-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NIzeTE1/lXKC+bnnjojl7XGe2LLhutK6wk+UTCa1MJK48rIyz8Jtqh3nchPde3tj rXVP5VCWrpasDh76eg7j+g== 0000891554-99-000302.txt : 19990217 0000891554-99-000302.hdr.sgml : 19990217 ACCESSION NUMBER: 0000891554-99-000302 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEXTRONICS INTERNATIONAL LTD CENTRAL INDEX KEY: 0000866374 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 000000000 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23354 FILM NUMBER: 99542226 BUSINESS ADDRESS: STREET 1: BLK 514 CHAI CHEE LANE #04-13 STREET 2: BODEK INDUSTRIAL ESTATE REPUBLIC OF SING CITY: SINGAPORE 1646 STATE: U0 BUSINESS PHONE: 0654495255 FORMER COMPANY: FORMER CONFORMED NAME: FLEX HOLDINGS PTE LTD DATE OF NAME CHANGE: 19940201 10-Q 1 QUARTERLY REPORT =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q (MARK ONE) {X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended December 31, 1998 OR { } 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: 0-23354 FLEXTRONICS INTERNATIONAL LTD. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) SINGAPORE NOT APPLICABLE (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) ------------------------ SINGAPORE 469029 (65) 449-5255 (ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ MICHAEL E. MARKS CHIEF EXECUTIVE OFFICER FLEXTRONICS INTERNATIONAL LTD. 514 CHAI CHEE LANE #04-13 BEDOK INDUSTRIAL ESTATE SINGAPORE 469029 (65) 449-5255 (NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ 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 {X} No { } At February 9, 1999, there were 47,333,739 Ordinary Shares, S$0.01 par value, outstanding. 1 FLEXTRONICS INTERNATIONAL LIMITED INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Condensed Consolidated Balance Sheets - December 31, 1998 and March 31, 1998 ........................................... 3 Condensed Consolidated Statements of Income - Three Months Ended December 31, 1998 and 1997 ............................. 4 Condensed Consolidated Statements of Income - Nine Months Ended December 31, 1998 and 1997 ............................. 5 Statements of Comprehensive Income - Three Months Ended December 31, 1998 and 1997 ................................... 6 Statements of Comprehensive Income - Nine Months Ended December 31, 1998 and 1997 ................................... 7 Condensed Consolidated Statements of Cash Flow - Nine Months Ended December 31, 1998 and 1997 ............................. 8 Notes to Condensed Consolidated Financial Statements ......... 9-11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...................................... 12-20 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K ............................... 21 Signatures ..................................................... 22 2 ITEM 1. FINANCIAL STATEMENTS FLEXTRONICS INTERNATIONAL LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
December 31, March 31, 1998 1998 ----------- ----------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents .............................. $ 201,121 $ 89,390 Accounts receivable, net ............................... 179,906 155,125 Inventories ............................................ 197,141 157,077 Deferred income taxes and other current assets ......... 51,791 37,942 ----------- ----------- Total current assets ........................... 629,959 439,534 Property and equipment, net .............................. 327,118 255,573 Other non-current assets ................................. 50,379 49,016 ----------- ----------- Total assets ................................... $ 1,007,456 $ 744,123 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Bank borrowings and current portion of long-term debt .. $ 32,682 $ 43,209 Capital lease obligations .............................. 10,647 9,587 Accounts payable and accrued liabilities ............... 237,555 177,084 Other current liabilities .............................. 51,034 85,118 ----------- ----------- Total current liabilities ...................... 331,918 314,998 ----------- ----------- Long-term debt, net of current portion ................... 174,200 166,497 Capital lease obligations, net of current portion ........ 27,418 23,181 Deferred income taxes .................................... 4,424 4,812 Other long-term liabilities .............................. 9,054 18,832 Minority interest ........................................ 1,917 994 ----------- ----------- Total long-term liabilities ................... 217,013 214,316 ----------- ----------- Shareholders' Equity: Ordinary Shares ........................................ 296 134 Additional paid-in capital ............................. 416,787 214,466 Retained earnings ...................................... 46,803 6,934 Accumulated other comprehensive loss ................... (5,361) (6,725) ----------- ----------- Total shareholders' equity ..................... 458,525 214,809 ----------- ----------- Total liabilities and shareholders' equity ..... $ 1,007,456 $ 744,123 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 FLEXTRONICS INTERNATIONAL LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) Three months ended December 31, 1998 1997 -------- -------- Net sales ...................................... $499,901 $295,000 Cost of sales .................................. 457,068 266,192 -------- -------- Gross margin .......................... 42,833 28,808 -------- -------- Operating expenses: Selling, general and administrative .......... 17,397 13,773 Goodwill and intangibles amortization ........ 879 951 -------- -------- Total operating expenses .............. 18,276 14,724 -------- -------- Income from operations ......................... 24,557 14,084 Other income and expenses: Interest expense ............................. 5,729 4,331 Interest income .............................. (1,295) (1,444) Merger-related expenses ...................... -- 4,000 Other expense, net ........................... 2,504 59 -------- -------- Income before income taxes ............ 17,619 7,138 Provision for income taxes ..................... 2,126 1,197 -------- -------- Net income ............................ $ 15,493 $ 5,941 ======== ======== Earnings per share: Basic ........................................ $ 0.36 $ 0.15 Diluted ...................................... $ 0.34 $ 0.15 Shares used in computing per share amounts: Basic ........................................ 43,267 38,568 Diluted ...................................... 46,061 40,606 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 FLEXTRONICS INTERNATIONAL LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) Nine months ended December 31, 1998 1997 ---------- ---------- Net sales ..................................... $1,298,928 $ 782,013 Cost of sales ................................. 1,186,133 705,496 ---------- ---------- Gross margin ......................... 112,795 76,517 ---------- ---------- Operating expenses: Selling, general and administrative ......... 48,307 38,143 Goodwill and intangibles amortization ....... 2,640 2,704 ---------- ---------- Total operating expenses ............. 50,947 40,847 ---------- ---------- Income from operations ........................ 61,848 35,670 Other income and expenses: Interest expense ............................ 15,992 13,183 Interest income ............................. (2,765) (2,040) Merger related expenses ..................... -- 4,000 Other expense, net .......................... 3,140 (1,438) ---------- ---------- Income before income taxes ........... 45,481 21,965 Provision for income taxes .................... 5,468 2,856 ---------- ---------- Net income ........................... $ 40,013 $ 19,109 ========== ========== Earnings per share: Basic ....................................... $ 0.95 $ 0.54 Diluted ..................................... $ 0.90 $ 0.51 Shares used in computing per share amounts: Basic ....................................... 42,127 35,530 Diluted ..................................... 44,249 37,108 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 FLEXTRONICS INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Three months ended December 31, 1998 1997 -------- -------- Net income ..................................... $ 15,493 $ 5,941 Other comprehensive loss, net of tax: Foreign currency translation adjustments ..... (2,061) (2,405) -------- -------- Comprehensive income ........................... $ 13,432 $ 3,536 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements. 6 FLEXTRONICS INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Nine months ended December 31, 1998 1997 -------- -------- Net income ........................................ $ 40,013 $ 19,109 Other comprehensive income (loss), net of tax : Foreign currency translation adjustments ........ 1,200 (4,092) -------- -------- Comprehensive income .............................. $ 41,213 $ 15,017 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements. 7 FLEXTRONICS INTERNATIONAL LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine months ended December 31, 1998 1997 --------- --------- Net cash provided by operating activities .................. $ 38,327 $ 4,435 --------- --------- Cash flows from investing activities: Purchases of property and equipment ...................... (95,152) (65,944) Proceeds from sale of property and equipment ............. 5,905 1,095 Remaining payment for 40% interest in FICO ............... -- (2,200) Effect of Energipilot and DTM acquisitions ............... -- 1,504 Other investments ........................................ (2,260) (2,756) Payment of earnout and remaining purchase price related to the acquisition of Astron ............................... (24,000) (6,250) --------- --------- Net cash used in investing activities ...................... (115,507) (74,551) --------- --------- Cash flows from financing activities: Bank borrowings and proceeds from long-term debt ......... 63,334 3,220 Repayment of bank borrowings and long-term debt .......... (68,236) (120,750) Repayment of capital lease obligations ................... (7,452) (7,298) Repayment of loan from related party ..................... -- 2,975 Repayment of note payable ................................ -- (108) Proceeds from exercise of stock options .................. 7,175 1,136 Proceeds from Employee Stock Purchase Plan ............... 1,166 -- Net proceeds from issuance of senior subordinated notes .. -- 145,687 Net proceeds from equity offering ........................ 194,000 95,297 --------- --------- Net cash provided by financing activities .................. 189,987 120,159 --------- --------- Effect of exchange rate changes on cash .................... (1,076) (869) --------- --------- Net increase ............................................... 111,731 49,174 Cash and cash equivalents at beginning of period ........... 89,390 24,159 --------- --------- Cash and cash equivalents at end of period ................. $ 201,121 $ 73,333 ========= =========
The accompanying notes are an integral part of these condensed consolidated financial statements. 8 FLEXTRONICS INTERNATIONAL LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998 (unaudited) Note A - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements, and should be read in conjunction with the annual audited consolidated statements as of and for the year ended March 31, 1998 contained in the Company's 1998 annual report on Form 10-K. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended December 31, 1998 are not necessarily indicative of the results that may be expected for the year ending March 31, 1999. Note B - Inventories Inventories consist of the following (in thousands): December 31, March 31, 1998 1998 -------- -------- Raw materials ................ $159,951 $130,868 Work-in-process .............. 23,605 21,536 Finished goods ............... 13,585 4,673 -------- -------- $197,141 $157,077 ======== ======== Note C - EARNINGS PER SHARE In the third quarter of fiscal 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." Under SFAS No. 128, the Company presents two earnings per share ("EPS") amounts. Basic EPS is computed using the weighted average number of Ordinary Shares outstanding during the applicable periods. Diluted EPS is computed using the weighted average number of Ordinary Shares and dilutive Ordinary Share equivalents outstanding during the applicable periods. Ordinary Share equivalents include dilutive Ordinary Shares issuable upon the exercise of stock options and are computed using the treasury stock method. Reconciliation between basic and diluted earnings per share is as follows for the three and nine month periods ended December 31, 1998 and 1997 (in thousands, except per share data):
Three months ended Nine months ended December 31, December 31, ------------------ ------------------ 1998 1997 1998 1997 ------- ------- ------- ------- Shares issued and outstanding (1) 43,267 37,647 42,127 34,609 Shares due to Astron (2) -- 921 -- 921 ------- ------- ------- ------- Weighted average ordinary shares - basic 43,267 38,568 42,127 35,530 Ordinary Shares equivalents: Stock options (3) 2,794 2,038 2,122 1,578 ------- ------- ------- ------- Weighted average ordinary shares and equivalents - diluted 46,061 40,606 44,249 37,108 ======= ======= ======= ======= Net income $15,493 $ 5,941 $40,013 $19,109 ======= ======= ======= ======= Basic earnings per share: $ 0.36 $ 0.15 $ 0.95 $ 0.54 ======= ======= ======= ======= Diluted earnings per share: $ 0.34 $ 0.15 $ 0.90 $ 0.51 ======= ======= ======= =======
9 (1) Ordinary Shares issued and outstanding based on the weighted average method. (2) In fiscal 1998, the Company had a provision for the Ordinary Shares to be issued as purchase price due to Astron's former shareholders in June 1998. In fiscal 1999, the Company elected to settle this purchase price obligation in cash, which was its option. As a result, the provision for Ordinary Shares was eliminated. (3) Stock options of the Company calculated based on the treasury stock method using average market price for the period, if dilutive. Note D - COMPREHENSIVE INCOME The Company adopted SFAS No. 130, "Comprehensive Income" in the first quarter of fiscal 1999. SFAS No. 130 requires companies to report an additional measure of income on the income statement referred to as "comprehensive income" or to create a separate financial statement that reflects comprehensive income. The Company's comprehensive income includes net income and foreign currency translation adjustments. The following table sets forth the components of other comprehensive income (loss) net of income tax as follows (in thousands):
Three months ended Three months ended December 31, 1998 December 31, 1997 ---------------------------------- ---------------------------------- Tax Tax Pre-Tax (Expense) Net-of-Tax Pre-Tax (Expense) Net-of-Tax Amount or Benefit Amount Amount or Benefit Amount ------- ------- ------- ------- ------- ------- Foreign currency translation adjustments $(2,342) $ 281 $(2,061) $(2,890) $ 485 $(2,405) ------- ------- ------- ------- ------- ------- Other comprehensive income (loss) $(2,342) $ 281 $(2,061) $(2,890) $ 485 $(2,405) ======= ======= ======= ======= ======= ======= Nine months ended Nine months ended December 31, 1998 December 31, 1997 ---------------------------------- ---------------------------------- Tax Tax Pre-Tax (Expense) Net-of-Tax Pre-Tax (Expense) Net-of-Tax Amount or Benefit Amount Amount or Benefit Amount ------- ------- ------- ------- ------- ------- Foreign currency translation adjustments $ 1,364 $ (164) $ 1,200 $(4,704) $ 612 $(4,092) ------- ------- ------- ------- ------- ------- Other comprehensive income (loss) $ 1,364 $ (164) $ 1,200 $(4,704) $ 612 $(4,092) ======= ======= ======= ======= ======= =======
Note E - NEW ACCOUNTING STANDARDS In 1998, the Company adopted SFAS No. 129, "Disclosure of information about capital structure." SFAS No. 129 requires companies to disclose certain information about their capital structure. SFAS No. 129 did not have a material impact on the Company's consolidated financial statement disclosures. In 1998, the FASB issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," which will be adopted by the Company in its 1999 annual consolidated financial statements. SFAS No. 131 requires companies to report financial and descriptive information about its reportable operating segments, including segment profit or loss, certain specific revenue and expense items, and segment assets, as well as information about the revenues derived from the Company's products and services, the countries in which the Company earns revenues and hold assets, and major customers. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. It requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met and that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999 and cannot be applied retroactively. The Company is currently evaluating this statement, but does not expect that it will have a material effect on the Company's financial position or results of operations. 10 Note F - EQUITY OFFERING On December 7, 1998, the Company completed an equity offering of 2.7 million Ordinary Shares at $72.50 per share with net proceeds of $194.0 million. Subsequent to December 7, 1998, the Company completed a two-for-one stock split and the shares from this offering have been restated to 5.4 million Ordinary Shares. Note G - STOCK SPLIT The Company set a record date of December 22, 1998 for a two-for-one stock split to be effected as a bonus issue (the Singapore equivalent of a stock dividend). The distribution of 23,534,229 Ordinary Shares occurred on January 11, 1999. This stock dividend has been reflected in the Company's financial statements as of and for the three and nine months ended December 31, 1998, unless otherwise noted. All share and per share amounts have been retroactively restated to reflect the stock split. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except for historical information contained herein, the matters discussed in this Form 10-Q are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words "expects," "anticipates," "believes," "intends," "plans" and similar expressions identify forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-Q with the Securities and Exchange Commission. Readers are urged to carefully review and consider the various disclosures made by the Company in this report and in the Company's other reports filed with the Securities and Exchange Commission, including its Form 10-K and its other Form 10-Qs, that attempt to advise interested parties of the risks and factors that may affect the Company's business. These forward-looking statements are subject to certain risks and uncertainties, including, without limitation, those discussed in "Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations--Certain Factors Affecting Future Operating Results," that could cause future results to differ materially from historical results or anticipated results. OVERVIEW Flextronics is a leading provider of advanced electronics manufacturing services to original equipment manufacturers ("OEMs") in the telecommunications, networking, computer, consumer electronics and medical device industries. The Company provides a wide range of integrated services, from initial product design to volume production and fulfillment. In addition, the Company provides advanced engineering services, PCB layout, quickturn prototyping and test development. Throughout the production process, the Company offers logistics services, such as materials procurement, inventory management, and packaging and distribution. In recent years, the Company has substantially expanded its manufacturing capacity, technological capabilities and service offerings, through both acquisitions and internal growth. On March 31, 1998, the Company acquired Conexao Informatica Ltda., a Brazil-based electronics manufacturing service provider and Altatron, Inc., an electronics manufacturing service provider with facilities in California, Texas, and Scotland (together with a related real estate company). On December 1, 1997, the Company acquired DTM Products, Inc., a Colorado-based producer of injection molded plastics for North American OEMs, and acquired Energipilot AB, a Swedish company principally engaged in providing cables and engineering services to Northern European OEMs. The acquisitions of Conexao, Altatron, DTM Products and Energipilot have been accounted for as poolings-of-interests. The Company did not restate its prior period financial statements with respect to these acquisitions because such acquisitions did not have a material impact on its consolidated financial statements. On October 30, 1997, the Company acquired 92% of the outstanding shares of Neutronics, an Austrian electronics manufacturing service provider with operations in Austria and Hungary. The acquisition was accounted for as a pooling-of-interests and accordingly, the Company has restated its prior period financial statements to give effect to this acquisition. The ability of the Company to obtain the benefits of these acquisitions is subject to a number of risks and uncertainties, including the Company's ability to successfully integrate the acquired operations and its ability to maintain, and increase, sales to customers of the acquired companies. There can be no assurance that any acquisitions will not adversely affect the Company. See "-Certain Factors Affecting Future Operating Results Risks of Acquisitions." In addition to acquisitions, the Company has substantially increased overall capacity by expanding operations in its industrial parks in China, Hungry and Mexico. As a result of these acquisitions and expansions, the Company's overall capacity has increased from approximately 1.0 million square feet at the end of Fiscal 1997 to over 2.7 million square feet at December 31, 1998, providing an extensive network of manufacturing facilities in the world's major electronics markets - Asia, the Americas, and Europe. The Company is continuing to expand operations and capacity at each of the industrial parks and plans to establish and industrial park in Brazil, See "-Certain Factors Affecting Future Operating Results -- Management of Expansion and Consolidation." 12 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain statement of operations data expressed as a percentage of net sales. Three months ended Nine months ended December 31, December 31, --------------- --------------- 1998 1997 1998 1997 ----- ----- ----- ----- Net sales ........................... 100.0 100.0 100.0 100.0 Cost of sales ....................... 91.4 90.2 91.3 90.2 ----- ----- ----- ----- Gross margin ...................... 8.6 9.8 8.7 9.8 Selling, general and administrative . 3.5 4.7 3.7 4.9 Goodwill and intangibles amortization 0.2 0.3 0.2 0.4 ----- ----- ----- ----- Income from operations ............ 4.9 4.8 4.8 4.5 Merger-related expenses ............. -- 1.4 -- 0.5 Other expenses, net ................. 1.4 1.0 1.3 1.2 ----- ----- ----- ----- Income before income taxes ........ 3.5 2.4 3.5 2.8 Provision for income taxes .......... 0.4 0.4 0.4 0.4 ----- ----- ----- ----- Net income ........................ 3.1 2.0 3.1 2.4 ===== ===== ===== ===== Net Sales Substantially all of the Company's net sales have been derived from the manufacture and assembly of products for OEM customers. Net sales for the third quarter of fiscal 1999 increased 69% to $499.9 million from $295.0 million for the third quarter of fiscal 1998. Net sales for the nine months ended December 31, 1998 increased 66% to $1.3 billion from $782.0 million for the nine months ended December 31, 1997. The increase in net sales was primarily due to increased sales to certain existing customers and, to a lesser extent, from sales to new customers. Sales for the third quarter also increased due to the growth in the Company's manufacture and assembly of consumer electronics during the holiday season. The Company's five largest customers in the third quarter of fiscal 1999 accounted for approximately 62% of consolidated net sales with one customer exceeding 20% and two customers exceeding 10%. During the third quarter of fiscal 1998, the Company's five largest customers accounted for approximately 60% of consolidated net sales, with one customer exceeding 30% of consolidated net sales and one customer exceeding 10%. During the first nine months ended December 31, 1998, the Company's five largest customers accounted for approximately 63% of consolidated net sales, with four customers exceeding 10% of consolidated net sales. During the first nine months ended December 31, 1997, the Company's five largest customers accounted for approximately 59% of consolidated net sales with one customer exceeding 20% of consolidated net sales and one customer exceeding 10%. See "-Certain Factors Affecting Operating Results -- Customer Concentration; Dependence on Electronics Industry." Gross Profit Gross profit varies from period to period and is affected by, among other things, product mix, component costs, customer's product life cycles, unit volumes, expansion and consolidation of manufacturing facilities, pricing, competition and new product introductions. Gross profit margin decreased to 8.6% for the third quarter of fiscal 1999 from 9.8% for the same period of fiscal 1998. Gross profit margin decreased to 8.7% for the first nine months of the current fiscal year from 9.8% for the first nine months of fiscal 1998. The gross profit margin for the three and nine month periods ended December 31, 1998 was adversely affected by several factors, including changes in customer and product mix, costs associated with expanding facilities in Mexico and Hungary, and overhead costs associated with the startup of new customers. Prices paid to the Company by its significant customers can vary based on the customer's order level, with per unit prices typically declining as volumes increase. These changes in price and volume can materially affect the Company's gross profit margin. See "-Certain Factors Affecting Operating Results --Risks of Expansion of Operations." Selling, General and Administrative Expenses Selling, general and administrative expenses ("SG&A") for the third quarter of fiscal 1999 increased to $17.4 million from $13.8 million in the third quarter of fiscal 1998 but decreased as a percentage of net sales to 3.5% for the third quarter of fiscal 1999 from 4.7% for the third quarter of fiscal 1998. SG&A increased from $38.1 million in the first nine months of fiscal 1998 to $48.3 million in the first nine months of fiscal 1999, but decreased as a percentage of net sales to 3.7% in fiscal 1999 from 4.9% in fiscal 1998. The dollar increase in SG&A was mainly due to the inclusion 13 of the SG&A from Conexao and Altatron after the acquisitions of these facilities on March 31, 1998, increased staffing and related administrative expenses, and increased expenses associated with the implementation of the Company's new information system in the areas of maintenance, staffing and training. SG&A expenses decreased as a percentage of net sales due to the increase in the Company's net sales. The Company anticipates its SG&A expenses will continue to increase in absolute terms in the future. However, to the extent that net sales continue to grow faster than SG&A expenses, the Company expects SG&A expenses may continue to decline as a percentage of net sales. Goodwill and Intangibles Amortization Goodwill and intangible assets are amortized on a straight-line basis over the estimated life of the benefits received, which ranges from three to twenty-five years. Goodwill and intangible asset amortization for the third quarter of fiscal 1999 decreased to $879,000 from $951,000 for the same period of fiscal 1998. Goodwill and intangible assets amortization was $2.6 million and $2.7 million for the first nine months of fiscal 1999 and fiscal 1998, respectively. The decrease in goodwill and intangible assets amortization in the third quarter of fiscal 1999 was primarily due to a write-off of goodwill in March 1998 as a result of the closure of the Wales facility. Interest Expense, net Net interest expense was $4.4 million for the third quarter of fiscal 1999 and $2.9 million for the third quarter of fiscal 1998. Net interest expenses increased to $13.2 million for the first nine months of fiscal 1999 from $11.1 million of the first nine months of fiscal 1998. The increase in net interest expenses for the nine month period was primarily attributable to the Company's issuance of $150.0 million principal amount of 8.75% senior subordinated notes in October 1997 partially offset by interest income. Merger-related Expenses In the third quarter of fiscal 1998, the Company recorded a one-time charge of $4.0 million related to the merger expenses associated with the acquisitions of Neutronics, Energipilot, and DTM Products. Until it was acquired by the Company, Neutronics had planned an initial public offering and approximately $1.9 million of these merger expenses represented the costs paid to the underwriters upon the cancellation of this offering. Other Expenses, net Other expense, net increased to a loss of $2.5 million for the third quarter of fiscal 1999 compared to $59,000 loss for the third quarter of fiscal 1998. The increase in other expense, net for the third quarter of fiscal 1999 was primarily due to a $2.3 million foreign exchange loss related to foreign currency transactions in Austria, Brazil, and Hungary. Other expense, net increased to a loss of $3.1 in the first nine months of fiscal 1999 compared to $1.4 million gain in the first nine months of fiscal 1998. The increase in other expenses, net in the first nine months of fiscal 1999 was primarily due to foreign exchange losses of $3.6 million. The $1.4 million gain in the first nine months of fiscal 1998 consisted primarily of foreign exchange gain. Provision for Income Taxes The Company's consolidated effective tax rates were 12.0% and 13.0% for the nine months ended December 31, 1998 and 1997, respectively. The Company is structured as a holding company, conducting its operations through manufacturing and marketing subsidiaries in Austria, Brazil, China, Hungary, Malaysia, Mauritius, Mexico, Singapore, Sweden, the United Kingdom, and the United States. These subsidiaries are subject to taxation in the country in which they have been formed. The Company's Asian and Hungarian manufacturing subsidiaries have, at various times, been granted certain tax relief in each of these countries, resulting in lower taxes than would otherwise be the case under ordinary tax rates. The Company's United States subsidiaries have benefited from net operating loss carry-forwards. See "- Certain Factors Affecting Operating Results -- Risk of Increased Taxes." Liquidity and Capital Resources The Company has funded its operations from the proceeds of public offerings of equity and debt securities, cash and cash equivalents generated from operations, bank debt and lease financing of capital equipment. At December 31, 1998, the Company had cash and cash equivalents balances totaling $201.1 million, total bank and other debts totaling $206.9 million and $118.5 million available for borrowing under its credit facility subject to compliance with certain financial covenants. Cash provided by operating activities was $38.3 million and $4.4 million for the first nine months of fiscal 1999 and fiscal 1998, respectively. Cash provided by operating activities increased primarily due to the increase in net sales and improvement in accounts receivable collection. Depreciation and amortization was $36.7 million in the first nine months of fiscal 1999 and $22.0 million in the first nine months of fiscal 1998. Cash used in investing activities was $115.5 million and $74.6 million for the first nine months of fiscal 1999 and fiscal 1998, respectively. Cash used in investing activities for the first 14 nine months of fiscal 1999 was primarily related to capital expenditures of $95.2 million to purchase equipment in Brazil, China, Hungary, Mexico, and Sweden and payment of $24.0 million to the former shareholders of Astron for the remaining purchase price payable in connection with the Company's acquisition of Astron. Cash used in investing activities for the first nine months of fiscal 1998 consisted primarily of expenditures for new and expanded facilities, including plant construction at the Company's industrial parks in Doumen, China and Guadalajara, Mexico, Sao Paulo, Brazil, and San Jose, California. Net cash provided by financing activities was $190.0 million and $120.2 million during the nine months ended December 31, 1999 and 1998, respectively. Cash provided by financing activities for the first nine months of fiscal 1999 resulted primarily from our December 1998 equity offering of 2.7 million Ordinary Shares (5.4 million shares after giving effect to our recent two-for-one stock split) with net proceeds of $194.0 million. Net cash provided by financing activities for the first nine months of fiscal 1998 resulted primarily from net proceeds from the issuance of senior subordinated notes of $145.7 million and net proceeds from the equity offering of $95.3 million, partially offset by repayments of bank borrowings, capital leases and long-term debt of $128.0 million. The Company anticipates expending an aggregate of approximately $16.0 to $18.0 million, of which approximately $14.0 million has already been expended, to implement a new management information system, and anticipates funding these expenditures with cash from operations and proceeds form the Company's recent equity offering. See "- Certain Factors Affecting Operating Results -- Replacement of management Information Systems; Year 2000 Compliance." The Company anticipates that its working capital requirements will increase in order to support anticipated increases in its business. In addition, the Company anticipates incurring significant capital expenditures in order to support the anticipated expansions of its facilities in Brazil, China, Hungary and Mexico. Future liquidity needs will depend on fluctuations in inventory levels, the timing of expenditures by the Company on new equipment, the extent to which the Company utilizes leases to finance new facilities and equipment, levels of shipments by the Company and changes in volumes of customer orders. The Company believes that its existing cash balances, together with anticipated cash flows from operations and amounts available under its credit facilities, will be sufficient to fund its operations at its current level of business. To the extent the Company finances its working capital and capital expenditures through increased borrowings, its interest expense may increase. From time to time, the Company may consider alternative financing opportunities, including certain off-balance sheet transactions such as sale leasebacks or receivable financings. See "- Certain Factors Affecting Operating Results -- Risks of Expansion of Operations." Qualitative and Quantitative Disclosures About Market Risk There were no material changes during the three or nine months ended December 31, 1998 to the Company's exposure to market risk for changes in interest rates. There were no material changes during the three or nine months ended December 31, 1998 to the Company's foreign currency hedging programs. Certain Factors Affecting Operating Results You should carefully consider the following factors as well as the other information contained or incorporated by reference in this filing before deciding to invest in the Ordinary Shares of Flextronics. These factors could cause our future results to differ materially from those expressed or implied in forward-looking statements made by us. Risks of Expansion of Operations We have grown rapidly in recent periods, and this growth may not continue. Internal growth will require us to develop new customer relationships and expand existing ones, improve our operational and information systems and further expand our manufacturing capacity. We plan to further expand our manufacturing capacity by expanding our facilities and by adding new equipment. Such expansion involves significant risks. For example: o we may not be able to attract and retain the management personnel and skilled employees necessary to support expanded operations; o we may not efficiently and effectively integrate new operations, expand existing ones and manage geographically dispersed operations; o we may incur cost overruns; 15 o we may encounter construction delays, equipment delays or shortages, labor shortages and disputes and production start-up problems that could adversely affect our growth and our ability to meet customers' delivery schedules; and o we may not be able to obtain funds for this expansion, and we may not be able to obtain loans or operating leases with attractive terms. In addition, we expect to incur new fixed operating expenses associated with our expansion efforts, including substantial increases in depreciation expense and rental expense, that will increase our cost of sales. If our revenues do not increase sufficiently to offset these expenses, our operating results would be adversely affected. Our expansion, both through acquisitions and internal growth, has contributed to our incurring significant accounting charges and experiencing volatility in our operating results. We may continue to experience volatility in operating results in connection with future expansion efforts. Risks of Acquisitions Acquisitions have represented a significant portion of the Company's growth strategy, and the Company intends to continue to pursue attractive acquisition opportunities. Our acquisitions during the last two fiscal years represented a significant expansion of our operations. Acquisitions involve a number of risks and challenges, including: o diversion of management's attention; o the need to integrate acquired operations; o potential loss of key employees and customers of the acquired companies; o lack of experience operating in the geographic market of the acquired business; and o an increase in our expenses and working capital requirements. To integrate acquired operations, we must implement our management information systems and operating systems and assimilate and manage the personnel of the acquired operations. The difficulties of this integration may be further complicated by geographic distances. The integration of acquired businesses may not be successful and could result in disruption to other parts of our business. Any of these and other factors could adversely affect our ability to achieve anticipated levels of profitability at acquired operations or realize other anticipated benefits of an acquisition. Furthermore, any future acquisitions may require debt or equity financing, which could increase our leverage or be dilutive to our existing shareholders. No assurance can be given that we will consummate any acquisitions in the future. Variability of Customer Requirements and Operating Results Electronics manufacturing service providers must provide increasingly rapid product turnaround for their customers. We generally do not obtain firm, long-term purchase commitments from our customers, and over the past few years we have experienced reduced lead-times in customer orders. Customers may cancel their orders, change production quantities or delay production for a number of reasons. Cancellations, reductions or delays by a significant customer or by a group of customers would adversely affect our results of operations. In addition to the variable nature of our operating results due to the short-term nature of our customers' commitments, other factors may contribute to significant fluctuations in our results of operations. These factors include: o the timing of customer orders; o the volume of these orders relative to our capacity; o market acceptance of customers' new products; o changes in demand for customers' products and product obsolescence; o the timing of our expenditures in anticipation of future orders; 16 o our effectiveness in managing manufacturing processes; o changes in the cost and availability of labor and components; o changes in our product mix; o changes in economic conditions; o local factors and events that may affect our production volume (such as local holidays); and o seasonality in customers' product requirements. We make significant decisions, including the levels of business that we will seek and accept, production schedules, component procurement commitments, personnel needs and other resource requirements, based on our estimates of customer requirements. The short-term nature of our customers' commitments and the possibility of rapid changes in demand for their products reduces our ability to estimate accurately future customer requirements. On occasion, customers may require rapid increases in production, which can stress our resources and reduce margins. Although we have increased our manufacturing capacity and plan further increases, there can be no assurance we will have sufficient capacity at any given time to meet our customers' demands. In addition, because many of our costs and operating expenses are relatively fixed, a reduction in customer demand can adversely affect our gross margins and operating income. Customer Concentration; Dependence on Electronics Industry Sales to our five largest customers had represented a majority of our net sales in recent periods. The identity of our principal customers has varied from year to year, and our principal customers may not continue to purchase services from us at current levels, if at all. Significant reductions in sales to any of these customers, or the loss of major customers, would have a material and adverse effect on us. We can not assure the timely replacement of expired, canceled, or reduced contracts with new business. See "--Variability of Customer Requirements and Operating Results." Factors affecting the electronics industry in general could have a material adverse effect on our customers and, as a result on us. Our customers' markets are characterized by rapidly changing technology and evolving industry standards. This frequently results in short product life cycles. Our success will depend to a significant extent on the success achieved by our customers in developing and marketing their products, some of which are new and untested. If customers' products become obsolete or fail to gain widespread commercial acceptance, our business may be materially and adversely affected. Our customers' markets are also subject to economic cycles and are likely to experience recessionary periods in the future. A recession in the industries we serve could have a materials adverse effect on us. Year 2000 Compliance The Company is aware of the issues associated with programming code in existing computer systems as the Year 2000 approaches. The Year 2000 computer issue refers to a condition in computer software where a two digit field rather than a four digit field is used to distinguish a calendar year. Unless corrected, some computer programs could be unable to function on January 1, 2000 (and thereafter until corrected), as they will be unable to distinguish the correct date. Such an uncorrected condition could significantly interfere with the conduct of the Company's business, could result in disruption of its operations, and could subject it to potentially significant legal liabilities. The Company is primarily addressing the Year 2000 issues by replacing its management information system with a new enterprise management information system that is designed to provide enhanced functionality. We have been advised that our new enterprise management information system is Year 2000 compliant. However, there can be no assurance that the new system will be Year 2000 compliant or that it will be implemented by January 1, 2000. The new system will significantly affect many aspects of our business, including our manufacturing, sales and marketing and accounting functions. In addition, the successful implementation of this system will be important to our future growth. The Company currently has implemented this new information system in certain facilities in Europe and North America and anticipates that the installation of the new system will be completed in September 1999. The Year 2000 issue also could affect the Company's infrastructure and production lines. The possibility also exists that the Company could inadvertently fail to correct a Year 2000 problem 17 with a mechanical equipment microcontroller. The Company believes the impact of such an occurrence would be minor, as substantial Year 2000 compliant equipment additions and upgrades have occurred in recent years. However, sufficient testing to date has not been completed to fully validate the readiness of its microprocessors. Additional testing is planned during fiscal 1999 to reasonably ensure their Year 2000 readiness. The Company has sent a Year 2000 Readiness Questionaire to most of its critical and significant suppliers and the Company is in the process of identifying and devoting resources to ensure Year 2000 compliance of these suppliers. The Company may need to find alternative suppliers based on the results of the questionaires. Their can be no assurance that the Company will be able to find suitable alternative suppliers and contract with them on reasonable prices and terms, and such inability could have a material and adverse impact on the Company's business and results of operations. The Company is currently working with many of its major customers to ensure year 2000 compliance and is currently being audited by many of its customers. The Company intends to review its contracts with customers and suppliers with respect to responsibility for Year 2000 issues and to seek to address such issues in future agreements with customers and suppliers. The Company has currently incurred in excess of $14.0 million in total hardware, software, and system related costs in connection with remediation of Year 2000 issues. These costs are primarily costs associated with the implementation of the Company's new information system and have primarily been capitalized as fixed assets. The Company anticipates expending an additional $2.0 to $4.0 million before January 1, 2000 to complete the implementation of the new information system and address any Year 2000 compliance issues. There can be no assurances that the cost estimates associated with the Company's Year 2000 issues will prove to be accurate or that the actual costs will not have a material adverse effect on the Company's results of operations and financial condition. Although the Company currently anticipates the installation of the new system will be completed in September 1999, it could be delayed until later. Implementation of the new system could cause significant disruption in operations. In the event the new information system is not implemented by September 1999, the Company's contingency plan is to upgrade the existing information system currently in use by a majority of the Company's operations to a new version which the Company has been advised is Year 2000 compliant. The Company estimates the cost to upgrade the existing information system to be approximately $500,000. There can be no assurance that such measures will prevent the occurrence of Year 2000 problems, which can have a material adverse effect upon the Company's business, operating results and financial condition. Risk of Increased Taxes We have structured our operations in a manner designed to maximize income in countries where tax incentives have been extended to encourage foreign investment or where income tax rates are low. Our taxes could increase if these tax incentives are not renewed upon expiration, or tax rates applicable to us are increased. Substantially all of the products manufactured by our Asian subsidiaries are sold to customers based in North America and Europe. We believe that profits from our Asian operations are not sufficiently connected to jurisdictions in North America or Europe to give rise to income taxation there. However, tax authorities in jurisdictions in North America and Europe could challenge the manner in which profits are allocated among our subsidiaries, and we may not prevail in any such challenge. If our Asian profits became subject to income taxes in such other jurisdictions, our worldwide effective tax rate could increase. Significant Leverage Our level of indebtedness presents risks to investors, including: o the possibility that we may be unable to generate cash sufficient to pay the principal of and interest on the indebtedness when due; o making us more vulnerable to economic downturns; o limiting our ability to pursue new business opportunities; and reducing our flexibility in responding to changing business and economic conditions. Risks of Competition The electronics manufacturing services industry is extremely competitive and includes hundreds of companies, several of which have achieved substantial market share. Current and prospective customers also evaluate our capabilities against the merits of internal production. Certain of our competitors, including Solectron Corporation and SCI Systems, have substantially greater market shares than us, and substantially greater manufacturing, financial, research and development and 18 marketing resources. In recent years, many participants in the industry, including us, have substantially expanded their manufacturing capacity. If overall demand for electronics manufacturing services should decrease, this increased capacity could result in substantial pricing pressures, which could adversely affect our operating results. Risks of International Operations The geographical distances between Asia, the Americas and Europe create a number of logistical and communications challenges. Our manufacturing operations are located in a number of countries, including Austria, Brazil, China, Hungary, Malaysia, Mexico, Sweden, the United Kingdom and the United States. As a result, we are affected by economic and political conditions in those countries, including: o fluctuations in the value of currencies; o changes in labor conditions; o longer payment cycles; o greater difficulty in collecting accounts receivable; o burdens and costs of compliance with a variety of foreign laws; o political and economic instability; o increases in duties and taxation; o imposition of restrictions on currency conversion or the transfer of funds; o limitations on imports or exports; o expropriation of private enterprises; and o reversal of the current policies (including favorable tax and lending policies) encouraging foreign investment or foreign trade by our host countries. The attractiveness of our services to our U.S. customers can be affected by changes in U.S. trade policies, such as "most favored nation" status and trade preferences for certain Asian nations. For example, trade preferences extended by the United States to Malaysia in recent years were not renewed in 1997. In addition, some countries in which we operate, such as Brazil, Mexico and Malaysia, have experienced periods of slow or negative growth, high inflation, significant currency devaluations and limited availability of foreign exchange. Furthermore, in countries such as Mexico and China, governmental authorities exercise significant influence over many aspects of the economy, and their actions could have a significant effect on Flextronics. Finally, we could be adversely affected by inadequate infrastructure, including lack of adequate power and water supplies, transportation, raw materials and parts in countries in which we operate. Currency Fluctuations With the acquisitions of the Karlskrona facilities, Neutronics and Conexao, a significant portion of our business is conducted in the Swedish kronor, Austrian schilling and Brazilian real, respectively. In addition, some of our costs, such as payroll and rent, are denominated in currencies such as the Singapore dollar, the Hong Kong dollar, the Malaysian ringgit, the Hungarian forint, the Mexican peso, and the British pound, as well as the kronor, the schilling and the real. In recent years, the Hungarian forint, Brazilian real and Mexican peso have experienced significant devaluations, and in January 1999 the Brazilian real experienced further significant devaluations. Changes in exchange rates between these and other currencies and the U.S. dollar will affect our cost of sales and operating margins. We cannot predict the impact of future exchange rate fluctuations. Our European and Latin American operations use financial instruments, primarily forward purchase contracts, to hedge certain fixed Japanese yen, German deutschmark, U.S. dollar, and other foreign currency commitments arising from trade accounts payable and fixed purchase obligations. Because we hedge only fixed obligations, we do not expect that these hedging activities 19 will have a material effect on our results of operations or cash flows. However, our hedging activities may be unsuccessful, and we may change or reduce our hedging activities in the future. 20 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: (10.1) Second amendment to the amended and restated revolving credit agreement dated as of June 26, 1998 Among Flextronics International USA, Inc., Bankboston, N.A. and the lending institutions listed on Schedule 1 thereto. (10.2) Second amendment to the amended and restated revolving credit agreement dated as of June 26, 1998 among Flextronics International Ltd., Bankboston, N.A. and the lending institutions listed on Schedule 1 thereto. (10.3) Third amendment to the amended and restated revolving credit agreement dated as of September 29, 1998 among Flextronics International USA, Inc., Bankboston, N.A. and the lending institutions listed on Schedule 1 thereto. (10.4) Third amendment to the amended and restated revolving credit agreement dated as of September 29, 1998 among Flextronics International, Ltd., Bankboston, N.A. and the lending institutions listed on Schedule 1 thereto. (27) Financial data schedule as of December 31, 1998 and for the nine months ended December 31, 1998. (b) Reports on Form 8-K The Company has filed no reports on Form 8-K during the quarter ended December 31, 1998. 21 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. FLEXTRONICS INTERNATIONAL LTD. (Registrant) Date: February 16, 1999 /s/ MICHAEL E.MARKS ---------------------------- Michael E. Marks Chief Executive Officer Date: February 16, 1999 /s/ ROBERT R.B. DYKES ---------------------------- Robert R.B. Dykes Senior Vice president of Finance and Administration and Chief Financial Officer (principal Financial and accounting officer) 22 EX-10.1 2 2ND AMENDMENT REVOLVING CREDIT AGREEMENT (USA) - -------------------------------------------------------------------------------- SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT - -------------------------------------------------------------------------------- Second Amendment dated as of June 26, 1998 to Amended and Restated Revolving Credit Agreement (the "Second Amendment"), by and among FLEXTRONICS INTERNATIONAL USA, INC., a California corporation (the "Borrower"), BANKBOSTON, N.A. (formerly known as The First National Bank of Boston) and the other lending institutions listed on Schedule 1 to the Credit Agreement (as hereinafter defined) (the "Banks"), amending certain provisions of the Amended and Restated Revolving Credit Agreement dated as of January 14, 1998 (as amended and in effect from time to time, the "Credit Agreement") by and among the Borrower, the Banks and BankBoston, N.A. as agent for the Banks (the "Agent"). Terms not otherwise defined herein which are defined in the Credit Agreement shall have the same respective meanings herein as therein. WHEREAS, the Borrower and the Banks have agreed to modify certain terms and conditions of the Credit Agreement as specifically set forth in this Second Amendment; NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ss.1. Amendment to Section 1.1 of the Credit Agreement. Section 1.1 of the Credit Agreement is hereby amended as follows: (a) the definition of "Applicable Margin" is hereby amended by deleting such definition in its entirety and restating it as follows: Applicable Margin. For each period commencing on an Adjustment Date through the date immediately preceding the next Adjustment Date (each a "Rate Adjustment Period"), the Applicable Margin shall be the applicable margin set forth below with respect to FIL's Pricing Leverage Ratio, as determined for the fiscal period of FIL and its Subsidiaries ending immediately prior to the applicable Rate Adjustment Period.
- ---------------------------------------------------------------------------------------------------------- Base Eurodollar Letter of Acceptance Fee Commitment Level Pricing Leverage Ratio Rate Rate Credit Rate Fee Loans Loans Fees Rate - ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- I Less than 1.50:1.00 0 50.00 50.00 50.00 20.00 - ---------------------------------------------------------------------------------------------------------- II Equal to or greater than 0 62.50 62.50 62.50 20.00 1.50:1.00 but less than 2.00:1.00 - ---------------------------------------------------------------------------------------------------------- III Equal to or greater than 0 87.50 87.50 87.50 25.00 2.00:1.00 but less than 2.50:1.00 - ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- IV Equal to or greater than 0 112.50 112.50 112.50 25.00 2.50:1.00 but less than 3.00:1.00 - ----------------------------------------------------------------------------------------------------------
-2- - ---------------------------------------------------------------------------------------------------------- V Equal to or greater than 0 137.50 137.50 137.50 25.00 3.00:1.00 but less than 3.50:1.00 - ---------------------------------------------------------------------------------------------------------- VI Equal to or greater than 0 162.50 162.50 162.50 25.00 3.50:1.00 but less than 4.00:1.00 - ---------------------------------------------------------------------------------------------------------- VII Equal to or greater than 0 187.50 187.50 187.50 25.00 4.00:1.00 - ----------------------------------------------------------------------------------------------------------
Notwithstanding the foregoing, (a) for purposes of interest on Revolving Credit Loans outstanding, the Letter of Credit Fees, the Acceptance Fee Rate and the Commitment Fee Rate payable during the period commencing on June 26, 1998 through the date immediately preceding the first Adjustment Date to occur after the fiscal quarter ended June 26, 1998, the Applicable Margin shall be at Level III set forth above, and (b) if the Borrower fails to deliver any Compliance Certificate pursuant to ss.9.4(a) hereof then, for the period commencing on the next Adjustment Date to occur subsequent to such failure through the date immediately following the date on which such Compliance Certificate is delivered, the Applicable Margin shall be at the highest Applicable Margin set forth above. (b) the definition of "Excluded Subsidiaries" is hereby amended by deleting such definition in its entirety and restating it as follows: Excluded Subsidiaries. Collectively, Astron Technologies Ltd., Flextronics Industrial (Shenzhen) Limited, Flextronics Computer (Shekou) Limited, Zhuhai Daomen Chao Yi Technology Co. Ltd., Zhuhai Daomen Chao Yi Electronics Co. Ltd., Flex Asia (UK) Ltd., EnergiPilot AB, Proactive, Inc., Marathon Business Park LLC, any Unrestricted Subsidiary and any other Subsidiary formed or acquired after the Closing Date and which is not required to become a Guarantor pursuant to ss.9.14 hereof and which does not elect to become a Guarantor pursuant to ss.7 hereof; provided, however, to the extent any Person which is an Excluded Subsidiary hereunder subsequently elects or is otherwise required to become a Guarantor hereunder and complies with ss.7.3 hereof, such Person shall cease being an Excluded Subsidiary hereunder on the date all the conditions of ss.7.3 have been satisfied. (c) the definition of "Total Funded Indebtedness" is hereby amended by deleting the words "less the sum of (a) cash of FIL and its Subsidiaries existing on the date of determination plus (b) Investments of FIL and its Subsidiaries made pursuant to ss.10.3(a), (b) or (c) of the FIL Credit Agreement" from such definition; (d) by inserting the following definitions in the appropriate alphabetical order: Pricing Leverage Ratio. As at any date of determination, the ratio of (a) Total Pricing Funded Indebtedness of FIL and its Subsidiaries outstanding on such date to (b) the EBITDA of FIL and its Subsidiaries for the period of four (4) consecutive fiscal quarters (treated as a single accounting period) most recently ended on such date. Restricted Subsidiary. Any Subsidiary of FIL which is not an Unrestricted Subsidiary. Neither FIL nor any Subsidiary shall have the right to change the status of a Restricted Subsidiary to an Unrestricted Subsidiary, but FIL or any Subsidiary shall have the right to change the status of an Unrestricted Subsidiary to a Restricted Subsidiary, subject to compliance with the provisions of ss.9.14 hereof. -3- Total Pricing Funded Indebtedness. All Indebtedness of FIL and its Subsidiaries for borrowed money (including without limitation, all guarantees by such Person of Indebtedness of others for borrowed money), purchase money Indebtedness and with respect to Capitalized Leases, determined on a consolidated basis in accordance with generally accepted accounting principles, less the sum of (a) cash of FIL and its Subsidiaries existing on the date of determination plus (b) Investments of FIL and its Subsidiaries made pursuant to ss.10.3(a), (b) or (c) of the FIL Credit Agreement. Unrestricted Subsidiary. Collectively, (a) Neutronics Electronic Industries Holdings AG, Althofen Electronics GmbH, HTR Technical Resources Kft, Ecoplast Kft, Conexao Informatica Ltda, Flextronics do Brazil Servicios Ltda and (b) any other Subsidiary of FIL, direct or indirect, as to which (i) such Subsidiary conducts substantially all of its business in countries other than the United States of America and is organized under the laws of a jurisdiction other than the United States of America and the States (or the District of Columbia) thereof; (ii) the principal operations of such Subsidiary are not located in the United States; (iii) FIL has provided the Agent with an officer's certificate certifying that FIL has designated such Subsidiary as an Unrestricted Subsidiary at or prior to the time such Subsidiary is formed or acquired by FIL, as the case may be, and FIL has provided written notice to the Agent in reasonable detail of such designation within five (5) Business Days after designation thereof; (iv) FIL owns not less than eighty percent (80%) of the capital stock of such Subsidiary and not less than eighty percent (80%) of the Voting Stock of such Subsidiary; (v) all of such Subsidiary's liabilities (other than liabilities permitted to be guaranteed by FIL pursuant to the FIL Credit Agreement hereof) are non-recourse as to FIL or any Restricted Subsidiary; and (vi) such Subsidiary does not own any capital stock of, or own or hold any lien, security interest or other encumbrance on, any property of FIL or any other Restricted Subsidiary, provided, however, no Subsidiary shall be subsequently designated as an Unrestricted Subsidiary if any Default or Event of Default has occurred and is continuing or would exist immediately after giving effect to such designation. ss.2. Amendment to Section 9 of the Credit Agreement. Section 9 of the Credit Agreement is hereby amended by inserting the following immediately after the end of the text of ss.9.16: 9.17. Unrestricted Subsidiaries. The Company shall at all times designate persons constituting a majority of the directors (or members of the governing body) of, and at all times have the power, directly or indirectly, to direct the management and polices of each Unrestricted Subsidiary. ss.3. Amendment to Credit Agreement. Notwithstanding anything to the contrary contained in the Credit Agreement, from and after the date hereof the Borrowers shall not be permitted to request any Revolving Credit Loans to be denominated in an Optional Currency, shall only be permitted to have Revolving Credit Loans denominated in Dollars and, to the extent there are any Revolving Credit Loans denominated in any Optional Currency, shall be required to repay such Revolving Credit Loans on the date hereof. ss.4. Conditions to Effectiveness. This Second Amendment shall not become effective until the Agent receives a counterpart of this Second Amendment, executed by the Borrower, the Guarantors and the Majority Banks. ss.5. Representations and Warranties. The Borrower hereby repeats, on and as of the date hereof, each of the representations and warranties made by it in ss.8 of the Credit Agreement, and such -4- representations and warranties remain true as of the date hereof (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date), provided, that all references therein to the Credit Agreement shall refer to such Credit Agreement as amended hereby. In addition, the Borrower hereby represents and warrants that the execution and delivery by the Borrower of this Second Amendment and the performance by the Borrower of all of its agreements and obligations under the Credit Agreement as amended hereby are within the corporate authority of each the Borrower and has been duly authorized by all necessary corporate action on the part of the Borrower. ss.6. Ratification, Etc. Except as expressly amended hereby, the Credit Agreement and all documents, instruments and agreements related thereto, including, but not limited to the Security Documents, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The Credit Agreement and this Second Amendment shall be read and construed as a single agreement. All references in the Credit Agreement or any related agreement or instrument to the Credit Agreement shall hereafter refer to the Credit Agreement as amended hereby. ss.7. No Waiver. Nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligation of the Borrower or any rights of the Agent or the Banks consequent thereon. ss.8. Counterparts. This Second Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. ss.9. Governing Law. THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS). -5- IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as a document under seal as of the date first above written. FLEXTRONICS INTERNATIONAL USA, INC By:__________________________________ Title: BANKBOSTON, N.A. By:__________________________________ Title: ABN AMRO BANK N.V. By: _________________________________ Name: Title: THE BANK OF NOVA SCOTIA By: _________________________________ Name: Title: BANQUE NATIONALE DE PARIS, SAN FRANCISCO BRANCH By: _________________________________ Name: Vice President PARIBAS By: _________________________________ Name: Title: -6- COMERICA BANK By: _________________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By: _________________________________ Name: Title: SUMITOMO BANK OF CALIFORNIA By: _________________________________ Name: Title: -7- RATIFICATION OF GUARANTY Each of the undersigned guarantors hereby acknowledges and consents to the foregoing Second Amendment as of June 26, 1998, and agrees that each of the Guarantees dated as of January 14, 1998 from each of the undersigned Guarantors remain in full force and effect, and each of the Guarantors confirms and ratifies all of its obligations thereunder. FLEXTRONICS INTERNATIONAL LTD. By:__________________________________ Title: FLEXTRONICS INTERNATIONAL (UK) LTD. By:__________________________________ Title: FLEXTRONICS MANUFACTURING (HK) LTD. By:__________________________________ Title: FLEXTRONICS SINGAPORE PTE. LTD. By:__________________________________ Title: FLEXTRONICS HOLDING (UK) LTD. By:__________________________________ Title: -8- FLEXTRONICS MALAYSIA SDN BHD By:__________________________________ Title: FLEXTRONICS INTERNATIONAL MARKETING (L) LTD. By:__________________________________ Title: FLEXTRONICS HOLDINGS AB By:__________________________________ Title: FLEXTRONICS INTERNATIONAL SWEDEN AB By:__________________________________ Title: ASTRON GROUP LIMITED By:__________________________________ Title: DTM PRODUCTS CORPORATION By:__________________________________ Title: EX-10.2 3 2ND AMENDMENT TO REVOLVING CREDIT AGREEMENT (FIL) - -------------------------------------------------------------------------------- SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT - -------------------------------------------------------------------------------- Second Amendment dated as of June 26, 1998 to Amended and Restated Revolving Credit Agreement (the "Second Amendment"), by and among FLEXTRONICS INTERNATIONAL LTD., a company incorporated in Singapore (the "Borrower"), BANKBOSTON, N.A. (formerly known as The First National Bank of Boston) and the other lending institutions listed on Schedule 1 to the Credit Agreement (as hereinafter defined) (the "Banks"), amending certain provisions of the Amended and Restated Revolving Credit Agreement dated as of January 14, 1998 (as amended and in effect from time to time, the "Credit Agreement") by and among the Borrower, the Banks and BankBoston, N.A. as agent for the Banks (the "Agent"). Terms not otherwise defined herein which are defined in the Credit Agreement shall have the same respective meanings herein as therein. WHEREAS, the Borrower and the Banks have agreed to modify certain terms and conditions of the Credit Agreement as specifically set forth in this Second Amendment; NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ss.1. Amendment to Section 1.1 of the Credit Agreement. Section 1.1 of the Credit Agreement is hereby amended as follows: (a) the definition of "Applicable Margin" is hereby amended by deleting such definition in its entirety and restating it as follows: Applicable Margin. For each period commencing on an Adjustment Date through the date immediately preceding the next Adjustment Date (each a "Rate Adjustment Period"), the Applicable Margin shall be the applicable margin set forth below with respect to the Company's Pricing Leverage Ratio, as determined for the fiscal period of the Company and its Subsidiaries ending immediately prior to the applicable Rate Adjustment Period.
- ------------------------------------------------------------------------------------------------------------- Base Eurodollar Letter of Acceptance Fee Commitment Level Pricing Leverage Ratio Rate Rate Credit Rate Fee Loans Loans Fees Rate - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- I Less than 1.50:1.00 0 50.00 50.00 50.00 20.00 - ------------------------------------------------------------------------------------------------------------- II Equal to or greater than 0 62.50 62.50 62.50 20.00 1.50:1.00 but less than 2.00:1.00 - ------------------------------------------------------------------------------------------------------------- III Equal to or greater than 0 87.50 87.50 87.50 25.00 2.00:1.00 but less than 2.50:1.00 - ------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------- IV Equal to or greater than 0 112.50 112.50 112.50 25.00 2.50:1.00 but less than 3.00:1.00 - -------------------------------------------------------------------------------------------------------------
-2- - ------------------------------------------------------------------------------------------------------------- V Equal to or greater than 0 137.50 137.50 137.50 25.00 3.00:1.00 but less than 3.50:1.00 - ------------------------------------------------------------------------------------------------------------- VI Equal to or greater than 0 162.50 162.50 162.50 25.00 3.50:1.00 but less than 4.00:1.00 - ------------------------------------------------------------------------------------------------------------- VII Equal to or greater than 0 187.50 187.50 187.50 25.00 4.00:1.00 - -------------------------------------------------------------------------------------------------------------
Notwithstanding the foregoing, (a) for purposes of interest on Revolving Credit Loans outstanding, the Letter of Credit Fees, the Acceptance Fee Rate and the Commitment Fee Rate payable during the period commencing on June 26, 1998 through the date immediately preceding the first Adjustment Date to occur after the fiscal quarter ended June 26, 1998, the Applicable Margin shall be at Level III set forth above, and (b) if the Company fails to deliver any Compliance Certificate pursuant to ss.9.4(c) hereof then, for the period commencing on the next Adjustment Date to occur subsequent to such failure through the date immediately following the date on which such Compliance Certificate is delivered, the Applicable Margin shall be at the highest Applicable Margin set forth above. (b) the definition of "Excluded Subsidiaries" is hereby amended by deleting such definition in its entirety and restating it as follows: Excluded Subsidiaries. Collectively, Astron Technologies Ltd., Flextronics Industrial (Shenzhen) Limited, Flextronics Computer (Shekou) Limited, Zhuhai Daomen Chao Yi Technology Co. Ltd., Zhuhai Daomen Chao Yi Electronics Co. Ltd., Flex Asia (UK) Ltd., EnergiPilot AB, Proactive, Inc., Marathon Business Park LLC, any Unrestricted Subsidiary and any other Subsidiary formed or acquired after the Closing Date and which is not required to become a Guarantor pursuant to ss.9.14 hereof and which does not elect to become a Guarantor pursuant to ss.7 hereof; provided, however, to the extent any Person which is an Excluded Subsidiary hereunder subsequently elects or is otherwise required to become a Guarantor hereunder and complies with ss.6.2 hereof, such Person shall cease being an Excluded Subsidiary hereunder on the date all the conditions of ss.7.4 have been satisfied. (c) the definition of "Total Funded Indebtedness" is hereby amended by deleting the words "less the sum of (a) cash of the Company and its Subsidiaries existing on the date of determination plus (b) Investments of the Company and its Subsidiaries made pursuant to ss.10.3(a), (b) or (c) hereof" from such definition; (d) by inserting the following definitions in the appropriate alphabetical order: Pricing Leverage Ratio. As at any date of determination, the ratio of (a) Total Pricing Funded Indebtedness of the Company and its Subsidiaries outstanding on such date to (b) the EBITDA of the Company and its Subsidiaries for the period of four (4) consecutive fiscal quarters (treated as a single accounting period) most recently ended on such date. Restricted Subsidiary. Any Subsidiary which is not an Unrestricted Subsidiary. Neither the Company nor any Subsidiary shall have the right to change the status of a Restricted Subsidiary to an Unrestricted Subsidiary, but the Company or any Subsidiary shall have the right to change the status of an Unrestricted Subsidiary to a Restricted Subsidiary, subject to compliance with the provisions of ss.9.14 hereof. -3- Total Pricing Funded Indebtedness. All Indebtedness of the Company and its Subsidiaries for borrowed money (including without limitation, all guarantees by such Person of Indebtedness of others for borrowed money), purchase money Indebtedness and with respect to Capitalized Leases, determined on a consolidated basis in accordance with generally accepted accounting principles, less the sum of (a) cash of the Company and its Subsidiaries existing on the date of determination plus (b) Investments of the Company and its Subsidiaries made pursuant to ss.10.3(a), (b) or (c) hereof. Unrestricted Subsidiary. Collectively, (a) Neutronics Electronic Industries Holdings AG, Althofen Electronics GmbH, HTR Technical Resources Kft, Ecoplast Kft, Conexao Informatica Ltda, Flextronics do Brazil Servicios Ltda and (b) any other Subsidiary of the Company, direct or indirect, as to which (i) such Subsidiary conducts substantially all of its business in countries other than the United States of America and is organized under the laws of a jurisdiction other than the United States of America and the States (or the District of Columbia) thereof; (ii) the principal operations of such Subsidiary are not located in the United States; (iii) the Company has provided the Agent with an officer's certificate certifying that the Company has designated such Subsidiary as an Unrestricted Subsidiary at or prior to the time such Subsidiary is formed or acquired by the Company, as the case may be, and the Company has provided written notice to the Agent in reasonable detail of such designation within five (5) Business Days after designation thereof; (iv) the Company owns not less than eighty percent (80%) of the capital stock of such Subsidiary and not less than eighty percent (80%) of the Voting Stock of such Subsidiary; (v) all of such Subsidiary's liabilities (other than liabilities permitted to be guaranteed by the Company pursuant to ss.10.1 hereof) are non-recourse as to the Company or any Restricted Subsidiary; and (vi) such Subsidiary does not own any capital stock of, or own or hold any lien, security interest or other encumbrance on, any property of the Company or any other Restricted Subsidiary, provided, however, no Subsidiary shall be designated after the date hereof as an Unrestricted Subsidiary if any Default or Event of Default would exist immediately after giving effect to such designation. ss.2. Amendment to Section 9 of the Credit Agreement. Section 9 of the Credit Agreement is hereby as follows: (a) Section 9.16 of the Credit Agreement is hereby amended by deletingss.9.16 in its entirety and restating it as follows: 9.16. Payment of Astron Obligation. The Company shall make all payments under the Astron Sales Agreement, the Services Agreement dated February 2, 1996 between the Company, Astron Technologies Limited and Stephen Rees (the "Rees Service Agreement") and the Supplemental Services Agreement dated February 2, 1996 between Astron Group Limited and Stephen Rees (the "Supplemental Rees Agreement") which are able to be paid pursuant to such agreements in Astron Consideration Shares (as to the Astron Sales Agreement) or ordinary shares of the Company (pursuant to the Rees Service Agreement and the Supplemental Rees Agreement); provided, however, the Company shall be permitted to make such payments in cash so long as no Default or Event of Default has occurred and is continuing and the Company can demonstrate to the satisfaction of the Agent that the Pricing Leverage Ratio at the time of such cash payment is equal to or less than 2.50:1.00 both before and after giving effect to such cash payments. -4- (b) Section 9.20 of the Credit Agreement is hereby amended by deletingss.9.20 in its entirety and restating it as follows: 9.20. Unrestricted Subsidiaries. The Company shall at all times designate persons constituting a majority of the directors (or members of the governing body) of, and at all times have the power, directly or indirectly, to direct the management and polices of each Unrestricted Subsidiary. ss.3. Amendment to Section 10 of the Credit Agreement. Section 10 of the Credit Agreement is hereby amended as follows: (a) Section 10.1(h) of the Credit Agreement is hereby amended by deletingss.10.1(h) in its entirety and restating it as follows: (h) obligations under (i) Capitalized Leases, (ii) Synthetic Leases and (iii) other Indebtedness incurred in connection with the acquisition after the date hereof of any real or person property or any business entity by any Borrower or such Subsidiary; provided that the aggregate principal amount of such Indebtedness under this ss.10.1(h)(iii) of the Borrowers and the Restricted Subsidiaries and any Unrestricted Subsidiary which is guaranteed by the Company or any Restricted Subsidiary plus the aggregate principal amount of outstanding secured Indebtedness of any Unrestricted Subsidiary which is guaranteed by the Company or any Restricted Subsidiary and which is permitted to be incurred pursuant to ss.10.1(q) hereof shall not exceed the aggregate amount of $50,000,000 at any one time; (b) Section 10.1(o) of the Credit Agreement is hereby amended by (a) deleting the words "other unsecured Indebtedness or Indebtedness secured solely by a Temporary Lien" which appear in ss.10.1(o) and substituting in place thereof the words "other unsecured Indebtedness of any Subsidiary or Indebtedness of a Restricted Subsidiary secured solely by a Temporary Lien"; and (b) deleting the word "and" which appears at the end of the text of ss.10.1(o); (c) Section 10.1(p) of the Credit Agreement is hereby amended by deleting the period which appears at the end of such section and substituting in place thereof a semicolon and the word "and"; (d) Section 10.1 of the Credit Agreement is further amended by inserting immediately after the text ofss.10.1(p) the following: (q) secured Indebtedness of an Unrestricted Subsidiary which is not otherwise permitted hereunder provided that (i) no Default or Event of Default shall have occurred and be continuing or would exist as a result of incurring such Indebtedness; (ii) the Company is in compliance with the financial covenants set forth in ss.11 hereof on a pro forma basis both before and immediately after giving effect to such Indebtedness and, to the extent reasonably requested by the Agent, the Company has demonstrated such compliance to the reasonable satisfaction of the Agent; (iii) to the extent such Indebtedness is guaranteed by the Company or any Restricted Subsidiary, the terms of such Indebtedness (including, without limitation, the covenants, defaults, penalties and conditions pertaining to such Indebtedness, but excluding amortization, collateral and maturity) taken as a whole, are not materially more onerous to the Company and its Subsidiaries than the terms contained herein taken as a whole; and (iv) to the extent such Indebtedness is guaranteed by the Company or any Restricted Subsidiary, the aggregate -5- principal amount of such Indebtedness under this ss.10.1(q) of the Borrowers and their Subsidiaries which is guaranteed by the Company or any Restricted Subsidiary plus the aggregate principal amount of outstanding purchase money Indebtedness of any Borrower or any Subsidiary which is guaranteed by the Company or any Restricted Subsidiary and which is permitted to be incurred pursuant to ss.10.1(h)(iii) hereof shall not exceed the aggregate amount of $50,000,000 at any one time. (e) Section 10.2(xiv) of the Credit Agreement is hereby amended by deleting the word "and" which appears at the end of such section; (f) Section 10.2(xv) of the Credit Agreement is hereby amended by (a) deleting the words "liens on assets of a Subsidiary" and substituting in place thereof the words "liens on assets of a Restricted Subsidiary"; and (b) deleting the period which appears at the end of ss.10.2(xv) and substituting in place thereof a semicolon and the word "and"; (g) Section 10.2 is further amended by inserting immediately after the end of ss.10.2(xv) the following: (xvi) liens on assets of any Unrestricted Subsidiary to secure Indebtedness permitted to be incurred pursuant to ss.10.1(q) hereof. (h) Section 10.3 is hereby amended by deleting ss.10.3(l) in its entirety and restating such ss.10.3(l) as follows: (l) Investments with respect to Indebtedness permitted by ss.10.1(g) and Investments (other than Investments in an Unrestricted Subsidiary) made pursuant to the Investment Policy Guidelines; ss.4. Amendment to Section 11 of the Credit Agreement. Section 11 of the Credit Agreement is hereby amended as follows: (a) Section 11.1 of the Credit Agreement is hereby amended by deleting the ratio "3.50:1.00" which appears in ss.11.1 and substituting in place thereof the ratio "4.50:1.00"; and (b) Section 11.3 of the Credit Agreement is hereby amended by (i) deleting the words "95% of Consolidated Tangible Net Worth at September 30, 1997" and substituting in place thereof the number "$175,000,000"; and (b) deleting the date "September 30, 1997" from each place in which it appears in ss.11.3 and substituting in place thereof the date "March 31, 1998". ss.5. Amendment to Credit Agreement. Notwithstanding anything to the contrary contained in the Credit Agreement, from and after the date hereof the Borrowers shall not be permitted to request any Revolving Credit Loans to be denominated in an Optional Currency, shall only be permitted to have Revolving Credit Loans denominated in Dollars and, to the extent there are any Revolving Credit Loans denominated in any Optional Currency, shall be required to repay such Revolving Credit Loans on the date hereof. ss.6. Amendment to Schedules 10.1 and 10.2 of the Credit Agreement. Schedules 10.1 and 10.2 of the Credit Agreement are each hereby amended as follows: -6- (a) Schedule 10.1 of the Credit Agreement is hereby amended by deleting from Schedule 10.1 all Indebtedness incurred by Neutronics, and substituting in place thereof the Indebtedness set forth on the annex to Schedule 10.1 attached hereto; and (b) Schedule 10.2 of the Credit Agreement is hereby amended by deleting from Schedule 10.2 all liens on assets of Neutronics securing Indebtedness of Neutronics and substituting in place thereof the liens set forth on the annex to Schedule 10.2 attached hereto. ss.7. Conditions to Effectiveness. This Second Amendment shall not become effective until the Agent receives a counterpart of this Second Amendment, executed by the Borrower, the Guarantors and the Majority Banks. ss.8. Representations and Warranties. The Borrower hereby repeats, on and as of the date hereof, each of the representations and warranties made by it in ss.8 of the Credit Agreement, and such representations and warranties remain true as of the date hereof (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date), provided, that all references therein to the Credit Agreement shall refer to such Credit Agreement as amended hereby. In addition, the Borrower hereby represents and warrants that the execution and delivery by the Borrower of this Second Amendment and the performance by the Borrower of all of its agreements and obligations under the Credit Agreement as amended hereby are within the corporate authority of each the Borrower and has been duly authorized by all necessary corporate action on the part of the Borrower. ss.9. Ratification, Etc. Except as expressly amended hereby, the Credit Agreement and all documents, instruments and agreements related thereto, including, but not limited to the Security Documents, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The Credit Agreement and this Second Amendment shall be read and construed as a single agreement. All references in the Credit Agreement or any related agreement or instrument to the Credit Agreement shall hereafter refer to the Credit Agreement as amended hereby. ss.10. No Waiver. Nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligation of the Borrower or any rights of the Agent or the Banks consequent thereon. ss.11. Counterparts. This Second Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. ss.12. Governing Law. THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS). -7- IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as a document under seal as of the date first above written. FLEXTRONICS INTERNATIONAL LTD. By:__________________________________ Title: BANKBOSTON, N.A. By:__________________________________ Title: ABN AMRO BANK N.V. By: _________________________________ Name: Title: THE BANK OF NOVA SCOTIA By: _________________________________ Name: Title: BANQUE NATIONALE DE PARIS, SAN FRANCISCO BRANCH By: _________________________________ Name: Vice President PARIBAS By: _________________________________ Name: Title: -8- COMERICA BANK By: _________________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By: _________________________________ Name: Title: SUMITOMO BANK OF CALIFORNIA By: _________________________________ Name: Title: -9- RATIFICATION OF GUARANTY Each of the undersigned guarantors hereby acknowledges and consents to the foregoing Second Amendment as of June 26, 1998, and agrees that each of the Guarantees dated as of January 14, 1998 from each of the undersigned Guarantors remain in full force and effect, and each of the Guarantors confirms and ratifies all of its obligations thereunder. FLEXTRONICS INTERNATIONAL USA, INC. By:__________________________________ Title: FLEXTRONICS INTERNATIONAL (UK) LTD. By:__________________________________ Title: FLEXTRONICS MANUFACTURING (HK) LTD. By:__________________________________ Title: FLEXTRONICS SINGAPORE PTE. LTD. By:__________________________________ Title: FLEXTRONICS HOLDING (UK) LTD. By:__________________________________ Title: -10- FLEXTRONICS MALAYSIA SDN BHD By:__________________________________ Title: FLEXTRONICS INTERNATIONAL MARKETING (L) LTD. By:__________________________________ Title: FLEXTRONICS HOLDINGS AB By:__________________________________ Title: FLEXTRONICS INTERNATIONAL SWEDEN AB By:__________________________________ Title: ASTRON GROUP LIMITED By:__________________________________ Title: DTM PRODUCTS CORPORATION By:__________________________________ Title: ANNEX TO SCHEDULE 10.1 ANNEX TO SCHEDULE 10.2 EX-10.3 4 3RD AMENDMENT REVOLVING CREDIT AGREEMENT (USA) - -------------------------------------------------------------------------------- THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT - -------------------------------------------------------------------------------- Third Amendment dated as of September 29, 1998 to Amended and Restated Revolving Credit Agreement (the "Third Amendment"), by and among FLEXTRONICS INTERNATIONAL USA, INC., a California corporation (the "Borrower"), BANKBOSTON, N.A. (formerly known as The First National Bank of Boston) and the other lending institutions listed on Schedule 1 to the Credit Agreement (as hereinafter defined) (collectively, the "Existing Banks"), Bank of America National Trust and Savings Association (the "New Bank" and, together with the Existing Banks, the "Banks") and BankBoston, N.A. in its capacity as agent for the Banks (the "Agent"), amending certain provisions of the Amended and Restated Revolving Credit Agreement dated as of January 14, 1998 (as amended and in effect from time to time, the "Credit Agreement") by and among the Borrower, the Existing Banks and BankBoston, N.A. as agent for the Banks (the "Agent"). Terms not otherwise defined herein which are defined in the Credit Agreement shall have the same respective meanings herein as therein. WHEREAS, the New Bank wishes to become a party to the Credit Agreement, and certain of the Existing Banks wish to assign certain portions of their Revolving Credit Loans, Letter of Credit Participations and Commitments under the Credit Agreement to the New Bank and certain Existing Banks; and WHEREAS, the Borrower has requested, and the Banks have agreed upon the terms and conditions described herein, that the aggregate Commitments of the Banks to extend credit under the Credit Agreement be increased to $57,142,857.13; WHEREAS, the Borrower and the Banks have agreed to modify certain other terms and conditions of the Credit Agreement as specifically set forth in this Third Amendment; NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ss.1. Amendment to Section 1 of the Credit Agreement. Section 1.2(d) of the Credit Agreement is hereby amended by deleting the text of ss.1.2(d) in its entirety and substituting in place thereof the words "A reference to any Person includes its permitted successors and assigns, with the provisions of this Credit Agreement be binding upon and inuring to the benefit of such Person and its permitted successors and assigns." ss.2. Amendment to Section 5 of the Credit Agreement. Section 5.1.1(b)(ii) of the Credit Agreement is hereby amended by inserting immediately after the words "all Unpaid Reimbursement Obligations" the words "plus all Bankers' Acceptances outstanding". ss.3. Amendment to Section 8 of the Credit Agreement. Section 8 of the Credit Agreement is hereby by inserting the following immediately after the end of the text of ss.8.23: -2- 8.25. Year 2000 Compliance. The Borrower and its Subsidiaries have reviewed the areas within their businesses and operations which could be adversely affected by, and have developed or are developing a program to address on a timely basis, the "Year 2000" (i.e. the risk that computer applications used by the Borrower or any of its Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999). Based upon such review, the Borrower reasonably believes that the "Year 2000" will not have any materially adverse effect on the business or financial condition of the Borrower or any of its Subsidiaries. ss.4. Amendment to Section 12 of the Credit Agreement. Section ss.12.2 of the Credit Agreement is hereby amended by inserting immediately after the words "such Letter of Credit" which appear in ss.12.2 the words "and to accept and/or purchase any Bankers' Acceptances". ss.5. Amendment to Schedule 1 of the Credit Agreement. Schedule 1 of the Credit Agreement is hereby amended by deleting such schedule in its entirety and substituting in place thereof the Schedule 1 attached hereto. ss.6. Assignment and Acceptance. (a) For the purposes of the assignment contemplated herein, the provisions of ss.19.1 of the Credit Agreement are hereby waived and the parties hereto hereby consent and agree to such assignment. (b) Each of Comerica Bank and The Sumitomo Bank of California (collectively, the "Assignors") hereby sells and assigns to each of BankBoston, N.A., Bank of America National Trust and Savings Association, and ABN Amro Bank N.V. (collectively, the "Assignees"), and each Assignee hereby purchases and assumes from each Assignor, a certain percentage of each such Assignor's rights and obligations under the Credit Agreement as of the effective date hereof, including, without limitation, such percentage interest in each such Assignor's Commitment as in effect on the effective date, and the outstanding amount of the Revolving Credit Loans, Letter of Credit Participation and Bankers' Acceptance Participation owing to each Assignor on the effective date and the Revolving Credit Note held by each Assignor (such interest being hereinafter referred to as the "Assigned Portion") such that, after giving effect to the assignments contemplated hereby, the respective Commitments, Commitment Percentages of each Assignor shall be zero, and the respective Commitments and Commitment Percentages of each Assignee (after giving effect to the increase in the Total Commitment contemplated by this Third Amendment) shall be as set forth on Schedule 1 attached hereto, and each Assignee shall have that percentage interest in all Revolving Credit Loans, Letter of Credit Participations and Bankers Acceptance Participations. Notwithstanding any term or provision of ss.19 of the Credit Agreement to the contrary, the execution and delivery hereof by each Assignor, each Assignee, the Agent and the Borrower shall constitute an Assignment and Acceptance delivered in accordance with the Credit Agreement and shall be effective in respect of the assignment contemplated hereby. (c) each Assignor (i) represents and warrants (as to itself only and not as to the other Assignor) that as of the date hereof, its Commitment and Commitment Percentage is sufficient to give effect to this Assignment and Acceptance; (ii) makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any of the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any of the other Loan Documents or any other instrument or document furnished pursuant thereto or the attachment, perfection or priority of any security interest or mortgage, other than that it is the legal and beneficial owner of the -3- interest being assigned by it hereunder free and clear of any claim or encumbrance; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any of its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Borrower or any of its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations of any of its obligations under the Credit Agreement or any of the other Loan Documents or any other instrument or document delivered or executed pursuant thereto; and (iv) requests that in connection with such assignment as set forth herein the Borrower exchange the Revolving Credit Notes of each Assignor for new Revolving Credit Notes, each dated as of the effective date hereof payable to the order of each Assignee in the principal amount of the Commitment set forth opposite each Assignee's name on Schedule 1 to the Credit Agreement as amended hereby and each such new note shall be deemed to be a "Revolving Credit Note" under the Credit Agreement. (d) each Assignee (i) represents and warrants (as to itself only and not as to any other Assignee) that it has received a copy of the Credit Agreement and the other Loan Documents, together with copies of the financial statements referred to in ss.9 of the Credit Agreement and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this agreement, that it is an Eligible Assignee under the Credit Agreement and that all acts, conditions and things required to be done and performed have occurred prior to the execution, delivery and performance of this assignment, and to render the same the legal, valid and binding obligation of each such Assignee, enforceable against it in accordance with its terms, have been done and performed and have occurred in due and strict compliance with all applicable laws; (ii) agrees that it will, independently and without reliance upon any Assignor, the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; and (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, and agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement and the other Loan Documents are required to be performed by it as a Bank. (e) Upon the effectiveness of the assignment contemplated hereby, each Assignor shall return to the Borrower its Revolving Credit Note, marked "Cancelled". ss.7. Addition of New Bank. (a) Each of the Agent and the Borrower consent to the addition of the New Bank as a Bank hereunder such that, after giving effect thereto and as of the effective date hereof, the New Bank shall be a party to the Credit Agreement and shall have the rights and obligations of a Bank thereunder. (b) The New Bank (a) represents and warrants that (i) it is duly and legally authorized to enter into this Amendment, (ii) the execution, delivery and performance of this Amendment do not conflict with any provision of law or of the charter or by-laws of the New Bank, or of any agreement binding on the New Bank, (iii) all acts, conditions and things required to be done and performed and to have occurred prior to the execution, delivery and performance of this Third Amendment, and to render the same the legal, valid and binding obligation of the New Bank, enforceable against it in accordance with its terms, have been done and performed and have occurred in due and strict compliance with all applicable laws; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to ss.9 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this -4- Amendment; (c) agrees that it will, independently and without reliance upon the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; and (e) agrees that it will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank. ss.8. Conditions to Effectiveness. This Third Amendment shall not become effective until the Agent receives a counterpart of this Third Amendment, executed by the Borrower, the Guarantors and the Banks, as well as new Revolving Credit Notes payable to each Assignee and the New Bank in the amount set forth opposite such Bank's name on Schedule 1 hereto. ss.9. Representations and Warranties. The Borrower hereby repeats, on and as of the date hereof, each of the representations and warranties made by it in ss.8 of the Credit Agreement, and such representations and warranties remain true as of the date hereof (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date), provided, that all references therein to the Credit Agreement shall refer to such Credit Agreement as amended hereby. In addition, the Borrower hereby represents and warrants that the execution and delivery by the Borrower of this Third Amendment and the performance by the Borrower of all of its agreements and obligations under the Credit Agreement as amended hereby are within the corporate authority of each the Borrower and has been duly authorized by all necessary corporate action on the part of the Borrower. ss.10. Ratification, Etc. Except as expressly amended hereby, the Credit Agreement and all documents, instruments and agreements related thereto, including, but not limited to the Security Documents, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The Credit Agreement and this Third Amendment shall be read and construed as a single agreement. All references in the Credit Agreement or any related agreement or instrument to the Credit Agreement shall hereafter refer to the Credit Agreement as amended hereby. ss.11. No Waiver. Nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligation of the Borrower or any rights of the Agent or the Banks consequent thereon. ss.12. Counterparts. This Third Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. ss.13. Governing Law. THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS). -5- IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment as a document under seal as of the date first above written. FLEXTRONICS INTERNATIONAL USA, INC. By:____________________________________ Title: BANKBOSTON, N.A. By:____________________________________ Title: ABN AMRO BANK N.V. By: ___________________________________ Name: Title: THE BANK OF NOVA SCOTIA By: ___________________________________ Name: Title: BANQUE NATIONALE DE PARIS, SAN FRANCISCO BRANCH By: ___________________________________ Name: Vice President PARIBAS By: ___________________________________ Name: Title: -6- COMERICA BANK By: ___________________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ___________________________________ Name: Title: SUMITOMO BANK OF CALIFORNIA By: ___________________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: ___________________________________ Name: Title: -7- RATIFICATION OF GUARANTY Each of the undersigned guarantors hereby acknowledges and consents to the foregoing Third Amendment as of September 29, 1998, and agrees that each of the Guarantees dated as of January 14, 1998 from each of the undersigned Guarantors remain in full force and effect, and each of the Guarantors confirms and ratifies all of its obligations thereunder. FLEXTRONICS INTERNATIONAL LTD. By:______________________________________ Title: FLEXTRONICS INTERNATIONAL (UK) LTD. By:______________________________________ Title: FLEXTRONICS MANUFACTURING (HK) LTD. By:______________________________________ Title: FLEXTRONICS SINGAPORE PTE. LTD. By:______________________________________ Title: FLEXTRONICS HOLDING (UK) LTD. By:______________________________________ Title: -8- FLEXTRONICS MALAYSIA SDN BHD By:______________________________________ Title: FLEXTRONICS INTERNATIONAL MARKETING (L) LTD. By:______________________________________ Title: FLEXTRONICS HOLDINGS AB By:______________________________________ Title: FLEXTRONICS INTERNATIONAL SWEDEN AB By:______________________________________ Title: ASTRON GROUP LIMITED By:______________________________________ Title: DTM PRODUCTS CORPORATION By:______________________________________ Title: SCHEDULE 1 ---------- Banks/Commitments
- --------------------------------------------------------------------------------------------------------------- Commitment Revolving Percentage of Revolving Credit Loans, Credit Loan Bankers' Acceptances and Letters Banks Commitment of Credit =============================================================================================================== BankBoston, N.A. $12,380,952.38 21.6666667% Domestic Lending Office: 100 Federal Street, 01-08-06 Boston, Massachusetts 02110 Attn: High Technology Division Eurodollar Lending Office: Same as above =============================================================================================================== ABN Amro Bank N.V. $9,761,904.76 17.0833333% Domestic Lending Office: 101 California Street, Suite 4550 San Francisco, CA 94111 Eurodollar Lending Office: Same as above =============================================================================================================== Bank of Nova Scotia $9,523,809.52 16.6666667% Domestic Lending Office: 580 California Street, 21st Floor San Francisco, CA 94104 Eurodollar Lending Office: Same as above =============================================================================================================== Bank of America National Trust and $9,523,809.52 16.6666667% Savings Association Domestic Lending Office: 555 California Street San Francisco, CA 94104 Eurodollar Lending Office: Same as above =============================================================================================================== Banque Nationale de Paris $7,142,857.13 12.5000000% Domestic Lending Office: 180 Montgomery Street, 3rd Floor San Francisco, CA 94104 Eurodollar Lending Office: Same as above ===============================================================================================================
- --------------------------------------------------------------------------------------------------------------- Paribas $5,952,380.95 10.4166667% Domestic Lending Office: 101 California Street, Suite 3150 San Francisco, CA 94104 Eurodollar Lending Office: Same as above =============================================================================================================== Industrial Bank of Japan $2,857,142,86 5.0000000% Domestic Lending Office: 555 California Street, Suite 3110 San Francisco, CA 94104 Eurodollar Lending Office: Same as above =============================================================================================================== Totals: $57,142,857.13 100% - ---------------------------------------------------------------------------------------------------------------
EX-10.4 5 3RD AMENDMENT REVOLVING CREDIT AGREEMENT (FIL) - -------------------------------------------------------------------------------- THIRD AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT - -------------------------------------------------------------------------------- Third Amendment dated as of September 29, 1998 to Amended and Restated Revolving Credit Agreement (the "Third Amendment"), by and among FLEXTRONICS INTERNATIONAL LTD., a company incorporated in Singapore (the "Borrower"), BANKBOSTON, N.A. (formerly known as The First National Bank of Boston) and the other lending institutions listed on Schedule 1 to the Credit Agreement (as hereinafter defined) (collectively, the "Existing Banks"), Bank of America National Trust and Savings Association (the "New Bank" and, together with the Existing Banks, the "Banks") and BankBoston, N.A. in its capacity as agent for the Banks (the "Agent"), amending certain provisions of the Amended and Restated Revolving Credit Agreement dated as of January 14, 1998 (as amended and in effect from time to time, the "Credit Agreement") by and among the Borrower, the Existing Banks and BankBoston, N.A. as agent for the Banks (the "Agent"). Terms not otherwise defined herein which are defined in the Credit Agreement shall have the same respective meanings herein as therein. WHEREAS, the New Bank wishes to become a party to the Credit Agreement, and certain of the Existing Banks wish to assign certain portions of their Revolving Credit Loans, Letter of Credit Participations and Commitments under the Credit Agreement to the New Bank and certain Existing Banks; and WHEREAS, the Borrower has requested, and the Banks have agreed upon the terms and conditions described herein, that the aggregate Commitments of the Banks to extend credit under the Credit Agreement be increased to $62,857,142.87 WHEREAS, the Borrower and the Banks have agreed to modify certain other terms and conditions of the Credit Agreement as specifically set forth in this Third Amendment; NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ss.1. Amendment to Section 1 of the Credit Agreement. Section 1.2(d) of the Credit Agreement is hereby amended by deleting the text of ss.1.2(d) in its entirety and substituting in place thereof the words "A reference to any Person includes its permitted successors and assigns, with the provisions of this Credit Agreement be binding upon and inuring to the benefit of such Person and its permitted successors and assigns." ss.2. Amendment to Section 5 of the Credit Agreement. Section 5.1.1(b)(ii) of the Credit Agreement is hereby amended by inserting immediately after the words "all Unpaid Reimbursement Obligations" the words "plus all Bankers' Acceptances outstanding". ss.3. Amendment to Section 8 of the Credit Agreement. Section 8 of the Credit Agreement is hereby amended by inserting the following immediately after the end of the text of ss.8.28: -2- 8.29. Year 2000 Compliance. The Company and its Subsidiaries have reviewed the areas within their businesses and operations which could be adversely affected by, and have developed or are developing a program to address on a timely basis, the "Year 2000" (i.e. the risk that computer applications used by the Company or any of its Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999). Based upon such review, the Borrower reasonably believes that the "Year 2000" will not have any materially adverse effect on the business or financial condition of the Company or any of its Subsidiaries. ss.4. Amendment to Schedule 1 of the Credit Agreement. Schedule 1 of the Credit Agreement is hereby amended by deleting such schedule in its entirety and substituting in place thereof the Schedule 1 attached hereto. ss.5. Assignment and Acceptance. (a) For the purposes of the assignment contemplated herein, the provisions of ss.20.1 of the Credit Agreement are hereby waived and the parties hereto hereby consent and agree to such assignment. (b) Each of Comerica Bank and The Sumitomo Bank of California (collectively, the "Assignors") hereby sells and assigns to each of BankBoston, N.A., Bank of America National Trust and Savings Association and ABN Amro Bank N.V. (collectively, the "Assignees"), and each Assignee hereby purchases and assumes from each Assignor, a certain percentage of each such Assignor's rights and obligations under the Credit Agreement as of the effective date hereof, including, without limitation, such percentage interest in each such Assignor's Commitment as in effect on the effective date, and the outstanding amount of the Revolving Credit Loans, Letter of Credit Participation and Bankers' Acceptance Participation owing to each Assignor on the effective date and the Revolving Credit Note held by each Assignor (such interest being hereinafter referred to as the "Assigned Portion") such that, after giving effect to the assignments contemplated hereby, the respective Commitments, Commitment Percentages of each Assignor shall be zero, and the respective Commitments and Commitment Percentages of each Assignee (after giving effect to the increase in the Total Commitment contemplated by this Third Amendment) shall be as set forth on Schedule 1 attached hereto, and each Assignee shall have that percentage interest in all Revolving Credit Loans, Letter of Credit Participations and Bankers Acceptance Participations. Notwithstanding any term or provision of ss.20 of the Credit Agreement to the contrary, the execution and delivery hereof by each Assignor, each Assignee, the Agent and the Borrower shall constitute an Assignment and Acceptance delivered in accordance with the Credit Agreement and shall be effective in respect of the assignment contemplated hereby. (c) each Assignor (i) represents and warrants (as to itself only and not as to the other Assignor) that as of the date hereof, its Commitment and Commitment Percentage is sufficient to give effect to this Assignment and Acceptance; (ii) makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any of the other Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any of the other Loan Documents or any other instrument or document furnished pursuant thereto or the attachment, perfection or priority of any security interest or mortgage, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder free and clear of any claim or encumbrance; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any of its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Borrower or any of its Subsidiaries or any -3- other Person primarily or secondarily liable in respect of any of the Obligations of any of its obligations under the Credit Agreement or any of the other Loan Documents or any other instrument or document delivered or executed pursuant thereto; and (iv) requests that in connection with such assignment as set forth herein the Borrower exchange the Revolving Credit Notes of each Assignor for new Revolving Credit Notes, each dated as of the effective date hereof payable to the order of each Assignee in the principal amount of the Commitment set forth opposite each Assignee's name on Schedule 1 to the Credit Agreement as amended hereby and each such new note shall be deemed to be a "Revolving Credit Note" under the Credit Agreement. (d) each Assignee (i) represents and warrants (as to itself only and not as to any other Assignee) that it has received a copy of the Credit Agreement and the other Loan Documents, together with copies of the financial statements referred to in ss.9.4 of the Credit Agreement and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this agreement, that it is an Eligible Assignee under the Credit Agreement and that all acts, conditions and things required to be done and performed have occurred prior to the execution, delivery and performance of this assignment, and to render the same the legal, valid and binding obligation of each such Assignee, enforceable against it in accordance with its terms, have been done and performed and have occurred in due and strict compliance with all applicable laws; (ii) agrees that it will, independently and without reliance upon any Assignor, the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; and (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, and agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement and the other Loan Documents are required to be performed by it as a Bank. (e) Upon the effectiveness of the assignment contemplated hereby, each Assignor shall return to the Borrower its Revolving Credit Note, marked "Cancelled". ss.6. Addition of New Bank. (a) Each of the Agent and the Borrower consent to the addition of the New Bank as a Bank hereunder such that, after giving effect thereto and as of the effective date hereof, the New Bank shall be a party to the Credit Agreement and shall have the rights and obligations of a Bank thereunder. (b) The New Bank (a) represents and warrants that (i) it is duly and legally authorized to enter into this Amendment, (ii) the execution, delivery and performance of this Amendment do not conflict with any provision of law or of the charter or by-laws of the New Bank, or of any agreement binding on the New Bank, (iii) all acts, conditions and things required to be done and performed and to have occurred prior to the execution, delivery and performance of this Third Amendment, and to render the same the legal, valid and binding obligation of the New Bank, enforceable against it in accordance with its terms, have been done and performed and have occurred in due and strict compliance with all applicable laws; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to ss.9.4 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Amendment; (c) agrees that it will, independently and without reliance upon the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the -4- Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; and (e) agrees that it will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank. ss.7. Conditions to Effectiveness. This Third Amendment shall not become effective until the Agent receives a counterpart of this Third Amendment, executed by the Borrower, the Guarantors and the Banks, as well as new Revolving Credit Notes payable to each Assignee and the New Bank in the amount set forth opposite such Bank's name on Schedule 1 hereto. ss.8. Representations and Warranties. The Borrower hereby repeats, on and as of the date hereof, each of the representations and warranties made by it in ss.8 of the Credit Agreement, and such representations and warranties remain true as of the date hereof (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date), provided, that all references therein to the Credit Agreement shall refer to such Credit Agreement as amended hereby. In addition, the Borrower hereby represents and warrants that the execution and delivery by the Borrower of this Third Amendment and the performance by the Borrower of all of its agreements and obligations under the Credit Agreement as amended hereby are within the corporate authority of each the Borrower and has been duly authorized by all necessary corporate action on the part of the Borrower. ss.9. Ratification, Etc. Except as expressly amended hereby, the Credit Agreement and all documents, instruments and agreements related thereto, including, but not limited to the Security Documents, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The Credit Agreement and this Third Amendment shall be read and construed as a single agreement. All references in the Credit Agreement or any related agreement or instrument to the Credit Agreement shall hereafter refer to the Credit Agreement as amended hereby. ss.10. No Waiver. Nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligation of the Borrower or any rights of the Agent or the Banks consequent thereon. ss.11. Counterparts. This Third Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. ss.12. Governing Law. THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO CONFLICT OF LAWS). -5- IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment as a document under seal as of the date first above written. FLEXTRONICS INTERNATIONAL LTD. By:_____________________________________________ Title: BANKBOSTON, N.A. By:_____________________________________________ Title: ABN AMRO BANK N.V. By: ____________________________________________ Name: Title: THE BANK OF NOVA SCOTIA By: ____________________________________________ Name: Title: BANQUE NATIONALE DE PARIS, SAN FRANCISCO BRANCH By: ____________________________________________ Name: Vice President PARIBAS By: ____________________________________________ Name: Title: -6- COMERICA BANK By: ____________________________________________ Name: Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By: ____________________________________________ Name: Title: SUMITOMO BANK OF CALIFORNIA By: ____________________________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: ____________________________________________ Name: Title: RATIFICATION OF GUARANTY Each of the undersigned guarantors hereby acknowledges and consents to the foregoing Third Amendment as of September 29, 1998, and agrees that each of the Guarantees dated as of January 14, 1998 from each of the undersigned Guarantors remain in full force and effect, and each of the Guarantors confirms and ratifies all of its obligations thereunder. FLEXTRONICS INTERNATIONAL USA, INC. By:__________________________________ Title: FLEXTRONICS INTERNATIONAL (UK) LTD. By:____________________________________ Title: FLEXTRONICS MANUFACTURING (HK) LTD. By:____________________________________ Title: FLEXTRONICS SINGAPORE PTE. LTD. By:__________________________________ Title: FLEXTRONICS HOLDING (UK) LTD. By:____________________________________ Title: -8- FLEXTRONICS MALAYSIA SDN BHD By:____________________________________ Title: FLEXTRONICS INTERNATIONAL MARKETING (L) LTD. By:____________________________________ Title: FLEXTRONICS HOLDINGS AB By:____________________________________ Title: FLEXTRONICS INTERNATIONAL SWEDEN AB By:____________________________________ Title: ASTRON GROUP LIMITED By:____________________________________ Title: DTM PRODUCTS CORPORATION By:____________________________________ Title: SCHEDULE 1 Banks/Commitments
====================================================================================================================== Commitment Revolving Percentage of Revolving Credit Loans, Credit Loan Bankers' Acceptances and Letters Banks Commitment of Credit ====================================================================================================================== BankBoston, N.A. $13,619,047.62 21.6666667% Domestic Lending Office: 100 Federal Street, 01-08-06 Boston, Massachusetts 02110 Attn: High Technology Division Eurodollar Lending Office: Same as above ====================================================================================================================== ABN Amro Bank N.V. $10,738,095.24 17.0833333% Domestic Lending Office: 101 California Street, Suite 4550 San Francisco, CA 94111 Eurodollar Lending Office: Same as above ====================================================================================================================== Bank of Nova Scotia $10,476,190.48 16.6666667% Domestic Lending Office: 580 California Street, 21st Floor San Francisco, CA 94104 Eurodollar Lending Office: Same as above ====================================================================================================================== Bank of America National Trust and $10,476,190.48 16.6666667% Savings Association Domestic Lending Office: 555 California Street San Francisco, CA 94104 Eurodollar Lending Office: Same as above ====================================================================================================================== Banque Nationale de Paris $7,857,142.87 12.5000000% Domestic Lending Office: 180 Montgomery Street, 3rd Floor San Francisco, CA 94104 Eurodollar Lending Office: Same as above ======================================================================================================================
-2-
====================================================================================================================== Commitment Revolving Percentage of Revolving Credit Loans, Credit Loan Bankers' Acceptances and Letters Banks Commitment of Credit ====================================================================================================================== Paribas $6,547,619.05 10.4166667% Domestic Lending Office: 101 California Street, Suite 3150 San Francisco, CA 94104 Eurodollar Lending Office: Same as above ====================================================================================================================== Industrial Bank of Japan $3,142,857.14 5.0000000% Domestic Lending Office: 555 California Street, Suite 3110 San Francisco, CA 94104 Eurodollar Lending Office: Same as above ====================================================================================================================== Totals: $62,857,142.87 100% ======================================================================================================================
EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF DECEMBER 31, 1998 (UNAUDITED) AND THE STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERNCE TO SUCH FINANCIAL STATEMENTS. 9-MOS MAR-31-1999 APR-01-1998 DEC-31-1998 201,121 0 186,463 6,557 197,141 629,959 428,272 101,154 1,007,456 331,918 0 0 0 153 458,372 1,007,456 1,298,928 1,298,928 1,186,133 1,186,133 3,138 0 13,229 45,481 5,468 40,013 0 0 0 40,013 0.95 0.90
-----END PRIVACY-ENHANCED MESSAGE-----