers manufacture Products (as defined below) and install copies of Installed Software (as defined below) on Products on behalf of Cisco BV pursuant to the terms and conditions of this PPA for purchase by or transfer to Cisco BV.

E. The parties intend that this PPA define the general terms and conditions governing any and all transactions between the parties on a worldwide basis regarding the manufacture of Products by Suppliers. However, the parties may enter into such other agreements as they may deem to be necessary, as amended from time to time by the parties (collectively, “Ancillary Agreements”) to define specific terms and conditions for a particular business model, a particular Product and/or a particular manufacturing or delivery site. All such Ancillary Agreements must conform to this PPA, and the terms of this PPA shall prevail and be enforced in the event of any conflict or inconsistency with any Ancillary Agreement.

F. If Cisco BV and a Supplier agree that such Supplier is to perform additional services outside the scope of this PPA, including, without limitation, design services, Cisco BV and such Supplier shall enter into a separate agreement to address the terms and conditions for such additional services.

NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows:

1.0 DEFINITIONS. The following terms as used in this PPA and its exhibits shall have the meanings specified below. The parties acknowledge that additional definitions may appear in the SLA glossary.

• Approved Third Party(ies): Shall mean any third parties that are listed on Exhibit C hereto and any other third party that Cisco BV designates as an approved third party by delivery of written notice to Supplier.

• Authorized Sublicense Agreement: Shall have the meaning given in Section 3.2.

• Cisco BV Affiliate: Shall mean any corporation, firm, partnership, or other entity, whether de jure or de facto, that directly or indirectly owns, is owned by, or is under common ownership with Cisco BV to the extent of at least 50 percent of the equity having the power to vote on or direct the affairs of the entity, and any person, firm, partnership, corporation, or other entity actually controlled by, controlling, or under common control with Cisco BV.

• Cisco BV Negotiated Components: Shall mean those Components included in a Cisco BV Purchase Agreement.

• Cisco BV Proprietary Technology: Shall mean Intellectual Property (including, but not limited to, data, know-how, technical, manufacturing, and marketing information, designs, drawings, specifications, bills of materials, and documentation of processes) owned by or licensed to Cisco BV and related to or useful in the manufacture, testing, assembly, materials purchasing, materials management, packaging and delivery of Products, including, but not limited to that described in Exhibit B, together with all Intellectual Property rights embodied therein.

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 2
CONFIDENTIAL

• Cisco BV Purchase Agreement: Shall mean an agreement between Cisco BV and a Component supplier which sets forth the terms of purchase of such Components, certain terms of which will be afforded to Supplier by the Component supplier and used by Supplier in the purchase of Components in accordance with Section 4.5.

• CM Affiliate: Shall mean any corporation, firm, partnership, or other entity, whether de jure or de facto, that directly or indirectly owns, is owned by, or is under common ownership with CM to the extent of at least 50 percent of the equity having the power to vote on or direct the affairs of the entity, and any person, firm, partnership, corporation, or other entity actually controlled by, controlling, or under common control with CM.

• COMBAT: Shall mean CSI’s Outsource Manufacturing Business Analysis Tool, a collection of tools that primarily supports the determination of costs. It includes tools to create, upload, and manage quotes to suppliers and tools to maintain supply channels. It also includes tools for running costed BOMs, setting standard costs, understanding BOM risk, and running cost savings analysis, as well as other tools related to the quoting, pricing and Channel Cost creation process.

• Components: Shall mean all materials, individual components and assemblies which are ultimately to be incorporated into a Product or are designated to be incorporated into a Product.

• CSI: Shall mean Cisco Systems, Inc.

• Electronic Forecast: Shall be that non-binding electronic forecast submitted by Cisco BV to Supplier on a periodic basis identifying Cisco BV’s potential Product needs over a rolling period of at least fifty-two (52) weeks.

• Epidemic Failure: Shall be deemed to have occurred if during the Epidemic Failure Period a repetitive defect [ * ] and is traceable to a Single Root Cause (including multiple types of failures traceable to a Single Root Cause) that occurs in more than [ * ] of a particular Product occurring over any consecutive [ * ].

• Epidemic Failure Period: Shall mean the period set forth in Section 4.3.2.

• ERP (“Enterprise Resource Planning”): Shall mean the primary business transaction system used by Cisco BV and CM including manufacturing, purchasing, financial, inventory, and order management transactions.

• Installed Software: Shall mean computer software, in whatever medium or form, that constitutes Cisco BV Proprietary Technology and that is provided to Suppliers pursuant to a limited license hereunder for the sole purpose of Supplier performing the service of installing copies of such software onto Products on behalf of Cisco BV.

• Intellectual Property: Shall mean any and all tangible and intangible: (i) rights associated with works of authorship throughout the world, including but not limited to copyrights, neighboring rights, moral rights, and mask works, databases, topography rights and all derivative works thereof, (ii) trademark and trade name rights and similar rights, (iii) trade secret rights, confidentiality and other proprietary

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 3
CONFIDENTIAL

	rights including all rights to know-how and other technical information, (iv) patents, registered designs, design rights, algorithms and other industrial property rights, (v) rights in the nature of unfair competition rights and rights to sue in passing off Cisco BV products as counterfeit products, (vi) all other intellectual and industrial property rights (of every kind and nature throughout the world and however designated) whether arising by operation of law, contract, license, or otherwise, and (vii) all registrations, initial applications, renewals, extensions, continuations, divisions or reissues thereof now or hereafter in force (including any rights in any of the foregoing).
•	Liable Component: Shall mean either: (i) a Component that is outside the definition of Non-Liable Component; or (ii) any Component once it has entered WIP.
•	Loaned Equipment: Shall mean that capital equipment (including tools) which is loaned to Supplier by Cisco BV or a Cisco BV Affiliate to be used in the manufacturing process, to which Cisco BV or a Cisco BV Affiliate retains title.
•	Non-Liable Component: Shall mean a Component which does not contain any Cisco BV Intellectual Property and does not require alteration in a manner based on specific requirements unique to Products or for which Supplier has an alternative redistribution channel, in each case until such time as such Component has entered WIP.
•	Packout: Shall mean the moment in the production process when all configuration, testing and packaging of a Product for which there is a sales order issued under this PPA is complete.
•	PO: Shall mean a document that shows the supplier or vendor from whom a purchase is being made, what is being purchased, and the amount of the purchase.
•	Price: Shall mean the agreed purchase price of Products and/or Supplier services as established by the parties and recorded in COMBAT.
•	Product: Shall mean any product or other item that has a Cisco BV SKU, including any Components included within that product or other item.
•	Root Cause Failure Analysis: Shall mean an analysis prepared by Supplier which specifies and logs the reason for the failure, the event causing the failure, the conditions leading to the event, the failure mechanism and the recommended corrective actions.
•	Scrap Policy: Shall mean Cisco BV’s Scrap Policy and Process Document identified in the SLA for all Products or Components purchased or manufactured by or on behalf of or at the request of Cisco BV.
•	Shipment Date: Shall mean the most current required delivery date on or after the factory completion date (“FCD”) as specified via the Cisco BV ERP on a per order basis.

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 4
CONFIDENTIAL

• Signing Affiliate: Shall mean any CM Affiliate listed on Exhibit D who signs and becomes a party to this PPA and thereby becomes a “Supplier”.

• Single Root Cause: Shall mean Product failures which are traceable to a single source or Component.

• SKU: Shall refer to Stock Keeping Unit and shall mean the identification, which is usually alphanumeric, for tracking a Product for inventory purposes.

• SLA: Shall mean the Service Level Addendum attached hereto as Exhibit A, as it may be amended and/or expanded by the parties throughout the term of this PPA.

• Specifications: Shall mean the respective specifications for each Product as set forth in this PPA and Ancillary Agreements, including, without limitation, product design drawings, approved vendor listings, Component descriptions (including approved substitutions), manufacturing process requirements, testing parameters and standards, equipment and quality control requirements, new product introduction standards as agreed in writing for products that have commenced their first commercial run, and or other relevant documentation and information.

• Split Supplier: Shall mean those Suppliers listed on Exhibit F which manufacture and sell Products from Supplier sites located in the United States to both CSI and Cisco BV. To the extent a Supplier has sites located within and without the United States in the same Supplier legal entity, the parties agree that the term “Split Supplier” only relates to the Supplier’s sites in the United States within such Supplier legal entity.

• Stores: Shall mean a physical controlled location for the storage of Component inventory.

• Supplier Negotiated Components: Shall mean those Components which are not Cisco BV Negotiated Components.

• Territory: Shall mean the United States, Mexico, Central America, and South America.

• Third Party Customer: Shall mean a customer that is not a Cisco BV Affiliate.

• WIP or Work in Process: Shall mean those Components as withdrawn from Stores inventory and placed on the manufacturing line for purposes of manufacturing or testing, provided that such withdrawal (i) conforms to Cisco BV’s or, if applicable, an Approved Third Party’s, demand signaling and (ii) is undertaken in accordance with the inventory management and flexibility requirements of this PPA and the SLA. All such Components shall remain classified as WIP until transformed to a finished Product or returned to Stores inventory.

• Work Product: Shall mean all specifications, designs, discoveries, inventions, products, modifications, computer programs, technical information, procedures, processes, improvements, developments, drawings, notes, documents, information and materials made, conceived, reduced to practice or developed by Supplier (or an

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 5
CONFIDENTIAL

authorized sublicensee) which result from, relate to or arise out of its performance under this PPA and relate to the Products or Cisco BV Proprietary Technology, and all Intellectual Property rights therein, [ * ].

2.0	MANUFACTURE AND PURCHASE OF PRODUCTS
2.1	Manufacture of Products and Related Services. Under the direction and oversight of Cisco BV, including, without limitation, its quality control requirements, each Supplier shall (a) manufacture Products and Components and either (i) sell Products immediately following completion of Packout to Cisco BV, or (ii) transfer or sell Products to another Supplier or to an Approved Third Party either for subsequent sale to Cisco BV or for incorporation into other Products that are sold to Cisco BV by such other Supplier or an Approved Third Party, or (iii) transfer or sell Components to another Supplier or to an Approved Third Party for incorporation into Products that are sold to Cisco BV by such other Supplier or an Approved Third Party; and (b) perform all necessary and appropriate ancillary activities pursuant to this PPA, including without limitation the installation of copies of Installed Software on Products on behalf of Cisco BV, and the provision of assembly, test, failure analysis, materials purchasing, materials management, packaging, new Product introduction, and delivery services to Cisco BV or Cisco BV’s designated recipients in accordance with all SLA terms, Specifications, cycle times, Price and other applicable quality requirements, as they may be amended by the parties from time to time. Each Supplier shall design, measure and maintain capable, technologically current processes for manufacturing Products that are consistent with the technology requirements for such Products. Such processes shall include, without limitation, new product introduction services, such as design for manufacturing, design for test and design for assembly. Each Supplier’s manufacturing processes shall correspond to all Specifications, including, without limitation, any new product introduction standards provided by Cisco BV. Each Supplier agrees to employ effective controls to identify and contain Product defects. No other party shall have any right to the output of Products or Liable Components of any Supplier, except as specifically provided in this PPA. No Supplier shall have any right to deal with or dispose of Products or Liable Components except as explicitly authorized in this PPA, nor to sell Products or Liable Components to, or to install copies of Installed Software for, any party, except as specifically provided in this PPA.
	2.1.1 Scope. The scope of the manufacturing and related services provided for in this Agreement extends to all Products purchased by Cisco BV for sale by Cisco BV. For the avoidance of doubt, this PPA shall not extend to Products purchased by CSI from (i) the United States sites of Split Suppliers for sale by CSI to Third Party Customers in the Territory as contemplated by Section 2.2, or (ii) the United States sites of other Suppliers named in CSI’s Manufacturing and Product Purchase Agreement with CM and the Signing Affiliates named therein.
	2.1.2 Cisco BV Retention of Title to Cisco BV Proprietary Technology including Installed Software. Notwithstanding any other term of this PPA, Suppliers acknowledge that, as between each Supplier and Cisco BV, all right, title and interest in and to the Cisco BV Proprietary Technology, including Installed Software and all copies thereof, are held by Cisco BV, and that Suppliers’ only right in connection with the Installed Software and all copies thereof is to install them on Products. Nothing in this PPA, including but not

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 6
CONFIDENTIAL

	limited to the definition of Products, or the use of words “sale” or “sell”, shall be interpreted to mean or infer that any Supplier is selling any Cisco BV Proprietary Technology, including Installed Software, to Cisco BV, another Supplier or an Approved Third Party.
2.2	Certain Orders.
	2.2.1 Split Suppliers. CM and each applicable Supplier shall notify Cisco BV promptly in the event (i) there is a change in ownership representing [ * ] or more of the equity ownership of any Supplier, (ii) any Supplier closes or relocates a United States site, or (iii) any Supplier or other CM Affiliate opens a new United States site. Exhibit F may be amended from time to time to provide for additional Supplier sites, if any, within the United States.
	2.2.2 Orders Placed with Split Suppliers. Each United States site of a Split Supplier shall accept and act on POs issued to it by or on behalf of either Cisco BV or CSI. CSI is a party to a Manufacturing and Product Purchase Agreement with each Split Supplier. Due to information system constraints CSI does not currently issue and account for POs in its own name to a Split Supplier. With respect to the United States site(s) of Split Suppliers, each Product for which there is, from the time immediately prior to entering WIP through the time of Packout in the United States by a Split Supplier at a Split Supplier site identified on Exhibit F, a Third Party Customer order that specifies a bill-to address located within the Territory shall be built for CSI and deemed a CSI order under CSI’s Manufacturing and Product Purchase Agreement; all other orders shall be built for Cisco BV by such Split Supplier under this PPA and shall be deemed a Cisco BV order under this PPA.
	2.2.3 No Specific Third Party Customer Order. With respect to POs for Products that are issued to a United States site of a Split Supplier for which there is no specific Third Party Customer order that specifies a bill-to address located within the Territory from the time immediately prior to entering WIP through the time of Packout in the United States, such Product shall be built for Cisco BV under this PPA and shall be deemed a Cisco BV order under this PPA. If at any time a Split Supplier does not have access to pertinent bill-to information with respect to particular Products or is not provided the bill-to information for such Products by Cisco BV or CSI, then such Products shall be built for and sold to Cisco BV by such Split Supplier under this PPA.
	2.2.4 Invoicing for CSI Orders. Unless otherwise instructed by CSI or Cisco BV, each Split Supplier shall invoice CSI in the name of Cisco BV for all POs for Products sold from a Split Supplier site identified on Exhibit F that are allocated to CSI pursuant to this Section 2.2. CSI shall be liable to pay such Split Supplier for such invoices and shall do so through Cisco BV. The provisions of this Section 2.2 are for administrative and logistical convenience to address the information system constraints of CSI and shall not render or be deemed to render Cisco BV an agent of CSI, or vice versa, for any purpose.
2.3	Source Inspection. During the term of this PPA and during the implementation of any Transition Plan (as defined in Section 10.5.3), Cisco BV shall have the right, at its discretion, to inspect, review, monitor and oversee, and verify for compliance, during regular business hours upon reasonable notice, the work being performed and the

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 7
CONFIDENTIAL

	Products being manufactured under this PPA, including, without limitation, the right to direct that all work relating to a deficient process be stopped in whole or in part until further notice.
3.0	LIMITED LICENSE, OWNERSHIP, LIMITED RIGHT TO SUBLICENSE
3.1	Cisco BV Proprietary Technology; Grant of Limited License. Subject to the conditions and limitations of this PPA, Cisco BV hereby grants each Supplier a non-exclusive, non-assignable limited license to use the Cisco BV Proprietary Technology and Work Product for the sole purposes of manufacturing Products and Components for transfer or sale on the terms and conditions of Section 2 and providing ancillary services under the terms of this PPA, provided, however, that the only right granted to each Supplier in connection with the Installed Software is to perform the services of installing copies of such Installed Software on Products on behalf of Cisco BV in accordance with Specifications.
3.2	Limited Right to Sublicense. Cisco BV hereby grants to each Supplier the limited right to sublicense the rights granted in Section 3.1 only to (i) CM Affiliates who are not Signing Affiliates and (ii) Approved Third Parties, in each case only pursuant to a binding written sublicense agreement in substantially the form attached hereto as Exhibit E (“Authorized Sublicense Agreement”) and solely for the purposes of manufacturing Products or Components for ultimate sale or transfer to Cisco BV and Approved Third Parties and of installing copies of Installed Software on Products on behalf of Cisco BV. Except as expressly permitted in this Section 3.2, no Supplier may assign, sublicense or otherwise transfer any of its rights under the license granted in Section 3.1 without the express, prior written consent of Cisco BV, which consent Cisco BV may grant or deny in its sole discretion. Each Supplier will provide Cisco BV with fully executed copies of any Authorized Sublicense Agreement it enters into within 30 days of execution.
	3.2.1 Exception to Sublicense Requirement. Notwithstanding the above, if an Approved Third Party is a party to a Manufacturing and Product Purchase Agreement with Cisco BV that contains a grant of the rights granted in Section 3.1 to such Approved Third Party, or if an Approved Third Party is a sublicensee under an Authorized Sublicense Agreement with a party to a Manufacturing and Product Purchase Agreement with Cisco BV that contains a grant of the rights granted in Section 3.1 to such Approved Third Party, no additional Authorized Sublicense Agreement will be required in connection with such Approved Third Party.
3.3	License Restrictions. Each Supplier agrees:
	(i) not to engage in, facilitate or authorize others to engage in, the reverse engineering, disassembly or the decompilation of any of the Cisco BV Proprietary Technology;
	(ii) not to disclose the Cisco BV Proprietary Technology or Work Product to any third party, unless pursuant to an Authorized Sublicense Agreement as provided in Section 3.2 or unless agreed to via prior written approval by Cisco BV and documented as required by Cisco BV;

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 8
CONFIDENTIAL

	(iii) not to use the Cisco BV Proprietary Technology or Work Product for its own benefit or the benefit of others, or to the detriment of Cisco BV or any Cisco BV Affiliate; and
	(iv) to secure and protect the Cisco BV Proprietary Technology and Work Product with at least the same degree of care it utilizes with respect to its own and/or CM’s most valued proprietary information, and in any event, no less than a reasonable standard of care.
3.4	Ownership. As between Cisco BV and each Supplier, all right, title, and interest in the Cisco BV Proprietary Technology and Work Product are and shall remain solely with Cisco BV, subject to the limited license granted herein. Each Supplier hereby irrevocably assigns, transfers and conveys to Cisco BV any rights such Supplier may have, or may hereafter acquire, or may purport to have or hereafter acquire, in or to any Cisco BV Proprietary Technology or Work Product worldwide. To the extent Work Product is a “work made for hire” under applicable copyright law, it shall be considered a “work made for hire” from the moment of creation, the copyright of which shall be owned exclusively by Cisco BV worldwide. To the extent such Work Product does not qualify as a “work made for hire” under applicable copyright law, all right, title and interest that any Supplier may have in and to same is hereby assigned, transferred and conveyed from the moment of creation exclusively to Cisco BV. Each Supplier shall execute such documents, render such assistance, and take such other action as Cisco BV may reasonably request, at Cisco BV’s expense, to further evidence such assignment and to apply for, register, perfect, confirm, and protect Cisco BV’s rights to the Cisco BV Proprietary Technology and Work Product. The parties acknowledge that any right to Work Product assigned, transferred or conveyed to Cisco BV may be further assigned, transferred or conveyed by Cisco BV.
3.5	Waiver of Moral Rights. Each Supplier represents that it has or will obtain a waiver of moral rights from each individual who performs work in connection with this PPA, including without limitation, a waiver regarding the right to the integrity of any Work Product, the right to be associated with any Work Product, the right to modify any Work Product in any way, the right to prevent the use of any Work Product in association with any product, service, cause or institution, and the right to restrain the publication of any Work Product throughout the world. Supplier hereby waives any and all moral rights, including without limitation any right to identification of authorship or limitation on subsequent modification that Supplier (or its employees, agents or consultants) has or may have in any Work Product and any derivatives, improvements or modifications thereof. Supplier hereby undertakes to ensure that its employees, agents and consultants are contractually bound to the foregoing terms.
3.6	Attorney In Fact. Each Supplier agrees that if Cisco BV is unable because of such Supplier’s unavailability, dissolution or incapacity, or for any other reason, to secure such Supplier’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering the Work Product and/or inventions and developments assigned to Cisco BV as provided above, then such Supplier hereby irrevocably designates and appoints Cisco BV and its duly authorized officers and agents as such Supplier’s agent and attorney in fact, to act for and in such Supplier’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 9
CONFIDENTIAL

	to further the prosecution and issuance of patents and copyright registrations thereon with the same legal force and effect as if executed by such Supplier.
4.0	WARRANTY
4.1	By Suppliers.
	4.1.1 Representations. Each Supplier represents to Cisco BV that (i) each Product purchased hereunder from such Supplier will be free and clear of all liens, claims, and encumbrances created or caused by any Supplier; [ * ] (iii) all manufacturing processes, excluding manufacturing processes provided by Cisco BV, utilized and services provided hereunder by such Supplier are either owned or properly licensed by such Supplier or are in the public domain and do not infringe any proprietary rights of any third party; (iv) it has the full authority to enter into this PPA and to carry out its obligations hereunder; and (v) its compliance with the terms and conditions of this PPA shall not violate any applicable federal, state or local laws, regulations or ordinances or any third party agreements in effect at the time of manufacture of a particular Product.
	4.1.2 Product Warranty. The warranty period for each Product shall be [ * ] from the date of shipment from a Supplier facility or as otherwise agreed to in writing by the parties (the “Warranty Period”). Each Supplier warrants during the Warranty Period each such Product: (i) shall be new and unused; (ii) shall comply in all respects with the Specifications applicable as of the date of manufacture; [ * ].
	4.1.2.1   [ * ]
	4.1.2.2   [ * ]
	4.1.3 Failure Analysis. [ * ] Further, the applicable Supplier shall deliver replacement Products and/or Components to a location designated by Cisco BV within [ * ] after receipt of Cisco BV’s request for replacement dependent upon Product and/or Component availability. Subject to Section 4.1.2 above, any Product repaired under warranty is warranted for the period of time remaining in the original warranty for the Product, but no less than [ * ]. Any Product that is replaced with a new Product shall be provided with a full new Product warranty as set forth in Section 4.1.2. Each Supplier shall adhere to the failure analysis procedure as set forth in the SLA and provide to Cisco BV a failure analysis report specifying the reason for failure of any non-conforming Product and/or Component (this obligation shall continue for one year beyond the Warranty Period) and recommendations for corrective actions. Once the conditions leading to the failure have been discovered, subject to Cisco BV approval, the applicable Supplier shall implement corrective actions to remove all conditions leading to another like failure. The event causing the failure, the conditions leading to the event, the failure mechanism, and recommended corrective actions shall be logged by the applicable Supplier in a Root Cause Failure Analysis report to be provided to Cisco BV. [ * ].
	In the event that no defect is found in a Product and/or Component submitted by Cisco BV for Root Cause Failure Analysis or the failure is not covered by the warranty set forth in Sections 4.1.1 and 4.1.2 above, Cisco BV shall be responsible for all reasonable

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 10
CONFIDENTIAL

	costs incurred by CM in conducting the Root Cause Failure Analysis; provided, however, that to the extent Cisco BV has retained any Supplier to perform Root Cause Failure Analysis under a separate agreement, Cisco BV shall not be obligated to pay such Supplier for any costs other than those set forth in such agreement.
	[ * ]
	4.1.4 Except as otherwise set forth herein, the warranty set forth in Section 4.1.2, above, does not apply and no Supplier shall have any liability under the warranty to the extent that the Product: [ * ]
	[ * ]
	4.1.5 Component Warranty Assignment. Upon Cisco BV’s request, to the extent permitted by the applicable Component supplier agreement, the applicable Supplier shall assign to Cisco BV such Supplier’s right to enforce any warranty claims relating to Components contained within a Product. In its contracts with Components suppliers, each Supplier shall use reasonable commercial efforts to ensure that warranty claims may be assigned to Cisco BV. If any Supplier is unable to include such terms in its supplier contracts, such Supplier shall promptly notify Cisco BV. Further, each Supplier shall provide to Cisco BV all reasonable assistance in pursuing any such claim, including at minimum, providing all purchase records, failure data and prior claim history. In the event that a party should assign any rights it may have in accordance with this section, the assignor shall release and indemnify the assigning party from any liability that may arise due to a failure or defect in the subject Components.
4.2	By Cisco BV
	Cisco BV warrants that at the time of delivery by Cisco BV or an affiliate of Cisco BV, Cisco BV or the affiliate of Cisco BV, applicable, has the right to provide the Loaned Equipment. In the event of a breach of the foregoing warranty, Cisco BV shall at its option replace or repair Loaned Equipment. CM’S SOLE AND EXCLUSIVE REMEDY AND CISCO BV’S ENTIRE LIABILITY FOR BREACH OF THE WARRANTY SET FORTH IN THIS SECTION 4.2 IS AS STATED IN THIS SECTION.
4.3	Epidemic Failure.
	4.3.1 Epidemic Failure—Procedure: [ * ]. In the event of an Epidemic Failure, the discovering party shall promptly notify the other parties in writing upon discovery of the failure (the “Epidemic Failure Notice”). CM shall be responsible for managing the Epidemic Failure for both Cisco BV Negotiated Components and Supplier Negotiated Components and shall implement the following procedures:
	(i) the applicable Supplier shall inform Cisco BV of its preliminary plan for problem diagnosis within one (1) business day of the Epidemic Failure Notice;
	(ii) CM shall work with the applicable Suppliers to diagnose the problem, conduct Root Cause Failure Analysis, and plan an initial work-around. [ * ];

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 11
CONFIDENTIAL

	(iii) Each Supplier shall adhere to the failure analysis procedure as set forth in the SLA and CM shall provide to Cisco BV the Root Cause Failure Analysis Report. Once the conditions leading to the Epidemic Failure have been discovered, subject to Cisco BV approval each Supplier shall implement corrective actions to effect a permanent solution and remove all conditions leading to another like failure. To provide adequate failure analysis, each Supplier agrees to maintain sufficient processes as agreed to in the failure analysis statement of work to allow it to be able to identify the cause of any Epidemic Failure in a Product. If necessary, Product changes shall be implemented in a manner consistent with the requirements of the SLA;
	[ * ]
	(v) Each Supplier shall provide to Cisco BV, upon request, all information relevant to the Epidemic Failure.
	4.3.2 Epidemic Failure—Costs and Indemnification.
	[ * ]
4.4	THE WARRANTIES CONTAINED IN THIS SECTION ARE IN LIEU OF, AND EACH PARTY EXPRESSLY DISCLAIMS, ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR ARISING BY COURSE OF DEALING OR PERFORMANCE, CUSTOM, USAGE IN THE TRADE OR OTHERWISE, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE AND FITNESS FOR A PARTICULAR USE.
4.5	Pass-Through Terms.
	(a) Sale of Components to Approved Third Parties. Each Supplier shall ensure that sales by a Supplier to an Approved Third Party shall be made on the terms of Sections 4 (Warranty), 5.1.3 (Risk of Loss and Damage Borne by Supplier), 7.1.1, 7.2.1, 7.3, 7.5 and 7.6 (Indemnity), 8.1(a) (Price), 8.2 (Competitive Pricing), 8.3 (Taxes), 9 (Shipment Terms) and 11(a) (Limitation of Liability) of the PPA (collectively, the “Selling Flow-Through Terms”), such that an Approved Third Party shall have rights substantially similar to the rights afforded to Cisco BV under such sections of the PPA, and that any remedy provided by a Supplier to an Approved Third Party under the Selling Flow-Through Terms for such a sale shall be enforceable by either Cisco BV or such Approved Third Party, but not both Cisco BV and such Approved Third Party, even though the sale is made to such Approved Third Party. Cisco BV agrees to use reasonable commercial efforts to enter into an agreement with each Approved Third Party that contains an acknowledgement from the Approved Third Party similar to the language contained in Section 4.5(b) below.
	(b) Purchase of Components by Suppliers.

      (1) Purchases of Components from Component Suppliers other than Approved Third Parties. Each Supplier acknowledges that Cisco BV has entered into Cisco BV Purchase Agreements with certain Component suppliers (excluding Approved Third Parties who have executed Manufacturing and Product Purchase Agreements with Cisco

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 12
CONFIDENTIAL

BV similar to this PPA (“Similar PPAs”)), and that such Component suppliers (excluding Approved Third Parties who have executed Similar PPAs) have agreed to afford to the Suppliers the benefits of certain terms of such Cisco BV Purchase Agreements, including terms related to warranty, subject to specified applicable conditions and limitations (the “Component Supplier Purchasing Pass-Through Terms”). Each Supplier agrees to accept the Component Supplier Purchasing Pass-Through Terms, including all specified applicable conditions and limitations, and to include such terms in the terms of its purchases of Components from Component suppliers. Each Supplier agrees that in the event of a conflict between such Supplier’s purchase order and the Component Supplier Purchasing Pass-Through Terms, the Component Supplier Purchasing Pass-Through Terms shall prevail. Each Supplier hereby agrees that it will not enforce its rights against a Component supplier with respect to a transaction governed by Component Supplier Purchasing Pass-Through Terms, whether in such Supplier’s capacity as a buyer or seller, if Cisco has elected to enforce the transaction terms directly against such Component supplier. For transactions governed by Component Supplier Purchasing Pass-Through Terms, in the event that Cisco elects to enforce such transaction terms directly against a Component supplier, Cisco shall first obtain the relevant Supplier’s consent, provided that in the event a Supplier does not enforce the transaction terms against a Component supplier after a written request from Cisco, Cisco may enforce such terms directly against the Component supplier without obtaining Supplier’s consent.

     (2) Purchases of Components from Approved Third Parties who Have Executed Manufacturing and Product Purchase Agreements with Cisco BV. Each Supplier acknowledges that Cisco BV has entered into or is in the process of entering into Similar PPAs with certain Approved Third Parties, pursuant to which such Approved Third Parties have agreed or are expected to agree to afford to the Suppliers the benefits of certain terms of such Similar PPAs, including terms related to warranty (collectively, the “Purchasing Pass-Through Terms”). Each Supplier agrees to accept the Purchasing Pass-Through Terms, including all specified applicable conditions and limitations, and to include such terms in the terms of its purchases of Components from Approved Third Parties who have executed Similar PPAs. Each Supplier agrees that in the event of a conflict between such Supplier’s purchase order and the Purchasing Pass-Through Terms, the Purchasing Pass-Through Terms shall prevail. Each Supplier hereby agrees that it will not enforce its rights against an Approved Third Party with respect to a transaction governed by Purchasing Pass-Through Terms, whether in such Supplier’s capacity as a buyer or seller, if Cisco has elected to enforce the transaction terms directly against such Approved Third Party.

5.0	TITLE AND RISK
5.1	Title and Risk of Loss.
	5.1.1 Title. Subject to compliance with the terms and conditions of this PPA, including Section 2.2 with respect to orders placed with Split Suppliers, together with its exhibits and any Ancillary Agreements, Cisco BV shall have title to each Product immediately following the completion of Packout and, if applicable, export clearance. Cisco BV shall not hold title to (i) any Products prior to completion of Packout or (ii) any Components, except as may be provided in a separate warehousing, consignment or

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 13
CONFIDENTIAL

	other agreement between the parties. In no event shall the purchase of Products by Cisco BV hereunder be deemed to constitute a purchase of Cisco BV Proprietary Technology, including Installed Software or any copies thereof, for which (as between Cisco BV and each Supplier) all right, title and interest shall at all times remain with Cisco BV.
	5.1.2 Risk of Loss and Damage Borne By Cisco BV. Notwithstanding passage of title to a Product to Cisco BV immediately following the completion of Packout of such Product as provided in Section 5.1.1, Cisco BV shall bear the risk of loss and damage for a Product only when such Product has both completed Packout and has been loaded on a carrier’s means of transport at the applicable Supplier’s premises.
	5.1.3 Risk of Loss and Damage Borne by Supplier. Supplier shall bear the risk of loss and damage with respect to Components and Products while such Components and Products are in Supplier’s care, custody or control (which in the case of Products that have completed Packout shall be deemed to continue until such Products have been loaded on a carrier’s means of transport at Supplier’s premises). In addition, Supplier shall bear the risk of loss and damage for: (i) Products that have not completed Packout while in transit between Suppliers and/or CM Affiliates (meaning between related CM entities), or between Suppliers and/or Approved Third Parties; and (ii) Components while in transit (a) between Suppliers and/or CM Affiliates (meaning between related CM entities), (b) between Suppliers and/or Approved Third Parties (subject to any different arrangements between Suppliers and any such [ * ] or (c) from a Component supplier to any Supplier (subject to any different arrangements between any Component supplier and such [ * ]. Supplier’s liability for lost or damaged Components or Products, [ * ].
	5.1.4 Loaned Equipment. Cisco BV or a Cisco BV Affiliate if it provides Loaned Equipment shall retain all right, title and interest to any Loaned Equipment. Each Supplier shall bear all risk of loss and damage with respect to all such Loaned Equipment as of its receipt at such Supplier’s location and at all times such Loaned Equipment is in Supplier’s care, custody or control. [ * ].
	5.1.5 Products and Loaned Equipment. Products (immediately following completion of Packout of such Products) and any Loaned Equipment shall be collectively referred to as “Cisco BV Property.”
5.2	Cisco BV Property. Except with Cisco BV’s prior written consent, Supplier shall use Cisco BV Property solely to discharge its obligations under this PPA.
6.0	CONFIDENTIALITY
6.1	PPA As Confidential Information. The parties shall treat the terms and conditions and the existence of this PPA as Confidential Information (as such term is defined in the NDA referenced below).
6.2	Confidential Information. Upon execution hereof, the parties shall comply with the provisions of that certain Master Non-Disclosure Agreement executed by CM and CSI on September 28, 2001 (the “NDA”). Suppliers agree that Cisco BV may disclose Supplier Confidential Information to third parties involved in the manufacture of Products,

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 14
CONFIDENTIAL

	including without limitation other Cisco BV contract manufacturers and suppliers. Any such disclosure shall be subject to a nondisclosure agreement.
6.3	Information Exchange. The parties acknowledge that during the course of each Supplier’s manufacture and sale of Products to Cisco BV, information shall be exchanged with Cisco BV electronically. The parties affirm that the terms of the Agreement for e-Hub Access and Use Agreement dated August 28, 2004 shall apply to all such information exchange.
7.0	INDEMNIFICATION
7.1	General Indemnity.
	[ * ]
7.2	Infringement Indemnity.
	[ * ]
7.3	Continued Use. If Cisco BV or any of Cisco BV’s customers are prevented or are likely to be prevented from obtaining, selling, importing, or using Products or any Components thereof by reason of any Cisco BV Claims relating to actual or potential infringement as detailed in Section 7.2.1, then CM together with each other Supplier shall, at their sole expense, either: (i) obtain all rights required to permit the manufacture and sale of such Products or any Components thereof by any Supplier, and the manufacture, sale, import, and use of the Products or any Components thereof by or for Cisco BV and its customers (including Cisco BV Affiliates); or (ii) modify or replace such Products or any Components thereof to make them non-infringing, provided that any replacement of such Products or any Components thereof is satisfactory to Cisco BV and effected in a manner consistent with the SLA. If any Supplier is unable to achieve any option above within thirty (30) days after issuance of an injunction, then such Supplier shall promptly refund to Cisco BV the Price and all shipping, storage and related costs of all affected Products or any Components thereof that are returned or destroyed and such Supplier shall assist Cisco BV in identifying alternative sources for the affected Products’ functionality.
7.4	Limitations.
	7.4.1 Supplier Indemnity Limitations. [ * ]. Cisco BV shall notify CM, in writing, of any Cisco BV Claim for which Cisco BV believes that it is entitled to indemnification (provided that failure to provide such notice shall relieve Suppliers of their indemnification obligations only if and to the extent that such failure prejudices Supplier’s ability to defend the Cisco BV Claim). Cisco BV shall permit Suppliers to control, in a manner not adverse to Cisco BV, the defense and settlement of any such Cisco BV Claim using counsel reasonably acceptable to Cisco BV. Cisco BV may employ counsel, at Cisco BV’s expense, with respect to any Cisco BV Claim (provided that if counsel is employed due to a conflict of interest or because Suppliers do not assume control, Suppliers shall bear such expense). No Supplier shall enter into any settlement that affects Cisco BV’s rights or interests without Cisco BV’s prior written approval.

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 15
CONFIDENTIAL

7.4.2	Cisco BV Indemnity Limitations. [ * ]. CM shall notify Cisco BV, in writing, of any CM Claim for which CM believes that any Supplier is entitled to indemnification (provided that failure to provide such notice shall relieve Cisco BV of its indemnification obligations only if and to the extent that such failure prejudices Cisco BV’s ability to defend the CM Claim). Suppliers shall permit Cisco BV to control, in a manner not adverse to Suppliers, the defense and settlement of any such CM Claim using counsel reasonably acceptable to CM. Suppliers may employ counsel, at their expense, with respect to any CM Claim (provided that if counsel is employed due to a conflict of interest or because Cisco BV does not assume control, Cisco BV shall bear such expense). Cisco BV shall not enter into any settlement that affects any Supplier’s rights or interests without such Supplier’s prior written approval.
7.5	Indemnification of Cisco BV by Component Suppliers. Suppliers shall [ * ] to have Cisco BV and Cisco BV Affiliates named as additional indemnified parties or eligible to tender claims for indemnification in all those agreements between any Supplier and any Component supplier in which any Supplier is indemnified in any manner by such Component supplier.
7.6	CM Indemnity. [ * ]
8.0	PRICE TERMS
8.1	Compensation to Suppliers. In exchange for the Products manufactured and related services provided to Cisco BV by any Supplier pursuant to this PPA, Cisco BV’s compensation to any Supplier shall be comprised of:

(a)	Payment of the applicable Price for the Products purchased;
(b)	Payment of approved engineering fees related to the manufacture of Products as may be referenced in the SLA and agreed upon by the parties;
(c)	Payments arising from any revaluation process as set forth in the SLA;
(d)	Payment for any Liable Components on the terms and conditions of the SLA; and
(e)	Any other service fees to which the parties may agree in writing.

8.2 [ * ]

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 16
CONFIDENTIAL

8.3 Taxes. Each party shall bear any and all taxes it incurs as a direct or indirect result of the entry into this PPA or the exercise of the rights and performance of the obligations under this PPA, unless the parties have agreed otherwise.

8.3.1	Cisco BV and each Supplier shall each be solely responsible for all taxes measured by its gross or net income (including any capital gains taxes or minimum taxes) which are incurred as a direct or indirect result of the entry into this PPA or the rights and obligations under this PPA.
8.3.2	Cisco BV may withhold from payment to any Supplier under this PPA any income taxes required to be withheld by Cisco BV under the applicable laws of the United States or any other country. Amounts withheld shall be paid to the appropriate taxing authorities and, upon request, Cisco BV shall provide any Supplier with official receipts issued by said taxing authority or such other evidence as is reasonably available to establish that such taxes have been paid. Cisco BV shall cooperate with Suppliers and take all actions reasonably necessary in order to secure a reduction or elimination of withholding taxes pursuant to any applicable income tax treaty.
8.3.3	Unless otherwise expressly provided, any sum, amount or rate expressed in this PPA has been determined without regard to, and does not include, amounts to be added on under this section on account of sales, personal property and use taxes, VAT, GST duties, or similar indirect taxes (each, an “Indirect Tax”).
8.3.4	If an Indirect Tax is payable as a consequence of any supply made or deemed to be made in connection with this PPA Cisco BV must pay to the applicable Supplier the Indirect Tax amount upon receiving a tax invoice complying with any legislation under which the Indirect Tax is imposed. Any Indirect Tax shall appear as separate additional items on the invoice from any Supplier. If under local legislation for any supply made or deemed to be made in connection with this PPA special invoicing or other requirements exist in order to apply a zero-rate or an exemption on this supply for an Indirect Tax, Cisco BV and/or Suppliers shall take all necessary steps to obtain this zero-rate/exemption, including issuing a tax-invoice complying with this legislation. Suppliers must do all other things reasonably requested by Cisco BV to enable Cisco BV to obtain any input or other tax credit to which it is entitled.
8.3.5	If an adjustment is made as between any Supplier and the relevant taxing authority of an amount paid on account of an Indirect Tax on any supply made to Cisco BV under this PPA, a corresponding adjustment shall be made as between such Supplier and Cisco BV, and any payments by Cisco BV to such Supplier required to give effect to the adjustment shall be made, but only to the extent that a tax invoice as described in Section 8.3.4 is raised and to the extent that Cisco BV can reclaim this adjustment as if such taxes were timely invoiced to Cisco BV. If any Supplier is entitled to an adjustment by way of refund, such Supplier must apply for the refund if requested to do so by Cisco BV, and shall, at Cisco BV’s election, promptly remit such refund to Cisco BV or offset such refund against Indirect Taxes payable by Cisco BV to such Supplier after the refund is received.

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 17
CONFIDENTIAL

8.3.6	Nothing in this Section requires Cisco BV to pay any amount on account of a fine, penalty, interest or other amount for which any Supplier is liable, to the extent that the liability arises as a consequence of a default of any Supplier, its employees, agents or any other persons acting for such Supplier.
8.3.7	The parties will cooperate in good faith to minimize any property taxes assessed against any party with respect to Products and/or Components subject to this PPA to the extent possible pursuant to applicable law.
8.3.8	Cisco BV and each Supplier hereby agree and acknowledge that to the extent the Products manufactured under this PPA have been manufactured or produced in whole or in significant part within the United States within the meaning of Section 199 of the Internal Revenue Code of 1986, as amended, as between Cisco BV and each Supplier, such Products shall be deemed to have been manufactured by Cisco BV in whole or in significant part within the United States within the meaning of Section 199 and that any deduction available pursuant to Section 199 and any state statute adopting or conforming to Section 199 shall be claimed by Cisco BV. Each Supplier hereby covenants and agrees to not take any such deductions on its United States federal or state tax returns with respect to Products manufactured under this PPA.

8.4	Payment. Cisco BV shall make payments to Suppliers [ * ] of Cisco BV’s receipt of a valid Supplier invoice or such other time period as agreed upon by the parties. The parties agree that those Supplier invoices that cannot pass through the Cisco BV-Supplier automated payment process shall be paid to Supplier upon completion of Cisco BV’s verification of such invoice(s).
9.0	SHIPMENT TERMS
9.1	Shipment. Suppliers shall ship Products on the applicable Shipment Dates, and shall implement delivery and shipment in a manner consistent with the requirements of the SLA and Suppliers’ performance thereof shall be measured through the Scorecard Process referenced in the SLA.
9.2	Late Shipment. If any Supplier is unable to ship Products on the applicable Shipment Date, such Supplier shall (i) notify the appropriate Cisco BV manufacturing operations contact within twenty four (24) hours of such Supplier’s knowledge of late shipment and (ii) make reasonable commercial efforts to allow no less than forty eight (48) hours notice of any such late shipment. Each Supplier shall immediately notify Cisco BV of any known or anticipated delays that may cause a manufacturing line to go down, or of any circumstances that may cause disruption in shipment. Additionally, each Supplier shall adhere to the freight and logistics requirements of the SLA.
10.0	TERM AND TERMINATION
10.1	Term. Unless terminated earlier as provided herein, this PPA shall have an initial term of five (5) years from the Effective Date (the “Initial Term”) and shall automatically renew for additional periods of one (1) year each (the “Extended Term”), (collectively referred to as the “Term”) unless a party provides to the other notice of non-renewal at

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 18
CONFIDENTIAL

	least ninety (90) days prior to the expiration of the Initial Term or the then applicable Extended Term.
10.2	Suspension/Termination for Cause. Cisco BV, on the one hand, and any Supplier, on the other hand, may suspend its performance and/or terminate this PPA as to such party upon [ * ] written notice at any time upon occurrence of any one of the following events:
	10.2.1 The other party (meaning a Supplier in the case of Cisco BV and meaning Cisco BV in the case of any Supplier) is in material breach of any term, condition or covenant of this PPA, including, but not limited to, all terms, conditions and covenants of the SLA, and fails to cure the breach or fails to submit an acceptable plan to cure the breach within [ * ] after written notice thereof; or
	10.2.2 Upon notice to the other party upon the occurrence of any one of the following events: (i) a receiver is appointed for such party or its property; (ii) such party makes a general assignment for the benefit of its creditors; (iii) such party commences, or has commenced against it, proceedings under any bankruptcy, insolvency or debtor’s relief law, which proceedings are not dismissed within [ * ]; or (iv) such party is liquidated, dissolved or ceases business operations.
	10.2.3 For purposes of this Section 10.2, any failure by any Supplier to comply with the terms of the Scrap Policy shall be deemed to be one of the events that constitutes a material breach.
10.3	Change in Control. If there is a change in ownership representing [ * ] or more of the equity ownership of any Supplier, Cisco BV may, at its option, immediately terminate this PPA by reason thereof as to such Supplier.
10.4	Termination for Convenience. Any party may, for any reason, or for no reason whatsoever, terminate this PPA upon [ * ] written notice to the other parties. Cisco BV may elect to terminate this PPA as to fewer than all Suppliers.
10.5	Effect of Termination. Upon termination of this PPA for any reason or no reason by any party, the parties shall adhere to the following process and shall fulfill the obligations set forth in this Section 10.5:
	10.5.1 Each affected Supplier shall, during an agreed upon post termination transition period, continue to provide to Cisco BV those Products and a level of service as agreed to by the parties and at a minimum consistent with the requirements of the SLA;
	10.5.2 Cisco BV’s liability in connection with Components shall be consistent with the SLA;
10.5.3	Within fourteen (14) calendar days following the notice of termination, the parties shall agree upon a post-termination transition plan which shall address the following critical issues (the “Transition Plan”) to be confirmed in a written transition agreement between the parties:

 • The time period during which the transition shall occur;

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 19
CONFIDENTIAL

 • Continuity of key personnel;

 • Establishment of a fixed Electronic Forecast during the entire transition period;

 • Inventory evaluation and audit, and order transfer to transitioning alternate contract manufacturer(s);

 • Establishment of fixed pricing during the entire transition period;

 • Confirmation that no profit or opportunity cost of any Supplier shall be passed on to Cisco BV;

 • Access to Supplier locations by Cisco BV and its designated agents (including transitioning alternate contract manufacturer(s));

 • Loaned Equipment, Cisco BV Proprietary Technology, Work Product and Confidential Information as defined in the NDA; and

 • The process through and time by which each Supplier shall submit to Cisco BV auditable written claims for termination/cancellation charges, if any.

	10.5.4 All licenses granted by Cisco BV to the terminated Supplier under this PPA shall immediately terminate upon termination of this PPA as to such Supplier, except as necessary during any transition period to effect a party’s obligations under an agreed upon Transition Plan.
	10.5.5 THIS SECTION 10 SETS FORTH CISCO BV’S AND EACH SUPPLIER’S ENTIRE REMEDY WITH RESPECT TO TERMINATION OF THIS PPA BY ANY PARTY.
10.6	Non-Renewal.
	10.6.1 Non-Renewal and Continuing Business. Upon the non-renewal of this PPA, the parties may elect to continue to do business with one another in any agreed upon manner.
	10.6.2 Non-Renewal and Business Cessation. In the event (i) the parties elect to cease business following a notice of non-renewal by any party or (ii) Cisco BV exercises its option to terminate under Section 10.3 the parties acknowledge that Section 10.5 in its entirety shall apply.
10.7	Termination as to One Supplier. This PPA may be terminated as between Cisco BV and one or more Suppliers for any reason allowed above, without affecting the contract between Cisco BV and the remaining Supplier or Suppliers If this PPA is terminated as to fewer than all Suppliers, it shall remain in full force and effect between Cisco BV and the remaining Supplier(s).
10.8	Duty to Mitigate Costs. All parties shall, in good faith, undertake reasonable measures to mitigate the costs of termination.

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 20
CONFIDENTIAL

10.9	Survival; Support After Termination. Sections 1.0 (entirely), 2.3, 3.3, 3.4, 3.5, 3.6, 4.0 (entirely), 5.0 (entirely), 6.0 (entirely), 7.0 (entirely), 8.3, 10.5, 10.8, 10.9, 11.0 (entirely), 12.0 (entirely), 13.0 (entirely), 15.0 (entirely), 16.0 (entirely) and all end user licenses shall survive termination or expiration of this PPA.
11.0	LIMITATION OF LIABILITY
	(a) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS PPA, EXCEPTING EACH SUPPLIER’S OBLIGATIONS IN SECTION 7 (INDEMNIFICATION) AND FURTHER EXCEPTING BREACH OF ANY SUPPLIER’S RESPECTIVE CONFIDENTIALITY OBLIGATIONS UNDER SECTION 6 (CONFIDENTIALITY), UNDER NO CIRCUMSTANCES SHALL ANY SUPPLIER, ITS EMPLOYEES, OFFICERS OR DIRECTORS, AGENTS, SUCCESSORS OR ASSIGNS BE LIABLE TO CISCO BV OR ITS EMPLOYEES, OFFICERS OR DIRECTORS, AGENTS, SUCCESSORS OR ASSIGNS UNDER ANY CONTRACT, STRICT LIABILITY, TORT (INCLUDING NEGLIGENCE) OR OTHER LEGAL OR EQUITABLE THEORY, FOR ANY SPECIAL, INCIDENTAL, EXEMPLARY, INDIRECT, PUNITIVE OR CONSEQUENTIAL COSTS OR DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFITS, LITIGATION COSTS, LOSS OF DATA, PRODUCTION OR PROFIT, ARISING OUT OF OR RELATING IN ANY WAY TO THE SUBJECT MATTER OF THIS PPA. THIS SECTION DOES NOT LIMIT ANY SUPPLIER’S LIABILITY FOR BODILY INJURY (INCLUDING DEATH) OR PHYSICAL DAMAGE TO TANGIBLE PROPERTY.
	(b) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS PPA, EXCEPTING CISCO BV’S OBLIGATIONS IN SECTION 7 (INDEMNIFICATION) AND FURTHER EXCEPTING BREACH OF CISCO BV’S CONFIDENTIALITY OBLIGATIONS UNDER SECTION 6 (CONFIDENTIALITY), UNDER NO CIRCUMSTANCES SHALL CISCO BV, ITS EMPLOYEES, OFFICERS OR DIRECTORS, AGENTS, SUCCESSORS OR ASSIGNS BE LIABLE TO ANY SUPPLIER OR ITS EMPLOYEES, OFFICERS OR DIRECTORS, AGENTS, SUCCESSORS OR ASSIGNS UNDER ANY CONTRACT, STRICT LIABILITY, TORT (INCLUDING NEGLIGENCE) OR OTHER LEGAL OR EQUITABLE THEORY, FOR ANY SPECIAL, INCIDENTAL, EXEMPLARY, INDIRECT, PUNITIVE OR CONSEQUENTIAL COSTS OR DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFITS, LITIGATION COSTS, LOSS OF DATA, PRODUCTION OR PROFIT, ARISING OUT OF OR RELATING IN ANY WAY TO THE SUBJECT MATTER OF THIS PPA. THIS SECTION DOES NOT LIMIT CISCO BV’S LIABILITY FOR BODILY INJURY (INCLUDING DEATH) OR PHYSICAL DAMAGE TO TANGIBLE PROPERTY.
	(c) THE PARTIES ACKNOWLEDGE AND AGREE THAT THE LIMITATIONS IN THIS SECTION 11 SHALL APPLY EVEN IF ANY LIMITED REMEDY SPECIFIED HEREIN IS FOUND TO HAVE FAILED OF ITS ESSENTIAL PURPOSE AND THAT THE PROVISIONS OF THIS SECTION 11 CONTAIN THE ALLOCATION OF RISK AND ARE A FUNDAMENTAL BASIS OF THE BARGAIN AGREED TO BY THE PARTIES. THIS SECTION SHALL NOT DIMINISH SUPPLIERS’ OBLIGATIONS TO PAY CISCO BV’S EPIDEMIC FAILURE COSTS (WHICH SHALL BE CONSIDERED TO BE DIRECT DAMAGES) IN ACCORDANCE WITH SECTION 4.3.
12.0	AUDIT

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 21
CONFIDENTIAL

12.1	Conduct of Formal Audit. Without any limitation of its rights to direct, monitor, inspect, manage, audit and/or control provided elsewhere in this PPA, at any time during the term of this PPA and during the implementation of any Transition Plan, Cisco BV may inspect, review and monitor, at a minimum, the following: (i) work being performed; (ii) facility security and safety systems; (iii) business continuity plan(s); (iv) [ * ]; (v) Loaned Equipment; (vi) manufacturing cycle times; (vii) Product quality records or data as pertaining to Cisco BV Products; (viii) any Supplier’s performance under the requirements and conditions of this PPA and (ix) each Supplier’s protection of Cisco BV Intellectual Property. Such audits shall be conducted at Cisco BV’s expense, during Supplier’s hours of operation and upon not less than 15 days’ notice. Such audits of each of the aforementioned may be conducted at each Supplier location at which work relating to the Products is being performed. [ * ].
12.2	Report of Formal Audit. Cisco BV shall report the results of all audits under Section 12.1 to CM within thirty (30) business days after Cisco BV finalizes or receives the written audit report. If CM wishes to challenge any of the findings or conclusions of the audit report, it must provide a written statement to Cisco BV within fifteen (15) days after receipt of the report specifying each and every reason for such challenge, which statement shall be accompanied by all supporting documents and data. Cisco BV, using good faith and in its reasonable discretion, shall be the final arbiter of any such challenge.
12.3	Adjustments for Non-compliance or Variance. Upon discovery of a variance or non- compliance as set forth in Section 12.1, Cisco BV may require the applicable Supplier to identify the cause of each such variance or non-compliance and implement all corrective action approved by Cisco BV in accordance with the SLA.
13.0	COMPLIANCE WITH LAWS
13.1	Compliance with Laws. Each party warrants it has complied and shall comply with all applicable laws, regulations and ordinances in effect at the time of manufacture of each of the Products. For the purpose of this Section, Suppliers’ compliance shall mean the compliance of its manufacturing and business operations. Upon Cisco BV’s reasonable request, each Supplier agrees to provide reasonable assistance to Cisco BV to facilitate compliance with such laws.
13.2	Use, Export, Re-Export, Import & Transfer Controls. The Cisco BV Proprietary Technology supplied by or made available by Cisco BV to Supplier pursuant to this PPA, and the Work Product, Products and Components (collectively, the “Cisco BV Products and Technology”) are subject to export and import controls, including those of the United States, European Union and other applicable international laws and regulations. Each party shall comply with all such laws and regulations governing the use, export, re-export, import, transfer of and record keeping regarding Cisco BV Products and Technology and will obtain all required U.S. and local authorizations, permits, and licenses. In the event of a conflict between any such requirements, Supplier shall ensure adherence to the laws of the United States. The parties shall provide to one another information, support documents, and assistance as may reasonably be required to secure applicable authorizations or licenses.

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 22
CONFIDENTIAL

	Information regarding compliance with U.S. use, export, re-export, and transfer laws may be located at the following URL: http://www.Cisco.com/wwl/export/compliance_provision.html.
13.3	Valuation. Values reflected on any customs clearance documentation shall comply with the World Trade Organization customs valuation agreement and other international and national customs valuation laws and regulations, [ * ]. No Products may be exported using zero or nominal values on invoices. All Supplier invoices for Products shall contain a complete and accurate statement of the Price together with all other charges payable by Cisco BV and relating to the Products and meet the requirements for commercial invoices. [ * ].
13.4	Duty Drawback. Cisco BV reserves the right to be the importer of record for all deliveries. If Cisco BV is not importer of record and any Supplier obtains duty drawback rights to any delivery of Products, such Supplier will provide Cisco BV with documents required by the customs authorities of the applicable country of receipt to prove importation and to transfer duty drawback rights to Cisco BV.
13.5	Compliance with Environmental Laws. Each party shall comply with all applicable environmental laws, regulations, ordinances and legal rulings, including but not limited to those of the United States and European Union, relating to this PPA and the Products provided hereunder. Each Supplier shall be fully responsible under this PPA for any liability resulting from its actions or inaction or otherwise failing to comply with environmental laws and regulations. Without limiting the generality of the foregoing, beginning on the Effective Date (or such later date as authorized in writing by Cisco BV):
	(a) With respect to all Components and materials, each Supplier shall collaborate with Cisco BV to enable compliance with the Regulated Materials Directive. [ * ].
	(b) Each Supplier agrees to use material which is in compliance with the requirements of European Union Directive 2002/95/EC or 2002/96/EC, or any other law, regulation, directive or order governing the permissible content of regulated materials (collectively, the “Regulated Materials Directive”) for all process material which is not specified by Cisco BV which is used in the manufacturing process and any rework (including part removal and replacement process); and
	[ * ]
	[ * ]
	Except as provided in Sections (a), (b), (c) and (d) above, no Supplier shall be responsible or liable for compliance with the requirements of any Regulated Materials Directive.
13.6	Small and Disadvantaged Business. To the extent that any Supplier controls the selection of the subcontractor or vendor, such Supplier shall comply with all applicable laws regarding requirements for small business and disadvantaged business concerns including, if appropriate, FAR 52.219-8 (Oct. 2000) and/or 52.219-9 (Jan. 2002). Further, each Supplier shall coordinate with Cisco BV and report to Cisco BV the manner

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 23
CONFIDENTIAL

	in which such Supplier has supported Cisco BV’s goals to reach out to small, women-owned, small disadvantaged, minority, disabled veteran and HUBZone small business enterprises. Cisco BV shall keep CM informed of such goals on an annual basis throughout the Term.
13.7	Supplier Social Responsibility and Sustainability. In addition to operating and performing its manufacturing services described in this PPA in compliance with the law of each country of operation, each Supplier shall diligently pursue effecting its operations and performance hereunder according to Cisco BV’s Manufacturing Supplier Code of Conduct. Each Supplier acknowledges and agrees that Cisco BV reserves the right to audit using Cisco BV personnel or contracted agents working on behalf of Cisco BV to assess each Supplier’s compliance with Cisco BV’s Manufacturing Code of Conduct. Each Supplier further acknowledges that Cisco BV shall include in its evaluation and audit of such Supplier’s performance under this PPA such Supplier’s implementation of its commitment to such social accountability principles, including assessing Supplier facility compliances, if any. For reference to Cisco BV’s Manufacturing Supplier Code of Conduct and Cisco BV’s support of it please refer to http://preview.Cisco.com/en/US/about/ac227/ac228/ac231/.
	Further, each Supplier shall be compliant with the then current ISO quality and environmental standards within eighteen (18) months of the Effective Date or such longer period as mutually agreed by the parties. Implementation of any future ISO quality and environmental standards at Supplier’s facilities will be completed no later than twelve (12) months following the adoption of any such change or addition, unless otherwise agreed. Such ISO compliance shall be achieved with respect to each Supplier facility at which any portion of the performance called for in this MMA are being undertaken. Additionally, each such facility shall remain ISO compliant throughout the term of this PPA.
14.0	BUSINESS CONTINUITY
14.1	Business Recovery. Within 60 days subsequent to the Effective Date, each Supplier shall submit for Cisco BV’s approval a documented plan for recovery in the event such Supplier experiences circumstances at any worldwide site where Cisco BV operations are being performed which render it incapable of performing under this PPA (the “Business Continuity Plan”). The Business Continuity Plan must include at a minimum, (a) the availability of back-up facilities, (b) security, (c) flood, fire, earthquake and natural disaster insurance coverage pursuant to Section 15 below, on an all risk of physical loss basis, including coverage for sprinkler leakage, theft and malicious mischief, and including coverage for Products, Components, WIP, Loaned Equipment and other materials, and (d) information technology/data networking systems functions.
15.0	INSURANCE
15.1	Insurance. Each Supplier shall, at its own expense, at all times during the term of this PPA and after its termination pursuant to Section 10.0, provide and maintain in effect those insurance policies and minimum limits of coverage as designated below together with any other insurance required by law in any jurisdiction where such Supplier performs its obligations under this PPA. Such policies shall be issued by insurance

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 24
CONFIDENTIAL

	companies (i) authorized to do business in the jurisdiction where Supplier performs its obligations under this PPA and (ii) reasonably acceptable to Cisco BV. In no way do these minimum requirements limit the liability assumed elsewhere in this PPA, including but not limited to each party’s defense and indemnity obligations. The required insurance shall be subject to the approval of Cisco BV, but any acceptance of insurance certificates by Cisco BV shall not limit or relieve any Supplier of the duties and responsibilities with respect to maintaining insurance assumed by it under this PPA.
15.2	Workers’ Compensation, Social Scheme and Employer’s Liability Insurance. Each Supplier shall provide Workers’ Compensation insurance as required by any applicable law or regulation and, in accordance with the provisions of the laws of the nation, state, territory or province having jurisdiction over Supplier’s employees. If any such applicable jurisdiction has a social scheme providing insurance or benefits to injured workers, each Supplier must be in full compliance with all laws thereof. Employer’s Liability insurance shall be provided in amounts not less than the local currency equivalent of [ * ], provided such coverage is available in the nation, state, territory or province having jurisdiction over Supplier’s employees.
	[ * ].
15.3	General Liability Insurance. Suppliers shall carry Public Liability, Products Liability or Commercial General Liability insurance covering all operations by or on behalf of Suppliers arising out of or connected with this PPA including coverage for products liability and products/completed operations liability, claims by one insured against another insured, and Suppliers’ defense and indemnity obligations under this PPA, with limits of not less than [ * ] per occurrence. Such insurance shall also provide, by endorsement or otherwise, for contractual liability and cross liability and shall include Cisco BV as an additional insured. If “claims made” policies are provided, Suppliers shall maintain such policies for at least three years after the expiration or termination of this PPA.
15.4	Automobile Liability Insurance. [ * ] Suppliers shall each carry Comprehensive Business Automobile Liability insurance, including bodily injury and property damage for all vehicles used in the performance of [ * ] obligations under this PPA, including but not limited to all owned, hired (or rented) and non-owned vehicles. The limits of liability shall not be less than the local currency equivalent of [ * ] combined single limit for each incident, or whatever is required by local law or statute, whichever is higher. If injury to third-party passengers of such vehicles is not covered by the above insurance, then [ * ] shall also maintain separate insurance to cover injury to such passengers.
15.5	Errors and Omissions Liability Insurance (Professional Liability). Suppliers shall maintain errors and omissions insurance (also known as professional liability or professional indemnity insurance) with limits of not less than the local currency equivalent of [ * ] per occurrence or per claim. If such insurance is maintained on an “occurrence” basis, such insurance shall be maintained for at least one year after the expiration or termination of this PPA, and if such insurance is maintained on a “claims-made” basis, such insurance shall be maintained for at least three years after the expiration or termination of this PPA. [ * ].

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 25
CONFIDENTIAL

15.6	Property Insurance. Suppliers shall carry property insurance on an all risks of physical loss basis, including coverage for flood, fire, earthquake [ * ], natural disaster, sprinkler leakage, theft and malicious mischief, with limits sufficient to cover its liability for risk of loss and damage for WIP, Loaned Equipment and Products following Packout as described in Section 5 herein. [ * ].
15.7	Cargo Insurance. Suppliers shall carry Cargo insurance covering risk of loss for all Products, Components, WIP and other materials while in transit, with limits of not less than the local currency equivalent of [ * ].
15.8	Certificates of Insurance. Certificates of Insurance or other formalized evidence of the coverages required above shall be furnished by Suppliers to Cisco BV when this PPA is signed, or within a reasonable time thereafter, and within a reasonable time after such coverage is renewed or replaced. If requested by Cisco BV, a certified copy of the actual policy(s) with appropriate endorsement(s) shall be provided to Cisco BV. Certificates shall be delivered to Cisco BV pursuant to Section 16.11, with a copy also sent to:

Global Risk Management
Cisco Systems International B.V.
c/o Cisco Systems, Inc.
170 W. Tasman Drive, M/S SJC-11/3
San Jose, CA 95134

15.9	Cisco BV Can Provide Insurance. If Suppliers do not comply with the insurance requirements of this Section 15, Cisco BV may, at its option, provide insurance coverage to protect Cisco BV and Suppliers and charge Suppliers for the cost of that insurance.
15.10	Waiver of Subrogation. Except where prohibited by law, Suppliers, their subcontractor(s) (regardless of tier) and their respective insurers waive all rights of recovery or subrogation against Cisco BV, its officers, directors, employees, agents, and insurers.
15.11	Policies to be Primary. The policies provided under this PPA shall provide that Suppliers’ insurance will be primary to and noncontributory with any and all other insurance maintained or otherwise afforded to Cisco BV.
16.0	GENERAL
16.1	Entire Agreement. This PPA, together with the SLA and other exhibits and documents referenced herein and therein, as amended from time to time by the parties, constitutes the entire agreement between Cisco BV and each Supplier with respect to such Supplier’s manufacture and sale of Products to Cisco BV and the provision of related manufacturing, materials procurement, materials management, production, assembly, testing, and packaging services and supersedes all prior agreements and understandings between the parties relating to Products and/or such services including without limitation the Prior MMA and the Prior SLA. The terms and conditions of this PPA shall govern and prevail in the event of any conflict with any terms and conditions of any Ancillary Agreement, the SLA, purchase order, acknowledgment, invoice, confirmation or similar document, instrument or communication, in any form. Any

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 26
CONFIDENTIAL

	terms and conditions set forth in any PO or acknowledgement that are not consistent with the terms of this PPA shall have no force or effect.
16.2	Controlling Law and Jurisdiction. This PPA and all actions related hereto shall be governed, controlled, interpreted, and enforced by and under the laws of the State of California and the United States, without regard to the conflict of laws provisions thereof. The exclusive jurisdiction and venue of any action with respect to the subject matter of this PPA shall be the state courts of the State of California for the County of Santa Clara or the United States District Court for the Northern District of California, in the United States and each of the parties hereto submits itself to the exclusive jurisdiction and venue of such courts for the purpose of any such action. The parties hereby agree to expressly exclude application of the United Nations Convention on Contracts for the International Sale of Goods.
16.3	Force Majeure.
16.3.1	No party shall be considered in default of performance under this PPA to the extent that performance of its obligations is delayed or prevented by fire, flood, earthquake or similar natural disasters, riot, war, terrorism or civil strife labor disputes or disturbances, governmental regulations, communications or utility failures, or casualties (collectively, “Force Majeure”), to the extent such default is beyond the reasonable control of such party and provided that the delayed party: (i) gives the other party notice of such cause as soon as possible, to be confirmed in writing within [ * ] calendar days of discovery of the event; and (ii) uses its reasonable efforts to remedy any delay in its performance. Notwithstanding the foregoing, in the event any Supplier experiences a Force Majeure event such that such Supplier cannot deliver Products to Cisco for any period of time, such Supplier shall use its best efforts to comply with the requirements of its Cisco BV-approved Business Continuity Plan (as defined in Section 14.1) to resume pre-disaster Product production levels within the Recovery Time Objective stated in the Business Continuity Plan. The provisions of this Section 16.3.1 will not apply in connection with any Force Majeure event to the extent that any Supplier fails to use its best efforts to continuously comply with the applicable Business Continuity Plan.
16.3.2	In the event any Supplier fails to deliver Products due to a Force Majeure, Cisco BV may either:

 • Terminate this PPA subject to the terms of Section 10 hereof, in whole or in part after [ * ] prior written notice where any Supplier fails to perform for [ * ] due to the Force Majeure event; or

 • Suspend this PPA in whole or in part for the duration of the delaying cause, and, at Cisco BV’s option, cause the Products to be manufactured elsewhere. Suppliers shall resume performance under and pursuant to the terms of this PPA immediately after any delaying cause ceases and within any Recovery Time Objective defined in the Cisco BV-approved Business Continuity Plan and, at Cisco BV’s option, the then current term of this PPA will be extended for a period equal to the length of time of the excused delay.

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 27
CONFIDENTIAL

16.4	Assignment. No Supplier may assign or transfer this PPA, the SLA or any Ancillary Agreement, or its respective rights or obligations hereunder or thereunder, in whole or in part, without the prior written consent of Cisco BV. [ * ]. Any attempt to assign or transfer without such consent is void. For purposes of this Section 16.4, any transfer by sale, merger or other working combination of ownership of or control over more than [ * ] of the voting securities or control shall constitute an assignment. [ * ], Cisco BV may assign this PPA, the SLA or any Ancillary Agreement, or its rights or obligations hereunder or thereunder, in whole or in part, to any Cisco BV Affiliate without CM’s consent.
16.5	Separate Contractual Duties. This PPA (together with the SLA and other Exhibits hereto) creates a separate, binding contract between Cisco BV and each Supplier, enforceable against each Supplier in accordance with its terms. Each such contract is independent of the other contractual relationships created hereby. Notwithstanding the foregoing, CM hereby covenants and agrees to cause each Signing Affiliate to timely and fully perform all of its respective obligations under this PPA, the SLA, any applicable Authorized Sublicense Agreements and any applicable Ancillary Agreements and hereby guarantees to Cisco BV the performance by each of the Signing Affiliates of its respective obligations under this PPA, the SLA, any applicable Authorized Sublicense Agreements and any applicable Ancillary Agreements, and the performance thereunder by any CM Affiliate, if any, which is a sublicensee under an Authorized Sublicense Agreement.
16.6	Relationship of Parties. Each Supplier shall perform its obligations hereunder as an independent contractor. Nothing contained herein shall be construed to imply a partnership or joint venture relationship between or among the parties or entitle any party to any sharing of profits or losses realized by any other party from distribution of the Products. No Supplier shall have the right to create any obligations on behalf of Cisco BV, and Cisco BV shall have no right to create any obligations on behalf of any Supplier. No Supplier shall enter into any contracts with third parties in the name of Cisco BV.
16.7	Amendment and Waiver. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial waiver have effect on any other right, power or privilege. This PPA may not be altered or amended except by a written document signed by a duly authorized representative of the parties agreeing to the alteration or amendment. If fewer than all Suppliers sign any such alteration or amendment it shall be effective only as between Cisco BV and the Suppliers that do sign such alteration or amendment, unless CM or a Signing Affiliate agrees in such alteration or amendment that it shall be binding on all Suppliers.
16.8	Severability. If any provision of this PPA is found unenforceable or invalid under any applicable law or judicial or administrative decision, only that provision shall be affected. This PPA shall remain in effect and such unenforceable or invalid provision shall be modified or interpreted so as to best accomplish its intended objective.
16.9	Signatures and Counterparts. This PPA shall be valid as between Cisco BV and each Supplier upon the initial exchange of signatures by facsimile from both such parties and may be executed in two or more counterparts, each of which shall be deemed original, but all of which shall constitute one and the same instrument. Each Signing Affiliate

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 28
CONFIDENTIAL

	will be deemed to be party to this PPA upon its execution of this PPA and the failure of one CM Affiliate to execute this PPA shall not affect the contractual relationship between Cisco BV and each Supplier who has executed this PPA.
16.10	Dispute Resolution. The parties shall use their best efforts to amicably resolve any disputes arising from the activities undertaken in the course of performing or fulfilling this PPA, including but not limited to utilization of the dispute escalation path as contained in the SLA.
16.11	Notices. All notices shall be personally delivered, delivered by telecopy, delivered by a major commercial rapid delivery courier service or mailed by certified or registered mail, return receipt requested, to Cisco BV or CM and the Suppliers as provided below or such other address as such party may provide by notice pursuant to this Section 16.11. Notice shall be effective upon the earlier of (i) receipt or (ii) twenty-four (24) hours after submission by any such method.

CISCO SYSTEMS INTERNATIONAL B.V.	SOLECTRON CORPORATION
Haalerbergpark, Haarlergbegweg	847 Gibraltar Drive
13-19, 1101 CH Amsterdam	Milpitas, CA 95035
Attn: Director, Manufacturing Operations
With a copy to:
CISCO SYSTEMS, INC.	SOLECTRON TECHNOLOGY Sdn. Bhd.
170 West Tasman Avenue	Plot 131A
San Jose, CA 95134	Jalan Perindustria Bukit Minyak
Attn: General Counsel	14100 Bukit Minyak
Fax: (408) 526-7019	Seberang Parai
	Tengah Malaysia
	SOLECTRON TEXAS, L.P.
	12455 Research Boulevard
	Austin, Texas 78759
	SOLECTRON USA, INC.
	847 Gibraltar Drive
	Milpitas, CA 95035

16.12

Equitable Relief. Each party acknowledges that a breach by another party of any confidentiality or proprietary rights provision of this PPA or the NDA may cause the non-breaching party irreparable damage, for which the award of damages would not be adequate compensation. Consequently, the non-breaching party may institute an action to enjoin the breaching party from any and all acts in violation of those provisions, which remedy shall be cumulative and not exclusive, and a party may seek an injunction enjoining any breach or threatened breach of those provisions, in addition to any other relief to which the non-breaching party may be entitled at law or in equity.

16.13

Use of Contractors. At its option, Cisco BV may contract with Cisco BV Affiliates or third parties as independent contractors to assist Cisco BV in exercising its rights or performing its obligations hereunder.

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 29
CONFIDENTIAL

16.14 Third Party Beneficiaries. Unless expressly provided herein, no provisions of this PPA are intended or shall be construed to confer upon or give to any person or entity other than Cisco BV, CSI solely to the extent provided in Section 2.2, and each Supplier (and any permitted sublicensee) any rights, remedies or other benefits under or by reason of this PPA.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 30
CONFIDENTIAL

     IN WITNESS WHEREOF, the parties have caused this PPA to be executed by their duly authorized representatives as of the Effective Date.

SOLECTRON CORPORATION	CISCO SYSTEMS INTERNATIONAL B.V.
BY:	BY:
NAME:	NAME:
TITLE:	TITLE:
DATE:	DATE:
SOLECTRON TECHNOLOGY Sdn. Bhd.
BY:
NAME:
TITLE:
DATE:
SOLECTRON TEXAS , L.P.
By: SOLECTRON TEXAS, INC., as General Partner
BY:
NAME:
TITLE:
DATE:
SOLECTRON USA, INC.
BY:
NAME:
TITLE:
DATE:

[Signature Page To Manufacturing and Product Purchase Agreement]

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 31
CONFIDENTIAL

EXHIBIT A

SERVICE LEVEL ADDENDUM

This Service Level Addendum to the Manufacturing and Product Purchase Agreement, dated March 9, 2007 (the “PPA”), between the Cisco entity identified in the PPA (“Cisco”) and Solectron Corporation (“CM”) and each of the Signing Affiliates (as defined in the PPA), as such Service Level Addendum may be amended from time to time in writing and signed by the parties (as so amended, the “SLA”), sets forth the variety of operating guidelines to which the parties will adhere during the course of the manufacturing and product purchase relationship contemplated by the PPA. CM and each Signing Affiliate are referred to herein individually as a “Supplier” and collectively as the “Suppliers”. Except as otherwise defined in this SLA, all terms used in this SLA shall be as defined in the PPA. This SLA supersedes, in its entirety, any prior Service Level Addendum, between Cisco or any Cisco affiliate and CM.

[ * ]

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 32
CONFIDENTIAL

EXHIBIT B

CISCO BV PROPRIETARY TECHNOLOGY

[ * ]

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 33
CONFIDENTIAL

EXHIBIT C

APPROVED THIRD PARTIES

[ * ]

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 34
CONFIDENTIAL

EXHIBIT D

CM AFFILIATES

Signing Affiliates that are Suppliers:

The following CM Affiliates are signatories to this Manufacturing and Product Purchase Agreement:

Solectron Corporation
847 Gibraltar Drive
Milpitas, CA 95035

Solectron Technology Sdn. Bhd.
Plot 131A
Jalan Perindustria Bukit Minyak
14100 Bukit Minyak
Seberang Perai
Tengah Malaysia

Solectron Texas, L.P.
12455 Research Boulevard
Austin, Texas 78759

Solectron USA, Inc.
847 Gibraltar Drive
Milpitas, CA 95035

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 35
CONFIDENTIAL

EXHIBIT E

FORM OF AUTHORIZED SUBLICENSE AGREEMENT

     This Authorized Sublicense Agreement (this “Authorized Sublicense Agreement”) is made effective as of                      (the “Effective Date”) by and between                     , a company organized under the laws of                      (“Sublicensor”) and                     , a company organized under the laws of                      (“Sublicensee”).

RECITALS

     WHEREAS, Sublicensor is a party to that certain Manufacturing and Product Purchase Agreement dated as of                      (the “PPA”) by and among Sublicensor, certain Affiliates of Sublicensor and Cisco Systems International B.V., a company organized under the laws of the Netherlands (“Cisco BV”), pursuant to which Sublicensor manufactures Sublicensor Products for sale to Cisco BV;

     WHEREAS, pursuant to the PPA, Sublicensor has a limited right to sublicense its rights in certain Cisco BV intellectual property to enable Sublicensor to obtain Sublicensee Products and Components for incorporation into Sublicensor Products to be sold by Sublicensor to Cisco BV pursuant to the PPA;

     WHEREAS, Sublicensee desires to enter into this Authorized Sublicense Agreement to obtain sufficient rights to permit Sublicensee to provide Sublicensee Products and Components to Sublicensor and Approved Parties; and

     WHEREAS, Sublicensee may currently or in the future have access to certain proprietary technology of Cisco Systems, Inc., a California corporation (“CSI”), via a Manufacturing and Product Purchase Agreement with CSI or a separate Authorized Sublicense Agreement covering proprietary technology of CSI and, if so, the parties agree and acknowledge that use of such CSI proprietary technology by Sublicensee shall be governed by such separate CSI Manufacturing and Product Purchase Agreement or Authorized Sublicense Agreement, and not by this Authorized Sublicense Agreement.

AGREEMENT

     NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

ARTICLE 1

DEFINITIONS

     1.1 “Approved Parties” means the parties listed on Exhibit A to this Authorized Sublicense Agreement and other parties approved by Cisco BV in writing.

     1.2 “Approved Party Products” means items that are manufactured by an Approved Party (i) for sale by such Approved Party to Cisco BV pursuant to the terms of a

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 36
CONFIDENTIAL

Manufacturing and Product Purchase Agreement between the applicable Approved Party and Cisco BV; or (ii) for transfer by such Approved Party to Cisco BV pursuant to the terms of a Master Manufacturing Agreement between the applicable Approved Party and Cisco BV.

     1.3 “Cisco BV Proprietary Technology” means Intellectual Property (including, but not limited to, data, know-how, technical, manufacturing, and marketing information, designs, drawings, specifications, bills of materials, and documentation of processes) owned by or licensed to Cisco BV, licensed to Sublicensor pursuant to the PPA, and related to or useful in the manufacture, testing, assembly, materials purchasing, materials management, packaging and delivery of Sublicensee Products, Components or Services, including, but not limited to, that described in Exhibit B, together with all Intellectual Property rights embodied therein.

     1.4 “Component” means any item sold or otherwise transferred by Sublicensee to Sublicensor or an Approved Party which is ultimately to be incorporated into a Sublicensor Product or an Approved Party Product.

     1.5 “Confidential Information” means any and all non-public information disclosed by either party to the other party in connection with the performance or pursuant to the terms of this Authorized Sublicense Agreement, including without limitation any and all non-public Cisco BV Proprietary Technology, Intellectual Property, Sublicensor Products, Sublicensee Products, Components, Services, unreleased products, technical data, product plans, product designs, marketing plans, research and development projects and results, customer preferences and data, business opportunities, financial data, the source code and related unpublished documentation of proprietary computer programs, and integrated circuit topography and industrial designs.

     1.6 “Installed Software:” means computer software, in whatever medium or form, that constitutes Cisco BV Proprietary Technology and that is provided to Sublicensee pursuant to a limited license hereunder for the sole purpose of Sublicensee performing the service of installing copies of such software onto Sublicensee Products.

     1.7 “Intellectual Property” means any and all tangible and intangible: (i) rights associated with works of authorship throughout the world, including but not limited to copyrights, neighboring rights, Moral Rights, and mask works, and all derivative works thereof; (ii) trademark, service mark and trade name rights and similar rights; (iii) trade secret rights; (iv) patents, designs, algorithms and other industrial property rights; (v) all other intellectual and industrial property rights (of every kind and nature throughout the world and however designated) whether arising by operation of law, contract, license, or otherwise; and (vi) all registrations, initial applications, renewals, extensions, continuations, divisions or reissues thereof now or hereafter in force (including any rights in any of the foregoing).

     1.8 “Moral Rights” means any and all rights to claim authorship to or to object to any distortion, mutilation, or other modification or derogatory action in relation to a work, whether or not copyrighted, whether or not such would be prejudicial to the author’s reputation, and any similar right existing under common or statutory law of any country in the world or under any treaty, regardless of whether or not such right is denominated or generally referred to as a “moral right.”

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 37
CONFIDENTIAL

     1.9 “Sublicensee Products” means items that are sold or otherwise transferred by Sublicensee to Sublicensor or an Approved Party for further sale to Cisco BV.

     1.10 “Sublicensor Products” means items that are manufactured by Sublicensor for sale to Cisco BV pursuant to the terms of the PPA.

     1.11 “Work Product” means all specifications, designs, discoveries, inventions, products, modifications, computer programs, technical information, procedures, processes, improvements, developments, drawings, notes, documents, information and materials made, conceived, reduced to practice or developed by Sublicensee which result from, relate to or arise out of its performance under this Authorized Sublicense Agreement or relate to Cisco BV Proprietary Technology or Sublicensor Products, and all Intellectual Property rights therein, [ * ].

ARTICLE 2

THIRD PARTY BENEFICIARY

     2.1 Cisco BV is Third Party Beneficiary. Sublicensee and Sublicensor hereby agree and acknowledge that Cisco BV is and will be an intended third party beneficiary of this Authorized Sublicense Agreement, and shall be entitled to enforce its terms and conditions in full.

ARTICLE 3

LICENSE GRANT AND RESTRICTIONS

     3.1 Grant of Limited License. Subject to the conditions and limitations of this Authorized Sublicense Agreement, Sublicensor hereby grants to Sublicensee a personal, non-exclusive, non-assignable, non-transferable, non-sublicensable limited license to use and copy the Cisco BV Proprietary Technology and Work Product, for the sole purposes of manufacturing Sublicensee Products and Components for transfer or sale to Sublicensor and Approved Parties and for providing ancillary services in connection with such Sublicensee Products and Components, provided, however, that the only right granted to Sublicensee in connection with the Installed Software is to perform the service of installing copies of such Installed Software on Sublicensee Products on behalf of Cisco BV. In no event shall Sublicensee have the right to assign, sublicense or otherwise transfer any of the rights granted to it or obligations imposed upon it pursuant to this Authorized Sublicense Agreement without the express, written consent of Sublicensor and Cisco BV, which consent each of Sublicensor and Cisco BV may grant or deny in their sole discretion.

     3.2 License Restrictions. Sublicensee agrees:

          (i) not to engage in, facilitate or authorize others to engage in, the reverse engineering, disassembly or decompilation of any of the Cisco BV Proprietary Technology;

          (ii) not to disclose the Cisco BV Proprietary Technology or Work Product to any third party, without the express prior written approval by Sublicensor and/or Cisco BV and documented as required by Sublicensor and/or Cisco BV;

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 38
CONFIDENTIAL

          (iii) not to use the Cisco BV Proprietary Technology or Work Product for its own benefit (or for the benefit of anyone other than Cisco BV), or to the detriment of Sublicensor or Cisco BV; and

          (iv) to secure, protect and keep confidential the Cisco BV Proprietary Technology and Work Product with at least the same degree of care it utilizes with respect to its own most valued proprietary information, and in any event, no less than a reasonable standard of care.

     3.3 Ownership. Sublicensee agrees that:

          (i) As between Cisco BV, Sublicensor and Sublicensee, all right, title, and interest in the Cisco BV Proprietary Technology, including Installed Software and all copies thereof, and Work Product are and shall remain solely with Cisco BV and/or its licensors, subject to the limited licenses granted herein and pursuant to the PPA;

          (ii) Sublicensee’s only right in connection with the Installed Software and all copies thereof is to install them on Sublicensee Products;

          (iii) Sublicensee hereby irrevocably assigns, transfers and conveys to Sublicensor, for immediate assignment, transfer and conveyance to Cisco BV pursuant to the PPA, any rights Sublicensee may have, or may acquire, or may purport to have or acquire, in or to any Cisco BV Proprietary Technology or Work Product worldwide;

          (iv) To the extent any Work Product is a “work made for hire” under applicable copyright law, it shall be considered a “work made for hire” from the moment of creation, the copyright of which shall be owned by Sublicensor worldwide, for immediate assignment, transfer and conveyance to Cisco BV pursuant to the PPA. To the extent Work Product does not qualify as a “work made for hire” under applicable copyright law, all right, title and interest that Sublicensee may have in and to the same is hereby assigned, transferred and conveyed from the moment of creation exclusively to Sublicensor, for immediate assignment, transfer and conveyance to Cisco BV pursuant to the PPA; and

          (v) Sublicensee will execute such documents, render such assistance, and take such other action as Sublicensor and/or Cisco BV may reasonably request, at Sublicensor’s or Cisco BV’s expense, to further evidence such assignment and to apply for, register, perfect, confirm, and protect Cisco BV’s rights to the Cisco BV Proprietary Technology and Work Product.

     3.4 Waiver of Moral Rights. Sublicensee has or will obtain a waiver of Moral Rights from any individual who performs work in connection with this Authorized Sublicense Agreement, including without limitation, a waiver regarding the right to the integrity of any Work Product, the right to be associated with any Work Product, the right to modify any Work Product in any way, the right to prevent the use of any Work Product in association with any product, service, cause or institution, and the right to restrain the publication of any Work Product throughout the world. Sublicensee agrees that anything Sublicensor or Cisco BV or any affiliate or either may do with any Work Product does not and will not constitute any prejudice to Sublicensee’s reputation or the honor or reputation of any individual who performed work on any Work Product. Sublicensee hereby waives any and all Moral Rights, including without limitation any right to identification of authorship or limitation on subsequent modification that

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 39
CONFIDENTIAL

Sublicensee (or its employees, agents or consultants) has or may have in any Work Product and any derivatives, improvements or modifications thereof. Sublicensee hereby undertakes to ensure that its employees, agents and consultants are contractually bound to the foregoing waivers.

     3.5 Attorney In Fact. Sublicensee agrees that if Sublicensor or Cisco BV is unable because of Sublicensee’s unavailability, dissolution or incapacity, or for any other reason, to secure Sublicensee’s signature to apply for or pursue any application for any United States or foreign patents or copyright registrations covering the Work Product and/or inventions and developments assigned to Sublicensor as provided above, then Sublicensee hereby irrevocably designates and appoints each of Sublicensor and Cisco BV, and their duly authorized officers and agents, as Sublicensee’s agent and attorney in fact, to act for and in such Sublicensee’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of patents and copyright registrations thereon with the same legal force and effect as if executed by Sublicensee.

ARTICLE 4

CONFIDENTIAL INFORMATION

     4.1 Confidentiality. Sublicensee shall hold in strict confidence and trust any and all Confidential Information that it receives from Sublicensor and treat it as confidential and proprietary to the same extent and in the same manner that Sublicensee treats its own confidential information of like importance, in no event using less than reasonable care. Sublicensee shall not disclose or use such Confidential Information except as necessary for Sublicensee to exercise the rights granted by Sublicensor under this Authorized Sublicense Agreement. Sublicensee shall develop and implement reasonable and prudent procedures to prevent the intentional or negligent disclosure of the Confidential Information to third parties. Sublicensee acknowledges that its procedures for protecting Confidential Information at a minimum require that its employees and contractors enter into confidentiality agreements with Sublicensee upon initial employment or engagement, with terms, conditions, and restrictions no less restrictive than set forth in this Article 4.

     4.2 Permitted Disclosures. Notwithstanding the other provisions of this Article 4, Sublicensee shall have the right to communicate to suppliers and manufacturers relevant portions of the Confidential Information reasonably necessary for, and solely for the purposes of, the procurement by Sublicensee of materials and parts or manufacturing services in connection with Sublicensee Products or Components; provided, however, that (i) any such recipient shall be advised by Sublicensee in writing at the time of or before such communication that proprietary information is being communicated and that such information is to be kept confidential and must not be used or disclosed except as permitted under this Authorized Sublicense Agreement and (ii) Sublicensee shall require that such recipient undertakes in writing prior to disclosure to respect such confidentiality and be bound by terms substantially similar to and no less restrictive than this Article 4.

     4.3 Exceptions. Nothing in this Authorized Sublicense Agreement shall prevent the disclosure by Sublicensee of Confidential Information that:

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 40
CONFIDENTIAL

          (a) Is, or becomes subsequent to the time of transmittal to Sublicensee a matter of general public knowledge other than through breach by Sublicensee or Sublicensor of any obligation of confidentiality under this Authorized Sublicense Agreement or otherwise;

          (b) Is rightfully made public by Sublicensor;

          (c) Was or is rightfully received by Sublicensee free of any obligation of confidentiality to Sublicensor or Cisco BV or any affiliate of either; or

          (d) Was or is received in good faith from a third party having the right to disclose it who, to the best of Sublicensee’s knowledge, did not obtain such information from Sublicensor or Cisco BV or any affiliate of either, and who imposes no obligation of secrecy on Sublicensee with respect to such information.

     4.4 Agreement is Confidential. The terms and conditions of this Authorized Sublicense Agreement shall be treated by Sublicensor and Sublicensee as confidential and shall not be disclosed without the consent of the other party and Cisco BV, except as required by law. Notwithstanding the foregoing, either party may disclose such terms and conditions to its legal or financial advisors as necessary to obtain legal or financial advice.

     4.5 Injunctive Relief. Sublicensee understands, acknowledges and agrees that the Cisco BV Proprietary Technology and Work Product constitute valuable business assets of Cisco BV, the unauthorized use or disclosure of which may irreparably damage Sublicensor and/or Cisco BV. In the event of breach or threatened breach of Sublicensee’s obligations hereunder, the parties agree that each of Sublicensor and Cisco BV shall be entitled to obtain an injunction restraining Sublicensee from violating such obligations without having to prove that monetary damages would not be an adequate remedy or that no adequate remedy at law exists. Nothing in this Section shall be construed as prohibiting Sublicensor or Cisco BV from pursuing any other remedies available to it for such breach or threatened breach of this Authorized Sublicense Agreement by Sublicensee.

ARTICLE 5

TERM AND TERMINATION

     5.1 Term. This Authorized Sublicense Agreement shall be effective beginning on the Effective Date and ending on the date of termination of the PPA, unless earlier terminated in accordance with the provisions of this Article 5.

     5.2 Termination for Cause. The foregoing provision notwithstanding, Sublicensor shall have the right to terminate this Authorized Sublicense Agreement or any of the licenses granted herein, in whole or in part, at any time in the event Sublicensee fails or neglects to perform its obligations under any material provision of this Authorized Sublicense Agreement, and, in the case of defaults capable of cure, fails to cure such default within thirty (30) days after receipt of notice of default. In addition, Sublicensor may terminate this Authorized Sublicense Agreement, by giving written notice to Sublicensee, upon the occurrence of any of the following events: (i) any act, determination, filing, judgment, declaration, notice, appointment of receiver or trustee, failure to pay debts, or other events under any law applicable to Sublicensee indicating the insolvency or bankruptcy of Sublicensee; or (ii) any

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 41
CONFIDENTIAL

extraordinary governmental action, including, without limitation, seizure or nationalization of assets, stock, or other property relating to Sublicensee.

     5.3 Termination upon Notice. The foregoing provisions notwithstanding, Sublicensor shall have the right to terminate this Authorized Sublicense Agreement, for any reason or no reason, without compensation to Sublicensee, by providing at least thirty (30) days notice to Sublicensee of its desire to terminate this Authorized Sublicense Agreement and the effective date of termination.

     5.4 Events Upon Termination.

          5.4.1 In the event of termination of this Authorized Sublicense Agreement, regardless of the cause thereof, Sublicensee agrees to cease continued manufacture and transfer of Sublicensee Products and Components and the provision of services that incorporate, embody, reflect or otherwise use any Cisco BV Proprietary Technology or Work Product, and all rights and licenses granted to Sublicensee hereunder shall terminate.

          5.4.2 Upon termination of this Authorized Sublicense Agreement, Sublicensee shall promptly return to Sublicensor all embodiments of any Confidential Information then in its possession that are in written, recorded, electronic or other tangible form. Sublicensee hereby expressly waives and agrees not to assert any right of detention whatsoever with respect to any of the Confidential Information.

          5.4.3 The provisions specified in this Authorized Sublicense Agreement to survive, or that by their nature should survive, will remain in effect after termination of this Authorized Sublicense Agreement.

ARTICLE 6

MISCELLANEOUS

     6.1 Notices. Any and all notices permitted or required to be made under this Authorized Sublicense Agreement shall be in writing and shall be delivered by hand or sent by first class mail, courier service, facsimile or email to the receiving party at its address indicated below or at such other address as may be supplied by such party in writing to the other party. Such notices shall be deemed to have been received upon delivery if delivered by hand, fifteen (15) days after mailing if sent by first class mail, three (3) days after delivery to a courier service, and the following business day if sent by facsimile or email. The address of any party may be changed at any time by giving notice to the other party as provided in this Section. Unless otherwise agreed by the parties, all notices and other communications hereunder shall be in the English language.

     6.2 Applicable Law. This Authorized Sublicense Agreement shall be governed by and construed in accordance with the federal law of the United States as it applies to patents, copyrights and trademarks and with respect to other matters in accordance with the internal laws of the State of California U.S.A. as applied to contracts entered into and to be performed entirely within the State of California by residents of such state.

     6.3 Successors and Assigns; Assignment. This Authorized Sublicense Agreement shall be binding on and shall inure to the benefit of the parties and their respective

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 42
CONFIDENTIAL

successors and permitted assigns. Sublicensee may not assign, transfer or convey this Authorized Sublicense Agreement, or any of its rights and/or obligations under this Authorized Sublicense Agreement, without the express prior written consent of Sublicensor and Cisco BV. Any successor or permitted assignee shall hold its interest subject to all of the terms and conditions of this Authorized Sublicense Agreement.

     6.4 No Waiver. The failure of any party to give notice to the other party of a breach of any covenant, condition or obligation under this Authorized Sublicense Agreement shall not constitute a waiver thereof, and the failure of any party to insist on strict performance of any covenant, condition or obligation under this Authorized Sublicense Agreement shall not constitute a waiver of such party’s right to demand strict compliance therewith in the future.

     6.5 Further Assurances. Each party hereby covenants and agrees that it shall execute and deliver such deeds, assignments and other documents and take such additional actions as may be reasonably requested by the other party to implement any of the provisions of this Authorized Sublicense Agreement.

     6.6 Severability. In the event any provision of this Authorized Sublicense Agreement or the application thereof in any circumstances violates any applicable law, rule, or regulation, or order of any court, legislative body or governmental agency or is held to be invalid or unenforceable, such violation, invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Authorized Sublicense Agreement or of the application of any such provision in any other circumstances. If any provision of this Authorized Sublicense Agreement constitutes a violation or is ruled invalid or unenforceable, such provision shall be enforced to the extent permissible, and the remainder of this Authorized Sublicense Agreement shall remain in full force and effect.

     6.7 No Amendment. No modification or amendment of any provision of this Authorized Sublicense Agreement shall be effective unless in writing and signed by both of the parties and approved in writing by Cisco BV.

     6.8 Entire Agreement. This Authorized Sublicense Agreement constitutes the complete, final and exclusive embodiment of the parties’ agreement with respect to the subject matter of this Authorized Sublicense Agreement and supersedes all prior agreements, whether written or oral, that may have been entered into between the parties regarding the subject matter of this Authorized Sublicense Agreement.

     6.9 Counterparts. This Authorized Sublicense Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one agreement binding on the parties. Each party hereby covenants and agrees to execute all duplicates or replacement counterparts of this Authorized Sublicense Agreement as may be required or appropriate. Executed counterparts of this Authorized Sublicense Agreement may be delivered as provided in Section 6.1.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 43
CONFIDENTIAL

     IN WITNESS WHEREOF, the parties hereto have caused this Authorized Sublicense Agreement to be executed by their duly authorized representatives, and made effective as of the Effective Date.

SUBLICENSOR:	SUBLICENSEE:
BY:	BY:
NAME:	NAME:
TITLE:	TITLE:
DATE:	DATE:
Address:	Address:

[SIGNATURE PAGE TO AUTHORIZED SUBLICENSE AGREEMENT]

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 44
CONFIDENTIAL

EXHIBIT A TO AUTHORIZED SUBLICENSE AGREEMENT

APPROVED PARTIES

[ * ]

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 45
CONFIDENTIAL

EXHIBIT B TO AUTHORIZED SUBLICENSE AGREEMENT

CISCO BV PROPRIETARY TECHNOLOGY

[ * ]

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 46
CONFIDENTIAL

EXHIBIT F

SPLIT SUPPLIERS AND SPLIT SUPPLIER UNITED STATES SITES

Name of Legal Entity	Split Supplier United States Site(s)
Solectron Texas L.P.	12455 Research Blvd.
	Austin, Texas 78759
CM anticipates that Solectron Texas L.P. will be merged with and into Solectron USA, Inc. shortly after the Effective Date.
Solectron USA, Inc.	847 Gibraltar Drive
	Milpitas, CA 95035

Cisco Systems International B.V. - Solectron Manufacturing and Product Purchase Agreement
March 9, 2007
Page 47
CONFIDENTIAL

EX-10.4

Exhibit 10.4

CONFIDENTIAL

INVENTORY PURCHASE AND TRANSFER AGREEMENT

     This INVENTORY PURCHASE AND TRANSFER AGREEMENT (“IPA”), dated effective as of March 11, 2007 (the “Effective Date”), is entered into between Solectron Corporation, a corporation organized under the laws of Delaware, having its principal place of business at 847 Gibraltar Drive, Milpitas, California 95035 (“CM”), and Cisco Systems International B.V., a company organized under the laws of The Netherlands, having its principal place of business at Haarlerbergpark, Haarlerbergweg 13-19, 1101 CH Amsterdam, The Netherlands (“Cisco”).

RECITALS

     Under the terms of an agreement between Cisco and CM and/or its ultimate parent entity that addresses the manufacturing services performed by CM for Cisco (the “MMA”), Cisco holds title to certain inventory held at or in transit to one or more sites of the CM or its contractors, including components, work in process, and Cisco products and/or components thereof that have not completed the final configuration and/or packaging stages of the manufacturing process;

     In connection with Cisco’s implementation of lean manufacturing, the parties are entering into a Manufacturing and Product Purchase Agreement (“PPA”) that includes certain Exhibits and ancillary agreements, including but not limited to a Service Level Addendum (“SLA”);

     In accordance with implementation of lean manufacturing, the parties desire to have CM own and hold title to such inventory; and

     This IPA is entered into between Cisco and CM in order to sell and transfer certain of such inventory from Cisco to CM.

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants, representations, warranties, conditions and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Cisco and CM hereby agree as follows:

ARTICLE 1
QUITCLAIM TRANSFER, PURCHASE, CONSIDERATION, TAXES, DELIVERY

1.1 Purchase and Sale of Listed Inventory and In Transit Inventory

     In accordance with the terms of this IPA, Cisco hereby sells, transfers, assigns and conveys to CM, and CM hereby purchases and acquires from Cisco, (a) as of the Effective Date, the inventory listed on Exhibit A hereto (the “Listed Inventory”) that is located at CM’s or its contractors’ facility(ies) identified on Exhibit B hereto (the “Facilities”); and (b) as of the time

CISCO CONFIDENTIAL Cisco BV – Solectron Texas

of receipt by CM or any of its contractors identified on Exhibit B hereto, all items owned by Cisco and in transit to any Facility (the “In Transit Inventory”) during the period (the “Initial In Transit Inventory Period”) beginning on the Effective Date and ending on the earlier of (i) the date of receipt of the last shipment of In Transit Inventory or (ii) the last day of the fiscal quarter of Cisco in which the Effective Date occurs (the “Quarter End Date”). CM and Cisco hereby agree to prepare a definitive cumulative list of the In Transit Inventory for the Initial In Transit Inventory Period (the “Initial In Transit Inventory”) promptly following the end of the Initial In Transit Inventory Period and to execute an Addendum hereto in the form of Exhibit A-1 no later than [ * ] following the end of the Initial In Transit Inventory Period. CM and Cisco hereby agree to prepare a supplemental definitive cumulative list of the In Transit Inventory, if any (the “Subsequent In Transit Inventory”), transferred to CM during the period beginning on the Quarter End Date and ending on the date of receipt of the last shipment of In Transit Inventory (the “Subsequent In Transit Inventory Period”) promptly following the end of the Subsequent In Transit Inventory Period and to execute a Supplemental Addendum hereto in the form of Exhibit A-2 no later than [ * ] prior to the end of the Subsequent in Transit Inventory Period.

1.2 Quitclaim Transfer of WIP Inventory.

     In accordance with the terms of this IPA, as of the Effective Date, Cisco hereby transfers, assigns, remises, releases, quitclaims and conveys to CM, and CM hereby acquires from Cisco, the work in process PCBA inventory described on Exhibit A hereto which is located at any Facility (collectively the “WIP Inventory”).

1.3 No Transfer of Intellectual Property Rights.

     Collectively, the WIP Inventory, the Listed Inventory and the In Transit Inventory are referred to herein as the “Inventory”. Nothing contained herein shall constitute a sale, transfer, assignment, license or other conveyance to CM of any of Cisco’s intellectual property rights in the Inventory or any other intangible property of Cisco.

1.4 Consideration for Sale of Listed Inventory and In Transit Inventory.

     The aggregate consideration for the sale and transfer of the Listed Inventory shall be the amount indicated on Exhibit A hereto (the “Listed Inventory Purchase Price”). The aggregate consideration for the sale and transfer of the In Transit Inventory identified on Addenda in the forms of Exhibit A-1 and Exhibit A-2 shall be the amount indicated on the respective Addendum (collectively, the “In Transit Inventory Purchase Price”). Collectively the Listed Inventory Purchase Price and the In Transit Inventory Purchase Price are referred to herein as the “Purchase Price”. All dollar amounts specified in this IPA and any Exhibit or Addenda hereto are in U.S. Dollars. CM shall pay Cisco the Purchase Price by wire transfer of immediately available funds to the bank account designated by Cisco within the time periods indicated on Exhibit A hereto (for the Listed Inventory) or the Addenda in the forms of Exhibit A-1 and Exhibit A-2 (for the In Transit Inventory), as applicable (“Payment Date”). [ * ].

1.5 Use and Resale of Inventory.

     CM hereby covenants and agrees to use and resell the Inventory pursuant to the terms of the PPA and SLA.

CISCO CONFIDENTIAL Cisco BV – Solectron Texas

2

1.6 Delivery, Risk of Loss and Title to Inventory

     The parties acknowledge that the WIP Inventory and the Listed Inventory are currently located at the Facilities and that the In Transit Inventory is in transit to one or more of the Facilities. CM hereby acknowledges that it has possession of the WIP Inventory and the Listed Inventory located at Facilities and CM hereby acknowledges that there shall be no obligation for Cisco to deliver the WIP Inventory or the Listed Inventory located at the CM’s contractors’ sites to the CM. Title to, ownership of and risk of loss for the WIP Inventory and the Listed Inventory shall transfer to CM [ * ]. Title to, ownership of and risk of loss for the In Transit Inventory shall transfer to CM as it is received by CM or CM’s contractors, and beginning on such date(s) CM shall insure the In Transit Inventory against damage, destruction, theft and other losses in accordance with the PPA.

1.7 Bulk Sales

     CM and Cisco hereby waive compliance with any applicable bulk sale or bulk transfer notices or similar laws in connection with sale and transfer of the Inventory.

1.8 Tax Exemption Certificates

     CM shall provide Cisco with sales and other applicable tax exemption certificates satisfactory in form and substance to Cisco as a condition of the sale and transfer of the Inventory.

1.9 Tax Indemnity

     Each party covenants and agrees to bear its own United States, state, local and foreign tax obligations, including without limitation taxes based upon its gross income or net income, arising in connection with this IPA, the purchase, sale or transfer of the Inventory, the ownership of the Inventory during the period it holds title to the Inventory, and any subsequent disposition of the Inventory. Cisco shall hold CM harmless and indemnify CM from any taxes, penalties, interest or other fees and assessments of any kind imposed upon CM as a result of Cisco failing to comply with applicable United States, state, local and foreign tax laws related to the transactions contemplated by this IPA. CM shall hold Cisco harmless and indemnify Cisco from any taxes, penalties, interest or other fees and assessments of any kind imposed upon Cisco as a result of CM failing to comply with applicable United States, state, local and foreign tax laws related to the transactions contemplated by this IPA.

CISCO CONFIDENTIAL Cisco BV – Solectron Texas

3

ARTICLE 2
CISCO WARRANTIES

2.1 Warranty of Title and Quitclaim of Title

     Cisco represents and warrants to CM that Cisco has good and marketable title to the Listed Inventory and the In Transit Inventory and will convey good and marketable title to the Listed Inventory and the In Transit Inventory to CM. As of the Effective Date, Cisco hereby transfers, assigns, remises, releases, quitclaims and conveys to CM all the right, title, interest and claim which Cisco has in and to the WIP Inventory.

2.2 “As Is” Condition of Inventory

EXCEPT FOR THE FOREGOING WARRANTY OF TITLE WITH RESPECT TO LISTED INVENTORY AND IN TRANSIT INVENTORY, THE INVENTORY IS BEING SOLD OR TRANSFERRED TO CM AT ITS CURRENT PHYSICAL LOCATION, WHETHER AT THE CM’S OR THE CM’S CONTRACTORS’ SITES, (OR, IF IN TRANSIT, AT SUCH SITES UPON ITS ARRIVAL) AND IN “AS IS” CONDITION, WITHOUT ANY EXPRESS, IMPLIED OR STATUTORY WARRANTIES OF ANY KIND, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, OPERABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS, AND THOSE ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICE.

[ * ]

ARTICLE 3
LIMITED LIABILITY

NOTWITHSTANDING ANY OTHER PROVISIONS OF THIS IPA, EACH PARTY’S AGGREGATE LIABILITY IN CONNECTION WITH THIS IPA, REGARDLESS OF THE FORM OF ACTION GIVING RISE TO THE LIABILITY (WHETHER IN CONTRACT, TORT, INCLUDING WITHOUT LIMITATION NEGLIGENCE, STRICT LIABILITY OR PRODUCT LIABILITY), SHALL NOT EXCEED THE PURCHASE PRICE PAID TO CISCO BY CM UNDER THIS IPA AND NEITHER PARTY SHALL NOT BE LIABLE FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF USE, LOSS OF DATA, OR INTERRUPTION OF BUSINESS, NOR FOR ANY INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY KIND RELATED TO THE INVENTORY OR THIS IPA, REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE, STRICT LIABILITY OR PRODUCT LIABILITY) OR OTHERWISE, AND WHETHER OR NOT A PARTY IS INFORMED OF THE POSSIBILITY THEREOF IN ADVANCE. THIS LIMITATION OF LIABILITY IS CUMULATIVE AND NOT PER INCIDENT. THE LIMITATIONS IN THIS SECTION SHALL APPLY NOTWITHSTANDING ANY FAILURE OF THE ESSENTIAL PURPOSE OF ANY LIMITED REMEDY. THE PARTIES ACKNOWLEDGE AND AGREE THAT THESE LIMITATIONS SHALL APPLY EVEN IF ANY LIMITED REMEDY SPECIFIED

CISCO CONFIDENTIAL Cisco BV – Solectron Texas

4

HEREIN IS FOUND TO HAVE FAILED OF ITS ESSENTIAL PURPOSE AND THAT THE PROVISIONS OF THIS ARTICLE 3 CONTAIN THE ALLOCATION OF RISK AND ARE A FUNDAMENTAL BASIS OF THE BARGAIN AGREED TO BY THE PARTIES. NOTWITHSTANDING THE FOREGOING, THIS LIMITATION OF LIABILITY SHALL NOT APPLY TO INVENTORY AFTER IT HAS BEEN INCORPORATED INTO CISCO PRODUCTS; IN SUCH CASE, THE LIMITATION OF LIABILITY PROVISIONS OF THE PPA SHALL APPLY.

ARTICLE 4
REPRESENTATIONS OF CISCO

     Cisco has the power and authority to enter into and be bound by the terms and conditions of this IPA and to carry out its obligations hereunder. This IPA is a legal, valid and binding obligation of Cisco enforceable against Cisco in accordance with its terms, subject to limitations imposed by general principles of equity upon the availability of equitable remedies and the enforcement of such provisions. The consummation by Cisco of the transactions contemplated by this IPA will not result in the creation of any lien or other encumbrance upon any Inventory or violate any judgment, order or decree of any court, administrative or governmental body binding upon Cisco or the Inventory.

ARTICLE 5
REPRESENTATIONS OF CM

     CM has the power and authority to enter into and be bound by the terms and conditions of this IPA and to carry out its obligations hereunder. This IPA is a legal, valid and binding obligation of CM enforceable against CM in accordance with its terms, subject to limitations imposed by general principles of equity upon the availability of equitable remedies and the enforcement of such provisions. The consummation by CM of the transactions contemplated by this IPA will not result in the creation of any lien or other encumbrance upon any Inventory or violate any judgment, order or decree of any court, administrative or governmental body binding upon CM or the Inventory.

ARTICLE 6
DISPUTE RESOLUTION

     The parties shall use their best efforts to amicably resolve any disputes relating to this IPA or the Inventory. If the dispute cannot be mutually resolved by CM and the Cisco lean implementation team, it will be escalated to Cisco’s GTM Commodity Manager.

ARTICLE 7
GENERAL PROVISIONS

     The terms, conditions and existence of this IPA shall be considered “Confidential Information” under that certain Nondisclosure Agreement between the parties and/or their affiliates dated September 28, 2001, and shall not be disclosed without the other party’s consent, except as required by law. Notwithstanding the foregoing, either party may disclose this IPA to its affiliates and to such party’s legal or financial advisors as necessary to obtain legal or financial advice. The relationship between Cisco and CM established by this IPA is that of

CISCO CONFIDENTIAL Cisco BV – Solectron Texas

5

independent contractors. This IPA is governed by the laws of the State of California, United States without regard to conflicts of law principles or any other principles that would result in the application of a different body of law. Venue for any legal action in connection with this IPA shall be the state and federal courts located in Santa Clara County, California, United States and each party hereby irrevocably consents to the jurisdiction of such courts; except that, notwithstanding the foregoing, either party may seek injunctive or equitable relief from any court of competent jurisdiction, at any time, to protect or enforce its rights hereunder. The parties specifically disclaim the UN Convention on Contracts for the International Sale of Goods. Each Party shall comply with all applicable laws and regulations applicable to such party and will obtain all required U.S., foreign and local authorizations, permits, or licenses required of such party. This IPA may be modified only by a written instrument duly executed by Cisco and CM. Any waiver by either party of any condition, part, term, or provision of this IPA shall not be construed as a waiver of any other condition, part, term or provision or a waiver of any future event or circumstance. Notices to Cisco shall be sent in care of Cisco Systems, Inc., to the attention of the General Counsel, 170 West Tasman Drive, San Jose, California 95134. Notices to CM shall be sent to the address set forth in the first paragraph of this IPA, with a copy in care of Solectron Corporation, attention General Counsel, 847 Gibraltar Drive, Building 5, Milpitas, California 95035. This IPA, and any rights or obligations hereunder, shall not be assignable by CM, in whole or in part, by contract, by operation of law or otherwise, and any attempt to do so shall be null and void. This IPA is for the sole benefit of Cisco and CM and nothing herein is intended to or shall confer upon any other person or entity any legal or equitable right, benefit or remedy of any nature whatsoever. If any provision of this IPA is held to be unenforceable, such provision shall be reformed only to the extent necessary to make it enforceable, and the remainder of this IPA shall nonetheless remain in full force and effect. This IPA, together with its Exhibits, constitutes the complete and exclusive statement of the understanding between the parties regarding the sale or transfer of the Inventory and supersedes all prior or contemporaneous proposals, oral or written, and all other communications between the parties relating to the specific subject matter of this IPA. Cisco and CM acknowledge that this IPA contains the agreement of the parties with respect to the sale and transfer of the Inventory and that they and/or their affiliates are or may be parties to other agreements regarding other inventory and/or the manufacture and sale of products and other subject matter. The original of this IPA has been written in English and the English language version of this IPA shall control for all purposes. This IPA may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one agreement binding on the parties.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

CISCO CONFIDENTIAL Cisco BV – Solectron Texas

6

     IN WITNESS WHEREOF, the parties hereto have caused this IPA to be executed by their duly authorized representatives as of the Effective Date.

SOLECTRON CORPORATION

By:

Name:

Title:

Date signed:

CISCO SYSTEMS INTERNATIONAL B.V.

By:

Name:

Title:

Date signed:

[SIGNATURE PAGE TO CISCO SYSTEMS INTERNATIONAL B.V. -
SOLECTRON CORPORATION IPA]

CISCO CONFIDENTIAL Cisco BV – Solectron Texas

7

EXHIBIT A

WIP INVENTORY AND LISTED INVENTORY

1. WIP Inventory: All components (after removal from stores inventory, if applicable) and work in process that have entered the manufacturing process on behalf of Cisco and that have not yet been received in Cisco’s Oracle database subinventory location.

2. [ * ]

[ * ]

PURCHASE PRICE FOR LISTED INVENTORY:

The aggregate Listed Inventory Purchase Price shall be US$: [ * ]

PAYMENT DATE FOR LISTED INVENTORY:

The Listed Inventory Purchase Price shall be paid by CM to Cisco [ * ] of the Effective Date for Schedule A items.

No portion of the Purchase Price is allocable to the WIP Inventory.

CISCO CONFIDENTIAL Cisco BV – Solectron Texas

8

EXHIBIT A-1

IN TRANSIT INVENTORY ADDENDUM

All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in that certain Inventory Purchase and Transfer Agreement dated effective March 11, 2007 between Cisco Systems International B.V. and Solectron Corporation (the “IPA”). CM and Cisco hereby agree that In Transit Inventory for the Initial In Transit Inventory Period is as set forth on the lists attached hereto.

[ * ]

PURCHASE PRICE FOR INITIAL IN TRANSIT INVENTORY:

The amount of the Purchase Price allocable to the Initial In Transit Inventory is [ * ].

PAYMENT DATE FOR INITIAL IN TRANSIT INVENTORY:

The amount of the Purchase Price allocable to the Initial In Transit Inventory shall be paid by CM to Cisco [ * ] from the end of the Initial In Transit Inventory Period.

Except as modified as set forth above, the IPA shall remain in full force and effect.

IN WITNESS WHEREOF, Cisco and CM have caused this Addendum to IPA, in the form of Exhibit A-1 to the IPA, to be executed by their duly authorized representatives as of the latest date set forth below.

SOLECTRON CORPORATION

By:

Name:

Title:

Date signed:

CISCO SYSTEMS INTERNATIONAL B.V.

By:

Name:

Title:

Date signed:

CISCO CONFIDENTIAL Cisco BV – Solectron Texas

9

EXHIBIT A-2

IN TRANSIT INVENTORY SUPPLEMENTAL ADDENDUM

All capitalized terms not otherwise defined herein shall have the meaning ascribed to them in that certain Inventory Purchase and Transfer Agreement dated effective March 11, 2007 between Cisco Systems International B.V. and Solectron Corporation (the “IPA”). CM and Cisco hereby agree that In Transit Inventory for the Subsequent In Transit Inventory Period is as set forth on the lists attached hereto.

[ * ]

PURCHASE PRICE FOR SUBSEQUENT IN TRANSIT INVENTORY:

The amount of the Purchase Price allocable to the Subsequent In Transit Inventory is [ * ].

PAYMENT DATE FOR SUBSEQUENT IN TRANSIT INVENTORY:

The amount of the Purchase Price allocable to the Subsequent n Transit Inventory shall be paid by CM to Cisco [ * ] from the end of the Subsequent In Transit Inventory Period.

Except as modified as set forth above and except as modified by that certain Initial In Transit Inventory Addendum, the IPA shall remain in full force and effect.

IN WITNESS WHEREOF, Cisco and CM have caused this Addendum to IPA, in the form of Exhibit A-2 to the IPA, to be executed by their duly authorized representatives as of the latest date set forth below.

SOLECTRON CORPORATION

By:

Name:

Title:

Date signed:

CISCO SYSTEMS INTERNATIONAL B.V.

By:

Name:

Title:

Date signed:

CISCO CONFIDENTIAL Cisco BV – Solectron Texas

10

EXHIBIT B

FACILITIES:

The Facilities at which the WIP Inventory or Listed Inventory is located or to which the In Transit Inventory is in transit:

Solectron Texas, L.P., a limited partnership organized under the laws of Delaware, or its successor-in-interest, with offices at:

12455 Research Boulevard, Austin, Texas 78759

CISCO CONFIDENTIAL Cisco BV – Solectron Texas

11

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302(A) OF
THE SARBANES — OXLEY ACT OF 2002

I, Paul J. Tufano, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Solectron Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: July 11, 2007

/s/ Paul J. Tufano Paul J. Tufano
Interim Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302(A) OF
THE SARBANES — OXLEY ACT OF 2002

I, Roop Lakkaraju, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Solectron Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: July 11, 2007

/s/ Roop Lakkaraju Roop Lakkaraju
Interim Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul J. Tufano, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Solectron Corporation on Form 10-Q for the three-month period ended June 1, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Solectron Corporation.

Date: July 11, 2007

/s/ Paul J. Tufano  

Paul J. Tufano 

Interim Chief Executive Officer 

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Roop Lakkaraju, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Solectron Corporation on Form 10-Q for the three-month period ended June 1, 2007 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Solectron Corporation.

Date: July 11, 2007

/s/ Roop Lakkaraju  

Roop Lakkaraju 

Interim Chief Financial Officer