10-Q

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002.
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: 1-10560

BENCHMARK ELECTRONICS, INC.
(Exact Name of Registrant as Specified in Its Charter)

Texas (State or Other Jurisdiction of Incorporation)	74-2211011 (I.R.S. Employer Identification Number)
3000 Technology Drive Angleton, Texas (Address of Principal Executive Offices)	77515 (Zip Code)

(979) 849-6550
(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 such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        As of November 13, 2002 there were 24,265,820 shares of Benchmark Electronics, Inc. Common Stock, par value $0.10 per share, outstanding.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(amounts in thousands)

				September 30, 2002			December 31, 2001
				(unaudited)
Assets
	Current assets:
		Cash and cash equivalents		$	237,621		$	59,879
		Accounts receivable, net of allowance for doubtful accounts of $9,249 and $2,211, respectively			188,393			180,021
		Income taxes receivable			4,723			1,711
		Inventories, net			208,694			197,278
		Prepaid expenses and other assets			19,586			12,928
		Deferred tax asset			8,579			9,080
			Total current assets		667,596			460,897
	Property, plant and equipment				222,616			210,556
	Accumulated depreciation				(129,461	)		(116,751	)
			Net property, plant and equipment		93,155			93,805
	Other assets, net				10,535			12,194
	Goodwill, net				126,348			119,209
				$	897,634		$	686,105
Liabilities and Shareholders' Equity
	Current liabilities:
		Current installments of other long-term debt		$	28,736		$	22,367
		Notes payable			565			—
		Accounts payable			199,157			144,150
		Accrued liabilities			49,390			26,541
			Total current liabilities		277,848			193,058
	Convertible subordinated notes				80,200			80,200
	Other long-term debt, excluding current installments				39,166			44,695
	Other long-term liability				4,043			7,771
	Deferred tax liability				13,503			8,699
	Shareholders' equity:
		Preferred shares, $0.10 par value; 5,000 shares authorized, none issued			—			—
		Common shares, $0.10 par value; 30,000 shares authorized; issued—24,312 and 19,751, respectively; outstanding—24,263 and 19,702, respectively			2,426			1,970
		Additional paid-in capital			434,112			319,875
		Retained earnings			67,552			44,363
		Accumulated other comprehensive loss			(21,096	)		(14,406	)
		Less treasury shares, at cost; 49 shares			(120	)		(120	)
			Total shareholders' equity		482,874			351,682
		Commitments and contingencies		$	897,634		$	686,105

See accompanying notes to condensed consolidated financial statements.

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BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(amounts in thousands, except per share data)

(unaudited)

			Three Months Ended September 30,						Nine Months Ended September 30,
			2002			2001			2002			2001
Sales			$	428,278		$	257,969		$	1,161,841		$	1,007,307
Cost of sales				395,767			239,071			1,073,653			934,194
		Gross profit		32,511			18,898			88,188			73,113
Selling, general and administrative expenses				17,268			12,581			47,566			41,406
Restructuring charges				—			481			—			5,094
Asset write-offs				—			61,720			1,608			61,720
Amortization of goodwill				—			3,222			—			9,667
		Income (loss) from operations		15,243			(59,106	)		39,014			(44,774	)
Interest expense				(2,886	)		(3,862	)		(8,577	)		(14,175	)
Other income				2,364			719			5,543			1,013
		Income (loss) before income taxes		14,721			(62,249	)		35,980			(57,936	)
Income tax expense (benefit)				5,138			(5,234	)		12,791			(3,940	)
		Net income (loss)	$	9,583		$	(57,015	)	$	23,189		$	(53,996	)
Earnings (loss) per share:
	Basic		$	0.40		$	(2.90	)	$	1.03		$	(2.75	)
	Diluted		$	0.38		$	(2.90	)	$	0.99		$	(2.75	)
Weighted average number of shares outstanding:
	Basic			24,246			19,645			22,565			19,616
	Diluted			24,924			19,645			23,378			19,616

See accompanying notes to condensed consolidated financial statements.

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BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(amounts in thousands)

(unaudited)

				Nine Months Ended September 30,
				2002			2001
Cash flows from operating activities:
	Net income (loss)			$	23,189		$	(53,996	)
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			23,703			40,372
		Asset write-offs			1,608			61,720
		Deferred income taxes			5,215			(3,756	)
		Loss on the sale of property, plant and equipment			73			20
		Federal tax benefit of stock options exercised			912			33
		Accrued compensation expense			—			361
	Changes in operating assets and liabilities, net of effects from acquisitions of businesses:
		Accounts receivable			19,579			98,132
		Inventories			23,818			105,846
		Prepaid expenses and other assets			(2,748	)		7,492
		Accounts payable			25,415			(137,379	)
		Accrued liabilities			18,708			(11,620	)
		Income taxes			(3,005	)		(5,919	)
			Net cash provided by operations		136,467			101,306
Cash flows from investing activities:
	Acquisition, net of cash acquired				(36,172	)		—
	Capital expenditures, net				(5,501	)		(16,011	)
	Additions to capitalized software				(173	)		(3,460	)
			Net cash used in investing activities		(41,846	)		(19,471	)
Cash flows from financing activities:
	Net proceeds from public offering of common shares				110,270			—
	Repayment of revolving line of credit, net				—			(65,500	)
	Proceeds from stock options exercised				2,898			143
	Proceeds from employee stock purchase plan				613			703
	Principal payments on other long-term debt				(24,383	)		(14,774	)
			Net cash provided by (used in) financing activities		89,398			(79,428	)
Effect of exchange rate changes					(6,277	)		(1,940	)
Net increase in cash and cash equivalents					177,742			467
	Cash and cash equivalents at beginning of year				59,879			23,541
	Cash and cash equivalents at September 30			$	237,621		$	24,008
Supplemental disclosures of cash flow information:
	Income taxes paid			$	8,510		$	6,551
	Interest paid			$	8,576		$	15,613

See accompanying notes to condensed consolidated financial statements.

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BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, unless otherwise noted)

(unaudited)

Note 1—Basis of Presentation

        Benchmark Electronics, Inc. (the Company) is a Texas corporation which provides electronics manufacturing and design services to original equipment manufacturers (OEMs) of computers and related products for business enterprises, telecommunication equipment, video/ audio/entertainment products, industrial control equipment, testing and instrumentation products, and medical devices. The Company has manufacturing operations located in the Americas, Europe and Asia.

        The condensed consolidated financial statements included herein have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements reflect all normal and recurring adjustments which in the opinion of management are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

        Certain reclassifications of prior period amounts have been made to conform to the current presentation.

Note 2—Acquisition

        On July 29, 2002, the Company completed its previously announced acquisition (the "Acquisition") of all of the issued and outstanding capital stock of ACT Manufacturing Holdings UK Limited (UK) and 68,374,718 shares, constituting at least 99.77% of the issued and outstanding capital stock of ACT Manufacturing (Thailand) Public Company Limited (Thailand) from ACT Manufacturing, Inc. ("ACT") pursuant to the terms of an Asset and Share Purchase Agreement dated as of July 2, 2002 by and between the Company and ACT (the "Purchase Agreement"). ACT had previously filed for reorganization under Chapter 11 of the United States Bankruptcy Code; the Purchase Agreement and the transactions contemplated thereby were approved by the bankruptcy court. The facilities acquired include a facility owned in Ayudhaya, Thailand and a leased facility in Leicester, England. The 240,000 square foot manufacturing facility in Ayudhaya, Thailand (near Bangkok) provides electronics manufacturing services, including printed circuit board (PCB) assembly and test, systems assembly and test, prototyping, warranty repair, materials procurement and engineering support services. The facility has experience in radio frequency (RF) and wireless product manufacturing, as well as a full suite of RF testing capabilities. The 55,000 square foot manufacturing facility in Leicester, England provides electronics manufacturing services, including PCB design, assembly and test, and systems assembly and test. In addition to the Ayudhaya and Leicester facilities, the Acquisition included leased international purchasing offices in San Jose, California, Hong Kong and The Republic of Singapore. As consideration for the Acquisition, the Company paid $45.2 million in cash and acquisition costs of $0.8 million. The Company is accounting for the acquisition utilizing the accounting principles promulgated by SFAS 141 and 142. Therefore, the results of operations of the UK and Thailand operations since July 29, 2002 have been included in the accompanying consolidated statements of income. The preliminary allocation of the net purchase price of the Acquisition resulted in goodwill of

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approximately $11.6 million. In connection with the Acquisition, the Company amended its Amended and Restated Credit Agreement dated June 23, 2000 to permit the Acquisition.

        The net purchase price of the Acquisition has been allocated based on preliminary estimates as follows:

Working capital, other than cash		$	31,742
Property, plant and equipment			18,623
Goodwill			11,567
Other assets			28
Notes payable			(6,986	)
Long term debt			(18,802	)
	Purchase price, net of cash received	$	36,172

        The following summary pro forma condensed consolidated financial information reflects the acquisition of Thailand as if it had occurred on January 1, 2002 for purposes of the statements of operations. The summary pro forma information is not necessarily representative of what the Company's results of operations would have been had the acquisition of Thailand in fact occurred on January 1, 2002 and is not intended to project the Company's results of operations for any future period or date. Because the UK operations are not individually significant to Benchmark, their financial information has not been included herein.

        Pro forma condensed consolidated financial information for the period ended September 30, 2002 (unaudited):

		Nine Months Ended September 30,
		2002		2001
Net sales		$	1,265,968	$	1,176,589
Gross profit		$	96,018	$	92,243
Income (loss) from operations		$	43,204	$	(31,004	)
Net income (loss)		$	26,680	$	(39,518	)
Earnings (loss) per share:
	Basic	$	1.18	$	(2.01	)
	Diluted	$	1.14	$	(2.01	)
Weighted average number of shares outstanding:
	Basic		22,565		19,616
	Diluted		23,378		19,616

Note 3—Earnings Per Share

        Basic earnings per share is computed using the weighted average number of shares outstanding. Diluted earnings per share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributed to outstanding stock options to purchase common stock.

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Incremental shares of 0.7 million and 0.8 million for the three and nine months ended September 30, 2002 were used in the calculation of diluted earnings per share. For the three and nine-month periods ended September 30, 2001, a total of 0.5 million and 0.7 million options were not included in the calculation of diluted earnings per share because the effect would have been antidilutive. Options to purchase 0.9 million and 0.7 million shares of common stock for the three and nine-month periods ended September 30, 2002, respectively, were not included in the computation of diluted earnings per share because the option exercise price was greater than the average market price of the common stock. Options to purchase 0.9 million and 0.8 million shares of common stock for the three and nine-month periods ended September 30, 2001 were not included in the computation of diluted earnings per share because the option exercise price was greater than the average market price of the common stock. The effect of the if-converted method for the 6% Convertible Subordinated Notes is antidilutive and approximately 2.0 million of potential common shares have not been considered in computing diluted earnings per share for the three and nine-month periods ended September 30, 2002 and 2001.

Note 4—Borrowing Facilities

        The Company has a five-year term loan (the Term Loan) through a syndicate of commercial banks. Principal on the Term Loan is payable in quarterly installments in annual amounts of $20 million in 2002, $22 million in 2003 and $21 million in 2004. The Term Loan bears interest, at the Company's option, at either the bank's Eurodollar rate plus 1.25% to 3.00% or its prime rate plus 0.00% to 1.75%, based upon the Company's debt ratio as specified in the agreement and interest is payable quarterly. The Term Loan matures on September 30, 2004. As of September 30, 2002, the Company had $48.0 million outstanding under the Term Loan, bearing interest at rates ranging from 3.50% to 8.255%.

        The Company has a $175 million revolving line of credit facility (the Revolving Credit Facility) with a syndicate of commercial banks. The Company is entitled to borrow under the Revolving Credit Facility up to the lesser of $175 million or the sum of 75% of its eligible accounts receivable, 45% of its eligible inventories and 50% of its eligible fixed assets. Interest on the Revolving Credit Facility is payable quarterly, at the Company's option, at either the bank's Eurodollar rate plus 1.25% to 3.00% or its prime rate plus 0.00% to 1.75%, based upon the Company's debt ratio as specified in the agreement. A commitment fee of 0.375% to 0.500% per annum on the unused portion of the Revolving Credit Facility is payable quarterly in arrears. The Revolving Credit Facility matures on September 30, 2004. As of September 30, 2002, the Company had no borrowings outstanding under the Revolving Credit Facility, $0.4 million outstanding letters of credit and $174.6 million was available for future borrowings.

        The Term Loan and the Revolving Credit Facility (collectively the Facility) are secured by the Company's domestic inventory and accounts receivable, 100% of the stock of the Company's domestic subsidiaries, and 65% of the voting capital stock of each direct foreign subsidiary and substantially all of the other tangible and intangible assets of the Company and its domestic subsidiaries. The Facility contains customary financial covenants as to working capital, interest coverage, debt leverage, fixed charges, and consolidated net worth, and restricts the ability of the Company to incur additional debt,

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pay dividends, sell assets, and to merge or consolidate with other persons, without the consent of the banks. At September 30, 2002, the Company was in compliance with all such restrictions.

        The Company's Thailand subsidiary has a Credit Agreement with Thai Farmers Bank Public Company Limited and Bank of Ayudhya Public Company Limited (the Thai Credit Agreement). The Thai Credit Agreement provides that the lenders will make available to the Company's Thailand subsidiary up to approximately $53.5 million in revolving loans, term loans and machinery loans for a term of five years. At September 30, 2002, $17.6 million was outstanding at interest rates ranging from 4.375% to 4.83%. The Thai Credit Agreement is secured by land, buildings and machinery in Thailand. In addition, the Thai Credit Agreement provides for approximately $1.4 million (60.0 million Thai baht) in working capital availability. At September 30, 2002, $0.7 million was outstanding. The Thai Credit Agreement contains financial covenants as to debt coverage and the ratio of debt to equity. As of September 30, 2002, the Company's Thailand subsidiary was in compliance with these covenants.

        The Company has outstanding $80.2 million principal amount of 6% Convertible Subordinated Notes due August 15, 2006 (the Notes). The indenture relating to the Notes contains affirmative and negative covenants including covenants restricting the Company's ability to merge or engage in certain other extraordinary corporate transactions unless certain conditions are satisfied. Upon the occurrence of a change of control of the Company (as defined in the indenture relating to the Notes), each holder of Notes will have the right to require the Company to repurchase all or part of the Holder's notes at 100% of the face amount thereof, plus accrued and unpaid interest.

        The Notes are convertible, unless previously redeemed or repurchased, at the option of the holder at any time prior to maturity, into shares of the Company's common stock at an initial conversion price of $40.20 per share, subject to adjustment in certain events. The Notes are convertible into a total of 1.995 million shares of the Company's common stock. Interest is payable February 15 and August 15 each year.

        The Company currently has an interest rate swap transaction agreement for a notional amount of $24.0 million under which it pays a fixed rate of interest of 6.63% plus 1.25% to 3.00% based upon its debt ratio as specified in the debt agreement, hedging against the variable interest rates charged by the term loan. The receive rate under the swap is based on LIBOR. The interest rate swap expires in the year 2003.

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Note 5—Inventories

        Inventory costs are summarized as follows:

	September 30, 2002			December 31, 2001
Raw materials	$	145,052		$	166,129
Work in process		41,847			28,147
Finished goods		42,410			12,026
Obsolescence reserve		(20,615	)		(9,024	)
	$	208,694		$	197,278

Note 6—Income Taxes

        Income tax expense consists of the following:

		Nine Months Ended September 30,
		2002			2001
Federal—Current		$	7,338		$	(1,744	)
Foreign—Current			(297	)		1,793
State—Current			535			(233	)
Deferred			5,215			(3,756	)
	Total	$	12,791		$	(3,940	)

        Income tax expense differs from the amount computed by applying the U.S. federal statutory income tax rate to income before income tax due to the impact of foreign income taxes, state income taxes, net of federal benefit and the benefit from the use of a foreign sales corporation.

        The Company considers earnings from certain foreign subsidiaries to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes has been made for these earnings. Upon distribution of foreign subsidiary earnings in the form of dividends or otherwise, such distributed earnings would be reportable for U.S. income tax purposes (subject to adjustment for foreign tax credits).

        The Company's manufacturing operations in Ireland are subject to a 10% tax rate through December 2010. Thereafter, the applicable statutory tax rate will be 12.5%. As a result of these reduced rates, income tax expense for the three and nine-month periods ended September 30, 2002 is approximately $0.1 million (approximately $0.01 per share diluted) and $0.5 million (approximately $0.02 per share diluted), respectively, lower than the amount computed by applying the statutory tax rate (16% in 2002). Income tax expense for the three and nine-month periods ended September 30, 2001 is approximately $0.2 million (approximately $0.01 per share diluted) and $0.6 million (approximately $0.03 per share diluted), respectively, lower than the amount computed by applying the statutory tax rate (20% in 2001).

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Note 7—Derivative Instruments and Certain Hedging Activities

        Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Certain Hedging Activities" and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of SFAS 133." These statements establish accounting and reporting standards requiring that derivative instruments, including certain derivative instruments embedded in other contracts, be recorded on the balance sheet at fair value as either assets or liabilities. The accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative at its inception. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results of the hedged item in the statements of operations, and requires the Company to formally document, designate and assess the effectiveness of the hedge transaction to receive hedge accounting. For derivatives designated as cash-flow hedges, changes in fair value, to the extent the hedge is effective, are recognized in other comprehensive income until the hedged item is recognized in earnings. Overall hedge effectiveness is measured at least quarterly. Any changes in the fair value of the derivative instrument resulting from hedge ineffectiveness, as defined by SFAS No. 133 and measured based on the cumulative changes in the fair value of the derivative instrument and the cumulative changes in the estimated future cash flows of the hedged item, are recognized immediately in earnings.

        The Company has designated its swap agreement as a cash flow hedge. During the three and nine-month periods ended September 30, 2002, the Company recognized $330 and $1,030 in losses, included in interest expense, on the interest rate swap attributable to interest costs occurring during the first nine months of 2002. During the three and nine-month periods ended September 30, 2001, the Company recognized $266 and $452 in losses, included in interest expense, on the interest rate swap attributable to interest costs occurring during the first nine months of 2001. No gain or loss on ineffectiveness was required to be recognized during 2002 or 2001. As of September 30, 2002, the fair value of the interest rate swap agreement was a loss of $1.2 million that is anticipated to be transferred into earnings over the next twelve months as interest costs on the term loan are recognized.

        The Company has utilized and expects to continue to utilize derivative financial instruments with respect to a portion of its interest rate risks to achieve a more predictable cash flow by reducing its exposure to interest rate fluctuations. These transactions generally are swaps and are entered into with major financial institutions. Derivative financial instruments related to the Company's interest rate risks are intended to reduce the Company's exposure to increases in the benchmark interest rates underlying the Company's variable rate Facility.

Note 8—Business Segments and Geographic Areas

        The Company has 15 manufacturing facilities in the Americas, Europe and Asia to serve its customers. The Company is operated and managed geographically. The Company's management evaluates performance and allocates the Company's resources on a geographic basis. Intersegment sales, primarily constituting sales from the Americas to Europe, are generally recorded at prices that approximate arm's length transactions. Operating segments' measure of profitability is based on income from operations (prior to amortization of goodwill and unallocated corporate expenses). Certain corporate expenses, including items such as insurance and software licensing costs, are allocated to

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these operating segments and are included for performance evaluation. Amortization expense associated with capitalized software costs is allocated to these operating segments, but the related assets are not allocated. Amortization expense during 2001 associated with goodwill is not allocated to the results of operations in analyzing segments, but the related balances are allocated to the segments. The accounting policies for the reportable operating segments are the same as for the Company taken as a whole.

        Information about operating segments for the three and nine-month periods ended September 30, 2002 and 2001 was as follows:

		Three Months Ended September 30,					Nine Months Ended September 30,
		2002			2001		2002		2001
Net sales:
	Americas	$	422,765		231,494		1,185,235		898,182
	Europe		85,129		43,295		260,303		173,951
	Asia		36,437		4,974		43,631		23,423
	Elimination of intersegment sales		(116,053	)	(21,794	)	(327,328	)	(88,249	)
		$	428,278		257,969		1,161,841		1,007,307
Depreciation and amortization:
	Americas	$	6,216		8,688		20,037		26,126
	Europe		795		1,332		2,420		3,946
	Asia		906		203		1,246		633
	Corporate—goodwill		—		3,222		—		9,667
		$	7,917		13,445		23,703		40,372
Income (loss) from operations:
	Americas	$	22,031		7,938		54,337		31,131
	Europe		(1,309	)	193		2,323		2,056
	Asia		786		109		518		2,090
	Corporate and intersegment eliminations		(6,265	)	(67,346	)	(18,164	)	(80,051	)
		$	15,243		(59,106	)	39,014		(44,774	)
Capital expenditures
	Americas	$	903		2,024		3,684		13,429
	Europe		159		224		466		1,780
	Asia		496		—		1,351		802
		$	1,558		2,248		5,501		16,011

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		September 30, 2002		December 31, 2001
Total assets:
	Americas	$	654,336	532,047
	Europe		118,821	113,824
	Asia		103,804	17,346
	Corporate		20,673	22,888
		$	897,634	686,105

        The following enterprise-wide information is provided in accordance with SFAS No. 131. Geographic net sales information reflects the destination of the product shipped. Long-lived assets information is based on the physical location of the asset.

		Three Months Ended September 30,			Nine Months Ended September 30,
		2002		2001	2002	2001
Net sales derived from:
	Printed circuit boards	$	332,641	214,055	871,769	837,922
	Systems integration and box build		95,637	43,914	290,072	169,385
		$	428,278	257,969	1,161,841	1,007,307
Geographic net sales:
	United States	$	375,986	193,479	1,006,703	763,773
	Europe		39,810	36,036	129,227	141,138
	Asia and other		12,482	28,454	25,911	102,396
		$	428,278	257,969	1,161,841	1,007,307

		September 30, 2002		December 31, 2001
Long-lived assets:
	United States	$	66,974	84,877
	Europe		11,389	12,215
	Asia and other		25,327	8,907
		$	103,690	105,999

Note 9—Comprehensive Income (Loss)

        Comprehensive income (loss), which includes net income, the change in the cumulative translation adjustment and the effect of accounting for cash flow hedging derivatives, for the three and nine-month periods ended September 30, 2002 and 2001, was $4.5 million and $(59.7) million and $16.5 million and

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$(64.1) million, respectively. Total comprehensive income (loss) for the three and nine-month periods ended September 30, 2002 and 2001 was as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2002			2001		2002		2001
Net income (loss)	$	9,583		(57,015	)	23,189		(53,996	)
Cumulative translation adjustment		(5,162	)	(2,177	)	(6,996	)	(8,935	)
Hedge accounting for derivative financial instruments, net of tax		39		(522	)	306		(740	)
Cumulative effect attributable to adoption of SFAS No. 133 (See note 6), net of tax		—		—		—		(402	)
Comprehensive income (loss)	$	4,460		(59,714	)	16,499		(64,073	)

        Included in the hedge accounting for derivative financial instruments of $39 and $306 are reclassification adjustments of approximately $197 and $615, respectively.

Note 10—Contingencies

        On October 18, 1999, the Company announced that its third quarter earnings announcement would be delayed and subsequently, on October 22, the Company announced its earnings for the third quarter were below the level of the same periods during 1998 and were below expectations. Several class action lawsuits were filed in federal district court in Houston, Texas against the Company and two of its officers and directors alleging violations of the federal securities laws. These lawsuits were consolidated in February 2000. The lawsuits seek to recover unspecified damages. The Company denies the allegations in the lawsuits, however, and further denies that such allegations provide a basis for recovery of damages as the Company believes that it has made all required disclosures on a timely basis. On August 16, 2002, the federal district court in Houston, Texas entered its order granting the Company's motion to dismiss the consolidated lawsuits, and dismissing the lawsuits without prejudice.

        The Company filed suit against J.M. Huber Corporation (the Seller) in the United States District Court for the Southern District of Texas for breach of contract, fraud and negligent misrepresentation on December 14, 1999 and is seeking an unspecified amount of damages in connection with the Amended and Restated Stock Purchase Agreement dated August 12, 1999 between the parties whereby the Company acquired all of the stock of AVEX from Seller. On January 5, 2000, Seller filed suit in the United States District Court for the Southern District of New York alleging that the Company failed to comply with certain obligations under the contract requiring the Company to register shares of its common stock issued to Seller as partial consideration for the acquisition. Seller's suit has been consolidated with the Company's suit in the United States District Court for the Southern District of Texas (the "Court"). On March 18, 2002, the Court entered an interlocutory judgement denying the Company's claims against Seller, but preserving Seller's counterclaims against the Company. On April 15, 2002, the Company and Seller jointly filed with the Court a stipulation to dismiss Seller's claims and counterclaims against the Company without prejudice allowing the Court to render a final

13

judgement in the case so that the Company may file an appeal to the Fifth Circuit Court of Appeals (the "Fifth Circuit"). Under the stipulation, Seller also agreed to refrain from refiling its claims while the Company pursued any appeals with the Fifth Circuit. On May 1, 2002, the Court entered a final judgement dismissing without prejudice the claims and counterclaims of Seller. On May 29, 2002, the Company filed a notice of appeal of the Court's final judgment to the Fifth Circuit, and on August 7, 2002, the Company filed its appellate brief with the Fifth Circuit.

        On April 14, 2000, the Company, along with numerous other companies, was named as a defendant in a lawsuit filed in the United States District Court for the District of Arizona by the Lemelson Medical, Education & Research Foundation (the Foundation). The lawsuit alleges that the Company has infringed certain of the Foundation's patents relating to machine vision and bar code technology utilized in machines the Company has purchased. On November 2, 2000, the Company filed an Answer, Affirmative Defenses, and a Motion to Stay based upon Declaratory Judgement Actions filed by Cognex and Symbol, manufacturers of the equipment at issue. On March 29, 2001, the Court granted the defendants' Motion to Stay and ordered that the lawsuit be stayed pending the entry of a final non-appealable judgement in the cases filed by Cognex and Symbol. The Company continues to explore any indemnity or similar rights the Company may have against manufacturers of the machines or other third parties. The Company intends to vigorously defend against such claim and pursue all rights it has against third parties. At the present time, the Company is unable to reasonably estimate the possible loss, if any, associated with these matters.

        The Company is also involved in various other legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial position or results of operations.

Note 11—Restructuring Charges and Asset Write-offs

        During the nine month period ended September 30, 2002, the Company recorded asset write-offs of approximately $1.6 million ($1.0 million after-tax) for the write-down of long-lived assets held for sale to fair value.

        During the nine month period ended September 30, 2001, the Company recorded restructuring charges of approximately $5.1 million ($3.6 million after-tax). These charges related to reductions in the Company's cost structure, including reductions in force and included costs resulting from payment of employee severance, consolidation of facilities and abandonment of leased equipment. These restructuring costs included severance costs of approximately $4.2 million and losses from lease commitments of $0.9 million.

        In the third quarter of 2001, the Company recorded asset write-offs of approximately $61.7 million ($43.2 million after-tax) for the write-down of long-lived assets to fair value. Included in the long-lived asset impairment are charges of approximately $28.0 million which related to property, plant and equipment associated with the consolidation and downsizing of certain manufacturing facilities and the write-off of approximately $33.7 million of the remaining goodwill and other intangibles related to these facilities.

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Note 12—Impact of Recently Issued Accounting Standards

        The Company adopted the Financial Accounting Standards Board (FASB) SFAS No. 141, "Business Combinations" effective July 1, 2001, and SFAS No. 142, "Goodwill and Other Intangible Assets" effective January 1, 2002. SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated or completed after June 30, 2001, and specifies criteria for the recognition and reporting of intangible assets apart from goodwill. Under SFAS No. 142, beginning January 1, 2002, the Company no longer amortizes goodwill and intangible assets with indefinite useful lives, but instead tests those assets for impairment at least annually. SFAS No. 142 also requires that intangible assets with definite useful lives be amortized over such lives to their estimated residual values.

        SFAS No. 142 required the Company to perform a transitional goodwill impairment evaluation as of the date of adoption. To accomplish this the Company identified its reporting units and determined the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of January 1, 2002. The Company determined the fair value of each reporting unit and compared it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of it assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with SFAS No. 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than December 31, 2002. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company's statement of earnings.

        As of January 1, 2002, the Company had unamortized goodwill in the amount of $119.2 million subject to the transition provisions of Statements 141 and 142. The change in the amount of unamortized goodwill during the three and nine month periods ended September 30, 2002 is due to the additional goodwill resulting from acquisitions and the impact of foreign currency translation adjustments. The adoption of the Statement 142 resulted in the elimination of approximately $12.2 million of goodwill amortization, annually, subsequent to December 31, 2001. Amortization expense related to goodwill was $3.2 million and $9.7 million for the three and nine-month periods ended September 30, 2001, respectively. The Company has completed the first step of the transitional goodwill impairment test and has determined that no impairment exits. As a result, the Company has recognized no transitional impairment loss during the nine months ended September 30, 2002 in connection with the adoption of SFAS 142. There can be no assurance that future goodwill impairment tests will not result in a charge to earnings.

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        The pro forma effects of the adoption of SFAS 142 on net income and earnings per share for the Company for the three and nine-month periods ended September 30, 2001 is as follows:

	Three Months Ended September 30, 2001			Nine Months Ended September 30, 2001
Net loss as reported	$	(57,015	)	(53,996	)
Add back: Amortization of goodwill, net of tax		2,489		7,431
Adjusted net loss	$	(54,526	)	(46,565	)
Basic loss per share, as reported	$	(2.90	)	(2.75	)
Add back: Amortization of goodwill, net of tax		0.13		0.38
Pro forma	$	(2.77	)	(2.37	)
Diluted loss per share, as reported	$	(2.90	)	(2.75	)
Add back: Amortization of goodwill, net of tax		0.13		0.38
Pro forma	$	(2.77	)	(2.37	)

        As of January 1, 2002, the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", but retains many of its fundamental provisions. SFAS No. 144 also clarifies certain measurement and classification issues from SFAS No. 121. In addition, SFAS No. 144 supercedes the accounting and reporting provisions for the disposal of a business segment as found in Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" (APB 30). However, SFAS No. 144 retains the requirement in APB 30 to separately report discontinued operations, and broadens the scope of such requirement to include more types of disposal transactions. The scope of SFAS No. 144 excludes goodwill and other intangible assets that are not to be amortized, as the accounting for such items is prescribed by SFAS No. 142. The adoption of SFAS No. 144 did not have a material effect on the Company's consolidated financial statements.

        In April 2002, SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections," was issued. SFAS 145 rescinds SFAS 4 and SFAS 64 related to classification of gains and losses on debt extinguishment such that most debt extinguishment gains and losses will no longer be classified as extraordinary. SFAS 145 also amends SFAS 13 with respect to sales-leaseback transactions. The Company adopted the provisions of SFAS 145 effective April 1, 2002, and the adoption had no impact on the Company's reported results of operations or financial position.

        In June 2002, SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" was issued. This statement provides guidance on the recognition and measurement of liabilities

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associated with disposal activities and is effective for the Company on January 1, 2003. The Company is currently reviewing the provisions of SFAS No. 146 to determine the standard's impact upon adoption.

Note 13—Stock Offering

        On April 15, 2002, the Company completed the public offering of 4,312,500 shares of its common stock for net proceeds of approximately $110.2 million. The Company invested the net proceeds in interest bearing short-term investments and cash equivalents.

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

        References in this report to "the Company", "Benchmark", "we", or "us" mean Benchmark Electronics, Inc. together with its subsidiaries. The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are any statements that do not relate solely to historical or current facts. They are identified by words such as "anticipate," "believe," "intend," "plan," "projection," "forecast," "strategy," "position," "continue," "estimate," "expect," "may," "will," or the negative of those terms or other variations of them or by comparable terminology. In particular, statements, express or implied, concerning future operating results or the ability to generate sales, income or cash flow are forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions, including those discussed under the heading Risk Factors below. The future results of our operations may differ materially from those expressed in the forward-looking statements included in this report. Many of the factors that will determine these results are beyond our ability to control or predict. You should not put undue reliance on any forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.

        The following discussion should be read in conjunction with the unaudited financial statements of the Company included elsewhere in this report.

General

        We are in the business of manufacturing electronics and provide our services to original equipment manufacturers of computers and related products for business enterprises, medical devices, video/audio/entertainment products, industrial control equipment, testing and instrumentation products, and telecommunication equipment. The services that we provide are commonly referred to as electronics manufacturing services. We offer our customers comprehensive and integrated design and manufacturing services, from initial product design to volume production and direct order fulfillment. We provide specialized engineering services including product design, printed circuit board layout, prototyping and test development. We believe that we have developed strengths in the manufacturing process for large, complex, high-density printed circuit boards as well as the ability to manufacture high and low volume products in lower cost regions such as Latin America and Southeast Asia. As our customers expand internationally, they increasingly require their electronics manufacturing services partners to have strategic regional locations and global procurement capabilities. We believe that our global manufacturing presence of 15 facilities in seven countries increases our ability to be responsive to our customers' needs by providing accelerated time-to-market and time-to-volume production of high quality products. These capabilities should enable us to build stronger strategic relationships with our customers and to become a more integral part of their operations.

        Substantially all of our manufacturing services are provided on a turnkey basis, whereby we purchase customer-specified components from our suppliers, assemble the components on finished printed circuit boards, perform post-production testing and provide our customers with production process and testing documentation. We offer our customers flexible, "just-in-time" delivery programs allowing product shipments to be closely coordinated with our customers' inventory requirements. Additionally, we complete the assembly of our customers' products at our facilities by integrating printed circuit board assemblies into other elements of our customers' products. We also provide manufacturing services on a consignment basis, whereby we utilize components supplied by the customer to provide assembly and post-production testing services.

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        We do not typically obtain long-term purchase orders or commitments from our customers. Instead we work closely with our customers to develop forecasts for future orders, which are not binding. Customers may cancel their orders, change production quantities from forecast volumes or delay production for a number of reasons beyond our control. Cancellations, reductions or delays by a significant customer or by a group of customers would have an adverse effect on us. As many of our costs and operating expenses are relatively fixed, a reduction in customer demand can disproportionately adversely affect our gross margins and operating income.

Recent Acquisitions

        On July 29, 2002, we completed the previously announced acquisition (the "Acquisition") of all of the issued and outstanding capital stock of ACT Manufacturing Holdings UK Limited (UK) and 68,374,718 shares, constituting at least 99.77% of the issued and outstanding capital stock of ACT Manufacturing (Thailand) Public Company Limited (Thailand) from ACT Manufacturing, Inc. ("ACT") pursuant to the terms of an Asset and Share Purchase Agreement dated as of July 2, 2002 by and between Benchmark and ACT (the "Purchase Agreement"). ACT had previously filed for reorganization under Chapter 11 of the United States Bankruptcy Code; the Purchase Agreement and the transactions contemplated thereby were approved by the bankruptcy court. The facilities acquired include a facility owned in Ayudhaya, Thailand and a leased facility in Leicester, England. The 240,000 square foot manufacturing facility in Ayudhaya, Thailand (near Bangkok) provides electronics manufacturing services, including printed circuit board (PCB) assembly and test, systems assembly and test, prototyping, warranty repair, materials procurement and engineering support services. The facility has experience in radio frequency (RF) and wireless product manufacturing, as well as a full suite of RF testing capabilities. The 55,000 square foot manufacturing facility in Leicester, England provides electronics manufacturing services, including PCB design, assembly and test, and systems assembly and test. In addition to the Ayudhaya and Leicester facilities, the Acquisition included leased international purchasing offices in San Jose, California, Hong Kong and The Republic of Singapore. As consideration for the Acquisition, we paid $45.2 million in cash and acquisition costs of $0.8 million. We are accounting for the acquisition utilizing the accounting principles promulgated by SFAS 141 and 142. Therefore, the results of operations of the UK and Thailand operations since July 29, 2002 have been included in the accompanying consolidated statements of income. The preliminary allocation of the net purchase price of the Acquisition resulted in goodwill of approximately $11.6 million.

        The inclusion of the operations of the acquired facilities in Thailand and the UK in Benchmark's accounts are responsible for a substantial portion of the variations in the results of our operations (including components thereof) from period to period. The effects of the Acquisition on our financial condition and our reported results of operations should be considered when reading the financial information contained herein.

        The Acquisition constitutes a significant expansion of our operations. Accordingly, the potential effect of the Acquisition on our future financial condition, liquidity and results of operations should be considered when reading the historical financial information and related discussions set forth in the following section. See Note 2 of Notes to Condensed Consolidated Financial Statements.

RESULTS OF OPERATIONS

        The following table presents the percentage relationship that certain items in the Company's Condensed Consolidated Statements of Income bear to sales for the periods indicated. The financial

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information and the discussion below should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto.

		Three Months Ended September 30,				Nine Months Ended September 30,
		2002		2001		2002		2001
Sales		100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales		92.4		92.7		92.4		92.7
	Gross profit	7.6		7.3		7.6		7.3
Selling, general and administrative expense		4.0		4.9		4.1		4.1
Asset write-offs		0.0		23.9		0.1		6.1
Restructuring charges		0.0		0.2		0.0		0.5
Amortization of goodwill		0.0		1.2		0.0		1.0
	Income from operations	3.6		(22.9	)	3.4		(4.4	)
Interest expense		(0.7	)	(1.5	)	(0.7	)	(1.4	)
Other income (expense)		0.5		0.3		0.4		0.0
	Income (loss) before income taxes	3.4		(24.1	)	3.1		(5.8	)
Income tax expense (benefit)		1.2		(2.0	)	1.1		(0.4	)
	Net income (loss)	2.2	%	(22.1	)%	2.0	%	(5.4	)%

Sales

        Sales for the third quarter of 2002 were approximately $428.3 million, a 66.0% increase from sales of approximately $258.0 million for the same quarter in 2001. Of this net increase, there is a 23.6% increase resulting from the facilities acquired on July 29 2002, a 12.2% decrease resulting from the consolidation and downsizing of certain manufacturing facilities during 2001, a 30.4% increase attributable to the operation of the systems integration facilities and an approximately 58.2% net increase in sales volumes. Sales for the first nine months of 2002 were approximately $1,161.8 million, a 15.3% increase from sales of approximately $1,007.3 million for the same period of 2001. Of this net increase, there is a 25.9% increase resulting from the facilities acquired on July 29 2002, a 41.6% decrease resulting from the consolidation and downsizing of certain manufacturing facilities during 2001, a 78.1% increase attributable to the operation of the systems integration facilities, and an approximately 37.6% net increase in sales volumes.

        We have 15 manufacturing facilities in the Americas, Europe and Asia to serve our customers. We are operated and managed geographically. Our facilities in the Americas provided 80.8% and 85.0% of net sales, respectively, during the third quarters of 2002 and 2001, and 84.4% and 85.5% of net sales, respectively, during the first nine months of 2002 and 2001. Our Americas region includes facilities in Angleton, Texas, Beaverton, Oregon, Campinas, Brazil, Guadalajara, Mexico, Hudson, New Hampshire, Huntsville, Alabama, Manassas, Virginia and Winona, Minnesota. There are two facilities in Huntsville, Alabama—a systems integration facility opened during 2000 and the PCB facility acquired in 1999. During 2001, we consolidated the Pulaski, Tennessee manufacturing facility into the Huntsville, Alabama facility. The Pulaski facility is currently being held for sale. Our facilities in Europe provided 10.8% and 13.2% of net sales, respectively during the third quarters of 2002 and 2001, and 12.0% and 12.2% of net sales, respectively, during the first nine months of 2002 and 2001. Our Europe region includes facilities in Cork, Ireland, Dublin, Ireland, East Kilbride, Scotland and Leicester, England. Our facilities in Asia provided 8.4% and 1.8% of net sales, respectively during the third quarters of 2002 and 2001, and 3.6% and 2.2% of net sales, respectively, during the first nine months of 2002 and 2001. Our Asia region includes facilities in the Republic of Singapore and Ayudhaya, Thailand. The

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Singapore facility includes both a systems integration and PCB operation. These operations were in separate facilities during 2001.

        A substantial percentage of our sales have been made to a small number of customers, and the loss of a major customer, if not replaced, would adversely affect us. During the nine months ended September 30, 2002, our three largest customers together represented 69.8% of our sales, with one customer exceeding 50% of our sales. Our future sales are dependent on the success of our customers, some of which operate in businesses associated with rapid technological change and consequent product obsolescence. As we ramp new programs and the new programs mature, we expect the percentage of sales of our three largest customers to decline. Developments adverse to our major customers or their products, or the failure of a major customer to pay for components or services, could have an adverse effect on us. Recently our customers have experienced a decline in demand for their products, which has had an adverse effect on our results of operations.

        As a result of our international sales and facilities, our operations are subject to the risks of doing business abroad. These dynamics have not had a material adverse effect on our results of operations through September 30, 2002. However, we cannot assure you that there will not be an adverse impact in the future. See RISK FACTORS for factors pertaining to our international sales and fluctuations in the exchange rates of foreign currency and for further discussion of potential adverse effects in operating results associated with the risks of doing business abroad. During the nine months ended September 30, 2002 and 2001, 19.8% and 22.4%, respectively, of our sales were from our international operations. The decrease in the percentage of international sales for 2002 as compared to 2001 primarily reflects the downsizing of the Cork, Ireland facility offset by additional sales resulting from the operation of the systems integration facilities in Dublin, Ireland and Singapore and the facilities in the United Kingdom and Thailand that were acquired on July 29, 2002.

Americas

        Sales in the Americas for the quarter ended September 30, 2002 increased $126.9 million compared to the same period of 2001. Of this net increase, there is a 36.9% increase attributable to the operation of the systems integration facilities, a 14.3% decrease resulting from the consolidation and downsizing of certain manufacturing facilities during 2001 and an approximately 77.4% net increase in sales volume. Sales in the Americas for the nine-month period ended September 30, 2002 increased $119.1 million compared to the same period of 2001. Of this net increase, there is a 82.9% increase attributable to the operation of the systems integration facilities, a 45.9% decrease resulting from the consolidation and downsizing of certain manufacturing facilities during 2001 and an approximately 63.0% net increase in sales volume. During 2001, we consolidated the Pulaski, Tennessee manufacturing facility into the Huntsville, Alabama facility. The Pulaski facility is currently being held for sale.

Europe

        Sales in Europe increased $12.3 million for the third quarter of 2002 compared to the same period of 2001. Of this net increase, there is a 67.3% increase in European sales resulting from the Leicester, England facility acquired in July 2002, a 39.5% increase in sales volumes from systems integration customers, a 20.2% decrease resulting from the downsizing of the Cork, Ireland facility during 2001 and a 13.4% increase due to the net decrease in sales volume resulting from the continued slowdown in the technology marketplace. Sales in Europe for the nine-month period ended September 30, 2002 increased $15.8 million compared to the same period of 2001. Of this net increase, there is a 52.4% increase in European sales resulting from the Leicester, England facility acquired in July 2002, a 136.8% increase in sales volumes from systems integration customers, a 60.6% decrease resulting from the downsizing of the Cork, Ireland facility during 2001 and an approximately 28.6% decrease due to the net decrease in sales volume resulting from the continued slowdown in the technology marketplace.

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Asia

        Sales in Asia increased by $31.1 million for the three-month period ended September 30, 2002 compared to 2001. Of this net increase, there is an approximately 102.2% increase in Asia sales resulting from the Thailand facility acquired in July 2002, a 0.5% increase in sales volumes from systems integration customers and an approximately 2.7% decrease due to the net decrease in sales volume resulting from the continued slowdown in the technology marketplace. Sales in Asia increased by $19.6 million for the nine-month period ended September 30, 2002 compared to 2001. Of this net increase, there is an approximately 162.3% increase resulting from the Thailand facility acquired in July 2002, a 1.6% increase in sales volumes from systems integration customers and an approximately 63.9% decrease due to the net decrease in sales volume resulting from the continued slowdown in the technology marketplace.

Gross Profit

        Gross profit increased 72.0% to $32.5 million for the third quarter of 2002 from $18.9 million in the same quarter of 2001. Gross profit as a percentage of sales for the three months ended September 30, 2001 and 2002, respectively, increased from 7.3% to 7.6%. Gross profit increased 20.6% to approximately $88.2 million in the first nine months of 2002 from approximately $73.1 million in the same period in 2001. Gross profit as a percentage of sales for the nine months ended September 30, 2002 and 2001, respectively, was 7.6% and 7.3%. The increase in gross profit was a result of the combined effect of fluctuations in capacity utilization, higher sales volumes, changes in product mix, favorable component market conditions, cost reductions, and efforts to integrate recent acquisitions. The combined effect of these factors, which are continually changing and are interrelated, make it impracticable to determine with precision the separate effect of each factor. We expect that a number of high volume programs serving customers in price sensitive markets will remain subject to competitive restraints on the margin that may be realized from these programs and that these restraints will exert downward pressure on our margins in the near future. For the foreseeable future, our gross margin is expected to depend primarily on the length and severity of the general slowdown in the technology marketplaces, facility utilization, product mix, start-up of new programs, pricing within the electronics industry, and the integration of acquisitions. The gross margins at each facility and for Benchmark as a whole are expected to continue to fluctuate. Increases in start-up costs associated with new programs and pricing within the electronics industry also could adversely impact our gross margin.

        The third quarter 2002 and 2001 gross profit reflects charges related to reserves for excess and obsolete inventory. During the third quarter of 2002 and 2001, $4.9 million and $1.4 million of additional inventory reserves were recorded, respectively. These charges related to inventory written down to lower of cost (principally first-in, first-out method) or market, raw materials held specific to customers who were no longer in business, and changes in customer demand for inventory that resulted in excess quantities on hand. Inventory is procured by us based on specific customer orders. Correspondingly, customer modifications to orders for inventory previously procured by us (e.g. cancellations as well as inventory that is highly customized and therefore not available for use by other customers) resulted in excess and obsolete inventory for the related customers that could not be recovered through put back to vendors or the specific customer concerned.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses were $17.3 million and $12.6 million in the third quarter of 2002 and 2001, respectively. The increase in selling, general and administrative expenses was the result of merger and acquisition activities, start-up activities for our greenfield operation in Suzhou, China and other volume related expenses. Selling, general and administrative expenses as a percentage of sales decreased from 4.9% for the third quarter of 2001 to 4.0% for the third quarter of 2002. The decrease in selling, general and administrative expenses as a percentage of sales reflects the increase in

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sales and the impact of facility consolidation and downsizing. Selling, general and administrative expenses were $47.6 million in the first nine months of 2002, an increase of 14.9% from $41.4 million for the same period in 2001. Selling, general and administrative expenses as a percentage of sales was 4.1% for first nine months of 2001 and 2002. The increase in selling, general and administrative expenses was the result of merger and acquisition activities, start-up activities for China and other volume related expenses.

Restructuring Charges and Asset Write-offs

        During the nine-month period ended September 30, 2002, we recorded asset write-offs of $1.6 million ($1.0 million after-tax) for the write-down of long-lived assets held for sale to fair value. Our Pulaski, Tennessee facility is currently held for sale. Our Mansfield, Massachusetts facility was closed during 2001 and we have notified the lessor of our intention to abandon the facility.

        During the three and nine-month periods ended September 30, 2001, we recorded restructuring charges of $0.5 million ($0.4 million after-tax) and $5.1 million ($4.6 million after-tax) related to reductions in our cost structure, including reductions in force and included costs resulting from payment of employee severance, consolidation of facilities and abandonment of leased equipment necessitated by the general slowdown in the technology marketplaces, which affected not only existing customer programs but also the pace of the new program rampings.

        In the third quarter of 2001, we recorded asset write-offs of approximately $61.7 million ($43.2 million after-tax) for the write-down of long-lived assets to fair value. Included in the long-lived asset impairment are charges of approximately $28.0 million which related to property, plant and equipment associated with the consolidation and downsizing of certain manufacturing facilities and the write-off of approximately $33.7 million of the remaining goodwill and other intangibles related to these facilities.

Amortization of Goodwill

        Effective January 1, 2002, we adopted accounting principles that change the way we account for amortization of goodwill. In accordance with SFAS No. 142, we no longer amortized goodwill effective January 1, 2002. The amortization of goodwill for the three and nine-month periods ended September 30, 2001 was $3.2 million and $9.7 million. We are also required to test goodwill for impairment at least annually. As of September 30, 2002, no impairment of goodwill was required.

Interest Expense

        Interest expense for the three and nine-month periods ended September 30, 2002 and 2001 was $2.9 million and $8.6 million, respectively, compared to $3.9 million and $14.2 million, respectively. The decrease is due to reductions in interest rates and repayments of outstanding debt.

Income Tax Expense

        Income tax expense of approximately $12.8 million represented an effective tax rate of 35.6% for the nine-month period ended September 30, 2002, compared with an effective tax rate of 6.8% for the nine-month period ended September 30, 2001. The increase in the effective tax rate is primarily due to the higher estimated income before income taxes for 2002 in the United States as compared to 2001.

Net Income

        We reported net income for the three and nine-month periods ended September 30, 2002 of approximately $9.6 million and $23.2 million, or diluted earnings of $0.38 and $0.99, compared with net loss of approximately $(57.0) million and $(54.0) million, or diluted loss of $(2.90) and $(2.75) per

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share, for the same periods of 2001. The increases of $66.6 million and $77.2 million during the three and nine months ended September 30, 2002 were due to the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

        We have financed our growth and operations through funds generated from operations, proceeds from the sale of our securities and funds borrowed under our credit facilities.

        Cash provided by operating activities was $136.5 million and $101.3 million for the nine months ended September 30, 2002 and 2001, respectively. The cash provided by operations during the first nine months of 2002 was primarily the result of increases in accounts payable and accrued liabilities and decreases in accounts receivable and inventories, net of effects from acquisitions. Our accounts receivable and inventories at September 30, 2002 decreased, net of effects from acquisitions, $19.6 million and $23.8 million, respectively, as compared to their levels at December 31, 2001, reflecting our increased backlog and effective working capital management during the first nine months of 2002. We expect increases in accounts receivable and inventories in the near term to support the anticipated growth in sales. We are continuing the practice of purchasing components only after customer orders are received, which mitigates, but does not eliminate the risk of loss on inventories. During the nine months ended September 30, 2002 and 2001, our gross profit was adversely effected by additional reserves of $8.0 million and $3.8 million, respectively, for excess and obsolete inventory that could not be put back to vendors or customers. Supplies of electronic components and other materials used in operations are subject to industry-wide shortages. In certain instances, suppliers may allocate available quantities to us.

        Cash used in investing activities was $41.8 million and $19.5 million for the nine months ended September 30, 2002 and 2001, respectively. On July 29, 2002, we acquired the Thailand and UK operations for $36.2 million, net of cash acquired. Net capital expenditures of $5.5 million for the nine months ended September 30, 2002 were primarily concentrated in manufacturing production equipment. We expect capital expenditures to remain below historical levels for the foreseeable future as a result of the general slowdown in the technology marketplaces.

        Cash provided by (used in) financing activities was $89.4 million and $(79.4) million for the nine months ended September 30, 2002 and 2001, respectively. On April 15, 2002, we completed the public offering of 4,312,500 shares of our common stock for net proceeds of approximately $110.2 million. We currently expect to use the proceeds from the sale of our common stock for working capital and other general corporate purposes, including to finance our growth, for capital expenditures made in the ordinary course of business and for acquisitions of businesses, products and technologies that complement or expand our business. During the first nine months of 2002, we made principal payments on other long-term debt totaling $24.4 million and received $3.5 million from the exercise of stock options and the employee stock purchase plan. During the first nine months of 2001, we decreased borrowings under our revolving line of credit by $65.5 million (net) and made principal payments on other long-term debt totaling $14.8 million.

        Principal on the term loan is payable in quarterly installments of $5.0 million and $5.5 million during 2002 and 2003, respectively. The final three installments of $7.0 million are due on the last day of March, June and September 2004.

        We have a $175 million revolving line of credit facility with a syndicate of commercial banks. We are entitled to borrow under the revolving credit facility up to the lesser of $175 million or the sum of 75% of our eligible accounts receivable, 45% of our eligible inventories and 50% of our eligible fixed assets. Interest on the revolving credit facility and the term loan is payable quarterly, at our option, at either the bank's Eurodollar rate plus 1.25% to 3.00% or its prime rate plus 0.00% to 1.75%, based upon our debt ratio as specified in the agreement. A commitment fee of 0.375% to 0.500% per annum on the unused portion of the revolving credit facility is payable quarterly in arrears. The revolving

24

credit facility matures on September 30, 2004. As of September 30, 2002, we had no borrowings outstanding under the revolving credit facility, $0.4 million outstanding letters of credit and $174.6 million was available for future borrowings.

        The term loan and the revolving credit facility are secured by our domestic inventory and accounts receivable, 100% of the stock of our domestic subsidiaries, and 65% of the voting capital stock of each direct foreign subsidiary and substantially all of our and our domestic subsidiaries' other tangible and intangible assets. The term loan and revolving credit facility contain customary financial covenants as to working capital, interest coverage, debt leverage, fixed charges, and consolidated net worth, and restricts our ability to incur additional debt, pay dividends, sell assets, and to merge or consolidate with other persons, without the consent of the banks. At September 30, 2002, we were in compliance with all such restrictions. In connection with the acquisition of the Thailand and UK facilities that closed on July 29, 2002, the term loan and revolving credit facility were amended to permit the acquisition of these subsidiaries.

        Our Thailand subsidiary has a Credit Agreement with Thai Farmers Bank Public Company Limited and Bank of Ayudhya Public Company Limited (the Thai Credit Agreement). The Thai Credit Agreement provides that the lenders will make available to our Thailand subsidiary up to approximately $53.5 million in revolving loans, term loans and machinery loans for a term of five years. At September 30, 2002, $17.6 million was outstanding at interest rates ranging from 4.375% to 4.83%. The Thai Credit Agreement is secured by land, buildings and machinery in Thailand. In addition, the Thai Credit Agreement provides for approximately $1.4 million (60.0 million Thai baht) in working capital availability. At September 30, 2002, $0.7 million was outstanding. The Thai Credit Agreement contains financial covenants as to debt coverage and the ratio of debt to equity. As of September 30, 2002, our Thailand subsidiary was in compliance with these covenants.

        We have outstanding $80.2 million principal amount of 6% Convertible Subordinated Notes due August 15, 2006. The indenture relating to the notes contains affirmative and negative covenants, including covenants restricting our ability to merge or engage in certain other extraordinary corporate transactions unless certain conditions are satisfied. Upon the occurrence of a change of control (as defined in the indenture relating to the notes) of our company, each holder of notes will have the right to require us to repurchase all or part of the holder's notes at 100% of the face amount thereof, plus accrued and unpaid interest. The notes are convertible into shares of our common stock at an initial conversion price of $40.20 per share at the option of the holder at any time prior to maturity, unless previously redeemed or repurchased.

        Our operations, and the operations of businesses we acquire, are subject to certain foreign, federal, state and local regulatory requirements relating to environmental, waste management, health and safety matters. We believe we operate in substantial compliance with all applicable requirements and we seek to ensure that newly acquired businesses comply or will comply substantially with applicable requirements. To date the costs of compliance and workplace and environmental remediation have not been material to us. However, material costs and liabilities may arise from these requirements or from new, modified or more stringent requirements in the future. In addition, our past, current and future operations, and the operations of businesses we have or may acquire, may give rise to claims of exposure by employees or the public, or to other claims or liabilities relating to environmental, waste management or health and safety concerns.

        Our acquisitions in 1999 significantly increased our leverage ratio and decreased our interest coverage ratio. At September 30, 2002 our debt to total capitalization ratio was 24%. The level of indebtedness, among other things, could make it difficult for us to obtain any necessary financing in the future for other acquisitions, working capital, capital expenditures, debt service requirements and other expenses; limit our flexibility in planning for, or reacting to changes in, our business; and make us more vulnerable in the event of an economic downturn in our business.

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        Management believes that our existing cash balances, funds generated from operations and available funds under our revolving credit facility will be sufficient to permit us to meet our liquidity requirements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

        Management's discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. Our significant accounting policies are summarized in Note 1 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2001. The preparation of these financial statements requires us to make estimates and judgements that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to allowance for doubtful accounts, inventories, deferred taxes, impairment of long-lived assets, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. We believe the following critical accounting policies affect our more significant judgements and estimates used in the preparation of our condensed consolidated financial statements.

Allowance for doubtful accounts

        Our accounts receivable balance is recorded net of allowances for amounts not expected to be collected from our customers. Because our accounts receivable are typically unsecured, we periodically evaluate the collectibility of our accounts based on a combination of factors, including a particular customer's ability to pay as well as the age of the receivables. To evaluate a specific customer's ability to pay, we analyze financial statements, payment history, third-party credit analysis reports and various information or disclosures by the customer or other publicly available information. In cases where the evidence suggests a customer may not be able to satisfy its obligation to us, we set up a specific reserve in an amount we determine appropriate for the perceived risk. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The allowance for doubtful accounts was $9.2 million at September 30, 2002, including acquired reserves of $3.8 million, and $2.2 million at December 31, 2001.

Inventory obsolescence reserve

        We record inventory reserves for estimated obsolescence equal to the difference between the cost of inventory and estimated market value based on assumptions on future demands and market conditions. We evaluate on a quarterly basis the status of our inventory to ensure the amount recorded in our financial statements reflects the lower of our cost or the value we expect to receive when we sell the inventory. The allowance for excess and obsolete inventory was $20.6 million at September 30, 2002, including acquired reserves of $5.4 million, and $9.0 million at December 31, 2001. If actual market conditions are less favorable than those we projected, additional inventory reserves may be required.

Deferred taxes

        We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to subsequently determine that we would be able to realize our deferred tax assets in the future

26

in excess of our net recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. Similarly, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would reduce income in the period such determination was made.

Impairment of Long-Lived Assets

        We adopted FASB SFAS No. 142, "Goodwill and Other Intangible Assets" effective January 1, 2002. Under SFAS No. 142, beginning January 1, 2002, we no longer amortize goodwill and intangible assets with indefinite useful lives, but instead test those assets for impairment at least annually. To accomplish this we identified our reporting units and determined the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of January 1, 2002. We determined the fair value of each reporting unit and compared it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and we must perform the second step of the transitional impairment test. In the second step, we must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with SFAS No. 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than December 31, 2002. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in our statement of earnings.

        We have completed the first step of the transitional goodwill impairment test and have determined that no impairment exits. As a result, we have recognized no transitional impairment loss during the nine months ended September 30, 2002 in connection with the adoption of SFAS 142. There can be no assurance that future goodwill impairment tests will not result in a charge to earnings.

        We assess the impairment of our long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important which could trigger an impairment review include significant underperformance relative to expected historical or projected future operating results, significant changes in the manner of our use of the acquired assets or the strategy for the overall business, significant negative industry or economic trends, and our market capitalization relative to net book value. When it is determined that the carrying value of long-lived assets not be recoverable based upon the existence of one or more of the above indicators of impairment, the measurement of any impairment is determined and the carrying value is reduced as appropriate.

RISK FACTORS

We are exposed to general economic conditions, which could have a material adverse impact on our business, operating results and financial condition.

        Our business is cyclical and has experienced economic and industry downturns. For example, we started to see sales decline in the technology sector worldwide at the end of the first quarter of 2001 and it continued throughout 2001. If the economic conditions and demand for our customers' products deteriorate or do not improve, we may experience a material adverse impact on our business, operating results and financial condition.

        Additionally, as the technology industry conditions continue to erode, some of our customers' credit quality continues to deteriorate. In cases where the evidence suggests a customer may not be able to satisfy its obligation to us, we set up reserves in an amount we determine appropriate for the perceived risk. If the financial condition of our customers were to deteriorate, resulting in an

27

impairment of their ability to make payments, additional receivable and inventory write-offs may be required.

The loss of a major customer would adversely affect us.

        A substantial percentage of our sales have been to a small number of customers, and the loss of a major customer, if not replaced, would adversely affect us. During the nine months ended September 30, 2002, our three largest customers together represented 69.8% of our sales, with one customer exceeding 50%. Our future sales are dependent on the success of our customers, some of which operate in businesses associated with rapid technological change and consequent product obsolescence. Developments adverse to our major customers or their products, or the failure of a major customer to pay for components or services, could have an adverse effect on us.

        We expect to continue to depend on the sales from our largest customers and any material delay, cancellation or reduction of orders from these or other significant customers would have a material adverse effect on our results of operations. In addition, we generate significant accounts receivable in connection with providing manufacturing services to our customers. If one or more of our customers were to become insolvent or otherwise unable to pay for the manufacturing services provided by us, our operating results and financial condition would be adversely affected.

We may encounter significant delays or defaults in payments owed to us by customers for products we have manufactured or components that are unique to particular customers.

        We structure our agreements with customers to mitigate our risks related to obsolete or unsold inventory. However, enforcement of these contracts may result in material expense and delay in payment for inventory. If any of our significant customers becomes unable or unwilling to purchase such inventory, our business may be materially harmed. During the first nine months of 2002, our gross profit was adversely affected by the write-down of $8.0 million in excess and obsolete inventory that could not be put back to vendors or customers.

We are dependent on the success of our customers.

        We are dependent on the continued growth, viability and financial stability of our customers. Our customers are original equipment manufacturers of:

•

computers and related products for business enterprises;



•

telecommunication equipment;



•

industrial control equipment;



•

medical devices;



•

video/audio/entertainment products; and



•

testing and instrumentation products.

        These industries are, to a varying extent, subject to rapid technological change, vigorous competition and short product life cycles. When our customers are adversely affected by these factors, we may be similarly affected. Recently, our customers have experienced a decline in demand for their products, which has had an adverse effect on our results of operations.

Long-term contracts are unusual in our business and cancellations, reductions or delays in customer orders would affect our profitability.

        We do not typically obtain firm long-term purchase orders or commitments from our customers. Instead, we work closely with our customers to develop forecasts for future orders, which are not binding. Customers may cancel their orders, change production quantities from forecast volumes or delay production for a number of reasons beyond our control. Cancellations, reductions or delays by a

28

significant customer or by a group of customers would have an adverse effect on us. As many of our costs and operating expenses are relatively fixed, a reduction in customer demand can disproportionately affect our gross margins and operating income. Our customer's products have life cycles of varying duration. In the ordinary course of business, production starts, increases, declines and stops in accordance with a product's life cycle. Should we fail to replace products reaching the end of their life cycles with new programs, or if there should be a substantial time difference between the loss of a product and the receipt of revenue from replacement production, our revenues could be adversely affected.

We operate in a highly competitive industry.

        We compete against many providers of electronics manufacturing services. Certain of our competitors have substantially greater resources and more geographically diversified international operations than we do. Our competitors include large independent manufacturers such as Celestica, Inc., Flextronics International Ltd., Jabil Circuit, Inc, Sanmina-SCI Corporation and Solectron Corporation. We also face competition from the manufacturing operations of our current and future customers.

        During periods of recession in the electronics industry, our competitive advantages in the areas of quick turnaround manufacturing and responsive customer service may be of reduced importance to electronics OEMs, who may become more price sensitive. We may also be at a competitive disadvantage with respect to price when compared to manufacturers with lower cost structures, particularly those with offshore facilities located where labor and other costs are lower.

        We will experience intense competition, which is expected to intensify further as more companies enter markets in which we operate, as existing competitors expand capacity and as the industry consolidates. To compete effectively, we must continue to provide technologically advanced manufacturing services, maintain strict quality standards, respond flexibly and rapidly to customers' design and schedule changes and deliver products globally on a reliable basis at competitive prices. Our inability to do so could have an adverse effect on us.

We may be affected by consolidation in the electronics industry.

        As a result of the current economic climate, consolidation in the electronics industry may increase. Consolidation in the electronics industry could result in an increase in excess manufacturing capacity as companies seek to close plants or take other steps to increase efficiencies and realize synergies of mergers. The availability of excess manufacturing capacity could create increased pricing and competitive pressures for the electronics manufacturing services industry as a whole and Benchmark in particular. In addition, consolidation could also result in an increasing number of very large electronics companies offering products in multiple sectors of the electronics industry. The growth of these large companies, with significant purchasing power and market power, could also result in increased pricing and competitive pressures for us. Accordingly, industry consolidation could harm our business.

Our international operations may be subject to certain risks.

        We currently operate outside the United States in Brazil, England, Ireland, Mexico, Singapore, Thailand and the United Kingdom. During the nine months ended September 30, 2002 and 2001, 19.8% and 22.4%, respectively, of our sales were from our international operations. These international operations may be subject to a number of risks, including:

•

difficulties in staffing and managing foreign operations;



•

political and economic instability;



•

unexpected changes in regulatory requirements and laws;



•

longer customer payment cycles and difficulty collecting accounts receivable;

29

•

export duties, import controls and trade barriers (including quotas);



•

governmental restrictions on the transfer of funds;



•

burdens of complying with a wide variety of foreign laws and labor practices;



•

fluctuations in currency exchange rates, which could affect component costs, local payroll, utility and other expenses; and



•

inability to utilize net operating losses incurred by our foreign operations to reduce our U.S. income taxes.

        We cannot assure you that our international operations will contribute positively to our business, financial conditions or results of operations.

Shortages or price increases of components specified by our customers would delay shipments and adversely affect our profitability.

        Substantially all of our sales are derived from electronics manufacturing services in which we purchase components specified by our customers. In the past, supply shortages have substantially curtailed production of all assemblies using a particular component. In addition, industry-wide shortages of electronic components, particularly of memory and logic devices, have occurred. If shortages of these components occur or if components received are defective, we may be forced to delay shipments, which could have an adverse effect on our profit margins. Because of the continued increase in demand for surface mount components, we anticipate component shortages and longer lead times for certain components to occur from time to time. Also, we typically bear the risk of component price increases that occur between periodic repricings during the term of a customer contract. Accordingly, certain component price increases could adversely affect our gross profit margins.

Our success will continue to depend to a significant extent on our executives.

        We depend significantly on certain key executives, including, but not limited to, Donald E. Nigbor, Cary T. Fu, Gayla J. Delly, and Steven A. Barton. The unexpected loss of the services of any one of these executive officers would have an adverse effect on us.

We must successfully integrate the operations of acquired companies to maintain profitability.

        We have completed seven acquisitions since July 1996. We may pursue additional acquisitions over time. These acquisitions involve risks, including:

•

integration and management of the operations;



•

retention of key personnel;



•

integration of purchasing operations and information systems;



•

retention of the customer base of acquired businesses;



•

management of an increasingly larger and more geographically disparate business; and



•

diversion of management's attention from other ongoing business concerns.

        Our profitability will suffer if we are unable to successfully integrate and manage any future acquisitions that we might pursue, or if we do not achieve sufficient revenue to offset the increased expenses associated with these acquisitions.

We must maintain our technological and manufacturing process expertise.

        The market for our manufacturing services is characterized by rapidly changing technology and continuing process development. We are continually evaluating the advantages and feasibility of new manufacturing processes. We believe that our future success will depend upon our ability to develop

30

and provide manufacturing services which meet our customers' changing needs. This requires that we maintain technological leadership and successfully anticipate or respond to technological changes in manufacturing processes on a cost-effective and timely basis. We cannot assure you that our process development efforts will be successful.

Environmental laws may expose us to financial liability and restrictions on operations.

        We are subject to a variety of federal, state, local and foreign environmental laws and regulations relating to environmental, waste management, and health and safety concerns, including the handling, storage, discharge and disposal of hazardous materials used in or derived from our manufacturing processes. If we or companies we acquire have failed or fail in the future to comply with such laws and regulations, then we could incur liabilities and fines and our operations could be suspended. Such laws and regulations could also restrict our ability to modify or expand our facilities, could require us to acquire costly equipment, or could impose other significant expenditures. In addition, our operations may give rise to claims of property contamination or human exposure to hazardous chemicals or conditions.

Our acquisitions have significantly increased our leverage.

        Our acquisitions in 1999 have significantly increased our leverage ratio and decreased our interest coverage ratio. At September 30, 2002 our debt to total capitalization ratio was 24%. The level of our indebtedness, among other things, could:

•

make it difficult for us to obtain any necessary financing in the future for other acquisitions, working capital, capital expenditures, debt service requirements or other purposes;



•

limit our flexibility in planning for, or reacting to changes in, our business; and



•

make us more vulnerable in the event of a downturn in our business.

        There can be no assurance that we will be able to meet our debt service obligations.

Provisions in our charter documents and state law may make it harder for others to obtain control of Benchmark even though some shareholders might consider such a development to be favorable.

        Our shareholder rights plan, provisions of our amended and restated articles of incorporation and the Texas Business Corporation Act may delay, inhibit or prevent someone from gaining control of Benchmark through a tender offer, business combination, proxy contest or some other method. These provisions include:

•

a "poison pill" shareholder rights plan;



•

a statutory restriction on the ability of shareholders to take action by less than unanimous written consent; and



•

a statutory restriction on business combinations with some types of interested shareholders.

We may experience fluctuations in quarterly results.

        Our quarterly results may vary significantly depending on various factors, many of which are beyond our control. These factors include:

•

the volume of customer orders relative to our capacity;



•

customer introduction and market acceptance of new products;



•

changes in demand for customer products;



•

the timing of our expenditures in anticipation of future orders;



•

our effectiveness in managing manufacturing processes;

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•

changes in cost and availability of labor and components;



•

changes in our product mix;



•

changes in economic conditions; and



•

local factors and events that may affect our production volume, such as local holidays.

        Additionally, as is the case with many high technology companies, a significant portion of our shipments typically occurs in the last few weeks of a quarter. As a result, our sales may shift from one quarter to the next, having a significant effect on reported results.

Our stock price is volatile.

        Our common stock has experienced significant price volatility, and such volatility may continue in the future. The price of our common stock could fluctuate widely in response to a range of factors, including variations in our reported financial results and changing conditions in the economy in general or in our industry in particular. In addition, stock markets generally experience significant price and volume volatility from time to time which may affect the market price of our common stock for reasons unrelated to our performance.

We are exposed to interest rate fluctuations.

        We have exposure to interest rate risk under our variable rate revolving credit and term loan facilities. These facilities are based on the spread over the bank's Eurodollar rate or its prime rate. We currently have an interest rate swap transaction agreement for a notional amount of $24.0 million under which we pay a fixed rate of interest of 6.63%, plus 1.25% to 3.00% based upon our debt ratio as specified in the debt agreement, hedging against the variable interest rates charged by the term loan. The receive rate under the swap is based on LIBOR. The interest rate swap expires in the year 2003.

Item 3—Quantitative and Qualitative Disclosures About Market Risk

        We have exposure to interest rate risk under our variable rate revolving credit and term loan facilities. The interest rates payable under these facilities are based on a spread, which varies based upon our debt ratio, over the bank's Eurodollar rate or its prime rate, which vary with market rates. Inflation and changing prices have not significantly affected our operating results or the markets in which we perform services.

        We currently have an interest rate swap transaction agreement for a notional amount of $24.0 million under which we pay a fixed rate of interest of 6.63%, plus 1.25% to 3.00% based upon our debt ratio as specified in the debt agreement, hedging against the variable interest rates charged by the term loan. The interest rate swap expires in the year 2003. The receive rate under the swap is based on LIBOR.

        Our international sales are a significant portion of our net sales; we are exposed to risks associated with operating internationally, including the following:

•

Foreign currency exchange risk;



•

Import and export duties, taxes and regulatory changes;



•

Inflationary economies or currencies; and



•

Economic and political instability.

        We do not use derivative financial instruments for speculative purposes. Our policy is to maintain a hedged position for certain significant transaction exposures. These exposures are primarily, but not limited to, vendor payments and inter-company balances in currencies other than the functional currency of the operating entity. Our international operations in some instances operate in a natural

32

hedge because both operating expenses and a portion of sales are denominated in local currency. Certain significant transactions involving our international operations may now require us to engage in hedging transactions to attempt to mitigate our exposure to fluctuations in foreign exchange rates. Our primary foreign currency cash flows are in certain European countries, Brazil, and Singapore. Effective Jan. 1, 2001, we adopted the provisions of the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Certain Hedging Activities" and SFAS No. 138, "Accounting for Derivative Instruments and Certain Hedging Activities, an Amendment of SFAS 133".

Item 4—Controls and Procedures

(a)

Evaluation of disclosure controls and procedures

        Our principal executive officer and principal financial officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of a date within 90 days of the filing date of this Quarterly Report on Form 10-Q. Based on such evaluation, they have concluded that as of such date, our disclosure controls and procedures are effective.

(b)

Changes in internal controls

        There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of evaluation by our principal executive officer and principal financial officer. There were no corrective actions with regard to significant deficiencies and material weaknesses.

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PART II—OTHER INFORMATION

Item 1—Legal Proceedings

        On October 18, 1999, we announced that our third quarter 1999 earnings announcement would be delayed and subsequently, on October 22, we announced our earnings for the third quarter 1999 were below the level of the same periods during 1998 and were below expectations. Several class action lawsuits were filed in federal district court in Houston, Texas against Benchmark and two of its officers and directors alleging violations of the federal securities laws. These lawsuits were consolidated in February 2000. The lawsuits seek to recover unspecified damages. We deny the allegations in the lawsuits, however, and further deny that such allegations provide a basis for recovery of damages as we believe that we have made all required disclosures on a timely basis. On August 16, 2002, the federal district court in Houston, Texas entered its order granting Benchmark's motion to dismiss the consolidated lawsuits, and dismissing the lawsuits without prejudice.

        Benchmark filed suit against J. M. Huber Corporation (Seller) in the United States District Court for the Southern District of Texas for breach of contract, fraud and negligent misrepresentation on December 14, 1999 and is seeking an unspecified amount of damages in connection with the contract between Benchmark and Seller pursuant to which Benchmark acquired all of the stock of AVEX and Kilbride Holdings B.V. On January 5, 2000, Seller filed suit in the United States District Court for the Southern District of New York alleging that Benchmark failed to comply with certain obligations under the contract requiring Benchmark to register shares of its common stock issued to Seller as partial consideration for the acquisition. Seller's suit has been consolidated with Benchmark's suit in the United States District Court for the Southern District of Texas (the "Court"). On March 18, 2002, the Court entered an interlocutory judgement denying our claims against Seller, but preserving Seller's counterclaims against Benchmark. On April 15, 2002, Benchmark and Seller jointly filed with the Court a stipulation to dismiss Seller's claims and counterclaims against Benchmark without prejudice allowing the Court to render a final judgement in the case so that Benchmark may file an appeal to the Fifth Circuit Court of Appeals (the "Fifth Circuit"). Under the stipulation, Seller also agreed to refrain from refiling its claims while Benchmark pursued any appeals with the Fifth Circuit. On May 1, 2002, the Court entered a final judgement dismissing without prejudice the claims and counterclaims of Seller. On May 29, 2002, Benchmark filed a notice of appeal of the Court's final judgment to the Fifth Circuit, and on August 7, 2002, Benchmark filed its appellate brief with the Fifth Circuit. On October 10, 2002, Huber filed its appellee brief with the Fifth Circuit, and on October 25, 2002, Benchmark filed a reply brief to Huber's appellee brief. Oral arguments before the Fifth Circuit have not yet been scheduled.

        On April 14, 2000, Benchmark, along with numerous other companies, was named as a defendant in a lawsuit filed in the United States District Court for the District of Arizona by the Lemelson Medical, Education & Research Foundation (the Foundation). The lawsuit alleges that Benchmark has infringed certain of the Foundation's patents relating to machine vision and bar code technology utilized in machines Benchmark has purchased. On November 2, 2000, Benchmark filed an Answer, Affirmative Defenses, and a Motion to Stay based upon Declaratory Judgement Actions filed by Cognex and Symbol, manufacturers of the equipment at issue. On March 29, 2001, the Court granted the defendants' Motion to Stay and ordered that the lawsuit be stayed pending the entry of a final non-appealable judgement in the cases filed by Cognex and Symbol. We continue to explore any indemnity or similar rights Benchmark may have against manufacturers of the machines or other third parties. Management intends to vigorously defend against such claim and pursue all rights it has against third parties.

        Benchmark is also involved in various other legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on Benchmark's consolidated financial position or results of operations.

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Item 4—Submission of Matters to a Vote of Security Holders

        (a) - - (c) At the Special Meeting of Shareholders held on August 13, 2002, the amendment to increase the number of authorized shares of common stock, par value $.10 per share from 30 million to 85 million was approved.

        With respect to the amendment to increase the number of authorized shares of common stock, par value $.10 per share from 30 million to 85 million, the voting was as follows:

For	Against	Abstain	Non-Vote
16,440,252	3,599,203	17,690	-0-

Item 6—Exhibits and Reports on Form 8-K

(a)

Exhibits.

10.1	ACT Manufacturing (Thailand) Public Company Limited Credit Facilities Agreement
99.1	Certification by Chief Executive Officer
99.2	Certification by Chief Financial Officer

(b)

During the quarterly period ended September 30, 2002, the Company filed the following Current Reports on Form 8-K:

Current Report on Form 8-K dated July 2, 2002, disclosing the signing of the Stock Purchase Agreement relating to the acquisition of stock of ACT Manufacturing (Thailand) Public Company Limited ("ACT Thailand") and ACT Manufacturing UK Ltd. ("ACT UK") under Item 5 and the related press release under Item 7.

Current Report on Form 8-K dated July 18, 2002, disclosing the Company's earnings press release for the quarter ended June 30, 2002 and the Company's greenfield operations in Suzhou, China under Item 5 and the related press release under Item 7.

Current Report on Form 8-K dated July 29, 2002, disclosing the Company's acquisition of the stock of ACT Thailand and ACT UK under Items 2 and 7.

Current Report on Form 8-K dated August 13, 2002, disclosing the sworn statements of the Company's chief executive officer and chief financial officer under Items 9 and 7.

35

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 on November 14, 2002.

BENCHMARK ELECTRONICS, INC. (Registrant)
By:	/s/  DONALD E. NIGBOR Donald E. Nigbor Chief Executive Officer (Principal Executive Officer)
By:	/s/  GAYLA J. DELLY Gayla J. Delly Chief Financial Officer (Principal Financial Officer)

36

CERTIFICATIONS

I, Donald E. Nigbor, Chairman and Chief Executive Officer of Benchmark Electronics, Inc. (the "Registrant") certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Benchmark Electronics, Inc.;



2.

Based on my knowledge, this quarterly 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 quarterly report;



3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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-14 and 15d-14) for the Registrant and we have:

a.

designed such disclosure controls and procedures 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 quarterly report is being prepared;



b.

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and



c.

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function):

a.

all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and



b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and

6.

The Registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

By:	/s/  DONALD E. NIGBOR Donald E. Nigbor Chief Executive Officer
	November 14, 2002

37

I, Gayla J. Delly, Chief Financial Officer of Benchmark Electronics, Inc. (the "Registrant") certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Benchmark Electronics, Inc.;



2.

Based on my knowledge, this quarterly 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 quarterly report;



3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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-14 and 15d-14) for the Registrant and we have:

a.

designed such disclosure controls and procedures 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 quarterly report is being prepared;



b.

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and



c.

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent function):

a.

all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and



b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and

6.

The Registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

By:	/s/  GAYLA J. DELLY Gayla J. Delly Chief Financial Officer
	November 14, 2002

38

EXHIBIT INDEX

Exhibit Number	Description of Exhibit
10.1	ACT Manufacturing (Thailand) Public Company Limited Credit Facilities Agreement
99.1	Certification of Chief Executive Officer
99.2	Certification of Chief Financial Officer

39

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (amounts in thousands)
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Income (amounts in thousands, except per share data) (unaudited)
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (amounts in thousands) (unaudited)
BENCHMARK ELECTRONICS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (amounts in thousands, unless otherwise noted) (unaudited)

Note 13—Stock Offering

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
General
Recent Acquisitions
RESULTS OF OPERATIONS
Americas
Europe
Asia
LIQUIDITY AND CAPITAL RESOURCES
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Allowance for doubtful accounts
Inventory obsolescence reserve
Deferred taxes
Impairment of Long-Lived Assets
RISK FACTORS
Item 3—Quantitative and Qualitative Disclosures About Market Risk
Item 4—Controls and Procedures

PART II—OTHER INFORMATION

Item 1—Legal Proceedings
Item 4—Submission of Matters to a Vote of Security Holders
Item 6—Exhibits and Reports on Form 8-K

SIGNATURES
CERTIFICATIONS
EXHIBIT INDEX

EX-10.1

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Exhibit 10.1

        29 March 2001

ACT MANUFACTURING (THAILAND) PUBLIC COMPANY LIMITED
(as Borrower)

THE THAI FARMERS BANK PUBLIC COMPANY LIMITED
(as Arranger)

THE THAI FARMERS BANK PUBLIC COMPANY LIMITED
BANK OF AYUDHYA PUBLIC COMPANY LIMITED
(as Lenders)

BANK OF AYUDHYA PUBLIC COMPANY LIMITED
(as Facility Agent)

and

THE THAI FARMERS BANK PUBLIC COMPANY LIMITED
(as Security Agent)

US $53,470,000 and Baht 60,000,000
CREDIT FACILITIES AGREEMENT

CONTENTS

Clause			Page
SECTION I:	DEFINITIONS AND INTERPRETATION		4
	1.	Definitions and Interpretation	4
SECTION II:	THE FACILITIES		16
	2.	Amount and Purpose	16
	3.	Syndicate	16
	4.	Signing Date and Conditions Precedent	17
SECTION III:	TRANCHE A FACILITY		18
	5.	Tranche A Facility	18
	6.	Interest	19
	7.	Repayment	21
SECTION IV:	TRANCHE B FACILITIES		22
	8.	General	22
	9.	Tranche B Letter of Credit Facility	22
	10.	Tranche B Trust Receipt Facility	24
	11.	Tranche B Loan Facility	26
SECTION V:	TRANCHE C FACILITY		29
	12.	Tranche C Facility	29
	13.	Interest	30
	14.	Repayment	30
SECTION VI:	TRANCHE D FACILITY		30
	15.	Tranche D Facility	30
SECTION VII:	TRANCHE E FACILITY		31
	16.	Tranche E Facility	31
SECTION VIII:	PREPAYMENT AND CANCELLATION		33
	17.	Prepayment and Cancellation	33
	18.	Supplementary Provisions Relating to Prepayment and Cancellation	34
SECTION IX:	PAYMENTS, TAXES AND DEFAULT INTEREST		35
	19.	Payment	35
	20.	Taxes	35
	21.	Default Interest	36
SECTION X:	CHANGES IN CIRCUMSTANCES		37
	22.	Changes in Circumstances	37

1

SECTION XI:	REPRESENTATIONS AND UNDERTAKINGS		39
	23.	Representations and Warranties	39
	24.	Undertakings	41
SECTION XII:	DEFAULT AND INDEMNITY		48
	25.	Default	48
	26.	Indemnity	50
SECTION XIII:	SET-OFF AND SECURITY SHARING ARRANGEMENTS		51
	27.	Set-off and Pro Rata Sharing	51
	28.	Security Sharing Arrangements	52
SECTION XIV:	THE AGENTS AND THE ARRANGER		53
	29.	The Agents and the Arranger	53
SECTION XV:	AMENDMENTS, ASSIGNMENTS AND TRANSFERS		57
	30.	Amendments	57
	31.	Assignments and Transfers	57
SECTION XVI:	FEES AND EXPENSES		59
	32.	Fees and Expenses	59
SECTION XVII:	MISCELLANEOUS		61
	33.	Miscellaneous	61
SECTION XVIII:	LAW		62
	34.	Law	62
	SCHEDULE 1		62
		Lenders and Commitments	62
	SCHEDULE 2		63
		Conditions Precedent Documents to Facilities	63
	SCHEDULE 3		64
		Part I Form of Drawing Notice	64
		Part II Form of Receipt	66
	SCHEDULE 4		66
		Certificate of Borrower	66
	SCHEDULE 5		67
		Certificate of Guarantor	67

2

SCHEDULE 6		70
	Form of Transfer Certificate	70
SCHEDULE 7		71
	List of Asset and Property to be Granted as Security	71
SCHEDULE 8		73
	List of Bank Accounts	73
SIGNATURE PAGE		75

3

THIS CREDIT FACILITIES AGREEMENT is made on 29 March 2001

Between

ACT MANUFACTURING (THAILAND) PUBLIC COMPANY LIMITED of 94 Moo 1, Hi-Tech Industrial Estate, Banlane, Bang-Pa-In, Phra Nakhon Si Ayutthaya 13160, Thailand (the Borrower);

THE THAI FARMERS BANK PUBLIC COMPANY LIMITED of 1 Thai Farmers Lane, Ratburana Road, Bangkok 10140, Thailand as arranger of the Facilities (the Arranger);

THE THAI FARMERS BANK PUBLIC COMPANY LIMITED of 1 Thai Farmers Lane, Ratburana Road, Bangkok 10140, Thailand and BANK OF AYUDHYA PUBLIC COMPANY LIMITED of 1222 Rama III Road, Bangpongpang, Yannawa, Bangkok 10120, Thailand, as Lenders (the Lenders);

BANK OF AYUDHYA PUBLIC COMPANY LIMITED as facility agent for the Lenders; and

THE THAI FARMERS BANK PUBLIC COMPANY LIMITED as security agent for the Lenders

It is agreed:

SECTION I:
DEFINITIONS AND INTERPRETATION

Definitions and Interpretation

        1.1    Definitions:    In this Agreement, except where the context otherwise requires:

        Accounting Principles means the accounting principles, standards, conventions and practices used by the Borrower in the preparation of its audited statutory accounts for the year ended 24 November 2000 as such principles, standards, conventions and practices may hereafter be modified in order to comply with changes in generally accepted accounting principles in the Kingdom of Thailand or otherwise with the prior written consent of the Facility Agent;

        ACT Loan Agreement means a loan arrangement between the Borrower and the Guarantor under which the Guarantor has granted a loan of money in the principal amount of US$10,500,000 (US$ ten million five hundred thousand) to the Borrower and the entire amount of this outstanding principal and accrued interest (if any) shall be converted into share capital of the Borrower in accordance with clause 24.2(n) (ACT Loan Agreement);

        Advance means the principal amount of each amount made available to the Borrower hereunder (including without limitation Tranche A Advances, Tranche B T/R Advances, Tranche B Loan Advances, Tranche C Advances and Tranche D Advances) by way of loan, Conversion or (as the context requires) the principal amount thereof for the time being outstanding;

        Agents means the Facility Agent and the Security Agent, and Agent means either of them, as the context requires;

        Authorised Directors mean the directors who are authorised to sign on behalf of the Borrower;

        Availability Period means:

(a)

in respect of the Tranche A Facility, the period commencing on the Effective Date and ending at the end of the Business Day in Bangkok on the date falling 60 (sixty) days after the Effective Date;



(b)

in respect of the Tranche B Facilities, the period commencing on the Effective Date and ending at the end of the Business Day in Bangkok on 26 November 2001;

4

(c)

in respect of the Tranche C Facility, the Tranche D Facility and the Tranche E Facility, the period commencing on the Effective Date and ending at the end of the Business Day in Bangkok on either of the following dates, whichever occurs first:



(i)

the date falling 5 (five) years from the last Drawing Date in respect of a Tranche B Loan Advance; or



(ii)

the date falling 5 (five) years from the last Conversion Date in respect of a Tranche B Loan Advance,

provided that the Availability Period in respect of the Tranche C Facility, the Tranche D Facility and the Tranche E Facility will be subject to changes upon a review on an annual basis by the Tranche C Lenders, the Tranche D Lenders and the Tranche E Lenders, as the case may be, provided always that where an Availability Period relating to any Facility ends on a day which is not a Business Day, it shall be deemed to end on the Business Day preceding that day;

        Average Selling Rate means the average (rounded, if necessary, to the nearest four decimal places with the midpoint rounded upwards) of the telegraphic transfer exchange rates quoted by the relevant Lenders for the sale of the relevant currency using Baht as the means of payment for such sale at 12 noon (Bangkok time) 2 (two) Business Days prior to the day the amount in question is due to be calculated, determined or notionally converted, as the case may be;

        Baht means Thai baht, the lawful currency of the Kingdom of Thailand;

        BAY means Bank of Ayudhya Public Company Limited;

        BoT Announcements means announcements, notifications and regulations of the Bank of Thailand as may be issued and/or amended from time to time (including without limitation the Notification of the Bank of Thailand Re: Prescription on Interests and Discounts to be Observed by Commercial Banks in respect of Interest Payable on Loans made by Commercial Banks);

        Business Day means a day (other than a Saturday or Sunday) on which the Lenders are open for general interbank business in Bangkok;

        Commitment means, in relation to a Lender, the aggregate of its Tranche A Commitment, its Tranche B Commitments, its Tranche C Commitment, its Tranche D Commitment and its Tranche E Commitment;

        Conversion means, in relation to the Tranche B Facilities, any conversion of the Tranche B L/C Outstandings and/or the Tranche B T/R Outstandings into Tranche B Loan Advances pursuant to the terms of this Agreement;

        Conversion Date means, in relation to the Tranche B Facilities, each of the following dates on which a Conversion is made automatically in accordance with clause 11.3 (Conversion):

(a)

the last Business Day of June 2001;



(b)

the last Business Day of September 2001; and



(c)

the last Business Day of December 2001;

        Debt means any indebtedness of the Borrower as at any date for or in respect of:

(a)

all moneys borrowed (with or without security) or raised by the Borrower;



(b)

moneys raised by the sale of receivables, invoices, bills or notes or other financial assets on terms that recourse may be had to the vendors in the event of non-payment of such receivables, invoices, bills or financial assets when due;

5

(c)

the acquisition cost of any asset remaining unpaid for which deferred payment is arranged primarily as a method of raising finance;



(d)

any obligation under any lease which is required to be capitalised under the Accounting Principles;



(e)

the net exposure (meaning the amount payable by the party liable thereunder on termination or closing out of such arrangements determined on a mark to market basis) of currency swap or interest swap, cap or collar transactions;



(f)

the principal amount raised by the Borrower by acceptances (not being acceptances in relation to the purchase of goods or services in the ordinary course of trading which have been outstanding for 180 (one hundred and eighty) days or less) or under any acceptance credit opened on its behalf by a bank or accepting house;



(g)

the principal amount (including any fixed or minimum premium payable on final redemption or repayment) of any debentures, notes, bonds, bills or other similar instruments of the Borrower;



(h)

any other transaction having the commercial effect of a borrowing (whether including money, commodities or other property); and



(i)

any Subordinated Loan,

        provided that no amount shall be taken into account more than once in the same calculation;

        Debt Service Coverage Ratio means the ratio of (a) EBITDA for the six months immediately prior to the relevant calculation date to (b) all scheduled payments of principal and interest which fell due for payment by the Borrower under the Tranche A Facility and the Tranche B Facilities for the six months immediately prior to the relevant calculation date, with non-Baht denominated amounts being notionally converted to Baht at the Average Selling Rate;

        Debt Service Reserve Accounts means the bank accounts listed in Schedule 8 (List of Bank Accounts) which have been opened and maintained by the Borrower and any other bank account to be opened by the Borrower pursuant to the terms of this Agreement from which funds may be withdrawn for servicing scheduled payments of principal and interest by the Borrower under the Tranche A Facility and the Tranche B Facilities (including any substitute and replacement account thereof);

        Debt to Equity Ratio means the ratio of Debt to Equity;

        Default means an Event of Default or a Potential Event of Default;

        Default Interest Rate means:

(a)

in respect of amounts payable in US dollars, the rate per annum determined by the Facility Agent to be the aggregate of:



(i)

LIBOR;



(ii)

the Margin; and



(iii)

4% (four per cent.); and

(b)

in respect of amounts payable in Baht, the default interest rate per annum announced by each Lender from time to time according to the BoT Announcements (as a matter of reference only, such default interest announced as at the Signing Date by TFB is 13.5% (thirteen point five per cent.) per annum and by BAY is 14.5% (fourteen point five per cent.) per annum);

        Drawing Date means a Business Day upon which any Advance is to be made;

6

        Drawing Notice means a notice of drawing substantially in the form set out in Part I of Schedule 3 (Form of Drawing Notice) duly completed and signed by the Authorised Directors;

        EBITDA means, for the relevant period, revenues less cost of goods sold and selling and administrative expenses, but before extraordinary gains/losses, foreign exchange gains/losses, interest income, interest expense, income tax, depreciation and amortisation;

        Effective Date means the Business Day determined and notified as such by the Facility Agent to each of the Lenders and the Borrower after all of the conditions precedent documents referred to in Schedule 2 (Conditions Precedent Documents to Facilities) have been satisfactorily received by the Facility Agent in accordance with clause 4.2 (Conditions to Facilities);

        Equity means paid-in capital plus (a) share premium; (b) undistributed profits after deduction of retained losses (if any); and (c) legal reserves;

        Event of Default means any of the events mentioned in clause 25.1 (Event of Default);

        Existing BAY Facilities means the revolving credit facilities in an aggregate amount of no less than US$4,500,000 (US$ four million five hundred thousand) which has been, and/or will be, granted independently of this Agreement by BAY to the Borrower up until the date immediately preceding the Effective Date but which will, as from the Effective Date, be deemed and treated for all purposes and to all intents as part of the Tranche C Commitment, the Tranche C Advance and/or the Tranche C Outstandings, as the case may be, in respect of BAY under the Tranche C Facility and shall, thereafter, be subject to the terms and conditions of this Agreement in all respects;

        Existing Security Interests means the Security Interests created or otherwise arising under credit facility arrangements between the Borrower and the Export-Import Bank of Thailand in an aggregate amount of US$4,000,000 (including without limitation those credit facilities under their US$2,000,000 short-term credit facilities agreement dated 1 August 1998 and their US$2,000,000 short-term credit facilities agreement dated 14 June 2000);

        Existing TFB Packing Credit Facility means the revolving packing credit facility in an aggregate amount of no more than US$4,500,000 (US$ four million five hundred thousand) which has been, and/or will be, granted independently of this Agreement by TFB to the Borrower up until the date immediately preceding the Effective Date but which will, as from the Effective Date, be deemed and treated for all purposes and to all intents as part of the Tranche C Commitment, the Tranche C Advance and/or the Tranche C Outstandings, as the case may be, in respect of TFB under the Tranche C Facility and shall, thereafter, be subject to the terms and conditions of this Agreement in all respects;

        Existing TFB T/R Facility means the revolving trust receipt facility in an aggregate amount of no more than US$2,000,000 (US$ two million) which has been, and/or will be, granted independently of this Agreement by TFB to the Borrower up until the date immediately preceding the Effective Date but which will, as of the Effective Date, be deemed and treated for all purposes and to all intents as part of the Tranche B T/R Commitment, the Tranche B T/R Advance and/or the Tranche B T/R Outstandings, as the case may be, in respect of TFB under the Tranche B T/R Facility and shall, thereafter, be subject to the terms and conditions of this Agreement in all respects;

        Facilities means the Tranche A Facility, the Tranche B Facilities, the Tranche C Facility, the Tranche D Facility and the Tranche E Facility, the terms and conditions of which are set out in this Agreement, and Facility means any of them, as the context requires;

        Facility Agent means Bank of Ayudhya Public Company Limited or any successor as facility agent of the Lenders under the Financing Documents;

        Facility Office shall have the meaning given to it in clause 31.8 (Facility Office);

7

        Fee Letters means the letter agreements executed between: (a) each Agent and the Borrower in respect of agency fees; and (b) the Arranger and the Borrower in respect of arrangement fees, and Fee Letter means any of them, as the context requires;

        Finance Party means any of the Agents, the Arranger or a Lender;

        Financing Documents means this Agreement, the Parent Guarantee, the Side Letter, the Fee Letters, the Tranche D Overdraft Agreement, the Security Documents, the ACT Loan Agreement, any Transfer Certificate and any other document designated in writing as such by the Facility Agent and the Borrower;

        General Pledge Agreement means a pledge agreement over certain assets and property listed in Schedule 7 (List of Asset and Property to be Granted as Security) to be pledged pursuant to clause 24.2(i) (Security Documents), which shall be in form and content satisfactory to the Security Agent;

        Guarantor means ACT Manufacturing, Inc., a company incorporated under the law of the Commonwealth of Massachusetts;

        Guarantor Collateral Agreement means a guarantee and collateral agreement dated 29 June 2000 among the Guarantor, JP Morgan Chase, certain Subsidiaries of Guarantor and the other parties named therein (including any amendment and supplement thereof);

        Guarantor Credit Agreement means a US$250,000,000 credit agreement dated 29 June 2000 among the Guarantor, JP Morgan Chase as administrative agent, Credit Suisse First Boston as syndication agent, Societe Generale as documentation agent and the lenders named therein (including any amendment and supplement thereof);

        Interest Payment Date means, for any Advance, the last day of an Interest Period;

        Interest Period means, for any Advance, the period determined in accordance with clauses 6.1 (Period), 10.5 (Interest), 11.5 (Interest Period), 13.1 (Interest Period) and 15.4 (Interest), as the case may be;

        Issue means the issue by the Tranche B Lenders of a Tranche B Letter of Credit under the Tranche B L/C Facility or the issue by the Tranche E Lenders of a Tranche E Guarantee under the Tranche E Facility, as the case may be;

        Issue Date means the date of any Issue;

        JP Morgan Chase means J.P. Morgan Chase & Co. (formerly named "The Chase Manhattan Bank") which is a lender, and also acts as the administrative agent, under the Guarantor Credit Agreement;

        Land and Building Mortgages Agreement means a mortgage contract of land and buildings and any agreement annexed or supplemental thereto in respect of the land and buildings listed in Schedule 7 (List of Asset and Property to be Granted as Security) to be mortgaged pursuant to clause 24.2(i) (Security Documents), which shall be in form and content satisfactory to the Security Agent;

        Law includes common or customary law and any constitution, decree, judgment, legislation, order, ordinance, regulation, statute, treaty or other legislative measure in any jurisdiction and any present or future directive, regulation, approval, licence, authorisation, guideline, practice, concession, request or requirement whether or not having the force of law issued by any governmental body, agency or department or any central bank or other fiscal, monetary, regulatory, self regulatory or other authority or agency;

8

        Lenders means those Lenders listed in Schedule 1 (Lenders and Commitments) and their respective successors and any Transferee Lenders (as defined in clause 31.2 (Assignment and Transfers by Lenders)) which are, in each case, for the time being participating in the Facilities, and Lender means either of them, as the context requires;

        LIBOR means, in relation to an Interest Period under the Tranche A Facility and the Tranche B Facilities, the rate per annum determined by the Facility Agent to be the rate or rates, and if more than one, the highest of the rates, rounded upwards to the nearest whole multiple of one-sixteenth of one per cent. (¹/16%) of the offered quotations for deposits in US dollars for a comparable period to such Interest Period which appears on the Reuters screen being "LIBO" page (or such other page as may replace that service) at or about 11:00 a.m. (London time) on the date falling 2 (two) Business Days prior to the first day of such Interest Period;

        Machinery Mortgage Agreement means a mortgage contract of machinery and any agreement annexed and supplemental thereto in respect of machinery listed in Schedule 7 (List of Asset and Property to be Granted as Security) to be mortgaged pursuant to clause 24.2(i) (Security Documents), which shall be in form and content satisfactory to the Security Agent;

        Majority Lenders means, at any time, one or more Lenders whose Outstandings are more than 76% (seventy six per cent.) in aggregate of the Total Outstandings at that time or, in the event that there are no Outstandings at such time, Lenders whose Commitments then aggregate more than 76% (seventy six per cent.) of the Total Commitments, provided that, for the purposes of this definition:

(a)

Outstandings and Commitments which are not denominated in Baht shall be notionally converted into Baht at the Average Selling Rate; and



(b)

Outstandings and Commitments of each Lender and Total Outstandings and Total Commitments of all Lenders will be subject to the conditions set out in clause 3.3 (Majority Lenders);

        Margin means 2.50% (two point five per cent.) per annum;

        Material Adverse Effect means, in the opinion of the Facility Agent (acting upon the instructions of the Majority Lenders and upon consultation with the Borrower), the occurrence of an event which will or may materially and adversely affect: (i) the Borrower's ability to make payments when due in respect of any indebtedness; (ii) the financial condition or business prospects of the Borrower; (iii) the ability of the Lenders acting reasonably, to exercise their rights under any Financing Document; or (iv) the legality, validity or effectiveness of the Financing Documents;

        MOR Average means, on any day, the average (rounded, if necessary, to the nearest four decimal places with the midpoint rounded upwards) of the respective prevailing per annum interest rates announced by TFB and BAY for charging interest on overdraft in Baht granted to prime customers on the day in question pursuant to the BoT Announcements and known as "MOR";

        Obligor means each of the Borrower and the Guarantor;

        Outstandings means, in relation to a Lender, the aggregate of its Tranche A Outstandings, Tranche B Outstandings, Tranche C Outstandings, Tranche D Outstandings and Tranche E Guarantee Amount;

        Parent Guarantee means a guarantee to be executed by the Guarantor which is governed by the law of the Commonwealth of Massachusetts, in form and content satisfactory to the Lenders and the Agents;

        Party means, at any time, a party to this Agreement at such time;

        Permitted Security Interests means

(a)

a lien or right of set-off arising in the normal course of trading or by operation of Law;

9

(b)

any conditional sale or title retention arising under or pursuant to any contract for the purchase of goods in the normal course of trading;



(c)

any Security Interest created under the Security Documents;



(d)

any Security Interest created or permitted to subsist with the prior written consent of the Majority Lenders;



(e)

the Existing Security Interests; and



(f)

any Security Interest granted to secure the obligations of the Borrower (if any) under the Guarantor Credit Agreement or the Guarantor Collateral Agreement;

        Potential Event of Default means any event which with the giving of notice, lapse of time or making of any determination specified in clause 25.1 (Event of Default) would constitute an Event of Default;

        Repayment Date means, in respect of a Tranche A Advance and a Tranche B Loan Advance, each of the dates specified as such in clause 7.1 (Repayment) and clause 11.7 (Repayment), as the case may be;

        Secured Indebtedness means all present and future indebtedness and all other liabilities of the Borrower to the Security Agent and the Lenders (or any of them) present or future, actual or contingent, arising under or in connection with any of the Financing Documents (including without limitation any promissory notes, instruments and securities evidencing or representing such indebtedness or liabilities issued under or in connection with any of the Financing Documents);

        Security means the security created by the Security Documents, including all of the rights and interest which are to be vested in the Security Agent or any of the Lenders by or pursuant to the Security Documents;

        Security Agent means The Thai Farmers Bank Public Company Limited or any successor as security agent of the Lenders under the Financing Documents;

        Security Documents means the Land and Building Mortgages Agreement; the Machinery Mortgage Agreement and the General Pledge Agreement;

        Security Interest means any mortgage, charge, pledge, lien, right of set-off, assignment by way of security, retention of title or any other security interest whatsoever or any other agreement or arrangement having the effect of conferring security, howsoever created or arising;

        Selling Rate means the telegraphic transfer exchange rate quoted by the relevant Lender for the sale of the relevant currency using Baht as the means of payment for such sale at 12 noon (Bangkok time) on the day the amount in question is due to be converted, redenominated or paid;

        Side Letter means the side letter dated 6 December 2000 between the Borrower and the Lenders in connection with a front-end fee of the Facilities;

        Signing Date means the date of this Agreement;

        Subordinated Loan means each of the loans provided to the Borrower by person(s) approved by the Majority Lenders and upon subordinated terms and conditions acceptable to the Majority Lenders, under which, among other things, payment of interest and principal of the loans are to be repayable only after the Facilities and all other sums associated with the Facilities payable in accordance with the terms of this Agreement have been repaid in full;

        Subsidiary means a subsidiary for the time being of the Borrower and Subsidiaries shall refer to all such subsidiaries;

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        Subsidiary of Guarantor means, as to any person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such person;

        Tax means any present or future tax, duty, levy or charge of a similar nature payable to or imposed by any supra-national, governmental, federal, state, provincial, local governmental or municipal taxing authority, body or official, whether in Thailand or elsewhere (together with any related penalties, fines, surcharges and interest);

        TFB means The Thai Farmers Bank Public Company Limited;

        Total Commitments means, at any time, the aggregate amount of all the Commitments of all the Lenders at such time;

        Total Outstandings means, at any time, the aggregate amount of all Outstandings of all the Lenders at such time;

        Total Tranche A Commitments means, at any time, the aggregate amount of the Tranche A Commitments of all the Tranche A Lenders, which together at any time shall not exceed US$20,970,000 (US$ twenty million nine hundred and seventy thousand);

        Total Tranche A Outstandings means, at any time, the aggregate amount of the Tranche A Outstandings of all the Tranche A Lenders;

        Total Tranche B Commitments means, at any time, the aggregate amount of the Tranche B Commitments of all the Tranche B Lenders, which together shall at any time not exceed US$4,000,000 (US$ four million) in aggregate;

        Total Tranche B L/C Commitments means the aggregate amount of the Tranche B L/C Commitments of all the Tranche B Lenders;

        Total Tranche B L/C Outstandings means, at any time, the aggregate amount of the Tranche B L/C Outstandings of all the Tranche B Lenders;

        Total Tranche B Loan Commitments means, at any time, the aggregate amount of all the Tranche B Loan Commitments of all the Tranche B Lenders;

        Total Tranche B Loan Outstandings means, at any time, the aggregate amount of the Tranche B Loan Outstandings of all the Tranche B Lenders;

        Total Tranche B Outstandings means, at any time, the aggregate amount of the Tranche B Outstandings of all the Tranche B Lenders, which together shall at any time not exceed US$4,000,000 (US$ four million) in aggregate;

        Total Tranche B T/R Commitments means, at any time, the aggregate amount of all the Tranche B T/R Commitments of all the Tranche B Lenders;

        Total Tranche B T/R Outstandings means, at any time, the aggregate amount of the Tranche B T/R Outstandings of all the Tranche B Lenders;

        Total Tranche C Commitment means, at any time, the aggregate amount of the Tranche C Commitments of all the Tranche C Lenders, which together at any time shall not exceed US$28,500,000 (US$ twenty eight million five hundred thousand);

        Total Tranche C Outstandings means, at any time, the aggregate amount of the Tranche C Outstandings of all the Tranche C Lenders;

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        Total Tranche D Commitment means, at any time, the aggregate amount of the Tranche D Commitments of all the Tranche D Lenders, which together at any time shall not exceed Baht 20,000,000 (Baht twenty million);

        Total Tranche D Outstandings means, at any time, the aggregate amount of the Tranche D Outstandings of all the Tranche D Lenders;

        Total Tranche E Commitment means, at any time, the aggregate amount of the Tranche E Commitments of all the Tranche E Lenders, which together at any time shall not exceed Baht 40,000,000 (Baht forty million);

        Total Tranche E Guarantee Amounts means, at any time, the aggregate amount of the Tranche E Guarantee Amounts of all the Tranche E Lenders;

        Tranche A Advance means an Advance drawn under the Tranche A Facility;

        Tranche A Commitment means, in relation to a Tranche A Lender, the principal amount set opposite its name in Schedule 1 (Lenders and Commitments) in respect of the Tranche A Facility or, as applicable, the amount set out in respect of the Tranche A Facility in a Transfer Certificate for a Tranche A Lender, in any case to the extent not transferred, reduced or cancelled in accordance with the provisions hereof;

        Tranche A Facility means the US$20,970,000 (US$ twenty million nine hundred and seventy thousand) term loan facility, the terms and conditions of which are set out in this Agreement;

        Tranche A Lenders means the Lenders participating in the Tranche A Facility named in Schedule 1 (Lenders and Commitments);

        Tranche A Outstandings means, at any time, in relation to a Tranche A Lender, its participation in respect of all Tranche A Advances which have not been repaid or prepaid by the Borrower at such time;

        Tranche B Commitments means, in relation to a Tranche B Lender, its Tranche B L/C Commitment, its Tranche B T/R Commitment and its Tranche B Loan Commitment;

        Tranche B Facilities means the Tranche B L/C Facility, the Tranche B T/R Facility and the Tranche B Loan Facility in an aggregate amount up to US$4,000,000 (US$ four million), and Tranche B Facility means any of them, as the context requires;

        Tranche B Lenders means the Lenders participating in the Tranche B Facilities named in Schedule 1 (Lenders and Commitments);

        Tranche B Letter of Credit means a letter of credit issued or to be issued by the Tranche B Lenders under the Tranche B L/C Facility;

        Tranche B L/C Commitment means, in relation to a Tranche B Lender, the principal amount set opposite its name in Schedule 1 (Lenders and Commitments) in respect of the Tranche B L/C Facility or, as applicable, the amount set out in respect of the Tranche B L/C Facility in a Transfer Certificate for a Tranche B Lender, in any case to the extent not transferred, reduced or cancelled in accordance with the provisions hereof;

        Tranche B L/C Facility or Tranche B Letter of Credit Facility means the letter of credit facility in an aggregate amount up to US$4,000,000 (US$ four million), the terms and conditions of which are set out in this Agreement;

        Tranche B L/C Outstandings means, at any time, in relation to a particular Tranche B Lender and its Tranche B Letters of Credit, the aggregate of the maximum amount for which the Tranche B Lender

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could be actually or contingently liable thereunder from time to time and which has not been converted into Tranche B Loan Advances at such time in accordance with the terms of this Agreement;

        Tranche B Loan Advance means:

(a)

an Advance drawn under the Tranche B Loan Facility; and



(b)

an Advance converted into from Tranche B L/C Outstandings and Tranche B T/R Outstandings;

        Tranche B Loan Commitment means, in relation to a Tranche B Lender, the principal amount set opposite its name in Schedule 1 (Lenders and Commitments) in respect of the Tranche B Loan Facility or, as applicable, the amount set out in respect of the Tranche B Loan Facility in a Transfer Certificate for a Tranche B Lender, in any case to the extent not transferred, reduced or cancelled in accordance with the provisions hereof;

        Tranche B Loan Facility means the term loan facility in an aggregate amount up to US$4,000,000 (US$ four million), the terms and conditions of which are set out in this Agreement;

        Tranche B Loan Outstandings means, at any time, in respect of a particular Tranche B Lender, its participation in respect of all Tranche B Loan Advances which have not been repaid or prepaid by the Borrower at such time;

        Tranche B Outstandings means, at any time, in relation to a Tranche B Lender, the aggregate of its Tranche B L/C Outstandings, its Trance B T/R Outstandings and its Tranche B Loan Outstandings;

        Tranche B Trust Receipt means a trust receipt executed or to be executed by the Borrower under the Tranche B T/R Facility in favour of a Tranche B Lender in lieu of reimbursement to such Tranche B Lender of amounts paid by it under a Tranche B Letter of Credit;

        Tranche B T/R Advance means an Advance drawn under the Tranche B T/R Facility (for the avoidance of doubt, the Tranche B T/R Advance shall, as from the Effective Date, include any advance already made by TFB to the Borrower as part of the Existing TFB T/R Facility which remains outstanding as at the date immediately preceding the Effective Date);

        Tranche B T/R Commitment means, in relation to a Tranche B Lender, the principal amount set opposite its name in Schedule 1 (Lenders and Commitments) in respect of the Tranche B T/R Facility or, as applicable, the amount set out in respect of the Tranche B T/R Facility in a Transfer Certificate for a Tranche B Lender, in any case to the extent not transferred, reduced or cancelled in accordance with the provisions hereof;

        Tranche B T/R Facility or Tranche B Trust Receipt Facility means the trust receipt facility in an aggregate amount up to US$4,000,000 (US$ four million) of which, as from the Effective Date, the Existing TFB T/R Facility shall form an integral part, the terms and conditions of which are set out in this Agreement;

        Tranche B T/R Outstandings means, at any time, in respect of a particular Tranche B Lender, its participation in respect of all Tranche B Trust Receipts which have not been repaid or prepaid by the Borrower at such time and which have not been converted into Tranche B Loan Advances at such time in accordance with the terms of this Agreement (for the avoidance of doubt, the Tranche B T/R Outstandings shall, as from the Effective Date, include all outstanding principal amounts under the Existing TFB T/R Facility);

        Tranche C Advance means an Advance drawn under the Tranche C Facility (for the avoidance of doubt, the Tranche C Advance shall, as from the Effective Date, include any advance already made by BAY and TFB to the Borrower as part of the Existing BAY Facilities and the Existing TFB Packing

13

Credit Facility, respectively, which remains outstanding as at the date immediately preceding the Effective Date);

        Tranche C Commitment means, in relation to a Tranche C Lender, the principal amount set opposite its name in Schedule 1 (Loans and Commitments) in respect of the Tranche C Facility or, as applicable, the amount set out in respect of the Tranche C Facility in a Transfer Certificate for a Tranche C Lender, in any case to the extent not transferred, cancelled or reduced in accordance with the provisions hereof;

        Tranche C Facility means the US$28,500,000 (US$ twenty eight million five hundred thousand) revolving packing credit facility of which, as from the Effective Date, the Existing BAY Facilities and the Existing TFB Packing Credit Facility shall form an integral part, the terms and conditions of which are set out in this Agreement;

        Tranche C Lenders means the Lenders participating in the Tranche C Facility named in Schedule 1 (Lenders and Commitments);

        Tranche C Outstandings means, at any time, in respect of a particular Tranche C Lender, its participation in respect of all Tranche C Advances which have not been repaid or prepaid by the Borrower at such time (for the avoidance of doubt, the Tranche C Outstandings shall, as from the Effective Date, include all outstanding principal amounts under the Existing BAY Facilities and the Existing TFB Packing Credit Facility);

        Tranche D Advance means an Advance drawn under the Tranche D Facility;

        Tranche D Commitment means, in relation to a Tranche D Lender, the principal amount set opposite its name in Schedule 1 (Lenders and Commitments) in respect of the Tranche D Facility or, as applicable, the amount set out in respect of the Tranche D Facility in a Transfer Certificate for a Tranche D Lender, in any case to the extent not transferred, reduced or cancelled in accordance with the provisions hereof;

        Tranche D Facility means the Baht 20,000,000 (Baht twenty million) overdraft facility, the terms and conditions of which are set out in this Agreement;

        Tranche D Lenders means the Lenders participating in the Tranche D Facility named in Schedule 1 (Lenders and Commitments);

        Tranche D Outstandings means, at any time, in respect of a particular Tranche D Lender, its participation in respect of all Tranche D Advances which have not been repaid or prepaid by the Borrower at such time;

        Tranche D Overdraft Agreement means an agreement between the Borrower and a Tranche D Lender in relation to the Tranche D Facility in form and content satisfactory to such Tranche D Lender;

        Tranche E Commitment means, in relation to a Tranche E Lender, the principal amount set opposite its name in Schedule 1 (Lenders and Commitments) in respect of the Tranche E Facility or, as applicable, the amount set out in respect of the Tranche E Facility in a Transfer Certificate for a Tranche E Lender, in any case to the extent not transferred, reduced or cancelled in accordance with the provisions hereof;

        Tranche E Facility means the Baht 40,000,000 (Baht forty million) revolving letter of guarantee facility, the terms and conditions of which are set out in this Agreement;

        Tranche E Guarantee means a letter of guarantee issued or to be issued by a Tranche E Lender under the Tranche E Facility;

        Tranche E Guarantee Amount means, at any time, in respect of a particular

14

        Tranche E Lender and in relation to its Tranche E Guarantees, the maximum aggregate amount of the actual and contingent liabilities of that Tranche E Lender under such Tranche E Guarantees;

        Tranche E Lenders means the Lenders participating in the Tranche E Facility named in Schedule 1 (Lenders and Commitments);

        Transfer Certificate means a certificate in the form of Schedule 6 (Form of Transfer Certificate) delivered pursuant to clause 31 (Assignments and Transfers);

        US dollars and US$ means the lawful currency of the United States of America;

        1.2    Construction:    Except where the context otherwise requires, any reference in this Agreement to:

        an affiliate means, in relation to any person, a subsidiary or any holding company of such person and any other subsidiary of any such holding company;

        an agreement also includes a concession, contract, deed, franchise, licence, treaty or undertaking (in each case, whether oral or written);

        the assets of any person shall be construed as a reference to the whole or any part of its business, undertaking, property, assets, rights and revenues (including any right to receive revenues);

        a Financing Document or other agreement includes any amendments, novations or supplements thereto;

        a guarantee also includes any other obligation (whatever called) of any person to pay, purchase, provide funds (whether by way of the advance of money, the purchase of or subscription for shares or other securities, the purchase of assets or services, or otherwise) for the payment of, indemnity against the consequences of default in the payment of, or otherwise be responsible for, any indebtedness of any other person;

        indebtedness means any obligation (whether present or future, actual or contingent, secured or unsecured, as principal or surety or otherwise) for the payment or repayment of money;

        a person includes any corporation, association, partnership or other entity and includes its successors and permitted transferees and assigns;

        a provision of law is a reference to that provision as amended or re-enacted; a company is a subsidiary of another (its holding company) if that other company:

(a)

holds a majority of the voting rights in it; or



(b)

has the right to appoint or remove a majority of its board of directors; or



(c)

has the power to direct its management and policies whether through the ownership of voting rights, by contract or otherwise;

        a time of day is, unless the context requires otherwise, a reference to Bangkok time.

        Headings and the table of contents are for ease of reference only.

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SECTION II:
THE FACILITIES

Amount and Purpose

        2.1    Facility Amounts:    The Lenders hereby establish the Facilities, pursuant to which they will, in accordance with the provisions of this Agreement, make available the Facilities to the Borrower. At the Signing Date:

(a)

the maximum aggregate principal amount of:



(i)

the Tranche A Facility is US$20,970,000 (US$ twenty million nine hundred and seventy thousand);



(ii)

the Tranche B Facilities is US$4,000,000 (US$ four million);



(iii)

the Tranche C Facility is US$28,500,000 (US$ twenty eight million five hundred thousand);



(iv)

the Tranche D Facility is Baht 20,000,000 (Baht twenty million); and



(v)

the Tranche E Facility is Baht 40,000,000 (Baht forty million);

(b)

the Tranche A Facility, the Tranche B Facilities, the Tranche C Facility, the Tranche D Facility and the Tranche E Facility are separate and independent from each other and together they form the Facilities of US$53,470,000 (US $fifty three million four hundred and seventy thousand) and Baht 60,000,000 (Baht sixty million).

        The amount and availability of each Facility are subject to changes following a review by the Lenders if there occurs any circumstance set out in clause 24.2(h) (Guarantor's Shareholding).

        2.2    Purpose:    The Facilities shall be used as follows:

(a)

the Tranche A Facility shall be used only to repay all of the Borrower's existing indebtedness owed to TFB and the Industrial Finance Corporation of Thailand and to pay supplier credits extended by its suppliers;



(b)

the Tranche B Facilities shall be used only to pay for purchases of machinery used by it in its business operations as agreed from time to time between the Borrower and the Lenders;



(c)

the Tranche C Facility and the Tranche D Facility shall be used only for the working capital purposes of the Borrower; and



(d)

the Tranche E Facility shall be used only for the provision of one or more letters of guarantee against liabilities of the Borrower to any third party (including without limitation those which may arise from the provision of public utilities by the Electricity Generating Authority of Thailand, the Communications Authority of Thailand, the Customs Department of Thailand and any other government authorities), except for liabilities of the Borrower under any transaction having the commercial effect of a borrowing.

        No Finance Party shall be bound to enquire as to, nor shall any of them be concerned with, the application of the proceeds or the use of any of the Facilities.

Syndicate

        3.1    Participation:    Subject to the provisions of this Agreement, each of the Lenders shall:

(a)

participate in each Advance under the Tranche A Facility in the proportion which its Tranche A Commitment bears to the Total Tranche A Commitments up to an aggregate principal amount not exceeding its Tranche A Commitment; and

16

(b)

participate in the Tranche B Facilities, the Tranche C Facility, the Tranche D Facility and the Tranche E Facility up to an aggregate principal amount not exceeding its Tranche B Commitment, Tranche B Commitments, Tranche C Commitment, Tranche D Commitment and Tranche E Commitment, respectively.

        3.2    Obligations Several:    In participating in the Facilities:

(a)

the rights and obligations of each of the Finance Parties under the Financing Documents are several. Failure of a Finance Party to perform its obligations under the Financing Documents shall neither:



(i)

result in any other Finance Party incurring any liability whatsoever; nor



(ii)

relieve any other Finance Party or any Obligor from any of its obligations under the Financing Documents; and

(b)

the aggregate of the amounts due to each Finance Party under the Financing Documents at any time is a separate and independent debt and each Finance Party shall have the right to protect and (except as otherwise provided in the Financing Documents) enforce its rights under the Financing Documents and it shall not be necessary for any other Finance Party to be joined as an additional party in any proceedings to this end.

        3.3    Majority Lenders:    If at any time:

(a)

the business operations of either Lender has been temporarily or permanently suspended by the Ministry of Finance, the Bank of Thailand, the Financial Institutions Development Fund or any other government agencies (the authorities); or



(b)

either Lender has been ordered by the authorities to merge with any other entities or to dissolve or liquidate; or



(c)

the majority of shares of either Lender have been acquired (whether by way of purchase, debt-to-equity conversion or otherwise) and held by the authorities for the purposes of rehabilitation; or



(d)

any other actions or circumstances having the effect of nationalisation or expropriation occur in respect of either Lender;

(the Lender being subject to any of the actions or circumstances set out in (a), (b), (c) or (d) above, the affected Lender), then at all times thereafter and for the purposes of the definition of Majority Lenders, Outstandings or Commitments and Total Outstandings or Total Commitments, as the case may be, in respect of the affected Lenders shall not be taken into consideration in determining the Majority Lenders. Accordingly, only Outstandings or Commitments and Total Outstandings or Total Commitments, as the case may be, in respect of the other Lender(s) (the other Lender(s)) shall be counted in determining the Majority Lenders and the affected Lender shall be bound by, and comply with, any action or resolution (whether such action or resolution is in the nature of consent, approval, authorisation, determination, instruction or otherwise) of the other Lender(s) in all respects.

Signing Date and Conditions precedent

        4.1    Signing Date:    This Agreement shall come into force and effect on the Signing Date and be binding on all Parties hereto in accordance with the terms and conditions of this Agreement but the Borrower may not use or draw any of the Facilities until all of the relevant conditions precedent in this Agreement have been satisfied.

        4.2    Conditions to Facilities:    The Borrower shall provide the Facility Agent with the documents set out in Schedule 2 (Conditions Precedent Documents to Facilities), in each case in form and content

17

satisfactory to the Facility Agent, before the Facilities will become available to the Borrower. Upon its satisfactory receipt of such documents, the Facility Agent will then confirm to each of Lenders and the Borrower such receipt and notify each of them of the date on which the Effective Date will occur, which shall be a Business Day (the Effective Date).

        4.3    Conditions to Each Facility:    Each Facility is also subject to the further conditions precedent set out in clauses 5.1 (Conditions Precedent), 9.1 (Conditions Precedent), 10.2 (Conditions Precedent), 11.1 (Conditions Precedent), 12.3 (Conditions Precedent), 15.1 (Conditions Precedent) and 16.1 (Conditions Precedent), as the case may be.

SECTION III:
TRANCHE A FACILITY

Tranche A Facility

        5.1    Conditions Precedent:    Subject to satisfaction of the conditions specified in clause 4.2 (Conditions to Facilities), no Tranche A Lender will be obliged to participate in a Tranche A Advance until the following conditions precedent have been satisfied:

(a)

both on the date of the relevant Drawing Notice and on the relevant Drawing Date, no Default has occurred or would occur as a result of making the Tranche A Advance; and



(b)

each of the representations and warranties mentioned in clause 23.2 (Representations After Signing) remains accurate at the Drawing Date as if given on that date by reference to the facts and circumstances then existing.

        5.2    Drawdown:    Subject to the provisions of this Agreement, the Borrower may on Business Days during the Availability Period relating to the Tranche A Facility make a request for a Tranche A Advance by delivering, not less than 5 (five) Business Days before the proposed Drawing Date, to the Facility Agent the following documents:

(a)

a duly completed Drawing Notice specifying the proposed Drawing Date which may occur only on the following 3 (three) dates and the amount of such Tranche A Advance which will be subject to the following maximum amounts for each of the periods as follows:



(i)

in respect of the first Drawing Date, the period commencing on the Effective Date and ending at the end of the Business Day in Bangkok on the date falling 5 (five) days after the Effective Date and in an amount of no more than US$14,000,000 (US $fourteen million);



(ii)

in respect of the second Drawing Date, the period commencing on the Effective Date and ending at the end of the Business Day in Bangkok on the date falling 30 (thirty) days after the Effective Date and in an amount of no more than US$3,000,000 (US $three million); and



(iii)

in respect of the third Drawing Date, the period commencing on the Effective Date and ending at the end of the Business Day in Bangkok on the date falling 60 (sixty) days after the Effective Date and in an amount of no more than US$3,970,000 (US $three million nine hundred and seventy thousand),

Any undrawn or unutilised amount of the Tranche A Facility at the end of each of the periods set out in paragraphs (i), (ii) and (iii) above shall automatically be cancelled without any cancellation fee;

(b)

any written evidence certified to be true and correct by the authorised persons of the Borrower showing the amount of the Borrower's indebtedness owed to TFB and the Industrial

18

Finance Corporation of Thailand and/or any or all of its suppliers of which the proceeds of such Tranche A Advance shall be applied against for repayment.

        The Borrower shall, on the Drawing Date, provide each of the Tranche A Lenders participating in such Tranche A Advance with a receipt (substantially in the form set out in Part II of Schedule 3 (Form of Receipt)) and a promissory note (in form and content to be prescribed by the relevant Tranche A Lender) duly completed and signed by the Authorised Directors, and within the next Business Day following each Drawing Date, provide each of such Tranche A Lenders with any written evidence (for example, cheques and wire transfer documents) certified to be true and correct by the authorised persons of the Borrower showing for what purposes such Tranche A Advance has been used and to whom the proceeds of such Tranche A Advance have been transferred.

        5.3    Limits on Tranche A Advances:    No Tranche A Advance may be drawn under the Tranche A Facility if, as a result of drawing such Tranche A Advance, the Total Tranche A Outstandings would exceed the Total Tranche A Commitments.

        5.4    Irrevocability:    A Drawing Notice shall be irrevocable and, subject to the provisions of this Agreement, the Borrower shall draw the relevant Tranche A Advance on the Drawing Date specified in the Drawing Notice.

        5.5    Notice to Lenders:    When the Facility Agent actually receives a Drawing Notice pursuant to clause 5.2 (Drawdown), it shall notify each of the Tranche A Lenders of the details of, and the amount of such Tranche A Lender's participation in, the proposed Tranche A Advance and each Tranche A Lender shall, subject to the provisions of this Agreement, make available to the Borrower on the Drawing Date its participation in that Tranche A Advance.

Interest

        6.1    Period:    The following provisions shall apply to the duration of Interest Periods for Tranche A Advances:

(a)

each Interest Period shall be 3 (three) months;



(b)

the first Interest Period shall commence on the Drawing Date of that Tranche A Advance and end on the last day of the calendar quarter in which such Tranche A Advance has been drawn and each successive Interest Period shall commence on the last day of the previous one;



(c)

subject to clause 6.1(d) below, an Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day, unless the result of such extension would be that such Interest Period would end on a day in the next following calendar month, in which event such Interest Period shall end on the last preceding Business Day;



(d)

any Interest Period which would extend beyond a Repayment Date relating to a Tranche A Advance shall be of such duration that it shall end on that Repayment Date; and



(e)

the Borrower and the Facility Agent, with the written consent of all Tranche A Lenders, may enter into such arrangements as they may agree for the consolidation or splitting of Tranche A Advances.

        6.2    Rate and Payment:    The rate of interest payable on a Tranche A Advance for each Interest Period shall be the rate per annum determined by the Facility Agent to be the aggregate of:

(a)

LIBOR; and



(b)

the Margin.

19

        Interest payable under this clause shall be calculated on the basis of actual days elapsed (not counting within an Interest Period the last day of that Interest Period) and a year of 360 (three hundred and sixty) days, or otherwise as market convention dictates, and shall be paid on each Tranche A Advance by the Borrower for the account of the Tranche A Lenders in arrears on each Interest Payment Date in the currency applicable to that Tranche A Advance.

20

Repayment

        7.1    Repayment:    Subject to the provisions of this Agreement, the Tranche A Advances shall be repaid by the Borrower in 20 (twenty) quarterly instalments, in the amounts and on the dates shown below:

		Amount Repayable (in US$)
	Repayment Dates	TFB	BAY
1.	30 June 2001	639,500	409,000
2.	30September 2001	639,500	409,000
3.	31 December 2001	639,500	409,000
4.	31 March 2002	639,500	409,000
5.	30 June 2002	639,500	409,000
6.	30 September 2002	639,500	409,000
7.	31 December 2002	639,500	409,000
8.	31 March 2003	639,500	409,000
9.	30 June 2003	639,500	409,000
10.	30 September 2003	639,500	409,000
11.	31 December 2003	639,500	409,000
12.	31 March 2004	639,500	409,000
13.	30 June 2004	639,500	409,000
14.	30 September 2004	639,500	409,000
15.	31 December 2004	639,500	409,000
16.	31 March 2005	639,500	409,000
17.	30 June 2005	639,500	409,000
18.	30 September 2005	639,500	409,000
19.	31 December 2005	639,500	409,000
20.	31 March 2006	639,500	409,000
	Total	12,790,000	8,180,000

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SECTION IV:
TRANCHE B FACILITIES

General

        8.1    Tranche B Facilities:    Each Tranche B Lender will make available the Tranche B Facilities to the Borrower on terms and conditions set out in this Agreement, provided that:

(a)

the aggregate principal amount of the Tranche B L/C Outstandings, the Tranche B T/R Outstandings and the Tranche B Loan Outstandings shall at any time not exceed US$4,000,000 (US$ four million); and



(b)

the Borrower may at its option use, whether singly or collectively, any or all of the Tranche B L/C Facility, the Tranche B T/R Facility and/or the Tranche B Loan Facility, subject to the periods and amounts set out in clause 8.2 (Amounts and Periods) below.

        8.2    Amounts and Periods:    The aggregate principal amount of the Tranche B Facilities which the Borrower may use during each of the following periods under the Availability Period relating to the Tranche B Facilities shall be subject to the following maximum amounts:

(a)

commencing on the Effective Date and ending at the end of the Business Day in Bangkok on 23 April 2001, up to an aggregate principal amount of US$2,000,000 (US$ two million); and



(b)

commencing on 24 April 2001 and ending at the end of the Business Day in Bangkok on 26 November 2001, up to an aggregate principal amount of US$2,000,000 (US$ two million).

        Any undrawn or unutilised amount of the Tranche B Facilities at the end of each of the periods set out in paragraphs (a) and (b) above shall automatically be cancelled without any cancellation fee.

Tranche B Letter of Credit Facility

        9.1    Conditions Precedent:    Subject to satisfaction of the conditions specified in clause 4.2 (Conditions to Facilities), no Tranche B Lender will be obliged to participate in an Issue of a Tranche B Letter of Credit until the following conditions precedent have been satisfied:

(a)

on the relevant Issue Date, no Default has occurred or would occur as a result of the Issue;



(b)

each of the representations and warranties mentioned in clause 23.2 (Representations After Signing) remains accurate at the Issue Date as if given on that date by reference to the facts and circumstances then existing; and



(c)

the Borrower has given to the Tranche B Lender issuing the Tranche B Letter of Credit information relating to the obligations of the Borrower to which the Tranche B Letter of Credit relates as such Tranche B Lender may reasonably request;



(d)

the Borrower has paid fees and expenses in accordance with clause 9.4 (Fees and Expenses) which are due and payable in respect of the Tranche B Letter of Credit; and



(e)

form of the Tranche B Letter of Credit is acceptable to the Tranche B Lender issuing such Tranche B Letter of Credit.

        9.2    Issue of Tranche B Letter of Credit:    Subject to the provisions of this Agreement, the Borrower may, on Business Days during the Availability Period relating to the Tranche B Facilities, make a request for an Issue of a Tranche B Letter of Credit by delivering to a Tranche B Lender not less than 3 (three) Business Days prior to the proposed Issue Date a duly completed request (which shall be irrevocable) in the form to be specified by such Tranche B Lender.

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        9.3    Limits on Tranche B Letters of Credit:    No Tranche B Letter of Credit may be issued under the Tranche B L/C Facility if, as a result of such Issue:

(a)

the Total Tranche B L/C Outstandings would exceed the Total Tranche B L/C Commitments;



(b)

the Total Tranche B L/C Outstandings would exceed the maximum amount made available during each of the relevant periods set out in clause 8.2 (Amounts and Periods); or



(c)

the term of such Tranche B Letter of Credit would end beyond the last Conversion Date.

        9.4    Fees and Expenses:    The Borrower shall pay the following fees and expenses in respect of a Tranche B Letter of Credit:

(a)

Opening Letter of Credit Fee: The Borrower shall pay opening letter of credit fees in an amount and in the currency to be specified by the relevant Tranche B Lender in accordance with its normal banking practice and such payment shall be due and payable by the Borrower within the period to be specified by that Tranche B Lender.



(b)

Engagement Fee: In cases of a term Tranche B Letter of Credit, the Borrower shall pay an engagement fee in an amount and in the currency to be specified by the relevant Tranche B Lender in accordance with its normal banking practice and such payment shall be due and payable by the Borrower within the period to be specified by that Tranche B Lender.



(c)

Expenses: The Borrower shall pay any expenses (including, without limitation, any stamp duty) which may arise in connection with the utilisation of the Tranche B L/C Facility within the period to be specified in an invoice issued by the relevant Tranche B Lender or otherwise in accordance with the normal banking practice of that Tranche B Lender.

        Each of these fees and expenses shall be calculated in the denominated currency of each Tranche B Letter of Credit, but payable by the Borrower to the relevant Tranche B Lender in Baht at the Selling Rate.

        9.5    Indemnification

(a)

Each of the Tranche B Lenders shall at all times:



(i)

be entitled to discharge (whether by making payment, exercising rights of set-off, or combining accounts or otherwise) any actual liability and any sum due in relation to any Tranche B Letter of Credit issued by it without making any further investigation or enquiry;



(ii)

need not concern itself with the propriety of any claim made or purported to be made under and in the manner required by the terms of any Tranche B Letter of Credit; and



(iii)

be entitled to assume that any person expressed in each Tranche B Letter of Credit as being entitled to make requests or claims in relation to any sum so due thereunder or to receive payments thereunder is so entitled;

and, accordingly, the right of each Tranche B Lender to make any payment under any Tranche B Letter of Credit shall be in no way affected if it should appear that, as between such Tranche B Lender and the beneficiary of the relevant Tranche B Letter of Credit, such beneficiary was not entitled for whatever reason to demand such payment under that Tranche B Letter of Credit.

(b)

If, at any time, any Tranche B Lender is required to pay or pays any amount (such amount being hereinafter referred to as a relevant amount) to any beneficiary or beneficiaries pursuant to a Tranche B Letter of Credit, then an amount equal to such relevant amount shall become immediately due from, and payable by, the Borrower, denominated in the currency in which such a Tranche B Letter of Credit is denominated.

23

(c)

The Borrower hereby agrees, in addition to the obligations assumed by it under clause 9.5(b), to pay to each Tranche B Lender the amount paid by it in respect of any Tranche B Letter of Credit issued by it, to indemnify and hold harmless such Tranche B Lender from and against all liabilities, costs (including, without limitation, any costs incurred in funding any amount which falls due from any Tranche B Lender pursuant to a Tranche B Letter of Credit), losses, damages, expenses and any default interest if such amount is not paid upon demand which such Tranche B Lender may at any time incur or sustain pursuant to any Tranche B Letter of Credit issued by it. Any sum due and payable under this clause which is not paid on the due date shall be subject to default interest at the Default Interest Rate.



(d)

A Tranche B Lender may, at any time, by notice to the Borrower demand any amount payable by the Borrower to that Tranche B Lender to be redenominated from any non-Baht denominated currency into Baht at the Selling Rate and shall become payable by the Borrower in Baht, in which case the Borrower may prepay such redenominated amount in Baht to that Tranche B Lender without any prepayment fee provided that such prepayment shall be made within 30 (thirty) days after the date of redenomination together with interest accrued thereon (calculated from the date of redenomination up until the date of payment) at the rate to be determined by that Tranche B Lender in accordance with its normal banking practice.



(e)

A certificate of a Tranche B Lender, as to the amount of the actual liability of, or amount required to be paid by, such Tranche B Lender to discharge any sum due in relation to any Tranche B Letter of Credit issued by it shall, save for manifest error, be conclusive and binding upon the Borrower for the purposes of this Agreement and prima facie evidence of the amounts so required to be charged by such Tranche B Lender in any legal action or proceedings arising in connection herewith.

        9.6    Conversion of Tranche B L/C Outstandings:    A Tranche B Letter of Credit to be issued under this clause 9 will be payable by the relevant Tranche B Lender to any person expressed in such Tranche B Letter of Credit as being entitled to make requests or claims in relation to any sum so due thereunder or to receive payments thereunder in accordance with the terms and conditions of such Tranche B Letter of Credit. Following the payment by such Tranche B Lender in respect of such Tranche B Letter of Credit, any amount so paid shall be converted into a Tranche B T/R Advance subject to the terms and conditions set out in clause 10 (Tranche B Trust Receipt Facility) or, if the date of such payment by that Tranche B Lender falls on a day which is a Conversion Date, shall be converted automatically into a Tranche B Loan Advance in accordance with clause 11.3 (Conversion).

Tranche B Trust Receipt Facility

        10.1    Existing TFB T/R Facility:    Throughout the period between the Signing Date and the date immediately preceding the Effective Date, TFB may at its option continue granting or providing on a revolving basis the Existing TFB T/R Facility on terms and conditions in accordance with its normal banking practice. As from the Effective Date, the Existing TFB T/R Facility shall be treated for all purposes and to all intents as part of the Tranche B T/R Commitment, the Tranche B T/R Advance and/or the Tranche B T/R Outstandings, as the case may be, in respect of TFB under the Tranche B T/R Facility and shall, thereafter, be subject to the terms and conditions of this Agreement in all respects.

        10.2    Conditions Precedent:    Subject to the satisfaction of the conditions specified in clause 4.2 (Conditions to Facilities), no Tranche B Lender will be obliged to participate in a utilisation of a Tranche B Trust Receipt until the following conditions precedent have been satisfied:

(a)

on the date of utilisation, no Default has occurred or would occur as a result of the utilisation;

24

(b)

each of the representations and warranties mentioned in clause 23.2 (Representations After Signing) remains accurate at the date of utilisation as if given on that date by reference to the facts and circumstances then existing; and



(c)

the form of the Tranche B Trust Receipt is acceptable to the Tranche B Lender proposing to issue such Tranche B Trust Receipt.

        10.3    Utilisation:    Subject to the provisions of this Agreement, the Borrower may on Business Days during the Availability Period relating to the Tranche B Facilities make a request for utilisation of a Tranche B T/R Advance (including any Conversion of the Tranche B L/C Outstandings into a Tranche B T/R Advance) by delivering the following documents to the relevant Tranche B Lender no later than 3 (three) Business Days prior to the date of utilisation or the Conversion Date:

(a)

a duly completed request (which shall be irrevocable) in the form prescribed by the relevant Tranche B Lender in accordance with its normal banking practice;



(b)

a Tranche B Trust Receipt, in the form prescribed by the relevant Tranch B Lender in accordance with its normal banking practice, duly completed and executed by the Borrower in such Tranche B Lender's favour;



(c)

a promissory note duly completed and signed by the Authorised Directors in form and content to be prescribed by the relevant Tranche B Lender in accordance with its normal banking practice; and



(d)

any other supporting documents or information as reasonably requested by the relevant Tranche B Lender in accordance with its normal banking practice.

        Thereafter, the relevant Tranche B Lender will accept the Tranche B Trust Receipt executed in its favour and will release to the Borrower the shipping documents to which such Tranche B Trust Receipt relates.

        10.4    Limits on Tranche B Trust Receipts:    No Tranche B Trust Receipt may:

(a)

be executed by the Borrower if, as a result of such execution, the Tranche B T/R Outstandings of each Tranche B Lender would exceed the Tranche B T/R Commitments of such Tranche B Lender or would exceed the maximum amount made available during each of the relevant periods set out in clause 8.2 (Amounts and Periods); and



(b)

have a term ending beyond the last Conversion Date or have a term exceeding 180 (one hundred and eighty) days from the date of its being executed by the Borrower.

        10.5    Interest:    The Interest Period for each Tranche B Trust Receipt shall be determined in accordance with the normal banking practice of the relevant Tranche B Lender. The rate of interest payable on the Tranche B T/R Outstandings for each Interest Period shall be as follows:

(a)

in cases of Tranche B Trust Receipts denominated in US dollars, the rate per annum determined by the Facility Agent to be the aggregate of LIBOR and the Margin; and



(b)

in cases of Tranche B Trust Receipts denominated in any currency other than US dollars, the rate per annum determined by the relevant Tranche B Lender to be the rate applicable to such currency as quoted by it in accordance with its normal banking practice.

        Interest payable on the Tranche B T/R Outstandings shall be made in accordance with the normal banking practice of the relevant Tranche B Lender.

        10.6    Conversion of Tranche B T/R Outstandings:    Subject to the provisions of this Agreement, all Tranche B T/R Outstandings of each Tranche B Lender shall be automatically converted into Tranche B Loan Advances on each of the Conversion Dates.

25

Tranche B Loan Facility

        11.1    Conditions Precedent:    Subject to satisfaction of the conditions specified in clause 4.2 (Conditions to Facilities), no Tranche B Lender will be obliged to participate in a Tranche B Loan Advance, whether by way of loan pursuant to clause 11.2 (Drawdown) or by way of Conversion pursuant to clause 11.3 (Conversion), until the following conditions precedent have been satisfied:

(a)

on the date of the relevant Drawing Notice and on the relevant Drawing Date or the relevant Conversion Date, as the case may be, no Default has occurred or would occur as a result of making the Advance; and



(b)

each of the representations and warranties mentioned in clause 23.2 (Representations After Signing) remains accurate at the Drawing Date or the Conversion Date, as the case may be, as if given on that date by reference to the facts and circumstances then existing.

        11.2    Drawdown:    Subject to the provisions of this Agreement, the Borrower may on Business Days during the Availability Period relating to the Tranche B Facilities make a request for a Tranche B Loan Advance by delivering to the Facility Agent a duly completed Drawing Notice not less than 5 (five) Business Days before the proposed Drawing Date, specifying in respect of the proposed Tranche B Loan Advance the proposed Drawing Date (which shall be a Business Day within the Availability Period), in which case each Tranche B Lender shall participate in such Tranche B Loan Advance in the proportion which its Tranche B Loan Commitment bears to the Total Tranche B Loan Commitments.

        The Borrower shall, on the relevant Drawing Date, provide each of the Tranche B Lenders participating in such Tranche B Loan Advance with a receipt substantially in the form set out in Part II of Schedule 3 (Form of Receipt), duly completed and signed by the Authorised Directors.

        11.3    Conversion:    Subject to the provisions of this Agreement, on each Conversion Date, certain Tranche B L/C Outstandings will be converted into a Tranche B Loan Advance in accordance with clause 9.6 (Conversion of Tranche B L/C Outstandings) and all Tranche B T/R Outstandings shall be converted automatically into a Tranche B Loan Advance in accordance with clause 10.6 (Conversion of Tranche B T/R Outstandings). On such Conversion Date, the Borrower shall provide each of the relevant Tranche B Lenders with the following documents:

(a)

a receipt substantially in the form set out in Part II of Schedule 3 (Form of Receipt) duly completed and signed by the Authorised Directors;



(b)

a promissory note duly completed and signed by the Authorised Directors in form and content to be prescribed by the relevant Tranche B Lender in accordance with its normal banking practice; and



(c)

any other supporting documents or information as reasonably requested by the relevant Tranche B Lender in accordance with its normal banking practice.

        Upon each Conversion, the Tranche B L/C Outstandings and the Tranche B T/R Outstandings which have been so converted shall be reduced to 0 (zero) and treated for all purposes and to all intents as a Tranche B Loan Advance.

        11.4    Limits on Tranche B Loan Advances:    No Tranche B Loan Advance may be drawn or converted pursuant to clause 11.2 (Drawdown) or 11.3 (Conversion) under the Tranche B Loan Facility if, as a result of such drawing or Conversion, the Total Tranche B Loan Outstandings would exceed the Total Tranche B Loan Commitments or would exceed the maximum amount made available during each of the relevant periods set out in clause 8.2 (Amounts and Periods).

26

        11.5    Interest Period:    The following provisions shall apply to the duration of Interest Periods for Tranche B Loan Advances:

(a)

each Interest Period shall be 3 (three) calendar months;



(b)

the first Interest Period shall commence on the relevant Drawing Date or the relevant Conversion Date, as the case may be, of that Tranche B Loan Advance and end on the last day of the calendar quarter in which such Tranche Loan B Advance has been drawn or converted into and each successive Interest Period shall commence on the last day of the previous one;



(c)

subject to clause 11.5(d), an Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day unless the result of such extension would be that such Interest Period would end on a day in the next following calendar month, in which event such Interest Period shall end on the last preceding Business Day;



(d)

any Interest Period which would extend beyond a Repayment Date relating to a Tranche B Loan Advance shall be of such duration that it shall end on that Repayment Date; and



(e)

the Borrower and the Facility Agent, with the consent of all Tranche B Lenders, may enter into such arrangements as they may agree for the consolidation or splitting of Tranche B Loan Advances.

        11.6    Rate and Payment:    The rate of interest payable on a Tranche B Loan Advance for each Interest Period shall be the rate per annum determined by the Facility Agent to be the aggregate of:

(a)

LIBOR; and



(b)

the Margin.

        Interest payable under this clause 11.6 shall be calculated on the basis of actual days elapsed (not counting within an Interest Period the last day of that Interest Period) and a year of 360 (three hundred and sixty) days, or otherwise as market convention dictates, and shall be paid on each Tranche B Loan Advance by the Borrower to the Tranche B Lenders in arrears on each Interest Payment Date in the currency applicable to that Tranche B Loan Advance.

27

        11.7    Repayment:    Subject to the provisions of this Agreement, the Tranche B Loan Advances shall be repaid by the Borrower in 22 (twenty two) quarterly instalments, in the amounts and on the dates shown below:

Amounts payable (in US$)	Repayment Dates	Percentage of Amount of Tranche B Loan Advances Drawn or Converted into on or prior to July 2001 and 30 September 2001	Percentage of Amount of Tranche B Loan Advances Drawn or Converted into on or prior to 30 June 2001	Percentage of Amount of Tranche B Loan Advances Drawn or Converted into on or prior to 1 October 2001 and 31 December 2001
1	30 June 2001	5%	5%	5%
2	30 September 2001	5%	5%	5%
3	31 December 2001	5%	5%	5%
4	31 March 2002	5%	5%	5%
5	30 June 2002	5%	5%	5%
6	30 September 2002	5%	5%	5%
7	31 December 2002	5%	5%	5%
8	31 March 2003	5%	5%	5%
9	30 June 2003	5%	5%	5%
10	30 September 2003	5%	5%	5%
11	31 December 2003	5%	5%	5%
12	31 March 2004	5%	5%	5%
13	30 June 2004	5%	5%	5%
14	30 September 2004	5%	5%	5%
15	31 December 2004	5%	5%	5%
16	31 March 2005	5%	5%	5%
17	30 June 2005	5%	5%	5%
18	30 September 2005	5%	5%	5%
19	31 December 2005	5%	5%	5%
20	31 March 2006	5%	5%	5%
21	30 June 2006	5%		5%
22	30 September 2006	5%
Total		100%	100%	100%

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SECTION V
TRANCHE C FACILITY

Tranche C Facility

        12.1    Existing BAY Facilities:    Throughout the period between the Signing Date and the date immediately preceding the Effective Date, BAY may at its option continue granting or providing on a revolving basis the Existing BAY Facilities on terms and conditions in accordance with its normal banking practice. As from the Effective Date, the Existing BAY Facilities shall be deemed and treated for all purposes and to all intents as part of the Tranche C Commitment, the Tranche C Advance and/or the Tranche C Outstandings, as the case may be, in respect of BAY under the Tranche C Facility and shall, thereafter, be subject to the terms and conditions of this Agreement in all respects.

        12.2    Existing TFB Packing Credit Facility:    Throughout the period between the Signing Date and the date immediately preceding the Effective Date, TFB may at its option continue granting or providing on a revolving basis the Existing TFB Packing Credit Facility on terms and conditions in accordance with its normal banking practice. As from the Effective Date, the Existing TFB Packing Credit Facility shall be treated for all purposes and to all intents as part of the Tranche C Commitment, the Tranche C Advance and/or the Tranche C Outstandings, as the case may be, in respect of TFB under the Tranche C Facility and shall, thereafter, be subject to the terms and conditions of this Agreement in all respects.

        12.3    Conditions Precedent:    Subject to satisfaction of the conditions specified in clause 4.2 (Conditions to Facilities), no Tranche C Lender will be obliged to participate in a Tranche C Advance until the following conditions precedent have been satisfied:

(a)

on the relevant Drawing Date, no Default has occurred or would occur as a result of making the Tranche C Advance;



(b)

each of the representations and warranties mentioned in clause 23.2 (Representations After Signing) remains accurate at the Drawing Date as if given on that date by reference to the facts and circumstances then existing;



(c)

the Borrower has given to the relevant Tranche C Lender information relating to the purposes of the Tranche C Advance and the details of supply contracts, letters of credit and/or purchase orders to which the Tranche C Advance relates as such Tranche C Lender may reasonably request, provided that such supply contracts, letters of credit and/or purchase orders contain terms and conditions which are reasonably acceptable to such Tranche C Lender (and where they are not so reasonably acceptable, such Tranche C Lender shall supply its reasons to the Borrower as to why they are not reasonably acceptable); and



(d)

the Borrower complies with such Tranche C Lender's normal banking practice in respect of short-term loan and packing credit facilities (including without limitation providing and submitting any supporting documents as reasonably requested by such Tranche C Lender in accordance with its normal banking practice).

        12.4    Drawdown:    Subject to the provisions of this Agreement, the Borrower may on Business Days during the Availability Period relating to the Tranche C Facility make a request for a Tranche C Advance by notifying the relevant Tranche C Lender in writing not less than 3 (three) Business Days before the proposed Drawing Date. The Borrower shall, on the Drawing Date, provide such Tranche C Lender with a promissory note duly completed and signed by the Borrower as evidence of its indebtedness under such Tranche C Advance in form and content to be prescribed by such Tranche C Lender and/or, if requested by such Tranche C Lender, any other document which may be requested by such Tranche C Lender in accordance with its normal banking practice.

29

        12.5    Limits on Tranche C Advances:    No Tranche C Advance may be drawn under the Tranche C Facility if, as a result of drawing such Tranche C Advance, the Total Tranche C Outstandings would exceed the Total Tranche C Commitments.

Interest

        13.1    Interest Period:    The duration of each Interest Period for a Tranche C Advance shall be determined in accordance with the normal banking practice of the relevant Tranche C Lender, provided that the first Interest Period shall commence on the Drawing Date of that Tranche C Advance.

        13.2    Interest Rate:    The rate of interest payable on a Tranche C Advance for each Interest Period shall be the prevailing market rate per annum quoted by the relevant Tranche C Lender from time to time for the provision of general working capital facilities in respect of such currency. Interest payable under this Agreement shall be calculated and determined in accordance with the normal banking practice of such Tranche C Lender and a year of:

(a)

in the case of a Tranche C Advance denominated in US dollars, 360 (three hundred and sixty) days;



(b)

in the case of a Tranche C Advance denominated in Baht, 365 (three hundred and sixty five) days; and



(c)

in the case of a Tranche C Advance denominated in other currencies, such duration as is the normal banking practice of such Tranche C Lender, or otherwise as market convention dictates, and shall be paid on each Tranche C Advance by the Borrower to such Tranche C Lender in arrears on each Interest Payment Date in the currency applicable to that Tranche C Advance.

Repayment

        14.1    Supply Contracts and Purchase Orders:    In respect of a Tranche C Advance drawn for payments under supply contracts and purchase orders which the Borrower is obliged to make, the Borrower shall repay such Tranche C Advance to the relevant Tranche C Lender on either of the following dates, whichever occurs first:

(a)

the date falling 180 (one hundred and eighty) days from the relevant Drawing Date; or



(b)

the date falling 30 (thirty) days from the relevant shipment date of goods which are the subject matter of such supply contracts and/or purchase orders.

        14.2    Letters of Credit:    In respect of a Tranche C Advance drawn for payments under letters of credit which the Borrower is obliged to make, the Borrower shall repay such Tranche C Advance to the relevant Tranche C Lender on either of the following dates, whichever occurs first:

(a)

the date falling 180 (one hundred and eighty) days from the relevant Drawing Date; or



(b)

the expiry date of the relevant letter of credit.

SECTION VI:
TRANCHE D FACILITY

Tranche D Facility

        15.1    Conditions Precedent:    Subject to satisfaction of the conditions specified in clause 4.2 (Conditions to Facilities), no Tranche D Lender will be obliged to participate in a Tranche D Advance until the following conditions precedent have been satisfied:

30

(a)

on the relevant Drawing Date, no Default has occurred or would occur as a result of making the Tranche D Advance;



(b)

each of the representations and warranties mentioned in clause 23.2 (Representations After Signing) remains accurate at the Drawing Date as if given on that date by reference to the facts and circumstances then existing;



(c)

a Tranche D Overdraft Agreement has been entered into between the Borrower and the relevant Tranche D Lender and remains in full force and effect on the Drawing Date; and



(d)

contemporaneously with such Tranche D Advance, the Borrower complies with the normal banking practice in respect of overdraft credit facilities of the Tranche D Lender participating in such Tranche D Advance.

        15.2    Drawdown:    Subject to the provisions of this Agreement, the Borrower may, on Business Days during the Availability Period relating to the Tranche D Facility:

(a)

draw cheques in Baht on; or



(b)

withdraw money from, the account with a Tranche D Lender which is designated by such Tranche D Lender as the Borrower's overdraft account for the purposes of this Tranche D Facility.

        15.3    Limits on Tranche D Advances:    No Tranche D Lender will be obliged to permit any drawdown or utilisation of the Tranche D Facility if, as a result of such drawdown or utilisation, the Tranche D Outstandings of such Tranche D Lender would exceed its Tranche D Commitment.

        15.4    Interest:

(a)

The rate of interest payable on a Tranche D Advance per annum shall be the MOR Average in accordance with the normal banking practice of the relevant Tranche D Lender.



(b)

Interest will accrue on the Tranche D Outstandings on a daily basis and shall be due and payable by the Borrower in accordance with the normal banking practice of such Tranche D Lender.



(c)

Each Interest Period for Tranche D Advances shall be determined in accordance with the normal banking practice of such Tranche D Lender.



(d)

If the Borrower fails to pay accrued interest when due, such interest shall be added to and form part of the Tranche D Advances in accordance with normal banking practice of such Tranche D Lender.

        15.5    Repayment:    Subject to the provisions of this Agreement, the Borrower may repay the Tranche D Outstandings to the Tranche D Lenders at any time, but shall in any event repay in full all the Tranche D Outstandings on the last Repayment Date of Tranche B Loan Advances specified in clause 11.7 (Repayment).

SECTION VII:
TRANCHE E FACILITY

Tranche E Facility

        16.1    Conditions Precedent:    Subject to satisfaction of the conditions specified in clause 4.2 (Conditions to Facilities), no Tranche E Lender will be obliged to participate in an Issue of a Tranche E Guarantee until the following conditions precedent have been satisfied:

(a)

on the relevant Issue Date, no Default has occurred or would occur as a result of the Issue;

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(b)

each of the representations and warranties mentioned in clause 23.2 (Representations After Signing) remains accurate at the Issue Date as if given on that date by reference to the facts and circumstances then existing; and



(c)

the Borrower shall provide the Tranche E Lender issuing the Tranche E Guarantee with information and all supporting documents (to the extent reasonably requested by such Tranche E Lender) relating to the liabilities to be secured by such Tranche E Guarantee which must be in accordance with the provisions of clause 2.2(d) (Purpose), provided that such information and supporting documents shall be reasonably acceptable to such Tranche E Lender (and where they are not so reasonably acceptable, such Tranche E Lender shall supply its reasons to the Borrower as to why they are not reasonably acceptable);



(d)

the Borrower has paid guarantee fees which are due and payable in respect of the Tranche E Guarantee; and



(e)

form of the Tranche E Guarantee is acceptable to the Tranche E Lender issuing such Tranche E Guarantee.

        16.2    Issue of Tranche E Guarantees:    Subject to the provisions of this Agreement, the Borrower may, on Business Days during the Availability Period relating to the Tranche E Facility, make a request for an Issue of a Tranche E Guarantee by delivery to a Tranche E Lender not less than 5 (five) Business Days prior to the proposed Issue Date a duly completed request (which shall be irrevocable) in the form to be specified by such Tranche E Lender.

        16.3    Limits on Tranche E Guarantees:    No Tranche E Lender will be obliged to issue a Tranche E Guarantee if, as a result of such Issue, its Tranche E Guarantee Amount would exceed its Tranche E Commitment.

        16.4    Guarantee Fees:    The Borrower shall pay a guarantee fee in relation to a Tranche E Guarantee at the rate to be agreed between the Borrower and the relevant Tranche E Lender and such payment shall be made by the Borrower in accordance with the normal banking practice of such Tranche E Lender.

        16.5    Indemnification:

(a)

If, at any time, any Tranche E Lender is required to pay or pays any amount (such amount being hereinafter referred to as a relevant amount) to any beneficiary pursuant to a Tranche E Guarantee, then an amount equal to such relevant amount shall become immediately due from, and payable by, the Borrower.



(b)

The Borrower hereby agrees, in addition to the obligations assumed by it under clause 16.5(a), to pay to each Tranche E Lender the amount paid by it under a Tranche E Guarantee, to indemnify and hold harmless each Tranche E Lender on demand from and against all liabilities, costs (including, without limitation, any costs incurred in funding any amount which falls due from any Tranche E Lender pursuant to any Tranche E Guarantee), losses, damages, expenses and any default interest if such amount is not paid upon demand which such Tranche E Lender at any time incurs or sustains pursuant to each Tranche E Guarantee issued by it. Any sum due and payable under this clause 16.5(b) and clause 16.5(a) which is not paid on the due date shall be subject to default interest at the Default Interest Rate.



(c)

A certificate of a Tranche E Lender, as to the amount of the actual liability of, or amount required to be paid by, such Tranche E Lender to discharge any sum due in relation to any Tranche E Guarantee issued by it shall, save for manifest error, be conclusive and binding upon the Borrower for the purposes of this Agreement and be deemed prima facie evidence of the amounts so required to be charged by such Tranche E Lender in any legal action or proceedings arising in connection herewith.

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SECTION VIII:
PREPAYMENT AND CANCELLATION

Prepayment and Cancellation

        17.1    Prepayment of Tranche A Advances:    The Borrower may prepay any Tranche A Advance on any Interest Payment Date relating to the Tranche A Facility in whole or in part (in a minimum amount of US$2,000,000 (US$ two million) and in integral multiples thereafter of US$500,000 (US$ five hundred thousand)) together with any breakage costs and other amounts due under clause 26 (Indemnity) provided that:

(a)

it has given the Facility Agent not less than 30 (thirty) days' written notice, identifying and stating the amount to be prepaid and the date of such prepayment; and



(b)

in addition to any amounts due under clause 26 (Indemnity), the Borrower shall pay to the Tranche A Lenders a fee of 2% (two per cent.) of the amount of the Tranche A Advance being prepaid under this clause, except where:



(i)

the source of funds for making such prepayment derives from cash generated from the conduct and operation of the Borrower's business;



(ii)

the source of funds for making such prepayment derives from moneys paid in for the subscription for shares upon an increase in the capital of the Borrower;



(iii)

such prepayment is made within 30 (thirty) days following the date on which any Tranche A Lender exercises its rights under this Agreement to redenominate any or all of its Tranche A Outstandings or any other amounts payable under the Tranche A Facility into Baht, provided that such prepayment shall be made together with interest accrued thereon (calculated from the date of redenomination up until the date of payment) at the rate to be determined by that Tranche A Lender in accordance with its normal banking practice; or



(iv)

such prepayment is made following the occurrence of any illegality, increased costs or market disruption event set out in clause 22 (Changes in Circumstances).

        The prepayment under this clause shall be applied to each Tranche A Lender rateably with the other Tranche A Lender under the Tranche A Facility towards the repayment obligations under clause 7.1 (Repayment) in inverse order of maturity.

        17.2    Prepayment of Tranche B Loan Advances:    The Borrower may prepay a Tranche B Loan Advance on any Interest Payment Date relating to the Tranche B Facility in whole or in part (in a minimum amount of US$1,000,000 (US$ one million) and in integral multiples thereafter of US$250,000 (US$ two hundred fifty thousand)) together with any breakage costs and other amounts due under clause 26 (Indemnity) provided that:

(a)

it has given the Facility Agent not less than 30 (thirty) days' written notice, identifying and stating the amount to be prepaid and the date of such prepayment; and



(b)

in addition to any amounts due under clause 26 (Indemnity), the Borrower shall pay to the Tranche B Lenders a fee of 2% (two per cent.) of the amount of the Tranche B Loan Advance being prepaid under this clause, except where:



(i)

the source of funds for making such prepayment derives from cash generated from the conduct and operation of the Borrower's business;



(ii)

the source of funds for making such prepayment derives from moneys paid in for the subscription for shares upon a capital increase of the Borrower;

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(iii)

such prepayment is made within 30 (thirty) days following the date on which any Tranche B Lender exercises its rights under this Agreement to redonominate any or all of its Tranche B Outstandings or any other amounts payable under the Tranche B Facilities into Baht, provided that such prepayment shall be made together with interest accrued thereon (calculated from the date of redenomination up until the date of payment) at the rate to be determined by that Tranche B Lender in accordance with its normal banking practice; or



(iv)

such prepayment is made following the occurrence of any illegality, increased costs or market disruption event set out in clause 22 (Changes in Circumstances).

        Any prepayment under this clause shall be applied to each Tranche B Lender rateably with the other Tranche B Lender under the Tranche B Loan Facility towards the repayment obligations under clause 11.7 (Repayment) in inverse order of maturity.

        17.3    Cancellation:    The Borrower may cancel any undrawn or unutilised part of the Tranche A Facility, the Tranche B Facilities, the Tranche C Facility, the Tranche D Facility and/or the Tranche E Facility (in respect of which no Drawing Notice has been served) in whole or in part at any time provided that:

(a)

it has given the Facility Agent not less than 30 (thirty) days' written notice stating the principal amount to be cancelled and the date of such cancellation; and



(b)

it shall pay to the relevant Lenders a fee of 1.0% (one per cent.) of the principal amount to be cancelled.

        For the avoidance of doubt, any cancellation under this clause as a result of a review by the Lenders in accordance with clause 24.2(h) (Guarantor's Shareholding) shall not be subject to any cancellation fee. Any cancellation in part shall be applied against the Tranche A Commitment, the Tranche B Commitments, the Tranche C Commitment, the Tranche D Commitment and/or the Tranche E Commitment (as the case may be) of each relevant Lender pro rata.

Supplementary Provisions Relating to Prepayment and Cancellation

        18.1    Additional Right of Prepayment and Cancellation:    If:

(a)

the Borrower is required to pay to a Lender any additional amounts under clause 20.1 (Withholdings); or



(b)

the Borrower is required to pay to a Lender any amount under clause 22.2 (Increased Costs),

        then, without prejudice to the obligations of the Borrower under those clauses, the Borrower may, whilst the circumstances continue, serve a notice of prepayment and cancellation on that Lender through the Facility Agent. On the date falling 5 (five) Business Days after the date of service of the notice, the Borrower shall prepay to such Lender all of that Lender's Outstandings. On prepaying a Lender's Outstandings under this clause, the Borrower shall pay to the relevant Lender accrued interest together with all other amounts due to that Lender (including any breakage costs or other amount payable under the indemnity contained in clause 26 (Indemnity)).

        18.2    Irrevocability:    Any notice under clause 17.1 (Prepayment of Tranche A Advances), 17.2 (Prepayment of Tranche B Loan Advances), 17.3 (Cancellation), or 18.1 (Additional Right of Prepayment and Cancellation) shall be irrevocable. The amount of any prepayment under clause 17 (Prepayment and Cancellation) shall become due and payable on the date specified in the relevant notice. No amount cancelled under clause 17.3 (Cancellation) or 18.1 (Additional Right of Prepayment and Cancellation) may subsequently be reinstated.

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        18.3    Redrawing:    Any amount which is prepaid under clause 17.1 (Prepayment of Tranche A Advances), 17.2 (Prepayment of Tranche B Loan Advances), or 18.1 (Additional Right of Prepayment and Cancellation) in respect of a Tranche A Advance or a Tranche B Advance may not be redrawn.

        18.4    Limitation:    No Borrower shall be entitled to prepay Advances or any part of them or cancel the Tranche A Facility or the Tranche B Facilities in whole or in part otherwise than as specifically provided in this Agreement.

SECTION IX:
PAYMENTS, TAXES AND DEFAULT INTEREST

Payment

        19.1    Payments:    All payments under this Agreement shall be made as follows:

(a)

in the case of payments by the Borrower, directly to the account of the relevant Lender at such bank as it may notify to the Borrower; and



(b)

in the case of payments by a Lender, directly to the account of the Borrower at such bank as it may notify to the Lenders.

        19.2    No Set-off or Counterclaim:    All payments made by the Borrower under this Agreement shall be made without any set-off or counterclaim.

        19.3    Date:    If any payment would otherwise be due on a day which is not a Business Day, it shall be due on the next succeeding Business Day unless the result of such an extension would be that such payment would be due on a day in the following calendar month, in which event such payment shall be due on the last preceding Business Day.

        19.4    Judgment Currency:    If, under any applicable Law, whether as a result of a judgment against the Borrower or the liquidation of the Borrower or for any other reason, any payment under or in connection with this Agreement is made or is recovered in a currency (the other currency) other than that it is required to be paid hereunder (the original currency), then, to the extent that the payment to any Finance Party (when converted at the rate of exchange on the date of payment or, in the case of a liquidation, the latest date for the determination of liabilities permitted by the applicable Law) falls short of the amount unpaid under this Agreement, the Borrower shall, as a separate and independent obligation, fully indemnify that Finance Party against the amount of the shortfall.

Taxes

        20.1    Withholdings:    All payments by the Borrower under this Agreement, whether in respect of principal, interest, fees or any other item, shall be made in full without any deduction or withholding in respect of Tax or otherwise unless the deduction or withholding is required by Law. If such a deduction or withholding is required or if any deduction or withholding in respect of Tax or otherwise falls to be made in respect of any payment to any Finance Party under this Agreement:

(a)

the Borrower shall ensure that the deduction or withholding does not exceed the minimum amount legally required;



(b)

the Borrower shall forthwith pay directly to the relevant Finance Party an additional amount calculated to ensure that the net amount received by that Finance Party (taking into account any deduction or withholding required on such additional amounts) will equal the full amount which would have been received by it had no such deduction or withholding been made; and



(c)

the Borrower shall furnish to the Facility Agent on behalf of that Finance Party, within the period for payment permitted by the relevant Law, either:

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(i)

a copy of an official receipt of the relevant taxation or other authorities involved in respect of all amounts so deducted or withheld; or



(ii)

if such receipts are not issued by the taxation or other authorities concerned on payment to them of amounts so deducted or withheld, a certificate of deduction or equivalent evidence of the relevant deduction or withholding.

        20.2    Tax Indemnity:    Without prejudice to clause 20.1 (Withholdings), if any Finance Party is required to make any payment of or on account of Tax in respect of any payments received or made hereunder, the Borrower shall upon demand of the Facility Agent promptly indemnify that Finance Party against such Tax (together with any interest, penalties, costs and expenses payable or incurred in connection therewith, but only to the extent that such interest, penalties, costs and expenses arise from the Borrower's failure or delay to so promptly indemnify), provided that this clause 20.2 shall not apply to any Tax on the overall net income of a Finance Party (or the overall net income of a division or branch of a Finance Party) in the jurisdiction in which it is incorporated or its Facility Office is located.

        20.3    Value Added Tax:    The amounts stated in this Agreement to be payable by the Borrower are exclusive of value added tax (VAT) which may be chargeable in connection with those amounts. If any VAT or other similar tax is so chargeable, it shall be paid by the Borrower at the same time as it pays the relevant amounts.

Default Interest

        21.    If:

(a)

an Event of Default under clause 25.1(a) (Non-payment) has occurred; or



(b)

any other Event of Default has occurred and the Facility Agent and/or the Security Agent, as the case may be, has delivered any notice to the Borrower as specified in clause 25.2 (Action on Event of Default),

        the Borrower shall pay interest in the currency in which such amount is denominated on all the outstanding Advances, whether or not due, at the Default Interest Rate. Interest under this clause 21 (Default Interest) shall accrue daily on the basis of a year of 360 (three hundred and sixty) days in the case of amounts payable in US dollars and a year of 365 (three hundred and sixty five) days in the case of amounts payable in Baht and be calculated from the due date until the date of actual payment.

        With the exception of interest payable under clause 15.4 (Interest) in respect of Tranche D Advances, if any interest on any Advance is unpaid for not less than one year, it will be added to that Advance and the whole shall bear interest at the rates provided in this clause.

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SECTION X:
CHANGES IN CIRCUMSTANCES

Changes in Circumstances

        22.1    Illegality:    Where the introduction, imposition or variation of any Law or any change in the interpretation or application of any Law makes it unlawful or impractical without breaching such Law for any Lender to allow all or part of its participation in the Facilities to remain outstanding or to fund all or part of its participation in any of the Facilities, as the case may be, or to carry out all or any of its other obligations under this Agreement or to charge or receive interest at the rate applicable under this Agreement, upon that Lender (following its consultation with the other Lender) notifying the Facility Agent:

(a)

the Facility Agent shall notify the Borrower and that Lender's Commitment shall forthwith be reduced to the extent necessary to cure such illegality;



(b)

the Borrower shall, at the end of the relevant Interest Period or, if such event would make it so unlawful or impractical prior to the end of the relevant Interest Period, on the date as required by Law, prepay to that Lender all of that Lender's participation in the Facilities together with interest accrued thereon to the date of prepayment without any prepayment fee.

        22.2    Increased Costs:    Subject to clause 22.3 (Increased Costs—Exceptions), where any Finance Party determines that the enactment, introduction or variation of any Law or any change in the interpretation or application of any Law, in each case, occurring after the Signing Date, (including, without limitation, any such Law relating to a change in the currency of a country, taxation, reserve asset, special deposit, cash ratio, liquidity or capital adequacy requirements and/or any other form of banking, fiscal, monetary or regulatory controls) would cause it to incur or suffer an increased cost, such Finance Party shall, following its consultation with the other Finance Parties, notify the Facility Agent upon its becoming aware of such event and the Borrower shall forthwith on demand pay to that Finance Party, such amounts as such Finance Party from time to time certifies to the Facility Agent to be necessary to indemnify it against such increased cost. The Borrower may also prepay to that Finance Party any Advance which has been affected by such increased cost together with interest accrued thereon to the date of prepayment without any prepayment fee.

        In this Agreement increased cost means:

(a)

any direct or indirect additional cost to a Finance Party of making, maintaining or funding its Commitment or performing its obligations under the Financing Documents; or



(b)

any direct or indirect cost or loss incurred or suffered by a Finance Party in connection with the reduction of the amount of any sum received or receivable by it or its effective rate of return in respect of its Commitment or its Outstandings; or



(c)

any direct or indirect cost or loss incurred or suffered by a Finance Party arising out of any requirement for a Finance Party to make any payment or suffer any Tax, cost or loss of relief or other benefits, or forgo any interest on, or calculated by reference to, any sum received or receivable by such Finance Party under this Agreement; or



(d)

any direct or indirect cost or loss incurred or suffered by a Finance Party in connection with the reduction of the rate of return to such Finance Party on its overall capital or on any class of its capital as a result of any change in the amount or nature of the capital resources required to be allocated in respect of such Lender's Commitment.

37

        22.3    Increased Costs—Exceptions:    The Borrower shall not be obliged to make any payment under clause 22.2 (Increased Costs) to the extent that the payment is:

(a)

one in respect of which the Finance Party is entitled to be compensated under any other provision of this Agreement; or



(b)

attributable to any Tax on or any change in the rate of Tax on the overall net income of that Finance Party (or the overall net income of a division or branch of that Finance Party) in the jurisdiction in which it is incorporated or its Facility Office is located; or



(c)

attributable to any change in the Facility Office or principal office of any Finance Party.

        22.4    Mitigation:    If any of clauses 20.1 (Withholdings), 20.2 (Tax Indemnity) or 22.2 (Increased Costs) operates in relation to any Finance Party to the detriment of the Borrower:

(a)

such Finance Party shall, upon the request of the Borrower, enter into discussions with the Borrower with a view to determining what mitigating action might be taken by such Finance Party; and



(b)

at the request of the Borrower, the Facility Agent will enter into discussions with the Borrower with a view to determining what mitigating action might be taken by the Facility Agent with respect to the administration of this Agreement by the Facility Agent.

        22.5    Market Disruption:    If, in relation to any Advance:

(a)

the Facility Agent is notified by any Lender that, by reason of circumstances affecting the Bangkok inter-bank market generally or the London inter-bank market generally, reasonable and adequate means do not or will not exist for ascertaining MOR Average or LIBOR, respectively, for the forthcoming Interest Period;



(b)

the Facility Agent is notified by any Lender that deposits in US dollars are not in the ordinary course of business available in the London inter-bank market generally for a period equal to any forthcoming Interest Period in amounts sufficient to fund its participation in any Advance; or



(c)

the Facility Agent is notified by Lenders (the Affected Lenders) whose Commitments aggregate more than 30% (thirty per cent.) of the Total Commitments that LIBOR applicable to any Advance does not represent their effective cost of funding their participations in such Advance during the forthcoming Interest Period,

in which case the Facility Agent shall forthwith notify the Borrower and each Lender, and:

(i)

no further Advances shall be made while such circumstances continue to exist;



(ii)

if, within 30 (thirty) days of the giving of the notice, the Borrower and the Facility Agent (in consultation with the Lenders or, in the case of (c), the Affected Lenders) fail to arrive, by negotiation in good faith, at an alternative basis acceptable to the Borrower and the Lenders for continuing the Facilities or the participations of the Affected Lenders (and any alternative basis agreed in writing shall be retroactive to and effective from the commencement of the relevant Interest Period), the Borrower shall prepay without any prepayment fee to the Lenders any or all part of the Total Outstandings or, in the case of (c), the participations of the Affected Lenders within 30 (thirty) days after the end of such 30 (thirty) day period together with accrued interest payable to each Lender or Affected Lender at a rate equal to the Margin plus the aggregate of the amounts certified by such Lender or Affected Lender, and notified through the Facility Agent to the Borrower, as being the cost to that Lender of continuing its Outstandings during the two periods referred to in this paragraph; and

38

(iii)

while any agreed alternative basis is in force, the Facility Agent in consultation with the Lenders or, in the case of (c), the Affected Lenders, shall periodically (but at least monthly) determine whether circumstances are such that the basis is no longer necessary; and if the Facility Agent so determines, it shall forthwith notify the Borrower and each Lender and that basis shall cease to be effective on a date specified by the Facility Agent after consultation with the Lenders.

SECTION XI:
REPRESENTATIONS AND UNDERTAKINGS

Representations and Warranties

        23.1    Representations On Signing:    The Borrower acknowledges that each of the Finance Parties has entered into the Financing Documents and participated in the syndication of the Facilities in full reliance on representations by the Borrower in the following terms, and the Borrower now warrants to each of the Finance Parties that:

(a)

Status: it is duly incorporated with limited liability and validly existing under the Laws of the Kingdom of Thailand;



(b)

Powers and authorisations: the documents which contain or establish its constitution include provisions which give power, and all necessary corporate authority has been obtained and action taken, for it to own its assets, carry on its business and operations as they are now being conducted, to sign and deliver, and perform the transactions contemplated in, the Financing Documents to which it is a party, and the Financing Documents to which it is a party constitute valid and binding obligations of it enforceable in accordance with their terms (except to the extent enforceability may be limited by bankruptcy, insolvency, moratorium and similar laws affecting creditors' rights generally);



(c)

Non-violation: neither the signing and delivery of the Financing Documents to which it is a party nor the performance of any of the transactions contemplated in any of them does or will contravene or constitute a default under, or cause to be exceeded, any limitation on it or the powers of its directors imposed by or contained in:



(i)

any Law by which it or any of its assets is bound or affected;



(ii)

any document which contains or establishes its constitution; or



(iii)

any agreement to which it or any of its Subsidiaries is a party or by which any of its or their assets is bound;

(d)

Consents: with the exception of the possible liability to stamp the originals of this Agreement, the Tranche D Overdraft Agreement, the Tranche B Letters of Credit and the registration of the Land and Building Mortgage Agreement, no authorisation, approval, consent, licence, exemption, registration, recording, filing or notarisation and no payment of any duty or tax and no other action whatsoever which has not been duly and unconditionally obtained, made or taken is necessary or desirable to ensure the validity, legality, enforceability or priority of the liabilities and obligations of it or the rights of each of the Finance Parties under the Financing Documents;



(e)

No default: no event has occurred which constitutes, or which with the giving of notice and/or the lapse of time and/or a relevant determination would constitute, a contravention of, or default under, any agreement or instrument by which it or any of its assets is bound or affected, being a contravention or default which might have a Material Adverse Effect on the business, assets or condition of it;

39

(f)

Litigation: no litigation, arbitration or administrative proceeding or claim, which could by itself or together with any other such proceedings or claims have a Material Adverse Effect, is presently in progress or pending or, to the knowledge of the Borrower, threatened against it or any of its assets;



(g)

Tax liabilities: all necessary returns have been delivered by or on behalf of it to the relevant taxation authorities and it is not in default in the payment of any Taxes, and no material claim is being asserted with respect to Taxes which is not disclosed in the most recent financial statements of the Borrower;



(h)

Accounts: the audited financial statements (including the income statement, balance sheet and cash flow statement) of the Borrower for the period ending 24 November 1999 have been prepared on a basis consistently applied in accordance with generally accepted accounting principles and practices in Thailand and give a true and fair view of the results of its operations for that year and the state of its affairs at that date, and in particular accurately disclose or reserve against all the liabilities (actual or contingent) of it;



(i)

Material adverse change: there has been no material adverse change in its consolidated financial condition since the date referred to in paragraph (h) (Accounts) above;



(j)

No security: other than the Permitted Security Interests, none of its assets is affected by any Security Interest, and it is not a party to, nor is it or any of its assets bound by, any order, agreement or instrument under which it is, or in certain events may be, required to create, assume or permit to arise any Security Interest;



(k)

Information: as and when delivered to the Finance Parties, all financial and other information in respect of the Borrower and its business operations is true and accurate in all material respects and all expressions of expectation, intention, belief and opinion contained therein were prepared and made on reasonable grounds after due and careful enquiry by the Borrower;



(l)

Affiliates: all agreements, transactions or arrangements with any of its affiliates, Subsidiaries or related parties (including any Subsidiary of the Guarantor) are in the ordinary course of its business and on arm's length commercial terms;



(m)

Parent Guarantee and Security Documents: subject to the qualifications in the legal opinions referred to in paragraphs (9) and (10) of Schedule 2 (Conditions Precedent Documents to Facilities) of this Agreement, each of the Parent Guarantee and the Security Documents will upon execution be enforceable in accordance with the terms thereof; and



(n)

Applicable Laws: it is in full compliance with all applicable Laws.

        23.2    Representations After Signing:    The Borrower shall be deemed to represent and warrant to each of the Finance Parties on every Drawing Date, Issue Date or Conversion Date and on the first day of any Interest Period, with reference to the facts and circumstances then subsisting, that each of the representations and warranties given by them contained in clause 23.1 (Representations On Signing) (other than in the case of paragraph (h) (Accounts) referring to the then most recent financial statements of the Borrower) remains true, accurate and correct.

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Undertakings

        24.1    Accounts and Information:    The Borrower undertakes with each of the Finance Parties that, from the Signing Date until all its liabilities and obligations under the Financing Documents have been permanently and unconditionally discharged:

(a)

Preparation of accounts: it will prepare the financial statements referred to in paragraph (b) (Information) below on a basis consistently applied in accordance with the Accounting Principles and those financial statements shall give a true and fair view of the results of its operations for the period in question and the state of its affairs as at the date to which the financial statements are made up;



(b)

Information: it will deliver to the Facility Agent in sufficient numbers for each of the Lenders:



(i)

as soon as they become available (and in any event within 60 (sixty) days of the end of each of its financial periods) copies of its consolidated annual (audited) financial statements for that period which shall contain an income statement, a balance sheet and a cash flow statement and be audited and certified by a firm of independent accountants of recognised international standing;



(ii)

as soon as they become available (and in any event within 45 (forty five) days of the end of each of its first three quarters of each of its financial periods) copies of its consolidated quarterly (unaudited) financial statements for that quarter which shall contain an income statement, a balance sheet and a cash flow statement;



(iii)

with each set of financial statements delivered under paragraphs (i) and (ii) above, a certificate of the Borrower setting out in reasonable detail computations establishing compliance with clause 24.4 (Financial Covenants) in form and content satisfactory to the Facility Agent;



(iv)

promptly, all notices or other documents despatched by the Borrower to its shareholders (or any class thereof), the holders of any debt securities or its creditors generally, provided that such notices or documents contain information which, if disclosed to the Lenders, may render the Lenders to determine that the Obligor's ability to observe or perform its obligations under the Financing Documents would be materially and adversely affected; and



(v)

promptly, such additional financial or other information as the Facility Agent may from time to time reasonably request;

(c)

Details of bank accounts: on the last Business Day of March of each calendar year, it will deliver to the Facility Agent a letter signed by its authorised persons setting out details of all bank accounts which the Borrower has at such time and such letter shall be in form and content reasonably satisfactory to the Facility Agent and shall include such matters as the balances standing in each bank account, the types of accounts and the financial institutions with which such accounts have been opened, the first letter of which shall be so delivered by the Borrower on the last Business Day of March 2002; and



(d)

Accounting date and auditor: it will inform the Facility Agent immediately after it proceeds with the change of the date of its financial year end from 24 November or the change of its auditor and, in the case of change in its auditor, it will use its best efforts to appoint a substitute or replacement auditor of recognised international standing.

41

        24.2    General Undertakings:    The Borrower undertakes with each of the Finance Parties that, from the Signing Date until all its liabilities and obligations under the Financing Documents have been permanently and unconditionally discharged:

(a)

Consents: it will obtain and promptly renew from time to time any authorisation, approval, consent, licence, exemption, registration, recording, filing or notarisation as may be necessary or desirable to ensure the validity, enforceability or priority of the liabilities and obligations of it or the rights of each of the Finance Parties under the Financing Documents to which it is a party and it shall comply with the terms of the same;



(b)

Compliance with Laws: it will promptly comply with all Laws and ensure that its business operations are implemented in compliance with all applicable standards, regulations and orders (including environmental regulations, standards and orders);



(c)

Default: if it becomes aware of the occurrence of a Default, it will forthwith notify the Facility Agent and provide the Facility Agent with full details of any steps which it is taking, or is considering taking, in order to remedy or mitigate the effect of the Default or otherwise in connection with it;



(d)

Litigation: promptly after becoming aware of the same, inform the Facility Agent of details of any litigation, arbitration or administrative proceeding or claim of the kind described in clause 23.1(f) (Litigation) and keep the Facility Agent informed from time to time of progress of such proceeding;



(e)

Insurance: it will procure that there is in effect adequate insurance cover over its assets of a type and in an amount which is consistent with good business practice in the electronic manufacturing industry and that it maintains such insurance with reputable and creditworthy insurance companies and that the Lenders are named as co-insured and sole loss payee on each such insurance policy;



(f)

Pari passu ranking: it will procure that the rights of the Finance Parties to recover any sums outstanding under this Agreement rank at least pari passu with the rights of all its existing and future unsecured lenders and creditors;



(g)

Export-Import Bank of Thailand: within 3 (three) Business Days after the Effective Date, it will issue a notice, which shall be in form and content reasonably satisfactory to the Facility Agent, to the Export-Import Bank of Thailand informing the Export-Import Bank of Thailand that the Lenders now become lenders to the Borrower pursuant to the terms of this Agreement and arrange for the Export-Import Bank of Thailand to acknowledge in writing the terms of such notice and forward the same to the Facility Agent within 10 (ten) Business Days after the Effective Date;



(h)

Guarantor's shareholding: it will promptly inform the Lenders through the Facility Agent in writing if the shareholding percentage of the Guarantor in the share capital of the Borrower falls below 75% (seventy five per cent.) of the total issued share capital, in which case the Lenders shall have the right to review the availability of any of the Facilities, provided always that any reduction, cancellation or termination of any of the Facilities as a result of such review may not take effect within 3 (three) months after the Guarantor's shareholding percentage in the share capital of the Borrower falls below 75% (seventy five per cent.) of the total issued share capital;



(i)

Security Documents: unless otherwise agreed in writing by the Lenders, it will, at its own cost and expense:



(i)

within 15 (fifteen) Business Days from the first Drawing Date under the Tranche A Facility, execute the Land and Building Mortgages Agreement and the Machinery

42

Mortgage Agreement and complete in favour of the Lenders and the Security Agent the registration of all mortgages over all of the land, buildings and machinery described in paragraphs (1), (2), (3) and (4) of Schedule 7 (List of Asset and Property to be Granted as Security);

(ii)

within 15 (fifteen) Business Days from the Effective Date, execute the General Pledge Agreement; and



(iii)

as soon as legally and practically possible and within the reasonable period to be specified from time to time by the Security Agent, arrange for the pledge and registration of mortgage over assets and property described in paragraph (5) of Schedule 7 (List of Asset and Property to be Granted as Security);




(j)

Access: upon reasonable notice being given to the Borrower by the Facility Agent, permit the Finance Parties and any person (being an accountant, auditor, lawyer, valuer or other professional advisor of the Facility Agent) authorised by the Facility Agent to have upon its reasonable request and at all reasonable times during normal business hours, access to any of its assets, premises, accounting books and records and to discuss its affairs, finances and accounts with, and to be advised as to the same by, its respective officers at such reasonable times and intervals as the Finance Parties may designate;



(k)

Hedging transaction: other than indebtedness under clause 24.3(c)(v) (Indebtedness), it will obtain the prior written consent of the Lenders before it enters into any foreign currency, interest rate or other swap, option, forward purchase or sale, or similar hedging transaction with any party other than the Lenders;



(l)

Debt Service Reserve Accounts: throughout the 15 (fifteen) day period prior to each Repayment Date, it will maintain in all Debt Service Reserve Accounts an amount which in aggregate is equal to the aggregate of all scheduled interest and principal payments in respect of the Tranche A Facility and the Tranche B Facilities which fall due on such Repayment Date and it will provide the Facility Agent with the following documents in relation to the Debt Service Reserve Accounts:



(i)

on the date falling 16 (sixteen) days before each Repayment Date, computer printouts of account balances showing the aggregate amount of all balances then standing in all Debt Service Reserve Accounts; and



(ii)

at any time following the date in paragraph (i) above, bank statements showing the aggregate amount of all balances standing in all Debt Service Reserve Accounts as at the date referred to in paragraph (i) above;

(m)

Confirmation of indebtedness amount: on the last Business Day of March of each calendar year, it will deliver to the Facility Agent a letter of confirmation signed by its authorised persons confirming each amount of indebtedness and liability (whether actual or contingent) which is in excess of US$1,000,000 (US $one million) (or its equivalent in other currencies) which the Borrower has as at that time with any person (including without limitation any financial institution and trade creditor) and such letter of confirmation shall be in form and content reasonably satisfactory to the Facility Agent and shall include such matters as the outstanding amounts of principal, interest and default interest (if any) and the identity of each of such creditor, the first letter of which shall be so delivered to the Facility Agent on the last Business Day of March 2002;



(n)

ACT Loan Agreement: within 6 (six) calendar months from the Signing Date, it will, and procures that the Guarantor will, complete the conversion of US$10,500,000 (US $ten million

43

five hundred thousand) outstanding loan due under the ACT Loan Agreement into its share capital (the debt-to-equity conversion) and it will:

(i)

during such 6 (six) calendar months, not repay any amount (whether it be principal, interest or otherwise) payable under or in connection with the ACT Loan Agreement to the Guarantor or any other person, except for repayment made for the purposes of the debt-to-equity conversion;



(ii)

during such 6 (six) calendar months, inform in writing the progress of the debt-to-equity conversion whenever the Lenders reasonably request; and



(iii)

whenever the debt-to-equity conversion is completed, provide written evidence reasonably satisfactory to the Facility Agent demonstrating such completion;





(o)

Paid-Up capital: within 24 November 2002, it will procure that the amount of its equity shall be more than 50% (fifty per cent.) of the amount of its share capital then paid-in and, at all times thereafter, maintain that the amount of its equity shall be more than 50% (fifty per cent.) of the amount of its share capital then paid-in at such time, and provide the Facility Agent with any written evidence showing payment of each of such paid-in share capital within the period to be reasonably specified by the Facility Agent; for the purposes of this clause 24.2(o), the term "equity" shall mean paid-in share capital plus (i) share premium, (ii) undistributed profits after deduction of retained loss (if any), and (iii) legal reserves;



(p)

Bank accounts: it will obtain the prior written consent of the Lenders before it opens any bank account other than those disclosed to the Finance Parties as part of Schedule 2 (Conditions Precedent Document to Facilities) and in Schedule 8 (List of Bank Accounts);



(q)

BoT Announcements: it will, at its own cost and expense, carry out or cause to be carried out, any appraisal or re-appraisal of the value of the Security as may be necessary or expedient for the Finance Parties to comply with the BoT Announcements;



(r)

Amendment to Guarantor Credit Agreement: it will inform the Facility Agent in advance of any proposed amendment to the Guarantor Credit Agreement which would be likely to have any adverse effect on it, its assets or operations or otherwise, or on the rights or obligations of the Lenders under the Financing Documents and:



(i)

it will ensure that such proposed amendment will not adversely affect the rights or obligations of the Lenders under the Financing Documents or would be likely to have a Material Adverse Effect; and



(ii)

where such proposed amendment is of the nature which allows the Lenders to restrict or prohibit the Borrower from:



(A)

transferring any of its assets to the Guarantor or any Subsidiary of Guarantor;



(B)

making loans to the Guarantor or any Subsidiary of Guarantor; and/or



(C)

granting any Security Interest over the whole or any part of its present or future property, assets or revenues to secure its own obligations (if any) under the Guarantor Credit Agreement,

the Borrower shall agree to amend this Agreement such that any restriction or prohibition relating to any or all of the matters referred to in paragraphs (A), (B) and/or (C) above will be included in, and imposed on the Borrower under, this Agreement;

(s)

Notice of Meeting: at any time when a notice to convene a meeting of the board of directors of the Borrower to consider paying dividends or other distributions to its shareholders is issued, it will on the next Business Day notify the Facility Agent of details of such proposed

44

meeting and will at any time thereafter provide the Facility Agent with any other information relating to such payment of dividends or other distributions as the Facility Agent may from time to time reasonably request; and

(t)

Guarantor Credit Agreement/Guarantor Collateral Agreement: within 10 (ten) Business Days after the Effective Date, it will deliver to the Facility Agent 2 (two) sets of copies of the executed versions of the Guarantor Credit Agreement and the Guarantor Collateral Agreement.

        24.3    Negative Undertakings:    The Borrower undertakes with each of the Finance Parties that, from the Signing Date until all its liabilities and obligations under the Financing Documents have been permanently and unconditionally discharged:

(a)

Security: except for the Permitted Security Interest, it will not:



(i)

create or permit to subsist any Security Interest on the whole or any part of its present or future property, assets or revenues;



(ii)

sell or otherwise dispose of any of its assets on terms whereby such property or asset is or may be leased to or re-acquired or acquired by it;



(iii)

sell or otherwise dispose of any of its receivables on recourse terms except for the discounting of bills or notes in the ordinary course of business;

(b)

Disposals: it will not, either in a single transaction or in a series of transactions whether related or not, sell, transfer, lease or otherwise dispose of all or any substantial part of its property or assets except that the following shall not be taken into account:



(i)

disposals made with the prior written consent of the Lenders;



(ii)

disposals of obsolete, scrap or surplus equipment and excess inventory;



(iii)

disposals of property or assets (including repayment of loans) made in its ordinary course of business and having an aggregate value of less than Baht 5,000,000 (Baht five million) (or its equivalent in other currencies) in any period of 12 (twelve) months;



(iv)

disposals of property or assets in exchange for other property or assets comparable as to the type and value, and



(v)

transfers of its assets to the Guarantor or any Subsidiary of Guarantor,

provided always that:

(A)

any disposals of obsolete, scrap or surplus equipment or excess inventory in excess of US$1,000,000 (US $one million) (or its equivalent in other currencies) and any disposals of any machinery owned by the Borrower, which fall within the exceptions in paragraphs (ii), (iii) and (iv) above shall be informed in writing by the Borrower to the Facility Agent in advance of each of such disposals; and



(B)

any transfers referred to in paragraph (v) above shall be informed in writing by the Borrower to the Facility Agent at least 45 (forty five) days in advance of each of such transfers;




(c)

Indebtedness: it will not incur any debt or other indebtedness nor give any guarantee, indemnity or similar assurance in respect of any third party (whether actual or contingent, direct or indirect), except for:



(i)

the indebtedness to the Lenders under this Agreement;

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(ii)

indebtedness incurred as part of any trade credit with its suppliers of raw materials or goods in the ordinary course of business;



(iii)

indebtedness other than (ii) incurred in the ordinary course of business;



(iv)

indebtedness incurred in the course of normal and reasonable staff welfare arrangements; or



(v)

indebtedness incurred in the sound and prudent currency and interest rate protection arrangements,

provided always that the aggregate amount of indebtedness as specified in paragraphs (iii)-(v) inclusive of this clause 24.3(c) shall not exceed US$1,000,000 (US $one million) (or its equivalent in other currencies) which amount shall be subject to a review on an annual basis by the Lenders;

(d)

No loan: it will not grant, make or permit to subsist any further loans or additional financial assistance to any of its Subsidiaries (or arrangements in the nature of or analogous to a loan, including without limitation, any guarantee or obligation in the nature of or analogous to a guarantee) or to any of the directors or the shareholders of the Borrower or to persons connected with any of them or to any third party, except for:



(i)

the loans already granted or made by the Borrower to its Subsidiaries up until the Signing Date and disclosed as part of Schedule 2 (Conditions Precedent Documents to Facilities); or



(ii)

loans to the Guarantor or any Subsidiary of Guarantor made upon no less than 45 (forty five) days written notice thereof by the Borrower to the Facility Agent;

(e)

Dividends: it will not pay any dividend or other distribution to its shareholders until the aggregate amount of the Total Tranche A Outstandings and the Total Tranche B Loan Outstandings owed by it to the Lenders at such time equals or is less than US$10,500,000;



(f)

Investment in Subsidiaries: other than the investments which have already been made by it in its Subsidiaries up until the Signing Date and disclosed as part of Schedule 2 (Conditions Precedent Documents to Facilities), it shall not make any further investment in the Subsidiaries in excess of US$2,000,000 (US $two million) (or its equivalent in other currencies) in aggregate without the prior written consent of the Lenders;



(g)

Investment in certain assets: it will not purchase or make any investment in any of the following assets:



(i)

land;



(ii)

buildings; and



(iii)

machinery not to be used or owned by itself,

except where such purchase or investment is made as part of improvements or expansions of the existing land or buildings with a view to promoting or expanding its existing business engaged in as at the Signing Date;

(h)

Merger: it will not directly or indirectly consolidate with or merge into any other person or permit any other person to consolidate with or merge into it without the prior written consent of the Lenders (which shall not be unreasonably withheld);



(i)

No transaction with affiliates: it will not, except as otherwise provided in this Agreement, enter into any agreement, transaction or arrangement with any of its affiliates, Subsidiaries or

46

related parties (including any Subsidiary of the Guarantor) other than in the ordinary course of its business or on arm's length commercial terms;

(j)

Alteration of Articles: it will not alter, or agree to alter, its memorandum of association or articles of association in any manner prejudicial to, or which may, in the reasonable opinion of the Facility Agent upon consultation with the Borrower, adversely affect the rights of the Finance Parties under the Financing Documents;



(k)

Reduction of capital: it will not permit any reduction in its registered capital; and



(l)

Financing Documents: it will not take or omit to take any action the taking or omission of which might otherwise result in the material alteration or impairment of any of its obligations or the rights of the Finance Parties under the Financing Documents.

        24.4    Financial Covenants:    The Borrower undertakes with each Finance Party that from the Signing Date until all its liabilities and obligations under the Financing Documents have been permanently and unconditionally discharged, it shall procure that:

(a)

Debt Service Coverage Ratio: its Debt Service Coverage Ratio shall at all times exceed the ratio of 1:1; and



(b)

Debt to Equity Ratio: its Debt to Equity Ratio shall be as follows:



(i)

throughout the period commencing on 1 January 2002 and ending on 24 November 2002, not more than 10:1;



(ii)

at any time as from 25 November 2002, to be reduced such that it shall be not more than 10:1 and, as at 24 November 2003, not more than 4:1;



(iii)

at any time as from 25 November 2003, to be reduced such that it shall be not more than 4:1 and, as at 24 November 2004, not more than 3:1; and



(iv)

at any time as from 25 November 2004, to be reduced such that it shall be not more than 3:1 and, as at 25 November 2005 and thereafter, not more than 2:1.

        For the avoidance of doubt, the financial ratio covenants set out in this clause 24.4 shall supersede the financial ratio covenants set out in a credit facilities agreement dated 9 October 1996 (together with all supplemental and amendment agreement thereof) between the Borrower (formerly named "GSS/Array Technology Public Company Limited"), TFB as security agent, The Siam Commercial Bank Public Company Limited as facility agent and the lenders named therein (including TFB), and with effect from the Signing Date, this clause 24.4 shall apply to all the Parties hereto (including without limitation TFB and the Borrower) as regards its agreement on the financial ratio covenants imposed on the Borrower.

47

SECTION XII:
DEFAULT AND INDEMNITY

Default

        25.1    Event of Default:    Each of the following events shall constitute an Event of Default:

(a)

Non-payment: the Borrower fails to pay any amount due under any Financing Document on the due date or on demand, if so payable, under the relevant Financing Documents;



(b)

Breach of obligations: the Borrower fails to observe or perform any of its other obligations under the Financing Documents or under any undertaking or arrangement entered into in connection therewith (other than an obligation of the type referred to in clause 25.1(a) (Non-Payment)) and, in the case of a failure capable of being remedied, it has not been remedied to the Majority Lenders' satisfaction within 30 (thirty) days after the date of such failure;



(c)

Misrepresentation: any representation, warranty or statement which is made (or deemed or acknowledged to have been made) by any Obligor in any of the Financing Documents or which is contained in any certificate, statement, or notice provided under or in connection with any of the Financing Documents proves to be incorrect, or if repeated at any time with reference to the facts and circumstances subsisting at such time, would not be accurate;



(d)

Invalidity: any provision of any of the Financing Documents is or becomes, for any reason, invalid or unenforceable or is alleged by any Obligor to be invalid or unenforceable;



(e)

Cessation of business: the Borrower changes the nature or scope of its business, suspends a substantial part of the present business operations which it now conducts directly or indirectly, or any governmental authority expropriates all or part of its assets and the result of any of the foregoing will, in the reasonable determination of the Majority Lenders upon consultation with the Borrower, materially and adversely affect the financial condition of the Borrower or the Borrower's ability to observe or perform its obligations under this Agreement;



(f)

Cross-default:

(i)

any indebtedness of the Borrower (taken together) in aggregate of no less than Baht 5,000,000 (five million) (or its equivalent in other currencies) becomes due or capable of being declared due before its stated maturity or is not paid on maturity or on demand (if so payable);



(ii)

any indebtedness of the Borrower in the form of a guarantee (taken together) in aggregate of no less than Baht 5,000,000 (Baht five million) (or its equivalent in other currencies) is not discharged at maturity or when called; or



(iii)

the Borrower goes into default under, or commits a breach of, any instrument or agreement relating to any indebtedness set out in paragraph (i) and/or (ii) above,

provided always that paragraph (i) above shall not include any indebtedness in the nature of trade credits incurred in the ordinary course of business against which no legal actions are commenced by the relevant trade creditors, or if so commenced, claims under such legal actions are no more than US$1,000,000 (US$ one million) (or its equivalent in other currencies);

(g)

Appointment of receiver, legal process: an encumbrancer takes possession of, or a trustee or administrative agent or other receiver or similar officer is appointed in respect of, all or any part of the business or assets of the Borrower, or distress or any form of execution is levied or

48

enforced upon any such assets and is not discharged within 7 (seven) days of being levied or enforced;

(h)

Insolvency: any event occurs in respect of the Borrower giving rise to a presumption of insolvency under Section 8 of the Thai Bankruptcy Act B.E. 2483 (1940), as amended (or any substitute or replacement provision thereof);



(i)

Composition: the Borrower convenes a meeting of its creditors in general or proposes or makes any arrangement or composition with, or any assignment for the benefit of, its creditors in general;



(j)

Reorganisation, winding up: a petition is presented, or a meeting is convened for the purpose of considering a resolution, or other steps are taken, for making a reorganisation order against or for the winding up or liquidation of the Borrower or a reorganisation order or a winding up order is made against the Borrower;



(k)

Analogous proceedings: anything analogous to any of the events specified in paragraphs (g), (h), (i) or (j) occurs under the Laws of any applicable jurisdiction;



(l)

Breach by Guarantor: the Guarantor is in breach of any terms or conditions (including without limitation, representations, warranties and covenants) of the Parent Guarantee; and



(m)

Material adverse change: any event or series of events, whether related or not, occurs which could be expected materially and adversely to affect the business, financial condition, operations, performance, properties or prospects of the Borrower or the ability of the Borrower to perform any of its obligations under the Financing Documents.

        25.2    Action on Event of Default

        On the occurrence of an Event of Default (following the lapse of any applicable remedy period specified in this Agreement) and while such Event of Default is continuing then, at once or at any time thereafter, the Facility Agent or the Security Agent, as the case may be, may, and shall if so instructed by the Majority Lenders, give any or all of the following notices to the Borrower:

(a)

Default Interest Rate: other than an Event of Default under clause 25.1(a) (Non-payment), notice from the Facility Agent declaring that interest shall instead accrue on all the outstanding Advances, whether or not due, at the Default Interest Rate; and/or



(b)

Cancellation: notice from the Facility Agent cancelling all or part of the Total Commitments; and/or



(c)

Acceleration: notice from the Facility Agent declaring all or part of the Total Outstandings to be immediately due and payable whereupon they shall become so due and payable together with accrued interest thereon and any other amounts then payable under the Financing Documents, such payment to be effected on a date to be notified by the Facility Agent to the Borrower; and/or



(d)

Place on demand: notice from the Facility Agent placing all or part of the Advances on demand, whereupon they shall immediately become repayable on demand and at any time thereafter the Facility Agent may demand repayment of all or part of the Advances placed on demand together with accrued interest and any other amounts then payable under this Agreement or the other Financing Documents; and/or



(e)

Cash Collateral: notice from the Facility Agent requiring the Borrower to provide to the Facility Agent for payment to a bank account to be designated by the Facility Agent cash collateral forthwith in an amount equal to the aggregate amount of the Tranche B L/C

49

Outstandings and the Tranche E Guarantee Amount of each Tranche B Lender and Tranche E Lender respectively, whereupon the same shall be so payable; and/or

(f)

Security Documents and Parent Guarantee: notice from the Security Agent declaring any or all of the Security Documents and/or the Parent Guarantee to be immediately enforceable, whereupon the Security Agent may exercise all rights granted to it under the Security Documents, the Parent Guarantee or any other right granted to it in connection with the perfection or enforcement of any encumbrance securing any of the Borrower's liabilities or obligations; and/or



(g)

Redenomination: notice from the Facility Agent declaring that all or part of the Total Outstandings and interest accrued thereon which are not denominated in Baht to be redenominated into Baht at the Selling Rate.

        Notwithstanding the provisions of this clause 25.2, on the occurrence of an Event of Default and while such Event of Default is continuing, the Lenders may, immediately and independently of each other, redenominate into Baht all or part of the Total Outstandings and interest accrued thereon which are not denominated in Baht at the Selling Rate.

        25.3    Notice:    If the Facility Agent is notified under this Agreement of the occurrence of an Event of Default, it shall promptly inform each of the Lenders.

Indemnity

        26.1    Currency Indemnity:    If a Finance Party receives an amount in respect of the Borrower's liability under any of the Financing Documents or if that liability is converted into a claim, proof, judgment or order in a currency other than the currency (the contractual currency) in which the amount is expressed to be payable under the relevant Financing Documents:

(a)

the Borrower shall indemnify that Finance Party as an independent obligation against any loss or liability arising out of or as a result of the conversion;



(b)

if the amount received by that Finance Party, when converted into the contractual currency at a market rate in the usual course of its business, is less than the amount owed in the contractual currency, the Borrower shall pay on demand to that Finance Party an amount in the contractual currency equal to the deficit; and



(c)

the Borrower shall pay to the Finance Party concerned on demand any exchange or other costs or taxes payable and incurred in connection with any such conversion.

        26.2    Other Indemnities:    The Borrower shall, from time to time, forthwith on demand indemnify each Finance Party against any reasonable expense, loss, cost, damage or liability which that Finance Party suffers or incurs in connection with:

(a)

the occurrence of any Event of Default;



(b)

the operation of clause 27.2 (Pro-rata Sharing) (including by reason of any provision of clause 27.2 (Pro-rata Sharing) failing to take effect in accordance with its terms) or clause 25.2 (Action on Event of Default);



(c)

the receipt by any Lender of all or part of any Advance or an overdue sum, which is due to be paid on the last day of any Interest Period, otherwise than on the last day of such Interest Period;



(d)

the receipt by any Lender of any sum pursuant to clause 9.5 (Indemnification) or clause 16.5 (Indemnification) otherwise that in accordance with that clause;

50

(e)

any failure to draw down in accordance with a Drawing Notice.

        Without prejudice to its generality, the foregoing indemnity shall extend to any breakage costs and loss of margin and to any interest, fees or other sum whatsoever paid or payable on account of any funds borrowed in order to carry any unpaid amount.

SECTION XIII:
SET-OFF AND SECURITY SHARING ARRANGEMENTS

Set-off and Pro Rata Sharing

        27.1    Set-off:    At any time after the occurrence of an Event of Default (following the lapse of any applicable remedy period specified in this Agreement), any Finance Party may without notice to the Borrower combine, consolidate or merge all or any of the Borrower's accounts with, and liabilities to, that Finance Party and may set off or transfer any sum standing to the credit of any such accounts in or towards satisfaction of the Borrower's liabilities to that Finance Party under the Financing Documents, and may do so notwithstanding that the balances on such accounts and the liabilities may not be expressed in the same currency and each Finance Party is hereby authorised to effect any necessary conversions at the Finance Party's own rate of exchange then prevailing.

        27.2    Pro-rata Sharing:    The Lenders agree amongst themselves and with the Borrower that they shall rank pari passu and rateably in respect of all rights in and claims to the Outstandings owing to them. Accordingly, subject to clause 27.4 (Exceptions), if a Finance Party (the Recipient Finance Party) receives or recovers any amount (a Realised Amount) (other than from the Agents in accordance with this Agreement) in respect of sums due from the Borrower under the Financing Documents (whether by set-off or otherwise) it shall promptly notify the Facility Agent of such amount and:

(a)

the Facility Agent shall, as soon as practicable, determine and notify the Recipient Finance Party of the portion (the Notified Portion) of the Realised Amount which the other Finance Parties would have been entitled to had the Recipient Finance Party received such amount pro rata to its entitlement under this Agreement;



(b)

the Recipient Finance Party shall promptly pay the Notified Portion of the Realised Amount to the other Finance Parties pro rata to their entitlements under this Agreement;



(c)

as between the Borrower and the Recipient Finance Party, the Notified Portion shall be treated as not having been paid but the obligations of the Borrower to the other Finance Parties shall be discharged to the extent of the related distribution made under paragraph (b) above.

        For the purposes of calculation of pro-rata sharing under this Agreement, any amount not denominated in Baht shall be notionally converted into Baht at the Average Selling Rate.

        27.3    Clawback:    If all or any portion of a Realised Amount becomes repayable and is repaid by such Recipient Finance Party (whether pursuant to a court order following the taking of business reorganisation proceedings or bankruptcy proceedings against the Borrower or otherwise), then:

(a)

each Finance Party receiving a payment under clause 27.2(b) shall, at the request of the Facility Agent, reimburse the Facility Agent for the account of the Recipient Finance Party all or the appropriate portion of the amount paid to the Finance Party under such clause together with its proportionate share of any interest paid by the Recipient Finance Party in respect of such amount;



(b)

the adjustments to obligations made pursuant to clause 27.2(b) shall to the appropriate extent be reversed.

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        27.4    Exceptions:

(a)

Clause 27.2 (Pro-rata Sharing) shall not apply in respect of any amount received from any person, other than the Borrower, arising out of a subparticipation or an assignment, transfer or novation pursuant to clause 31 (Assignments and Transfers) or similar contractual arrangement.



(b)

A Finance Party shall not be entitled to any distribution under clause 27.2(b) if the Realised Amount arises as a result of any court action or proceeding in relation to which such Finance Party was invited in writing to participate in and/or make a proportionate contribution in respect of associated costs, but did not do so.

Security Sharing Arrangements

        28.1    Pari-Passu:    The rights of the Lenders among themselves under or in respect of the Security shall at all times rank pari passu without preference or priority of one over the other of them for all purposes and to all intents.

        28.2    Security Sharing:    Subject to contrary instructions from the Majority Lenders or contrary requirements of Law, the Security Agent may appropriate and apply all moneys received or realised by the Security Agent, after the Security has become enforceable in accordance with the Financing Documents through the exercise or enforcement of the Security, in or towards discharging the liability of the Borrower as follows:

(a)

firstly, in payment of all costs, charges, expenses and liabilities incurred and payments made by the Security Agent, the Facility Agent and any receiver, attorney, agent, delegate, sub-delegate or other person appointed by the Security Agent in accordance with the terms of the Security Documents in connection with the performance of its obligations hereunder or thereunder or the execution or purported execution of any powers, authorities or discretions vested in it pursuant hereto or thereto (including without limitation the remuneration of the Security Agent, the Facility Agent and of every such receiver or other person payable pursuant to the terms thereof);



(b)

secondly, in payment to the Lenders of the Secured Indebtedness rateably in the proportion which each Lender's Outstandings bears to the Total Outstandings as follows:



(i)

first, in payment pari passu and rateably of Secured Indebtedness, other than interest and principal amount, due to any Lender in the proportion that such Secured Indebtedness then due to each of the Lenders bears to the total of such Secured Indebtedness then due;



(ii)

second, in payment pari passu and rateably of Secured Indebtedness comprising interest (including interest on overdue interest) which has accrued to the date of such application in the proportion that the amount of interest then due to each of the Lenders bears to the total amount of interest then due; and



(iii)

third, in payment pari passu and rateably of all outstanding principal amount in the proportion that the amount of such outstanding principal due to each of the Lenders bears to the total amount of all outstanding principal then due.

        Pending such application such sums may be credited to any account which the Security Agent deems appropriate.

        28.3    Supplementary Provisions relating to Security:

(a)

Parent Guarantee: The Parties hereto agree that the Parent Guarantee shall be deemed to be security for the prompt payment by the Borrower pari passu and rateably of the Guaranteed

52

Obligations (as defined in the Parent Guarantee) as if such Parent Guarantee formed part of the Security, in the proportion that the amount of such Guaranteed Obligations then due to each of the Lenders bears to the total of such Guaranteed Obligations then due.

(b)

Continuation of Security: As long as all or any of the Secured Indebtedness remains outstanding, all Parties hereto acknowledge and agree that the Security and the Parent Guarantee shall remain in full force and effect as security for the payment of the Secured Indebtedness and the Guaranteed Obligations (as defined in the Parent Guarantee), respectively, and shall not be affected in any way by any interim settlement, Conversion or other matter or thing. Each of the Parties hereto acknowledges and agrees that no Conversion or other matter or thing under the Financing Documents is intended to be a discharge, cancellation or novation of the obligations of the Borrower or the Guarantor under the Financing Documents, unless otherwise specified in the Financing Documents.



(c)

Assignment and novation: In the event where there is any assignment of rights and benefits or any transfer of obligations by the Lenders pursuant to clause 31.2 (Assignment and Transfers by Lenders), the Parties hereto agree that the Security and the Parent Guarantee shall continue to secure the Secured Indebtedness and the Guaranteed Obligations, respectively, and the Borrower agrees to do all acts and things necessary to achieve this effect.

SECTION XIV:
THE AGENTS AND THE ARRANGER

The Agents and the Arranger

        29.1    Appointments:

(a)

Each Lender irrevocably authorises each Agent, subject to clause 29.3 (Majority Lenders' Directions), to take such action on its behalf and to perform such duties and obligations and to exercise and carry out such powers, discretions, authorities and duties as are specifically delegated to it by the Financing Documents to which it is a party and to exercise such other powers, discretions, authorisations, and duties as the respective Agent reasonably considers are incidental thereto. Each Agent shall have only those duties and responsibilities which are expressly specified in the Financing Documents. Except where an Agent is exercising a discretion under a Financing Document, its duties and responsibilities hereunder and under any other Financing Document are solely of a mechanical or administrative nature.



(b)

Each Lender irrevocably appoints the Facility Agent as its Agent, subject to clause 29.13 (Termination), to execute or accept, as the case may be, each of the Financing Documents which is expressed to be executed or accepted by the Facility Agent.



(c)

Each Lender irrevocably appoints the Security Agent as its Agent, subject to clause 29.13 (Termination), to execute or accept, as the case may be, on its behalf each of the Financing Documents which is expressed to be executed or accepted by the Security Agent.



(d)

Except as specifically provided in this Agreement, the Arranger has no obligations under or in connection with the Financing Documents.

        29.2    Relationship:    In connection with its powers, discretions, authorities and duties under the Financing Documents, each Agent:

(a)

shall act solely as the agent of each of the Finance Parties, and shall not assume, and shall not be deemed to have assumed, any obligations or duties to, the Finance Parties other than those

53

for which specific provision is made by the Financing Documents or any obligations or duty to, any of the Obligors;

(b)

shall not be liable for any failure of any other party to any Financing Document duly and punctually to observe and perform any of its obligations under any Financing Document;



(c)

shall not be liable for any action taken or omitted by it under or in connection with the Financing Documents unless directly caused by its gross negligence or wilful misconduct;



(d)

may act under the Financing Documents through its personnel and agents; and



(e)

may receive advice from counsel but shall not be responsible for negligence or misconduct of any adviser, agent or attorney-in-fact that it selects with reasonable care.

        29.3    Majority Lenders' Directions:    In the exercise of any power or discretion given to each Agent under the Financing Documents and as to any matter not expressly provided for in the Financing Documents or where a decision of the Majority Lenders is provided for, each Agent shall act or refrain from acting in accordance with the instructions of the Majority Lenders. In the absence of any such instructions or instructions failing to indemnify any Agent to its satisfaction, such Agent may act or refrain from acting as it shall see fit. Any such instructions of the Majority Lenders or any such decision of the Agent shall be binding on all the Lenders and the Agent shall not be liable to the Borrower or the Finance Parties or any of them for the consequences of any such instructions or decision.

        29.4    Credit Approval:    In favour of the Arranger and each Agent, each Lender acknowledges in connection with the Financing Documents:

(a)

that it has made such enquiries on its own behalf and taken such care as would have been the case had its participation in the Facilities been made directly by that Lender to the Borrower without the intervention of the Arranger or each Agent and that it has not relied, and does not rely, upon any information or advice provided, or any appraisal of, or investigation into, the financial condition, creditworthiness, affairs, status or nature of the Borrower effected or provided to it by any other Finance Party in such capacity;



(b)

that, subject to clause 29.8 (Transmitting Information), neither the Agent nor the Arranger was, were or will be obliged either before or at any time after the Signing Date to provide that Lender with any information or advice or to make any such investigation or appraisal.

        29.5    Documentation:    Neither the Agent nor the Arranger nor any of their respective directors, officers, employees or agents shall be liable:

(a)

for the execution, validity, enforceability, adequacy or effectiveness of any of the Financing Documents or any document delivered pursuant thereto or connected therewith; or



(b)

for any statements, representations or warranties made or referred to in any of the Financing Documents or any information given in connection with any of the Financing Documents.

        29.6    Reliance:    No Agent shall be liable:

(a)

for the consequences of relying on any communication or document believed by it to be genuine and correct and to have been communicated or signed by the person by whom it purports to be communicated or signed; or



(b)

for the consequences of relying on the advice of any professional advisers selected by it in connection with the Financing Documents.

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        29.7    Concerning Default:    No Agent shall be obliged to take:

(a)

any steps to ascertain whether any Default has occurred and until it has received express notice to the contrary from the Borrower or a Lender, it shall be entitled to assume that no such Default has occurred; or



(b)

any proceedings against the Borrower for the recovery of any sum due under any of the Financing Documents or otherwise in connection therewith unless it has been fully indemnified to its satisfaction by each Lender in the proportion which that Lender's Outstandings bear to the Total Outstandings (or, if no Outstandings, that Lender's Commitment bears to the Total Commitments).

        29.8    Transmitting Information:    Each Agent shall:

(a)

send a copy of all notices served by the Borrower under this Agreement and of all other documents delivered to it under the Financing Documents to each of the Finance Parties affected by such notice or document;



(b)

not be obliged to transmit to the Finance Parties any information in any way relating to any of the parties to the Financing Documents which it may have acquired otherwise than in its capacity as agent for the Finance Parties in connection with this Agreement.

        29.9    The Agent and Arranger Individually:

(a)

Each Agent and Arranger shall, with respect to its own participation in the Facilities, have the same rights and powers as any other Lender and may exercise them as though it were not also acting as Agent or Arranger for the Lenders.



(b)

Each Agent, Arranger and its associates and affiliates may, without liability to disclose or account, accept deposits from, lend money to and generally engage in any kind of financial or commercial business with, or acquire or dispose of any kind of security of, the Borrower or any of its Subsidiaries (or its holding company or any of its Subsidiaries) and neither the Facility Agent, the Security Agent nor the Arranger nor any of their associates or affiliates shall have any obligation to disclose or account for any dealings with the Borrower or any of its Subsidiaries (or its holding company or any of its Subsidiaries) prior to the Signing Date.



(c)

Neither Agent nor Arranger shall be liable to account to any Finance Party for any sum or profit received by it for its own account, nor for any interest derived by it on any sum received by it for the account of any Finance Party and not immediately payable to such Finance Party.

        29.10    Indemnity of Agents:    Without limiting the liability of the Borrower under the Financing Documents, each of the Lenders shall fully indemnify each Agent (including its various personnel and affiliates) rateably in the proportion which that Lender's Outstandings bear to the Total Outstandings (or if no Outstandings, that Lender's Commitment bears to the Total Commitments), from and against all claims, proceedings, costs, expenses, losses, damages and liabilities of every description (except in respect of any agency fee due to the Agents) which may be incurred by such Agent in such capacity in good faith and which in any way relate to or arise out of the Financing Documents or any related documents or any action taken or omitted by such Agent in good faith in enforcing or preserving, or in attempting to enforce or preserve, any of the rights of the Finance Parties under the Financing Documents or any related documents.

        29.11    Exoneration of Employees:    No Party may take any proceedings against any officer, employee or agent of any Agent in respect of any claim it might have against such Agent or in respect of any act or omission of any kind (including gross negligence or wilful misconduct) by that officer, employee or agent in relation to any Financing Document.

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        29.12    Compliance:    Each Agent may refrain from doing anything which might, in its opinion, constitute a breach of any Law or be otherwise actionable at the suit of any person, and may do anything which, in its opinion, is necessary or desirable to comply with any Law of any jurisdiction and in particular each Agent needs not disclose any information relating to the Borrower or any of its related entities if the disclosure might, in its opinion, constitute a breach of any Law or any duty of confidentiality.

        29.13    Termination:    The Facility Agent, the Security Agent or the Majority Lenders may at any time notify the Borrower, the other Agent and the Lenders of the proposed resignation of the respective agency. After the giving of any notice of proposed termination, the Majority Lenders may in writing appoint a successor as Facility Agent or Security Agent, as the case may be. If such successor is not appointed or has not accepted in writing the appointment within 30 (thirty) days after the notice of proposed termination, the Facility Agent or Security Agent, as the case may be, may within a further 30 (thirty) days appoint a successor with an office in Bangkok. If the Facility Agent or Security Agent, as the case may be, is unable to make such appointment as described herein it shall notify each of the Finance Parties as soon as possible and thereafter such appointment of a successor shall be arranged by the Finance Parties or the Borrower in agreement with the Lenders.

        Notwithstanding such arrangements, the Facility Agent or Security Agent, as the case may be, shall retire from the agency relationship upon the earlier of:

(a)

60 (sixty) days from its notice of proposed termination; or



(b)

the written acceptance (in such form as the Majority Lenders may approve) by a successor of its appointment as Facility Agent or Security Agent, as the case may be.

        Upon such retirement:

(a)

such successor shall become bound by all the obligations of the retiring Agent and become entitled to all the rights, privileges, powers, authorities and discretions of such Agent under the Financing Documents;



(b)

the agency of the retiring Agent shall terminate but without prejudice to any rights that may have accrued prior to the termination and without prejudice to any liabilities which the retiring Agent may have incurred prior to the termination of its agency;



(c)

the retiring Agent shall be discharged from any further liability or obligation under the Financing Documents; and



(d)

any cost or expense incurred in connection with the termination of any agency and appointment under this clause shall be solely borne by the Borrower.

        29.14    Arranger:    Without limiting any other provision of this clause 29, the Arranger shall not have any rights, powers, obligations, liabilities, responsibilities or duties under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, the Arranger shall not have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on the Arranger in deciding to enter into this Agreement or in taking or not taking action hereunder.

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SECTION XV:
AMENDMENTS, ASSIGNMENTS AND TRANSFERS

Amendments

        30.1    Amendments:    The relevant Agent may, (except where any other authority is required for the same by the express provisions of the Financing Documents), grant waivers or consents or amend the terms of any of the Financing Documents if authorised by the Majority Lenders. Any such waiver, consent or amendment so authorised and effected by the relevant Agent shall be binding on all the Finance Parties and such Agent shall be under no liability whatsoever in respect of any such waiver, consent or amendment. No amendment to the Financing Documents will be binding on the Borrower without its written consent.

        Notwithstanding the foregoing paragraph, the following matters shall require the prior written consent of all the Finance Parties and the Borrower:

(a)

any extension, deferral or rescheduling of the date for, or decrease in the amount or change in the currency of, any payment of principal, interest, fee, commission or any other amount payable under the Financing Documents;



(b)

any increase in or amendment to any Lender's Commitment, except for any reduction, cancellation or termination of any Lender's Commitment occurring as a result of a review by the Lenders pursuant to clause 24.2 (Guarantor's Shareholding) which requires no prior written consent of the Borrower;



(c)

any extension of the Availability Period;



(d)

any variation of:



(i)

the definition of Majority Lenders;



(ii)

clause 27.2 (Pro-Rata Sharing); or



(iii)

this clause 30.1;

(e)

any release of the Security Interest constituted under any of the Security Documents or any release of the guarantee constituted under the Parent Guarantee.

        30.2    Agents and Arranger:    A waiver, consent or variation which relates to the rights or obligations of the Agents or the Arranger may not be effected without the consent of the relevant Agent or the Arranger.

Assignments and Transfers

        31.1    Transfers by Borrower:    The Borrower may not assign, transfer, novate or dispose of any of, or any interest in, its rights and/or obligations under this Agreement.

        31.2    Assignment and Transfers by Lenders:

(a)

A Lender (the Transferor Lender) may at any time, to the extent permitted by applicable Laws:



(i)

assign, all or any of its rights and benefits under this Agreement; and/or



(ii)

transfer all or any of its obligations under this Agreement, to any one or more banks or financial institutions (each a Transferee Lender), provided that the Transferor Lender has given 30 (thirty) days' advance notice to the other Lender, the Facility Agent and the Borrower of its intention to do so and the assignment and transfer procedure in clause

57

        31.3(Assignment and Transfer Procedure) has been complied with.    

(b)

Neither a Transferor Lender nor any other Finance Party is responsible to a Transferee Lender for:



(i)

the execution, genuineness, validity, enforceability or sufficiency of any Financing Documents or any other document;



(ii)

the collectability of amounts payable under any Financing Documents or the financial condition of or the performance of its obligations under the Financing Documents by any Obligor; or



(iii)

the accuracy of any statements or information (whether written or oral) made in or in connection with or supplied in connection with any Financing Documents.

(c)

Each Transferee Lender confirms to each Transferor Lender and the other Finance Parties that it:



(i)

has made its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Transferor Lender or any other Finance Party in connection with any Financing Documents;



(ii)

will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities for so long as there are any Commitments or Outstandings under this Agreement.

(d)

Nothing in any Finance Document obliges a Transferor Lender to:



(i)

accept a re-transfer from a Transferee Lender of any of the rights, benefits and/or obligations assigned or transferred under this clause; or



(ii)

support any losses incurred by a Transferee Lender by reason of the non-performance by any Obligor of its obligations under any Financing Document or otherwise.

        31.3    Assignment and Transfer Procedure:

(a)

An assignment of rights and benefits by the Lenders (the assignment) and a transfer of obligations by the Lenders (the transfer) are effected if:



(i)

the Transferor Lender and the Transferee Lender deliver to the Facility Agent a duly completed Transfer Certificate executed by the Transferor Lender and the Transferee Lender;



(ii)

in cases of the assignment of rights and benefits, the Facility Agent executes the Transfer Certificate and delivers the same to the Borrower; and



(iii)

in cases of the transfer of obligations, the Facility Agent and the Borrower execute the Transfer Certificate.

(b)

Each Party (other than the Transferor Lender and the Transferee Lender) irrevocably authorises the Facility Agent to execute any duly completed Transfer Certificate on its behalf.



(c)

To the extent that they are expressed to be the subject of the assignment or transfer in the Transfer Certificate:



(i)

the Transferor Lender and the other Parties (the existing Parties) will be released from their obligations to each other under the Financing Documents (the discharged obligations);

58

(ii)

the Transferee Lender and the existing Parties will assume obligations towards each other under the Financing Documents which differ from the discharged obligations only insofar as they are owed to or assumed by the Transferee Lender instead of the Transferor Lender;



(iii)

the rights and benefits of the Transferor Lender against the existing Parties under the Financing Documents and vice versa (the discharged rights) will be cancelled; and



(iv)

the Transferee Lender and the existing Parties will acquire rights and benefits against each other under the Financing Documents which differ from the discharged rights only insofar as they are exercisable by or against the Transferee Lender instead of the Transferor Lender, all on the date of execution of the Transfer Certificate by the Facility Agent and/or the Borrower, as the case may be, or, if later, the date specified in the Transfer Certificate.

        31.4    Register:    The Facility Agent shall keep a record of all the Parties and shall supply any other Party (at that Party's expense) with a copy of the record on request.

        31.5    Transfer Costs:    If the Borrower will, as a result of any assignment, transfer or novation, have to pay any additional amount under this Agreement which the Borrower would not have been liable to pay had no such assignment, transfer or novation been effected, the Borrower shall not be obliged to pay such amount except where such assignment, transfer or novation has been effected:

(a)

as requested by, or as agreed to, by the Borrower; or



(b)

as a consequence of the Borrower's and the Lenders' actions taken to remedy or mitigate the effect of the occurrence of any of the circumstances set out in clause 22 (Changes in Circumstances).

        31.6    Sub-Participation:    Nothing in this Agreement restricts the ability of a Lender to sub-contract an obligation of that Lender providing such Lender remains liable under this Agreement for that obligation.

        31.7    Disclosure of Information:    Any Lender may disclose to a prospective assignee, transferee or sub-participant such information about any Obligor as shall have been made available to the Lenders generally.

        31.8    Facility Office:    Any Lender may make its participation in any Facilities from, and may receive the benefit of any payment due to it under this Agreement at, any of its lending offices (each a Facility Office). A Lender shall give the Facility Agent prior written notice of any change in its Facility Office for the purposes of this Agreement.

SECTION XVI:
FEES AND EXPENSES

Fees and Expenses

        32.1    Front-end fee:    Within 7 (seven) days of the Signing Date by the Parties, the Borrower shall pay to the Lenders a front-end fee in accordance with the terms of the Side Letter.

        32.2    Commitment Fee:    The Borrower shall pay a commitment fee in the following manner:

(a)

Tranche A Facility: A commitment fee on the Tranche A Facility shall be payable as follows:



(i)

at the rate of 0.5% (zero point five per cent.) per annum upon the daily amount in US dollars of the Tranche A Facility for the time being not drawn, utilised and uncancelled

59

and to be calculated on the basis of actual days elapsed from the Effective Date and a year of 360 (three hundred and sixty) days; and

(ii)

payable directly to the Tranche A Lenders on the dates falling at three monthly intervals after the Effective Date and on the last day of the Availability Period relating to the Tranche A Facility or on any earlier day when the Tranche A Facility is fully drawn, utilised or reduced to zero.




(b)

Tranche B Facilities: A commitment fee on the Tranche B Facilities shall be payable as follows:



(i)

at the rate of 0.5% (zero point five per cent.) per annum upon the daily amount in US dollars of the Tranche B Facilities for the time being not drawn, utilised and uncancelled and to be calculated on the basis of actual days elapsed from the Effective Date and a year of 360 (three hundred and sixty) days;



(ii)

payable directly to the Tranche B Lenders on the dates falling at three monthly intervals after the Effective Date and on the last day of the Availability Period relating to the Tranche B Facilities or on any earlier day when the Tranche B Facilities are fully drawn, utilised or reduced to zero.

        32.3    Expenses:    The Borrower shall pay, in each case on the basis of a full indemnity:

(a)

to each Agent and Arranger all reasonable costs and expenses (including legal, printing, publicity and out-of-pocket expenses) incurred in connection with the negotiation, preparation or completion of the Financing Documents and any related documents and the syndication of the Facilities;



(b)

to each Agent (for its own account and for the account of the Finance Parties) all reasonable costs and expenses (including legal and out-of-pocket expenses) incurred in connection with any variation, consent or approval relating to this Agreement or any related documents or in connection with the preservation or enforcement or the attempted preservation or enforcement of any of their rights under the Financing Documents or any related documents; and



(c)

to the Arranger all reasonable costs and expenses (including communications, accommodation, business class travel and out-of-pocket expenses) incurred in connection with the work carried out by the Arranger under the mandate letter between the Arranger and the Borrower dated 6 December 2000.

        Payment made by the Borrower under this clause 32.3 shall be made promptly and in any event no later than 15 (fifteen) days after submission by the relevant Agent or Arranger, as the case may be, of a statement of all such expenses to the Borrower.

        32.4    Stamp Duty:    The Borrower shall pay any stamp, documentary and other similar duties and taxes to which the Financing Documents (other than any Transfer Certificate) may be subject or give rise and shall fully indemnify each of the Finance Parties from and against any losses or liabilities which any of them may incur as a result of any delay or omission by the Borrowers to pay any such duties or taxes.

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SECTION XVII:
MISCELLANEOUS

Miscellaneous

        33.1    Certificates:    Any determination or notification by the Facility Agent or any other Finance Party concerning any rate or amount under this Agreement shall, in the absence of manifest error, be conclusive evidence as to that matter.

        33.2    Application of Moneys:

(a)

If any sum paid or recovered in respect of the liabilities of the Borrower under this Agreement is less than the amount then due, the Facility Agent shall apply that sum in the following order:



(i)

firstly, in or towards payment of any unpaid fees, costs and expenses of the Agents;



(ii)

secondly, in or towards payments pro rata of any unpaid fees, costs and expenses of the Lenders;



(iii)

thirdly, in or towards payment pro rata of any interest due to the Lenders;



(iv)

fourthly, in or towards payment pro rata of any principal due to the Lenders; and



(v)

fifthly, in or towards payment pro rata of any other sum due under the Financing Documents.

(b)

The Facility Agent shall, if so directed by all the Lenders, vary the order of priorities set out in sub-paragraphs (a)(ii)-(v) inclusive above.

        33.3    Rights Cumulative, Waivers:    The rights of the Finance Parties under this Agreement are cumulative, may be exercised as often as they consider appropriate and are in addition to their respective rights under the Law. The rights of the Finance Parties in relation to the Facilities (whether arising under this Agreement or under the Law) shall not be capable of being waived or varied otherwise than by an express waiver or variation in writing, and in particular:

(a)

any failure to exercise or any delay in exercising any of such rights shall not operate as a waiver or variation of that or any other such right;



(b)

any defective or partial exercise of any of such rights shall not preclude any other or further exercise of that or any other such right; and



(c)

no act or course of conduct or negotiation on their part or on their behalf shall in any way preclude them from exercising any such right or constitute a suspension or any variation of any such right.

        33.4    Notices:    All notices or other communications under or in connection with each Financing Document shall be given in writing or facsimile and shall be signed by the Party giving it. Any such notices or communications will be deemed to be given as follows:-

(a)

if in writing, when delivered; and



(b)

if by facsimile, when received.

        A notice given in accordance with the above but received on a non-working day or after business hours in the place of receipt will only be deemed to be given at opening of business on the next working day in that place.

        33.5    Addresses:    The relevant addresses and fax numbers of any Party for the purpose of clause 33.4 (Notices) shall be those set out for that Party in the signature pages of this Agreement, or

61

such other as the respective Party may notify to the other Parties by not less than 5 (five) Business Days' notice.

        33.6    English Language:    All notices or communications under or in connection with any Financing Document shall be in the English language or, if in any other language, accompanied by a translation into English. In the event of any conflict between the English text and the text in any other language, the English text shall prevail.

        33.7    Invalidity of any Provision:    If any of the provisions of any Financing Document becomes invalid, illegal or unenforceable in any respect under any Law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.

        33.8    Severability:    Any provision of any Financing Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable Law, the Borrower hereby waives any provision of Law which renders any provision of this Agreement prohibited or unenforceable in any respect.

        33.9    Entire Agreement:    This Agreement supersedes any prior agreements and understandings between each of the parties hereto with respect to the subject matter hereof and is the complete agreement of each of the parties hereto with respect to the subject matter hereof.

SECTION XVIII:
LAW

Law

        34.1    Choice of Law:    This Agreement is governed by, and shall be construed in accordance with, the Laws of the Kingdom of Thailand.

        Signed by the authorised representatives of all Parties.

SCHEDULE 1


Lenders and Commitments

Lenders Tranche E Commitment	Tranche A Commitment		Tranche B L/C Commitment T/R Commitment, Loan Commitment*		Tranche C Commitment		Tranche D Commitment	Total
TFB	US$	12,790,000	US$	2,000,000	US$	16,000,000	Baht 10,000,000	Baht 30,000,000
BAY	US$	8,180,000	US$	2,000,000	US$	12,500,000	Baht 10,000,000	Bhat 10,000,000
Total	US$	20,970,000	US$	4,000,000	US$	28,500,000	Baht 20,000,000	Baht 40,000,000

*

Subject to the periods and maximum amounts set out in clause 8.2 (Amounts and Periods), the Borrower may draw or use, whether singly or collectively, any of the Tranche B L/C Facility, the Tranche B T/R Facility and/or the Tranche B Loan Facility, provided that such drawing or use would not at all times exceed US$4,000,000.

        Schedule 1 (Lenders and Commitments)

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SCHEDULE 2

Conditions Precedent Documents to Facilities

(1)

Affidavit: the affidavit of the Borrower issued by the Ministry of Commerce or a certified copy of the affidavit of the Borrower;

(2)

Memorandum of Association: the memorandum of association of the Borrower issued by the Ministry of Commerce or a certified copy of the memorandum of association of the Borrower;

(3)

Board of Director's Resolution: a certified copy of resolution of the board of directors of the Borrower authorising the entry into and execution of the Agreement;

(4)

List of Shareholders: a certified copy of the register of shareholders of the Borrower as at any day not earlier than 15 (fifteen) days before the Signing Date;

(5)

Drawing Notice: a certificate signed by the Authorised Directors substantially in the form set out in Schedule 3 (Drawing Notice) and the documents therein referred to;

(6)

Certificate of Borrower: a certificate in respect of the Borrower signed by the Authorised Directors substantially in the form set out in Schedule 4 (Certificate of Borrower) and the documents therein referred to;

(7)

Certificate of Guarantor: a certificate in respect of the Guarantor substantially in the form set out in Schedule 5 (Certificate of Guarantor) or in any other form as agreed among the Borrower, the Guarantor and the Lenders and the documents therein referred to;

(8)

Legal Opinion of Borrower's Lawyer: an opinion of Siam Niti Law Office Company Limited, Thai lawyer to the Borrower;

(9)

Legal Opinion of Guarantor's Lawyer: an opinion of Testa, Hurwitz & Thibeault, LLP, as to the validity and enforceability of the Parent Guarantee under the laws of the Commonwealth of Massachusetts;

(10)

Legal Opinion of Lenders' Lawyer: an opinion of Freshfields Limited, Thai lawyer to the Lenders;

(11)

Fee Letters: the Fee Letters duly executed by the Borrower and the relevant parties thereto;

(12)

Parent Guarantee: the original of the Parent Guarantee duly executed by the Guarantor and notarised by a notary public in the Commonwealth of Massachusetts;

(13)

Confirmation of Indebtedness Amount: a letter signed or certified to be true and correct by the authorised officer (s) of the Borrower, confirming each amount of indebtedness and liability (whether actual or contingent) being in excess of US$1,000,000 (US$ one million) (or its equivalent in other currencies) which the Borrower has as at the Signing Date with any person (including without limitation any financial institution and trade creditor) and such letter of confirmation shall be in form and content reasonably satisfactory to the Facility Agent and shall include such matters as the outstanding amounts of principal, interest and default interest (if any) and the identity of each of such creditor;

(14)

Details of Bank Accounts: a letter signed or certified to be true and correct by the authorised person(s) of the Borrower, setting out details of all bank accounts which the Borrower has as at the Signing Date and such letter shall be in form and content reasonably satisfactory to the Facility Agent and shall include such matters as the balance standing in each bank account, the types of bank accounts and the financial institutions with which such accounts have been opened;

(15)

List of Suppliers: a letter signed or certified to be true and correct by the authorised person(s) of the Borrower, setting out the total number of its suppliers whose indebtedness is proposed to be paid off out of the proceeds of the Tranche A Facility, the total amount of such indebtedness and

63

the identity of such supplier whose indebtedness equals or exceeds US$ 500,000 (US$ five hundred thousand);

(16)

Details of Investment in Subsidiaries: a letter signed or certified to be true and correct by the authorised person(s) of the Borrower, setting out details of its investments in all of its Subsidiaries which the Borrower has as at the Signing Date and such letter shall be in form and content reasonably satisfactory to the Facility Agent and shall include such matters as the amount of investment in each of its Subsidiaries and the name of each of such Subsidiaries;

(17)

Details of Loans to Subsidiaries: a letter signed or certified to be true and correct by the authorised person(s) of the Borrower, setting out details of loans granted by it to all of its Subsidiaries which the Borrower has as at the Signing Date and such letter shall be in form and content reasonably satisfactory to the Facility Agent and shall include such matters as the amount of loan in each of its Subsidiaries and the name of each of such Subsidiaries;

(18)

Guarantor's Letter: a letter executed by an authorised person of the Guarantor, in form and content reasonably acceptable to the Facility Agent, to the effect that the Guarantor:

(a)

undertakes to complete the debt-to-equity conversion on terms and conditions set out in clause 24.2(n) (ACT Loan Agreement); and

(b)

confirms that the Borrower is not a party to the Guarantor Loan Agreement or the Guarantor Collateral Agreement;

(19)

JP Morgan Chase's Letter: a letter of confirmation, in form and content reasonably acceptable to the Facility Agent, from JP Morgan Chase, as administrative agent under the Guarantor Loan Agreement, that no Security Interest over any assets, revenues and property (as defined in the Guarantor Loan Agreement) of the Borrower has been given to secure any obligation or liability of any person under the Guarantor Loan Agreement or the Guarantor Collateral Agreement; and

(20)

Testa, Hurwitz & Thibeault, LLP's Letter: a letter of confirmation from Testa, Hurwitz & Thibeault, LLP, in form and content reasonably acceptable to the Facility Agent, to the effect that:

(a)

with certain exceptions specified in the Guarantor Loan Agreement, the Borrower is required to maintain its assets, revenues and property (as defined in the Guarantor Loan Agreement) free and clear of any encumbrance; and

(b)

the Borrower can create any Security Interest over any or all of the assets or property listed in Schedule 7 (List of Asset and Property to be Granted as Security) of this Agreement in favour of both TFB and BAY without any breach of the Guarantor Credit Agreement.

        In the case of documents (1) and (2), the Borrower shall obtain them from the Ministry of Commerce in Thailand within 15 (fifteen) days prior to the first Drawing Date.

SCHEDULE 3

Part I
Form of Drawing Notice

        Date: *             20*    

Dear Sirs,

US$53,470,000 and Baht 60,000,000 Credit Facilities Agreement

1.

We refer to clause 5.2 (Drawdown), 11.2 (Drawdown) or 12.4 (Drawdown) [as the case may be] of a US$53,470,000 and Baht 60,000,000 Credit Facilities Agreement dated [*] between (1) ourselves, (2) the Facility Agent, (3) the Security Agent, (4) the Arranger and (5) the Lenders named therein

64

(the Facilities Agreement). Terms defined in the Facilities Agreement have the same meanings in this Drawing Notice.

2.

We wish to borrow Advances with the following specifications:

(a)

Borrower: ACT Manufacturing (Thailand) Public Company Limited

(b)

Facility: * Tranche                         

(c)

Drawing Date: *                        20*    

(d)

Currency: *                        

(e)

Amount: *                        

(f)

Payment Instructions: *                        

3.

We confirm that:

(a)

the matters represented and warranted by the Borrower set out in clause 23.2 (Representations After Signing) of the Facilities Agreement are true and accurate on the date of this Drawing Notice as if made with reference to the facts and circumstances now prevailing and that no Default has occurred and is continuing or would result from the Advance; and

(b)

the drawing of the amount set out in paragraph 2 above will not cause the Outstandings in respect of any Lender to exceed the level of that Lender's Commitment.

Yours faithfully,

[Authorised Directors]

for and on behalf of
ACT Manufacturing (Thailand) Public Company Limited

65

Part II
Form of Receipt

        [Date]                

Attention:    [The Relevant Lender]

        US$53,470,000 and Baht 60,000,000 Credit Facilities Agreement

        We refer to the Facilities provided by the Lenders under a US$53,470,000 and Baht 60,000,000 Credit Facilities Agreement dated [*] between (1) ourselves, (2) the Facility Agent, (3) the Security Agent, (4) the Arranger and (5) the Lenders named therein (the Facilities Agreement).

        Words and expressions defined in the Facilities Agreement have the same meanings when used herein.

        We hereby confirm that we have borrowed and received the following Advance upon the terms and subject to the conditions set out in the Facilities Agreement:

(a)	Facility:	[Tranche [.]    ];
b)	Amount:	[.];
(c)	Drawing Date:	[.]; and
(d)	Lender:	[.].
Yours faithfully

Authorised Directors
for and on behalf of
ACT Manufacturing (Thailand) Public Company Limited

SCHEDULE 4

Certificate of Borrower

        [Letterhead of ACT Manufacturing (Thailand) PCL]

To: [*the Facility Agent]

        We [*name] and [*name], both Authorised Directors of ACT Manufacturing (Thailand) PCL of [*address] (the Borrower)

HEREBY CERTIFY that:

(a)

attached hereto marked "A", are true and correct copies of all documents which contain or establish or relate to the constitution of the Borrower; and



(b)

attached hereto marked "B", is a true and correct copy of [resolutions duly passed] at [a meeting of the Board of Directors] of the Borrower duly convened and held on *_________ _________ _________ 20*____ approving the execution of the US$53,470,000 and Baht 60,000,000 Credit Facilities Agreement [and those of the Financing Documents to which the Borrower is a party] and authorising [its] [their] execution, signature, delivery and performance and such resolutions have not been amended, modified or revoked and are in full force and effect.

66

        The following signatures are the true signatures of the persons who have been authorised to sign the Financing Documents and to give notices and communications, including notices of drawing, under or in connection with the Financing Documents.

Name	Position	Signature
*	*
*	*
*	*
Yours sincerely

Authorised Directors
For and on behalf of
ACT Manufacturing (Thailand) Public Company Limited

Date: *             20*    

SCHEDULE 5

Certificate of Guarantor

[Letterhead of ACT Manufacturing, Inc. (the Company)]

Certificate of Secretary of ACT Manufacturing, Inc.

I, the undersigned, the Secretary of ACT Manufacturing, Inc., do hereby certify that:

1.

Attached hereto as Exhibit A is a true, correct and complete copy of the certificate of incorporation of the Company as in effect on [            ], 2001 and at all times subsequent thereto to and including the date of this Certificate.



2.

Attached hereto as Exhibit B is a true, correct and complete copy of the by-laws of the Company as in effect on [            ], 2001 and at all times subsequent thereto to and including the date of this Certificate.



3.

There are no proceedings for the amendment or modification of or for any other change in such certificate of incorporation or by-laws or for the merger, consolidation, sale of all or substantially all assets and business, dissolution or liquidation of the Company or threatening its existence.



4.

The Company is a corporation duly formed and validly existing under and by virtue of the law of the Commonwealth of Massachusetts and is in good standing in that Commonwealth.



5.

Attached hereto as Exhibit C [in the form as attached] is a true, correct and complete copy of resolutions, including all exhibits thereto, adopted by the written consent of each of the members of the Board of Directors of the Company dated [            ], 2001 in connection with the proposed Guarantee referred to below, which resolutions and written consents have been filed with the minutes of the Board of Directors of the Company. Said resolutions have not been amended, annulled, rescinded or revoked and are in full force and effect. There exist no other resolutions of the Board of Directors of the Company acting in such capacity relating to the matters set forth in the resolutions attached hereto. There is no provision in the certificate of incorporation or by-laws of the Company limiting the power of the Board of Directors of the Company to pass the resolutions attached hereto, and the same are in conformity with the provisions of such certificate of incorporation and by-laws.

67

6.

The persons listed below have been duly elected or appointed, have duly qualified and on the date of this Certificate are (and at all times since [            ], 2001 have been) officers of the Company, holding the respective offices set forth below opposite their names, and the signatures set opposite their names are genuine:

Name	Office	Signature
	[President]
	[Vice-President]
	[Secretary]

        Each of the foregoing officers is authorized (a) to sign on behalf of the Company the Guarantee between the Company as Guarantor, The Thai Farmers Bank Public Company Limited, as security agent for the lenders (the Guarantee) and b) to act as a representative of the Company for the purposes of signing the Guarantee and giving notices and other communications in connection therewith and the transactions contemplated thereby.

        IN WITNESS WHEREOF, I have hereunto set my hand as Secretary of the Company this [    ] day of [            ], 2001.

Name:

        I, the undersigned, President of the Company, do hereby certify that [            ] has been duly elected or appointed, has duly qualified and this day is the Secretary of the Company, and that the signature above is genuine.

        IN WITNESS WHEREOF, I have hereunto set my hand as President of the Company this [    ] day of [            ], 2001.

Name:

68

EXHIBIT C

[Letterhead of ACT Manufacturing, Inc. (the Company)]

Resolutions of the Board of Directors

1.

RESOLVED, that (a) the form, as submitted to the directors and attached hereto as Annex A, of the proposed Guarantee (the Guarantee) between the Company, as Guarantor, and The Thai Farmers Bank Public Company Limited, as security agent acting on behalf of the lenders (as referred to in the Guarantee) (the Beneficiary), providing for a guarantee by the Company of the obligations of ACT Manufacturing (Thailand) Public Company Limited under the Facilities Agreement referred to in the Guarantee and (b) the transaction effected or to be effected pursuant to the terms and provisions of the Guarantee is hereby authorized and approved by the Company in every respect.

2.

RESOLVED, that [the President, the Vice President, the Treasurer, the Secretary and any duly authorized attorney] of the Company each be, and each of them hereby is, authorized to execute and deliver, on behalf of the Company, the Guarantee substantially in the form approved by the Board of Directors pursuant to the foregoing resolution, with such changes thereto as may be approved by the officer executing and delivering the same on behalf of the Company, the execution of any document or instrument by any of the aforesaid officers of the Company pursuant to these resolutions being conclusive evidence that the same have been authorized and approved by the Company in every respect and that any such changes have been approved by such officer.

3.

RESOLVED, that [the President, the Vice President, the Treasurer, the Secretary and any duly authorized attorney] of the Company each be, and each of them hereby is, authorized in the name of the Company to do and perform all such further acts and things and to execute and deliver all such further documents and instruments and to take all such further steps as any one of them may deem to be necessary, advisable, convenient or proper to carry out the intent of these resolutions and to perform fully the provisions of the Guarantee. The performance of any such further act or thing and the execution of any such document or instrument by any of the aforesaid officers of the Company pursuant to these resolutions shall be conclusive evidence that the same have been authorized and approved by the Company in every respect and have been approved by such officer.

4.

RESOLVED, that [the Secretary and each Assistant Secretary] of the Company be, and each of them hereby is, authorized to certify to the names of the current officers of the Company and other persons authorized to sign for it in such capacity (including, without limitation, persons to whom such officers or authorized persons have delegated their authority) and the offices respectively held by them, if any, together with specimens of their signatures, and in case of any change of any holder or holders of any such office or offices or of any such authorized person or persons, the fact of such change and the names of any new officer or officers, and any new authorized person or persons, and the offices respectively held by them, if any, together with specimens of their signatures;

5.

RESOLVED, that the Beneficiary be promptly notified in writing by the Secretary of the Company of any change in these resolutions, such notice to be given to the Beneficiary at its principal office, and that until the Beneficiary has actually received such notice in writing, the Beneficiary is authorized to act in reliance of these resolutions, and that until the Beneficiary has actually received such notice in writing and has had a reasonable opportunity to act upon such notice, the Beneficiary shall be indemnified and saved harmless from any loss suffered or liability incurred by it in continuing to act in reliance of these resolutions, even though these resolutions may have been changed.

69

6.

RESOLVED, that the [Secretary and each Assistant Secretary] of the Company be, and each of them hereby is, authorized and empowered to certify the passage of the foregoing resolutions.

SCHEDULE 6

Form of Transfer Certificate

To: [*the Facility Agent]

TRANSFER CERTIFICATE

relating to a US $53,470,000 and Baht 60,000,000 credit facilities agreement dated [*] and made between the Borrower, the Arranger, the Agents (as Agents for the Finance Parties) and certain Lenders named therein (the Facilities Agreement). Terms defined in the Facilities Agreement have the same meanings herein.

1.

[Transferor Lender] (the Transferor Lender):

(a)

confirms that to the extent that details appear in the Schedule hereto against, as the case may be, the heading "Bank's Participation", such details accurately summarise its participation in the Facilities (as defined in the Facilities Agreement); and

(b)

requests [Transferee Lender] (the Transferee Lender) to accept and procure the [assignment and/or transfer] to the Transferee Lender [rights, benefits and/or obligations] in respect of the portion specified in the Schedule of its participation in the [Tranche A Facility, Tranche B Facilities, Tranche C Facility, Tranche D Facility and/or Tranche E Facility] by counter-signing and delivering this Transfer Certificate to the Facility Agent at its address for the service of notices specified in the Facilities Agreement.

2.

The Transferee Lender hereby requests the Facility Agent to accept this Transfer Certificate as being delivered to the Facility Agent pursuant to and for the purposes of clause 31.3 (Assignment and Transfer Procedure) of the Facilities Agreement so as to take effect in accordance with the terms thereof on [date of transfer].

3.

The Facility Office and address for notices of the Transferee Lender for the purposes of the Financing Documents are set out in the Schedule.

4.

The Transferor Lender and the Transferee Lender acknowledge and agree that clauses 31.2(b) to 31.2(d) (Assignment and Transfers by Lenders) apply to this Transfer Certificate as if set out in full herein, mutatis mutandis.

5.

As regards assignment of rights and benefits to the Transferee Lender, the Transferee Lender hereby agrees with the Transferor Lender and each of the other parties to the Facilities Agreement that it will assume any right and benefit which the Transferor Lender had had prior to the Transfer Certificate taking effect such that it will not have any more rights than those assigned to it by the Transferor Lender (including without limitation rights relating to interest rate and payment) pursuant to the terms of the Facilities Agreement.

6.

The Transferor Lender and the Transferee Lender hereto agree that the Security and the Parent Guarantee shall continue to secure the Secured Indebtedness and the Guaranteed Obligations and each of them agrees to do all acts and things necessary to achieve this effect.

7.

This Transfer Certificate and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws of the Kingdom of Thailand.

70

The Schedule

Bank's Total Participation
[Tranche A Facility	Amount [    ]]
[Tranche B Facilities	Amount [    ]]
[Tranche C Facility	Amount [    ]]
[Tranche D Facility	Amount [    ]]
[Tranche E Facility	Amount [    ]]
Portion of Participation To be Assigned/Transferred
[Tranche A Facility	Amount [    ]]
[Tranche B Facilities	Amount [    ]]
[Tranche C Facility	Amount [    ]]
[Tranche D Facility	Amount [    ]]
[Tranche E Facility	Amount [    ]]

*Transferor Lender	[*Transferee Lender] Address: * Telephone: * Fax: * Attention: *
Signed	Signed
Acknowledged and Agreed by: [Facility Agent]:
Signed
Dated *             20*
Acknowledged and Agreed by: ACT Manufacturing (Thailand) Public Company Limited: Signed
Dated *             20*

[to be also signed by the Borrower in cases of a transfer of obligations]

SCHEDULE 7

List of Asset and Property to be Granted as Security

1.

Parcels of land under the Title Deeds numbers 5756 and 4790 located at Tambol Banglane, Amphor Bang-Pa-In Phra Nakhon Si Ayutthaya province, and all present and future structures and buildings situated thereon;

2.

Land under the Title Deed number 33271 located at Tambol Nongjabok, Amphor Muang Nakhon Ratchasima, Nakhon Ratchasima province, and all present and future structures and buildings situated thereon;

71

3.

Parcels of land under Title deeds number 23286, 23288, 23289 and 26223 located at Tambol Kukot, Amphor Lam Luk Ka, Patum-Thani province, and all present and future structures and buildings situated thereon;

4.

All machinery of the Borrower mortgaged or required to be mortgaged under a credit facilities agreement dated 9 October 1996 (together with all supplemental and amendment agreement thereof) between the Borrower (formerly named "GSS/Array Technology Public Company Limited"), TFB as security agent, The Siam Commercial Bank Public Company Limited as facility agent and the lenders named therein; and

5.

All fixed and capital assets (including without limitation machinery) purchased by the Borrower through any fund drawn or utilised by the Borrower under the Facilities, to the extent permitted by clause 7.3(g) of the Guarantor Credit Agreement and to the extent permitted by the law of the Kingdom of Thailand.

72

SCHEDULE 8

List of Bank Accounts

[OMMITED]

ACT MANUFACTURING (THAILAND) PUBLIC COMPANY LIMITED
DETAILS OF BANK ACCOUNT
AS OF FEBRUARY 2001

		Bank
No.
	Account No.	Branch	Type of Account		Address
14	314-00731102-2001	Klong Luang	Savings Account	(USD)	93 Moo 8	Klong Luang Pathumtani 12120
15	314-00909602-2001	Klong Luang	Savings Account	(YEN)	93 Moo 8	Klong Luang Pathumtani 12120
16		Head Office			Floor 4	Zone B Rutchadapisek Rd., Ladyao, Jatujak, Bangkok 10900

		Export-Import Bank of Thailand
No.
	Account No.	Branch	Type of Account	Address
17	202-1-00004-1	Pratoonum Pra-in	Current Account	125 Moo 7	Pratoonum-pra-in Ayudhaya 13160
18	202-3-00001-9	Pratoonum Pra-in	Fixed Account	125 Moo 7	Pratoonum-pra-in Ayudhaya 13160

		Bank of Ayudhya Public Company Limited
No.
	Account No.	Branch	Type of Account		Address
19	777-1-16840-8	Head Office	Savings Account		1222 Rama III Road,	Bang Pong Pang, Yannawa, Bangkok 10120
20	700-02-1-00297	Head Office	Savings Account	(USD)	1222 Rama III Road,	Bang Pong Pang, Yannawa, Bangkok 10120
21	777-0-030583	Head Office	Current Account		1222 Rama III Road,	Bang Pong Pang, Yannawa, Bangkok 10120

73

		Standard Chartered Bank
No.
	Account No.	Branch	Type of Account		Address
22	6791883-177	Pasir Panjang	Savings Account	(USD)	460 Alexander Road,	Singapore 0511
23	23-062-1006-8	Pasir Panjang	Savings Account	(SD)	460 Alexander Road,	Singapore 0511
24	77-000-1590-3	Pasir Panjang	Current Account	(USD)	460 Alexander Road,	Singapore 0511
25	To be Opened	Pasir Panjang	Savings Account	(USD)	460 Alexander Road,	Singapore 0511
DURING 19-23 FEB 01

ACT MANUFACTURING (THAILAND) PUBLIC COMPANY LIMITED
DETAILS OF BANK ACCOUNT
AS OF February 2001

		Wells Fargo Bank
No.
	Account No.	Branch	Type of Account	Address
26	02 99930362	Oakridge Almaden	Savings Account	1006 Blossom Hill Road,	San Jose, Ca 95123 Usa.

74

SIGNATURE PAGE

BORROWER:

ACT MANUFACTURING (THIALAND) PUBLIC COMPANY LIMITED

By:	/s/  JAMES MENGES	By:	/s/  SUTHIPOUG SAFNGKEAU
Name:	James Menges	Name:	Suthipoug Safngkeau
Title:	Senior Vice President OPS-ASIA	Title:	Director

Address:	94 Moo 1, Hi-Tech Industrial Estate Banlane, Bang-Pa-In, Ayudhaya 13160, Thialand
Telephone:	66-35-350890
Fax:	66-35-350945
Attention:	Finance Director

LENDERS:

THE THAI FARMERS BANK PUBLIC COMPANY LIMITED

By:	/s/  AUTHORIZED AGENT
Name:
Title:

Address:	1 Thai Farmers Lane Ratburana Road Bangkok 10140, Thailand
Telephone:	66(2) 470 2884, 470 2337
Fax:	66(2) 470 2948, 470 2399
Attention:	Corporate Client Relationship Department

BANK OF AYUDHYA PUBLIC COMPANY LIMITED

By:	/s/  AUTHORIZED AGENT
Name:
Title:

Address:	1222 Rama III Road Bangpongpang, Yannawa Bangkok 10120, Thailand
Telephone:	66(2) 296 3737
Fax:	66(2) 683 1264
Attention:	Special Project Credit Department

75

ARRANGER:

THE THAI FARMERS BANK PUBLIC COMPANY LIMITED

By:	/s/  AUTHORIZED AGENT
Name:
Title:

Address:	1 Thai Farmers Lane Ratburana Road Bangkok 10140, Thailand
Telephone:	66(2) 470 2884, 470 2337
Fax:	66(2) 470 2948, 470 2399
Attention:	Corporate Client Relationship Department

FACILITY AGENT:

BANK OF AYUDHYA PUBLIC COMPANY LIMITED

By:	/s/  AUTHORIZED AGENT
Name:
Title:

Address:	122 Rama III Road Bangpongpang, Yannawa Bangkok 10120, Thailand
Telephone:	(662) 296 4787
Fax:	(662) 683 1324
Attention:	Investment Banking Department

SECURITY AGENT:

THE THAI FARMERS BANK PUBLIC COMPANY LIMITED

By:	/s/  AUTHORIZED AGENT
Name:
Title:

Address:	1 Thai Farmers Lane Ratburana Road Bangkok 10140, Thailand
Telephone:	66(2) 470 2884, 470 2337
Fax:	66(2) 470 2948, 470 2399
Attention:	Corporate Client Relationship Department

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QuickLinks

Exhibit 10.1

CONTENTS
SECTION I: DEFINITIONS AND INTERPRETATION
SECTION II: THE FACILITIES
SECTION III: TRANCHE A FACILITY
SECTION IV: TRANCHE B FACILITIES
SECTION V TRANCHE C FACILITY
SECTION VI: TRANCHE D FACILITY
SECTION VII: TRANCHE E FACILITY
SECTION VIII: PREPAYMENT AND CANCELLATION
SECTION IX: PAYMENTS, TAXES AND DEFAULT INTEREST
SECTION X: CHANGES IN CIRCUMSTANCES
SECTION XI: REPRESENTATIONS AND UNDERTAKINGS
SECTION XII: DEFAULT AND INDEMNITY
SECTION XIII: SET-OFF AND SECURITY SHARING ARRANGEMENTS
SECTION XIV: THE AGENTS AND THE ARRANGER
SECTION XV: AMENDMENTS, ASSIGNMENTS AND TRANSFERS
SECTION XVI: FEES AND EXPENSES
SECTION XVII: MISCELLANEOUS
SECTION XVIII: LAW
SCHEDULE 1 Lenders and Commitments
SCHEDULE 2 Conditions Precedent Documents to Facilities
SCHEDULE 3 Part I Form of Drawing Notice
Part II Form of Receipt
SCHEDULE 4 Certificate of Borrower
SCHEDULE 5 Certificate of Guarantor [Letterhead of ACT Manufacturing, Inc. (the Company)] Certificate of Secretary of ACT Manufacturing, Inc.
EXHIBIT C [Letterhead of ACT Manufacturing, Inc. (the Company)] Resolutions of the Board of Directors
SCHEDULE 6 Form of Transfer Certificate
TRANSFER CERTIFICATE
The Schedule
SCHEDULE 7 List of Asset and Property to be Granted as Security
SCHEDULE 8 List of Bank Accounts [OMMITED]

ACT MANUFACTURING (THAILAND) PUBLIC COMPANY LIMITED DETAILS OF BANK ACCOUNT AS OF FEBRUARY 2001
ACT MANUFACTURING (THAILAND) PUBLIC COMPANY LIMITED DETAILS OF BANK ACCOUNT AS OF February 2001

SIGNATURE PAGE

EX-99.1

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Exhibit 99.1

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

In connection with the Quarterly Report of Benchmark Electronics, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Donald E. Nigbor, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  DONALD E. NIGBOR Donald E. Nigbor
Chief Executive Officer
November 14, 2002

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Exhibit 99.1

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

EX-99.2

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Exhibit 99.2

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

In connection with the Quarterly Report of Benchmark Electronics, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gayla J. Delly, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(3)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(4)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  GAYLA J. DELLY Gayla J. Delly
Chief Financial Officer
November 14, 2002

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Exhibit 99.2

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