-----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, KaUA2FzjxTs30yrpxEeK1Bbs9KsRmGCAWMMb4JOY2URZysLKHi3Pe3N8EgnGGJ2x J9LiRgYY0QuGEATpmS6rRQ== /in/edgar/work/20000613/0000891618-00-003322/0000891618-00-003322.txt : 20000919 0000891618-00-003322.hdr.sgml : 20000919 ACCESSION NUMBER: 0000891618-00-003322 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000613 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEXTRONICS INTERNATIONAL LTD CENTRAL INDEX KEY: 0000866374 STANDARD INDUSTRIAL CLASSIFICATION: [3672 ] IRS NUMBER: 000000000 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-23354 FILM NUMBER: 653835 BUSINESS ADDRESS: STREET 1: 11 UBI ROAD 1 STREET 2: #07 01 02 MEIBAN INDUSTRIAL BLDG CITY: SINGAPORE 408723 STATE: U0 BUSINESS PHONE: 0654495255 FORMER COMPANY: FORMER CONFORMED NAME: FLEX HOLDINGS PTE LTD DATE OF NAME CHANGE: 19940201 10-K405 1 0001.txt FORM 10-K DATED MARCH 31, 2000 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K ---------------- (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 2000 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 0-21272 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.) 11 UBI ROAD 1, #07-01/02 MEIBAN INDUSTRIAL BUILDING SINGAPORE 408723 (65) 844-3366 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of June 1, 2000, 192,572,807 shares of the Registrant's common stock were outstanding. The aggregate market value of the common stock held by non-affiliates of the Registrant as of June 1, 2000 was approximately $11,347,860,828.50. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's definitive proxy statement, to be delivered to shareholders in connection with the Registrant's general meeting of shareholders, are incorporated by reference into Part III of this Form 10-K. ================================================================================ 2 FLEXTRONICS INTERNATIONAL LIMITED 2000 FORM 10-K TABLE OF CONTENTS PART I Item 1. Business ..................................................................................... 3 Item 2. Facilities.................................................................................... 18 Item 3. Legal Proceedings............................................................................. 19 Item 4. Submission of Matters to a Vote of Security Holders........................................... 19 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters..................... 20 Item 6. Selected Financial Data....................................................................... 22 Item 7. Management's Discussion and Analysis of Financial Condition And Results of Operations......... 22 Item 8. Financial Statements and Supplementary Data................................................... 32 Item 9. Changes in and Disagreements with Accountants on Accounting And Financial Disclosure.................................................................................... 61 PART III Item 10. Directors and Officers ....................................................................... 62 Item 11. Executive Compensation........................................................................ 65 Item 12. Security Ownership of Certain Beneficial Owners and Management................................ 65 Item 13. Certain Relationships and Related Transactions................................................ 65 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............................. 66
2 3 PART I ITEM 1. BUSINESS Except for historical information contained herein, the matters discussed in this Annual Report on Form 10-K 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. These forward-looking statements are subject to certain risks and uncertainties, including, without limitation, those discussed in "Item 1-Business," "Item 1-Business-Risk Factors," and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" that could cause future results to differ materially from historical results or those anticipated. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include those described in "- Risk Factors," as well as: - our ability to carry out our strategies; - the planned expansion of our facilities and operations; - potential acquisitions; - adoption of outsourcing by original equipment manufacturers; - our ability to become an integral part of our customers' operations; - our ability to win new customer contracts; - tax matters; - currency fluctuations; and - our planned opening of industrial parks in Brazil, Hungary and Poland. 3 4 We are a leading provider of advanced electronics manufacturing services to OEMs primarily in the telecommunications and networking, consumer electronics and computer industries. Our strategy is to provide customers with the ability to outsource, on a global basis, a complete product where we take responsibility for engineering, supply chain management, assembly, integration, test and logistics management. We provide complete product design services, including electrical and mechanical, circuit and layout, radio frequency and test development engineering services. Our manufacturing services include the fabrication and assembly of plastic and metal enclosures, PCBs and backplanes. We believe that we have developed particular strengths in advanced interconnect, miniaturization and packaging technologies, and in the engineering and manufacturing of wireless communications products employing radio frequency technology. Throughout the production process, we offer logistics services, such as materials procurement, inventory management, packaging and distribution. Through a combination of internal growth and acquisitions, including our mergers with The DII Group, Inc. and Palo Alto Products International Pte. Ltd., or PAPI, in April 2000, we have become the world's third largest provider of electronics manufacturing services, with revenues of $5.7 billion and EBITDA of $391.4 million in fiscal 2000. In addition, we have increased our manufacturing square footage from 1.5 million square feet on April 1, 1998 to 11.2 million square feet to date. We offer a complete and flexible manufacturing solution that provides accelerated time-to-market and time-to-volume production, reduced production costs and advanced engineering and design capabilities. By working closely with and being highly responsive to customers throughout the design, manufacturing and distribution process, we believe that we can be an integral part of their operations. We believe that our size, global presence, broad service offerings and expertise enable us to win large programs from leading multinational OEMs for the manufacture of advanced electronics products. Our customers include industry leaders such as Cisco, Ericsson, Hewlett-Packard, Lucent, Microsoft, Motorola, Nokia, Palm Computing and Philips. Due to our focus on high growth technology sectors, our prospects are influenced by such major trends as the upgrade of the communications and Internet infrastructure, the proliferation of wireless devices, increasing product miniaturization and other trends in electronics technologies. In addition, our growth is affected by the pace at which leading OEMs are continuing to adopt outsourcing as a core business strategy. We have established an extensive network of manufacturing facilities in the world's major electronics markets -- Asia, the Americas and Europe -- to serve the increased outsourcing needs of both multinational and regional OEMs. We strategically locate facilities near our customers and their end markets. In fiscal 2000, production in the Americas represented 43% of our net sales, production in Europe represented 39% of our net sales and production in Asia represented 18% of our net sales. We have also established fully integrated, high volume industrial parks in low cost regions near our customers' end markets. These industrial parks provide a total supply chain management by co-locating our manufacturing and distribution operations with our suppliers at a single location. This approach to production and distribution is designed to benefit our customers by reducing logistical barriers and costs, increasing flexibility, lowering transportation costs and reducing turnaround times. Our industrial parks are located in China, Hungary and Mexico and we are building new industrial parks in Brazil, Hungary and Poland. In addition to our industrial parks, we have established product introduction centers which provide engineering expertise in developing new products and preparing them for high volume manufacturing. INDUSTRY OVERVIEW With electronics products growing in technical complexity and experiencing shorter product lifecycles in response to customer requirements, the demand for advanced manufacturing capabilities and related services has grown rapidly. Many OEMs in the electronics industry are increasingly utilizing electronics manufacturing service providers in their business and manufacturing strategies. Outsourcing allows OEMs to take advantage of the manufacturing expertise and capital investments of electronics manufacturing service providers, thereby enabling OEMs to concentrate on their core competencies, such as product 4 5 development, marketing and sales. We believe that by developing strategic relationships with electronics manufacturing service providers, OEMs can enhance their competitive position by: - reducing production costs; - accelerating time-to-market and time-to-volume production; - accessing advanced manufacturing, design and engineering capabilities; - reducing capital investment requirements and fixed overhead costs; - improving inventory management and purchasing power; and - accessing worldwide manufacturing capabilities. As a result of these factors, industry sources estimate that the overall market for electronics manufacturing services will grow at an average annual rate of 20% from 1998 to 2003, reaching an estimated $149.4 billion in 2003. Over the last few years the larger electronics manufacturing services providers have grown faster than smaller providers. We believe that the market for electronic manufacturing services will continue to grow, driven largely by OEMs' need for increasing flexibility to respond to rapidly changing markets and technologies and accelerating product life cycles, and their need for advanced manufacturing and engineering capabilities as a result of increased complexity and reduced size of electronics products. STRATEGY Our objective is to provide customers with the ability to outsource, on a global basis, a complete product, with Flextronics taking responsibility for the engineering, supply chain management, assembly, integration, test and logistics management to accelerate their time-to-market and time-to-volume. To achieve this objective, we will continue to implement the following strategies: Develop and Enhance Our Customers' Product Development and Manufacturing Strategy. We believe we can become an integral part of our customers' operations by working closely with them throughout the design, manufacturing and distribution process, and by offering flexible, highly responsive services. We believe our customer relationships are strengthened through a management approach which fosters rapid decision-making and a customer service orientation that responds quickly to frequently changing customer design specifications and production requirements. Our approach allows our customers to focus on their core competencies enabling them to accelerate their time-to-market and time-to-volume production. Leverage Our Global Presence. We have established an extensive network of design and manufacturing facilities in the world's major electronics markets -- Asia, the Americas and Europe -- to serve the increased outsourcing needs of both multinational and regional OEMs. Our global network of manufacturing facilities in 23 countries gives us the flexibility to transition customer projects to any of our locations. This flexibility allows design, prototyping and initial production to be located near the customer's own research and development centers, so that manufacturing can then be moved to locations closer to their end markets, or transitioned to low-cost regional manufacturing facilities or industrial parks as volumes increase over the product life-cycle. Expand Our Industrial Parks Strategy. Our industrial parks are self-contained facilities that co-locate our manufacturing and distribution operations with our suppliers in low-cost regions near our customers' end markets. Our industrial parks provide a total supply chain management. This approach to production and distribution benefits our customers by reducing logistical barriers and costs, improving communications, increasing flexibility, lowering transportation costs and reducing turnaround times. We have strategically established large industrial parks in Doumen, China, Sarvar and Zalaegerszeg, Hungary and Guadalajara, Mexico, and are currently building new industrial parks in Gdansk, Poland, Sao Paulo, Brazil and Nyiregyhaza, Hungary. 5 6 Offer Comprehensive and Integrated Design and Manufacturing Solutions. We offer a comprehensive range of engineering, supply chain management, assembly, integration, test and logistics management services to our customers that simplifies the global product development process and provides them meaningful cost savings for them. Our capabilities help our customers improve product quality and performance, reduce costs and accelerate time-to-market. Streamline Business Processes Through Information Technologies. We utilize new information technologies to streamline business processes for our customers. For example, we use innovative Internet supply chain solutions to improve order placement, tracking and fulfillment. We are also able to provide our customers with online access to product design and manufacturing process information. Integrating our information systems with those of our customers allows us to assist our customers in improving their communications and relationships across their supply chain. Pursue Strategic Opportunities. We have actively pursued acquisitions and purchases of manufacturing facilities to expand our worldwide operations, broaden our service offerings, diversify and strengthen our customer relationships and enhance our management depth. We will continue to review opportunities and are currently in preliminary discussions to acquire manufacturing operations and enter into business combinations. We cannot assure the terms of, or that we will complete, such transactions. We will continue to selectively pursue strategic transactions that we believe will further our business objectives. We cannot assure that our strategies can be successfully implemented, or will reduce the risks associated with our business. See "Risk Factors." CUSTOMERS Our customers consist of a select group of OEMs primarily in the telecommunications and networking, consumer electronics and computer industries. Within these industries, our strategy is to establish relationships with leading companies that seek to outsource significant production volumes of complex products. We have focused on building long-term relationships with these customers and expanding our relationship to include additional product lines and services. We have increasingly focused on sales to larger companies and to customers in the telecommunications and networking, consumer electronics and computer industries. In fiscal 2000 our five largest customers accounted for approximately 54% of our net sales (excluding the customers of DII and PAPI). Our largest customers during fiscal 2000 were Ericsson, Philips and Cisco accounting for approximately 15%, 12% and 10% of consolidated net sales, respectively. See "Risk Factors -- The majority of our sales comes from a small number of customers; if we lose any of these customers, our sales could decline significantly." The following table lists in alphabetical order some of our largest customers in fiscal 2000 and the products of those customers for which we provide manufacturing services:
CUSTOMER END PRODUCTS -------- ------------ Cabletron.................................... Data communications products Compaq....................................... Computer products Cisco Systems................................ Data communications products Ericsson..................................... Business telecommunications systems, GSM infrastructure Hewlett-Packard.............................. Inkjet printers, storage devices Lucent....................................... Data communication products Motorola..................................... Cellular phones, set-top boxes Nokia........................................ Cellular phone accessories, office phones Palm Computing............................... Pilot electronic organizers Philips Electronics.......................... Consumer electronics products
6 7 In addition, we recently significantly expanded the scope of our relationships with a number of existing customers and entered into relationships with new customers, including ABB Automation Products (PCB assemblies), Cabletron Systems (data communication products) and General Instruments (set-top boxes). On May 30, 2000, we entered into a strategic alliance for product manufacturing with Motorola. This alliance provides incentives for Motorola to purchase over $30.0 billion of products and services from us until December 31, 2005. We anticipate that this relationship will encompass a wide range of products, including cellular phones, pagers, set-top boxes and infrastructure equipment, and will involve a broad range of services, including design, PCB fabrication and assembly, plastics, enclosures and supply chain services. The relationship is not exclusive and does not require that Motorola purchase any specific volumes of products or services from us. Our ability to achieve any of the anticipated benefits of this relationship is subject to a number of risks, including our ability to provide our services on a competitive basis and to expand our manufacturing resources, as well as demand for Motorola's products. In connection with this strategic alliance, Motorola will pay $100.0 million for an equity instrument that entitles them to acquire 11,000,000 Flextronics ordinary shares at any time through December 31, 2005, upon meeting targeted purchase levels or making specified payments to us. The issuance of this equity instrument will result in a one-time non-cash charge of approximately $290.0 million in the first fiscal quarter of fiscal 2001, offset by a corresponding credit to shareholders' equity. SALES AND MARKETING We achieve worldwide sales coverage through a direct sales force, which focuses on generating new accounts, and through program managers, who are responsible for managing relationships with existing customers and making follow-on sales. Our Asian sales offices are located in Singapore and Hong Kong. In North America, we maintain sales offices in California, Florida, Massachusetts and Texas. In Europe, we maintain sales offices in England, France, Germany, the Netherlands and Sweden. In addition to our sales force, our executive staff plays an integral role in our marketing efforts. SERVICES We offer a broad range of integrated services, providing customers with a total design and manufacturing solution to take a product from initial design through volume production, test and distribution into post-sales service and support. These integrated services include the following: Flextronics Systems Assembly. Our assembly and manufacturing operations, which reflects the majority of our revenues, include PCB assembly, assembly of systems and subsystems that incorporate PCBs and complex electromechanical components. A substantial portion of our net sales is derived from the manufacture and assembly of complete products. We employ just-in-time, ship-to-stock and ship-to-line programs, continuous flow manufacturing, demand flow processes and statistical process control. As OEMs seek to provide greater functionality in smaller products, they increasingly require more sophisticated manufacturing technologies and processes. Our investment in advanced manufacturing equipment and our experience and expertise in innovative miniaturization, packaging and interconnect technologies, such as chip scale packaging, chip-on-board and ball grid array, enable us to offer a variety of advanced manufacturing solutions. In addition, we have recently developed significant expertise in the manufacture of wireless communications products employing radio frequency technology. We offer computer-aided testing of assembled PCBs, systems and subsystems, which contributes significantly to our ability to deliver high-quality products on a consistent basis. Our test capabilities include management defect analysis, in-circuit tests and functional tests. In addition, we also provide environmental stress tests of board or system assemblies. Multek. Multek provides PCB and backpanel fabrication services. PCBs and backpanels are platforms which provide interconnection for integrated circuits and other electronic components. 7 8 Backpanels also provide interconnection for other printed circuit boards. Semiconductor designs are currently so complex that they often require printed circuit boards with many layers of narrow, densely spaced wiring. We manufacture high density, complex multilayer printed circuit boards and backpanels on a low-volume, quick-turn basis, as well as on a high-volume production basis. Our quick-turn prototype service allows us to provide small test quantities to customers' product development groups in as short as 24 hours. We are one of only a few independent manufacturers who can respond to our customers' demands for an accelerated transition from prototype to volume production. The manufacture of complex multilayer interconnect products often requires the use of sophisticated circuit interconnections between layers (called "vias") and adherence to strict electrical characteristics to maintain consistent circuit transmission speeds. Our production of microvias, by laser ablation and our surface laminar circuit technology, a photo generated microvia capability, provides our customers with proven high volume production capacity in both of the major high density interconnect process solutions. Flextronics Enclosures. We offer a comprehensive set of custom electronic enclosures and related products and services. Our services include design, manufacturing, and integration of electronics packaging systems from custom enclosure systems, power and thermal subsystems, interconnect subsystems to cabling and cases. In addition to the typical sheet metal fabrication, we assist in the design of electronic packaging systems that protect sensitive electronics and enhance functionality. Our enclosure design services focus on functionality, manufacturability and testing. These services are integrated with our other services to provide our customers with greater responsiveness, improved logistics and overall improved supply chain management. In addition to our inhouse design and manufacturing capabilities, we have established a strategic alliance with a top tier enclosure manufacturer to broaden our design, engineering, supply chain management, manufacturing and assembly expertise for our customers worldwide. Flextronics Semiconductor. We coordinate industrial design and tooling for product manufacturing. By integrating the combined capabilities of design, engineering and semiconductor services, we can compress the time from product concept to market introduction and minimize product development costs. Flextronics semiconductor provides ASIC design services to our OEM customers, including: - Conversion services from field programmable gate arrays to ASICs. These services focus on designs that utilize primarily digital signals, with only a small amount of analog signals. - Design services for mixed-signal ASICs. These services focus on designs that utilize primarily analog signals, with only a small amount of digital signals. - Silicon integration design services. These services utilize silicon design modules that are used to accelerate complex ASIC designs, including system-on-a-chip. Flextronics Semiconductor utilizes external foundry suppliers for its customers' silicon manufacturing requirements, thereby using a "fabless" manufacturing approach. This enables us to take advantage of the suppliers' high volume economies of scale and access to advanced process technology. We believe that our semiconductor design expertise provides us with a competitive advantage by enabling us to offer our customers reduced costs through the consolidation of components onto silicon chips. Flextronics Design Services. We offer a comprehensive spectrum of value-added design services for products we manufacture for our customers. Products designed by this group range from commercial and military applications, including radio frequency analog, high-speed digital, multi-chip module, and flex circuits, to high volume consumer products, to small quantity prototypes. We work with our customers to develop product-specific test strategies and can custom design test equipment and software ourselves or use test equipment and software provided by our customers. Approximately 40% of our revenues are from products that incorporate Flextronics design aspects. To assist customers with initial design, we provide computer-aided engineering and computer-aided design, 8 9 engineering for manufacturability, printed circuit board layout and test development. At our product introduction centers, we employ hundreds of advanced engineers to provide the engineering expertise in developing new products and preparing them for high volume manufacturing. These centers coordinate and integrate our worldwide design, prototype, test development practices and, in some locations, provide dedicated production lines for prototypes. Flextronics Plastics. We offer tool fabrication, quickturn prototyping and full production of plastic parts. We are able to quickly transition our customers' products into volume production. By maintaining these services at our industrial parks along with manufacturers and suppliers of sheet metal, cable harnesses, components and packaging, we increase our customers' production flexibility and speed. Flextronics Network Services. We offer network installation services to OEMs in the data and telecommunications industries. Our services include project planning, documentation, engineering, production, installation and commissioning of equipment. We have expertise in the installation of public and mobile telecommunications systems, exchanges, corporate networks and peripheral equipment. Supply Chain Services. We provide materials procurement, information technology solutions and logistics. Materials procurement and management consist of the planning, purchasing, expediting and warehousing of components and materials used in the manufacturing process. Our inventory management expertise and volume procurement capabilities contribute to cost reductions and reduce total cycle time. Our industrial parks in China, Hungary and Mexico include providers of many of the custom components that we use to reduce material and transportation costs, simplify logistics and facilitate inventory management. We also use sophisticated automated manufacturing resources planning systems and enhanced electronic data interchange capabilities to ensure inventory control and optimization. Through our manufacturing resources planning system, we have real-time visibility on material availability and real-time tracking of work in process. We also utilize electronic data interchange with our customers and suppliers to implement a variety of supply chain management programs. Electronic data interchange allows customers to share demand and product forecasts and deliver purchase orders while also assisting suppliers with just-in-time delivery and supplier-managed inventory. We offer our customers flexible, just-in-time delivery programs allowing product shipments to be closely coordinated with customers' inventory requirements. Increasingly, we ship products directly into customers' distribution channels or directly to the end-user. We believe that this service can provide our customers with a more comprehensive solution and enable them to be more responsive to market demands. COMPETITION The electronics manufacturing services industry is extremely competitive and includes hundreds of companies, several of whom have achieved substantial market share. We compete with different companies, depending on the type of service or geographic area. We compete against numerous domestic and foreign electronics manufacturing services providers, and current and prospective customers also evaluate our capabilities against the merits of internal production. In addition, in recent years the electronics manufacturing industry has attracted a significant number of new entrants, including large OEMs with excess manufacturing capacity, and many existing participants, including us, have significantly increased their manufacturing capacity by expanding their facilities and adding new facilities. In the event of a decrease in overall demand for electronics manufacturing services, this increased capacity could result in substantial pricing pressures which could harm our operating results. Some of our competitors, including Solectron Corporation and SCI Systems, may have greater manufacturing, financial and other resources than us. As competitors increase the scale of their operations, they may increase their ability to realize economies of scale, to reduce their prices and to more effectively meet the needs of large OEMs. We believe that the principal competitive factors in the segments of the electronics manufacturing services industry in which we operate are cost, technological capabilities, responsiveness and flexibility, delivery cycles, location of facilities, product quality and range of services available. Failure to satisfy any of the 9 10 foregoing requirements could seriously harm our business. See "Risk Factors -- Our industry is extremely competitive." ACQUISITIONS Business Combinations. We have actively pursued business combinations and other business acquisitions to expand our global reach, manufacturing capacity and service offerings and strengthen our customer relationships. Since fiscal 1997, we have completed the following business combinations:
DATE ACQUIRED COMPANY NATURE OF BUSINESS CONSIDERATION LOCATION(S) ---- ---------------- ------------------ ------------- ----------- May 2000 Sample Rate Systems Oyj Provides electronics 88,657 ordinary shares Finland manufacturing services May 2000 San Marco Engineering Provides electronics 275,000 ordinary shares Italy Srl manufacturing services April 2000 Palo Alto Products Provides industrial and 3,618,374 ordinary Tun Cheng, Taiwan International Pte. Ltd. electronics shares Samuprakaru, Thailand manufacturing design Palo Alto, California services New Braunfels, Texas April 2000 The DII Group, Inc. Provides electronics 62,768,139 ordinary Anaheim, California manufacturing services shares Irvine, California Sunnyvale, California Palm Harbor, Florida Austin, Texas Roseville, Minnesota Binghamton, New York Boulder, Colorado Longmont, Colorado Zhuhai, China Melaka, Malaysia Singapore Kindberg, Austria Brno, Czech Republic Boeblingen, Germany Cork, Ireland Guadalajara, Mexico Puebla, Mexico Sao Paolo, Brazil March 2000 PCB Assembly, Inc. Provides electronics 1,084,566 ordinary Sunnyvale, California design, assembly and shares test services March 2000 Purchased remaining 10% Manufactures injection $3.0 million cash Shenzhen, China interest in FICO molded plastics Investment Holdings Ltd. February 2000 Vastbright PCB Co. Ltd. Manufactures advanced $18.0 million cash Zhuhai, China technology PCBs November 1999 Circuit Board Provides electronics 559,098 ordinary shares Research Triangle Park, Assemblers, Inc., EMC design, assembly and North Carolina International, Inc., test services Newport Technology and Summit Manufacturing July 1999 Kyrel EMS Oyj Provides electronics 3,643,610 ordinary Kyroskoski, Finland design, assembly and shares Luneville, France test services March 1999 Advanced Component Labs Manufactures advanced $15.0 million cash Zhuhai, China HK Ltd. technology PCBs
10 11
DATE ACQUIRED COMPANY NATURE OF BUSINESS CONSIDERATION LOCATION(S) ---- ---------------- ------------------ ------------- ----------- March 1999 Increased ownership of Manufactures injection $7.2 million cash, $3.0 Shenzhen, China FICO Investment Holdings molded plastics million in promissory Ltd. from 40% to 90% notes, and 255,700 ordinary shares March 1998 Conexao Informatica Provides electronics 1,686,372 ordinary Sao Paulo, Brazil Ltda. design, assembly and shares test services March 1998 Altatron, Inc. Provides electronics 3,154,600 ordinary Fremont, California design, assembly and shares test services December 1997 DTM Products, Inc. Manufactures injection 1,009,876 ordinary Boulder, Colorado molded plastics shares December 1997 Energipilot AB Provides cable assembly 919,960 ordinary shares Stockholm, Sweden and engineering services October 1997 Neutronics Electronics Provides electronics 11,224,000 ordinary Althofen, Austria Industries Holding AG design, assembly and shares Tab, Hungary test services Sarvar, Hungary Zalaegerszeg, Hungary
Acquisitions of Manufacturing Facilities. We have purchased a number of manufacturing facilities and related assets from customers and simultaneously entered into manufacturing agreements to provide electronics design, assembly and test services to these customers. The transactions were accounted for as purchases of assets. Since fiscal 1997, we have completed the following facilities purchases:
DATE CUSTOMER CONSIDERATION FACILITY LOCATION(S) ---- -------- ------------- -------------------- May 2000 Bosch Telecom GmbH $98.3 million Pandrup, Denmark March 2000 Cabletron Systems Inc. $83.4 million Rochester, New Hampshire Limerick, Ireland January 2000 Fujitsu Siemens $69.7 million Paderborn, Germany June 1999 Ericsson $39.4 million Visby, Sweden May 1999 ABB Automation Products $24.5 million Vasteras, Sweden
We will continue to review opportunities to acquire OEM manufacturing operations and enter into business combinations and selectively pursue strategic transactions that we believe will further our business objectives. We are currently in preliminary discussions to acquire additional businesses and facilities. We cannot assure the terms of, or that we will complete, such acquisitions, and our ability to obtain the benefits of such combinations and transactions is subject to a number of risks and uncertainties, including our ability to successfully integrate the acquired operations and our ability to maintain and increase sales to customers of the acquired companies. See "Risk Factors -- We may encounter difficulties with acquisitions, which could harm our business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Acquisitions, Purchases of Facilities and Other Strategic Transactions." 11 12 EMPLOYEES As of March 31, 2000, we employed approximately 37,200 persons, which increased to approximately 49,000 persons following the completion of our acquisitions of DII and Palo Alto Products International. We have never experienced a work stoppage or strike and we believe that our employee relations are good. Our success depends to a large extent upon the continued services of key managerial and technical employees. The loss of such personnel could seriously harm our business, results of operations, prospects and debt service ability. To date, we have not experienced significant difficulties in attracting or retaining such personnel. Although we are not aware that any of our key personnel currently intend to terminate their employment, we cannot assure you of their future services. See "Risk Factors -- We depend on our key personnel." 12 13 RISK FACTORS IF WE DO NOT MANAGE EFFECTIVELY THE EXPANSION OF OUR OPERATIONS, OUR BUSINESS MAY BE HARMED. We have grown rapidly in recent periods. Our workforce has tripled in size over the last year as a result of internal growth and acquisitions. This growth is likely to considerably strain our management control system and resources, including decision support, accounting management, information systems and facilities. If we do not continue to improve our financial and management controls, reporting systems and procedures to manage our employees effectively and to expand our facilities, our business could be harmed. We plan to increase our manufacturing capacity by expanding our facilities and by adding new equipment. Such expansion involves significant risks, including, but not limited to the following: - we may not be able to attract and retain the management personnel and skilled employees necessary to support expanded operations; - we may not efficiently and effectively integrate new operations and information systems, expand our existing operations and manage geographically dispersed operations; - we may incur cost overruns; - we may encounter construction delays, equipment delays or shortages, labor shortages and disputes and production start-up problems that could harm our growth and our ability to meet customers' delivery schedules; and - 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 seriously harmed. Our expansion, both through internal growth and acquisitions, has contributed to our incurring significant accounting charges. For example, in connection with our acquisitions of DII and Palo Alto Products International, we expect to record a one-time charge of approximately $180.0 million and in connection with the issuance of an equity instrument to Motorola relating to our alliance with Motorola, we expect to record a one-time non-cash charge of approximately $290.0 million, both in the first fiscal quarter of fiscal 2001. WE MAY ENCOUNTER DIFFICULTIES WITH ACQUISITIONS, WHICH COULD HARM OUR BUSINESS. We have completed a number of acquisitions of businesses and facilities and expect to continue to acquire additional businesses and facilities in the future. We are currently in preliminary discussions to acquire additional businesses and facilities. Any future acquisitions may require additional debt or equity financing, which could increase our leverage or be dilutive to our existing shareholders. We cannot assure the terms of, or that we will complete, any acquisitions in the future. To integrate acquired businesses, 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. 13 14 In addition, acquisitions involve a number of other risks and challenges, including, but not limited to, - diversion of management's attention; - potential loss of key employees and customers of the acquired companies; - lack of experience operating in the geographic market of the acquired business; and - an increase in our expenses and working capital requirements. Any of these and other factors could harm our ability to achieve anticipated levels of profitability at acquired operations or realize other anticipated benefits of an acquisition. WE HAVE NEW CUSTOMER RELATIONSHIPS FROM WHICH WE ARE NOT YET RECEIVING SIGNIFICANT REVENUES, AND ORDERS FROM THESE CUSTOMERS MAY NOT REACH ANTICIPATED LEVELS. We have recently announced major new customer relationships, including our alliance with Motorola, from which we anticipate significant future sales. However, similar to our other customer relationships, there are no volume purchase commitments under these new programs, and the revenues we actually achieve may not meet our expectations. In anticipation of future activities under these programs, we are incurring substantial expenses as we add personnel and manufacturing capacity and procure materials. Our operating results will be seriously harmed if sales do not develop to the extent and within the time frame we anticipate. OUR CUSTOMERS MAY CANCEL THEIR ORDERS, CHANGE PRODUCTION QUANTITIES OR DELAY PRODUCTION. 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 we continue to experience 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 seriously harm our results of operations. In addition, we make significant decisions, including determining 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, we may not 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 harm our gross margins and operating income. OUR OPERATING RESULTS VARY SIGNIFICANTLY. We experience significant fluctuations in our results of operations. The factors which contribute to fluctuations include: - the timing of customer orders; - the volume of these orders relative to our capacity; - market acceptance of customers' new products; - changes in demand for customers' products and product obsolescence; - the timing of our expenditures in anticipation of future orders; - our effectiveness in managing manufacturing processes; 14 15 - changes in the cost and availability of labor and components; - changes in our product mix; - changes in economic conditions; - local factors and events that may affect our production volume, such as local holidays; and - seasonality in customers' product requirements. One of our significant end-markets is the consumer electronics market. This market exhibits particular strength towards the end of the year in connection with the holiday season. As a result, we have experienced relative strength in revenues in our third fiscal quarter. THE MAJORITY OF OUR SALES COMES FROM A SMALL NUMBER OF CUSTOMERS; IF WE LOSE ANY OF THESE CUSTOMERS, OUR SALES COULD DECLINE SIGNIFICANTLY. Sales to our five largest customers have represented a majority of our net sales in recent periods. Our five largest customers accounted for approximately 54% of consolidated net sales in fiscal 2000 (excluding the customers of DII and PAPI). Our largest customers during fiscal 2000 were Ericsson, Philips and Cisco accounting for approximately 15%, 13% and 12% of consolidated net sales, respectively. In fiscal 1999, our five largest customers accounted for 54% of net sales, with Philips, Ericsson and Cisco accounting for approximately 15%, 13% and 10%, respectively. The identity of our principal customers have 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 seriously harm our business. If we are not be able to timely replace expired, canceled or reduced contracts with new business, our revenues would be harmed. WE DEPEND ON THE ELECTRONICS INDUSTRY WHICH CONTINUALLY PRODUCES TECHNOLOGICALLY ADVANCED PRODUCTS WITH SHORT LIFE CYCLES; OUR INABILITY TO CONTINUALLY MANUFACTURE SUCH PRODUCTS ON A COST-EFFECTIVE BASIS WOULD HARM OUR BUSINESS. Factors affecting the electronics industry in general could seriously harm our customers and, as a result, us. These factors include: - the inability of our customers to adapt to rapidly changing technology and evolving industry standards, which results in short product life cycles; - the inability of our customers to develop and market their products, some of which are new and untested, the potential that our customers' products may become obsolete or the failure of our customers' products to gain widespread commercial acceptance; and - recessionary periods in our customers' markets. If any of these factors materialize, our business would suffer. THERE MAY BE SHORTAGES OF REQUIRED ELECTRONIC COMPONENTS. A substantial majority of our net sales are derived from turnkey manufacturing in which we are responsible for purchasing components used in manufacturing our customers products. We generally do not have long-term agreements with suppliers of components. This typically results in our bearing the risk of component price increases because we may be unable to procure the required materials at a price level necessary to generate anticipated margins from our agreements with our customers. Accordingly, component price changes could seriously harm our operating results. At various times, there have been shortages of some of the electronic components that we use, and suppliers of some components have lacked sufficient capacity to meet the demand for these components. In 15 16 recent months, component shortages have become more prevalent in our industry. In some cases, supply shortages and delays in deliveries of particular components have resulted in curtailed production, or delays in production, of assemblies using that component, which has contributed to an increase in our inventory levels. We expect that shortages and delays in deliveries of some components will continue. If we are unable to obtain sufficient components on a timely basis, we may experience manufacturing and shipping delays, which could harm our relationships with current or prospective customers and reduce our sales. OUR INDUSTRY IS EXTREMELY COMPETITIVE. 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. Some of our competitors, including Solectron, Celestica and SCI Systems, have substantially greater market share than us, and substantially greater manufacturing, financial, research and development and 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 seriously harm our operating results. WE ARE SUBJECT TO THE 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. We base our tax position upon the anticipated nature and conduct of our business and upon our understanding of the tax laws of the various countries in which we have assets or conduct activities. However, our tax position is subject to review and possible challenge by taxing authorities and to possible changes in law which may have retroactive effect. We cannot determine in advance the extent to which some jurisdictions may require us to pay tax or make payments in lieu of tax. Several countries in which we are located allow for tax holidays or provide other tax incentives to attract and retain business. We have obtained holidays or other incentives where available. Our taxes could increase if certain tax holidays or incentives are not renewed upon expiration, or tax rates applicable to us in such jurisdictions are otherwise increased. In addition, further acquisitions may cause our effective tax rate to increase. WE CONDUCT OPERATIONS IN A NUMBER OF COUNTRIES AND ARE SUBJECT TO 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, the Czech Republic, Finland, France, Germany, Hungary, Ireland, Italy, 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: - fluctuations in the value of currencies; - changes in labor conditions; - longer payment cycles; - greater difficulty in collecting accounts receivable; - burdens and costs of compliance with a variety of foreign laws; - political and economic instability; - increases in duties and taxation; 16 17 - imposition of restrictions on currency conversion or the transfer of funds; - limitations on imports or exports; - expropriation of private enterprises; and - 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 some Asian nations. 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 us. Finally, we could be seriously harmed by inadequate infrastructure, including lack of adequate power and water supplies, transportation, raw materials and parts in countries in which we operate. WE ARE SUBJECT TO RISKS OF CURRENCY FLUCTUATIONS AND HEDGING OPERATIONS. A significant portion of our business is conducted in the European euro, the Swedish krona and the Brazilian real. In addition, some of our costs, such as payroll and rent, are denominated in currencies such as the Austrian schilling, the British pound, the Chinese renminbi, the German deutsche mark, the Hong Kong dollar, the Hungarian forint, the Irish pound, the Malaysian ringgit, the Mexican peso and the Singapore dollar, as well as the krona, the euro and the real. In recent years, the Hungarian forint, Brazilian real and Mexican peso have experienced significant devaluations. Changes in exchange rates between these and other currencies and the U.S. dollar will affect our cost of sales, operating margins and revenues. We cannot predict the impact of future exchange rate fluctuations. We use financial instruments, primarily forward purchase contracts, to hedge Japanese yen, European euro, 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 will harm 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. As a result, we may experience significant unexpected expenses from fluctuations in exchange rates. WE DEPEND ON OUR KEY PERSONNEL. Our success depends to a larger extent upon the continued services of our key executives, managers and skilled personnel. Generally our employees are not bound by employment or non-competition agreements, and we cannot assure that we will retain our key officers and employees. We could be seriously harmed by the loss of key personnel. WE ARE SUBJECT TO ENVIRONMENTAL COMPLIANCE RISKS. We are subject to various federal, state, local and foreign environmental laws and regulations, including those governing the use, storage, discharge and disposal of hazardous substances in the ordinary course of our manufacturing process. In addition, we are responsible for cleanup of contamination at some of our current and former manufacturing facilities and at some third party sites. If more stringent compliance or cleanup standards under environmental laws or regulations are imposed, or the results of future testing and analyses at our current or former operating facilities indicate that we are responsible for the release of hazardous substances, we may be subject to additional remediation liability. Further, additional environmental matters may arise in the future at sites where no problem is currently known or at sites that we may acquire in the future. Currently unexpected costs that we may incur with respect to environmental matters may result in additional loss contingencies, the quantification of which cannot be determined at this time. 17 18 ITEM 2. FACILITIES Our facilities consist of a global network of industrial parks, manufacturing and technology centers, regional manufacturing facilities and product introduction centers, providing approximately 11.2 million square feet of capacity, which includes the capacity of DII and PAPI. We own facilities with approximately 2.7 million square feet of capacity in Asia, 2.3 million square feet in the Americas and 4.2 million square feet in Europe. We lease facilities with approximately 1.1 million square feet of capacity in Asia, 200,000 square feet in the Americas and 600,000 square feet in Europe. Our industrial parks, each incorporating from approximately 205,000 to 435,000 square feet of facilities, are designed for fully integrated, high volume manufacturing. These industrial parks offer manufacturing and distribution operations and suppliers that are located together at a single site in low cost areas close to major electronics markets. We believe that by offering all of those capabilities at a single site, we can reduce material and transportation costs, simplify logistics and communications and improve inventory management. This enables us to provide customers with a more complete, cost-effective manufacturing solution. Manufacturing and technology centers are facilities that have both medium and high volume manufacturing and product introduction centers and, as a result, are where we focus on launching customers' new products and transitioning them to volume production. Each center features advanced technological competency. Regional manufacturing facilities range from approximately 70,000 to 375,000 square feet and provide medium and high volume production in locations close to strategic markets. Product information centers provide a broad range of advanced engineering services and prototype and low volume production capabilities. All of our manufacturing facilities are registered to the quality requirements of the International Organization for Standardization (ISO 9002) or are in the process of final certification. The locations of our facilities are as follows:
AMERICAS ASIA EUROPE -------- ---- ------ INDUSTRIAL PARKS Guadalajara, Mexico Doumen, China Sarvar, Hungary Zalaegerzeg, Hungary MANUFACTURING San Jose, California Hong Kong, China Althofen, Austria AND TECHNOLOGY Fremont, California Tun Cheng, Taiwan Karlskrona, Sweden CENTERS New Braunfels, Texas Katrineholm, Sweden Binghamton, New York Stockholm, Sweden Puebla, Mexico Vasteras, Sweden Visby, Sweden REGIONAL Anaheim, California Doumen, China Boeblingen, Germany MANUFACTURING Austin, Texas Johore, Malaysia Brno, Czech Republic FACILITIES Greeley, Colorado Melaka, Malaysia Cork, Ireland Irvine, California Samuprakaru, Thailand Limerick, Ireland Longmont, Colorado Shenzhen, China Hamilton, Scotland Raleigh, North Carolina Kindberg, Austria Palm Harbor, Florida Kyroskoski, Finland Richardson, Texas Luneville, France Rochester, New Hampshire Paderborn, Germany Roseville, Minnesota Solothurn, Switzerland Sao Paulo, Brazil Tab, Hungary PRODUCT Dallas, Texas Doumen, China Althofen, Austria INTRODUCTION Boulder, Colorado Hamilton, Scotland CENTERS Raleigh, North Carolina Kyroskoski, Finland Richardson, Texas Karlskrona, Sweden San Jose, California Malmo, Sweden San Diego, California Stockholm, Sweden Sunnyvale, California Monza, Italy Westford, Massachusetts Paderborn, Germany
The facilities are generally well maintained and suitable for the operations conducted and, in substantially all cases where owned, free and clear of any encumbrances. The productive capacity of our plants is generally adequate for current needs. Over the past several years, we have actively increased our overall capacity through internal growth, acquisitions and purchases of manufacturing facilities. As a result, we have grown to approximately 11.2 million square feet of capacity on four continents. We plan to further expand these facilities, add new equipment and are currently developing new industrial parks in Brazil, Hungary and Poland. We cannot assure that we will not encounter unforeseen difficulties, costs or delays in expanding our facilities. See "Risk Factors -- If we do not manage effectively the expansion of our operations, our business may be harmed." 18 19 ITEM 3. LEGAL PROCEEDINGS Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At our Extraordinary General Meeting of Shareholders held on March 30, 2000, our shareholders approved the issuance of 1.61 Flextronics ordinary shares for each outstanding share of common stock of The DII Group, Inc. in connection with the merger of Flextronics with The DII Group pursuant to the Agreement and Plan of Merger dated as of November 22, 1999 among Flextronics, Slalom Acquisition Corp., a wholly-owned subsidiary of Flextronics, and The DII Group, Inc. Voting in favor of the merger were 89,559,418, opposed were 21,387, abstaining were 1,832,284, and broker non-votes amounted to 13,872,575. At that meeting, our shareholders also approved the proposal to amend our 1993 Share Option Plan to increase the number of ordinary shares authorized and reserved for issuance there under from 16,400,000 ordinary shares to 20,400,000 ordinary shares. Voting in favor of the amendment were 58,442,193, opposed were 46,804,911, and abstaining were 38,560. 19 20 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS PRICE RANGE OF ORDINARY SHARES Our ordinary shares are traded on the Nasdaq National Market under the symbol "FLEX". The following table sets forth the high and low per share sales prices for our ordinary shares since the beginning of our 1999 fiscal year.
HIGH LOW ------ ------ FISCAL 1999 First Quarter $13.13 $ 9.03 Second Quarter 11.88 5.50 Third Quarter 21.84 7.00 Fourth Quarter 26.09 16.38 FISCAL 2000 First Quarter $29.19 $18.69 Second Quarter 34.06 21.25 Third Quarter 49.38 28.56 Fourth Quarter 79.75 38.31
All Flextronics share prices have been adjusted to give effect to two-for-one stock splits by means of bonus issues, the Singapore equivalent of a stock dividend, paid on January 11, 1999 and December 22, 1999. On June 1, 2000, there were 2,094 holders of record of our ordinary shares and the closing sale price of the ordinary shares on the Nasdaq National Market was $62.875 per share. DIVIDENDS Since inception, we have not declared or paid any cash dividends on our ordinary shares, and our bank credit facility prohibits the payment of cash dividends without the lenders' prior consent. The terms of our outstanding senior subordinated notes also restrict our ability to pay cash dividends. See "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." We anticipate that all earnings in the foreseeable future will be retained to finance the continuing development of our business. TAXATION This summary of Singapore and U.S. tax considerations is based on current law and is provided for general information. The discussion does not purport to deal with all aspects of taxation that may be relevant to particular shareholders in light of their investment or tax circumstances, or to certain types of shareholders (including insurance companies, tax-exempt organizations, regulated investment companies, financial institutions or broker-dealers, and shareholders that are not U.S. shareholders subject to special treatment under the U.S. federal income tax laws. Such shareholders should consult their own tax advisors regarding the particular tax consequences to such shareholders of any investment in our ordinary shares. INCOME TAXATION UNDER SINGAPORE LAW Under current provisions of the Income Tax Act, Chapter 134 of Singapore, corporate profits are taxed at a rate equal to 25.5%. Under Singapore's taxation system, the tax paid by a company is deemed paid by its shareholders. Thus, the shareholders receive dividends net of the tax paid by Flextronics. Dividends received by either a resident or a nonresident of Singapore are not subject to withholding tax. Shareholders are taxed on the gross amount of dividends 20 21 (meaning the cash amount of the dividend plus the amount of corporate tax paid by Flextronics). The tax paid by Flextronics will be available to shareholders as a tax credit to offset the Singapore income tax liability on their overall income (including the gross amount of dividends). No tax treaty currently exists between the Republic of Singapore and the U.S. Under current Singapore tax law there is no tax on capital gains, and, thus, any profits from the disposal of shares are not taxable in Singapore unless the vendor is regarded as carrying on a trade in shares in Singapore (in which case, the disposal profits would be taxable as trade profits rather than capital gains). There is no stamp duty payable in respect of the holding and disposition of shares. No duty is payable on the acquisition of new shares. Where existing shares are acquired in Singapore, stamp duty is payable on the instrument of transfer of the shares at the rate of S$2 for every S$1,000 of the market value of the shares. The stamp duty is borne by the purchaser unless there is an agreement to the contrary. Where the instrument of transfer is executed outside of Singapore, stamp duty must be paid if the instrument of transfer is received in Singapore. Under Article 22 (iii) of our Articles of Association, our directors are authorized to refuse to register a transfer unless the instrument of transfer has been duly stamped. INCOME TAXATION UNDER UNITED STATES LAW Individual shareholders that are U.S. citizens or resident aliens (as defined in Section 7701(b) of the Internal Revenue Code of 1986), corporations or partnerships or other entities created or organized under the laws of the United States, or any political subdivision thereof, an estate the income of which is subject is subject to U.S. federal income taxation regardless of its source or a trust which is subject to the supervision of a court within the United States and the control of section 7701(b)(30) of the Internal Revenue Code will, upon the sale or exchange of a share, recognize gain or loss for U.S. income tax purposes in an amount equal to the difference between the amount realized and the U.S. shareholder's tax basis in such a share. If paid in currency other than U.S. dollars, certain currency translation rules will apply to determine the U.S. dollar amount realized. Such gain or loss will be capital gain or loss if the share was a capital asset in the hands of the U.S. shareholder and will be short-term capital gain or loss if the share has been held for not more than one year, mid-term capital gain or loss if the share has been held for more than one year but not more than eighteen months and, long-term capital gain or loss if the share has been held for more than eighteen months. If a U.S. shareholder receives any currency other than U.S. dollars on the sale of a share, such U.S. shareholder may recognize ordinary income or loss as a result of currency fluctuations between the date of such sale and the date such sale proceeds are converted into U.S. dollars. U.S. shareholders will be required to report as income for U.S. income tax purposes the amount of any dividend received from us to the extent paid out of our current or accumulated earnings and profits, as determined under current U.S. income tax principles. If over 50% of our stock (by vote or value) were owned by U.S. shareholders who individually held 10% or more of our voting stock, such U.S. shareholders potentially would be required to include in income a portion or all of their pro rata share of our and our non-U.S. subsidiaries' earnings and profits. Certain attribution rules apply in this regard. If 50% or more of our assets during a taxable year produced or were held for the production of passive income, as defined in section 1297(b) of the Code (e.g., certain forms of dividends, interest and royalties), or 75% or more of our gross income for a taxable year was passive income, adverse U.S. tax consequences could result to U.S. shareholders. As of March 31, 2000, we were not aware of any U.S. shareholder who individually held 10% or more of our voting stock. Shareholders that are not U.S. shareholders will not be required to report for U.S. federal income tax purposes the amount of any dividend received from us. Non-U.S. shareholders, upon the sale or exchange of a share, would not be required to recognize gain or loss for U.S. federal income tax purposes. ESTATE TAXATION In the case of an individual who is not domiciled in Singapore, a Singapore estate tax is imposed on the value of all movable and immovable properties situated in Singapore. Our shares are considered to be situated in Singapore. Thus, an individual shareholder who is not domiciled in Singapore at the time of his or her death will be subject to Singapore estate tax on the value of any such shares held by the individual upon the individual's death. Such a shareholder will be required to pay Singapore estate tax to the extent that the value of the shares (or in aggregate with 21 22 any other assets subject to Singapore estate tax) exceeds S$600,000. Any such excess will be taxed at a rate equal to 5% on the first S$12,000,000 of the individual's Singapore chargeable assets and thereafter at a rate equal to 10%. An individual shareholder who is a U.S. citizen or resident (for U.S. estate tax purposes) also will have the value of the shares included in the individual's gross estate for U.S. estate tax purposes. An individual shareholder generally will be entitled to a tax credit against the shareholder's U.S. estate tax to the extent the individual shareholder actually pays Singapore estate tax on the value of the shares; however, such tax credit is generally limited to the percentage of the U.S. estate tax attributable to the inclusion of the value of the shares included in the shareholder's gross estate for U.S. estate tax purposes, adjusted further by a pro rata apportionment of available exemptions. Individuals who are domiciled in Singapore should consult their own tax advisors regarding the Singapore estate tax consequences of their investment. ITEM 6. SELECTED FINANCIAL DATA 23 The following selected financial data includes for all periods presented the results of operations and balance sheet of PCB Assembly, Inc. and Kyrel EMS Oyj, which we acquired in March 2000 and July 1999, respectively, in transactions accounted for as a pooling-of-interests. These historical results are not necessarily indicative of the results to be expected in the future. The following table is qualified by reference to and should be read in conjunction with the consolidated financial statements, related notes thereto and other financial data included elsewhere herein.
FISCAL YEAR ENDED MARCH 31, --------------------------------------------------------------------------------------- 1996 1997 1998 1999 2000 ---------- ---------- ---------- ---------- ---------- (In thousands, except per share amounts) Net sales ........................ $ 840,450 $ 902,104 $1,335,762 $2,233,208 $4,307,193 Cost of sales .................... 758,438 820,497 1,216,588 2,053,471 4,004,626 Unusual charges .................. 1,254(1) 5,868(2) 8,869(3) 3,361(4) -- ---------- ---------- ---------- ---------- ---------- Gross profit ..................... 80,758 75,739 110,305 176,376 302,567 Selling, general and administrative ................. 37,255 41,785 62,260 81,597 135,540 Goodwill and intangible amortization ................... 1,296 2,651 3,663 3,664 6,782 Acquired in-process research and development .................... 29,000(1) -- -- 2,000(4) -- Merger-related expenses .......... -- -- 7,415(3) -- 3,523(5) Interest and other expense, net .. 4,956 7,749 12,213 20,600 20,300 ---------- ---------- ---------- ---------- ---------- Income before provision for income taxes .................... 8,251 23,554 24,754 68,515 136,422 Provision for income taxes ....... 8,693 3,175 2,318 7,632 15,507 ---------- ---------- ---------- ---------- ---------- Net income (loss) ................ $ (442) $ 20,379 $ 22,436 $ 60,883 $ 120,915 ========== ========== ========== ========== ========== Diluted net income (loss) per share(6) ................... $ (0.01) $ 0.28 $ 0.28 $ 0.63 $ 1.02 ========== ========== ========== ========== ========== Weighted average ordinary shares and equivalents outstanding - diluted(6) ....... 66,473 74,041 81,117 97,055 118,274
AS OF MARCH 31, --------------------------------------------------------------------------------------- 1996 1997 1998 1999 2000 ---------- ---------- ---------- ---------- ---------- (In thousands) CONSOLIDATED BALANCE SHEET DATA: Working Capital (deficit) ........ $ 39,354 $ (8,319) $ 140,751 $ 256,857 $1,043,091 Total assets ..................... 400,130 518,899 821,898 1,296,640 3,087,082 Long-term debt and capital leases, excluding current portion ........................ 38,407 32,623 192,418 219,995 214,727 Shareholders' equity ............. 112,843 133,912 246,217 500,046 1,593,242
(1) In fiscal 1996, we wrote off $29.0 million of in-process research and development associated with the acquisition of Astron and also recorded charges totaling $1.3 million for costs associated with the closing of one of our Malaysian plants and our Shekou, China operations. (2) In fiscal 1997, we incurred plant closing expenses aggregating $5.9 million in connection with closing our manufacturing facility in Texas, downsizing manufacturing operations in Singapore, the write-off of excess equipment and severance obligations at our semiconductor fabrication operations. (3) In fiscal 1998, we incurred plant closing expenses aggregating $8.9 million in connection with closing our manufacturing facility in Wales, UK. The Company also incurred $7.4 million of merger-related costs as a result of the acquisitions of Neutronics, DTM, Energipilot, Altatron and Conexao in fiscal 1998. (4) In fiscal 1999, we incurred plant closing expenses aggregating $3.4 million in connection with consolidating our manufacturing facilities in Hong Kong after the acquisition of ACL 24 and restructuring some of our U.S. manufacturing facilities. The Company also wrote off $2.0 million of in-process research and development associated with the acquisition of ACL. (5) In fiscal 2000, we incurred $3.5 million merger-related costs as a result of the acquisitions of Kyrel and PCB. (6) We set a record date of December 8, 1999 for a two-for-one stock split to be effected as a bonus issue (the Singapore equivalent of a stock dividend). The distribution of ordinary shares occurred on December 22, 1999. This stock dividend has been reflected in our financial statements for all periods presented unless otherwise noted. All share and per share amounts have been retroactively restated to reflect the stock split. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with the supplemental consolidated financial statements and the related notes included elsewhere in this filing. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements. BUSINESS ACQUISITIONS AND PURCHASE OF ASSETS We have actively pursued acquisitions to expand our geographic presence, enhance our product and service offerings and diversify our customer base. An increasing number of original equipment manufacturers (OEMs) are outsourcing and divesting their manufacturing operations as an integral part of their manufacturing strategy. We intend to selectively pursue OEM divestitures and other strategic acquisition opportunities, which we believe could favorably impact our profitability. See "Item 1 - Business - Risk Factors - We may encounter difficulties with acquisitions, which could harm our business". We have completed a number of business combinations. The accompanying consolidated financial statements have been restated for all periods presented to reflect the pooling-of-interests mergers with Kyrel EMS Oyj and PCB Assembly, Inc. Additionally, we have completed a number of other immaterial pooling-of-interests transactions. Prior period statements have not been restated for these immaterial pooling-of-interests transactions. We have also made a number of purchase acquisitions. The consolidated financial statements include the operating results of each business from the date of acquisition. Pro forma results of operations have not been presented because the effects of these acquisitions were not material on either an individual or an aggregate basis. These business combinations are summarized as follows:
APPROXIMATE DATE ACQUIRED COMPANY ACCOUNTING METHOD CONSIDERATION LOCATION(s) ---- ---------------- ----------------- ------------- ----------- Mar-00 PCB Assembly, Inc.(1) Pooling-of-interests 1,084,566 ordinary Sunnyvale, California shares Mar-00 Purchased remaining 10% Purchase $3.0 million cash Shenzhen, China interest in FICO Investment Holdings Ltd(3) Feb-00 Vastbright PCB Co. Ltd. Purchase $18.0 million cash Zhuhai, China ("Vastbright") (2) Nov-99 Circuit Board Assemblers, Pooling-of-interests 559,098 ordinary shares Research Triangle Inc. ("CBA") (1) EMC Park, North Carolina International, Inc. ("EMC)(1), Newport Technology(1), and Summit Manufacturing (1) Jul-99 Kyrel EMS Oyj(1) Pooling-of-interests 3,643,610 ordinary Two facilities in shares Finland and one in Lunerville, France Mar-99 Advanced Component Labs HK Purchase $15.0 million cash Zhuhai, China Ltd. ("ACL") (2) Mar-99 Increased ownership of FICO Purchase $7.2 million cash,$3.0 Shenzhen, China Investment Holdings Ltd to million in 2% 90%(3) promissory notes, and 255,700 ordinary shares Mar-98 Conexao Informatica Ltda. Pooling-of-interests 1,686,372 ordinary Sao Paulo, Brazil (1) shares Mar-98 Altatron, Inc. (1) Pooling-of-interests 3,154,600 ordinary Freemont, California shares Dec-97 DTM Products, Inc. (3) Pooling-of-interests 1,009,876 ordinary Boulder, Colorado shares Dec-97 Energipilot AB(4) Pooling-of-interests 919,960 ordinary shares Stockholm, Sweden Oct-97 Neutronics(1) Pooling-of-interests 11,224,000 ordinary Althofen, Austria; shares Tab, Sarvar and Zalaegerszeg, Hungary
- --------------- (1) Provides electronics design, assembly and test services. (2) Manufactures advanced technology printed circuit boards. (3) Manufactures injection molded plastics. 22 25 (4) Provides cable assembly and engineering services. Additionally, we have purchased manufacturing facilities and related assets from customers and simultaneously entered into manufacturing agreements to provide electronics design, assembly and test services to these customers. The transactions were accounted for as a purchase of assets and the purchase price has been allocated to the assets acquired based on the relative fair values of the assets at the date of acquisition.
APPROXIMATE DATE CUSTOMER CONSIDERATION FACILITY LOCATION(s) ---- -------- ------------- -------------------- Mar-00 Cabletron Systems Inc. $89.4 million Rochester, New Hampshire and Limerick, Ireland Jan-00 Fujitsu Siemens $69.7 million Paderborn, Germany Jun-99 Ericsson $39.4 million Visby, Sweden May-99 ABB Automation Products $24.5 million Vasteras, Sweden
Subsequent to March 31, 2000, we completed two pooling-of-interests mergers. On April 3, 2000, we merged with The DII Group, Inc. through a tax-free, stock-for-stock exchange. The DII Group is a leading provider of electronics manufacturing and design services, operating through a global operations network in the Americas, Asia/Pacific and Europe. As a result of the merger, we issued 62,768,139 ordinary shares for all of the outstanding shares of common stock of the DII Group, based upon the exchange ratio of 1.61 Flextronics ordinary shares for each share of DII common stock, resulting in current DII shareholders owning approximately 33% of the combined company. On April 7, 2000, we merged with Palo Alto Products International Pte. Ltd., an enclosure design and plastic molding company with operations in Taiwan, Thailand and the United States, by exchanging 3,618,374 ordinary shares of Flextronics for the outstanding shares of Palo Alto Products International Pte. Ltd. 23 26 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, certain statements of operations data expressed as a percentage of net sales.
FISCAL YEAR ENDED MARCH 31 -------------------------- 1998 1999 2000 ------ ------ ------ Net sales ................................... 100.0 100.0 100.0 Cost of sales ............................... 91.1 92.0 93.0 Unusual charges ............................. 0.6 0.1 -- ------ ------ ------ Gross margin ............................. 8.3 7.9 7.0 Selling, general and administrative ......... 4.7 3.7 3.1 Goodwill and intangible amortization ........ 0.3 0.2 0.2 Acquired in-process research and development ................................. -- 0.1 -- Merger-related expenses ..................... 0.5 -- 0.1 Interest and other expense, net ............. 0.9 0.9 0.4 ------ ------ ------ Income before income taxes ............... 1.9 3.0 3.2 Provision for income taxes .................. 0.2 0.3 0.4 ------ ------ ------ Net income .................................. 1.7 2.7 2.8 ====== ====== ======
NET SALES We derive our net sales from our wide range of service offerings including product design, printed circuit board assembly and fabrication, material procurement, inventory management, plastic injection molding, final system assembly and test, packaging and distribution. Net sales for fiscal 2000 increased 92.9% to $4.3 billion from $2.2 billion in fiscal 1999. The increase in sales for fiscal 2000 was primarily the result of our ability to continue to expand sales to new customers worldwide as well as expanding sales to our existing customer base and, to a lesser extent, the incremental revenue associated with the purchases of several manufacturing facilities and related assets during fiscal 2000. During fiscal 2000, our five largest customers accounted for approximately 54% of net sales, with Ericsson, Philips and Cisco accounting for approximately 15%, 13% and 12%, respectively. Net sales for fiscal 1999 increased 67.2% to $2.2 billion from $1.3 billion in fiscal 1998. The increase in sales for fiscal 1999 was primarily due to expanding sales to existing customers and, to a lesser extent, sales to new customers. In fiscal 1999, our five largest customers accounted for approximately 54% of net sales, with Philips, Ericsson and Cisco accounting for approximately 15%, 13% and 10%, respectively. GROSS PROFIT Gross profit varies from period to period and is affected by a number of factors, including product mix, component costs, product life cycles, unit volumes, startup, expansion and consolidation of manufacturing facilities, pricing, competition and new product introductions. See "Item 1-Business - Risk Factors". Gross margin decreased to 7.0% for fiscal 2000 from 7.9% in fiscal 1999. Excluding unusual pre-tax charges of $3.4 million in fiscal 1999, gross margin decreased from 8.0% in fiscal 1999 to 7.0% in fiscal 2000. Gross margin decreased to 7.9% for fiscal 1999 from 8.3% in fiscal 1998. Excluding unusual pretax charges of $3.4 million and $8.9 million in fiscal 1999 and 1998, respectively, gross margin decreased from 8.9% in fiscal 1998 to 8% in fiscal 1999. Gross profit in each fiscal year was adversely 24 27 affected by several factors, including costs associated with expanding are facilities, costs associated with the startup of new customers and projects which typically carry higher levels of under absorbed manufacturing overhead costs until the projects reach higher volume production, and changes in product mix to higher volume projects, which typically have a lower gross margin. Increased mix of products that have relatively high material costs as a percentage of total unit costs can adversely affect our gross margins. We believe that this and other factors may adversely affect our gross margins, but we do not expect that this will have a material effect on our income from operations. UNUSUAL CHARGES We recognized unusual pre-tax charges of $3.4 million in fiscal 1999, comprised of $2.2 million relating to the costs of consolidating our four manufacturing and administrative facilities in Hong Kong and $1.2 million relating to the consolidation of certain U.S. facilities. This charge was comprised of $1.5 million for the reduction of certain personnel due to consolidation of certain operations, $1.5 million for the write-off of equipment and assets related to the operations we have exited, and $0.4 million related to the consolidation of facilities. In connection with the provision for excess facilities, we have terminated approximately 250 employees. The consolidation of facilities was substantially completed in November 1999. We recognized unusual pre-tax charges of $8.9 million in fiscal 1998 relating to the costs incurred in closing the Wales, United Kingdom facility. This charge consists primarily of the write-off of goodwill and intangible assets of $3.8 million, $2.4 million of severance payments, $1.6 million for reimbursement of government grants, and $1.1 million for costs associated with the disposal of the factory. This closure is a result of our acquisition of Altatron, which resulted in duplicative facilities in the United Kingdom. See Note 9 of Notes to Consolidated Financial Statements. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses, or SG&A, for fiscal 2000 increased to $135.5 million from $81.6 million in fiscal 1999 but decreased as a percentage of net sales to 3.1% in fiscal 2000 from 3.7% in fiscal 1999. SG&A expenses for fiscal 1999 increased to $81.6 million from $62.3 million in fiscal 1998 but decreased as a percentage of net sales to 3.7% in fiscal 1999 from 4.7% in fiscal 1998. The dollar increase in SG&A expenses for each fiscal year was primarily due to continued investment in infrastructure such as sales, marketing, supply-chain management and other related corporate and administrative expenses as well as information systems necessary to support the expansion of our business. The decline in SG&A expenses as a percentage of each fiscal year's net sales reflects our continued focus on controlling operating expenses relative to sales growth and gross margin levels. GOODWILL AND INTANGIBLE ASSETS 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 assets amortization in fiscal 2000 increased to $6.8 million from $3.7 million in fiscal 1999. This increase is primarily the result of the Vastbright and Fujitsu Siemens acquisitions in fiscal 2000 and acquisitions of ACL and an additional 50% equity interest in FICO in March 1999. Goodwill and intangible assets amortization in fiscal 1999 was unchanged at $3.7 million from fiscal 1998 as there were no increases to goodwill or intangible assets during fiscal 1999, except for the FICO and ACL acquisitions which were completed in late March 1999. 25 28 ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT Based on an independent valuation of certain of the assets of ACL and other factors, we determined that the purchase price of ACL included in-process research and development costs totaling $2.0 million which had not reached technological feasibility and had no probable alternative future use. Accordingly, we wrote-off $2.0 million of in-process research and development in fiscal 1999. MERGER EXPENSES In fiscal 2000, we incurred merger-related expenses of $3.5 million associated with the pooling-of-interests acquisitions of Kyrel and PCB. The merger expenses consisted of a transfer tax of $1.7 million, approximately $0.4 million of investment banking fees and approximately $1.4 million of legal and accounting fees. In fiscal 1998, we incurred $7.4 million of merger expenses associated with the acquisitions of Neutronics, EnergiPilot, DTM, Altatron and Conexao. The Neutronics merger expenses included $2.2 million in cost associated with the cancellation of Neutronics's public offering and $0.9 million in other legal and accounting fees. The remaining $4.3 million consists of a $3.1 million brokerage and finder's fees incurred in the Altatron acquisition and $1.2 million in legal and accounting fees for all of the fiscal 1998 acquisitions. INTEREST AND OTHER EXPENSE, NET Interest and other expense, net decreased to $20.3 million in fiscal 2000 from $20.6 million in fiscal 1999. The following table sets forth information concerning the components of interest and other expense.
FISCAL YEAR ENDED MARCH 31 ---------------------------------------------- 1998 1999 2000 --------- ------------ --------- (IN THOUSANDS) Interest expense ............................... $ (17,964) $ (22,891) $ (33,351) Interest income ................................ 2,919 5,494 16,770 Foreign exchange gain (loss) ................... 1,221 (5,068) (1,056) Equity in earnings of associated companies .................................... 1,194 1,036 -- Minority interest .............................. (356) (1,319) (2,154) Other income (expense) net ..................... 773 2,148 (509) --------- --------- --------- Total interest and other expense, net .......... $ (12,213) $ (20,600) $ (20,300) ========= ========= =========
Net interest expense decreased to $16.6 million in fiscal 2000 from $17.4 million in fiscal 1999. The decrease was attributable to the increase in interest income from our equity offering proceeds invested in money market funds and corporate debt securities offset by increased bank borrowings to finance our capital expenditures, expansion of various facilities and purchases of manufacturing assets. Fiscal 2000 net interest expense includes accelerated amortization of approximately $1.0 million in bank arrangement fees associated with termination of a credit facility. Net interest expense increased to $17.4 million in fiscal 1999 from $15.0 million in fiscal 1998. The increase was primarily due to increased bank borrowings to finance capital expenditures and expansion of our facilities in Sweden, Hungary, Mexico and China. In fiscal 2000, there was $1.1 million of foreign exchange loss compared to $5.1 million foreign exchange loss in fiscal 1999. The foreign exchange loss in fiscal 2000 mainly relates to net non-functional currency monetary liabilities in Austria, Finland and Hungary. Foreign exchange loss increased to $5.1 26 29 million from a foreign exchange gain of $1.2 million in fiscal 1998. The foreign exchange loss in fiscal 1999 mainly relates to net non-functional currency monetary liabilities in Austria, Finland, Brazil and Hungary. The foreign exchange gain in fiscal 1998 was mainly due to the strengthening of the U.S. dollar against Asian currencies. See Note 2 of Notes to Consolidated Financial Statements. Equity in earnings of associated companies for fiscal 2000 was nil as compared to $1.0 million in fiscal 1999. This decrease is the result of our having increased our ownership of FICO to 100% by acquiring an additional 50% of its equity interests in March 1999 and the remaining 10% in March 2000. Prior to the increased ownership, we accounted for this investment according to the equity method of accounting, and as a result did not recognize revenue from sales by FICO but, based on our ownership interest, recognized 40% of the net income or loss of the associated company. Equity in earnings of associated companies for fiscal 1999 remained relatively unchanged at $1.0 million versus $1.2 million in fiscal 1998. The equity in earnings of associated companies resulted primarily from our previous 40% investment in FICO and, to a lesser extent, certain minority investments of Neutronics. Minority interest expense for fiscal 2000 and fiscal 1999 was comprised primarily of the 8% minority interest in Neutronics and 10% minority interest in FICO not acquired by us in March 1999. Minority interest expense for fiscal 1998 was comprised primarily of the 8% minority interest in Neutronics not acquired by us in October 1997 and the 4.1% minority interest in Ecoplast, a subsidiary of Neutronics held by a third party. Other income (expense), net decreased from $2.1 million of net other income in fiscal 1999 to $0.5 million of net other expense in fiscal 2000. The other expense in fiscal 2000 was comprised mainly of a loss on disposal of fixed assets in Hungary offset by compensation received in a settlement of a claim. The other income in fiscal 1999 comprised mainly of gain from disposal of land in Mexico. PROVISION FOR INCOME TAXES Certain of our subsidiaries have, at various times, been granted tax relief in their respective countries, resulting in lower income taxes than would otherwise be the case under ordinary tax rates. See Note 7 of Notes to Consolidated Financial Statements. The consolidated effective tax rate for a particular year will vary depending on the mix of earnings, operating loss carryforwards, income tax credits, and changes in previously established valuation allowances for deferred tax assets based upon management's current analysis of the realizability of these deferred tax assets. The Company's consolidated effective tax rate was 11.4% for fiscal year 2000 compared to 11.1% for fiscal year 1999. The slight increase in the effective tax rate was due primarily to the expansion of operations and increase in profitability in countries with higher tax rates. BACKLOG Although we obtain firm purchase orders from our customers, OEM customers typically do not make firm orders for delivery of products more than 30 to 90 days in advance. We do not believe that the backlog of expected product sales covered by firm purchase orders is a meaningful measure of future sales since orders may be rescheduled or canceled. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2000 we had cash and cash equivalents balances totaling $618.6 million, total bank and other debts amounting to $485.6 million and $63.0 million available for borrowing under our credit facilities subject to compliance with certain financial ratios. Cash used by operating activities was $67.4 million in fiscal 2000 compared to cash provided by operating activities of $58.1 million and $55.7 million in fiscal 1999 and 1998, respectively. Cash provided by operating activities decreased in fiscal 2000 from fiscal 1999 because of increases in accounts receivable, inventories and other current assets, offset by increases in net income, depreciation and amortization and accounts payable. Cash provided by operating activities increased in fiscal 1999 from fiscal 1998 due to an increase in net income, depreciation and amortization and accounts payable, partially offset by increases in accounts receivables and inventories. 27 30 Accounts receivable, net of allowance for doubtful accounts, increased to $635.0 million at March 31, 2000 from $302.4 million at March 31, 1999. The increase in accounts receivable was primarily due to an increase of 92.9% in sales in fiscal 2000. Inventories increased to $840.6 million at March 31, 2000 from $250.4 million at March 31, 1999. The increase in inventories was primarily the result of increased purchases of materials to support the growing sales, combined with the inventory acquired in connection with the manufacturing facility purchases in the fourth quarter of fiscal 2000. Cash used in investing activities was $572.2 million, $222.4 million and $110.1 million in fiscal 2000, 1999 and 1998, respectively. Cash used in investing activities in fiscal 2000 were primarily related to: - $250.4 million of capital expenditures to purchase equipment and continued expansion of our manufacturing facilities in Brazil, China, Hungary, Mexico, United States and Sweden; - $230.0 million for purchases of manufacturing facilities and related asset purchases during fiscal 2000; - $26.8 million for the acquisition of Vastbright, FICO and other immaterial acquisitions; - $20.2 million for minority investment in the stocks of various technology companies in software and related industries, and; - $75.0 million of funding for a loan to another company. Cash used in investing activities in fiscal 1999 were primarily related to: - $165.9 million of capital expenditures to purchase equipment and continued expansion of our manufacturing facilities in Brazil, China, Hungary, Mexico, United States and Sweden; - $22.2 million for acquisition of ACL and FICO - $24.0 million of contingent purchase price adjustments (earn-out payments) relating to the acquisition of Astron, which occurred in fiscal 1996; and - $17.8 million for minority investment in the stocks of various technology companies in software and related industries. Cash provided by financing activities was $1,070.4 million, $259.0 million and $130.0 million in fiscal 2000, 1999, and 1998, respectively. Cash provided by financing activities in fiscal 2000 were primarily related to the completion of our two public stock offerings. In February 2000, we sold a total of 8.6 million ordinary shares at a price of $59.00 per share resulting in net proceeds to us of approximately $494.1 million. In October 1999, we sold a total of 13.8 million ordinary shares at a price of $33.84 per share resulting in net proceeds to us of approximately $448.9 million. Additionally, cash provided by financing activities in fiscal 2000 resulted from - $131.1 million of net proceeds from bank borrowings, capital leases, and long-term debts; - $19.8 million in proceeds from stock issued under our stock plans; offset by - $23.5 million of dividends paid to former PCB shareholders. Cash provided by financing activities in fiscal 1999 resulted primarily from our equity offering of 10.8 million ordinary shares in December 1998 with net proceeds of $194.0 million. Additionally, cash provided by financing activities in fiscal 1999 resulted from: - $58.8 million of net proceeds from bank borrowings, capital leases and long-term debts; - $12.6 million in proceeds from stock issued under our stock plans; offset by - $6.4 million of dividends paid to former PCB shareholders. 28 31 In October 1999, we entered into a credit facility with a syndicate of banks, providing for revolving credit borrowings by us and a number of our subsidiaries of up to $200.0 million. As of March 31, 2000, there were $137.0 million in borrowings outstanding under this facility and the weighted-average interest rate for these borrowings was 6.87%. We were in compliance with all loan covenants at March 31, 2000. On April 3, 2000, we replaced our $200.0 million credit facility and a DII credit facility of $210.0 million (other than purchase money debt and capitalized leases) with a $500.0 million credit facility with a syndicate of domestic and foreign banks. This new credit facility consists of two separate credit agreements, one providing for up to $150.0 million principal amount of revolving credit loans to ourselves and designated subsidiaries and one providing for up to $350.0 million principal amount of revolving credit loans to our United States subsidiary. Both agreements are split equally between a 364-day facility and a three-year facility. At the maturity of the 364-day facility, outstanding borrowings under that facility may be converted into one-year term loans. Borrowings under the credit facility bear interest, at our option, at either the agent's base rate or the LIBOR Rate (as defined in the credit facility) plus a margin for LIBOR loans ranging between 0.625% and 1.75%, based on our ratio of debt to EBITDA (earnings before interest, taxes, depreciation, and amortization). The credit facility is secured by a pledge of stock of certain of our subsidiaries. The credit facility contains covenants that restrict our ability to (1) incur secured debt (other than purchase money debt and capitalized leases), (2) incur liens on our property, (3) make dispositions of assets, and (4) make investments in companies that are not our subsidiaries. The credit facility also prohibits us from paying dividends. The credit facility also requires that we maintain a maximum ratio of total indebtedness in EBITDA, and maintain a minimum ratio of EBITDA to the sum of our net interest expense plus the current portion of our long-term debt and a specified portion of certain other debt. We plan to increase the size of our credit facility, or enter into additional credit facilities, to fund anticipated growth in our operations. We cannot provide any assurances that we will be able to complete any such transaction, or as to its potential terms. In addition, we maintain smaller credit facilities for a number of our non-U.S. subsidiaries, typically on an uncommitted basis. We have also entered into relationships with financial institutions for the sale of accounts receivable, and for leasing transactions. On June 6, 2000, we entered into a $50.0 million senior note agreement with Bank of America, N.A., as lender. We plan to replace the senior note agreement with a new senior note agreement to increase availability to up to $200.0 million. We intend to use borrowings under these agreements for general corporate purposes. We cannot provide any assurances that we will be able to complete this transaction, or as to its potential terms. In the first fiscal quarter of 2001, we announced our intentions to purchase the manufacturing facilities and related assets from Ascom Business Systems AG located in Solothurn, Switzerland and Bosch Telecom GmbH in Pandrup, Denmark, as well as acquire Uniskor, Ltd., located in Israel. The expected aggregate cost for the purchases of the manufacturing and business combinations are expected to aggregate to $178.0 million. We anticipate that our working capital requirements and capital expenditures will continue to increase in order to support the anticipated continued growth in our operations. In addition to our anticipated manufacturing facility purchases, we anticipate incurring significant capital expenditures and operating lease commitments in order to support our anticipated expansions of our industrial parks in China, Hungary, Mexico, Brazil, and Poland. We intend to continue our acquisition strategy and it is possible that future acquisitions may be significant. Future liquidity needs will also depend on fluctuations in levels of inventory, the timing of expenditures by us on new equipment, the extent to which we utilize operating leases for the new facilities and equipment, levels of our shipments and changes in volumes of customer orders. 29 32 Historically, we have funded our operations from the proceeds of public offerings of equity securities and debt offerings, cash and cash equivalents generated from operations, bank debt, sales of accounts receivable and lease financings of capital equipment. We recently announced plans to effect an underwritten public offering of 5,500,000 ordinary shares. We are also planning a private offering of senior subordinated notes to qualified institutional buyers for an aggregate principal amount of approximately $450 million, a portion of which is expected to be denominated in Euros. We cannot assure you that such offerings will be successful or that such offerings will be completed on terms favorable to us. We believe that our existing cash balances, together with anticipated cash flows from operations, borrowings available under our credit facility and our net proceeds from our planned public equity offering and private offering of senior subordinated notes will be sufficient to fund our operations for at least the next twelve months. We anticipate that we will continue to enter into debt and equity financings, sales of accounts receivable and lease transactions to fund our acquisitions and anticipated growth. Such financings and other transactions may not be available on terms acceptable to us or at all. 30 33 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK INTEREST RATE RISK A portion of our exposure to market risk for changes in interest rates relates to our investment portfolio. We do not use derivative financial instruments in our investment portfolio. We invest in high-credit quality issuers and, by policy, limit the amount of credit exposure to any one issuer. As stated in our policy, we protect our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in safe and high-credit quality securities and by constantly positioning its portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer, guarantor or depository. The portfolio includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity. Maturities of short-term investments are timed, whenever possible, to correspond with debt payments and capital investments. As of March 31, 2000, the outstanding amount in the investment portfolio was $398.7 million, with an average maturity of 34 days and an average return of 5.84%. We also have exposure to interest rate risk with certain variable rate lines of credit. These credit lines are located throughout the world and are based on a spread over that country's inter-bank offering rate. We primarily enter into debt obligations to support general corporate purposes including capital expenditures, acquisitions and working capital needs. As of March 31, 2000, the outstanding short-term debt, including capitalized leases was $270.9 million. The following table presents principal cash flows and related interest rates by fiscal year of maturity for debt obligations. The variable interest rate for future years assumes the same rate as March 31, 2000.
EXPECTED FISCAL YEAR OF MATURITY --------------------------------------------------------------------------- DEBT 2001 2002 2003 2004 2005 THEREAFTER TOTAL - ---- -------- ------- ------- ------- ------- ---------- ------- (DOLLARS IN THOUSANDS) Sr. Subordinated Notes -- -- -- -- -- 150,000 150,000 Average Interest Rate 8.75% 8.75% 8.75% 8.75% 8.75% 8.75% 8.75% Fixed Rate 27,292 17,160 12,554 7,018 1,112 6,657 71,793 Average Interest Rate 7.5% 8.4% 7.5% 7.8% 8.6% 9.0% 7.9% Variable Rate 243,559 4,409 4,037 9,688 720 1,372 263,785 Average Interest Rate 5.7% 3.5% 3.9% 5.7% 2.9% 6.6% 5.6%
FOREIGN CURRENCY EXCHANGE RISK We transact business in various foreign countries. We manage our foreign currency exposure by borrowing in various foreign currencies and by entering into foreign exchange forward contracts only with respect to transaction exposure. Our policy is to maintain a fully hedged position for all certain, known transactions exposures. These exposures are primarily, but not limited to, vendor payments and inter-company balances in currencies other than the functional unit of the operating entity. We will first evaluate and, to the extent possible, use non-financial techniques, such as currency of invoice, leading and lagging payments, receivable management or local borrowing to reduce transaction exposure before taking steps to minimize remaining exposure with financial instruments. As of March 31, 2000, the total cumulative outstanding amounts of our forward contracts in French Franc, German Deutsche Mark, Japanese Yen, Swedish Kronor and United States Dollar was approximately $43.5 million. YEAR 2000 COMPLIANCE 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. We developed a comprehensive Year 2000 project plan to address the issues associated with programming code in existing computer systems as the year 2000 approached. While we have not experience material Year 2000 problems to date, some computer programs may be unable to function and we may experience errors or interruptions due to the Year 2000 problem. Such an uncorrected condition could significantly interfere with the conduct of our business, could result in disruption of our operations, and could subject us to potentially significant legal liabilities. the issues associated with programming code in existing computer systems as the year 2000 approached. While we have not experience material Year 2000 problems to date, some computer programs may be unable to function and we may experience errors or interruptions due to the Year 2000 problem. Such an uncorrected condition could significantly interfere with the conduct of our business, could result in disruption of our operations, and could subject us to potentially significant legal liabilities. 31 34 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Flextronics International Ltd: We have audited the accompanying consolidated balance sheets of Flextronics International Ltd. and subsidiaries (a Singapore company) as of March 31, 1999 and 2000 and the related consolidated statements of operations, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended March 31, 2000. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Flextronics International Ltd. and subsidiaries as of March 31, 1999 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2000 in conformity with accounting principles generally accepted in the United States. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed under Item 14(a) 2 is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP San Jose, California April 18, 2000 32 35 FLEXTRONICS INTERNATIONAL LTD. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
MARCH 31 ------------------------------- 1999 2000 ----------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents .................................................... $ 194,509 $ 618,581 Accounts receivable, less allowances for doubtful accounts of $8,010 and $13,663 as of March 31, 1999 and 2000, respectively ..................................................... 302,364 634,997 Inventories .................................................................. 250,443 840,590 Other current assets ......................................................... 66,793 204,527 ----------- ----------- Total current assets ................................................. 814,109 2,298,695 ----------- ----------- Property and equipment, net .................................................... 407,353 599,338 Goodwill and other intangibles, net ............................................ 38,839 70,714 Other assets ................................................................... 36,339 118,335 ----------- ----------- Total assets ......................................................... $ 1,296,640 $ 3,087,082 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Bank borrowings and current portion of long-term debt ........................ $ 83,976 $ 254,798 Capital lease obligations .................................................... 11,475 16,053 Accounts payable ............................................................. 349,530 812,194 Accrued liabilities .......................................................... 106,295 168,662 Deferred revenue ............................................................. 5,976 3,897 ----------- ----------- Total current liabilities ............................................ 557,252 1,255,604 ----------- ----------- Long-term debt, net of current portion ......................................... 188,808 179,297 Capital lease obligations, net of current portion .............................. 31,187 35,430 Deferred income taxes .......................................................... 4,457 4,780 Other long-term liabilities .................................................... 10,868 15,275 Minority interest .............................................................. 4,022 3,454 ----------- ----------- Total long-term liabilities .......................................... 239,342 238,236 ----------- ----------- Commitments (Note 6) SHAREHOLDERS' EQUITY: Ordinary Shares, S$.01 par value; Authorized -- 250,000,000 shares; issued and outstanding - 100,197,275 and 125,697,596 as of March 31, 1999 and 2000, respectively ........................................... 626 773 Additional paid-in capital ................................................... 425,424 1,391,432 Retained earnings ............................................................ 97,843 192,264 Accumulated other comprehensive income (loss) ................................ (23,847) 8,773 ----------- ----------- Total shareholders' equity ........................................... 500,046 1,593,242 ----------- ----------- Total liabilities and shareholders' equity ........................... $ 1,296,640 $ 3,087,082 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 33 36 FLEXTRONICS INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED MARCH 31, ------------------------------------------ 1998 1999 2000 ---------- ---------- ---------- Net Sales ...................................... $1,335,762 $2,233,208 $4,307,193 Cost of Sales .................................. 1,216,588 2,053,471 4,004,626 Unusual charges ................................ 8,869 3,361 -- ---------- ---------- ---------- Gross profit ......................... 110,305 176,376 302,567 Selling, general and administrative ............ 62,260 81,597 135,540 Goodwill and intangibles amortization .......... 3,663 3,664 6,782 Acquired in-process research and development ... -- 2,000 -- Other expense: Merger-related expenses ..................... 7,415 -- 3,523 Interest and other expense, net ............. 12,213 20,600 20,300 ---------- ---------- ---------- Income before income taxes ............ 24,754 68,515 136,422 Provision for Income Taxes ..................... 2,318 7,632 15,507 ---------- ---------- ---------- Net income ............................ $ 22,436 $ 60,883 $ 120,915 ========== ========== ========== Earnings Per Share: Basic ..................................... $ 0.29 $ 0.66 $ 1.11 ========== ========== ========== Diluted ................................... $ 0.28 $ 0.63 $ 1.02 ========== ========== ========== Shares used for earnings per share: Basic ..................................... 77,781 91,867 108,827 ========== ========== ========== Diluted ................................... 81,117 97,055 118,274 ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 34 37 FLEXTRONICS INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (IN THOUSANDS)
YEARS ENDED MARCH 31, ----------------------------------------- 1998 1999 2000 --------- --------- --------- Net income ........................................... $ 22,436 $ 60,883 $ 120,915 Other comprehensive income (loss): Foreign currency translation adjustment ............ (11,307) (12,024) (18,301) Unrealized gain on available-for-sale securities, net of tax .................................. -- -- 50,921 --------- --------- --------- Comprehensive income ................................. $ 11,129 $ 48,859 $ 153,535 ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 35 38 FLEXTRONICS INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED MARCH 31, 1998, 1999 AND 2000 (IN THOUSANDS)
ACCUMULATED OTHER ORDINARY SHARES ADDITIONAL COMPREHENSIVE TOTAL ----------------- PAID-IN RETAINED INCOME SHAREHOLDERS' SHARES AMOUNT CAPITAL EARNINGS (LOSS) EQUITY ------ ------ ----------- ----------- ----------------- ------------ BALANCE AT MARCH 31, 1997 .......... 70,184 $ 452 $ 106,310 $ 27,666 $ (516) $ 133,912 Adjustment to conform fiscal year of pooled entity .............. -- -- -- (3,136) -- (3,136) Impact of immaterial pooling- of-interests acquisitions ..... 6,298 38 9,801 (2,823) -- 7,016 Exercise of stock options ........ 1,039 8 1,940 -- -- 1,948 Sale of shares in public offering, net of offering costs ......... 8,740 50 96,100 -- -- 96,150 Net income ....................... -- -- -- 22,436 -- 22,436 Dividend paid to former Kyrel shareholder ................... -- -- -- (802) -- (802) Foreign currency translation ..... -- -- -- -- (11,307) (11,307) ----------- ------- ----------- ----------- ----------- ----------- BALANCE AT MARCH 31, 1998 .......... 86,261 548 214,151 43,341 (11,823) 246,217 Issuance of ordinary shares for acquisition of FICO ............ 256 2 4,798 -- -- 4,800 Exercise of stock options ........ 2,739 16 11,369 -- -- 11,385 Sale of shares in public offering, net of offering costs .......... 10,800 58 193,942 -- -- 194,000 Ordinary shares issued under Employee Stock Purchase Plan .. 141 2 1,164 -- -- 1,166 Net income ....................... -- -- -- 60,883 -- 60,883 Dividend paid to former PCB shareholder ................... -- -- -- (6,381) -- (6,381) Foreign currency translation ..... -- -- -- -- (12,024) (12,024) ----------- ------- ----------- ----------- ----------- ----------- BALANCE AT MARCH 31, 1999 .......... 100,197 626 425,424 97,843 (23,847) 500,046 Adjustment to conform fiscal year of pooled entity ................ -- -- -- (818) -- (818) Impact of immaterial pooling- of-interests acquisitions ....... 503 4 1,609 (2,162) -- (549) Exercise of stock options ........ 2,458 13 17,381 -- -- 17,394 Sale of shares in public offering, net of offering costs .......... 22,400 129 942,895 -- -- 943,024 Ordinary shares issued under Employee Stock Purchase Plan .. 140 1 2,440 -- -- 2,441 Net income ....................... -- -- -- 120,915 -- 120,915 Dividend paid to former PCB shareholder ................... -- -- -- (23,514) -- (23,514) Tax benefit on employee stock plans ........................ -- -- 1,683 -- -- 1,683 Change in unrealized gain on available-for-sale securities . -- -- -- -- 50,921 50,921 Foreign currency translation ..... -- -- -- -- (18,301) (18,301) ----------- ------- ----------- ----------- ----------- ----------- BALANCE AT MARCH 31, 2000 .......... 125,698 $ 773 $ 1,391,432 $ 192,264 $ 8,773 $ 1,593,242 =========== ======= =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 36 39 FLEXTRONICS INTERNATIONAL LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED MARCH 31, ------------------------------------------- 1998 1999 2000 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ................................................... $ 22,436 $ 60,883 $ 120,915 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization ............................. 35,567 56,438 82,687 Loss (gain) on sales of equipment ......................... 37 (664) 2,751 Provision for doubtful accounts ........................... 1,850 (423) 7,095 Provision for inventories ................................. 4,096 6,479 32,307 Equity in earnings of associated companies ................ (1,194) (1,036) -- In-process research and development ....................... -- 2,000 -- Unusual charges ........................................... 8,869 3,361 -- Minority interest expense and other non-cash expenses ..... 871 1,238 5,416 Changes in operating assets and liabilities (net of effect of acquisitions): Accounts receivable .................................. (46,914) (119,511) (315,982) Inventories .......................................... (36,559) (86,630) (454,556) Other current assets ................................. (20,137) (25,939) (71,133) Accounts payable and accrued liabilities ............. 86,481 162,276 530,961 Deferred revenue ..................................... 317 314 (2,292) Deferred income taxes ................................ -- (729) (5,561) ----------- ----------- ----------- Net cash provided by (used in) operating activities ............ 55,720 58,057 (67,392) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment .......................... (104,072) (165,933) (250,458) Proceeds from sale of property and equipment ................. 1,622 6,544 28,874 Investment in associated company ............................. (2,200) -- -- Other investments and notes receivable ....................... (3,611) (17,754) (95,228) Payment for acquired businesses, earnout obligations and remaining purchase price related to acquired businesses .... (6,250) (24,000) (26,799) Effect of acquisitions on cash ............................... 4,363 379 1,278 Cash paid for acquired manufacturing operations .............. -- (22,200) (229,861) Other ........................................................ 35 572 -- ----------- ----------- ----------- Net cash used in investing activities .......................... (110,113) (222,392) (572,194) ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Bank borrowings and proceeds from long-term debt ............. 160,615 190,603 216,561 Repayment of bank borrowings and long-term debt .............. (261,420) (119,817) (57,096) Borrowings from related company .............................. 2,946 -- -- Repayment of capital lease obligations ....................... (10,152) (11,957) (28,411) Dividend paid to former shareholders of companies acquired ... (802) (6,381) (23,514) Proceeds from exercise of stock options and Employee Stock Purchase Plan ........................................ 1,948 12,551 19,835 Payments on notes payable .................................... (5,000) -- -- Net proceeds from issuance of Senior Subordinated Notes ...... 145,687 -- -- Net proceeds from sales of Ordinary Shares ................... 96,150 194,000 943,024 ----------- ----------- ----------- Net cash provided by financing activities ...................... 129,972 258,999 1,070,399 ----------- ----------- ----------- Effect of exchange rate changes ................................ (4,305) (2,138) (5,923) Effect of adjustment to conform fiscal year of pooled entities ..................................................... 389 -- (818) ----------- ----------- ----------- Increase in cash and cash equivalents .......................... 71,663 92,526 424,072 Cash and cash equivalents, beginning of year ................... 30,320 101,983 194,509 ----------- ----------- ----------- Cash and cash equivalents, end of year ......................... $ 101,983 $ 194,509 $ 618,581 =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 37 40 FLEXTRONICS INTERNATIONAL LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 1. ORGANIZATION OF THE COMPANY Flextronics International Ltd. ("Flextronics" or the "Company") is incorporated in the Republic of Singapore. Flextronics provides advanced electronics manufacturing services to original equipment manufacturers, or OEMs, primarily in the telecommunications, networking, consumer electronics and computer industries. The Company provides customers with the opportunity to outsource on a global basis, a complete product where the Company takes responsibility for engineering, supply chain management, assembly, integration, test and logistics management. The Company provides complete product design services, including electrical and mechanical, circuit and layout, radio frequency and test development engineering services. 2. SUMMARY OF ACCOUNTING POLICIES Principles of consolidation and basis of presentation The accompanying consolidated financial statements include the accounts of Flextronics and its wholly and majority-owned subsidiaries, after elimination of all significant intercompany accounts and transactions. As is more fully described in Note 11, Flextronics acquired 100% of the outstanding shares of PCB Assembly, Inc. ("PCB") and Kyrel EMS Oyj ("Kyrel") in March 2000 and July 1999, respectively. Both acquisitions were accounted for as pooling-of-interests and the consolidated financial statements have been restated to reflect the combined operations of PCB, Kyrel and Flextronics for all periods presented. Kyrel operated under a calendar year end prior to merging with Flextronics, and accordingly, Kyrel's statements of operations, shareholders' equity and cash flows for the years ended December 31, 1998 have been combined with the corresponding Flextronics consolidated statements for the fiscal years ended March 31, 1999. During fiscal 2000, Kyrel's year-end was changed from December 31 to March 31 to conform to the Company's fiscal year end. Accordingly, Kyrel's operations for the three months ended March 31, 1999, which included net sales of $101.8 million and net loss of $0.8 million have been excluded from the consolidated results of fiscal 2000 and was reported as an adjustment to retained earnings in the first quarter of fiscal 2000. PCB operated under the same fiscal year end as Flextronics, and accordingly, PCB's statements of operations, shareholders' equity and cash flows have been combined with the corresponding Flextronics consolidated statements for the fiscal years ended March 31, 2000. All dollar amounts included in the financial statements are expressed in U.S. dollars unless otherwise designated as Singapore dollars (S$). Reclassifications Certain prior years' balances have been reclassified to conform to the current year's presentation. Translation of Foreign Currencies 38 41 The functional currency of the majority of Flextronics' Asian subsidiaries and certain other subsidiaries is the U.S. dollar. Accordingly, all of the monetary assets and liabilities of these subsidiaries are translated into U.S. dollars at the current exchange rate as of the applicable balance sheet date, and all non-monetary assets and liabilities are remeasured at historical rates. Revenues and expenses are translated at the average exchange rate prevailing during the period. Gains and losses resulting from the translation of these subsidiaries' financial statements are included in the accompanying consolidated statements of operations. The financial position and results of operations of the Company's Swedish, UK, Austrian, Finnish, French, Brazilian and Hungarian subsidiaries are measured using local currency as the functional currency. Accordingly, for these subsidiaries all assets and liabilities are translated into U.S. dollars at current exchange rates as of the respective balance sheet date. Revenue and expense items are translated at the average exchange rates prevailing during the period. Cumulative translation gains and losses from the translation of these subsidiaries' financial statements are reported as a separate component of shareholders' equity. On January 1, 1999, the Company's Austrian, Finnish, French and Hungarian subsidiaries adopted the Euro as their functional currency. Cash, Cash Equivalents and Investments All highly liquid investments with a maturity of three months or less at date of purchase are carried at fair market value and considered to be cash equivalents. Cash and cash equivalents consist of cash deposited in checking and money market accounts, commercial paper and certificates of deposit. The Company's investments comprise corporate debt securities and public corporate equity securities. Investments with maturities of less than one year are considered short term and are included within Other Current Assets in the Company's balance sheet and carried at fair value. Nearly all investments are held in the Company's name and custodied with major financial institutions. The specific identification method is used to determine the cost of securities disposed of, with realized gains and losses reflected in other income and expense. At March 31, 2000, substantially all of the Company's investments were classified as available-for-sale. Unrealized holding gains and losses on these investments are included as a separate component of shareholders' equity, net of any related tax effect. Cash equivalents and short-term investments are all due within one year and consist of the following (in thousands):
March 31, 2000 --------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- --------- Money market funds ........ $115,900 $ -- $ -- $115,900 Certificates of deposits .. 32,026 -- -- 32,026 Corporate debt securities . 282,781 -- -- 282,781 Corporate equity securities 19,563 50,921 -- 70,484 -------- -------- -------- -------- $450,270 $ 50,921 $ -- $501,191 ======== ======== ======== ======== Included in cash and cash
39 42 equivalents .............. $430,707 $ -- $ -- $430,707 Included in other assets .. 19,563 50,921 -- 70,484 -------- -------- -------- -------- $450,270 $ 50,921 $ -- $501,191 ======== ======== ======== ========
March 31, 1999 --------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- --------- Money market funds ........ $ 42,660 $ -- $ -- $ 42,660 Certificates of deposits .. 41,795 -- -- 41,795 Corporate debt securities . 49,504 -- -- 49,504 -------- --------- -------- -------- Included in cash and cash equivalents .............. $133,959 $ -- $ -- $133,959 ======== ========= ======== ========
There were no sales activities for the fiscal years ended March 31, 2000 and 1999. The Company also has certain investments in non-publicly traded companies. These investments are included within Other Assets in the Company's balance sheet and are generally carried at cost. The Company monitors these investments for impairment and makes appropriate reductions in carrying values when necessary. Property and equipment Property and equipment is stated at cost. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the related assets (two to ten years), with the exception of building leasehold improvements, which are amortized over the life of the lease, if shorter. Repairs and maintenance costs are expensed as incurred. Property and equipment was comprised of the following as of March 31 (in thousands):
1999 2000 --------- --------- Machinery and equipment ........................ $ 291,013 $ 396,827 Land ........................................... 21,229 34,538 Buildings ...................................... 116,458 183,026 Leasehold improvements ......................... 31,389 50,331 Computer equipment and software ................ 36,775 65,456 Furniture, fixtures and vehicles ............... 45,405 63,658 --------- --------- 542,269 793,836 Accumulated depreciation and amortization ...... (134,916) (194,498) --------- --------- Property and equipment, net .................... $ 407,353 $ 599,338 ========= =========
Concentration of credit risk 40 43 Financial instruments, which potentially subject the Company to concentration of credit risk, are primarily accounts receivable, cash equivalents and investments. The Company performs ongoing credit evaluations of its customers' financial condition and maintains an allowance for doubtful accounts based on the outcome of its credit evaluations. The Company maintains cash and cash equivalents with various financial institutions that management believes to be high credit quality. These financial institutions are located in many different locations throughout the world. Sales to customers who accounted for more than 10% of net sales were as follows for the years ended March 31:
1998 1999 2000 ---- ---- ---- Ericsson ......................... 21% 13% 15% Philips .......................... 10 15 13 Cisco ............................ -- 10 12 Lucent ........................... 10 -- --
41 44 Goodwill and other intangibles Any excess of cost over net assets acquired (goodwill) is amortized by the straight-line method over estimated lives ranging from eight to twenty-five years. Intangible assets are comprised of technical agreements, patents, trademarks, developed technologies and other acquired intangible assets including assembled work forces, favorable leases and customer lists. Technical agreements are being amortized on a straight-line basis over periods of up to five years. Patents and trademarks are being amortized on a straight-line basis over periods of up to ten years. Purchased developed technologies are being amortized on a straight-line basis over periods of up to seven years. Intangible assets related to assembled work forces, favorable leases and customer lists are amortized on a straight-line basis over three to ten years. Goodwill and other intangibles were as follows as of March 31 (in thousands):
1999 2000 -------- -------- Goodwill ................................. $ 37,533 $ 75,163 Other intangibles ........................ 13,840 14,971 -------- -------- 51,373 90,134 Accumulated amortization ................. (12,534) (19,420) -------- -------- Goodwill and other intangibles, net ...... $ 38,839 $ 70,714 ======== ========
Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of property and equipment is measured by comparison of its carrying amount, including the unamortized portion of goodwill allocated to the property and equipment, to future net cash flows the property and equipment are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property and equipment, including the allocated goodwill, if any, exceeds its fair market value. The Company assesses the recoverability of enterprise level goodwill and intangible assets as well as long-lived assets by determining whether the unamortized balances can be recovered through undiscounted future results of the operation or asset. The amount of enterprise level long lived asset impairment, if any, is measured based on projected discounted future results using a discount rate reflecting the Company's average cost of funds. To date, the Company has made no adjustments to the carrying value of its long-lived assets. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 42 45 Inventories Inventories are stated at the lower of cost (first-in, first-out basis) or market value. Cost is comprised of direct materials, labor and overhead. As of March 31, the components of inventories are as follows (in thousands):
1999 2000 -------- -------- Raw materials .................... $193,036 $669,187 Work-in-process .................. 33,204 109,649 Finished goods ................... 24,203 61,754 -------- -------- $250,443 $840,590 ======== ========
Accrued liabilities Accrued liabilities was comprised of the following as of March 31 (in thousands):
1999 2000 -------- -------- Income taxes payable .................................... $ 11,163 $ 24,557 Accrued payroll ......................................... 40,057 75,151 Accrued loan interest ................................... 6,200 7,696 Accrued expenses for excess facilities (see note 9) ..... 2,523 931 Customer deposits ....................................... 18,299 3,542 Sales tax and other tax payable ......................... 6,118 15,593 Other accrued liabilities ............................... 21,935 41,192 -------- -------- $106,295 $168,662 ======== ========
Revenue recognition The Company's net sales are comprised of product sales and service revenue earned from engineering and design services. Revenue from product sales is recognized upon shipment of the goods. Service revenue is recognized as the services are performed, or under the percentage-of-completion method of accounting, depending on the nature of the arrangement. If total costs to complete a project exceed the anticipated revenue from that project, the loss is recognized immediately. Interest and other expense, net Interest and other expense, net was comprised of the following for the years ended March 31 (in thousands):
1998 1999 2000 -------- -------- -------- Interest expense .............................. $(17,964) $(22,891) $(33,351) Interest income ............................... 2,919 5,494 16,770 Foreign exchange gain (loss) .................. 1,221 (5,068) (1,056) Equity in earnings of associated companies .... 1,194 1,036 -- Minority interest ............................. (356) (1,319) (2,154) Other income(expense), net .................... 773 2,148 (509) -------- -------- -------- Total interest and other expense, net...................... $(12,213) $(20,600) $(20,300) ======== ======== ========
43 46 Net income per share Basic net income per share is computed using the weighted average number of Ordinary Shares outstanding during the applicable periods. Diluted net income per share is computed using the weighted average number of Ordinary Shares and dilutive Ordinary Share equivalents outstanding during the applicable periods. Ordinary Share equivalents include 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 fiscal years ended March 31 (in thousands, except per share data):
1998 1999 2000 -------- -------- -------- Ordinary Shares issued and outstanding(1) ....... 77,781 91,867 108,827 Ordinary Share equivalents -- stock options(2) .. 3,336 5,188 9,447 -------- -------- -------- Weighted average Ordinary Shares and equivalents -- diluted ........................ 81,117 97,055 118,274 ======== ======== ======== Net income ...................................... $ 22,436 $ 60,883 $120,915 ======== ======== ======== Basic earnings per share ........................ $ 0.29 $ 0.66 $ 1.11 ======== ======== ======== Diluted earnings per share ...................... $ 0.28 $ 0.63 $ 1.02 ======== ======== ========
(1) Ordinary Shares issued and outstanding based on the weighted average method. (2) Stock options of the Company calculated based on the treasury stock method using average market price for the period, if dilutive. Options to purchase 347,584, 112,658 and 246,536 weighted shares outstanding during fiscal 1998, 1999, and 2000, respectively, were excluded from the computation of diluted earnings per share because the options exercise price was greater than the average market price of the Company's Ordinary Shares during those years. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS No. 133") which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments imbedded in other contracts and for hedging activities. It requires that companies recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Company expects to adopt SFAS No. 133 in the first quarter of fiscal 2002 and anticipates that SFAS No. 133 will not have a material impact on its consolidated financial statements. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101("SAB 101"), "Revenue Recognition in Financial Statements". SAB 101 provides guidance on applying generally accepted accounting principles to revenue recognition issues in financial statements. The Company will adopt SAB 101 as required in the first quarter of 2001 and is evaluating the effect that such adoption may have on its consolidated results of operations and financial position. 44 47 3. SUPPLEMENTAL CASH FLOW DISCLOSURES For purposes of the statement of cash flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents. The following information relates to fiscal years ended March 31 (in thousands):
1998 1999 2000 ------- ------- ------- Cash paid for: Interest ................................................... $11,340 $16,297 $31,553 Income taxes ............................................... 1,331 3,015 5,189 Non-cash investing and financing activities: Equipment acquired under capital lease obligations ......... 9,094 22,104 32,528 Issuance of 255,700 Ordinary Shares valued at $18.77 for acquisition of FICO ................................... -- 4,800 --
4. BANK BORROWINGS AND LONG-TERM DEBT The Company has $150 million in unsecured Senior Subordinated Notes due in 2007 outstanding with an annual interest rate of 8.75% due semi-annually. The fair value of the unsecured Senior Subordinated Notes based on broker trading prices was 94.5% of the face value on March 31, 2000. The Company maintained a credit facility with a syndicate of banks. This facility provided for revolving credit borrowings by Flextronics and a number of its subsidiaries of up to $200.0 million, subject to compliance with certain financial covenants and the satisfaction of customary borrowing conditions. The credit facility consisted of two separate credit agreements, one providing for up to $40.0 million principal amount of revolving credit loans to the Company and designated subsidiaries and one providing for up to $160.0 million principal amount of revolving credit loans to the Company's United States subsidiary. As of March 31, 2000, there were $137.0 million in borrowings outstanding under the revolving credit loans and the weighted-average interest rate for the Company's borrowings under the revolving credit loans was 6.87%. On April 3, 2000, the Company replaced its $200.0 million credit facility with a $500.0 million Revolving Credit Facility ("Credit Facility") with a syndicate of domestic and foreign banks. The Credit Facility consisted of two separate credit agreements, one providing for up to $150.0 million principal amount of revolving credit loans to the Company and designated subsidiaries ("Tranche A") and one providing for up to $350.0 million principal amount of revolving credit loans to the Company's United States subsidiary ("Tranche B"). Both Tranche A and Tranche B are split equally between a 364 day and a three year facility. Borrowings under the Credit Facility bear interest, at the Company's option, at either: (i) the Base Rate (as defined in the Credit Facility); or (ii) the LIBOR Rate (as defined in the Credit Facility) plus the Applicable Margin for LIBOR loans ranging between 0.625% and 1.75%, based on certain financial ratios of the Company. The Company is required to pay a quarterly commitment fee ranging from 0.15% to 0.375% per annum, based on certain financial ratios of the Company, of the unutilized portion of the Credit Facility. The Credit Facility is unsecured, and contains certain restrictions on the Company's ability to (i) incur certain debt, (ii) make certain investments and (iii) make certain acquisitions of other entities. The Credit Facility also requires that the Company maintain certain financial covenants, including, among other things, a maximum ratio of total indebtedness to EBITDA (earnings before 45 48 interest, taxes, depreciation, and amortization) and a minimum ratio of fixed charge coverage, as defined, during the term of the Agreement. Certain subsidiaries of the Company have various lines of credit available with annual interest rates ranging from 3.3% to 8.5%. These lines of credit expire on various dates through 2001. The Company also has term loans with annual interest rates generally ranging from 1.5% to 9.0% with terms of up to 20 years. These lines of credit and term loans are primarily secured by assignment of account receivables and assets. The Company has financed the purchase of certain facilities with mortgages. The mortgages generally have terms of 5 to 10 years and annual interest rates ranging from 7.4% to 10.0% and are secured by the underlying properties with a net book value of approximately $23.0 million. In addition, the Company had notes payable for purchase price due to the former shareholders of FICO for the additional 50% interest acquired in March 1999. The notes were unsecured and bear interest at 2%. The amount outstanding as of March 31, 2000 was $2.0 million. Bank borrowings and long-term debt was comprised of the following at March 31 (in thousands):
1999 2000 --------- --------- Senior Subordinated Notes ................ $ 150,000 $ 150,000 Outstanding under lines of credit ........ 13,193 97,946 Credit Facility .......................... 40,073 137,000 Mortgages ................................ 15,630 8,549 Term loans and other debt ................ 53,888 40,600 --------- --------- 272,784 434,095 Current portion ........................ (83,976) (254,798) --------- --------- Non-current portion .................... $ 188,808 $ 179,297 ========= =========
Maturities for the bank borrowings and other long-term debt are as follows for the years ended March 31 (in thousands): 2001.............................................. $ 254,798 2002.............................................. 5,878 2003.............................................. 4,430 2004.............................................. 9,972 2005.............................................. 989 Thereafter........................................ 158,028 -------- $ 434,095 ========
5. FINANCIAL INSTRUMENTS The value of the Company's cash and cash equivalents, investments, accounts receivable and accounts payable carrying amount approximates fair value. The fair value of the Company's long-term debt (see Note 4) is determined based on current broker trading prices. The Company's cash equivalents are comprised of cash deposited in money market accounts, commercial paper and certificates of deposit (see Note 2). The Company's investment policy limits the amount of credit exposure to 10% of the total investment portfolio in any single issuer. 46 49 The Company enters into forward exchange contracts to hedge underlying transactional currency exposures and does not engage in foreign currency speculation. The credit risk of these forward contracts is minimal since the contracts are with large financial institutions. The Company hedges committed exposures and these forward contracts generally do not subject the Company to risk of accounting losses. The gains and losses on forward contracts generally offset the gains and losses on the asset, liabilities and transactions hedged. The Company's off-balance sheet financial instruments consist of $16.5 million and $61.1 million of aggregate foreign currency forward contracts outstanding at the end of fiscal year 1999 and 2000, respectively. These foreign exchange contracts expire in less than three months and will settle in French Franc, German Deutsche Mark, Japanese Yen, Swedish Kronor and United States dollar. 6. COMMITMENTS As of March 31, 1999 and 2000, the Company has financed a total of $61.5 million and $41.2 million, respectively in machinery and equipment purchases with capital leases. Accumulated amortization for property and equipment under capital leases totaled $14.8 million and $13.7 million at March 31, 1999 and 2000, respectively. These capital leases have interest rates ranging from 1.7% to 13.0%. The Company also leases certain of its facilities under non-cancelable operating leases. The capital and operating leases expire in various years through 2007 and require the following minimum lease payments for the years ended March 31 (in thousands):
CAPITAL OPERATING ------- --------- 2001.................................................... $16,749 $51,560 2002.................................................... 16,251 48,613 2003.................................................... 12,621 38,969 2004.................................................... 7,051 21,026 2005.................................................... 947 10,988 Thereafter.............................................. -- 14,602 ------- -------- Minimum lease payments.................................. 53,619 $185,758 ======== Amount representing interest............................ (2,136) ------- Present value of minimum lease payments................. 51,483 Current portion......................................... (16,053) ------- Capital lease obligations, net of current portion............................................... $35,430 =======
Total rent expense was $8.3 million, $17.3 million and $33.0 million for the years ended March 31, 1998, 1999 and 2000, respectively. 47 50 7. INCOME TAXES The domestic and foreign components of income before income taxes were comprised of the following for the years ended March 31 (in thousands):
1998 1999 2000 -------- -------- -------- Singapore.................................... $ (9,346) $ (8,159) $ 16,286 Foreign...................................... 34,100 76,674 120,136 -------- -------- -------- $ 24,754 $ 68,515 $136,422 ======== ======== ========
The provision for income taxes consisted of the following for the years ended March 31 (in thousands):
1998 1999 2000 -------- ------- -------- Current : Singapore................................ $ 226 $ -- $ 477 Foreign.................................. 5,423 8,135 20,034 -------- ------- -------- 5,649 8,135 20,511 -------- ------- -------- Deferred : Singapore................................ (451) -- -- Foreign.................................. (2,880) (503) (5,004) -------- ------- -------- (3,331) (503) (5,004) -------- ------- -------- $ 2,318 $ 7,632 $ 15,507 ======== ======= ========
The Singapore statutory income tax rate was 26% for each of the years in the three year period ended March 31, 2000. The reconciliation of the income tax expense expected based on Singapore statutory income tax rates to the provision for income taxes included in the consolidated statements of operations for the years ended March 31 is as follows (in thousands):
1998 1999 2000 -------- -------- -------- Income taxes based on Singapore statutory rates ........................................... $ 6,436 $ 17,814 $ 35,470 Losses from non-incentive Singapore operations .... 2,707 3,098 -- Tax exempt income ................................. -- (549) (866) Effect of foreign operations taxed at various rates ........................................... (4,055) (8,536) (22,846) Amortization of goodwill and intangibles .......... 946 942 1,346 Merger costs ...................................... 398 -- 257 Change in valuation allowance ..................... (2,829) (5,229) 1,363 Joint venture losses .............................. (310) (269) -- Other ............................................. (975) 361 783 -------- -------- -------- Provision for income taxes .............. $ 2,318 $ 7,632 $ 15,507 ======== ======== ======== Effective tax rate ................................ 9.4% 11.1% 11.4%
48 51 The components of deferred income taxes are as follows as of March 31 (in thousands):
1999 2000 -------- -------- Deferred tax assets: Provision for inventory obsolescence ......................... $ 3,260 $ 10,298 Provision for doubtful accounts .............................. 1,717 3,478 Net operating loss carryforwards ............................. 15,107 20,979 General accruals ............................................. 3,777 4,815 Leasing - interest and exchange .............................. 771 -- Uniform capitalization of inventory .......................... -- 2,380 Others ....................................................... 1,870 1,654 -------- -------- Total gross deferred tax assets ......................... 26,502 43,604 Valuation allowance ..................................... (18,637) (27,494) -------- -------- 7,865 16,110 -------- -------- Deferred tax liabilities: Depreciation ................................................. $ (3,716) $ (8,348) Intangible assets ............................................ (2,059) -- Fixed assets ................................................. (515) (2,259) Exchange losses .............................................. (934) (57) Others ....................................................... (2,010) (1,811) -------- -------- Total gross deferred tax liabilities ................... $ (9,234) $(12,475) -------- -------- Net deferred tax asset (liability) ..................... $ (1,369) $ 3,635 ======== ======== The net deferred tax liability is classified as follows : Current asset (classified as Other Current Assets) ...... $ 3,088 $ 8,415 Long-term liability ..................................... (4,457) (4,780) -------- -------- $ (1,369) $ 3,635 ======== ========
The deferred tax asset arises from available tax loss carryforwards and non-deductible accruals. The Company has total tax loss carryforwards of approximately $80.0 million, a portion of which begin expiring in tax year 2010. The utilization of these tax loss deductions is limited to the future operations of the Company in the tax jurisdictions in which such loss deductions arose. As a result, management is uncertain as to when or whether these operations will generate sufficient profit to realize the deferred tax asset benefit. The valuation allowance provides a reserve against deferred tax assets that may expire or go unutilized by the Company. However, management has determined that it is more likely than not that the Company will realize certain of these benefits and, accordingly, has recognized a deferred tax asset from these benefits. The amount of deferred tax assets considered realizable, however, could be reduced or increased in the near-term if facts, including the amount of taxable income or the mix of taxable income between subsidiaries, differ from management's estimates. No deferred tax liability has been provided for withholding taxes on distributions of dividends by various subsidiaries in the group as earnings of foreign subsidiaries are intended to be reinvested indefinitely. The Company has been granted the following tax incentives: i) Product Export Enterprise incentive for the Shekou and Shenzhen, China facilities. The Company's operations in Shekou and Shenzhen, China are located in "Special Economic Zone" and are approved "Product Export Enterprise" which qualifies for a special corporate income tax rate of 10%. This special tax is subject to the subsidiaries exporting more than 70% of its total value of products manufactured by the respective plants 49 52 in China. The subsidiaries' status as a Product Export Enterprise is reviewed annually by the Chinese government. ii) The Company's investments in its plants in Xixiang, China and Doumen, China fall under the "Foreign Investment Scheme" that entitles the subsidiaries to apply for a five-year tax incentive. The Company obtained the incentive for the Doumen plant in December 1995 and the Xixiang plant in October 1996. With the approval of the Chinese tax authorities, the subsidiaries' tax rates on income from these facilities during the incentive period will be 0% in years 1 and 2 and 7.5% in years 3 through 5, commencing in the first profitable year. The Company has another plant in Doumen, which commenced operations in the fiscal year 1998. The plant which, falls under the "Foreign Investment Scheme," is confident that the five-year tax incentive will be granted upon formal application in its first profitable year. However, there can be no assurance that the five-year tax incentive will be granted. iii) Ten year negotiated tax holiday with the Hungarian government for its Hungarian subsidiaries. This incentive provides for the reduction of the regular tax rate to zero percent, beginning January 1, 2000. 8. SHAREHOLDERS' EQUITY Secondary offerings In October 1997, the Company completed an offering of its Ordinary Shares. A total of 8,740,000 ordinary shares were sold at a price of $11.75 per share resulting in net proceeds to the Company of $96.2 million. In December 1998, the Company completed another offering of its Ordinary Shares. A total of 10,800,000 ordinary shares were sold at a price of $18.125 per share resulting in net proceeds to the Company of $194.0 million. During fiscal 2000, Flextronics completed two secondary offerings of its Ordinary Shares. In February 2000, a total of 8,600,000 Ordinary Shares were sold at a price of $59.00 per share resulting in net proceeds to the Company of approximately $494.1 million. In October 1999, a total of 13,800,000 Ordinary Shares were sold at a price of $33.84 per share resulting in net proceeds to the Company of approximately $448.9 million. Stock split The Company had two stock splits. The first stock split was in 1998 and the record date was set on December 22, 1998 for a 2:1 stock split to be effected as a bonus issue (the Singapore equivalent of a stock dividend). The distribution of 47,068,458 Ordinary Shares occurred on January 11, 1999. The second stock split was in 1999 and the record date was December 8, 1999 for a 2:1 stock split. The distribution of 57,497,204 Ordinary Shares occurred on December 22, 1999. Both stock splits were to be effected as bonus issues (the Singapore equivalent of a stock dividend). The Company has accounted for these transactions as a stock split and all share and per share amounts have been retroactively restated to reflect both stock splits. Stock-based compensation 50 53 The Company's 1993 Share Option Plan (the "Plan") provides for the grant of up to 20,400,000 incentive stock options and non-statutory stock options to employees and other qualified individuals to purchase Ordinary Shares of the Company. As of March 31, 2000, the Company had 882,350 Ordinary Shares available for future option grants under the Plan at an exercise price of not less than 85% of the fair value of the underlying stock on the date of grant. Options issued under the Plan generally vest over 4 years and expire 5 years from the date of grant. The Company's 1997, 1998 and 1999 Interim Option Plans provide for grants of up to 1,000,000, 1,572,000, and 2,600,000 respectively. These plans provide grants of non-statutory options to employees and other qualified individuals to purchase Ordinary Shares of the Company. Options under these plans can not be granted to executive officers and directors. The Company's 1997, 1998 and 1999 Interim Option Plans had 240,098, 80,317, and 958,244 Ordinary Shares available for future option grants respectively. All Interim Option Plans have an exercise price of not less than 85% of fair market value of the underlying stock on the date of grant. Options issued under these plans generally vest over 4 years and expire 5 years from the date of grant. The Company has assumed certain option plans and the underlying options of companies which the Company has merged with or acquired (the "Assumed Plans"). Options under the Assumed Plans have been converted into the Company's options and adjusted to effect the appropriate conversion ratio as specified by the applicable acquisition or merger agreement, but are otherwise administered in accordance with the terms of the Assumed Plans. Options under the Assumed Plans generally vest over 4 years and expire 5 years from the date of grant. The following table presents the activity for options outstanding under all of the stock option plans as of March 31 ("Price" reflects the weighted average exercise price):
1998 1999 2000 ----------------- ------------------ -------------------- OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE --------- ----- --------- ------ ---------- ------ Outstanding, beginning of year....... 6,700,088 $4.66 9,788,156 $ 6.01 12,991,732 $9.19 Granted.............................. 5,630,016 7.27 6,857,078 11.48 4,675,603 33.14 Exercised............................ (1,038,832) 1.88 (2,738,740) 4.19 (2,457,729) 7.26 Forfeited............................ (1,503,116) 7.53 (914,762) 6.99 (408,160) 11.44 --------- --------- ---------- Outstanding, end of year............. 9,788,156 $6.01 12,991,732 $9.19 14,801,446 $17.01 ========= ========= ========== Exercisable, end of year............. 3,262,304 3,251,040 4,675,210 ========= ========= ========= Weighted average fair value per option granted................... $3.48 $6.61 $15.28 ===== ===== =====
The following table presents the composition of options outstanding and exercisable as of March 31, 2000 ("Price" and "Life" reflect the weighted average exercise price and weighted average contractual life unless otherwise noted):
OPTIONS OPTIONS OUTSTANDING EXERCISABLE RANGE OF EXERCISE ----------------------------- ------------------- PRICES AMOUNT PRICE LIFE AMOUNT PRICE - ---------------------- --------- ------ ---- --------- ------ $ 3.69 -- $ 5.82 2,358,364 $ 5.71 2.39 1,688,526 $ 5.69 5.94 -- 8.38 2,194,198 8.05 2.97 878,713 7.99
51 54 8.41 -- 9.75 1,505,244 9.42 3.17 550,584 9.43 10.03 -- 12.00 3,435,606 11.89 3.52 1,264,127 11.82 12.45 -- 26.19 1,714,537 20.52 4.10 198,760 18.26 26.25 -- 29.00 2,178,920 28.91 4.49 94,500 28.81 29.13 -- 68.50 1,309,377 45.47 4.77 -- -- 75.00 -- 75.00 104,200 75.00 5.00 -- -- 77.06 -- 77.06 325 77.06 4.99 -- -- 78.125-- 78.125 675 78.125 4.99 -- -- ---------- --------- Total, March 31, 2000 14,801,446 $17.01 3.55 4,675,210 $ 9.22 ========== =========
Options reserved for future issuance under all stock options plans was 7,161,009 as of March 31, 2000. The Company's employee stock purchase plan (the "Purchase Plan") provides for issuance of up to 800,000 Ordinary Shares. The Purchase Plan was approved by the stockholders in October 1997. Under the Purchase Plan, employees may purchase, on a periodic basis, a limited number of shares of common stock through payroll deductions over a six month period up to 10% of each participant's compensation. The per share purchase price is 85% of the fair market value of the stock at the beginning or end of the offering period, whichever is lower. As of March 31, 2000, there are 519,552 Ordinary Shares available for sale under this plan. The Ordinary Shares sold under this plan in fiscal 2000 and 1999 amounted to 139,404 and 141,044, respectively. There were no Ordinary Shares sold under this plan in 1998. The weighted-average fair value of Ordinary Shares sold under this plan in fiscal 2000 and 1999 was $17.37 and $8.05, respectively. The Company has elected to follow APB Opinion No. 25 "Accounting for Stock Issued to Employees" and related interpretations in accounting for its employee stock option plans and employee stock purchase plans and has adopted the disclosure provisions of SFAS No. 123 "Accounting for Stock Based Compensation". Because the exercise price of the Company's stock options has equaled the fair value of the underlying stock on the date of grant, no compensation expense has been recognized under APB Opinion No. 25. Had the compensation cost for the Company's stock-based compensation plans been determined based on the fair values of these options, the Company's fiscal 1998, 1999, and 2000 net income and earnings per share would have been adjusted to the pro-forma amounts indicated below:
1998 1999 2000 --------- --------- --------- Net income: As reported ................. $ 22,436 $ 60,883 $ 120,915 Pro-forma ................... 16,765 48,294 99,184 Basic earnings per share: As reported ................. $ 0.29 $ 0.66 $ 1.11 Pro-forma ................... 0.22 0.53 0.91 Diluted earnings per share: As reported ................. $ 0.28 $ 0.63 $ 1.02 Pro-forma ................... 0.21 0.50 0.84
In accordance with the disclosure provisions of SFAS No. 123, the fair value of employee stock options granted during fiscal 1998, 1999 and 2000 was estimated at the date of grant using the Black-Scholes model and the following weighted average assumptions: 52 55
Years Ended March 31, 1998 1999 2000 ---- ---- ---- Volatility ....................... 66% 64% 62% Risk-free interest rate range .... 5.9% 5.0% 6.2% Dividend yield ................... 0% 0% 0% Expected lives ................... 4.0 yrs 4.0 yrs 3.9 yrs
Because SFAS No. 123 is applicable only to awards granted subsequent to December 30, 1994, and due to the subjective nature of the assumptions used in the Black-Scholes model, the pro-forma net income and net income per share disclosures may not reflect the associated fair value of the outstanding options. Option Repricing In light of the substantial decline in the market price of the Company's Ordinary Shares in the first quarter of fiscal 1998, in June 1997 the Company offered to all employees the opportunity to cancel existing options outstanding with exercise price in excess of $5.82 per share, the fair market value of the Company's Ordinary Shares at that time, and to have such options replaced with options that have the lower exercise price of $5.82 per share. Employees electing to have options repriced were required to accept an extension of their vesting schedule. The other terms of the options remained unchanged. On June 5, 1997, the Company repriced options to purchase 1,155,840 shares pursuant to this offer. 9. UNUSUAL CHARGES The provision for excess facilities of $3.4 million in fiscal 1999 was comprised of $2.2 million relating to the costs for consolidating the Company's four manufacturing and administrative facilities in Hong Kong and $1.2 million relating to the consolidation of certain U.S. facilities. The provision for excess facilities consisted of $1.5 million for the reduction of certain personnel due to consolidation of certain operations, $1.5 million for the write-off of equipment and assets related to the operations the Company has exited, and $0.4 million related to the consolidation of facilities. In connection with the provision for excess facilities, the Company terminated approximately 250 employees in the areas of finance, engineering, operations, production and purchasing. The consolidation of these facilities was substantially completed by November 1999. The provision for excess facilities of $8.9 million in fiscal 1998 related to the costs incurred in closing the Wales (United Kingdom) facility. The provision included $3.8 million for the write-off of goodwill associated with the acquisition of the facility, $1.6 million for severance payments and payments required under the pension scheme, $2.4 million for fixed asset write-offs and factory closure expenses and $1.1 million for required repayment of previously received government grants. 53 56 10. RELATED PARTY TRANSACTIONS AND NOTES PAYABLES TO SHAREHOLDERS Stephen Rees, a former Director and Senior Vice President of the Company, holds a beneficial interest in both Mayfield International Ltd. ("Mayfield") and Croton Ltd. ("Croton"). During fiscal 1998, the Company paid $140,000 to Croton for management services and $208,000 to Mayfield for the rental of certain office space. Additionally, as of March 31, 2000, $2.5 million was due from Mayfield under a note receivable. The note is included in other current assets on the accompanying balance sheet. The Company has loaned $6.8 million to various executive officers of the Company. Each loan is evidenced by a promissory note in favor of the Company. Certain notes are non-interest bearing and others have interest rates ranging from 7.0% to 7.25%. The remaining outstanding balance of the loans, including accrued interest, as of March 31, 2000 was $6.9 million. 11. BUSINESS COMBINATIONS AND ASSET PURCHASES In fiscal 2000, the Company purchased the manufacturing facilities of (i) Cabletron Systems Inc. in Rochester, New Hampshire and Limerick, Ireland, (ii) Fujitsu Siemens Computer in Paderbron, Germany, (iii) Ericsson Business Network in Visby, Sweden and (iv) ABB Automation Products in Vasteras, Sweden. These transactions have been accounted for as an acquisition of assets. Additionally, in fiscal 2000, the Company acquired Vastbright PCB Ltd. located in Zhuhai, China as well as the remaining 10% interest in FICO located in Shenzhen, China. These transactions have been accounted for under the purchase method of accounting and accordingly, the results of the acquired businesses were included in the Company's consolidated statements of operations from the acquisition dates forward. Comparative pro-forma information has not been presented, as the results of the acquired operations were not material to the Company's consolidated financial statements. The aggregate purchase price for the asset acquisitions and business combinations was allocated to the net assets acquired based on their estimated fair values at the dates of acquisition as follows (in thousands): Net assets at fair value .... $216,806 Goodwill and intangibles .... 35,354 -------- $252,160 ========
The goodwill associated with these transactions is being amortized over ten years. In fiscal 2000, the Company merged with Kyrel, an electronics manufacturing services provider with operations in Finland and France. The merger was accounted for as a pooling-of-interests and the Company issued 3,643,610 Ordinary Shares in exchange for all the outstanding shares of Kyrel. All financial statements presented have been retroactively restated to include the financial results of Kyrel. Kyrel operated under a calendar year end prior to merging with Flextronics, and accordingly, Kyrel's statements of operations, shareholders' equity and cash flows for the years ended December 31, 1998 have been combined with the corresponding Flextronics consolidated statements for the fiscal year ended March 31, 1999. In fiscal 2000, Kyrel's fiscal year end was 54 57 changed to conform to Flextronics' fiscal year end. Accordingly, Kyrel's operations for the three months ended March 31, 1999, which include net sales of $101.8 million and net loss of $0.8 million have been excluded from the consolidated results and have been reported as an adjustment to retained earnings in the first quarter of fiscal 2000. In fiscal 2000 the Company also merged with PCB, an electronics manufacturing service provider based in the USA, in exchange for a total of 1,084,566 Ordinary Shares, of which 108,457 Ordinary Shares are to be issued upon resolution of certain general and specific contingencies. The merger was accounted for as a pooling-of-interests. All financial statements presented have been retroactively restated to include the financial results of PCB. PCB has the same fiscal year as the Company. Separate results of operations for the periods presented are as follows for the years ended March 31 (in thousands):
1998 1999 ----------- ----------- Net sales: Previously reported ....... $ 1,113,071 $ 1,807,628 Kyrel ..................... 78,123 235,746 PCB ....................... 144,568 189,834 ----------- ----------- As restated ............... $ 1,335,762 $ 2,233,208 =========== =========== Net income(loss): Previously reported ....... $ 19,913 $ 51,530 Kyrel ..................... (1,662) 886 PCB ....................... 4,185 8,467 ----------- ----------- As restated ............... $ 22,436 $ 60,883 =========== ===========
The Company also completed several other immaterial pooling-of-interests transactions. In connection with these mergers, the Company issued 559,098 Ordinary Shares, of which 55,910 Ordinary Shares are to be issued upon resolution of certain contingencies. The historical operations of these entities were not material to the Company's consolidated operations on either an individual or an aggregate basis; therefore, prior period statements have not been restated for these acquisitions. In fiscal 1999, the Company acquired the manufacturing facilities and related assets of Advanced Component Labs HK Ltd. ("ACL"), a Hong Kong based advanced technology printed circuit board manufacturer for $15.0 million cash. The transaction has been accounted for under the purchase method and accordingly, the results of ACL was included in the Company's consolidated statements of operations from March 1, 1999. Comparative pro-forma information has not been presented as the results of operations for ACL were not material to the Company's financial statements. The goodwill associated with this acquisition is amortized over ten years. The purchase price was allocated to the net assets acquired based on their estimated fair values at the date of acquisition as follows (in thousands): ACL's net assets at fair value.................. $ 5,250 In-process research and development............. 2,000 Goodwill........................................ 7,750 ------- $15,000 =======
55 58 The purchase price allocated to in-process research and development related to development projects which had not reached technological feasibility and had no probable alternative future uses; accordingly, the Company expensed the entire amount on the date of acquisition as a one-time charge to operations. ACL's in-process research and development projects were initiated to address the rapid technological change associated with the miniaturized printed circuit board market. The incomplete projects include developing technology for a low cost Ball Grid Array ("BGA") package, developing thermal vias, and developing new methods that enable the use of extremely thin 1.5 mil technology. In fiscal 1997, the Company acquired an initial 40% of FICO, a plastic injection molding company located in Shenzhen, China for $5.2 million of which $3.0 million was paid in fiscal 1997. The remaining $2.2 million purchase price was paid in fiscal 1998. Goodwill and other intangibles resulting from this initial purchase totaled $3.2 million and are being amortized over ten years. The Company accounted for its investment in FICO under the equity method and accordingly has included its 40% share of FICO's operating results in its accompanying consolidated statement of operations from December 20, 1996 through February 28, 1999. In fiscal 1999, the Company acquired an additional 50% of FICO for (i)$7.2 million cash, (ii)255,700 Ordinary Shares issued at closing valued at $4.8 million, and (iii)$3.0 million in 2% promissory notes due $1.0 million each in year 2000 through year 2002. In fiscal 2000, the Company acquired the remaining 10% of FICO for $3.0 million cash. This transaction has been accounted for under the purchase method and accordingly, the results of operations for FICO have been included in the accompanying consolidated statements of operations since March 1999. The acquisition of the additional 60% interest resulted in additional goodwill and intangible assets of $10.2 million and $420,000 which were being amortized over 8 and 3 years, respectively. In fiscal 1998, the company merged with (i) Conexao Informatica Ltd. located in Sao Paulo, Brazil, (ii) Altatron, Inc. headquartered in Fremont, California with additional facilities in Richardson, Texas and Hamilton, Scotland, (iii) DTM Products located in Niwot, Colorado, (iv) Energipilot AB located in Sweden and (v) Neutronics located in Austria and Hungary. The Company issued the following ordinary shares in connection with these mergers: - 1,686,372 shares for Conexao, - 3,154,600 shares for Altatron, - 1,009,876 shares for DTM, - 919,960 shares for Energipilot, and - 11,224,000 for 92% of Neutronics. The Conexao, Altatron, DTM and Energipilot mergers were accounted for under the pooling-of-interests method of accounting. The Company did not restate its prior period financials statements with respect to these mergers, because they did not have a material impact on the Company's consolidated results. Accordingly, the results of these acquired companies are included in the Company's consolidated statements of operations from the dates of these acquisitions. The Neutronics merger was also accounted for under the pooling-of-interests method of accounting. All financial statements presented have been retroactively restated to include the results of Neutronics. Neutronics 56 59 operated under a calendar year end prior to merging with Flextronics, and during fiscal 1998, Neutronics' fiscal year end was changed from December 31 to March 31 to conform to the Company's fiscal year-end. Accordingly, Neutronics' operations for the three months ended March 31, 1997, which included net sales of $34.9 million and net loss of $3.1 million have been excluded from the consolidated results and have been reported as an adjustment to retained earnings in the first quarter of fiscal 1998. 12. SEGMENT REPORTING The Company operates and is managed internally by four geographic business segments. The operating segments include Asia, Americas, Western Europe and Central Europe. Each operating segment has a regional president that reports to the Company's Chairman and Chief Executive Officer, who is the chief decision maker. 57 60 Information about segments for the years ended March 31 (in thousands):
1998 1999 2000 ----------- ----------- ----------- Net Sales : Asia ...................................... $ 303,993 $ 401,126 $ 677,449 Americas .................................. 422,351 873,398 1,755,821 Western Europe ............................ 410,960 603,792 1,112,386 Central Europe ............................ 210,233 406,107 827,531 Intercompany eliminations ................. (11,775) (51,215) (65,994) ----------- ----------- ----------- $ 1,335,762 $ 2,233,208 $ 4,307,193 =========== =========== ===========
Income(Loss) before Income Taxes : Asia ...................................... $ 15,970 $ 25,416 $ 44,500 Americas .................................. (228) 27,763 43,595 Western Europe ............................ 7,269 12,885 19,061 Central Europe ............................ 7,723 12,833 18,938 Intercompany eliminations, corporate allocations and non-recurring charges .... (5,980) (10,382) 10,328 ----------- ----------- ----------- $ 24,754 $ 68,515 $ 136,422 =========== =========== =========== Long Lived Assets: Asia ...................................... $ 76,011 $ 109,513 $ 134,543 Americas .................................. 91,872 127,712 252,952 Western Europe ............................ 58,689 75,435 92,253 Central Europe ............................ 47,474 94,693 119,590 ----------- ----------- ----------- $ 274,046 $ 407,353 $ 599,338 =========== =========== =========== Depreciation and Amortization : Asia ...................................... $ 12,690 $ 15,320 $ 23,351 Americas .................................. 7,122 16,465 21,861 Western Europe ............................ 10,498 14,492 22,611 Central Europe ............................ 5,257 10,161 14,864 ----------- ----------- ----------- $ 35,567 $ 56,438 $ 82,687 =========== =========== =========== Capital Expenditures : Asia ...................................... $ 34,549 $ 37,417 $ 41,788 Americas .................................. 41,025 52,782 140,603 Western Europe ............................ 15,330 22,564 31,218 Central Europe ............................ 13,168 53,170 36,849 ----------- ----------- ----------- $ 104,072 $ 165,933 $ 250,458 =========== =========== ===========
For purposes of the preceding tables, "Asia" includes China, Malaysia, and Singapore, "Americas" includes USA, Mexico, and Brazil, "Western Europe" includes Sweden, Finland, France, Scotland, Germany and United Kingdom and "Central Europe" includes Austria, Hungary and Ireland. Geographic revenue transfers are based on selling prices to unaffiliated companies, less discounts. Income before tax is net sales less operating expenses, interest or other expenses, but prior to income taxes. 58 61 The following table represents net sales and long lived assets attributable to foreign countries exceeding 10% for fiscal years ended March 31:
1998 1999 2000 ---- ---- ---- Net Sales : China ......................... 16% 14% 13% United States ................. 31% 31% 29% Sweden ........................ 22% 15% 17% Finland ....................... -- 11% 8% Hungary ....................... 16% 18% 17% All others .................... 15% 11% 16% Long Lived Assets: China ......................... 24% 25% 25% United States ................. 23% 19% 18% Sweden ........................ 15% 10% 17% Hungary ....................... 17% 23% 16% All others .................... 21% 23% 24%
13. SUBSEQUENT EVENTS (UNAUDITED) Subsequent to March 31, 2000, the Company completed two pooling-of-interests mergers. On April 3, 2000, Flextronics merged with The Dii Group, Inc. ("Dii") through a tax-free, stock-for-stock exchange. Dii is a leading provider of electronics manufacturing and design services, operating through a global operations network in the Americas, Asia/Pacific and Europe. As a result of the merger, the Company issued 62,768,139 Ordinary Shares for all of the outstanding shares of Dii common stock, based upon the exchange ratio of 1.61 Flextronics Ordinary Shares for each share of Dii common stock, resulting in current Dii shareholders owning approximately 33% of the combined company. On April 6, 2000, Flextronics merged with Palo Alto Products International Pte. Ltd.("PAPI"), an industrial design services Company with plastic molding and enclosure assembly operations in Taiwan, Thailand and the United States, by exchanging 3,618,374 Ordinary Shares of Flextronics. The following unaudited pro forma combined results of operations for the Company assumes that the two mergers were completed April 1, 1997 (in thousands, except per share data):
1998 1999 2000 ---------- ---------- ---------- Net Sales ...................... $2,202,451 $3,253,025 $5,739,735 Net Income ..................... $ 68,579 $ 48,800 $ 181,445 Diluted Earnings Per Share ..... $ 0.54 $ 0.35 $ 1.04
These pro forma amounts represent the historical operating results of Dii and PAPI combined with those of the Company. These pro forma amounts are not necessarily indicative of operating results that would have occurred if Dii and PAPI had been operated by current management during the periods presented. Dii operated under a calendar year end prior to merging with Flextronics, and accordingly, Dii's statements of operations, shareholders' equity and cash flows for the years ended December 31, 1999 will be combined with the corresponding Flextronics' consolidated statements for the fiscal year ended March 31, 2000. In fiscal 2001, Dii's fiscal year end will be changed to conform to Flextronics' fiscal year end. Additionally, in connection with the recently completed pooling-of-interests mergers with Dii and PAPI, the Company expects to record a one-time 59 62 charge of approximately $180.0 million in the first fiscal quarter of 2001 relating to expenses incurred in connection with this transaction. The Company estimates that the one-time charge consists of approximately $120.0 million in cash charges primarily relating to items such as investment banking and financial advisory fees, severance, and professional services fees. In the first fiscal quarter of 2001, the Company announced its intentions to purchase the manufacturing facilities and related assets from Ascom Business Systems AG located in Solothurn, Switzerland and Bosch Telecom GmbH in Pandrup, Denmark, as well as acquire Uniskor, Ltd, located in Israel. While the Ascom transaction has already closed, the Bosch and Uniskor transactions are expected to close in the first quarter of 2001 and are subject to applicable governmental approvals and customary conditions of closing. These transactions will be accounted for under the purchase method of accounting and the purchase price, which is expected to aggregates $178.0 million, will be allocated to the net assets acquired based on their estimated values at the dates of acquisition. 14. Quarterly Financial Data (UNAUDITED) The following table contains selected unaudited quarterly financial data for 1999 and 2000 fiscal years.
FISCAL YEAR ENDED FISCAL YEAR ENDED MARCH 31, 1999 MARCH 31, 2000 -------------------------------------------- --------------------------------------------- First Second Third Fourth First Second Third Fourth ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales ............. $ 427,501 $ 515,394 $ 631,932 $ 658,381 $ 685,641 $ 941,760 $1,251,681 $1,428,111 Cost of sales ......... 391,095 472,804 582,306 607,266 633,360 869,276 1,164,498 1,337,492 Unusual charges ....... -- -- -- 3,361 -- -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Gross margin .......... 36,406 42,590 49,626 47,754 52,281 72,484 87,183 90,619 Selling, general and administrative ...... 15,994 19,420 21,527 24,656 25,859 29,802 37,076 42,803 Goodwill and intangible amortization ........ 884 890 893 997 1,414 1,460 1,471 2,437 Acquired in-process research and development ......... -- -- -- 2,000 -- -- -- -- Merger-related expenses -- -- -- -- -- 2,455 -- 1,068 Interest and other expense, net ........ 4,721 5,289 7,742 2,848 3,531 7,445 5,890 3,434 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income before Income taxes ........ 14,807 16,991 19,464 17,253 21,477 31,322 42,746 40,877 Income tax expense .... 1,576 1,726 2,079 2,251 2,623 3,170 4,680 5,034 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income ............ $ 13,231 $ 15,265 $ 17,385 $ 15,002 $ 18,854 $ 28,152 $ 38,066 $ 35,843 ========== ========== ========== ========== ========== ========== ========== ========== Diluted earnings per share ........... $ 0.14 $ 0.17 $ 0.18 $ 0.14 $ 0.17 $ 0.25 $ 0.31 $ 0.27 ========== ========== ========== ========== ========== ========== ========== ========== Weighted average ordinary shares and Equivalents outstanding - diluted 91,721 91,029 96,851 108,089 109,555 113,695 121,068 131,455 ========== ========== ========== ========== ========== ========== ========== ==========
60 63 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 61 64 PART III ITEM 10. DIRECTORS AND OFFICERS The names, ages and positions of our directors and officers as of June 1, 2000 are as follows:
NAME AGE POSITION ---- --- -------- Michael E. Marks..................... 49 Chairman of the Board and Chief Executive Officer Robert R. B. Dykes................... 50 President, Systems Group and Chief Financial Officer Ronny Nilsson........................ 51 President, Western European Operations Michael McNamara..................... 43 President, Americas Operations Ash Bhardwaj......................... 36 President, Asia Pacific Operations Humphrey Porter...................... 52 President, Central/Eastern European Operations Steven C. Schlepp.................... 44 President, Multek Ronald R. Snyder..................... 43 President, Flextronics Semiconductor Thomas J. Smach...................... 40 Vice President of Finance Tsui Sung Lam........................ 50 Director Michael J. Moritz.................... 45 Director Richard L. Sharp..................... 53 Director Patrick Foley........................ 68 Director Chuen Fah Alain Ahkong............... 52 Director Hui Shing Leong...................... 40 Director
MICHAEL E. MARKS -- Mr. Marks has been our Chief Executive Officer since January 1994 and the Chairman of our board of directors since July 1993. He has been a member of our board of directors since December 1991. From November 1990 to December 1993, Mr. Marks was President and Chief Executive Officer of Metcal, Inc., a precision heating instrument company. Mr. Marks received a B.A. and an M.A. from Oberlin College and an M.B.A. from the Harvard Business School. ROBERT R. B. DYKES -- Mr. Dykes has served as our Chief Financial Officer since February 1997, and as our President, Systems Group since April 1999. From February 1997 to April 1999, Mr. Dykes served as our Senior Vice President of Finance and Administration. Mr. Dykes served as a member of our board of directors from January 1994 until August 1997. From 1988 to February 1997, Mr. Dykes served as Executive Vice President, Worldwide Operations and Chief Financial Officer of Symantec Corporation, an application and system software products company. Mr. Dykes received a Bachelor of Commerce and Administration degree from Victoria University in Wellington, New Zealand. Mr. Dykes serves on the board of directors of Symantec Corporation. RONNY NILSSON -- Mr. Nilsson has served as our President, Western European Operations since April 1997. From May 1995 to April 1997, Mr. Nilsson served as Vice President and General Manager, Supply and Distribution and Vice President, Procurement of Ericsson Business Networks. From January 1991 to May 1995, Mr. Nilsson served as Director of Production of the EVOX+RIFA Group, a manufacturer of components, and Vice President of RIFA AB. Mr. Nilsson received a certificate in Mechanical Engineering from the Lars Kagg School in Kalmar, Sweden and certificates from the Swedish Management Institute and the Ericsson Management Program. MICHAEL MCNAMARA -- Mr. McNamara has served as our President of Americas Operations since April 1994. From May 1993 to March 1994, Mr. McNamara served as President and Chief Executive Officer of Relevant Industries, Inc., which we acquired in March 1994. From May 1992 to May 1993, Mr. McNamara served as Vice President, Manufacturing Operations at Anthem Electronics, an electronics distributor. From April 1987 to May 1992, Mr. McNamara was a Principal of Pittiglo, Rabin, Todd & McGrath, an operations consulting firm. Mr. McNamara received a B.S. from the University of Cincinnati and an M.B.A. from Santa Clara University. ASH BHARDWAJ -- Mr. Bhardwaj joined Flextronics in 1988. Most recently, Mr. Bhardwaj served as our Vice President for the China region. Mr. Bhardwaj received a degree in electrical engineering from Thapar Institute of Engineering and Technology and an M.B.A. from Southeastern Louisiana University. 62 65 HUMPHREY PORTER -- Mr. Porter has served as our President of Central and Eastern European Operations since October 1997. From July 1994 to October 1997, Mr. Porter served as President and Chief Executive Officer of Neutronics Electronics Industries Holding AG, which we acquired in October 1997. Prior to joining Neutronics, Mr. Porter served in various positions at Philips. Between 1989 and 1994, Mr. Porter served as Industrial Director for Philips Audio Austria, and between 1984 and 1989, Mr. Porter served as Managing Director of the Philips Audio factory in Penang, Malaysia. Mr. Porter has a B.Sc. in production engineering from Trent University. STEVEN C. SCHLEPP -- Mr. Schlepp has served as our President, Multek since April 2000 following our acquisition of DII. From June 1996 to April 2000, Mr. Schlepp served as Senior Vice President of DII and President of Multilayer Technology, Inc. From January 1991 until June 1996, Mr. Schlepp served as President of Toppan West Incorporated, a wholly owned subsidiary of Toppan Printing Ltd. RONALD R. SNYDER -- Mr. Snyder has served as our President, Flextronics Semiconductor since April 2000 following our acquisition of DII. From May 1998 to April 2000, Mr. Snyder served as Senior Vice President of DII and President of DII Semiconductor. From March 1994 until May 1998, Mr. Snyder served as Senior Vice President of Sales and Marketing of DII. From March 1993 to March 1994, Mr. Snyder served as President of Dovatron Manufacturing Colorado, a division of Dovatron International, Inc. THOMAS J. SMACH -- Mr. Smach has served as our Vice President, Finance since April 2000 following our acquisition of DII. From August 1997 to April 2000, Mr. Smach served as Senior Vice President, Chief Financial Officer, and Treasurer of DII. From March 1994 to August 1997, Mr. Smach served as Corporate Controller and Vice President of DII. From 1982 to March 1994, Mr. Smach served as a certified public accountant with KPMG LLP. TSUI SUNG LAM -- Mr. Tsui has served as a member of our board of directors since 1991. From January 1994 to April 1997, Mr. Tsui served as our President and Chief Operating Officer. From June 1990 to December 1993, Mr. Tsui served as our Managing Director and Chief Executive Officer. From 1982 to June 1990, Mr. Tsui served in various positions for Flextronics, Inc., our predecessor, including Vice President of Asian Operations. Mr. Tsui received Diplomas in Production Engineering and Management Studies from Hong Kong Polytechnic, and a Certificate in Industrial Engineering from Hong Kong University. MICHAEL J. MORITZ -- Mr. Moritz has served as a member of our board of directors since July 1993. Since 1988, Mr. Moritz has been a General Partner of Sequoia Capital, a venture capital firm. Mr. Moritz also serves as director of Yahoo, Inc., Neomagic, Etoys, Webvan, Saba Software, Agile Software, PlanetRx.com and several privately-held companies. RICHARD L. SHARP -- Mr. Sharp has served as a member of our board of directors since July 1993. Mr. Sharp is Chairman of the Board and Chief Executive Officer of Circuit City Stores, Inc., a consumer electronics and appliance retailer. Mr. Sharp joined Circuit City as an Executive Vice President in 1982. He was President from June 1984 to March 1997 and became Chief Executive Officer in 1986 and Chairman of the Board in 1994. Mr. Sharp also serves as a director of Fort James Corporation. PATRICK FOLEY -- Mr. Foley has served as a member of our board of directors since October 1997. Mr. Foley is Chairman, President and Chief Executive Officer of DHL Corporation, Inc. and its major subsidiary, DHL Airways, Inc., a global document, package and airfreight delivery company. Mr. Foley joined DHL in September 1988 with more than thirty years experience in hotel and airline industries. Mr. Foley also serves as a director of Continental Airlines, Inc., Del Monte Corporation, DHL International, Foundation Health Systems, Inc. and Glenborough Realty Trust, Inc. CHUEN FAH ALAIN AHKONG -- Mr. Ahkong has served as a member of our board of directors since October 1997. Mr. Ahkong is a founder of Pioneer Management Services Pte. Ltd., a Singapore-based 63 66 consultancy firm, and has been the Managing Director of Pioneer since 1990. Pioneer provides advice to us and other multinational corporations on matters related to international taxation. HUI SHING LEONG -- Mr. Hui has served as a member of our board of directors since October 1997. Since 1996, Mr. Hui has served as Managing Director of CS Hui Holdings in Malaysia. Between 1984 and 1994, Mr. Hui served as Managing Director of Samda Plastics Industries Ltd., a plastic injection molding company in Malaysia. Since 1994, Mr. Hui has also served as a committee member of the Penang, Malaysia Industrial Council, Vice-Chairman of the SMI Center in Malaysia and Chairman of the Sub-Committee Plastics Technology Training Center in Malaysia. Since 1990, Mr. Hui has served as President of the North Malaysian Small and Medium Enterprises Association. 64 67 ITEM 11. EXECUTIVE COMPENSATION Information with respect to this item may be found in the section captioned "Executive Compensation" appearing in our definitive proxy statement to be delivered to shareholders in connection with our 2000 Annual General Meeting of Shareholders. Such information is incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to this item may be found in the section captioned "Security Ownership of Certain Beneficial Owners and Management" appearing in our definitive proxy statement to be delivered to shareholders in connection with our 2000 Annual General Meeting of Shareholders. Such information is incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to this item may be found in the section captioned "Certain Relationships and Related Transactions" appearing in our definitive proxy statement to be delivered to shareholders in connection with our 2000 Annual General Meeting of Shareholders. Such information is incorporated by reference. 65 68 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Documents to be filed as part of this Annual Report on Form 10-K 1. Financial Statements. See Item 8 2. Financial Statement Schedules. The following financial statement is filed as part of this report and should be read together with our financial statements: Schedule II - Valuation and qualifying accounts 3. Exhibits. The following exhibits are filed herewith:
EXHIBIT NUMBER EXHIBIT TITLE ------- ------------- 2.01 Agreement among the Registrant, Alberton Holdings Limited and Omac Sales Limited dated as of January 6, 1996. (Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K for the event reported on February 2, 1996.) 2.02 Asset Transfer Agreement between Ericsson Business Networks AB and Flextronics International Sweden AB dated as February 12, 1997. Certain schedules have been omitted. The Registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request. (Incorporated by reference to Exhibit 2.6 of the Registrant's registration statement on Form S-3, No. 333-21715.) 2.03 Exchange Agreement dated October 19, 1997 by and among Registrant, Neutronics Electronic Industries Holding A.G. and the named Shareholders of Neutronics Electronic Industries Holding A.G. (Incorporated by reference to Exhibit 2 of the Registrant's Current Report on Form 8-K for the event reported on October 30, 1997.) 2.04 Agreement and Plan of Merger dated as of November 22, 1999 among the Registrant, Slalom Acquisition Corp. and The DII Group, Inc. Certain schedules have been omitted. The Registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request (Incorporated by reference to Exhibit 2.1 of the Registrant's Current Report on Form 8-K for event reported on November 22, 1999). 3.01 Memorandum of Association of the Registrant. (Incorporated by reference to Exhibit 3.1 of the Registrant's registration statement on Form S-1, No. 33-74622.) 3.02 Articles of Association of the Registrant. (Incorporated by reference to Exhibit 3.2 of the Registrant's registration statement on Form S-4, No. 33-85842.) 4.01 Indenture dated as of October 15, 1997 between Registrant and State Street Bank and Trust Company of California, N.A., as trustee. (Incorporated by reference to Exhibit 10.1 of the Registrant's Current Report on Form 8-K for event reported on October 15, 1997.) 10.01 Form of Indemnification Agreement between the Registrant and its Directors and certain officers. (Incorporated by reference to Exhibit 10.1 of the Registrant's registration statement on Form S-1, No. 33-74622.) 10.02 1993 Share Option Plan. (Incorporated by reference to Exhibit 4.2 of the Registrant's registration statement on Form S-8, No. 33-95189). 10.03 1997 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 4.3 of the Registrant's registration statement on Form S-8, No. 33-95189). 10.04 nCHIP, Inc. Amended and Restated 1988 Stock Option Plan. (Incorporated by reference to Exhibit 10.5 of the Registrant's registration statement on Form S-4, No. 33-85842.) 10.05* Agreement to Grant Options dated as of June 9, 1995 between the Company and Lifescan. (Incorporated by reference to Exhibit 10.7 of the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1995.) 10.06 Lease Agreement dated as of October 1, 1994 among Shenzhen Xinan Industrial Shareholdings Limited, Flextronics Industrial (Shenzhen) Limited and Flextronics Singapore Pte Ltd. (Incorporated by reference to Exhibit 10.25 of the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1995.) 10.07 Lease Agreement dated as of January 2, 1995 between Shenzhen Xinan Industrial Shareholdings Limited and Flextronics Industrial (Shenzhen) Limited. (Incorporated by reference to Exhibit 10.25 of the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1995.)
66 69
EXHIBIT NUMBER EXHIBIT TITLE ------- ------------- 10.08 Intentionally omitted 10.09 Intentionally omitted 10.10 Promissory Note dated April 17, 1995 executed by Michael E. Marks in favor of Flextronics Technologies, Inc. (Incorporated by reference to Exhibit 10.34 to the Registrant's Annual Report on Form 10-K for the fiscal year ended March 31, 1995.) 10.11* Printed Circuit Board Assembly Services Agreement between Lifescan Inc., a Johnson & Johnson Company, and the Registration dated November 1, 1992. (Incorporated by reference to Exhibit 10.41 of the Registrant's registration statement on Form S-1, No. 33-74622.) 10.12 Tenancy of Flatted Factory Unit dated February 28, 1996 between Jurong Town Corporation and the Registrant. (Incorporated by reference to Exhibit 10.44 of the Registrant's Annual Report on Form 10-K for fiscal year ended March 31, 1990.) 10.13 Tenancy of Flatted Factory Unit dated May 14, 1993 between Jurong Town Corporation and the Registrant. (Incorporated by reference to Exhibit 10.45 of the Registrant's registration statement on Form S-1, No. 33-74622.) 10.14 Flextronics Asia U.S.A. 401(k) plan. (Incorporated by reference to Exhibit 10.52 of the Registrant's registration statement on Form S-1, No. 33-74622.) 10.15 Credit Agreement dated as of October 27, 1999 by and among Flextronics International Ltd, the lenders named therein, ABN AMRO, as agent, BankBoston, N.A. as documentation agent and Bank of America, N.A., Banque Nationale de Paris, The Bank of Nova Scotia and Citicorp USA, Inc., as co-agents (Incorporated by reference to Exhibit 10.01 of the Company's Report on Form 10-Q/A for the quarterly period ended December 31, 1999.) 10.16 Credit Agreement dated October 27, 1999 by and among Flextronics International USA, Inc., the lenders named therein, ABN AMRO Bank N.V., as agent, BankBoston, N.A., as documentation agent, and Bank of America, N.A., Banque Nationale de Paris, The Bank of Nova Scotia and Citicorp USA, Inc., as co-agents. (Incorporated by reference to Exhibit 10.02 of the Registrant's Report on Form 10-Q/A for the quarterly period ended December 31, 1999.) 10.17 Employment and Noncompetition Agreement dated as of April 30, 1997 between Flextronics International Sweden AB and Ronny Nilsson. (Incorporated by reference to Exhibit 10.29 of the Registrant's Annual Report on Form 10-K for fiscal year ended March 31, 1997.) 10.18 Services Agreement dated as of April 30, 1997 between Flextronics International USA, Inc. and Ronny Nilsson. (Incorporated by reference to Exhibit 10.30 of the Registrant's Annual Report on Form 10-K for fiscal year ended March 31, 1997.) 10.19 Promissory Note dated April 15, 1997 executed by Ronny Nilsson in favor of Flextronics International USA, Inc. (Incorporated by reference to Exhibit 10.31 of the Registrant's Annual Report on Form 10-K for fiscal year ended March 31, 1997.) 10.20 Intentionally omitted 10.21 Intentionally omitted 10.22 Intentionally omitted 10.23 Intentionally omitted 10.24 Loan Agreement between Flextronics International USA, Inc. as lender, and Michael E. Marks, as borrower dated November 6, 1997. (Incorporated by reference to Exhibit 10.35 of the Registrant's Registration Statement on Form S-4, No. 333-41293.) 10.25 Secured Full Recourse Promissory Note, dated November 6, 1997, executed by Michael E. Marks in favor of Flextronics International USA, Inc. (Incorporated by reference to Exhibit 10.36 to the Registrant's Registration Statement on Form S-4, No. 333-41293.) 10.26 Credit Agreement dated as of April 3, 2000 among the Registrant, and its subsidiaries designated under the agreement as borrowers from time to time, the lenders named in Schedule I to the Credit Agreement, ABN AMRO Bank N.V. as agent for the lenders, Fleet National Bank as documentation
67 70
EXHIBIT NUMBER EXHIBIT TITLE ------- ------------- agent, Bank of America, National Association and Citicorp USA, Inc. as managing agents, and The Bank of Nova Scotia as co-agent (certain disclosure schedules have been omitted and will be provided to the Securities and Exchange Commission upon request). 10.27 Credit Agreement dated as of April 3, 2000 among Flextronics International USA, Inc., The DII Group, Inc., the lenders named in Schedule I to the Credit Agreement, ABN AMRO Bank N.V. as agent for the lenders, Fleet National Bank, as documentation agent, Bank of America, National Association and Citicorp USA, Inc. as managing agents, and The Bank of Nova Scotia as co-agent (certain disclosure schedules have been omitted and will be provided to the Securities and Exchange Commission upon request). 21.01 Subsidiaries of Registrant. 23.01 Consent of Arthur Andersen LLP. 27.01 Financial Data Schedule (EDGAR only).
- ---------- * Confidential treatment requested for portions of agreement. (b) Reports on Form 8-K We filed a current report on Form 8-K, in connection with our entering into an underwriting agreement on February 24, 2000 with Banc of America Securities LLC, providing for the public offering of 8,600,000 ordinary shares at a public offering price of $59.00 per share. The only exhibits filed with this report were such underwriting agreement and the press release relating to such public offering. 68 71 SIGNATURES Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereto duly authorized. Date : June 12, 2000 FLEXTRONICS INTERNATIONAL LTD. By: /s/ MICHAEL E. MARKS --------------------------------- Michael E. Marks POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints jointly and severally, Michael E. Marks and Robert R.B. Dykes and each one of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any and all amendments to this Report (including any and all amendments), and to file the same, with exhibits thereto and other documents In connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ MICHAEL E. MARKS Chairman of the Board, and June 12, 2000 - ----------------------------------- Chief Executive Officer Michael E. Marks (principal executive officer) /s/ ROBERT R.B. DYKES President, Systems Group and June 12, 2000 - ----------------------------------- Chief Financial Officer Robert R.B. Dykes /s/ THOMAS J. SMACH Vice President of Finance June 12, 2000 - ----------------------------------- (principal financial and Thomas J. Smach accounting officer) /s/ TSUI SUNG LAM Director June 12, 2000 - ----------------------------------- Tsui Sung Lam /s/ MICHAEL J. MORITZ Director June 12, 2000 - ----------------------------------- Michael J. Moritz /s/ RICHARD L. SHARP Director June 12, 2000 - ----------------------------------- Richard L. Sharp Director June 12, 2000 - ----------------------------------- Patrick Foley /s/ ALAIN AHKONG Director June 12, 2000 - ----------------------------------- Alain Ahkong /s/ HUI SHING LEONG Director June 12, 2000 - ----------------------------------- Hui Shing Leong
69 72 EXHIBIT INDEX
Exhibit Number Exhibit Title - ------- ------------- 10.26 Credit Agreement dated as of April 3, 2000 among the Registrant, and its subsidiaries designated under the agreement as borrowers from time to time, the lenders named in Schedule I to the Credit Agreement, ABN AMRO Bank N.V. as agent for the lenders, Fleet National Bank as documentation agent, Bank of America, National Association and Citicorp USA, Inc. as managing agents, and The Bank of Nova Scotia as co-agent (certain disclosure schedules have been omitted and will be provided to the Securities and Exchange Commission upon request). 10.27 Credit Agreement dated as of April 3, 2000 among Flextronics International USA, Inc., The DII Group, Inc., the lenders named in Schedule I to the Credit Agreement, ABN AMRO Bank N.V. as agent for the lenders, Fleet National Bank, as documentation agent, Bank of America, National Association and Citicorp USA, Inc. as managing agents, and The Bank of Nova Scotia as co-agent (certain disclosure schedules have been omitted and will be provided to the Securities and Exchange Commission upon request). 21.01 Subsidiaries of Registrant. 23.01 Consent of Arthur Andersen LLP. 27.01 Financial Data Schedule (EDGAR only).
EX-10.26 2 0002.txt EXHIBIT 10.26 1 EXHIBIT 10.26 EXECUTION VERSION ================================================================================ CREDIT AGREEMENT AMONG FLEXTRONICS INTERNATIONAL LTD. AND DESIGNATED BORROWERS AND THE LENDERS NAMED HEREIN AND ABN AMRO BANK N.V., AS AGENT FOR LENDERS AND FLEET NATIONAL BANK AS DOCUMENTATION AGENT AND BANK OF AMERICA, NATIONAL ASSOCIATION AND CITICORP USA, INC. AS MANAGING AGENTS AND THE BANK OF NOVA SCOTIA AS CO-AGENT APRIL 3, 2000 ================================================================================ 2 TABLE OF CONTENTS
PAGE SECTION I. INTERPRETATION............................................................1 1.01. Definitions..................................................................1 1.02. GAAP........................................................................17 1.03. Headings....................................................................17 1.04. Plural Terms................................................................17 1.05. Governing Law...............................................................17 1.06. English Language............................................................17 1.07. Construction................................................................17 1.08. Entire Agreement............................................................17 1.09. Calculation of Interest and Fees............................................17 1.10. References..................................................................17 1.11. Other Interpretive Provisions...............................................18 SECTION II. CREDIT FACILITIES........................................................18 2.01. Loans.......................................................................18 2.02. Notice of Borrowing.........................................................20 2.03. Interest....................................................................21 2.04. Purpose.....................................................................22 2.05. Amount Limitations, Commitment Reductions, Etc..............................22 2.06. Fees........................................................................24 2.07. Prepayments.................................................................24 2.08. Other Payment Terms.........................................................25 2.09. Loan Accounts; Notes........................................................26 2.10. Loan Funding................................................................26 2.11. Pro Rata Treatment..........................................................27 2.12. Change of Circumstances.....................................................28 2.13. Taxes on Payments...........................................................30 2.14. Funding Loss Indemnification................................................31 2.15. Security....................................................................31 2.16. Replacement of Lenders......................................................32
i 3 TABLE OF CONTENTS (continued)
PAGE SECTION III. CONDITIONS PRECEDENT.....................................................33 3.01. Initial Conditions Precedent................................................33 3.02. Conditions Precedent to Term Loan Borrowing.................................33 3.03. Conditions Precedent to Each Credit Event...................................33 3.04. Covenant to Deliver.........................................................33 3.05. Conditions Precedent to Adding Designated Borrower..........................34 SECTION IV. REPRESENTATIONS AND WARRANTIES...........................................34 4.01. Borrowers' Representations and Warranties...................................34 4.02. Reaffirmation...............................................................38 SECTION V. COVENANTS................................................................38 5.01. Affirmative Covenants.......................................................38 5.02. Negative Covenants..........................................................40 5.03. Financial Covenants.........................................................45 SECTION VI. DEFAULT..................................................................45 6.01. Events of Default...........................................................45 6.02. Remedies....................................................................47 6.03. Lender Rate Contract Remedies...............................................47 SECTION VII. THE AGENT AND RELATIONS AMONG LENDERS....................................47 7.01. Appointment, Powers and Immunities..........................................47 7.02. Reliance by Agent...........................................................47 7.03. Defaults....................................................................48 7.04. Indemnification.............................................................48 7.05. Non-Reliance................................................................48 7.06. Resignation or Removal of Agent.............................................48 7.07. Agent in its Individual Capacity............................................48 7.08. Documentation Agent, Managing Agents and Co-Agent...........................49 SECTION VIII. MISCELLANEOUS............................................................49 8.01. Notices.....................................................................49 8.02. Expenses....................................................................50 ii
4 TABLE OF CONTENTS (Continued)
PAGE 8.03. Indemnification.............................................................50 8.04. Waivers; Amendments.........................................................50 8.05. Successors and Assigns......................................................51 8.06. Setoff; Security Interest...................................................53 8.07. No Third Party Rights.......................................................54 8.08. Partial Invalidity..........................................................54 8.09. Jury Trial..................................................................54 8.10. Counterparts................................................................54 8.11. Borrowers' Liabilities......................................................54 8.12. Confidentiality.............................................................54 8.13. Consent to Jurisdiction.....................................................54 8.14. Usury.......................................................................55 8.15. Hong Kong Branch; Full Recourse Obligations.................................55 8.16. Effect......................................................................55
SCHEDULES I Lenders II Pricing Grid 3.01 Initial Conditions Precedent 4.01(o) Subsidiaries 5.02(a) Existing Secured Indebtedness 5.02(e) Existing Investments EXHIBITS A Notice of Revolving Loan Borrowing (2.02(a)) B Notice of Term Loan Borrowing (2.02(b)) C(1) Revolving Loan Note (2.09(b)) C(2) Term Loan Note (2.09(b)) D Guaranty (2.15(a)) E Pledge Agreement (2.15(a)) F Assignment Agreement (8.05(c))
iii 5 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of April 3, 2000, is entered into by and among: (1) FLEXTRONICS INTERNATIONAL LTD., a Singapore corporation ("FIL") acting, subject to Paragraph 8.15 hereof, through its Hong Kong branch, and each of the Subsidiaries of FIL designated as borrowers from time to time, as approved by all Lenders and Guarantors hereunder (such subsidiaries to be referred to herein collectively as "Designated Borrowers"); (2) Each of the financial institutions from time to time listed in Schedule I hereto, as amended from time to time (such financial institutions to be referred to herein collectively as "Lenders"); (3) ABN AMRO BANK N.V., as agent for Lenders (in such capacity, "Agent"); (4) Fleet National Bank, as documentation agent for Lenders (in such capacity, "Documentation Agent"); (5) Bank of America, National Association and Citicorp USA, Inc., as managing agents (collectively, in such capacity, the "Managing Agents"); and (6) The Bank of Nova Scotia, as co-agent (in such capacity, the "Co-Agent"). RECITALS A. FIL has requested Lenders to provide certain credit facilities to FIL and Designated Borrowers (collectively, "Borrowers"). B. Lenders are willing to provide such credit facilities upon the terms and subject to the conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the above Recitals and the mutual covenants herein contained, the parties hereto hereby agree as follows: SECTION I. INTERPRETATION. 1.01. Definitions. Unless otherwise indicated in this Agreement or any other Credit Document, each term set forth below, when used in this Agreement or any other Credit Document, shall have the respective meaning given to that term below or in the provision of this Agreement or other document, instrument or agreement referenced below. "ABN AMRO" shall mean ABN AMRO Bank N.V. "Affiliate" shall mean, with respect to any Person, each other Person that (a) directly or indirectly, owns or controls, whether beneficially or as a trustee, guardian or other fiduciary, ten percent (10%) or more of any class of Equity Securities of such Person or (b) that controls, is controlled by or is under common control with such Person or any Affiliate of such Person; provided, however, that in no case shall Agent or any Lender be deemed to be an Affiliate of any Borrower or any of its Subsidiaries for purposes of this Agreement. For the purpose of this definition, "control" of a Person shall mean the possession, 6 directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. "Agent" shall have the meaning given to that term in clause (3) of the introductory paragraph hereof. "Agent's Fee Letter" shall mean the letter agreement dated as of February 28, 2000 between FIL and Agent. "Agreement" shall mean this Credit Agreement. "Alternative Currency" shall mean any Currency (other than United States Dollars). "Alternative Currency Equivalent" shall mean, as to any amount denominated in United States Dollars as of any date of determination, the amount of the applicable Alternative Currency that could be purchased with such amount of Dollars based upon the spot selling rate at which ABN AMRO's London office offers to sell such Alternative Currency for Dollars in the London foreign exchange market at approximately 11:00 a.m. London time on such date for delivery two (2) Business Days later. "Applicable Lending Office" shall mean, with respect to any Lender and any Borrowing, such Lender's Lending Office. "Applicable Margin" shall mean, with respect to any Borrowing or Borrowing Portion at any time, the per annum margin which is determined pursuant to the Pricing Grid and added to the Base Rate or LIBO Rate, as the case may be, for such Borrowing or Portion; provided, however, that each Applicable Margin determined pursuant to the Pricing Grid shall be increased by two percent (2.00%) per annum on the date an Event of Default occurs and shall continue at such increased rate unless and until such Event of Default is cured or waived in accordance with this Agreement. The Applicable Margins shall be determined as provided in the Pricing Grid (subject to the proviso in the preceding sentence) and may change for each Pricing Period. "Applicable Payment Office" shall have the meaning given to that term in Subparagraph 2.13(b). "Applicable Rate Page" shall mean, with respect to any currency at any time, the applicable Telerate Page on which appears the London Interbank Offered Rate for deposits in such currency at such time or, if no such page is then available, the applicable Reuters Screen Page on which such information then appears. "Assignee Lender" shall have the meaning given to that term in Subparagraph 8.05(c). "Assignment" shall have the meaning given to that term in Subparagraph 8.05(c). "Assignment Agreement" shall have the meaning given to that term in Subparagraph 8.05(c). "Assignment Effective Date" shall have, with respect to each Assignment Agreement, the meaning set forth therein. "Assignor Lender" shall have the meaning given to that term in Subparagraph 8.05(c). "Base Rate" shall mean, on any day, the greater of (a) the Prime Rate in effect on such date and (b) the Federal Funds Rate for such day plus one-half percent (0.50%). "Base Rate Borrowing" shall mean any Revolving Loan Borrowing consisting of Base Rate Loans. 2 7 "Base Rate Loan" shall mean any Revolving Loan bearing interest based upon the Base Rate. "Base Rate Portion" shall mean a portion of a Term Loan Borrowing or a Term Loan bearing interest based upon the Base Rate. "Borrowers" shall have the meaning given to that term in Recital A. "Borrowing" shall mean any Facility A Revolving Loan Borrowing, any Facility B Revolving Loan Borrowing or any Term Loan Borrowing. "Business Day" shall mean any day on which commercial banks are not authorized or required to close in San Francisco, California, New York, New York or Chicago, Illinois, other than Saturday or Sunday, and (a) if such Business Day is related to a Borrowing in United States Dollars, dealings in Dollar deposits are carried out in the London interbank market and commercial banks are open for business in London or (b) if such Business Day is related to a Borrowing in an Alternative Currency, dealings in such currency are carried out in the London interbank market and commercial banks are open for business in London. "Capital Adequacy Requirement" shall have the meaning given to that term in Subparagraph 2.12(d). "Capital Leases" shall mean any and all lease obligations that, in accordance with GAAP, are required to be capitalized on the books of a lessee. "Change of Control" shall mean, with respect to FIL (i) the acquisition after the date hereof by any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934 (as amended, the "Exchange Act")) of (A) beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act) of fifty percent (50%) or more of the outstanding Equity Securities of Borrower entitled to vote for members of the board of directors, or (B) all or substantially all of the assets of Borrower; (ii) during any period of twelve (12) consecutive calendar months, individuals who are directors of Borrower on the first day of such period ("Initial Directors") and any directors of Borrower who are specifically approved by two-thirds of the Initial Directors and previously-approved Directors shall cease to constitute a majority of the Board of Directors of Borrower before the end of such period; or (iii) any other event or condition constituting a "Change of Control" (or similar defined term) under the Subordinated Indenture shall occur or exist. "Change of Law" shall have the meaning given to that term in Subparagraph 2.12(b). "Closing Date" shall mean April 3, 2000. "Co-Agent" shall have the meaning given to that term in clause (6) of the introductory paragraph hereof. "Collateral" shall mean all property in which Agent or any Lender has a Lien to secure the Obligations. "Commitment Fee Percentage" shall mean the per annum percentage which is used to calculate the Commitment Fees. The Commitment Fee Percentage shall be determined as provided in the Pricing Grid and may change for each Pricing Period. "Commitment Fees" shall mean, collectively, the Facility A Commitment Fees and the Facility B Commitment Fees. "Commitments" shall mean, collectively, the Facility A Commitments and the Facility B Commitments. 3 8 "Compliance Certificate" shall have the meaning given to that term in Subparagraph 5.01(a). "Contingent Obligation" shall mean, with respect to any Person, (a) any Guaranty Obligation of that Person; and (b) any direct or indirect obligation or liability, contingent or otherwise, of that Person (i) in respect of any Surety Instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments or (ii) in respect to any Rate Contract that is not entered into in connection with a bona fide hedging operation that provides offsetting benefits to such Person. The amount of any Contingent Obligation shall (subject, in the case of Guaranty Obligations, to the last sentence of the definition of "Guaranty Obligation") be deemed equal to the maximum reasonably anticipated liability in respect thereof, and shall, with respect to item (b)(ii) of this definition be marked to market on a current basis. "Contractual Obligation" of any Person shall mean, any indenture, note, lease, loan agreement, security, deed of trust, mortgage, security agreement, guaranty, instrument, contract, agreement or other form of contractual obligation or undertaking to which such Person is a party or by which such Person or any of its property is bound. "Credit Documents" shall mean and include this Agreement, the Notes, the Security Documents, Lender Rate Contracts and the Agent's Fee Letter, the FIUI Credit Documents, all other documents, instruments and agreements delivered to Agent or any Lender pursuant to Section III; and all other documents, instruments and agreements delivered by any Borrower or any of its Guarantors or Subsidiaries to Agent or any Lender in connection with this Agreement on or after the date of this Agreement. "Credit Event" shall mean (a) the making of any Loan, (b) the conversion of any Portion of a Term Loan Borrowing into a LIBOR Portion, (c) the selection of a new Interest Period exceeding one (1) month for any LIBOR Portion of a Term Loan Borrowing and (d) the selection of a new Interest Period exceeding one (1) month for any LIBOR Borrowing. "Currencies" shall mean United States Dollars, Swiss francs, United Kingdom pounds and Euros. "Debt/EBITDA Ratio" shall mean, with respect to FIL for any period, the ratio, determined on a consolidated basis in accordance with GAAP, of: (a) The total Indebtedness of FIL and its Subsidiaries on the last day of such period; provided, however, that in computing the foregoing sum, there shall be excluded therefrom any Indebtedness to the extent the proceeds of which are (i) legally segregated from FIL's or such Subsidiaries' other assets and (ii) either (A) only held in the form of cash or cash equivalents or (B) used by FIL or its Subsidiaries for any such purpose as may be approved in advance from time to time by the Required Lenders; to (b) The EBITDA of FIL and its Subsidiaries for such period. "Default" shall mean an Event of Default or any event or circumstance not yet constituting an Event of Default which, with the giving of any notice or the lapse of any period of time or both, would become an Event of Default. "Defaulting Lender" shall mean a Lender which has failed to fund its portion of any Borrowing which it is required to fund under this Agreement and has continued in such failure for three (3) Business Days after written notice from Agent. "Designated Borrower" shall have the meaning given to that term in clause (1) of the introductory paragraph hereof. 4 9 "DII" shall mean The DII Group, Inc., a Delaware corporation. "DII Acquisition" shall mean the merger of DII with a wholly-owned Subsidiary of FIUI as a result of which the outstanding capital stock of DII shall be converted into the right to receive ordinary shares in FIL. "Documentation Agent" shall have the meaning given to that term in clause (4) of the introductory paragraph hereof. "Dollar Equivalent" shall mean, as to any amount denominated in an Alternative Currency as of any date of determination, the amount of Dollars that would be required to purchase the amount of such Alternative Currency based upon the spot selling rate at which ABN AMRO's London office offers to sell such Alternative Currency for Dollars in the London foreign exchange market at approximately 11:00 a.m. London time on such date for delivery two (2) Business Days later. "Dollars" and "$" shall mean, unless otherwise indicated, the lawful currency of the United States of America and, in relation to any payment under this Agreement, same day or immediately available funds. "EBITDA" shall mean, with respect to FIL for any period, the sum, determined on a consolidated basis in accordance with GAAP, of the following: (a) The net income or net loss of FIL and its Subsidiaries for such period before provision for income taxes; plus (b) The sum (to the extent deducted in calculating net income or loss in clause (a) above) of (i) all Interest Expenses of FIL and its Subsidiaries accruing during such period, (ii) all depreciation and amortization expenses of FIL and its Subsidiaries accruing during such period and (iii) other noncash charges for such period. "Eligible Assignee" shall mean (a) a commercial bank, (b) a subsidiary, affiliate or branch of a Lender, or (c) any other financial institution that makes or purchases commercial loans in the ordinary course of business, in each case having a combined capital and surplus of at least $100,000,000. "Eligible Material Subsidiary" shall mean, at any time, any Material Subsidiary that is not then an Ineligible Material Subsidiary. "Employee Benefit Plan" shall mean any employee benefit plan within the meaning of section 3(3) of ERISA maintained or contributed to by any Borrower, any Material Subsidiary or any ERISA Affiliate, other than a Multiemployer Plan. "Environmental Laws" shall mean all the Governmental Rules relating to the protection of human health and the environment, including all Governmental Rules pertaining to the reporting, licensing, permitting, transportation, storage, disposal, investigation or remediation of emissions, discharges, releases, or threatened releases of Hazardous Materials into the air, surface water, groundwater, or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation or handling of Hazardous Materials. "Equity Securities" of any Person shall mean (a) all common stock, preferred stock, participations, shares, partnership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any of the foregoing. 5 10 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may from time to time be amended or supplemented, including any rules or regulations issued in connection therewith. "ERISA Affiliate" shall mean any Person which is treated as a single employer with any Borrower or any Material Subsidiary under Section 414 of the IRC. "Euro" shall mean the single currency of participating member states of the European Union. "Event of Default" shall have the meaning given to that term in Paragraph 6.01. "Existing Secured Indebtedness" shall mean the secured Indebtedness existing on the Closing Date specified on Schedule 5.02(a). "Excluded Taxes" shall mean all Taxes measured by or imposed upon the overall net income of any Lender or one of its Applicable Lending Offices and all franchise taxes imposed upon any Lender, in each case imposed (i) by the jurisdiction under the laws of which such Lender or one of its Applicable Lending Offices is organized or is located, or in which its principal executive office is located, or any nation within which such jurisdiction is located or any political subdivision thereof or (ii) by reason of any connection between the jurisdiction imposing such tax and such Lender or one of its Applicable Lending Offices other than a connection arising solely from such Lender having executed, delivered or performed its obligations under, or received payment under or enforced, this Agreement or any of the other Credit Documents. "Existing FIL Credit Agreement" shall mean the Credit Agreement dated as of October 27, 1999, among FIL, ABN AMRO and other lending institutions, and ABN AMRO, as agent for itself and such other lending institutions. "Existing FIL Credit Documents" shall mean the "Credit Documents" as defined in the Existing FIL Credit Agreement. "Facility" shall mean Facility A or Facility B. "Facility A" shall mean the revolving credit facility provided to Borrowers pursuant to Subparagraph 2.01(a). "Facility A Commitment" shall mean, with respect to each Lender, the Dollar amount set forth under the caption "Facility A Commitment" opposite such Lender's name on Part A of Schedule I, or, if changed, such Dollar amount as may be set forth for such Lender in the Register. "Facility A Commitment Fees" shall have the meaning given to that term in clause (i) of Subparagraph 2.06(b). "Facility A Lender" shall mean, at any time, any Lender then having a Facility A Commitment or a Facility A Revolving Loan outstanding. "Facility A Maturity Date" shall mean April 3, 2003. 6 11 "Facility A Proportionate Share" shall mean: (a) With respect to any Facility A Lender at any time prior to the termination of the Facility A Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) such Lender's Facility A Commitment at such time to (ii) the Total Facility A Commitment at such time; and (b) With respect to any Facility A Lender at any time after the termination of the Facility A Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) the aggregate principal amount of such Lender's Facility A Revolving Loans outstanding at such time to (ii) the sum of the aggregate principal amount of all Facility A Revolving Loans outstanding at such time. "Facility A Revolving Loan" shall have the meaning given to that term in clause (i) of Subparagraph 2.01(a). "Facility A Revolving Loan Borrowing" shall mean a borrowing consisting of all the Facility A Revolving Loans of the same currency and Type (and same Interest Period if LIBOR Loans) made by Facility A Lenders on the same date pursuant to the same Notice of Revolving Loan Borrowing. Any reference to a Facility A Revolving Loan Borrowing shall include all of the Facility A Revolving Loans constituting such Facility A Revolving Loan Borrowing. "Facility B" shall mean the revolving credit facility and term loan credit facility provided to Borrowers pursuant to Subparagraph 2.01(b) and Subparagraph 2.01(c). "Facility B Commitment" shall mean, with respect to each Lender, the Dollar amount set forth under the caption "Facility B Commitment" opposite such Lender's name on Part A of Schedule I, or, if changed, such Dollar amount as may be set forth for such Lender in the Register. "Facility B Commitment Fees" shall have the meaning given to that term in clause (ii) of Subparagraph 2.06(b). "Facility B Lender" shall mean, at any time, any Lender then having a Facility B Commitment or a Facility B Loan outstanding. "Facility B Loan" shall mean a Facility B Revolving Loan or a Term Loan. "Facility B Proportionate Share" shall mean: (a) With respect to any Facility B Lender at any time prior to the termination of the Facility B Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) such Lender's Facility B Commitment at such time to (ii) the Total Facility B Commitment at such time; and (b) With respect to any Facility B Lender at any time after the termination of the Facility B Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) the aggregate principal amount of such Lender's Facility B Loans outstanding at such time to (ii) the sum of the aggregate principal amount of all Facility B Loans outstanding at such time. "Facility B Revolving Loan" shall have the meaning given to that term in clause (i) of Subparagraph 2.01(b). "Facility B Revolving Loan Borrowing" shall mean a borrowing consisting of all the Facility B Revolving Loans of the same currency and Type (and same Interest Period if LIBOR Loans) made by 7 12 Facility B Lenders on the same date pursuant to the same Notice of Revolving Loan Borrowing. Any reference to a Facility B Revolving Loan Borrowing shall include all of the Facility B Revolving Loans constituting such Facility B Revolving Loan Borrowing. "Facility B Revolving Loan Maturity Date" shall mean the date 364 days after the date of this Agreement. "Federal Funds Rate" shall mean, for any day, the rate per annum set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor publication, "H.15 (519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day, such rate is not yet published in H.15 (519), the rate for such day shall be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor publication, the "Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds Effective Rate". If on any relevant day, such rate is not yet published in either H.15 (519) or the Composite 3:30 p.m. Quotations, the rate for such day shall be the arithmetic means, as determined by Agent, of the rates quoted to Agent for such day by three (3) Federal funds brokers of recognized standing selected by Agent for overnight federal funds transactions. "Federal Reserve Board" shall mean the Board of Governors of the Federal Reserve System. "FIL" shall have the meaning given to that term in clause (1) of the introductory paragraph hereof. "Financial Statements" shall mean, with respect to any accounting period for any Person, statements of income, shareholders' equity and cash flows of such Person for such period, and a balance sheet of such Person as of the end of such period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year if such period is less than a full fiscal year or, if such period is a full fiscal year, corresponding figures from the preceding annual audit, all prepared in reasonable detail and in accordance with GAAP. "FIUI" shall mean Flextronics International USA, Inc., a California corporation. "FIUI Credit Agreement" shall mean the Credit Agreement dated the date hereof among FIUI, DII, each of the financial institutions from time to time party thereto, ABN AMRO Bank N.V., as agent, and Fleet National Bank, as documentation agent, Bank of America, National Association and Citicorp USA, Inc., as managing agents, and The Bank of Nova Scotia, as co-agent, as amended or restated from time to time. "FIUI Credit Documents" shall mean the FIUI Credit Agreement and all agreements, documents and instruments delivered to the agent or any Lender under the FIUI Credit Agreement. "Fixed Charge Coverage Ratio" shall mean, with respect to FIL for any period, the ratio, determined on a consolidated basis in accordance with GAAP, of: (a) The EBITDA of FIL and its Subsidiaries for such period; to (b) The remainder of: (i) The sum of (A) all Interest Expenses of FIL and its Subsidiaries for such period, plus (B) fifty percent (50%) of the aggregate principal amount of all Loans outstanding under Facility B and all loans outstanding under "Facility B" of the FIUI Credit Agreement on the last day of such period, plus (C) the current portion of the long-term Indebtedness of FIL and its Subsidiaries on the last day of such period (other than 8 13 the Loans outstanding under Facility B and loans outstanding under Facility B of the FIUI Credit Agreement), minus (ii) All interest income earned by FIL and its Subsidiaries during such period. "Foreign Plan" shall mean any employee benefit plan maintained by any Borrower or any of its Subsidiaries which is mandated or governed by any Governmental Rule of any Governmental Authority other than the United States. "Foreign Subsidiary" shall mean any Subsidiary of FIL that is organized under the laws of a jurisdiction other than the United States or a state thereof. "GAAP" shall mean generally accepted accounting principles and practices as in effect in the United States of America from time to time, consistently applied, subject to Paragraph 1.02 hereof. "Governmental Authority" shall mean any domestic or foreign national, state or local government, any political subdivision thereof, any department, agency, authority or bureau of any of the foregoing, or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including, without limitation, the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Comptroller of the Currency, any central bank or any comparable authority. "Governmental Charges" shall mean, with respect to any Person, all levies, assessments, fees, claims or other charges imposed by any Governmental Authority upon such Person or any of its property or otherwise payable by such Person. "Governmental Rule" shall mean any law, rule, regulation, ordinance, order, code interpretation, judgment, decree, directive, guidelines, policy or similar form of decision of any Governmental Authority. "Guarantor" shall mean each of the Borrowers and Material Subsidiaries that has executed the Guaranty or otherwise become a party thereto. "Guaranty" shall have the meaning given to that term in Subparagraph 2.15(a). "Guaranty Obligation" shall mean, with respect to any Person, any direct or indirect liability of that Person with respect to any indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person, whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, or (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, or (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof. The amount of any Guaranty Obligation shall be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof. "Hazardous Materials" shall mean all pollutants, contaminants and other materials, substances and wastes which are hazardous, toxic, caustic, harmful or dangerous to human health or the environment, including petroleum and petroleum and petroleum products and byproducts, radioactive materials, asbestos and polychlorinated biphenyls. 9 14 "Indebtedness" of any Person shall mean, without duplication, the following (each, unless otherwise noted, calculated in accordance with GAAP): (a) All obligations of such Person evidenced by notes, bonds, debentures or other similar instruments and all other obligations of such Person for borrowed money (including obligations to repurchase receivables and other assets sold with recourse); (b) All obligations of such Person for the deferred purchase price of property or services (including obligations under letters of credit and other credit facilities which secure or finance such purchase price, and the capitalized amount reported for income tax purposes with respect to obligations under "synthetic" leases); (c) All obligations of such Person under conditional sale or other title retention agreements with respect to property acquired by such Person (to the extent of the value of such property if the rights and remedies of the seller or lender under such agreement in the event of default are limited solely to repossession or sale of such property); (d) All obligations of such Person as lessee under or with respect to Capital Leases; (e) All Contingent Obligations of such Person; and (f) All obligations of other Persons of the types described in clauses (a) - (f) above to the extent secured by (or for which any holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien in any property (including accounts and contract rights) of such Person, even though such Person has not assumed or become liable for the payment of such obligations. "Ineligible Material Subsidiary" shall mean, at any time, any Material Subsidiary (a) that is then prohibited by any applicable Governmental Rule from acting as a Guarantor under the Guaranty, (b) that then would incur, or would cause FIL to incur, a significant increase in its tax liabilities or similar liabilities or obligations as a result of acting as a Guarantor under the Guaranty or (c) that is a Foreign Subsidiary as to which the representations and warranties set forth in Paragraph 4.01(s) would not be true and correct were it to execute the Guaranty. "Interest Expenses" shall mean, with respect to any Person for any period, the sum, determined on a consolidated basis in accordance with GAAP, of (a) all interest expenses of such Person during such period (including interest attributable to Capital Leases) plus (b) all fees in respect of outstanding letters of credit paid, accrued or scheduled for payment by such Person during such period. "Interest Period" shall mean, with respect to any LIBOR Borrowing or any LIBOR Portion of the Term Loan Borrowing, the time period selected by the applicable Borrower pursuant to Subparagraph 2.02(a) or Subparagraph 2.02(b) which commences on the date of such Borrowing, or the effective date of any conversion of a Base Rate Portion to a LIBOR Portion, and ends on the last day of such time period, and thereafter, each subsequent time period selected by the applicable Borrower pursuant to clause (ii) of Subparagraph 2.03(b) which commences on the last day of the immediately preceding time period and ends on the last day of that time period. "Investment" of any Person shall mean any loan or advance of funds by such Person to any other Person (other than advances to employees of such Person for moving and travel expenses, drawing accounts and similar expenditures in the ordinary course of business), any purchase or other acquisition of any Equity Securities or Indebtedness of any other Person, any capital contribution by such Person to or any other investment by such Person in any other Person (including any Guaranty Obligations of such Person and any indebtedness of such Person of the type described in clause (h) of the definition of "Indebtedness" on behalf of any other Person); provided, however, that Investments shall not include (a) accounts receivable or other indebtedness owed by customers of such Person which are current assets and 10 15 arose from sales of inventory in the ordinary course of such Person's business or (b) prepaid expenses of such Person incurred and prepaid in the ordinary course of business. "IRC" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Lenders" shall have the meaning given to that term in clause (2) of the introductory paragraph hereof. "Lender Rate Contract" shall mean any Rate Contract entered into by any Borrower or its Subsidiaries with a Lender or its Affiliates as permitted by this Agreement. "Lending Office" shall mean, with respect to any Lender and the Borrowing, (a) initially, such Lender's office designated as such in Part B of Schedule I (or, in the case of any Lender which becomes a Lender by an assignment pursuant to Subparagraph 8.05(c), its office designated as such in the applicable Assignment Agreement) and (b) subsequently, such other office or offices as such Lender may designate to Agent as the office at which such Lender's Loans will thereafter be maintained and for the account of which all payments of principal of, and interest on, such Lender's Loans will thereafter be made. "LIBO Rate" shall mean, with respect to any Interest Period for any LIBOR Borrowing or any LIBOR Portion of the Term Loan Borrowing, a rate per annum equal to the quotient (rounded upward if necessary to the nearest 1/100 of one percent) of (a) the arithmetic mean (rounded upward if necessary to the nearest 1/16 of one percent) of the rates per annum appearing on the Applicable Rate Page for the currency of such Borrowing on the second Business Day prior to the first day of such Interest Period at or about 11:00 A.M. (London time) (for delivery of such currency on the first day of such Interest Period) for a term comparable to such Interest Period, divided by (b) one minus any applicable Reserve Requirement in effect from time to time. If for any reason rates are not available as provided in clause (a) of the preceding sentence, the rate to be used in clause (a) shall be, at the Agent's discretion, (i) the rate per annum at which deposits in the applicable currency are offered to Agent in the London interbank market or (ii) the rate at which deposits in the applicable currency are offered to Agent in, or by Agent to major banks in, any offshore interbank market selected by Agent, in each case on the second Business Day prior to the commencement of such Interest Period at or about 10:00 A.M. (New York time) (for delivery on the first day of such Interest Period) for a term comparable to such Interest Period and in an amount approximately equal to the amount of the Loan to be made or funded by Agent as part of such Borrowing or the Portion to be made or funded by Agent as part of the Term Loan Borrowing, as the case may be. The LIBO Rate shall be adjusted automatically as to all LIBOR Loans and LIBOR Portions outstanding as of the effective date of any change in the Reserve Requirement. "LIBOR Borrowing" shall mean any Revolving Loan Borrowing consisting of LIBOR Loans. "LIBOR Loan" shall mean any Revolving Loan or Term Loan bearing interest based upon the LIBO Rate. "LIBOR Portion" shall mean a portion of the Term Loan Borrowing bearing interest based upon the LIBO Rate. "Lien" shall mean, with respect to any property, any security interest, mortgage, pledge, lien, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, Capital Lease or other title retention agreement, or any agreement to provide any of the foregoing. "Loan" shall mean a Revolving Loan or Term Loan. "Loan Account" shall have the meaning given to that term in Subparagraph 2.09(a). 11 16 "Managing Agents" shall have the meaning given to that term in clause (5) of the introductory paragraph hereof. "Margin Stock" shall have the meaning given to that term in Regulation U issued by the Federal Reserve Board. "Material Adverse Effect" shall mean a material adverse effect on (a) the business, assets, operations or financial condition of any Borrower and its Subsidiaries, taken as a whole; (b) the ability of any Borrower to pay or perform its Obligations in accordance with the terms of this Agreement and the other Credit Documents; (c) the ability of the Guarantors (taken as a whole) to pay or perform the Obligations in accordance with the terms of this Agreement and the other Credit Documents; (d) the rights and remedies of Agent or any Lender under this Agreement, the other Credit Documents or any related document, instrument or agreement; or (e) the value of the Collateral, Agent's or any Lender's security interest in the Collateral or the perfection or priority of such security interests. "Material Subsidiary" shall mean, at any time during any fiscal year of FIL, any Subsidiary of FIL that (i) (A) had revenues during the immediately preceding fiscal year equal to or greater than five percent (5.0%) of the consolidated total revenues of FIL and all of its Subsidiaries during such preceding year or (B) held assets, excluding investments in Subsidiaries, on the last day of the immediately preceding fiscal year equal to or greater than ten percent (10%) of the consolidated total assets of FIL and all of its Subsidiaries on such date, in each case as set forth or reflected in the audited Financial Statements provided pursuant to clause (i) of Subparagraph 5.01(a) hereof or (ii) with respect to any Subsidiary added or created during such year, (A) had revenues, determined on a pro forma basis as of the most recent twelve months for which financial statements are available, greater than five percent (5%) of the consolidated total revenues of FIL and all of its Subsidiaries during such preceding year or (B) held assets, excluding investments in Subsidiaries, on the last day of the immediately preceding month equal to or greater than ten percent (10%) of the consolidated total assets of FIL and all of its Subsidiaries on such date of the consolidated total revenues of FIL and its Subsidiaries (including such added or created Subsidiary or Subsidiaries) determined on a pro forma basis during such year. "maturity" shall mean, with respect to any Loan, interest, fee or other amount payable by any Borrower under this Agreement or the other Credit Documents, the date such Loan, interest, fee or other amount becomes due, whether upon the stated maturity or due date, upon acceleration or otherwise. "Moody's" shall mean Moody's Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency. "Multiemployer Plan" shall mean any multiemployer plan within the meaning of section 3(37) of ERISA maintained or contributed to by any Borrower, any Material Subsidiary or any ERISA Affiliate. "Non-Excluded Taxes" shall mean all Taxes other than Excluded Taxes. "Note" shall mean a Revolving Loan Note or Term Loan Note. "Notice of Borrowing" shall mean a Notice of Revolving Loan Borrowing or the Notice of Term Loan Borrowing. "Notice of Interest Period Selection" shall have the meaning given to that term in clause (ii) of Subparagraph 2.03(b). "Notice of Revolving Loan Borrowing" shall have the meaning given to that term in Subparagraph 2.02(a). "Notice of Term Loan Borrowing" shall have the meaning given to that term in Subparagraph 2.02(b). 12 17 "Notice of Term Loan Conversion" shall have the meaning given to that term in clause (iii) of Subparagraph 2.03(b). "Obligations" shall mean and include all loans, advances, debts, liabilities, and obligations, howsoever arising, owed by any Borrower individually or all Borrowers jointly and severally to Agent or any Lender of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising pursuant to the terms of this Agreement or any of the other Credit Documents, including all interest, fees, charges, expenses, attorneys' fees and accountants' fees chargeable to Borrowers or payable by Borrowers thereunder. "Overnight Rate" shall mean, for any amount payable in an Alternative Currency on any day, the per annum interest rate at which overnight deposits in such Alternative Currency in an amount approximately equal to such amount would be offered for such day by ABN AMRO's London Office to major banks in the London interbank market. "Participant" shall have the meaning given to that term in Subparagraph 8.05(b). "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any successor thereto. "Permitted Indebtedness" shall have the meaning given to that term in Subparagraph 5.02(a). "Permitted Liens" shall have the meaning given to that term in Subparagraph 5.02(b). "Person" shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, an unincorporated association, a limited liability company, a joint venture, a trust or other entity or a Governmental Authority. "Pledge Agreement" shall have the meaning given to that term in Subparagraph 2.15(a). "Portion" shall mean a portion of the principal amount of the Term Loan Borrowing or any Term Loan. The Term Loan Borrowing shall consist of one or more Portions, and each Term Loan comprising the Term Loan Borrowing shall consist of the same number of Portions, with each such Loan Portion corresponding pro rata to a Borrowing Portion. Any reference to a Portion of the Term Loan Borrowing shall include the corresponding Portion of each Term Loan comprising the Term Loan Borrowing. "Pricing Grid" shall mean Schedule II. "Pricing Period" shall mean (a) the period commencing on the date of this Agreement and ending 45 days after the quarter ended June 30, 2000 and (b) thereafter each period commencing 45 days after the last day of the immediately preceding calendar quarter and ending 45 days after the last day of the next applicable calendar quarter, as explained in the Pricing Grid. "Pricing Period Level" shall mean either a Level 1 Period, Level 2 Period, Level 3 Period, Level 4 Period, Level 5 Period or Level 6 Period, which shall be determined based upon FIL's corresponding Debt/EBITDA Ratio for the consecutive four-quarter period ending on the last day of the immediately preceding quarter as set forth in the Pricing Grid; provided that, Level 2 Period pricing, as set forth in the Pricing Grid, will apply during any Pricing Period (other than FIL's first Pricing Period) in which FIL's senior unsecured long-term debt rating from S&P or Moody's is equal to or better than either BBB- or Baa3. Such pricing adjustment (if any) occurring as a result of such debt rating will take place when FIL notifies Agent that such debt rating has been achieved, and will continue until such debt rating drops below BBB- or Baa3 in which case the pricing will be calculated as set forth in the Pricing Grid. "Prime Rate" shall mean the per annum rate publicly announced by ABN AMRO from time to time at its Chicago office as its "prime rate." The Prime Rate is determined by ABN AMRO from time to 13 18 time as a means of pricing credit extensions to some customers and is neither directly tied to any external rate of interest or index nor necessarily the lowest rate of interest charged by ABN AMRO at any given time for any particular class of customers or credit extensions. Any change in the Base Rate resulting from a change in the Prime Rate shall become effective on the Business Day on which each change in the Prime Rate occurs. "Proportionate Share" shall mean: (a) With respect to any Lender and Facility A at any time, such Lender's Facility A Proportionate Share at such time; (b) With respect to any Lender and Facility B at any time, such Lender's Facility B Proportionate Share at such time; (c) With respect to any Lender without reference to either Facility: (i) At any time prior to the termination of the Facility B Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) the sum of such Lender's Facility A Commitment and Facility B Commitment at such time to (ii) the sum of the Total Facility A Commitment and Total Facility B Commitment at such time; (ii) With respect to any Lender at any time after the termination of the Facility B Commitments and prior to the termination of the Facility A Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) the sum of such Lender's Facility A Commitment and the principal amount of such Lender's Term Loan outstanding at such time to (ii) the sum of the Total Facility A Commitment and the aggregate principal amount of all Term Loans outstanding at such time; and (iii) With respect to any Lender at any time after the termination of both the Facility A Commitments and the Facility B Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) the aggregate principal amount of all of such Lender's Loans outstanding at such time to (ii) the aggregate principal amount of all Lenders' Loans outstanding at such time. "Rate Contracts" shall mean swap agreements (as that term is defined in Section 101 of the Federal Bankruptcy Reform Act of 1978, as amended) and any other agreements or arrangements designed to provide protection against fluctuations in interest rates, currency exchange rates or commodity prices. "Register" shall have the meaning given to that term in Subparagraph 8.05(d). "Reportable Event" shall have the meaning given to that term in ERISA and applicable regulations thereunder. "Required Lenders" shall mean, at any time, Lenders whose Proportionate Shares equal or exceed fifty-one percent (51%) at such time, except at any time any Lender is a Defaulting Lender. (For the purposes of determining "Required Lenders" at any time any Lender is a Defaulting Lender, the "Proportionate Shares" of non-defaulting Lenders shall be determined excluding from the Total Facility A Commitment, the Total Facility B Commitment and the aggregate principal amount of all Term Loans the aggregate amounts of the Defaulting Lenders' Facility A Commitments, Facility B Commitments and Term Loans; and "Required Lenders" shall mean non-defaulting Lenders whose Proportionate Shares as so determined then equal or exceed fifty-one percent (51%).) 14 19 "Requirement of Law" applicable to any Person shall mean (a) the Articles or Certificate of Incorporation and By-laws, Partnership Agreement or other organizational or governing documents of such Person, (b) any Governmental Rule applicable to such Person, (c) any license, permit, approval or other authorization granted by any Governmental Authority to or for the benefit of such Person or (d) any judgment, decision or determination of any Governmental Authority or arbitrator, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Reserve Requirement" shall mean (a) with respect to any day in an Interest Period for any Portion of a Borrowing in Dollars, the aggregate of the reserve requirement rates, if any (expressed as a decimal), in effect on such day for funding in Dollars maintained by commercial banks in the United States, (b) with respect to any day in an Interest Period for any Portion of a Borrowing in Swiss francs, the aggregate of the reserve requirement rates, if any (expressed as a decimal), in effect on such day for funding in Swiss francs maintained by commercial banks which lend in Swiss francs, or (c) with respect to any day in an Interest Period for any Portion of a Borrowing in United Kingdom pounds, the aggregate of the reserve requirement rates, if any (expressed as a decimal), in effect on such day for funding in United Kingdom pounds maintained by commercial banks which lend in United Kingdom pounds, or (d) with respect to any day in an Interest Period for any Portion of a Borrowing in Euros, the aggregate of the reserve requirement rates, if any (expressed as a decimal), in effect on such day for funding in Euros maintained by commercial banks which lend in Euros. As used herein, the term "reserve requirement" shall include, without limitation, any basic, supplemental or emergency reserve requirements imposed on any Lender by any Governmental Authority. "Revolving Loan" shall mean a Facility A Revolving Loan or a Facility B Revolving Loan. "Revolving Loan Borrowing" shall mean a Facility A Revolving Loan Borrowing or a Facility B Revolving Loan Borrowing. "Revolving Loan Note" shall have the meaning given to that term in Subparagraph 2.09(b). "S&P" shall mean Standard & Poor's Rating Services, and any successor thereto that is a nationally recognized rating agency. "Security Documents" shall mean and include the Guaranty, the Pledge Agreements and all other instruments, agreements, certificates, opinions and documents (including Uniform Commercial Code financing statements) delivered to Agent or any Lender in connection with any Collateral or to secure the Obligations. "Solvent" shall mean, with respect to any Person on any date, that on such date (a) the fair value of the property of such Person is greater than the fair value of the liabilities (including contingent, subordinated, matured and unliquidated liabilities) of such Person, (b) the present fair saleable value of the assets of such Person is greater than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (d) such Person is not engaged in or about to engage in business or transactions for which such Person's property would constitute an unreasonably small capital. "Subordinated Indebtedness" shall mean Indebtedness of any Borrower or Subsidiary that is subordinated to the Obligations. "Subordinated Indenture" shall mean the Indenture dated as of October 15, 1997 by and between FIL and State Street Bank and Trust Company of California, N.A., as trustee, and any other document, instrument or agreement evidencing Subordinated Indebtedness. "Subsidiary" of any Person shall mean (a) any corporation of which more than 50% of the issued and outstanding Equity Securities having ordinary voting power to elect a majority of the Board of 15 20 Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries, (b) any partnership, joint venture, limited liability company or other association of which more than 50% of the equity interest having the power to vote, direct or control the management of such partnership, joint venture or other association is at the time owned and controlled by such Person, by such Person and one or more of the other Subsidiaries or by one or more of such Person's other Subsidiaries or (c) any other Person included in the Financial Statements of such Person on a consolidated basis. (All references in this Agreement and the other Credit Documents to Subsidiaries of FIL shall, unless otherwise indicated, include any of the other Borrowers and their Subsidiaries.) "Surety Instruments" shall mean all letters of credit (including standby and commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments. "Taxes" shall mean all present and future income, stamp, documentary and other taxes and duties, and all other levies, imposts, charges, fees, deductions and withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority. "Term Loan" shall have the meaning given to that term in clause (i) of Subparagraph 2.01(c). "Term Loan Borrowing" shall mean a borrowing consisting of all the Term Loans of the same currency and Type (and same Interest Period if LIBOR Loans) made by Facility B Lenders on the Facility B Revolving Loan Maturity Date pursuant to the Notice of Term Loan Borrowing. Any reference to a Term Loan Borrowing shall include all the Term Loans constituting such Term Loan Borrowing. (One or more Term Loan Borrowings may be made on the Facility B Revolving Loan Maturity Date.) "Term Loan Maturity Date" shall mean the date that is one (1) year after the Facility B Revolving Loan Maturity Date. "Term Loan Note" shall have the meaning given to that term in Subparagraph 2.09(b). "Total Facility A Commitment" shall mean, at any time, the sum at such time of Facility A Lenders' Facility A Commitments. The Total Facility A Commitment on the date of this Agreement is Seventy Five Million Dollars ($75,000,000). "Total Facility B Commitment" shall mean, at any time, the sum at such time of Facility B Lenders' Facility B Commitments. The Total Facility B Commitment on the date of this Agreement is Seventy Five Million Dollars ($75,000,000). "Type" shall mean, with respect to any Revolving Loan, any Revolving Loan Borrowing or any Portion of any Term Loan or the Term Loan Borrowing at any time, the classification of such Loan, Borrowing or Portion by the type of interest rate it then bears, whether an interest rate based upon the Base Rate or LIBO Rate. "Unused" shall mean (a) With respect to the Facility A Commitment at any time, the remainder of (i) the Total Facility A Commitment at such time minus (ii) the Dollar Equivalent of the aggregate principal amount of all Facility A Revolving Loans outstanding at such time; and (b) With respect to the Facility B Commitment at any time, the remainder of (i) the Total Facility B Commitment at such time minus (ii) the Dollar Equivalent of the aggregate principal amount of all Facility B Revolving Loans outstanding at such time. 16 21 1.02. GAAP. Unless otherwise indicated in this Agreement or any other Credit Document, all accounting terms used in this Agreement or any other Credit Document shall be construed, and all accounting and financial computations hereunder or thereunder shall be computed, in accordance with GAAP. If GAAP changes during the term of this Agreement such that any covenants contained herein would then be calculated in a different manner or with different components, Borrowers, Lenders and Agent agree to negotiate in good faith to amend this Agreement in such respects as are necessary to conform those covenants as criteria for evaluating Borrower's financial condition to substantially the same criteria as were effective prior to such change in GAAP; provided, however, that, until Borrowers, Lenders and Agent so amend this Agreement, all such covenants shall be calculated in accordance with GAAP as in effect immediately prior to such change. Any calculations performed under this Credit Agreement that are based on the total assets or total revenues of FIL and its Subsidiaries and which contemplate the completion of the DII Acquisition shall be determined based on the March 31 fiscal year end consolidated pro forma financial statements of FIL giving effect to the DII Acquisition for such purposes; except with respect to the definition of "Material Subsidiary" herein, which shall be calculated based on a nine (9) month pro forma basis. 1.03. Headings. Headings in this Agreement and each of the other Credit Documents are for convenience of reference only and are not part of the substance hereof or thereof. 1.04. Plural Terms. All terms defined in this Agreement or any other Credit Document in the singular form shall have comparable meanings when used in the plural form and vice versa. 1.05. Governing Law. Unless otherwise expressly provided in any Credit Document, this Agreement and each of the other Credit Documents shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of law rules. 1.06. English Language. This Agreement and the other Credit Documents are executed and shall be construed in the English language. All instruments, agreements, certificates, opinions and other documents to be furnished or communications to be given or made under this Agreement or any other Credit Document shall be in the English language. 1.07. Construction. This Agreement is the result of negotiations among, and has been reviewed by, Borrowers, each Lender, Agent and their respective counsel. Accordingly, this Agreement shall be deemed to be the product of all parties hereto, and no ambiguity shall be construed in favor of or against any Borrower, any Lender or Agent. 1.08. Entire Agreement. This Agreement and each of the other Credit Documents, taken together, constitute and contain the entire agreement of Borrowers, Lenders and Agent and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof (excluding the Agent's Fee Letter but including the commitment letter dated as of February 28, 2000 between FIL and ABN AMRO). 1.09. Calculation of Interest and Fees. All calculations of interest and fees under this Agreement and the other Credit Documents for any period (a) shall include the first day of such period and exclude the last day of such period and (b) shall be calculated on the basis of a year of 360 days for actual days elapsed, except that during any period any Loan or Portion bears interest based upon the Prime Rate, such interest shall be calculated on the basis of a year of 365 or 366 days, as appropriate, for actual days elapsed. 1.10. References. (a) References in this Agreement to "Recitals," "Sections," "Paragraphs," "Subparagraphs," "Exhibits" and "Schedules" are to recitals, sections, paragraphs, subparagraphs, exhibits and schedules therein and thereto unless otherwise indicated. (b) References in this Agreement or any other Credit Document to any document, instrument or agreement (i) shall include all exhibits, schedules and other attachments thereto, (ii) shall include all 17 22 documents, instruments or agreements issued or executed in replacement thereof if such replacement is permitted hereby, and (iii) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time if such amendment, modification or supplement is permitted hereby. (c) References in this Agreement or any other Credit Document to any Governmental Rule (i) shall include any successor Governmental Rule, (ii) shall include all rules and regulations promulgated under such Governmental Rule (or any successor Governmental Rule), and (iii) shall mean such Governmental Rule (or successor Governmental Rule) and such rules and regulations, as amended, modified, codified or reenacted from time to time and in effect at any given time. (d) References in this Agreement or any other Credit Document to any Person in a particular capacity (i) shall include any permitted successors to and assigns of such Person in that capacity and (ii) shall exclude such Person individually or in any other capacity. 1.11. Other Interpretive Provisions. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement or any other Credit Document shall refer to this Agreement or such other Credit Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Credit Document, as the case may be. The words "include" and "including" and words of similar import when used in this Agreement or any other Credit Document shall not be construed to be limiting or exclusive. In the event of any inconsistency between the terms of this Agreement and the terms of any other Credit Document, the terms of this Agreement shall govern. SECTION II. CREDIT FACILITIES. 2.01. Loans. (a) Facility A Revolving Loans. (i) Availability. Subject to the terms and conditions of this Agreement (including the amount limitations set forth in Paragraph 2.05), each Facility A Lender severally agrees to advance to Borrowers from time to time during the period beginning on the Closing Date and ending on the Facility A Revolving Loan Maturity Date its pro rata share of such revolving loans in Currencies as Borrowers may request under Facility A (individually, a "Facility A Revolving Loan"); provided, however, that no Lender shall have any obligation to make a requested Facility A Revolving Loan if, after giving effect to such Loan, the Dollar Equivalent of the such Lender's Facility A Revolving Loans then outstanding would exceed such Lender's Facility A Commitment at such time. All Facility A Revolving Loans shall be made on a pro rata basis by Facility A Lenders in accordance with their respective Facility A Proportionate Shares, with each Facility A Revolving Loan Borrowing to be comprised of a Facility A Revolving Loan made by each Facility A Lender equal to such Facility A Lender's Proportionate Share of such Facility A Revolving Loan Borrowing. Except as otherwise provided herein, Borrowers may borrow, repay and reborrow Facility A Revolving Loans until the Facility A Revolving Loan Maturity Date. (ii) Scheduled Payments. Borrowers shall repay the principal amount of the Facility A Revolving Loans in full on the Facility A Revolving Loan Maturity Date. Borrowers shall pay accrued interest on the unpaid principal amount of each Facility A Revolving Loan in arrears (A) in the case of a Base Rate Loan, on the last day of the month of each March, June, September and December, (B) in the case of a LIBOR Loan, on the last day of each Interest Period therefor (and, if any such Interest Period is longer than three (3) months, every three (3) months); and (C) in the case of all Facility A Revolving Loans, upon prepayment (to the extent thereof) and at maturity. 18 23 (b) Facility B Revolving Loans. (i) Availability. Subject to the terms and conditions of this Agreement (including the amount limitations set forth in Paragraph 2.05), each Facility B Lender severally agrees to advance to Borrowers from time to time during the period beginning on the Closing Date and ending on the Facility B Revolving Loan Maturity Date its pro rata share of such revolving loans in Currencies as Borrowers may request under Facility B (individually, a "Facility B Revolving Loan"); provided, however, that no Facility B Lender shall have any obligation to make a requested Facility B Revolving Loan if, after giving effect to such Loan, the Dollar Equivalent of such Lender's Facility B Revolving Loans then outstanding would exceed such Lender's Facility B Commitment at such time. All Facility B Revolving Loans shall be made on a pro rata basis by Facility B Lenders in accordance with their respective Facility B Proportionate Shares, with each Facility B Revolving Loan Borrowing to be comprised of a Facility B Revolving Loan made by each Facility B Lender equal to such Facility B Lender's Proportionate Share of such Facility B Revolving Loan Borrowing. Except as otherwise provided herein, Borrowers may borrow, repay and reborrow Facility B Revolving Loans until the Facility B Revolving Loan Maturity Date. (ii) Scheduled Payments. Borrowers shall repay the principal amount of the Facility B Revolving Loans in full on the Facility B Revolving Loan Maturity Date. Such repayment may be effected with the proceeds of the Term Loan Borrowing pursuant to Subparagraph 2.02(b). Borrowers shall pay accrued interest on the unpaid principal amount of each Facility B Revolving Loan in arrears (A) in the case of a Base Rate Loan, on the last day of the month of each March, June, September and December, (B) in the case of a LIBOR Loan, on the last day of each Interest Period therefor (and, if any such Interest Period is longer than three (3) months, every three (3) months); and (C) in the case of all Facility B Revolving Loans, upon prepayment (to the extent thereof) and at maturity. (c) Term Loan. (i) Availability. Subject to the terms and conditions of this Agreement (including the amount limitations set forth in Paragraph 2.05), each Facility B Lender severally agrees to advance, upon the request of Borrowers pursuant to Subparagraph 2.02(b), to Borrowers on the Facility B Revolving Loan Maturity Date its pro rata share of such term loans in Currencies as Borrowers shall request under Facility B (individually, a "Term Loan"); provided, however, that no Lender shall have any obligation to make requested Term Loans if the Dollar Equivalent of the aggregate principal amount thereof would exceed such Lender's Facility B Commitment on the Facility B Revolving Loan Maturity Date. The Term Loans shall be made on a pro rata basis by Facility B Lenders in accordance with their respective Facility B Proportionate Shares, with each Term Loan Borrowing to be comprised of a Term Loan by each Facility B Lender equal to such Facility B Lender's Facility B Proportionate Share of such Term Loan Borrowing. Borrowers may not reborrow the principal amount of a Term Loan after repayment or prepayment thereof. (ii) Scheduled Payments. Borrowers shall repay the principal amount of the Term Loans in full in a single installment on the Term Loan Maturity Date. Borrowers shall pay accrued interest on the unpaid principal amount of each Term Loan in arrears (A) in the case of a Base Rate Portion, on the last day of the month of each March, June, September and December, (B) in the case of a LIBOR Portion, on the last day of each Interest Period (and if any such Interest Period is equal to or longer than three (3) months, every three (3) months); and (C) in the case of all Term Loans, upon prepayment (to the extent thereof) and at maturity. 19 24 2.02. Notice of Borrowing. (a) Notice of Revolving Loan Borrowing. Borrowers shall request each Revolving Loan Borrowing by delivering to Agent an irrevocable written notice in the form of Exhibit A, appropriately completed (a "Notice of Revolving Loan Borrowing"), which specifies, among other things: (i) Whether such Revolving Loan Borrowing is a Borrowing under Facility A or Facility B; (ii) The currency and principal amount of such Revolving Loan Borrowing, which shall be in the minimum Dollar Equivalent of $5,000,000 or an integral multiple of $1,000,000 in excess thereof; (iii) Whether such requested Revolving Loan Borrowing is to consist of Base Rate Loans or LIBOR Loans; (iv) If such Revolving Loan Borrowing is to consist of LIBOR Loans, the initial Interest Period selected by the applicable Borrower for such Revolving Loan Borrowing in accordance with Subparagraph 2.03(b)(i); (v) The date of such Borrowing, which shall be a Business Day; and (vi) The applicable Borrower for such Revolving Loan Borrowing. Borrowers shall give each Notice of Revolving Loan Borrowing to Agent at least four (4) Business Days before the date of the requested Revolving Loan Borrowing in the case of a Borrowing in an Alternative Currency and at three (3) Business Days before the date of the requested Revolving Loan Borrowing in the case of a Revolving Loan Borrowing in Dollars consisting of LIBOR Loans and at least one (1) Business Day before the date of the requested Revolving Loan Borrowing in the case of a Revolving Loan Borrowing in Dollars consisting of Base Rate Loans. Each Notice of Revolving Loan Borrowing shall be signed by the applicable Borrower and delivered by first-class mail or facsimile to Agent at the office or facsimile number and during the hours specified in Paragraph 8.01; provided, however, that Borrowers shall promptly deliver to Agent the original of any Notice of Revolving Loan Borrowing initially delivered by facsimile. Agent shall promptly notify each Lender of the contents of each Notice of Revolving Loan Borrowing. (b) Notice of Term Loan Borrowing. Borrowers shall request each Term Loan Borrowing by delivering to Agent an irrevocable written notice in the form of Exhibit B, appropriately completed (a "Notice of Term Loan Borrowing"), which specifies, among other things: (i) The currency and principal amount of each Term Loan Borrowing, which shall be in the minimum Dollar Equivalent of $5,000,000 or an integral multiple of $1,000,000 in excess thereof; (ii) (A) The principal portion of such Term Loan Borrowing which is to be a Base Rate Portion and (2) the principal portion(s) of such Term Loan Borrowing which is (are) to be a LIBOR Portion(s); (iii) If any Portion of such Term Loan Borrowing is initially to be a LIBOR Portion, the initial Interest Period selected by the applicable Borrower for each such Portion in accordance with Subparagraph 2.03(b)(i); and (iv) The applicable Borrower for each Term Loan Borrowing. 20 25 Borrowers shall give the Notice of Term Loan Borrowing to Agent at least four (4) Business Days before the Facility B Revolving Loan Maturity Date in the case of a Term Loan Borrowing in an Alternative Currency and at least three (3) Business Days before the Facility B Revolving Loan Maturity Date in the case of a Term Loan Borrowing in Dollars if any Portion of the Term Loan Borrowing is initially to be a LIBOR Portion and at least one (1) Business Day before the Facility B Revolving Loan Maturity Date in the case of a Term Loan Borrowing in Dollars if the only Portion of the Term Loan Borrowing is initially to be a Base Rate Portion. The Notice of Term Loan Borrowing shall be signed by the applicable Borrower(s) and delivered by first-class mail or facsimile to Agent at the office or facsimile number and during the hours specified in Paragraph 8.01; provided, however, that Borrowers shall promptly deliver to Agent the original of the Notice of Term Loan Borrowing if initially delivered by facsimile. Agent shall promptly notify each Lender of the contents of the Notice of Term Loan Borrowing. 2.03. Interest. (a) Interest Rates. Borrowers shall pay interest on the unpaid principal amount of each Loan from the date of such Loan until the maturity thereof, at one of the following rates per annum: (i) During such periods as any Revolving Loan is a Base Rate Loan or any Portion of such Term Loan is a Base Rate Portion, at a rate per annum on such Loan or Portion equal to the Base Rate plus the Applicable Margin therefor, such rate to change from time to time as the Applicable Margin or Base Rate shall change; and (ii) During such periods as any Revolving Loan is a LIBOR Loan or any Portion of such Term Loan is a LIBOR Portion, at a rate per annum on such Loan or Portion equal at all times during each Interest Period for such Loan or Portion to the LIBO Rate for such Interest Period plus the Applicable Margin therefor, such rate to change from time to time as the Applicable Margin shall change. All Revolving Loans in each Revolving Loan Borrowing shall, at any given time prior to maturity, bear interest at one, and only one, of the above rates. Only Borrowings in Dollars may be Base Rate Loans. Each LIBOR Loan Borrowing or LIBOR Portion of the Term Loan Borrowing shall be in a minimum amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof. (b) Terms. (i) LIBOR Loan and LIBOR Portion Interest Periods. The initial and each subsequent Interest Period selected by a Borrower for any Revolving Loan Borrowing consisting of LIBOR Loans or any LIBOR Portion of the Term Loan Borrowing shall be one (1), two (2), three (3) or six (6) months; provided, however, that (A) any Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such next Business Day falls in another calendar month, in which case such Interest Period shall end on the immediately preceding Business Day; (B) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (C) no Interest Period for a Facility A Revolving Loan Borrowing shall end after the Facility A Revolving Loan Maturity Date; (D) no Interest Period of a Facility B Revolving Loan Borrowing shall end after the Facility B Revolving Loan Maturity Date, and (E) no Interest Period for a LIBOR Portion of a Term Loan Borrowing shall end after the Term Loan Maturity Date. (ii) Notice of Interest Period Selection. The applicable Borrower shall notify Agent by an irrevocable written notice in a form acceptable to Agent, appropriately completed (a "Notice of Interest Period Selection"), at least four (4) Business Days prior to the last day of each Interest Period for any Borrowing in an Alternative Currency and at least three (3) Business Days prior to the last day of each Interest Period for a Revolving Loan Borrowing in Dollars consisting of LIBOR Loans or any LIBOR Portion of a Term Loan Borrowing of the Interest Period selected by 21 26 such Borrower for the next succeeding Interest Period for such Borrowing or Portion. Each Notice of Interest Period Selection shall be given by first-class mail or facsimile to the office or the facsimile number and during the hours specified in Paragraph 8.01; provided, however, that the applicable Borrower shall promptly deliver to Agent the original of any Notice of Interest Period Selection initially delivered by facsimile. If any Borrower fails to notify Agent of the next Interest Period for a Borrowing in accordance with this Subparagraph 2.03(b)(ii), the next Interest Period for such Borrowing shall be one (1) month. Agent shall promptly notify each Lender of the contents of each Notice of Interest Period Selection. (iii) Conversion of Term Loan Portions. Any Borrower may convert any Portion of the Term Loan Borrowing from one Type of Portion to another Type; provided, however, that any conversion of a LIBOR Portion into a Base Rate Portion shall be made on, and only on, the last day of an Interest Period for such LIBOR Portion. Borrowers shall request such a conversion by an irrevocable written notice to Agent in a form acceptable to Agent, appropriately completed (a "Notice of Term Loan Conversion"), which specifies, among other things: (A) The Portion of the Term Loan Borrowing which is to be converted; (B) The amount and Type of each Portion of the Term Loan Borrowing into which it is to be converted; (C) If any Portion of the Term Loan Borrowing is to be converted into a LIBOR Portion, the initial Interest Period selected by the applicable Borrower for such Portion in accordance with Subparagraph 2.03(b)(i); and (D) The date of the requested conversion, which shall be a Business Day. Borrowers shall give each Notice of Term Loan Conversion to Agent at least four (4) Business Days before the date of the requested conversion in the case of a Term Loan Conversion in an Alternative Currency and at least three (3) Business Days before the date of the requested conversion in the case of a Term Loan Conversion in Dollars. Each Notice of Term Loan Conversion shall be delivered by first-class mail or facsimile to Agent at the office or to the facsimile number and during the hours specified in Paragraph 8.01; provided, however, that such Borrower shall promptly deliver to Agent the original of any Notice of Term Loan Conversion initially delivered by facsimile. Agent shall promptly notify each Lender of the contents of each Notice of Term Loan Conversion. Only Term Loan Borrowings in Dollars may include Base Rate Portions. 2.04. Purpose. (a) Revolving Loans. FIL shall use the proceeds of the initial Revolving Loan to repay on the Closing Date all indebtedness outstanding under the Existing FIL Credit Agreement and to fund the DII Acquisition (including debt refinancing), and thereafter Borrowers shall use the proceeds of the Revolving Loans and for their respective working capital and general corporate needs. (b) Term Loans. Borrowers shall use the proceeds of the Term Loans first to repay all outstanding Facility B Revolving Loans and then for their respective working capital and general corporate needs. Any Facility B Revolving Loans outstanding at the time of the funding of any Term Loan shall be deemed to be converted into Term Loans. 2.05. Amount Limitations, Commitment Reductions, Etc. (a) Commitment Limitations. The Dollar Equivalent of the aggregate principal amount of all Facility A Revolving Loans outstanding at any time shall not exceed the Total Facility A Commitment at such time. The Dollar Equivalent of the aggregate principal amount of all Facility B Revolving Loans 22 27 outstanding at any time shall not exceed the Total Facility B Commitment at such time. The Dollar Equivalent of the aggregate principal amount of all Term Loans outstanding at any time shall not exceed the Total Facility B Commitment at such time. (b) Determination of Dollar Equivalent. For the purposes of applying the amount limitations set forth in Subparagraph 2.05(a) and calculating the Unused Total Facility A Commitment and the Unused Total Facility B Commitment and for all other purposes herein, the Dollar Equivalent of each Loan in an Alternative Currency shall be determined by Agent on the date of such Loan, on the last day of each month and, if an Event of Default has occurred and is continuing, at any other time determined by Agent, and the Dollar Equivalent of such Loan at any time shall be the Dollar Equivalent most recently so determined by Agent. Each such determination by Agent shall, in the absence of manifest error, be conclusive and binding on the parties hereto. (c) Reduction or Cancellation of Commitments. Upon four (4) Business Days prior written notice to Agent, Borrowers may permanently reduce the Total Facility A Commitment and/or the Total Facility B Commitment by the Dollar Equivalent amount of Five Million Dollars ($5,000,000) or integral multiples in excess thereof or cancel the Total Facility A Commitment and/or the Total Facility B Commitment in its entirety; provided, however, that: (i) Borrowers may not reduce the Total Facility A Commitment prior to the Facility A Revolving Loan Maturity Date, if, after giving effect to such reduction, the Dollar Equivalent of the aggregate principal amount of all Facility A Revolving Loans then outstanding would exceed the Total Facility A Commitment; (ii) Borrowers may not reduce the Total Facility B Commitment prior to the Facility B Revolving Loan Maturity Date if, after giving effect to such reduction, the Dollar Equivalent of the aggregate principal amount of all Facility B Revolving Loans then outstanding would exceed the Total Facility B Commitment; (iii) Borrowers may not cancel the Total Facility A Commitment prior to the Facility A Revolving Loan Maturity Date, if, after giving effect to such cancellation, any Facility A Revolving Loan would then remain outstanding; and (ii) Borrowers may not cancel the Total Facility B Commitment prior to the Facility B Revolving Loan Maturity Date, if, after giving effect to such cancellation, any Facility B Revolving Loan would then remain outstanding. Unless sooner terminated pursuant to this Agreement, the Facility A Commitments shall terminate on the Facility A Revolving Loan Maturity Date and the Facility B Commitments shall terminate on the Facility B Revolving Loan Maturity Date. (d) Effect of Commitment Reductions. From the effective date of any reduction of the Total Facility A Commitment or the Total Facility B Commitment, the Commitment Fees payable pursuant to Subparagraph 2.06(b) shall be computed on the basis of the Total Facility A Commitment and/or the Total Facility B Commitment as so reduced. Once reduced or cancelled, the Total Facility A Commitment or the Total Facility B Commitment may not be increased or reinstated without the prior written consent of all Facility A Lenders or Facility B Lenders, as applicable. Any reduction of the Total Facility A Commitment pursuant to Subparagraph 2.05(c) shall be applied ratably to reduce each Facility A Lender's Facility A Commitment in accordance with clause (i) of Subparagraph 2.09(a). Any reduction of the Total Facility B Commitment pursuant to Subparagraph 2.05(c) shall be applied ratably to reduce each Facility B Lender's Facility B Commitment in accordance with clause (ii) of Subparagraph 2.11(a). 23 28 2.06. Fees. (a) Agent's Fee. Borrowers shall pay to Agent, for its own account, agent's fees and other compensation in the amounts and at the times set forth in the Agent's Fee Letter. (b) Commitment Fees. Borrowers shall pay to Agent: (i) For the ratable benefit of Facility A Lenders as provided in clause (v) of Subparagraph 2.11(a), commitment fees in Dollars (the "Facility A Commitment Fees") equal to the Commitment Fee Percentage of the daily average Unused amount of the Total Facility A Commitment for the period beginning on the date of this Agreement and ending on the Facility A Revolving Loan Maturity Date; and (ii) For the ratable benefit of Facility B Lenders as provided in clause (vi) of Subparagraph 2.11(a), commitment fees in Dollars (the "Facility B Commitment Fees") equal to the Commitment Fee Percentage of the daily average Unused amount of the Total Facility B Commitment for the period beginning on the date of this Agreement and ending on the Facility B Revolving Loan Maturity Date. Borrowers shall pay the Commitment Fees in arrears on the last day of each March, June, September and December (commencing June 30, 2000) and on the Facility A Revolving Loan Maturity Date and the Facility B Revolving Loan Maturity Date, as the case may be (or if the Total Facility A Commitment or Total Facility B Commitment is cancelled on a date prior to the Facility A Revolving Loan Maturity Date or the Facility B Revolving Loan Maturity Date, as the case may be, on such prior date). 2.07. Prepayments. (a) Terms of all Prepayments. Upon the prepayment of any Loan (whether such prepayment is an optional prepayment under Subparagraph 2.07(b), a mandatory prepayment required by Subparagraph 2.07(c) or a mandatory prepayment required by any other provision of this Agreement or the other Credit Documents, including a prepayment upon acceleration), the applicable Borrower shall pay to the Lender that made such Loan (i) all accrued interest to the date of such prepayment on the amount prepaid and (ii) if such prepayment is the prepayment of a LIBOR Loan or of a LIBOR Portion on a day other than the last day of an Interest Period for such LIBOR Loan or such LIBOR Portion, all amounts payable to such Lender pursuant to Paragraph 2.14. (b) Optional Prepayments. At its option, any Borrower may prepay, in whole or in part, any Borrowing made to it, provided that: (i) Such Borrower delivers to Agent prior written notice of such prepayment, which notice shall be delivered (A) not less than four (4) Business Days prior to the prepayment of any Revolving Loan Borrowing in Alternative Currency; and (B) not less than three (3) Business Days prior to the prepayment of any Revolving Loan Borrowing consisting of LIBOR Loans or any LIBOR Portion or a Term Loan Borrowing; and (C) not less than one (1) Business Day prior to any prepayment of a Base Rate Borrowing or Base Rate Portion; and (ii) Any prepayment in part shall be in a minimum aggregate principal amount equal to the Dollar Equivalent of $5,000,000 or an integral multiple of $1,000,000 in excess thereof. (c) Mandatory Prepayments. (i) If, at any time, the aggregate principal amount of all Facility A Revolving Loans then outstanding exceeds any limitations set forth in Subparagraph 2.05(c), the applicable Borrower(s) shall immediately prepay such Facility A Revolving Loans in such amounts as Agent shall determine are necessary to eliminate such excess. 24 29 (ii) If, at any time, the aggregate principal amount of all Facility B Revolving Loans then outstanding exceeds any limitations set forth in Subparagraph 2.05(c), the applicable Borrower(s) shall immediately prepay such Facility B Revolving Loans in such amounts as Agent shall determine are necessary to eliminate such excess. (d) Application of Prepayments. All prepayments of Borrowings shall, to the extent possible, be applied to prepay the Base Rate Borrowings, Base Rate Portions, LIBOR Borrowings or LIBOR Portions designated by any Borrower. 2.08. Other Payment Terms. (a) Place and Manner. (i) Borrowers shall make all payments due to each Lender or Agent hereunder by payments to Agent at Agent's New York office located at the address specified in Paragraph 8.01, with each such payment due to a Lender to be for the account of such Lender and such Lender's Lending Office. (ii) Borrowers shall make all payments hereunder in the lawful Currency required by Subparagraph 2.08(c) and in same day or immediately available funds and without deduction or offset not later than 11:00 a.m. (California time, in the case of any payment to be made to Agent's New York office) and on the date due. Agent shall promptly disburse to each Lender each payment received by Agent for the account of such Lender. (b) Date. Whenever any payment due hereunder shall fall due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest or fees, as the case may be. (c) Currency of Payment. (i) Borrowers shall pay principal of, interest on and all other amounts related to each Borrowing in the Currency of such Borrowing. Borrowers shall pay Commitment Fees and all other amounts payable under this Agreement and the other Credit Documents in Dollars. If, for any reason, any Borrower is prohibited by any Governmental Rule from making any required payment hereunder in an Alternative Currency, such Borrower shall make such payment in Dollars in the Dollar Equivalent of such Alternative Currency amount as determined by Agent. (ii) If any amounts required to be paid by Borrowers under this Agreement, any other Credit Document or any order, judgment or award given or rendered in relation hereto or thereto has to be converted from the currency (the "first currency") in which the same is payable hereunder or thereunder into another currency (the "second currency") for the purpose of (A) making or filing a claim or proof against Borrowers with any Governmental Authority, (B) obtaining an order or judgment in any court or other tribunal or (C) enforcing any order or judgment given or made in relation hereto, Borrowers shall, to the fullest extent permitted by law, indemnify and hold harmless each of the Persons to whom such amounts are payable from and against any loss suffered as a result of any discrepancy between (1) the rate of exchange used for such purpose to convert the amounts in question from the first currency into the second currency and (2) the rate or rates of exchange at which such Person may, using reasonable efforts in the ordinary course of business, purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. The foregoing indemnity shall constitute a separate obligation of Borrowers distinct from their other obligations hereunder and shall survive the giving or making of any judgment or order in relation to all or any of such obligations. The obligations of Borrowers under this Subparagraph 2.08(c) shall survive the payment and performance of the Obligations and the termination of this Agreement. 25 30 (d) Late Payments. If any amount required to be paid by any Borrower under this Agreement or the other Credit Documents (including, without limitation, principal or interest payable on any Loan, any fees or any other amount) remains unpaid after such amount is due, such Borrower shall pay interest on the aggregate, outstanding balance of such amount from the date due until such amount is paid in full at a per annum rate equal to (i) in the case any amount payable in Dollars, the Base Rate plus two percent (2.00%), such rate to change from time to time as the Base Rate shall change, and (ii) in the case of any amount payable in an Alternative Currency, the Overnight Rate for such amount plus three percent (3.00%), such rate to change from time to time as the Overnight Rate shall change. (e) Application of Payments. All payments hereunder shall be applied first to unpaid fees, costs and expenses then due and payable under this Agreement or the other Credit Documents, second to accrued interest then due and payable under this Agreement or the other Credit Documents and finally to reduce the principal amount of outstanding Loans. (f) Failure to Pay Agent. Unless Agent shall have received notice from a Borrower at least one (1) Business Day prior to the date on which any payment is due to Lenders hereunder that such Borrower will not make such payment in full, Agent shall be entitled to assume that such Borrower has made or will make such payment in full to Agent on such date and Agent may, in reliance upon such assumption, cause to be paid to the applicable Lenders on such due date an amount equal to the amount then due such Lenders. If and to the extent such Borrower shall not have so made such payment in full to Agent, each such Lender shall repay to Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to Agent, at a per annum rate equal to (i) the Federal Funds Rate for the first three (3) days and the Base Rate thereafter for any amount in Dollars or (ii) the Overnight Rate for the first three (3) days and the Overnight Rate plus one percent (1%) thereafter for any amount in an Alternative Currency. A certificate of Agent submitted to any Lender with respect to any amount owing by such Lender under this Subparagraph 2.08(f) shall constitute prima facie evidence of such amount. 2.09. Loan Accounts; Notes. (a) Loan Accounts. The obligation of each Borrower to repay the Loans made to it by each Lender and to pay interest thereon at the rates provided herein shall be evidenced by an account or accounts maintained by such Lender on its books (individually, a "Loan Account"), except that any Lender may request that its Loans be evidenced by a note or notes pursuant to Subparagraph 2.09(b). Each Lender shall record in its Loan Accounts (i) the date, amount and currency of each Loan made by such Lender, (ii) the interest rates applicable to each such Loan and each Portion thereof and the effective dates of all changes thereto, (iii) the Interest Period for each LIBOR Loan and LIBOR Portion, (iv) the date, amount and currency of each principal and interest payment on each Loan and Portion and (v) such other information as such Lender may determine is necessary for the computation of principal and interest payable to it by each Borrower hereunder; provided, however, that any failure by a Lender to make, or any error by any Lender in making, any such notation shall not affect Borrowers' Obligations hereunder. The Loan Accounts shall constitute prima facie evidence of the matters noted therein. (b) Notes. If any Lender so requests, (i) such Lender's Revolving Loans shall be evidenced by promissory notes in the form of Exhibit C(1) (individually, a "Revolving Loan Note") and (ii) such Lender's Term Loans shall be evidenced by promissory notes in the form of Exhibit C(2) (individually, a "Term Loan Note"), each of which shall be (A) payable to the order of such Lender, (B) dated the Closing Date, and (C) otherwise appropriately completed. 2.10. Loan Funding. (a) Lender Funding and Disbursements to Borrowers. Each Lender shall, before 11:00 a.m. (New York time) on the date of each Borrowing, make available to Agent at Agent's New York office specified in Paragraph 8.01, in immediately available funds, such Lender's applicable Proportionate Share of such Borrowing. After Agent's receipt of such funds and upon satisfaction of the applicable conditions set forth in Section III, Agent shall promptly disburse such funds to the applicable Borrower no later than 26 31 1:00 p.m. (California time) in immediately available funds. Agent shall disburse the proceeds of each Borrowing as directed by the applicable Borrower in the applicable Notice of Borrowing. (b) Lender Failure to Fund. Unless Agent shall have received notice from a Lender prior to the date of a Borrowing that such Lender will not make available to Agent such Lender's applicable Proportionate Share of such Borrowing, Agent shall be entitled to assume that such Lender has made or will make such amount available to Agent on the date of such Borrowing in accordance with Subparagraph 2.08(a), and Agent may on such date, in reliance upon such assumption, disburse or otherwise credit to the applicable Borrower a corresponding amount. If any Lender does not make the amount of its applicable Proportionate Share of a Borrowing available to Agent on or prior to the date of such Borrowing, such Lender shall pay to Agent, on demand, interest which shall accrue on such amount from the date of such Borrowing until such amount is paid to Agent at rates equal to (i) the Federal Funds Rate for the first three (3) days and the Base Rate thereafter for any amount in Dollars or (ii) the Overnight Rate plus one percent (1%) for any amount in an Alternative Currency. A certificate of Agent submitted to any Lender with respect to any amount owing by such Lender under this Subparagraph 2.08(b) shall constitute prima facie evidence of such amount. If the amount of any Lender's applicable Proportionate Share of any Borrowing is not paid to Agent by such Lender within three (3) Business Days after the date of such Borrowing, the applicable Borrower shall repay such amount to Agent, on demand, together with interest thereon, for each day from the date such amount was disbursed to such Borrower until the date such amount is repaid to Agent, at the interest rate applicable at the time to the Loans comprising such Borrowing. (c) Lenders' Obligations Several. The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation hereunder to make its Loan as part of such Borrowing, but no Lender shall be obligated in any way to make any Loan which another Lender has failed or refused to make or otherwise be in any way responsible for the failure or refusal of any other Lender to make any Loan required to be made by such other Lender. 2.11. Pro Rata Treatment. (a) Borrowings, Commitment Reductions, Etc. Except as otherwise provided herein: (i) Each Borrowing under Facility A and reduction of the Total Facility A Commitment shall be made or shared among Facility A Lenders pro rata according to their respective Facility A Proportionate Shares; (ii) Each Borrowing under Facility B and reduction of the Total Facility B Commitments shall be made or shared among Facility B Lenders pro rata according to their respective Facility B Proportionate Shares; (iii) Each payment of principal on Loans in any Borrowing shall be shared among Lenders which made or funded the Loans in such Borrowing pro rata according to the respective unpaid principal amounts of such Loans then owed to such Lenders; (iv) Each payment of interest on Loans in any Borrowing shall be shared among Lenders which made or funded the Loans in such Borrowing pro rata according to (A) the respective unpaid principal amounts of such Loans then owed to such Lenders so made or funded by such Lenders and (B) the dates on which such Lenders so made or funded such Loans; (v) Each payment of Facility A Commitment Fees shall be shared among Facility A Lenders (except for Defaulting Lenders) pro rata according to (A) their respective Facility A Proportionate Shares and (B) in the case of each Facility A Lender which becomes a Facility A Lender hereunder after the date hereof and before the Facility A Revolving Loan Maturity Date, the date upon which such Facility A Lender so became a Facility A Lender; 27 32 (vi) Each payment of Facility B Commitment Fees shall be shared among Facility B Lenders (except for Defaulting Lenders) pro rata according to (A) their respective Facility B Proportionate Shares and (B) in the case of each Facility B Lender which becomes a Facility B Lender hereunder after the date hereof and before the Facility B Revolving Loan Maturity Date, the date upon which such Facility B Lender so became a Facility B Lender; (vii) Each payment of interest (other than interest on Loans) shall be shared among Lenders and Agent owed the amount upon which such interest accrues pro rata according to (A) the respective amounts so owed such Lenders and Agent and (B) the dates on which such amounts became owing to such Lenders and Agent; and (v) All other payments under this Agreement and the other Credit Documents shall be for the benefit of the Person or Persons specified. (b) Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of the Loan owed to it as part of any Borrowing in excess of its ratable share of payments on account of all Loans in such Borrowing obtained by all applicable Lenders entitled to such payments, such Lender shall forthwith purchase from such other Lenders such participations in their Loans as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase shall be rescinded and each other applicable Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such other Lender's ratable share (according to the proportion of (i) the amount of such other Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Subparagraph 2.11 (b) may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. 2.12. Change of Circumstances. (a) Inability to Obtain Funds, Determine Rates, Etc. If, on or before the first day of any Interest Period for any LIBOR Borrowing or LIBOR Portion in any currency, Agent shall determine (which determination shall be conclusive and binding upon Borrowers absent manifest error) that (i) funds in the currency of such Borrowing or Portion are not readily available in the amounts necessary for such Borrowing or Portion in the London interbank market, (ii) the LIBO Rate for such Interest Period cannot be adequately and reasonably determined due to other circumstances affecting the London interbank market, or (iii) the rate of interest for such Borrowing or Portion does not adequately and fairly reflect the cost to Lenders of making or maintaining such Borrowing or Portion, Agent shall immediately give notice of such condition to the applicable Borrowers and the applicable Lenders. After the giving of any such notice and until Agent shall otherwise notify the applicable Borrowers that the circumstances giving rise to such condition no longer exist, such Borrowers' right to obtain, continue or convert to Borrowings or Portions in the affected currency shall be suspended. Any LIBOR Borrowings or LIBOR Portions in the affected currency outstanding at the commencement of any such suspension shall be repaid at the end of the then current Interest Period for such Borrowings or Portions unless such suspension has then ended. (b) Illegality. If, after the date of this Agreement, the adoption of any Governmental Rule, any change in any Governmental Rule or the application or requirements thereof (whether such change occurs in accordance with the terms of such Governmental Rule as enacted, as a result of amendment or otherwise), any change in the interpretation or administration of any Governmental Rule by any Governmental Authority, or compliance by any Lender with any request or directive (whether or not having the force of law) of any Governmental Authority (a "Change of Law") shall make it unlawful or impossible for any Lender to make or maintain any LIBOR Loan or LIBOR Portion in any currency, such Lender shall immediately notify Agent and the applicable Borrower of such Change of Law. Upon receipt of such notice, (i) such Borrower's right to obtain, continue or convert to LIBOR Loans or LIBOR Portions in the 28 33 affected currency shall be suspended until such time as Agent shall notify such Borrower and the applicable Lenders that the circumstances giving rise to such suspension no longer exist, and (ii) such Borrower shall, if so requested by such Lender, immediately repay such LIBOR Loans or LIBOR Portions in the affected currency if such Lender shall notify such Borrower that such Lender may not lawfully continue to fund and maintain such LIBOR Loans or LIBOR Portions. Any prepayment of LIBOR Loans or LIBOR Portions made pursuant to the preceding sentence prior to the last day of an Interest Period for such LIBOR Loans or LIBOR Portions shall be deemed a prepayment thereof for purposes of Paragraph 2.14. (c) Increased Costs. If, after the date of this Agreement, any Change of Law: (i) Shall subject any Lender to any tax, duty or other charge with respect to any LIBOR Loan or LIBOR Portion, or shall change the basis of taxation of payments by any Borrower to any such Lender on such a LIBOR Loan or LIBOR Portion, or in respect to such a LIBOR Loan or LIBOR Portion, under this Agreement (except for changes in the rate of taxation on the overall net income of such Lender imposed by its jurisdiction of incorporation or the jurisdiction of its Applicable Lending Office); or (ii) Shall impose, modify or hold applicable any reserve (excluding any Reserve Requirement or other reserve to the extent included in the calculation of the LIBO Rate for any Loans or Portions), special deposit or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances or loans by, or any other acquisition of funds by any Lender for any LIBOR Loan or LIBOR Portion; or (iii) Shall impose on any Lender any other condition related to any LIBOR Loan or LIBOR Portion or such Lender's Commitments; And the effect of any of the foregoing is to increase the cost to such Lender of making, continuing or maintaining any such LIBOR Loan or LIBOR Portion or its Commitments or to reduce any amount receivable by such Lender hereunder; then Borrowers shall from time to time, within ten (10) Business Days after demand by such Lender, pay to such Lender additional amounts sufficient to reimburse such Lender for such increased costs or to compensate such Lender for such reduced amounts; provided, however, that Borrowers shall have no obligation to make any payment to any demanding party under this Subparagraph 2.10(c) on account of any such increased costs or reduced amounts unless Borrowers receive notice of such increased costs or reduced amounts from the demanding party within twelve (12) months after they are incurred or realized. A certificate executed by an officer of the applicable Lender setting forth in reasonable detail the amount of such increased costs or reduced amounts, submitted by such Lender to Borrowers shall constitute prima facie evidence of such costs or amounts. The obligations of Borrowers under this Subparagraph 2.12(c) shall survive the payment and performance of the Obligations and the termination of this Agreement. (d) Capital Requirements. If, after the date of this Agreement, any Lender determines that (i) any Change of Law affects the amount of capital required or expected to be maintained by such Lender or any Person controlling such Lender (a "Capital Adequacy Requirement") and (ii) the amount of capital maintained by such Lender or such Person which is attributable to or based upon the Loans, the Commitments or this Agreement must be increased as a result of such Capital Adequacy Requirement (taking into account such Lender's or such Person's policies with respect to capital adequacy), Borrowers shall pay to such Lender or such Person, within ten (10) Business Days after demand of such Lender, such amounts as such Lender or such Person shall determine are necessary to compensate such Lender or such Person for the increased costs to such Lender or such Person of such increased capital; provided, however, that Borrowers shall have no obligation to make any payment to any demanding party under this Subparagraph 2.12(d) on account of any such increased costs unless Borrowers receive notice of such increased costs from the demanding party within twelve (12) months after they are incurred or realized. A certificate executed by an officer of the applicable Lender setting forth in reasonable detail the amount of such increased costs, submitted by any Lender to Borrowers shall constitute prima facie evidence of such costs. The obligations of Borrowers under this Subparagraph 2.12(d) shall survive the payment and performance of the Obligations and the termination of this Agreement. 29 34 (e) Mitigation. Any Lender which becomes aware of (i) any Change of Law which will make it unlawful or impossible for such Lender to make or maintain any LIBOR Loan or LIBOR Portion or (ii) any Change of Law or other event or condition which will obligate Borrowers to pay any amount pursuant to Subparagraph 2.12(c) or Subparagraph 2.12(d) shall notify Borrowers and Agent thereof as promptly as practical. If any Lender has given notice of any such Change of Law or other event or condition and thereafter becomes aware that such Change of Law or other event or condition has ceased to exist, such Lender shall notify Borrowers and Agent thereof as promptly as practical. Each Lender affected by any Change of Law which makes it unlawful or impossible for such Lender to make or maintain any LIBOR Loan or LIBOR Portion or to which Borrowers are obligated to pay any amount pursuant to Subparagraph 2.12(c) or Subparagraph 2.12(d) shall use reasonable commercial efforts (including changing the jurisdiction of its Applicable Lending Offices) to avoid the effect of such Change of Law or to avoid or materially reduce any amounts which Borrowers are obligated to pay pursuant to Subparagraph 2.12(c) or Subparagraph 2.12(d) if, in the reasonable opinion of such Lender, such efforts would not be disadvantageous to such Lender or contrary to such Lender's normal banking practices. 2.13. Taxes on Payments. (a) Payments Free of Taxes. All payments made by Borrowers under this Agreement and the other Credit Documents shall be made free and clear of, and, except as provided herein, without deduction or withholding for or on account of, Non-Excluded Taxes. If any Non-Excluded Taxes are required to be withheld from any amounts payable to Agent or any Lender hereunder or under the other Credit Documents, the amounts so payable to Agent or such Lender shall be increased to the extent necessary to yield to Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the other Credit Documents. Whenever any Taxes are payable by Borrowers, as promptly as possible thereafter, Borrowers shall send to Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by Borrowers showing payment thereof. If Borrowers fail to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to Agent the required receipts or other required documentary evidence, Borrowers shall indemnify Agent and Lenders for any taxes (including interest or penalties) that may become payable by Agent or any Lender as a result of any such failure. The obligations of Borrowers under this Subparagraph 2.13(a) shall survive the payment and performance of the Obligations and the termination of this Agreement. (b) Withholding Exemption Certificates. Each Borrower may from time to time, by written notice to the Agent and each Lender, designate an office from which payments under this Agreement shall be made (an "Applicable Payment Office"). Each Lender which is not organized under the laws of the jurisdiction of a Borrower's Applicable Payment Office shall, within sixty (60) days of receipt of any such notice, notify the applicable Borrower whether such Lender is entitled to receive payments on its Loans under this Agreement from such Borrower's Applicable Payment Office for the account of such Lender's Lending Office without deduction or withholding of any income taxes imposed by the jurisdiction of such Borrower's Applicable Payment Office and deliver to such Borrower such certificates and other evidence as such Borrower shall reasonably request to establish such fact. Each such Lender further agrees (A) promptly to notify the applicable Borrowers and Agent of any change of circumstances (including any change in any treaty, law or regulation) which would prevent such Lender from receiving such payments hereunder without any deduction or withholding of such taxes and (B) if such Lender is still legally entitled to do so, then on or before the date that any certificate or other form delivered by such Lender under this Subparagraph 2.13(b) expires, to deliver to such Borrowers and Agent a new certificate or form, certifying that such Lender is entitled to receive such payments under this Agreement without deduction or such taxes. (c) Mitigation. If Agent or any Lender claims any additional amounts to be payable to it pursuant to this Paragraph 2.13, such Person shall use reasonable commercial efforts to file any certificate or document requested in writing by the applicable Borrower reflecting a reduced rate of withholding or to change the jurisdiction of an Applicable Lending Office if the making of such a filing or such change in the jurisdiction of an Applicable Lending Office would avoid the need for or materially reduce the amount of any such additional amounts which may thereafter accrue and if, in the reasonable opinion of such Person, 30 35 in the case of a change in the jurisdiction of an Applicable Lending Office, such change would not be disadvantageous to such Person or contrary to such Person's normal banking practices. (d) Tax Returns. Nothing contained in this Paragraph 2.13 shall require Agent or any Lender to make available any of its tax returns (or any other information relating to its taxes which it deems to be confidential). (e) Lender Rate Contracts. Nothing contained in this Paragraph 2.13 shall override or supercede any term or provision of any Lender Rate Contract regarding withholding taxes relating to Rate Contracts. 2.14. Funding Loss Indemnification. If any of the Borrowers shall (a) repay, prepay or convert any LIBOR Loan or LIBOR Portion on any day other than the last day of an Interest Period therefor (whether a scheduled payment, an optional prepayment or conversion, a mandatory prepayment or conversion, a payment upon acceleration or otherwise), (b) fail to borrow any LIBOR Loan or LIBOR Portion after delivering the Notice of Borrowing therefor to Agent (whether as a result of the failure to satisfy any applicable conditions or otherwise), (c) fail to convert any Portion of a Term Loan Borrowing into a LIBOR Portion in accordance with a Notice of Term Loan Conversion delivered to Agent (whether as a result of the failure to satisfy any applicable conditions or otherwise) or (d) fail to pay when due any principal or interest on any LIBOR Loan or LIBOR Portion, such Borrower shall, within ten (10) Business Days after demand of such Lender, reimburse such Lender for and hold such Lender harmless from all reasonable costs and losses incurred by such Lender as a result of such repayment, prepayment, conversion or failure; provided, however, that Borrowers shall have no obligation to make any payment to any demanding party under this Paragraph 2.14 on account of any such costs or losses unless Borrowers receive notice of such costs or losses from the demanding party within twelve (12) months after they are incurred or realized. Borrowers understand that such costs and losses may include, without limitation, losses incurred by a Lender as a result of funding and other contracts entered into by such Lender to fund a LIBOR Loan or LIBOR Portion. Each Lender demanding payment under this Paragraph 2.14 shall deliver to Borrowers, with a copy to Agent, a certificate setting forth the amount of costs and losses for which demand is made, which certificate shall set forth in reasonable detail the calculation of the amount demanded. Such a certificate so delivered to Borrowers shall constitute prima facie evidence of such costs and losses. The obligations of Borrowers under this Paragraph 2.14 shall survive the payment and performance of the Obligations and the termination of this Agreement. 2.15. Security. (a) Guaranties, Etc. The Obligations shall be secured by the following: (i) A Guaranty in the form of Exhibit D (the "Guaranty"), duly executed by FIL and all Eligible Material Subsidiaries, with such changes thereto as may be appropriate based on the law of the applicable jurisdictions; and (ii) A Pledge Agreement or Pledge Agreements, each in the form of Exhibit E (individually a "Pledge Agreement"), duly executed by FIL and any Subsidiary that directly owns the stock of any Ineligible Material Subsidiaries, together with the Guaranty executed by any such Subsidiary, with such changes thereto as may be appropriate based on the law of the applicable jurisdictions; provided, however, that (1) in lieu of providing a pledge of the stock of Flextronics Industrial (Shenzhen) Co. Ltd. by Flextronics Singapore Pte Ltd., FIL shall provide a pledge of the stock of Flextronics Singapore Pte Ltd. and Flextronics Singapore Pte Ltd. shall execute the Guaranty, (2) in lieu of providing a pledge of the stock of Flextronics International Sweden AB by F.L. Tronics Holdings AB and a pledge of the stock of Flextronics International Finland Oy by Flextronics Holding Finland OY, Flextronics Holdings UK Limited shall execute the Guaranty and a pledge of the stock of F.L. Tronics Holdings AB, and (3) in lieu of providing a pledge of the stock of Flextronics International Kft, FIL shall pledge the stock of Flextronics International GmbH; (4) with respect to Flextronics Singapore Pte Ltd., on or prior to the date such Subsidiary is dissolved and the stock of Flextronics International (Shenzhen) Co. Ltd. is thereafter held by 31 36 Flextronics International Singapore Pte Ltd., FIL shall promptly provide a pledge of the stock of Flextronics International Singapore Pte Ltd. and Flextronics International Singapore Pte Ltd. shall promptly execute the Guaranty which shall replace the guaranty of Flextronics Singapore Pte Ltd.; (5) if FIL does not dissolve Flextronics International Fremont, Inc. on or before May 31, 2000, Flextronics International Fremont, Inc. shall also promptly execute the Guaranty; and (6) on or prior to April 14, 2000, Dovatron Malaysia Sdn. Bhd. shall execute the Guaranty, in connection with the DII Acquisition. (b) Changes in Material Subsidiaries. (i) If, at any time after the date of this Agreement, any Subsidiary of FIL that is not a Guarantor under the Guaranty shall become an Eligible Material Subsidiary, FIL promptly shall deliver, or cause to be delivered, to Agent, within sixty (60) days of any such event, (A) a Subsidiary Joinder in the form of Attachment 1 to the Guaranty, appropriately completed and duly executed by such Subsidiary, and (B) such other instruments, agreements, certificates, opinions and documents as Agent may reasonably request to secure, maintain, protect and evidence the obligations of such Subsidiary under the Guaranty. (ii) If, at any time after the date of this Agreement, any Subsidiary of FIL that is a Guarantor under the Guaranty shall cease to be an Eligible Material Subsidiary, Agent promptly shall release such Subsidiary from its obligations under the Guaranty, subject to the completion by FIL (and, if the Equity Securities of such Subsidiary are owned directly by another Subsidiary of FIL, by such other parent Subsidiary) of such actions as may be necessary to grant to Agent, to the extent provided in clause (iii) below, a perfected security interest in the Equity Securities of such Subsidiary. (iii) If, at any time after the date of this Agreement, any Subsidiary of FIL shall become an Ineligible Material Subsidiary, FIL shall deliver, or cause to be delivered, to Agent, within sixty (60) days of any such event, such instruments, agreements, certificates, opinions and documents (including Uniform Commercial Code financing statements) as Agent may reasonably request to grant, perfect, maintain, protect and evidence security interests in favor of Agent, for the benefit of Agent and Lenders as security for the Obligations, in any and all Equity Securities of such Subsidiary, to the extent such security interests are not prohibited by any applicable Governmental Rule and would not significantly increase the tax liability of FIL and its Subsidiaries. (iv) If, at any time after the date of this Agreement, any Ineligible Material Subsidiary becomes an Eligible Material Subsidiary, upon FIL's compliance with clause (i) of Subparagraph 2.15(b) above, Agent shall release the Equity Securities of such Subsidiary from any Pledge Agreement previously delivered with respect to such Subsidiary. (c) Further Assurances. Borrowers shall deliver, and shall cause their Guarantors and their Subsidiaries to deliver, to Agent such other pledge agreements, guaranties, guaranty supplements and other instruments, agreements, certificates, opinions and documents (including Uniform Commercial Code financing statements) as Agent may reasonably request to implement the provisions of Subparagraph 2.15(a) and otherwise to establish, maintain, protect and evidence the rights provided to Agent, for the benefit of Agents and Lenders, pursuant to the Security Documents. Borrowers shall fully cooperate with Agent and Lenders and perform all additional acts reasonably requested by Agent or any Lender to effect the purposes of this Paragraph 2.15. Without limiting the generality of the foregoing, FIL covenants and agrees that it will ensure that the aggregate revenues of the Material Subsidiaries that have executed and delivered the Guaranty and/or Pledge Agreements pursuant to this Agreement and the FIUI Credit Agreement for such year will equal or exceed 75% of the consolidated total revenues of FIL and all of its Subsidiaries as reflected for such year in FIL's annual audited Financial Statements. 2.16. Replacement of Lenders. If any Lender shall (a) become a Defaulting Lender more than one (1) time in a period of twelve (12) consecutive months, (b) continue as a Defaulting Lender for more than three (3) 32 37 Business Days at any time, (c) suspend its obligation to make or maintain LIBOR Loans or LIBOR Portions in any currency pursuant to Subparagraph 2.12(b) for a reason which is not applicable to any other Lender or (d) demand any payment under Subparagraph 2.12(a), 2.12(c) or 2.12(d) for a reason which is not applicable to any other Lender, then Agent may (or upon the written request of Borrowers, shall) replace such Lender (the "affected Lender"), or cause such affected Lender to be replaced, with another lender (the "replacement Lender") satisfying the requirements of an Assignee Lender under Subparagraph 8.05(c), by having the affected Lender sell and assign all of its rights and obligations under this Agreement and the other Credit Documents to the replacement Lender pursuant to Subparagraph 8.05(c); provided, however, that if Borrowers seek to exercise such right, they must do so within sixty (60) days after any Borrower first knows or should have known of the occurrence of the event or events giving rise to such right, and neither Agent nor any Lender shall have any obligation to identify or locate a replacement Lender for Borrowers; and provided, further, that no Lender shall be replaced under this Agreement unless such Lender is also replaced under the FIUI Credit Agreement. Upon receipt by any affected Lender of a written notice from Agent stating that Agent is exercising the replacement right set forth in this Paragraph 2.16, such affected Lender shall sell and assign all of its rights and obligations under this Agreement and the other Credit Documents to the replacement Lender pursuant to an Assignment Agreement and Subparagraph 8.05(c) for a purchase price equal to the sum of the principal amount of the affected Lender's Loans so sold and assigned, all accrued and unpaid interest thereon and its ratable share of all fees to which it is entitled. SECTION III. CONDITIONS PRECEDENT. 3.01. Initial Conditions Precedent. The obligations of the applicable Lenders to make the Loans comprising the initial Borrowing are subject to receipt by Agent, on or prior to the Closing Date, of each item listed in Schedule 3.01, each in form and substance satisfactory to Agent and each Lender, and with sufficient copies for, Agent and each Lender. 3.02. Conditions Precedent to Term Loan Borrowing . The obligations of Facility B Lenders to make the Term Loans comprising the Term Loan Borrowing also are subject to receipt by Agent, on or prior to the Facility B Revolving Loan Maturity Date, of a Term Loan Note for each Facility B Lender so requesting such a note, duly executed by the applicable Borrower. 3.03. Conditions Precedent to Each Credit Event. The occurrence of each Credit Event (including the initial Borrowing) is subject to the further conditions that: (a) Borrowers shall have delivered to Agent the Notice of Borrowing, Notice of Term Loan Conversion, or Notice of Interest Period Selection, as the case may be, for such Credit Event in accordance with this Agreement; and (b) On the date such Credit Event is to occur and after giving effect to such Credit Event, the following shall be true and correct: (i) The representations and warranties of Borrowers and their Subsidiaries set forth in Paragraph 4.01 and in the other Credit Documents are true and correct in all material respects as if made on such date (except for representations and warranties expressly made as of a specified date, which shall be true as of such date); and (ii) No Default has occurred and is continuing or will result from such Credit Event. The submission by any of the Borrowers to Agent of each Notice of Borrowing, each Notice of Term Loan Conversion (other than a notice for a conversion to a Base Rate Portion) and each Notice of Interest Period Selection (other than a notice selecting an Interest Period of one (1) month) shall be deemed to be a representation and warranty by such Borrower that each of the statements set forth above in this Subparagraph 3.03(b) is true and correct as of the date of such notice. 3.04. Covenant to Deliver. Borrowers agree (not as a condition but as a covenant) to deliver to Agent each item required to be delivered to Agent as a condition to the occurrence of any Credit Event if such Credit Event 33 38 occurs. Borrowers expressly agree that the occurrence of any such Credit Event prior to the receipt by Agent of any such item shall not constitute a waiver by Agent or any Lender of Borrowers' obligation to deliver such item. 3.05. Conditions Precedent to Adding Designated Borrower. The obligations of the applicable Lenders to make Loans to any Designated Borrower are subject to, on or prior to the date of such designation, the following: (a) receipt by Agent of each item listed in Schedule 3.01 with respect to such Designated Borrower, each in form and substance satisfactory to Agent and each Lender, and with sufficient copies for, Agent and each Lender, (b) execution of an amendment to this Agreement by each of the parties hereto, whereby Designated Borrower shall agree to be bound by all of the terms herein, (c) written approval by all of the Lenders and Guarantors party to this Agreement and any of the Credit Documents as to the designation of the Designated Borrower, and (d) execution by Designated Borrower and FIL of a Subsidiary Joinder to the Guaranty, substantially in the form of Attachment 1 to Exhibit D hereto. SECTION IV. REPRESENTATIONS AND WARRANTIES. 4.01. Borrowers' Representations and Warranties. In order to induce Agent and Lenders to enter into this Agreement, Borrowers hereby represent and warrant to Agent and Lenders as follows: (a) Due Incorporation, Qualification, etc. Each of Borrowers and their Subsidiaries (i) is a corporation duly organized, validly existing and, in any jurisdiction in which such legal concept is applicable, in good standing under the laws of its jurisdiction of organization; (ii) has the power and authority to own, lease and operate its properties and carry on its business as now conducted; and (iii) is duly qualified and licensed to do business as a foreign corporation or branch in each jurisdiction where the failure to be so qualified or licensed is reasonably and substantially likely to have a Material Adverse Effect. (b) Authority. The execution, delivery and performance by each of the Borrowers and their Subsidiaries of each Credit Document executed, or to be executed, by such Person and the consummation of the transactions contemplated thereby (i) are within the power of such Person and (ii) have been duly authorized by all necessary actions on the part of such Person. (c) Enforceability. Each Credit Document executed, or to be executed, by each of the Borrowers and their Subsidiaries has been, or will be, duly executed and delivered by such Person and constitutes, or will constitute, a legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors' rights generally and general principles of equity. (d) Non-Contravention. The execution and delivery by each of Borrowers and their Subsidiaries of the Credit Documents executed by such Person and the performance and consummation of the transactions contemplated thereby do not (i) violate any Requirement of Law applicable to such Person; (ii) violate any provision of, or result in the breach or the acceleration of, or entitle any other Person to accelerate (whether after the giving of notice or lapse of time or both), any Contractual Obligation of such Person; or (iii) result in the creation or imposition of any Lien (or the obligation to create or impose any Lien) upon any property, asset or revenue of such Person (except such Liens as may be created in favor of Agent pursuant to this Agreement or the other Credit Documents). (e) Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority or other Person (including the shareholders of any Person) is required in connection with the execution and delivery of the Credit Documents executed by each of the Borrowers and their Subsidiaries the performance or consummation of the transactions contemplated thereby. (f) No Violation or Default. Neither any Borrower nor any of their Subsidiaries is in violation of or in default with respect to (i) any Requirement of Law applicable to such Person or (ii) any 34 39 Contractual Obligation of such Person (nor is there any waiver in effect which, if not in effect, would result in such a violation or default), where, in each case, such violation or default is reasonably or substantially likely to have a Material Adverse Effect. Without limiting the generality of the foregoing, neither any Borrower nor any of its Subsidiaries (A) has violated any Environmental Laws, (B) has any liability under any Environmental Laws or (C) has received notice or other communication of an investigation or, to the knowledge of any Borrower or its Subsidiaries, is under investigation by any Governmental Authority having authority to enforce Environmental Laws, where such violation, liability or investigation is reasonably and substantially likely to have a Material Adverse Effect. No Default has occurred and is continuing. (g) Litigation. No actions (including derivative actions), suits, proceedings or investigations are pending or, to the knowledge of any Borrower, threatened against any Borrower or any of its Subsidiaries at law or in equity in any court or before any other Governmental Authority which (i) is reasonably and substantially likely (alone or in the aggregate) to have a Material Adverse Effect or (ii) seeks to enjoin, either directly or indirectly, the execution, delivery or performance by any Borrower or any of its Subsidiaries of the Credit Documents or the transactions contemplated thereby. (h) Title; Possession Under Leases. Each Borrower and its Subsidiaries own and have good and marketable title, or a valid leasehold interest in, all their respective material properties and assets as reflected in the most recent Financial Statements delivered to Agent (except those assets and properties disposed of in the ordinary course of business or otherwise in compliance with this Agreement since the date of such Financial Statements) and all respective material assets and properties acquired by such Borrower and its Subsidiaries since such date (except those disposed of in the ordinary course of business or otherwise in compliance with this Agreement). Such assets and properties are subject to no Lien, except for Permitted Liens. (i) Financial Statements. The Financial Statements of FIL and its Subsidiaries which have been delivered to Agent, (i) are in accordance with the books and records of FIL and its Subsidiaries, which have been maintained in accordance with good business practice; (ii) have been prepared in conformity with GAAP; and (iii) fairly present in all material respects the financial conditions and results of operations of FIL and its Subsidiaries as of the date thereof and for the period covered thereby. Neither FIL nor any of its Subsidiaries has any Contingent Obligations, liability for taxes or other outstanding obligations which are material in the aggregate, except as disclosed or reflected in the Financial Statements of FIL dated December 31, 1999, furnished by FIL Borrower to Agent prior to the date hereof, or in the Financial Statements delivered to Agent pursuant to clause (i) or (ii) of Subparagraph 5.01(a), or except as permitted under Section V of this Agreement. (j) Employee Benefit Plans. (i) Based on the latest valuation of each Employee Benefit Plan that any Borrower or any ERISA Affiliate maintains or contributes to, or has any obligation under (which occurred within twelve months of the date of this representation), the aggregate benefit liabilities of such plan within the meaning of Section 4001 of ERISA did not exceed the aggregate value of the assets of such plan. Neither any Borrower nor any ERISA Affiliate has any liability with respect to any post-retirement benefit under any Employee Benefit Plan which is a welfare plan (as defined in section 3(1) of ERISA), other than liability for health plan continuation coverage described in Part 6 of Title I(B) of ERISA, which liability for health plan contribution coverage is not reasonably and substantially likely to have a Material Adverse Effect. (ii) Each Employee Benefit Plan complies, in both form and operation, in all material respects, with its terms, ERISA and the IRC, and no condition exists or event has occurred with respect to any such plan which would result in the incurrence by any Borrower or any ERISA Affiliate of any material liability, fine or penalty. Each Employee Benefit Plan, related trust agreement, arrangement and commitment of any Borrower or any ERISA Affiliate is legally valid and binding and in full force and effect. No Employee Benefit Plan is being audited or investigated by any government agency or is subject to any pending or threatened claim or suit. 35 40 Neither any Borrower nor any ERISA Affiliate nor any fiduciary of any Employee Benefit Plan has engaged in a prohibited transaction under section 406 of ERISA or section 4975 of the IRC. (iii) Neither any Borrower nor any ERISA Affiliate contributes to or has any material contingent obligations to any Multiemployer Plan. Neither any Borrower nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of assets described in Section 4204 of ERISA. Neither any Borrower nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of Section 4241 or Section 4245 of ERISA or that any Multiemployer Plan intends to terminate or has been terminated under Section 4041A of ERISA. (iv) All employer and employee contributions required by any applicable Governmental Rule in connection with all Foreign Plans have been made, or, if applicable, accrued, in accordance with the country-specific accounting practices. The fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Plan funded through insurance or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations, as of the date hereof, with respect to all current and former participants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to determine employer contributions to such Foreign Plan, which actuarial assumptions are commercially reasonable. Each Foreign Plan required to be registered has been registered and has been maintained in good standing with applicable Governmental Authorities. Each Foreign Plan reasonably complies in all material respects with all applicable Governmental Rules. (k) Other Regulations. No Borrower or any Material Subsidiary is subject to regulation under the Investment Company Act of 1940, the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code or any other Governmental Rule that limits its ability to incur Indebtedness. (l) Patent and Other Rights. Each Borrower and its Subsidiaries own, license or otherwise have the full right to use, under validly existing agreements, without known conflict with any rights of others, all material patents, licenses, trademarks, trade names, trade secrets, service marks, copyrights and all rights with respect thereto, which are required to conduct their businesses as now conducted. (m) Governmental Charges. Each Borrower and its Subsidiaries have filed or caused to be filed all tax returns, reports and declarations which are required to be filed by them. Each Borrower and its Subsidiaries have paid, or made provision for the payment of, all taxes and other Governmental Charges which have or may have become due pursuant to said returns or otherwise and all other indebtedness, except such Governmental Charges or indebtedness, if any, which are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided or which are not reasonably and substantially likely to have a Material Adverse Effect if unpaid. (n) Margin Stock. No Borrower owns any Margin Stock which, in the aggregate, would constitute a substantial part of the assets of such Borrower, and no proceeds of any Loan will be used to purchase or carry, directly or indirectly, any Margin Stock or to extend credit, directly or indirectly, to any Person for the purpose of purchasing or carrying any Margin Stock. (o) Subsidiaries, Etc. Schedule 4.01(o) (as updated on a quarterly basis by Borrowers in a written notice to Agent no later than the date financial statements are required to be delivered pursuant to Subparagraph 5.01(a)) sets forth each of FIL's Subsidiaries (other than Subsidiaries with less than $100,000 in annual revenues or consolidated assets), its jurisdiction of organization, the classes of its Equity Securities, the number of shares of each such class issued and outstanding, the percentages of shares of each such class owned directly or indirectly by FIL and whether FIL owns such shares directly or, if not, the Subsidiary of FIL that owns such shares. The only Material Subsidiaries on the date of this Agreement 36 41 are Flextronics International USA, Inc., Flex International Marketing (L) Ltd., Flextronics International Latin America (L) Ltd., Flextronics Manufacturing Mexico, S.A. de C.V., Flextronics International Finland Oy, Flextronics Industrial (Shenzhen) Co. Ltd., Flextronics International GmbH, Flextronics International Sweden AB and Flextronics International Kft. FIUI and each of the other Material Subsidiaries is a Subsidiary of FIL. (p) Solvency, Etc. Each of the Borrowers and their Material Subsidiaries is Solvent and, after the execution and delivery of the Credit Documents and the consummation of the transactions contemplated thereby, will be Solvent. (q) Senior Debt. Borrowers have taken all actions necessary for the Obligations to constitute "Designated Senior Debt" for the purposes of and as defined in the Subordinated Indenture. Borrowers shall take all additional actions that may be necessary for the Obligations to continue at all times to constitute "Designated Senior Debt" or otherwise to be entitled to all the benefits of any senior debt under all Subordinated Indentures. (r) No Withholding, Etc. No Borrower or Guarantor is required by any Governmental Rule to make any deduction or withholding of any nature whatsoever from any payment required to be made by any Borrowers or any or Guarantor hereunder or under any other Credit Document. Neither this Agreement nor any of the other Credit Documents is subject to any registration or stamp tax or any other similar or like taxes payable in any jurisdiction. (s) Foreign Subsidiaries. (i) No Immunities, etc. Each Foreign Subsidiary that is a Borrower or Guarantor is subject to civil and commercial law with respect to its obligations under this Agreement and the other Credit Documents, and the execution, delivery and performance by each such Foreign Subsidiary of this Agreement and the other Credit Documents constitute and will constitute private and commercial acts and not public or governmental acts. Neither such Foreign Subsidiary nor any of its property, whether or not held for its own account, has any immunity (sovereign or other similar immunity) from any suit or proceeding, from jurisdiction of any court or from set-off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or other similar immunity) under laws of the jurisdiction in which such Foreign Subsidiary is organized and existing in respect of its obligations under this Agreement and the other Credit Documents. Each such Foreign Subsidiary has waived every immunity (sovereign or otherwise) to which it or any of its properties would otherwise be entitled from any legal action, suit or proceeding, from jurisdiction of any court and from set-off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) under the laws of the jurisdiction in which such Foreign Subsidiary is organized and existing in respect of its obligations under this Agreement and the other Credit Documents. The waiver by each such Foreign Subsidiary described in the immediately preceding sentence is the legal, valid and binding obligation of such Foreign Subsidiary. (ii) No Recordation Necessary. This Agreement and each of the other Credit Documents executed by a Foreign Subsidiary is in proper legal form under the law of the jurisdiction in which such Foreign Subsidiary is organized and existing for the enforcement hereof or thereof against such Foreign Subsidiary under the law of such jurisdiction, and to ensure the legality, validity, enforceability, priority or admissibility in evidence of this Agreement and such other Credit Documents. It is not necessary to ensure the legality, validity, enforceability, priority or admissibility in evidence of this Agreement or any other Credit Document executed by a Foreign Subsidiary that this Agreement, any other Credit Document or any other document be filed, registered or recorded with, or executed or notarized before, any court or other authority in the jurisdiction in which such Foreign Subsidiary is organized and existing or that any registration charge or stamp or similar tax be paid on or in respect of this Agreement, any other Credit Document or any other document, except for any such filing, registration or recording, or 37 42 execution or notarization, as has been made or is not required to be made until this Agreement, any other Credit Document or any other document is sought to be enforced and for any charge or tax as has been timely paid. (iii) Exchange Controls. The execution, delivery and performance by each Borrower of this Agreement and each of the other Credit Documents executed by a Foreign Subsidiary is, under applicable foreign exchange control regulations of the jurisdiction in which each such Borrower or Foreign Subsidiary is organized and existing, not subject to any notification or authorization except (A) such as have been made or obtained or (B) such as cannot be made or obtained until a later date (provided any notification or authorization described in immediately preceding clause (B) shall be made or obtained as soon as is reasonably practicable). (t) No Material Adverse Effect. No event has occurred and no condition exists which is reasonably and substantially likely to have a Material Adverse Effect. (u) Accuracy of Information Furnished. The Credit Documents and the other certificates, statements and information (excluding projections) furnished to Agent or any Lender by or on behalf of Borrowers and their Subsidiaries in connection with the Credit Documents and the transactions contemplated thereby, taken as a whole, do not contain and will not contain any untrue statement of a material fact and do not omit and will not omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. All projections have been based upon reasonable assumptions and represent, as of their respective dates of presentations, Borrowers' best estimates of the future performance of Borrowers and their Subsidiaries. 4.02. Reaffirmation. Each Borrower shall be deemed to have reaffirmed, for the benefit of Lenders and Agent, each representation and warranty contained in Paragraph 4.01 on and as of the date of each Credit Event (except for representations and warranties expressly made as of a specified date, which shall be true as of such date). SECTION V. COVENANTS. 5.01. Affirmative Covenants. Until the termination of this Agreement and the satisfaction in full by Borrowers of all Obligations, Borrowers will comply, and will cause compliance, with the following affirmative covenants, unless Required Lenders shall otherwise consent in writing: (a) Financial Statements, Reports, etc. Each Borrower shall furnish to Agent the following, each in such form and such detail as Agent or the Required Lenders shall reasonably request: (i) As soon as available and in no event later than forty-five (45) days after the last day of each fiscal quarter of FIL, a copy of the Financial Statements of FIL and its Subsidiaries (prepared on a consolidated basis) for such quarter and for the fiscal year to date, certified by the chief financial officer, treasurer or controller of FIL to present fairly in all material respects the financial condition, results of operations and other information reflected therein and to have been prepared in accordance with GAAP (subject to normal year-end audit adjustments); (ii) As soon as available and in no event later than ninety (90) days after the close of each fiscal year of FIL, (A) copies of the audited Financial Statements of FIL and its Subsidiaries (prepared on a consolidated and consolidating basis) for such year, audited by independent certified public accountants of recognized national standing reasonably acceptable to Agent, (B) copies of the unqualified opinions (or qualified opinions reasonably acceptable to Agent) and (C) if available from such accountants, certificates of such accountants to Agent stating that in making the examination necessary for their opinion they have reviewed this Agreement and have obtained no knowledge of any Default which has occurred and is continuing, or if, in the opinion of such accountants, a Default has occurred and is continuing, a statement as to the nature thereof; 38 43 (iii) Contemporaneously with the quarterly and year-end Financial Statements required by the foregoing clauses (i) and (ii), a compliance certificate of the chief financial officer, treasurer or controller of each Borrower (a "Compliance Certificate") which (A) states that no Default has occurred and is continuing, or, if any such Default has occurred and is continuing, a statement as to the nature thereof and what action Borrowers propose to take with respect thereto; and (B) sets forth, for the quarter or year covered by such Financial Statements or as of the last day of such quarter or year (as the case may be), the calculation of the financial ratios and tests provided in Paragraph 5.03 for FIL; (iv) As soon as possible and in no event later than five (5) Business Days after any officer of such Borrower knows of the occurrence or existence of (A) any Reportable Event under any Employee Benefit Plan or Multiemployer Plan; (B) any actual or threatened litigation, suits, claims or disputes against any Borrower or any of its Subsidiaries involving potential monetary damages payable by any Borrower or its Subsidiaries of $10,000,000 or more (alone or in the aggregate); (C) any other event or condition which is reasonably and substantially likely to have a Material Adverse Effect; or (D) any Default; the statement of the chief financial officer, treasurer or controller of such Borrower setting forth details of such event, condition or Default and the action which such Borrower proposes to take with respect thereto; (v) As soon as available and in no event later than five (5) Business Days after they are sent, made available or filed, copies of (A) all registration statements and reports filed by any of the Borrowers or any of their Subsidiaries with the United States Securities and Exchange Commission (including, without limitation, all 10-Q, 10-K and 8-K reports); and (B) all reports, proxy statements and financial statements sent or made available by any of the Borrowers or any of their Subsidiaries to its security holders; (vi) As soon as possible and in no event later than (A) forty-five (45) days after the last day of each fiscal quarter (or ninety (90) days in the case of the last fiscal quarter of each fiscal year), written notice of any new Subsidiary acquired or established directly or indirectly by FIL during such quarter, any new Equity Securities of any existing Subsidiary acquired directly or indirectly by FIL during such quarter or any other change in the information set forth in Schedule 4.01(o) during such quarter; and (B) ten (10) days after the date that any entity becomes a Material Subsidiary, written notice setting forth each Subsidiary of FIL that has become a Material Subsidiary and indicating for each such new Material Subsidiary whether such Material Subsidiary is an Eligible Material Subsidiary or Ineligible Material Subsidiary; (vii) As soon as available and in no event later than five (5) Business Days after any Borrower changes its legal name or the address of its chief executive office, written notice setting forth such Borrower's new legal name and/or new address; and (viii) Such other instruments, agreements, certificates, opinions, statements, documents and information relating to the operations or condition (financial or otherwise) of such Borrower or their Subsidiaries, and compliance by such Borrower with the terms of this Agreement and the other Credit Documents as Agent may from time to time reasonably request. In lieu of furnishing to Agent hard copies of the quarterly Financial Statements described in clause (i) above and the annual Financial Statements and auditor's report described in clauses (ii)(A) and (ii)(B) above and the other documents referred to in clause (v) above, FIL may make such documents available to Lenders at its website located at www.flextronics.com and through the United States Securities and Exchange Commission's EDGAR system ("EDGAR") or by transmitting such documents electronically to Lenders. The Agent shall provide to any Lender hard copies of such documents upon request if such Lender does not have access to FIL's website or EDGAR. (b) Books and Records. Each Borrower and their Subsidiaries shall at all times keep proper books of record and account which shall be complete and correct in all material respects in accordance with GAAP. 39 44 (c) Inspections. Each Borrower and their Subsidiaries shall permit Agent and each Lender, or any agent or representative thereof, upon reasonable notice and during normal business hours, to visit and inspect any of the properties and offices of such Borrower and its Subsidiaries, to examine the books and records of such Borrower and its Subsidiaries and make copies thereof and to discuss the affairs, finances and business of such Borrower and its Subsidiaries with, and to be advised as to the same by, their officers, auditors and accountants, all at such times and intervals as Agent or any Lender may reasonably request (which visits and inspections shall be at the expense of Agent or such Lender unless a Default has occurred and is continuing). (d) Insurance. Each Borrower and their Subsidiaries shall (i) carry and maintain insurance of the types and in the amounts customarily carried from time to time during the term of this Agreement by others engaged in substantially the same business as such Person and operating in the same geographic area as such Person, including fire, public liability, property damage and worker's compensation, (ii) carry and maintain each policy for such insurance with financially sound insurers and (iii) deliver to Agent from time to time, as Agent may request, schedules setting forth all insurance then in effect. (e) Governmental Charges and Other Indebtedness. Each Borrower and their Subsidiaries shall promptly pay and discharge when due (i) all taxes and other Governmental Charges prior to the date upon which penalties accrue thereon, (ii) all indebtedness which, if unpaid, could become a Lien upon the property of such Borrower or its Subsidiaries and (iii) subject to any subordination provisions applicable thereto, all other Indebtedness, which in each case, if unpaid, is reasonably and substantially likely to have a Material Adverse Effect, except such Indebtedness as may in good faith be contested or disputed, or for which arrangements for deferred payment have been made, provided that in each such case appropriate reserves are maintained in accordance with GAAP. (f) Use of Proceeds. Each Borrower shall use the proceeds of the Loans only for the respective purposes set forth in Section II. No Borrower shall use any part of the proceeds of any Loan, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock or for the purpose of purchasing or carrying or trading in any securities under such circumstances as to involve such Borrower, any Lender or Agent in a violation of Regulations T, U or X issued by the Federal Reserve Board. (g) General Business Operations. Each of the Borrowers and their Subsidiaries shall (i) preserve and maintain its corporate existence and all of its rights, privileges and franchises reasonably necessary to the conduct of its business, (ii) conduct its business activities in compliance with all Requirements of Law and Contractual Obligations applicable to such Person and (iii) keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted, except, in each case, where any failure is not reasonably and substantially likely to have a Material Adverse Effect. (h) Pari Passu Ranking. Each Borrower shall take, or cause to be taken, all actions necessary to ensure that the Obligations of such Borrower are and continue to rank at least pari passu in right of payment with all other unsecured and unsubordinated Indebtedness of such Borrower. 5.02. Negative Covenants. Until the termination of this Agreement and the satisfaction in full by Borrowers of all Obligations, Borrowers will comply, and will cause compliance, with the following negative covenants, unless Required Lenders shall otherwise consent in writing: (a) Indebtedness. None of the Borrowers or any of their Subsidiaries shall create, incur, assume or permit to exist any Indebtedness except for the following ("Permitted Indebtedness"): (i) Indebtedness that is not secured by a Lien in any asset or property of any of the Borrowers or any of their Subsidiaries; (ii) (A) Indebtedness under Capital Leases or under purchase money loans incurred by Borrower or any of its Subsidiaries to finance the acquisition, construction, development or 40 45 improvement by such Person of real property, fixtures or equipment provided that in each case (1) such Indebtedness is incurred by such Person at the time of, or not later than ninety (90) days after, the acquisition by such Person of the property so financed and (2) such Indebtedness does not exceed the purchase price of the property (or the cost of constructing, developing or improving the same) so financed, and (B) Indebtedness under initial or successive refinancings of any such Capital Leases or purchase money loans provided that the principal amount of any such refinancing does not exceed the principal amount of the Indebtedness being refinanced; (iii) Existing Secured Indebtedness; (iv) Indebtedness of any Borrower to any other Borrower or any Eligible Material Subsidiary or Indebtedness of any Eligible Material Subsidiary to any Borrower or any other Eligible Material Subsidiary, in each case to the extent otherwise permitted pursuant to Subparagraph 5.02(e) and Subparagraph 5.02(i); and (v) Other Indebtedness that is secured by a Lien on any assets or property of any of the Borrowers or any of their Subsidiaries, provided that the aggregate principal amount of all secured Indebtedness (other than Existing Secured Indebtedness or Indebtedness secured by cash or cash equivalents to the extent such cash or cash equivalents are proceeds of such Indebtedness), outstanding during any fiscal quarter of FIL does not exceed ten percent (10%) of the consolidated assets of FIL and its Subsidiaries on the last day of the immediately preceding fiscal quarter. (b) Liens. None of the Borrowers or any of their Subsidiaries shall create, incur, assume or permit to exist any Lien on or with respect to any of their assets or property of any character, whether now owned or hereafter acquired, except for the following Liens ("Permitted Liens"): (i) Liens that secure only Indebtedness which constitutes Permitted Indebtedness under clause (ii), (iii) or (iv) of Subparagraph 5.02(a); (ii) Liens in favor of any of the Borrowers or any Eligible Material Subsidiary on all or part of the assets of Subsidiaries of any Borrower or Eligible Material Subsidiary securing Indebtedness owing by Subsidiaries of any of the Borrowers or Eligible Material Subsidiary, as the case may be, to any of the Borrowers or to such other Eligible Material Subsidiary; (iii) Liens to secure taxes, assessments and other government charges in respect of obligations not overdue or Liens on properties to secure claims for labor, material or supplies in respect of obligations not overdue, or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves are being maintained in accordance with generally accepted accounting principles so long as such Liens are not being foreclosed; (iv) deposits or pledges made in connection with, or to secure payment of, workmen's compensation, unemployment insurance, old age pensions or other social security obligations and good faith deposits in connection with tenders, contracts or leases to which any Borrower or Subsidiary is a party or deposits or pledges to secure, or in lieu of, surety, penalty or appeal bonds, performance bonds or other similar obligations; (v) Liens of carriers, warehousemen, mechanics and materialmen, and other like Liens on properties which would not have a Material Adverse Effect and are in respect of obligations not overdue, or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves are being maintained in accordance with generally accepted accounting principles so long as such Liens are not being foreclosed; 41 46 (vi) encumbrances on real property consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's or lessee's Liens under leases to which a Borrower or a Subsidiary is a party, and other minor Liens or encumbrances none of which interferes materially with the use of the property, which defects do not individually or in the aggregate have a Material Adverse Effect; (vii) Liens in favor of the Agent for the benefit of the Lenders and the Agent under the Credit Documents; (viii) Liens in favor of the agent for the benefit of the lenders and the agent under the FIUI Credit Documents; (ix) Liens in favor of Ericsson Business Networks AB under the Pledge Agreement dated March 27, 1997 between Ericsson and Flextronics Holdings AB; (x) Liens securing Indebtedness or other obligations on cash or cash equivalents to the extent such cash or cash equivalents represent proceeds from such Indebtedness or other obligations; and (xi) rights of third parties in equipment or inventory consigned to, or otherwise owned by such third party and which is being stored on property owned or leased by, a Borrower or Subsidiary. Provided, however, that the foregoing exceptions shall not permit any Lien in any of the Collateral or in any other Equity Securities issued by any Subsidiary of FIL and owned by FIL or any of its other Subsidiaries, except for Liens in favor of Agent securing the Obligations or pursuant to the FIUI Credit Documents. (c) Asset Dispositions. None of the Borrowers or any of their Subsidiaries shall sell, lease, transfer or otherwise dispose of any of their assets or property, whether now owned or hereafter acquired, except for (i) assets or property sold, leased, transferred or otherwise disposed of in the ordinary course of business for fair market value; (ii) sales of accounts receivable in financing transactions, provided that the aggregate principal amount of any accounts receivable sold in any fiscal quarter of FIL shall not exceed thirty percent (30%) of the aggregate principal amount of accounts receivable originated by FIL and its Subsidiaries during such fiscal quarter; (iii) sales of duplicative or excess assets existing as a result of transactions otherwise permitted pursuant to Subparagraph 5.02(d), provided that the aggregate principal amount of any such duplicative assets sold in any fiscal year does not exceed five percent (5%) of all fixed assets of FIL and its Subsidiaries net of depreciation held by FIL and its Subsidiaries as of the end of the immediately preceding fiscal quarter; (iv) sales or transfers of assets or property to any Borrower or Material Subsidiary for a purchase price that is less than fair market value; provided, however, that the foregoing exception shall not permit any sale, lease, transfer or other disposition of any Collateral or of any other Equity Securities issued by any Subsidiary of FIL and owned by FIL or any of its other Subsidiaries, except for Liens in favor of Agent securing the Obligations; and (v) assets sold and leasedback by FIL or its Subsidiaries in the ordinary course of business. (d) Mergers, Acquisitions, Etc. None of the Borrowers or any of their Subsidiaries shall consolidate with or merge into any other Person or permit any other Person to merge into them, acquire any Person as a new Subsidiary or acquire all or substantially all of the assets of any other Person, except for the following: (i) Borrowers and their Subsidiaries may merge with each other, provided that (A) in any such merger involving any Borrower, such Borrower is the surviving corporation and (B) no Default has occurred and is continuing on the date of, or will result after giving effect to, any such merger; and 42 47 (ii) Borrowers and their Subsidiaries may acquire any Person as a new Subsidiary or of all or substantially all of the assets of any Person, provided that: (A) No Default has occurred and is continuing on the date of, or will result after giving effect to, any such acquisition; (B) Such Person is not primarily engaged in any business substantially different from (1) the present business of the acquiring Borrower or Subsidiary or (2) any business reasonably related thereto; and (C) Borrowers or their Subsidiaries possess the power to direct or cause the direction of the management and policies of such Person. (e) Investments. None of the Borrowers or any of their Subsidiaries shall make any Investment except for the following: (i) Investments permitted by the investment policy of FIL set forth in Schedule 5.02(e) or, if any changes to the investment policy of FIL are hereafter duly approved by the Board of Directors of FIL, in any subsequent investment policy which is the most recent investment policy delivered by FIL to Agent with a certificate of FIL's chief financial officer to the effect that such investment policy has been duly approved by FIL's Board of Directors and is then in effect; (ii) Investments listed in Schedule 5.02(e) existing on the date of this Agreement; (iii) Investments received by Borrowers and their Subsidiaries in connection with the bankruptcy or reorganization of customers and suppliers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (iv) Investments by Borrowers and the Material Subsidiaries and the Guarantors in each other; (v) Investments consisting of loans to employees and officers for travel, housing, relocation and other similar expenses incurred in the ordinary course of business; (vi) Investments of Borrowers and their Subsidiaries in interest rate protection, currency swap and foreign exchange arrangements, provided that all such arrangements are entered into in connection with bona fide hedging operations and not for speculation; (vii) Deposit accounts; (viii) Investments permitted by Subparagraph 5.02(d); (ix) Investment by Borrower or its Subsidiaries of up to $125,000,000 in Chatham Technologies, Inc.; and (x) Other Investments, provided that: (A) No Default has occurred and is continuing on the date of, or will result after giving effect to, any such Investment; and (B) The aggregate consideration paid by Borrowers and their Subsidiaries for all such Investments in any fiscal year does not exceed five percent (5%) of the total assets of FIL and its Subsidiaries at the end of the immediately preceding fiscal quarter. 43 48 (f) Dividends, Redemptions, Etc. None of the Borrowers or any of their Subsidiaries shall pay any dividends or make any distributions on its Equity Securities; purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Securities; return any capital to any holder of its Equity Securities as such; make any distribution of assets, Equity Securities, obligations or securities to any holder of its Equity Securities as such; or set apart any sum for any such purpose; except as follows: (i) Any of the Borrowers or any of their Subsidiaries may pay dividends on its capital stock payable solely in such Person's own capital stock, provided that, in the case of any such dividend payable by an Ineligible Material Subsidiary, such dividend is delivered and pledged to Agent to the extent required by Subparagraph 2.15(b); (ii) Any Subsidiary of any of the Borrowers may pay dividends to or repurchase its capital stock from such Borrower; and (iii) FIL may pay dividends on its capital stock payable in cash or repurchase its capital stock for cash, provided that, in each case, no Default has occurred and is continuing on the date of, or will result after giving effect to, any such payment or repurchase. (g) Change in Business. None of the Borrowers or any of their Subsidiaries shall engage to any material extent, either directly or indirectly, in any business substantially different from (i) their present business or (ii) any business reasonably related thereto. (h) Employee Benefit Plans. (i) None of the Borrowers or any ERISA Affiliate shall (A) adopt or institute any Employee Benefit Plan that is an employee pension benefit plan within the meaning of Section 3(2) of ERISA, (B) take any action which will result in the partial or complete withdrawal, within the meanings of sections 4203 and 4205 of ERISA, from a Multiemployer Plan, (C) engage or permit any Person to engage in any transaction prohibited by section 406 of ERISA or section 4975 of the IRC involving any Employee Benefit Plan or Multiemployer Plan which would subject any Borrower or any ERISA Affiliate to any tax, penalty or other liability including a liability to indemnify, (D) incur or allow to exist any accumulated funding deficiency (within the meaning of section 412 of the IRC or section 302 of ERISA), (E) fail to make full payment when due of all amounts due as contributions to any Employee Benefit Plan or Multiemployer Plan, (F) fail to comply with the requirements of section 4980B of the IRC or Part 6 of Title I(B) of ERISA, or (G) adopt any amendment to any Employee Benefit Plan which would require the posting of security pursuant to section 401(a)(29) of the IRC, where singly or cumulatively, the above would be reasonably and substantially likely to have a Material Adverse Effect. (ii) None of the Borrowers or any of their Subsidiaries shall (A) engage in any transaction prohibited by any Governmental Rule applicable to any Foreign Plan, (B) fail to make full payment when due of all amounts due as contributions to any Foreign Plan or (C) otherwise fail to comply with the requirements of any Governmental Rule applicable to any Foreign Plan, where singly or cumulatively, the above would be reasonably and substantially likely to have a Material Adverse Effect. (i) Transactions With Affiliates. None of the Borrowers or any of their Subsidiaries shall enter into any Contractual Obligation with any Affiliate (other than one of the Borrowers or one of its Subsidiaries) or engage in any other transaction with any such Affiliate except upon terms at least as favorable to such Borrower or such Subsidiary as an arms-length transaction with unaffiliated Persons, except as disclosed or reflected in the Financial Statements of FIL dated December 31, 1999, furnished by FIL to Agent prior to the date hereof, or in the Financial Statements delivered to Agent pursuant to clause (i) or (ii) of Subparagraph 5.01(a). 44 49 (j) Accounting Changes. None of the Borrowers or any of their Subsidiaries shall change (i) their fiscal year (currently April 1 through March 31) or (ii) their accounting practices except as required by GAAP. (k) Burdensome Contractual Obligations. None of the Borrowers or any of their Subsidiaries will enter into any Contractual Obligation (excluding this Agreement and the other Credit Documents) that restricts the ability of any Subsidiary of FIL to pay or make dividends or distributions in cash or kind, to make loans, advances or other payments of whatsoever nature or to make transfers or distributions of all or any part of their assets to any of the Borrowers or to any Subsidiary of such Subsidiary. (l) Senior Debt. None of the Borrowers or any of their Subsidiaries will designate or permit to exist any other Indebtedness as "Designated Senior Debt" for the purposes of and as defined in of the Subordinated Indenture, other than the Obligations arising under this Agreement and the other Credit Documents and obligations arising under facilities providing at least Seventy Five Million Dollars ($75,000,000) in the aggregate of loans or other debt financing. 5.03. Financial Covenants. Until the termination of this Agreement and the satisfaction in full by Borrowers of all Obligations, Borrowers will comply, and will cause compliance, with the following financial covenants, unless Required Lenders shall otherwise consent in writing: (a) Debt/EBITDA Ratio. FIL shall not permit its Debt/EBITDA Ratio to be greater than 3.25 to 1.00 for any consecutive four-quarter period ending on the last day of any fiscal quarter. (b) Fixed Charge Coverage Ratio. FIL shall not permit its Fixed Charge Coverage Ratio to be less than 1.50 to 1.00 for any consecutive four-quarter period ending on the last day of any fiscal quarter. SECTION VI. DEFAULT. 6.01. Events of Default. The occurrence or existence of any one or more of the following shall constitute an "Event of Default" hereunder: (a) Non-Payment. Any Borrower shall (i) fail to pay when due any principal of any Loan or (ii) fail to pay within three (3) Business Days after the same becomes due any interest, fee or other payment required under the terms of this Agreement or any of the other Credit Documents; or (b) Specific Defaults. Any Borrower or any of its Subsidiaries shall fail to observe or perform any covenant, obligation, condition or agreement set forth in Paragraph 5.02 or Paragraph 5.03; or (c) Other Defaults. Any Borrower or any of its Subsidiaries shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Agreement or the other Credit Documents and such failure shall continue for fifteen (15) Business Days after the earlier of (i) any Borrower's written acknowledgement of such failure and (ii) Agent's or any Lender's written notice to Borrowers of such failure; or (d) Representations and Warranties. Any representation, warranty, certificate, information or other statement (financial or otherwise) made or furnished by or on behalf of any Borrower to Agent or any Lender in or in connection with this Agreement or any of the other Credit Documents, or as an inducement to Agent or any Lender to enter into this Agreement, shall be false, incorrect, incomplete or misleading in any material respect when made (or deemed made) or furnished and either (i) Agent or any Lender has delivered to Borrowers written notice thereof and such representation, warranty, certificate, information or other statement cannot be remedied or (ii) such representation, warranty, certificate, information or other statement continues to be false, incorrect, incomplete or misleading in any material respect thirty (30) days after the earlier of (A) any Borrower's written acknowledgement that such representation, warranty, certificate, information or other statement was false, incorrect, incomplete or misleading in any material 45 50 respect and (B) Agent's or any Lender's written notice to Borrowers that such representation, warranty, certificate, information or other statement was false, incorrect, incomplete or misleading in any material respect; or (e) Cross-Default. (i) Any Borrower or any of its Subsidiaries shall fail to make any payment on account of any Indebtedness of such Person (other than the Obligations) when due (whether at scheduled maturity, by required prepayment, upon acceleration or otherwise) and such failure shall continue beyond any period of grace provided with respect thereto, if the amount of such Indebtedness exceeds $10,000,000 or the effect of such failure is to cause, or permit the holder or holders thereof to cause, Indebtedness of Borrowers and their Subsidiaries (other than the Obligations) in an aggregate amount exceeding $10,000,000 to become due (whether at scheduled maturity, by required prepayment, upon acceleration or otherwise); or (ii) any Borrower or any of its Subsidiaries shall otherwise fail to observe or perform any agreement, term or condition contained in any agreement or instrument relating to any Indebtedness of such Person (other than the Obligations), or any other event shall occur or condition shall exist, if the effect of such failure, event or condition is to cause, or permit the holder or holders thereof to cause, Indebtedness of Borrowers and their Subsidiaries (other than the Obligations) in an aggregate amount exceeding $10,000,000 to become due (and/or to be secured by cash collateral); or (iii) any Event of Default, as defined in the FIUI Credit Agreement, shall occur, without regard to any waiver of such Event of Default under the FIUI Credit Agreement; or (f) Insolvency, Voluntary Proceedings. Any Borrower or any of its Subsidiaries shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) become insolvent (as such term may be defined or interpreted under any applicable statute), (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi) take any action for the purpose of effecting any of the foregoing; or FIL, any Designated Borrower or any Material Subsidiary shall be dissolved or liquidated in full or in part; or (g) Involuntary Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of any Borrowers or any of its Subsidiaries or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to any Borrower or any of its Subsidiaries or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within sixty (60) days of commencement; or (h) Judgments. (i) One or more judgments, orders, decrees or arbitration awards requiring Borrowers and/or their Subsidiaries to pay an aggregate amount of $10,000,000 or more (exclusive of amounts covered by insurance issued by an insurer not an Affiliate of Borrowers and otherwise satisfying the requirements set forth in Subparagraph 5.01(d)) shall be rendered against Borrowers and/or their Subsidiaries in connection with any single or related series of transactions, incidents or circumstances and the same shall not be satisfied, vacated or stayed for a period of sixty (60) consecutive days; (ii) any judgment, writ, assessment, warrant of attachment, tax lien or execution or similar process shall be issued or levied against a substantial part of the property of any Borrower or any of its Subsidiaries and the same shall not be released, stayed, vacated or otherwise dismissed within sixty (60) days after issue or levy; or (iii) any other judgments, orders, decrees, arbitration awards, writs, assessments, warrants of attachment, tax liens or executions or similar processes which, alone or in the aggregate, are reasonably and substantially likely to have a Material Adverse Effect are rendered, issued or levied; or (i) Credit Documents. Any Credit Document or any material term thereof shall cease to be, or be asserted by any Borrowers or any of its Subsidiaries not to be, a legal, valid and binding obligation of any Borrower or any of its Subsidiaries enforceable in accordance with its terms; or 46 51 (j) Employee Benefit Plans. Any Reportable Event which constitutes grounds for the termination of any Employee Benefit Plan by the PBGC or for the appointment of a trustee by the PBGC to administer any Employee Benefit Plan shall occur, or any Employee Benefit Plan shall be terminated within the meaning of Title IV of ERISA or a trustee shall be appointed by the PBGC to administer any Employee Benefit Plan; or (k) Change of Control. Any Change of Control shall occur; or (l) Material Adverse Effect. Any event(s) or condition(s) which is (are) reasonably and substantially likely to have a Material Adverse Effect shall occur or exist. 6.02. Remedies. At any time after the occurrence and during the continuance of any Event of Default (other than an Event of Default referred to in Subparagraph 6.01(f) or 6.01(g)), Agent may, with the consent of the Required Lenders, or shall, upon instructions from the Required Lenders, by written notice to Borrowers, (a) terminate the Commitments and the obligations of Lenders to make Loans and/or (b) declare all outstanding Obligations payable by Borrowers to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Notes to the contrary notwithstanding. Upon the occurrence or existence of any Event of Default described in Subparagraph 6.01(f) or 6.01(g), immediately and without notice, (1) the Commitments and the obligations of Lenders to make Loans shall automatically terminate and (2) all outstanding Obligations payable by Borrowers hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Notes to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Agent may exercise any other right, power or remedy available to it under any of the Credit Documents or otherwise by law, either by suit in equity or by action at law, or both. 6.03. Lender Rate Contract Remedies. Notwithstanding any other provision of this Section VI, each Lender or its Affiliate which has entered into a Lender Rate Contract shall have the right, with prior notice to Agent, but without the approval or consent of Agent or any other Lender, (a) to declare an event of default, termination event or other similar event thereunder which will result in the early termination of such Lender Rate Contract, (b) to determine net termination amounts in accordance with the terms of such Lender Rate Contract and to set-off amounts between Lender Rate Contracts of such Lender, and (c) to prosecute any legal action against any Borrower or its Subsidiaries to enforce net amounts owing to such Lender or its Affiliate under such Lender Rate Contracts. SECTION VII. THE AGENT AND RELATIONS AMONG LENDERS. 7.01. Appointment, Powers and Immunities. Each Lender hereby appoints and authorizes Agent to act as its agent hereunder and under the other Credit Documents with such powers as are expressly delegated to Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement or in any other Credit Document, be a trustee for any Lender or have any fiduciary duty to any Lender. Notwithstanding anything to the contrary contained herein Agent shall not be required to take any action which is contrary to this Agreement or any other Credit Document or any applicable Governmental Rule. Neither Agent nor any Lender shall be responsible to any other Lender for any recitals, statements, representations or warranties made by any Borrower or any of its Subsidiaries contained in this Agreement or in any other Credit Document, for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or for any failure by any Borrower or any of its Subsidiaries to perform their respective obligations hereunder or thereunder. Agent may employ agents and attorneys-in-fact and shall not be responsible to any Lender for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Neither Agent nor any of its directors, officers, employees, agents or advisors shall be responsible to any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Credit Document or in connection herewith or therewith, except for its or their own gross negligence or willful misconduct. Except as otherwise provided under this Agreement, Agent shall take such action with respect to the Credit Documents as shall be directed by the Required Lenders. 47 52 7.02. Reliance by Agent. Agent shall be entitled to rely upon any certificate, notice or other document (including any cable, telegram, facsimile or telex) believed by it in good faith to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent with reasonable care. As to any other matters not expressly provided for by this Agreement, Agent shall not be required to take any action or exercise any discretion, but shall be required to act or to refrain from acting upon instructions of the Required Lenders and shall in all cases be fully protected by Lenders in acting, or in refraining from acting, hereunder or under any other Credit Document in accordance with the instructions of the Required Lenders, and such instructions of the Required Lenders and any action taken or failure to act pursuant thereto shall be binding on all of Lenders. 7.03. Defaults. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default unless Agent has received a written notice from a Lender or any Borrower, referring to this Agreement, describing such Default and stating that such notice is a "Notice of Default". If Agent receives such a notice of the occurrence of a Default, Agent shall give prompt notice thereof to Lenders. Agent shall take such action with respect to such Default as shall be reasonably directed by the Required Lenders; provided, however, that until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of Lenders. 7.04. Indemnification. Without limiting the Obligations of Borrowers hereunder, each Lender agrees to indemnify Agent, ratably in accordance with their Proportionate Shares, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against Agent in any way relating to or arising out of this Agreement or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or the enforcement of any of the terms hereof or thereof; provided, however, that no Lender shall be liable for any of the foregoing to the extent they arise from Agent's gross negligence or willful misconduct. Agent shall be fully justified in refusing to take or in continuing to take any action hereunder unless it shall first be indemnified to its satisfaction by Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The obligations of each Lender under this Paragraph 7.04 shall survive the payment and performance of the Obligations, the termination of this Agreement and any Lender ceasing to be a party to this Agreement (with respect to events which occurred prior to the time such Lender ceased to be a Lender hereunder). 7.05. Non-Reliance. Each Lender represents that it has, independently and without reliance on Agent, or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of the business, prospects, management, financial condition and affairs of Borrowers and their Subsidiaries and its own decision to enter into this Agreement and agrees that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own appraisals and decisions in taking or not taking action under this Agreement. Neither Agent nor any of its affiliates nor any of their respective directors, officers, employees, agents or advisors shall (a) be required to keep any Lender informed as to the performance or observance by any Borrower or any of its Subsidiaries of the obligations under this Agreement or any other document referred to or provided for herein or to make inquiry of, or to inspect the properties or books of any Borrower or any of its Subsidiaries; (b) have any duty or responsibility to provide any Lender with any credit or other information concerning any Borrower or any of its Subsidiaries which may come into the possession of Agent, except for notices, reports and other documents and information expressly required to be furnished to Lenders by Agent hereunder; or (c) be responsible to any Lender for (i) any recital, statement, representation or warranty made by any Borrower or any officer, employee or agent of any Borrower in this Agreement or in any of the other Credit Documents, (ii) the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any Credit Document, (iii) the value or sufficiency of the Collateral or the validity or perfection of any of the liens or security interests intended to be created by the Credit Documents, or (iv) any failure by any Borrower to perform its obligations under this Agreement or any other Credit Document. 7.06. Resignation or Removal of Agent. Agent may resign at any time by giving thirty (30) days prior written notice thereof to Borrowers and Lenders, and Agent may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent, which Agent, if not a Lender, shall be reasonably acceptable to Borrowers; provided, however, that 48 53 Borrowers shall have no right to approve a successor Agent if a Default has occurred and is continuing. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from the duties and obligations thereafter arising hereunder. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Section VII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. 7.07. Agent in its Individual Capacity. Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of banking or other business with Borrowers and their Subsidiaries and affiliates as though Agent were not Agent hereunder. With respect to Loans, if any, made by Agent in its capacity as a Lender, Agent in its capacity as a Lender shall have the same rights and powers under this Agreement and the other Credit Documents as any other Lender and may exercise the same as though it were not Agent, and the terms "Lender" or "Lenders" shall include Agent in its capacity as a Lender. 7.08. Documentation Agent, Managing Agents and Co-Agent. Documentation Agent, Managing Agents and Co-Agent do not assume any responsibility or obligation under this Agreement or any of the other Credit Documents or any duties as agents for the Lenders. The title "Documentation Agent", "Managing Agent" and "Co-Agent" implies no fiduciary responsibility on the part of any Documentation Agent, Managing Agent and Co-Agent to any Person, and the use of such title does not impose on any Documentation Agent, Managing Agent and Co-Agent any duties or obligations under this Agreement or any of the other Credit Documents. SECTION VIII. MISCELLANEOUS. 8.01. Notices. Except as otherwise provided herein, all notices, requests, demands, consents, instructions or other communications to or upon any Borrower, any Lender or Agent under this Agreement or the other Credit Documents shall be in writing and faxed, mailed or delivered, if to any Borrower or Agent, at its respective facsimile number or address set forth below or, if to any Lender, at the address or facsimile number specified for such Lender in Part B of Schedule I (or to such other facsimile number or address for any party as indicated in any notice given by that party to the other parties). All such notices and communications shall be effective (a) when sent by an overnight courier service of recognized standing, on the second Business Day following the deposit with such service; (b) when delivered by hand, upon delivery; (c) when faxed, upon confirmation of receipt; or (d) by any other means, upon receipt; provided, however, that any notice delivered to Agent under Section II shall not be effective until received by Agent. Agent: ABN AMRO Bank N.V. Syndications Group 1325 Avenue of the Americas, 9th Floor New York, NY 10019 U.S.A. Attn: Linda Boardman Tel. No: (212) 314-1724 Fax. No: (212) 314-1712 With a copy in each case to: ABN AMRO Bank N.V. 101 California Street, Suite 4550 San Francisco, CA 94111-5812 Attn: Mathew Harvey Tel: (415) 984-3733 Fax: (415) 362-3524 49 54 FIL: Flextronics International Ltd. 2090 Fortune Drive San Jose, CA 95131 Attn: Treasurer Tel. No: (408) 576-7233 Fax. No: (408) 526-9215 Each Notice of Borrowing, Notice of Interest Period Selection and Notice of Term Loan Conversion shall be given by the applicable Borrower to Agent's New York office located at the address referred to above during such office's normal business hours; provided, however, that any such notice received by Agent after 11:00 a.m. (California time) on any Business Day shall be deemed received by Agent on the next Business Day. In any case where this Agreement authorizes notices, requests, demands or other communications by Borrowers to Agent or any Lender to be made by telephone or facsimile, Agent or any Lender may conclusively presume that anyone purporting to be a person designated in any incumbency certificate or other similar document received by Agent or a Lender is such a person. 8.02. Expenses. Borrowers jointly and severally agree to pay on demand, whether or not any Loan is made hereunder, (a) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Agent in connection with the syndication of the Loans, the preparation, negotiation, execution and delivery of, and the exercise of its duties under, this Agreement and the other Credit Documents, and the preparation, negotiation, execution and delivery of amendments and waivers hereunder and thereunder and (b) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Agent and Lenders in the enforcement or attempted enforcement of any of the Obligations or in preserving any of Agent's or Lenders' rights and remedies (including, without limitation, all such fees and expenses incurred in connection with any "workout" or restructuring affecting the Credit Documents or the Obligations or any bankruptcy or similar proceeding involving any Borrower or any of its Subsidiaries). As used herein, the term "reasonable attorneys' fees and expenses" shall include, without limitation, allocable costs and expenses of Agent's and Lenders' in-house legal counsel and staff. The obligations of Borrowers under this Paragraph 8.02 shall survive the payment and performance of the Obligations and the termination of this Agreement. 8.03. Indemnification. To the fullest extent permitted by law, Borrowers jointly and severally agree to protect, indemnify, defend and hold harmless Agent, Lenders and their Affiliates and their respective directors, officers, employees, agents and advisors ("Indemnitees") from and against any and all liabilities, losses, damages or expenses of any kind or nature and from any suits, claims or demands (including in respect of or for reasonable attorney's fees and other expenses) arising on account of or in connection with any matter or thing or action or failure to act by Indemnitees, or any of them, arising out of or relating to the Credit Documents or any transaction contemplated thereby, including without limitation any use by any Borrower of any proceeds of the Loans, except to the extent such liability arises from the willful misconduct or gross negligence of such Indemnitee. Upon receiving knowledge of any suit, claim or demand asserted by a third party that Agent or any Lender believes is covered by this indemnity, Agent or such Lender shall give Borrowers notice of the matter and an opportunity to defend it, at Borrowers' sole cost and expense, with legal counsel satisfactory to Agent or such Lender, as the case may be. Agent or such Lender may also require Borrowers to defend the matter. Any failure or delay of Agent or any Lender to notify Borrowers of any such suit, claim or demand shall not relieve Borrowers of their obligations under this Paragraph 8.03 but shall reduce such obligations to the extent of any increase in those obligations caused solely by any such failure or delay which is unreasonable. The obligations of Borrowers under this Paragraph 8.03 shall survive the payment and performance of the Obligations and the termination of this Agreement. 8.04. Waivers; Amendments. Any term, covenant, agreement or condition of this Agreement or any other Credit Document may be amended or waived, and any consent under this Agreement or any other Credit Document may be given, if such amendment, waiver or consent is in writing and is signed by Borrowers and the Required Lenders (or Agent on behalf of the Required Lenders with the written approval of the Required Lenders); provided, however that: (a) Any amendment, waiver or consent which would (i) increase the Total Facility A Commitment, (ii) postpone, delay or extend the Facility A Revolving Loan Maturity Date, (iii) reduce the 50 55 principal of or interest on the Facility A Loans, the Facility A Commitment Fees or any other fees or amounts payable for the account of all Facility A Lenders hereunder or postpone, delay or extend the scheduled date for payment of any such principal, interest, fees or amounts must be in writing and signed or approved in writing by all Facility A Lenders; (b) Any amendment, waiver or consent which would (i) increase the Total Facility B Commitment, (ii) postpone, delay or extend the Facility B Revolving Loan Maturity Date or the Term Loan Maturity Date, (iii) reduce the principal of or interest on the Facility B Loans, the Facility B Commitment Fees or any other fees or amounts payable for the account of all Facility B Lenders hereunder or postpone, delay or extend the scheduled date for payment of any such principal, interest, fees or amounts must be in writing and signed or approved in writing by all Facility B Lenders; (c) Any amendment, waiver or consent which would (i) reduce the principal of or interest on the Loans or any fees or other amounts payable for the account of all Lenders hereunder or extend the scheduled date for payment of any such principal, interest, fees or amounts, (ii) reduce any fees or other amounts payable for the account of all Lenders hereunder or postpone, delay or extend the scheduled date for payment of any such fees or amounts, (iii) amend this Paragraph 8.04, (iv) amend the definition of Required Lenders, or (v) release any substantial part of the Collateral or any Guarantor (except for releases as provided in Paragraph 2.15), must be in writing and signed or approved in writing by all Lenders; (d) Any amendment, waiver or consent which would (i) increase or decrease the Facility A Commitment of any Facility A Lender (except for a pro rata decrease in the Facility A Commitments of all Facility A Lenders) or (ii) increase or decrease the Facility B Commitment of any Facility B Lender (except for a pro rata decrease in the Facility B Commitments of all Facility B Lenders) must be in writing and signed by such Lender; and (e) Any amendment, waiver or consent which affects the rights or obligations of Agent must be in writing and signed by Agent. No failure or delay by Agent or any Lender in exercising any right under this Agreement or any other Credit Document shall operate as a waiver thereof or of any other right hereunder or thereunder nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right hereunder or thereunder. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. 8.05. Successors and Assigns. (a) Binding Effect. This Agreement and the other Credit Documents shall be binding upon and inure to the benefit of Borrowers, Lenders, Agent, all future holders of the Notes and their respective successors and permitted assigns, except that any Borrower may not assign or transfer any of its rights or obligations under any Credit Document without the prior written consent of Agent and each Lender. (b) Participations. Any Lender may at any time sell to one or more banks or other financial institutions ("Participants") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under this Agreement and the other Credit Documents. In the event of any such sale by a Lender of participating interests, such Lender's obligations under this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of its Notes for all purposes under this Agreement and Borrowers and Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which any such sale is effected may require the selling Lender to obtain the consent of the Participant in order for such Lender to agree in writing to any amendment, waiver or consent of a type specified in Subparagraph 8.04(a), Subparagraph 8.04(b), Subparagraph 8.04(c) or Subparagraph 8.04(d) to the extent applicable but may not otherwise require the selling Lender to obtain the consent of such Participant to any other amendment, waiver or consent hereunder. Borrowers also agree that any Lender which has transferred any participating interest in its Commitments or Loans shall, notwithstanding any such transfer, 51 56 be entitled to the full benefits accorded such Lender under Paragraph 2.12, Paragraph 2.13, and Paragraph 2.14, as if such Lender had not made such transfer. (c) Assignments. Any Lender may, at any time, sell and assign to any other Lender or any Eligible Assignee (individually, an "Assignee Lender") all or a portion of its rights and obligations under this Agreement and the other Credit Documents (such a sale and assignment to be referred to herein as an "Assignment") pursuant to an assignment agreement in the form of Exhibit F (an "Assignment Agreement"), executed by each Assignee Lender and such assignor Lender (an "Assignor Lender") and delivered to Agent for its acceptance and recording in the Register; provided, however, that: (i) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL (which consent of Agent and FIL shall not be unreasonably withheld), no Lender may make any Assignment of its Commitment or Loans to any Assignee Lender which is not, immediately prior to such Assignment, a Lender hereunder or an Affiliate thereof; (ii) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL (which consent of Agent and FIL shall not be unreasonably withheld), no Facility A Lender may make any Assignment of its Facility A Commitment and Facility A Loans to any Assignee Lender if, after giving effect to such Assignment, the Facility A Commitment (or, after the termination of the Facility A Commitments, the Facility A Loans) of such Lender or such Assignee Lender would be less than Five Million Dollars ($5,000,000), except that a Facility A Lender may make an Assignment which reduces its Facility A Commitment (or, after the termination of the Facility A Commitments, its Facility A Loans) to zero without the written consent of FIL and Administrative Agent; (iii) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL (which consent of Agent and FIL shall not be unreasonably withheld), no Facility B Lender may make any Assignment of its Facility B Commitment and Facility B Loans to any Assignee Lender if, after giving effect to such Assignment, the Facility B Commitment (or, after the termination of the Facility B Commitments, the Facility B Loans) of such Lender or such Assignee Lender would be less than Five Million Dollars ($5,000,000), except that a Facility B Lender may make an Assignment which reduces its Facility B Commitment (or, after the termination of the Facility B Commitments, its Facility B Loans) to zero without the written consent of FIL and Administrative Agent; (iv) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL (which consent of Agent and FIL shall not be unreasonably withheld), no Facility A Lender may make any Assignment of its Facility A Commitment and Facility A Loans which does not assign and delegate an equal pro rata interest in such Facility A Lender's Facility A Commitment, Facility A Loans and all other rights, duties and obligations of such Facility A Lender under this Agreement and the other Credit Documents relating to Facility A; (v) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL (which consent of Agent and FIL shall not be unreasonably withheld), no Facility B Lender may make any Assignment of its Facility B Commitment and Facility B Loans which does not assign and delegate an equal pro rata interest in such Facility B Lender's Facility B Commitment, Facility B Loans and all other rights, duties and obligations of such Facility B Lender under this Agreement and the other Credit Documents relating to Facility B; and (vi) Any Assignor Lender which is, or which has an Affiliate which is, a party to a Lender Rate Contract may not make an Assignment of all of its Commitments or all of its Loans to an Assignee Lender unless such Assignee Lender or its Affiliate shall also assume all obligations of such Assignor Lender or its Affiliate with respect to such Lender Rate Contract. Upon such execution, delivery, acceptance and recording of each Assignment Agreement, from and after the Assignment Effective Date determined pursuant to such Assignment Agreement, (A) each Assignee 52 57 Lender thereunder shall be a Lender hereunder with Commitments or Loans as set forth on Attachment 1 to such Assignment Agreement (under the caption "Commitments or Loans After Assignment") and shall have the rights, duties and obligations of such a Lender under this Agreement and the other Credit Documents, and (B) the Assignor Lender thereunder shall be a Lender with Commitments or Loans as set forth on Attachment 1 to such Assignment Agreement (under the caption "Commitments or Loans After Assignment"), or, if the Commitments or Loans of the Assignor Lender have been reduced to zero, the Assignor Lender shall cease to be a Lender and to have any obligation to make any Loan; provided, however, that any such Assignor Lender which ceases to be a Lender shall continue to be entitled to the benefits of any provision of this Agreement which by its terms survives the termination of this Agreement. Each Assignment Agreement shall be deemed to amend Schedule I to the extent, and only to the extent, necessary to reflect the addition of each Assignee Lender, the deletion of each Assignor Lender which reduces its Commitments or Loans to zero, and the resulting adjustment of Commitments or Loans arising from the purchase by each Assignee Lender of all or a portion of the rights and obligations of an Assignor Lender under this Agreement and the other Credit Documents. On or prior to the Assignment Effective Date determined pursuant to each Assignment Agreement, Borrowers, at their own expense, shall, if requested by Assignee Lenders, execute and deliver to Agent, in exchange for the surrendered Notes, if any, of the Assignor Lender thereunder, new Notes to the order of each Assignee Lender thereunder and, if the Assignor Lender is continuing as a Lender hereunder, new Notes to the order of the Assignor Lender. The Notes surrendered by the Assignor Lender shall be returned by Agent to Borrowers marked "replaced". Each Assignee Lender which becomes a Lender and was not previously such a Lender hereunder shall, prior to becoming such a Lender, deliver such certificates and other evidence as is required by Subparagraph 2.13(b). (d) Register. Agent shall maintain at its address referred to in Paragraph 8.01 a copy of each Assignment Agreement delivered to it and a register (the "Register") for the recordation of the names and addresses of Lenders and the Commitments or Loans of each Lender from time to time. The entries in the Register shall be conclusive in the absence of manifest error, and Borrowers, Agent and Lenders may treat each Person whose name is recorded in the Register as the owner of the Commitments or Loans recorded therein for all purposes of this Agreement. The Register shall be available for inspection by any Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Registration. Upon its receipt of an Assignment Agreement executed by an Assignor Lender and an Assignee Lender (and, to the extent required by Subparagraph 8.05(c), by Borrowers and Agent) together with payment to Agent by Assignor Lender of a registration and processing fee of $3,000, Agent shall (i) promptly accept such Assignment Agreement and (ii) on the Effective Date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to Lenders and Borrowers. Agent may, from time to time at its election, prepare and deliver to Lenders and Borrowers a revised Schedule I reflecting the names, addresses and respective Commitments or Loans of all Lenders then parties hereto. (f) Confidentiality. Subject to Paragraph 8.12, Agent and Lenders may disclose the Credit Documents and any financial or other information relating to Borrowers or any Subsidiary to each other or to any potential Participant or Assignee Lender. (g) Pledges to Federal Reserve Banks. Notwithstanding any other provision of this Agreement, any Lender may at any time assign all or a portion of its rights under this Agreement and the other Credit Documents to a Federal Reserve Bank. No such assignment shall relieve the assigning Lender from its obligations under this Agreement and the other Credit Documents. 8.06. Setoff; Security Interest. (a) Setoff. In addition to any rights and remedies of Lenders provided by law, each Lender shall have the right, with the prior consent of Agent but without prior notice to or consent of Borrowers, any such notice and consent being expressly waived by Borrowers to the extent permitted by applicable law, upon the occurrence and during the continuance of an Event of Default, to set-off and apply against the Obligations of any Borrower any amount owing from such Lender to such Borrower. The aforesaid 53 58 right of set-off may be exercised by such Lender against a Borrower or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of such Borrower or against anyone else claiming through or against such Borrower or such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off may not have been exercised by such Lender at any prior time. Each Lender agrees promptly to notify the applicable Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. (b) Security Interest. As security for the Obligations, each Borrower hereby grants to Agent and each Lender, for the benefit of all Lenders, a continuing security interest in any and all deposit accounts or moneys of such Borrower now or hereafter maintained with such Lender. Each Lender shall have all of the rights of a secured party with respect to such security interest. 8.07. No Third Party Rights. Nothing expressed in or to be implied from this Agreement is intended to give, or shall be construed to give, any Person, other than the parties hereto and their permitted successors and assigns hereunder, any benefit or legal or equitable right, remedy or claim under or by virtue of this Agreement or under or by virtue of any provision herein. 8.08. Partial Invalidity. If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law or any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 8.09. Jury Trial. EACH OF BORROWERS, LENDERS AND AGENT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT. 8.10. Counterparts. This Agreement may be executed in any number of identical counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a complete, executed original for all purposes. 8.11. Borrowers' Liabilities. All Borrowers are jointly and severally liable for the payment and performance of all other Obligations under this Agreement and the other Credit Documents, and Borrowers also are liable for the payment and performance of all Obligations under this Agreement and the other Credit Documents as provided in the Guaranty. 8.12. Confidentiality. Neither any Lender nor Agent shall disclose to any Person any information with respect to Borrowers or any of their Subsidiaries which is furnished pursuant to this Agreement or under the other Credit Documents, except that any Lender or Agent may disclose any such information (a) to its own directors, officers, employees, auditors, counsel and other advisors and to its Affiliates; (b) to any other Lender or Agent; (c) which is otherwise available to the public; (d) if required or appropriate in any report, statement or testimony submitted to any Governmental Authority having or claiming to have jurisdiction over such Lender or Agent; (e) if required in response to any summons or subpoena; (f) in connection with any enforcement by Lenders and Agent of their rights under this Agreement or the other Credit Documents or any litigation among the parties relating to the Credit Documents or the transactions contemplated thereby; (g) to comply with any Requirement of Law applicable to such Lender or Agent; (h) to any Assignee Lender or Participant or any prospective Assignee Lender or Participant, provided that such Assignee Lender or Participant or prospective Assignee Lender or Participant agrees to be bound by this Paragraph 8.12; or (i) otherwise with the prior consent of the applicable Borrower; provided, however, that (i) any Lender or Agent served with any summons or subpoena demanding the disclosure of any such information shall use reasonable efforts to notify Borrowers promptly of such summons or subpoena if not prohibited by any Requirement of Law and, if requested by Borrowers and not disadvantageous to such Lender or Agent, to cooperate with Borrowers in obtaining a protective order restricting such disclosure, and (ii) any disclosure made in violation of this Agreement shall not affect the obligations of Borrowers and their Subsidiaries under this Agreement and the other Credit Documents. 54 59 8.13. Consent to Jurisdiction. Each Borrower irrevocably submits to the non-exclusive jurisdiction of the courts of the State of California and the courts of the United States of America located in the Northern District of California and agrees that any legal action, suit or proceeding arising out of or relating to this Agreement or any of the other Credit Documents may be brought against such party in any such courts. Final judgment against any Borrower in any such action, suit or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the judgment, or in any other manner provided by law. Nothing in this Subparagraph 8.13 shall affect the right of Agent or any Lender to commence legal proceedings or otherwise sue any Borrower in any other appropriate jurisdiction, or concurrently in more than one jurisdiction, or to serve process, pleadings and other papers upon any Borrower in any manner authorized by the laws of any such jurisdiction. Each Borrower agrees that process served either personally or by registered mail shall, to the extent permitted by law, constitute adequate service of process in any such suit. Without limiting the foregoing, each Borrower hereby appoints, in the case of any such action or proceeding brought in the courts of or in the State of California, CT Corporation, with offices on the date hereof at 818 West Seventh Street, Los Angeles, California 90017, to receive for it and on its behalf, service of process in the State of California with respect thereto, provided each Borrower may appoint any other person, reasonably acceptable to Agent, with offices in the State of California to replace such agent for service of process upon delivery to Agent of a reasonably acceptable agreement of such new agent agreeing so to act. Each Borrower irrevocably waives to the fullest extent permitted by applicable law (a) any objection which it may have now or in the future to the laying of the venue of any such action, suit or proceeding in any court referred to in the first sentence above; (b) any claim that any such action, suit or proceeding has been brought in an inconvenient forum; (c) its right of removal of any matter commenced by any other party in the courts of the State of California to any court of the United States of America; (d) any immunity which it or its assets may have in respect of its obligations under this Agreement or any other Credit Document from any suit, execution, attachment (whether provisional or final, in aid of execution, before judgment or otherwise) or other legal process; and (e) any right it may have to require the moving party in any suit, action or proceeding brought in any of the courts referred to above arising out of or in connection with this Agreement or any other Credit Document to post security for the costs of such Borrower or to post a bond or to take similar action. 8.14. Usury. In no event shall any provision of this Agreement or any other Credit Document ever obligate any Borrower to pay or allow any Lender to collect interest on any Loan or any other Obligation of a Borrower hereunder at a rate greater than the maximum non-usurious rate permitted by applicable law (herein referred to as the "highest lawful rate"), or obligate any Borrower to pay any taxes, assessments, charges, insurance premiums or other amounts to the extent that such payments, when added to the interest payable on the Loans or any other Obligations, would be held to constitute the payment by a Borrower of interest at a rate greater than the highest lawful rate. This provision shall control over any provision to the contrary. Without limiting the generality of the foregoing, in the event the maturity of all or any part of the principal amount of the Obligations of a Borrower shall be accelerated for any reason, then such principal amount so accelerated shall be credited with any interest theretofore paid thereon in advance and remaining unearned at the time of such acceleration. If, pursuant to the terms of this Agreement, any funds are applied to the payment of any part of the principal amount of the Obligations of a Borrower prior to the maturity thereof, then (a) any interest which would otherwise thereafter accrue on the principal amount so paid by such application shall be canceled, and (b) the Obligations of such Borrower remaining unpaid after such application shall be credited with the amount of all interest, if any, theretofore collected on the principal amount so paid by such application and remaining unearned at the date of said application; and if the funds so applied shall be sufficient to pay in full all the Obligations of such Borrower, then the Lenders shall refund to such Borrower all interest theretofore paid thereon in advance and remaining unearned at the time of such acceleration. Regardless of any other provision in this Agreement or any other Credit Document, no Borrower shall be required to pay any unearned interest on any Obligations or any portion thereof, or be required to pay interest thereon at a rate in excess of the highest lawful rate construed by courts having competent jurisdiction thereof. 8.15. Hong Kong Branch; Full Recourse Obligations. All Loans to FIL shall be made to FIL at its Hong Kong branch located at Room 908 Dominion Center, 43-59 Queens Road East, Wanchai, Hong Kong and all payments of principal and interest by FIL will be made through its Hong Kong branch, provided, however, that notwithstanding the foregoing, FIL acknowledges that the Obligations hereunder are full recourse to Flextronics International Ltd., a Singapore corporation, and are in no manner limited to any extent to any branch thereof and shall in no manner impair the Agent's or any Lender's ability to collect any Obligation from FIL. 55 60 8.16. Effect . On the Closing Date and upon the repayment in full of all existing monetary obligations outstanding under the Existing FIL Credit Agreement, (a) the Existing FIL Credit Agreement as well as the Existing FIL Credit Documents shall be terminated and deemed to have been replaced by this Agreement and the other Credit Documents; and (b) all Liens created pursuant to the Existing FIL Credit Agreement and the other FIL Credit Documents shall terminate and be released; provided, however, that nothing contained herein shall have any effect on Borrower's obligations to pay amounts (if any) payable under Subparagraph 2.10(c), Subparagraph 2.10(d), Subparagraph 2.11(a), Paragraph 2.12, Paragraph 8.02, or Paragraph 8.03 of the Existing FIL Credit Agreement which by their terms expressly provide that they shall survive the payment and performance of the Obligations and the termination of the Existing FIL Credit Agreement. Agent (as agent under the Existing FIL Credit Agreement), from time to time, upon request by FIL shall, without further consideration other than reimbursement for any costs and expenses, execute, deliver and acknowledge all such documents, agreements, certificates and instruments and do such acts as FIL may reasonably require to more effectively evidence or effectuate the termination of such Liens. [The first signature page follows.] 56 61 IN WITNESS WHEREOF, Borrowers, Agent, Documentation Agent, Managing Agents, Co-Agent and Lenders have caused this Agreement to be executed as of the day and year first above written. BORROWER: FLEXTRONICS INTERNATIONAL LTD. By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- AGENT: ABN AMRO BANK N.V., As Agent By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- S-1 62 DOCUMENTATION AGENT: FLEET NATIONAL BANK, As Documentation Agent By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- MANAGING AGENTS: BANK OF AMERICA, NATIONAL ASSOCIATION, As a Managing Agent By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- CITICORP USA, INC., As a Managing Agent By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- S-2 63 CO-AGENT AND LENDERS: ABN AMRO BANK N.V., As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- FLEET NATIONAL BANK, As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- BANK OF AMERICA, NATIONAL ASSOCIATION, As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- CITICORP USA, INC., As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- S-3 64 THE BANK OF NOVA SCOTIA, As a Co-Agent and a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- BANQUE NATIONALE DE PARIS, As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- DEN DANKSE BANK AKTIESELSKAB, As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- S-4 65 THE FUJI BANK, LIMITED, LOS ANGELES AGENCY, As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- THE INDUSTRIAL BANK OF JAPAN, LIMITED, As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- THE SUMITOMO BANK, LIMITED, As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- WELLS FARGO BANK, N.A., As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- S-5 66 THE DAI-ICHI KANGYO BANK, LTD., As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- AIB INTERNATIONAL FINANCE LIMITED, As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- BANCA DI ROMA S.P.A. - SINGAPORE BRANCH, As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- BANK HAPOALIM, B.M., As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- S-6 67 COMERICA BANK, As a Lender By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- S-7 68 SCHEDULE II PRICING GRID
APPLICABLE MARGIN APPLICABLE FOR MARGIN FOR FIL'S BASE RATE LIBOR FACILITY A FACILITY B DEBT/ PRICING BORROWINGS BORROWINGS COMMITMENT COMMITMENT EBITDA PERIOD AND AND FEE FEE RATIO LEVEL PORTIONS LIBOR PORTIONS PERCENTAGE PERCENTAGE -------- ------- ---------- -------------- ---------- ----------- <1.00 1 0% 0.625% 0.175% 0.150% - >1.00, <1.50 2 0% 0.750% 0.175% 0.150% - >1.50, <2.00 3 0% 0.875% 0.200% 0.175% - >2.00, <2.50 4 0% 1.000% 0.225% 0.200% - >2.50, <3.00 5 0% 1.250% 0.300% 0.250% - >3.00 6 0% 1.750% 0.375% 0.300%
EXPLANATION 1. The Applicable Margin For Base Rate Borrowings, Base Rate Portions, LIBOR Borrowings, LIBOR Portions, the Facility A Commitment Fee Percentage and the Facility B Commitment Fee Percentage will be set for each Pricing Period and will vary depending upon whether such period is a Level 1 Period, a Level 2 Period, a Level 3 Period, a Level 4 Period, a Level 5 Period or a Level 6 Period (each a "Pricing Period Level"). The applicable Pricing Period Level will be determined based on FIL's corresponding Debt/EBITDA Ratio for the immediately preceding consecutive four-quarter period. 2. The first Pricing Period, which commences on the date of this Agreement and ends 45 days after the quarter ended June 30, 2000, will be a Level 4 Period. 3. The second Pricing Period, which commences 45 days after the end of June 30, 2000 calendar quarter and ends 45 days after the quarter ended September 30, 2000, will be a Level 1 Period, a Level 2 Period, a Level 3 Period, a Level 4 Period, a Level 5 Period or a Level 6 Period, depending upon FIL's Debt/EBITDA Ratio for the consecutive four-quarter period ending on June 30, 2000. 4. Each Pricing Period thereafter will commence 45 days after the end of the immediately preceding quarter and will end 45 days after the end of the next applicable quarter and will be a Level 1 Period, a Level 2 Period, a Level 3 Period, a Level 4 Period, a Level 5 Period or a Level 6 Period depending upon FIL's Debt/EBITDA Ratio for the consecutive four-quarter period ending on the last day of the immediately preceding quarter. 5. Level 2 pricing will apply during any Pricing Period (other than the first Pricing Period) in which FIL's senior unsecured long-term debt rating from S&P or Moody's is equal to or better than either BBB- or Baa3. Such pricing adjustment (if any) occurring as a result of such debt rating will take place after FIL notifies Agent that such debt rating has been achieved, and will continue until such debt rating drops below BBB- or Baa3 in which case the pricing will be calculated as set forth above. II-1 69 6. Examples: (a) FIL's Debt/EBITDA Ratio is 1.76 for the consecutive four-quarter period ending on June 30, 2000, and FIL's senior unsecured long-term debt rating from S&P or Moody's is less than either BBB- of Baa3. The Pricing Period commencing 45 days after the quarter ended June 30, 2000 through the date which is 45 days after the quarter ended September 30, 2000 will be a Level 3 Period, and the Applicable Margin for LIBOR Borrowings and the LIBOR Portions during such Pricing Period will be 0.875%. (b) FIL's Debt/EBITDA Ratio is 2.10 for the consecutive four-quarter period ending on September 30, 2000, and FIL's senior unsecured long-term debt rating from S&P or Moody's is less than either BBB- of Baa3. The Pricing Period commencing 45 days after the quarter ended September 30, 2000 through the date which is 45 days after the quarter ended December 31, 2000 will be a Level 4 Period, and the Applicable Margin for LIBOR Borrowings and the LIBOR Portions during such Pricing Period will be 1.000%. (c) FIL's senior unsecured long-term debt rating from S&P or Moody's is at least equal to BBB- or Baa3. Commencing after FIL notifies Agent that such debt rating has been achieved, Level 2 Period pricing will apply, and the Applicable Margin for LIBOR Borrowings and the LIBOR Portions during such Pricing Period will be 0.7500%. II-2 70 SCHEDULE 3.01 INITIAL CONDITIONS PRECEDENT A. PRINCIPAL CREDIT DOCUMENTS. (1) The Credit Agreement, duly executed by each Borrower, each Lender, Agent, Documentation Agent, each Managing Agent and Co-Agent; (2) Such Revolving Notes as the Lenders shall request, each duly executed by the applicable Borrower; (3) The Guaranty, duly executed by FIL, each Eligible Material Subsidiary, Flextronics Holdings UK Limited and Flextronics Singapore Pte Ltd., with such changes thereto as may be appropriate based on the law of the applicable jurisdictions; and (4) Pledge Agreements of FIL and Flextronics Holdings UK Limited, each duly executed by such Person, with such changes thereto as may be appropriate based on the laws of the applicable jurisdictions. B. BORROWER AND MATERIAL SUBSIDIARY CORPORATE DOCUMENTS. (1) The Certificate of Incorporation (or comparable certificate) of FIL, any Designated Borrower, each Eligible Material Subsidiary, any Subsidiary executing a Pledge Agreement or the Guaranty, and any Subsidiary whose shares are being pledged pursuant to a Pledge Agreement, certified as of a recent date prior to the Closing Date by the Secretary of State (or comparable public official) of its jurisdiction of incorporation (or, if any such Subsidiary is organized under the laws of any jurisdiction outside the United States, such other evidence as Agent may request to establish that such Person is duly organized and existing under the laws of such jurisdiction), together with an English translation thereof (if appropriate); (2) To the extent such jurisdiction has the legal concept of a corporation being in good standing and a Governmental Authority in such jurisdiction issues any evidence of such good standing, a Certificate of Good Standing (or comparable certificate) for FIL, any Designated Borrower, each Eligible Material Subsidiary, any Subsidiary executing a Pledge Agreement or the Guaranty, and any Subsidiary whose shares are being pledged pursuant to a Pledge Agreement, certified as of a recent date prior to the Closing Date by the Secretary of State (or comparable public official) of its jurisdiction of incorporation (or, if any such Person is organized under the laws of any jurisdiction outside the United States, such other evidence as Agent may request to establish that such Person is duly qualified to do business and in good standing under the laws of such jurisdiction), together with an English translation thereof (if appropriate); (3) A certificate of the Secretary or an Assistant Secretary (or comparable officer) of FIL, any Designated Borrower, each Eligible Material Subsidiary, any Subsidiary executing a Pledge Agreement or the Guaranty, and any Subsidiary whose shares are being pledged pursuant to a Pledge Agreement, dated the Closing Date, certifying (a) that attached thereto is a true and correct copy of the Bylaws of such Subsidiary as in effect on the Closing Date (or, if any such Subsidiary is organized under the laws of any jurisdiction outside the United States, any comparable document provided for in the respective corporate laws of that jurisdiction); (b) (except in the case of a Subsidiary which is not executing any Credit Documents) that attached thereto are true and correct copies of resolutions duly adopted by the Board of Directors of such Subsidiary (or other comparable enabling action) and continuing in effect, which (i) authorize the execution, delivery and performance by such Person of the Credit Documents to be executed by such Person and the consummation of the transactions contemplated thereby and (ii) designate the officers, directors and attorneys authorized so to execute, deliver and perform on behalf of such Person; and (c) that there are no proceedings for the dissolution or liquidation of such Person, together with a certified English translation thereof (if appropriate); and 3.01-1 71 (4) A certificate of the Secretary or an Assistant Secretary (or comparable officer) of FIL, any Designated Borrower, each Eligible Material Subsidiary and any Subsidiary executing a Pledge Agreement or the Guaranty, dated the Closing Date, certifying the incumbency, signatures and authority of the officers, directors and attorneys of such Person authorized to execute, deliver and perform the Credit Documents to be executed by such Person, together with a certified English translation thereof (if appropriate). C. FINANCIAL STATEMENTS, FINANCIAL CONDITION, ETC. (1) A copy of the audited consolidated and consolidating Financial Statements of FIL and its Subsidiaries for the fiscal year ended March 31, 1999, audited by Arthur Andersen LLP, together with a copy of the unqualified opinion delivered by such accountants in connection with such Financial Statements; (2) A copy of the unaudited Financial Statements of FIL and its Subsidiaries for the fiscal quarter ended December 31, 1999 and for the fiscal year to such date (prepared on a consolidated and consolidating basis), certified by the chief financial officer, treasurer, controller or principal accounting officer of FIL to present fairly the financial condition, results of operations and other information reflected therein and to have been prepared in accordance with GAAP (subject to normal year-end audit adjustments); (3) A copy of the 10-K report filed by FIL with the Securities and Exchange Commission for the fiscal year ended March 31, 1999; (4) A copy of the 10-Q report filed by FIL with the Securities and Exchange Commission for the quarter ended December 31, 1999; (5) The consolidated plan and forecast of FIL and its Subsidiaries for the fiscal year to end March 31, 2001 (reflecting among other events the anticipated Borrowings under this Agreement), including quarterly cash flow projections and quarterly projections of FIL's compliance with each of the covenants set forth in Paragraph 5.03 of this Agreement; and (6) Such other financial, business and other information regarding Borrowers or any of their Subsidiaries as Agent or any Lender may reasonably request, including information as to possible contingent liabilities, tax matters, environmental matters and obligations for employee benefits and compensation. D. COLLATERAL DOCUMENTS. (1) The stock certificates representing all of the outstanding capital stock of each Subsidiary pledged to Agent pursuant to a Pledge Agreement and existing on the Closing Date, other than subsidiaries whose stock is not in certificated form, together with undated stock powers, duly executed by the Borrower or Subsidiary that owns such stock, in blank and attached thereto; (2) Any other items required by any applicable jurisdiction; (3) Such other documents, instruments and agreements as Agents may reasonably request to establish and perfect the Liens granted to Agent or any Lender in this Agreement, the Security Documents and the other Credit Documents; and (4) Such other evidence as Agent may request to establish that the Liens granted to Agent or any Lender in this Agreement, the Security Documents and the other Credit Documents are perfected and prior to the Liens of other Persons in the Collateral, except for any such Liens which are expressly permitted by the Credit Agreement to be prior. 3.01-2 72 E. OPINIONS. Favorable written opinions from each of the following counsel for Borrowers and their Subsidiaries, each dated the Closing Date, addressed to Agent for the benefit of Agent and Lenders, covering such legal matters as Agent may reasonably request and otherwise in form and substance satisfactory to Agent: (1) Fenwick & West, counsel for FIL and its Subsidiaries; (2) Bruckhaus Westrick Heller L`ber, Austrian counsel for FIL and its Subsidiaries; (3) Mayer, Brown & Platt, English counsel for FIL and its Subsidiaries; (4) Foo, Teo & Associates, Labuan counsel for FIL and its Subsidiaries; (5) Cuesta Campos Y Asociados, S.C., Mexican counsel for FIL and its Subsidiaries; (6) Allen & Gledhill, Singapore counsel for FIL and its Subsidiaries; (7) Magnusson Wahlin Advokatbyra, Swedish counsel for FIL and its Subsidiaries; and (8) Curtis Mallet-Prevost, US counsel for FIL and its Subsidiaries. F. OTHER ITEMS. (1) A duly completed and timely delivered Notice of Borrowing for the applicable Borrowing; (2) Copies of the acquisition agreement or similar agreement entered into in connection with the DII Acquisition, duly executed by FIL and DII, together with all exhibits and schedules thereto; (3) Evidence satisfactory to Agent and the Lenders that the DII Acquisition has been effected in accordance with all applicable Governmental Rules; (4) Copies of such other documents, instruments and agreements executed by FII, DII or any other Person in connection with the DII Acquisition as Agent or any Lender may reasonably request; (5) An organization chart for Borrowers and their Subsidiaries, setting forth the relationship among such Persons, certified by the Secretary or an Assistant Secretary of FIL; (6) Copy of Subordinated Indenture, certified to be true and complete by the Treasurer of FIL; (7) Evidence that the Obligations of Borrowers under this Agreement and the other Credit Documents constitute "Designated Senior Debt" under the Subordinated Indenture; (8) Evidence of the amounts owing to the lenders and agent under the Existing FIL Credit Agreement on the Closing Date and instructions for the payment of such amounts; (9) Evidence of the amounts owing on the Closing Date to the lenders and agent under any existing credit or loan agreement or similar financing agreement of DII and instructions for the payment of such amounts; (10) A certificate of the Chief Financial Officer of FIL, addressed to Agent and dated the Closing Date, certifying that: (a) The representations and warranties set forth in Paragraph 4.01 and in the other Credit Documents are true and correct in all material respects as of such date (except for such 3.01-3 73 representations and warranties made as of a specified date, which shall be true as of such date); and (b) No Default has occurred and is continuing as of such date; (11) All fees and expenses payable to Agent and Lenders on or prior to the Closing Date (including all fees payable to Agent pursuant to the Agent's Fee Letter); (12) All fees and expenses of Agent's counsels through the Closing Date; and (13) Such other evidence as Agent or any Lender may reasonably request to establish the accuracy and completeness of the representations and warranties and the compliance with the terms and conditions contained in this Agreement and the other Credit Documents. 3.01-4 74 SCHEDULE 4.01(o) SUBSIDIARIES A. PRIOR TO THE CLOSING OF THE DII ACQUISITION:
ISSUED AND JURISDICTION OF MATERIAL OUTSTANDING PERCENTAGE DIRECT OWNER SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP OF SHARES FLEXTRONICS Singapore INTERNATIONAL SINGAPORE PTE. LTD. FLEXTRONICS SINGAPORE Singapore No 6,700,000 auth @ 100% Flextronics PTE. LTD. S$1/share 4,600,000 International 36 Robinson Road issued + paid up Ltd. #18-01 City House Singapore 068877 FLEXTRONICS (MALAYSIA) Malaysia No RM4,025,400 100% Flextronics SDN. BHD. authorized Singapore 7th Floor, Wisma RM2,725,000 Pte. Ltd. Hamzah-Kwong Hing paid up No 1, Leboh Ampang 50100 KL, Malaysia DTM LATIN AMERICA (L), Labuan No 10,000 100% Flextronics LTD. shares $10,000 International Level 10, Wisma Oceanic, $2 paid up Ltd. Jalan OKK Awang Besar 87007 Labuan F.T. Malaysia FLEXTRONICS Labuan Yes 10,000 shares 100% Flextronics INTERNATIONAL MARKETING 10,000 authorized International (L) LTD. $10,000 paid up Ltd. Level 10, Wisma Oceanic, Jalan OKK Awang Besar 87007 Labuan F.T. Malaysia FLEXTRONICS Labuan Yes 10,000 100% Flextronics INTERNATIONAL LATIN shares $10,000 International AMERICA (L), LTD. $2 paid up Ltd. Level 10, Wisma Oceanic, Jalan OKK Awang Besar 87007 Labuan F.T. Malaysia ASTRON TECHNOLOGIES LTD. Mauritius No US$1M auth'd 100% Flextronics 6th Floor, Li Wan Po US$100K International House paid up Ltd. 12 Remy Ollier Street Port Lois, Mauritius FLEXTRONICS Hong Kong No HK4,000,000 100% Flextronics MANUFACTURING (HK) LTD. authorized International Unit B, 11/F., Block A, HK2 paid up Ltd. Wo Kee Hong Building, 585-609 Castle Peak Road, Kwai Chung, New Territories, Hong Kong
4.01-1 75
ISSUED AND JURISDICTION OF MATERIAL OUTSTANDING PERCENTAGE DIRECT OWNER SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP OF SHARES FLEXTRONICS INDUSTRIAL PRC Yes US$3,500,000 100% Flextronics (SHENZHEN) CO., LTD. authorized Singapore Blk C9, 2nd Industrial US$3,500,000 Pte. Ltd. Zone paid up Xixiang, Shenzhen People's Republic of China FLEXTRONICS COMPUTER PRC No US$1,200,000 100% Flextronics (SHEKOU) LTD. authorized Singapore 5/F. Nanshan Building US$1,200,000 Pte. Ltd. Shekou Industrial Zone paid up Industrial 8 Road Shenzhen. Guangdong, China ZHUHAI DAO MEN CHAO YI PRC No RMB100,000,000 96.25% Flextronics ELECTRONICS CO., LTD. auth'd Manufacturing Sam Chow Industrial City RMB100,000,000 (HK) Ltd. Jin An Town, Doumen, paid up Zhuhai People's Republic of China ASTRON GROUP LTD. Hong Kong No HK6,750,292 99.90% Flextronics 6th Floor, Hole Weal authorized Manufacturing Ind. Bldg. HK6,750,292 (HK) Ltd. 22-28 Tai Chung Road paid up Tsuen Wan, New Territories, Hong Kong FICO INVESTMENT HOLDING Hong Kong No HK10,000 90% Flextronics LTD. HOLDING LTD. authorized International Rm 10, 18/F, Blk B HK10,000 Ltd. Kong Nam Ind. Bldg. paid up 603 Castle Peak Road Tsuen Wan, New Territories, Hong Kong FOREST KEYBOARD PRC No HK55 million 100% FICO MANUFACTURING authorized Investment (SHENZHEN) LTD. HK42,981,525 issued Holding Gong Ming Zhen Ltd. Chang Zhen Village Industrial Zone PRC EUROPE FLEXTRONICS Sweden Yes 10,000,000 kr 100% F.L. INTERNATIONAL SWEDEN AB Tronics AB Box 532 371 23 Karlskrona Sweden FLEXTRONICS GROUP Sweden No 100,000 kr 100% Flextronics SWEDEN AB Holdings Box 532 UK Ltd. 371 23 Karlskrona Sweden
4.01-2 76
ISSUED AND JURISDICTION OF MATERIAL OUTSTANDING PERCENTAGE DIRECT OWNER SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP OF SHARES FLEXTRONICS LIMITED Scotland No Authorized 250,000 100% FIUK 4 Livingstone Boulevard ordy shares @ Hamilton International GBL1 Issued 60,000 Technology Park ordy shares @ GBL1 Blantyre Scotland G72 0BP FLEXTRONICS England No Authorized 190,476 100% Flextronics INTERNATIONAL (UK) LTD. ordy shares @ International 4 Livingstone Boulevard GBL1 Issued 186,588 Ltd. Hamilton International ordy shares @ L1 Technology Park Blantyre Scotland G72 0BP FLEXTRONICS HOLDINGS England No Authorized 500,000 100% Flextronics (UK) LTD. ordy shares @ International 50 Stratton Street GBL1 Issued 1,000 Ltd. London ordy shares @ W1X 6NX GBL1 FLEXTRONICS KFT Hungary No $15,000 100% FLX Cyprus HU 9600, Sarvar Ltd. Ikervari ut 42 Hungary FLEXTRONICS Austria No ATS 92% Flextronics INTERNATIONAL GmbH 160,000,000.00 International Wienerbergstrasse 7 Ltd. 1810 Vienna, Austria FLEXTRONICS Austria No ATS 25,000,000.00 100% Flextronics INTERNATIONAL GmbH International Friesacher Strasse 3 GmbH 9330 Althofen, Austria FLEXTRONICS Hungary Yes HUF 100% Flextronics INTERNATIONAL KFT. 539,000,000.00 International 8660 Tab GmbH Munkas U. 28, Hungary NEUTRONICS ECOPLAST Hungary No HUF 100% Flextronics MUANYAGIPARI TERMEKEKET 727,290,000.00 International GYARTO KFT. GmbH 9600 Sarvar Ikervari u. 42, Hungary NEUTRONICS COMPONENTS Hungary No ATS 600,000.00 100% Flextronics ELEKTRONIKAI International ALKATRESZGYARTO GmbH VAMSZABADTERULETI KFT. 9600 Sarvar Ikervari u. 42, Hungary MECHA DESIGN S.R.L. Italy No Lit 55% Flextronics Via G&A, Philips 12 160,000,000.00 International 20052 Monza, Italy GmbH
4.01-3 77
ISSUED AND JURISDICTION OF MATERIAL OUTSTANDING PERCENTAGE DIRECT OWNER SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP OF SHARES FLEXTRONICS Netherlands No 100% Flextronics INTERNATIONAL EUROPE, International B.V. Ltd. Koningslaan 34, P.O. Box 74658, 1070 BR Amsterdam, the Netherlands FLX CYPRUS LTD. LTD. Cyprus No auth'd: CYP 100% held Flextronics c/o Chrysanthou & 10,000 iss'd/paid in trust by International Christoforou up: CYP 1,000 2 locals: Ltd. Corner Th. Dervis - Christo- Florinis Street, 6th Floor fourou and P. O. Box 1675, CY-1512 Chrysanthou Nicosia, Cyprus 1066 FLEXTRONICS Finland Yes 2000 shares, 100% FHFin INTERNATIONAL FINDLAND 506,000 Euros OY Patentti- ja Reekisterihallitus PRH/2 rekisteritoimisto Arkadiankatu 6 A 00100 Helsinki, Finland FLEXTRONICS France No 96% Kyrel EMS Oyj INTERNATIONAL FRANCE SA 2 rue Lavoisier Z.I. Moncel-Les-Luneville 54 300 LUNEVILLE FLEXTRONICS HOLDING Finland No EURO 8,000 100% F.L.Tronics FINLAND OY Holding AB PO Box 23 FIN-39201 Kyroskoski Finland FLEXTRONICS Norway No 100 shares @ 100% F.L. INTERNATIONAL NORWAY AS 1,000 NOK Tronics Televeien 1 Holding AB 4879 Grimstad, Norway HTR TAB Hungary No 100% Neutronics HTR 8660 Tab Technikai Munkas U. 28, Hungary Rendszerszolg- altato Kft HTR ZALA Hungary No 100% Neutronics HTR 8660 Tab Technikai Munkas U. 28, Hungary Rendszerszolg- altato Kft HTR REAL ESTATE Hungary No 100% Neutronics HTR 8660 Tab Technikai Munkas U. 28, Hungary Rendszerszolg- altato Kft KOSKITUONTI OY Finland No 100% Kyrel EMS Oyj Patentti- ja Reekisterihallitus PRH/2 rekisteritoimisto Arkadiankatu 6 A 00100 Helsinki, Finland
4.01-4 78
ISSUED AND JURISDICTION OF MATERIAL OUTSTANDING PERCENTAGE DIRECT OWNER SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP OF SHARES ALFATEL OY Finland No 100% Kyrel EMS Oyj Patentti- ja Reekisterihallitus PRH/2 rekisteritoimisto Arkadiankatu 6 A 00100 Helsinki, Finland KOSTRON OY Finland No 100% Kyrel EMS Oyj Patentti- ja Reekisterihallitus PRH/2 rekisteritoimisto Arkadiankatu 6 A 00100 Helsinki, Finland IGROTTA AB Sweden No 100% Flextronics Box 532 International 371 23 Karlskrona Sweden AB Sweden MOCTOL AB Sweden No 100% Igrotta AB Box 532 371 23 Karlskrona Sweden NOITALL AB Sweden No 100% Igrotta AB Box 532 371 23 Karlskrona Sweden TOLIPIG AB Sweden No 100% Igrotta AB Box 532 371 23 Karlskrona Sweden MARATHON BUSINESS PARK USA No 100% Flextronics LLC International 47951 Westinghouse Drive USA, Inc. Fremont, CA 94539 MEXICO, BRASIL, OTHERS FLEXTRONICS Mexico Yes $50,000 Fixed 99.90% Flextronics MANUFACTURING MEX, SA Capital International DE CV Ltd. Carretara Base Aerea Militar 5850 Zapopan, Jalisco 45100 Mexico DTM PRODUCTS DE MEXICO, Mexico No 99.90% Flextronics S.A. DE C.V. International Carretara Base Aerea Ltd. Militar 5850 Zapopan, Jalisco 45100 Mexico
4.01-5 79
ISSUED AND JURISDICTION OF MATERIAL OUTSTANDING PERCENTAGE DIRECT OWNER SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP OF SHARES PARQUE DE TECNOLOGIA Mexico No $50,000 Fixed 99% Flextronics ELECTRONICA, S.A. DE Capital International C.V. Ltd. Carretara Base Aerea Militar 5850 Zapopan, Jalisco 45100 Mexico FLEXTRONICS Brazil No 100% Flextronics INTERNATIONAL International TECNOLOGIA LTDA Ltd. Al. Jurua, 548 Alphaville, Barueri Sao Paulo, Brazil 06454-070 FLEXTRONICS DO BRASIL Brazil No 99.90% FIT SERVICOS, LTDA Av. das Nacoes Unidas, 12995, 18o. andar, sala F, Sao Paulo, Brazil, 04578-000 FLEXTRONICS Brazil No US 30,000 100% Flextronics INTERNATIONAL authorized International INDUSTRIAL, LTDA Ltd. FLEXTRONICS Netherlands INTERNATIONAL N.V. Antilles Landhuis Joonchi Kaya Richard J. Beaujon z/n P.O. Box 837 Curacao, Netherlands Antilles UNITED STATES FLEXTRONICS California Yes 999 shares 100% Flextronics INTERNATIONAL USA, INC. International 2090 Fortune Drive Ltd. San Jose, CA 95131 FLEXTRONICS California Yes 100% Flextronics INTERNATIONAL - 1500186 International FREMONT, INC. USA Inc. 47951 Westinghouse Drive Fremont, CA 94539 FLEXTRONICS California, No 100% Flextronics DISTRIBUTION, INC. USA International 2241 Lundy Avenue (USA) San Jose, CA 95131 (FIUI-CA) DTM PRODUCTS, INC. Colorado, No 1,000,000 Common 100% Flextronics 6268 Monarch Park Place, USA Stock $10,000 International Niwot, CO 80503 USA
4.01-6 80
ISSUED AND JURISDICTION OF MATERIAL OUTSTANDING PERCENTAGE DIRECT OWNER SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP OF SHARES PROACTIVE CORPORATION Florida No 100% Flextronics 6421 Congress Ave., International Technologia, Suite 114 Ltda. PLEASE CONFIRM: QCOM SP. ZO. O. Poland PLN 780,000 100% Flextronics ul.Rzeznicka 54/56 International PL-80-822 Gdansk Taby AB Poland QCOM AB Sweden 141,943 shares 100% F.L. Gribbylundsvagen 15 (total of SEK Tronics Box 7314 1,419,430) Holdings AB SE-187 14 Taby, Sweden QCOM FINANS AB Sweden 100 shares 100% Flextronics Gribbylundsvagen 15 (SEK 100,000) International Box 7314 Taby AB SE-187 14 Taby, Sweden FLEXTRONICS Poland 40 shares at PLN 100% F.L. INTERNATIONAL POLAND 100 each Tronics SP. ZO. O. Holdings AB Tczew Poland VASTBRIGHT CABLETRON FLEXTRONICS INTERNATIONAL IRELAND FLEXTRONICS INTERNATIONAL NEW HAMPSHIRE FLEXTRONICS INTERNATIONAL HOLLAND BV FLEXTRONICS HOLDING GERMANY GmbH FLEXTRONICS HOLDING GERMANY AND CO K.G. FLEXTRONICS INTERNATIONAL DENMARK APS FLEISCHER-TRADING, SERVICOS E CONSULTADORIA LDA FLEXTRONICS HOLDING GmbH
4.01-7 81
ISSUED AND JURISDICTION OF MATERIAL OUTSTANDING PERCENTAGE DIRECT OWNER SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP OF SHARES FLEXTRONICS TECHNOLOGY GmbH IN USA: CBA SUMMIT EMC
4.01-8 82 B. AFTER THE CLOSING OF THE DII ACQUISITION: TO BE COMPLETED BY FII WITHIN 30 DAYS OF THE CLOSING DATE
ISSUED AND JURISDICTION OF MATERIAL OUTSTANDING PERCENTAGE DIRECT OWNER SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP OF SHARES ---------- ------------ ---------- ------------- --------- ---------
4.01-9 83 EXHIBIT A NOTICE OF REVOLVING LOAN BORROWING [Date] ABN AMRO Bank N.V. as Agent [_________] Attn: [_________] 1. Reference is made to that certain Credit Agreement, dated as of April 3, 2000 (the "Credit Agreement"), among Flextronics International Ltd. ("FIL"), each of the Subsidiaries of FIL designated as borrower from time to time, as approved by all of the Lenders and Guarantors (collectively, "Designated Borrowers"), the financial institutions listed in Schedule I to the Credit Agreement (the "Lenders") and ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). Unless otherwise indicated, all terms defined in the Credit Agreement have the same respective meanings when used herein. 2. Pursuant to Subparagraph 2.02(a) of the Credit Agreement, the undersigned Borrower hereby irrevocably requests a Revolving Loan Borrowing to be made upon the following terms: (a) The requested Borrowing is to be under Facility [__]; (b) The currency and principal amount of such Borrowing are to be __________; (c) Such Borrowing is to consist of [Base Rate] [LIBOR] Loans; (d) If such Borrowing is to consist of LIBOR Loans, the initial Interest Period for such Borrowing is to be __________ month[s]; (e) The date of such Borrowing is to be __________, ____; and (f) The Applicable Payment Office is located at _____________________________. 3. The undersigned Borrower hereby certifies to Lenders and Agent that, on the date of this Notice of Revolving Loan Borrowing and after giving effect to the requested Revolving Loan Borrowing: (a) The representations and warranties of Borrowers and their Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in the other Credit Documents are true and correct in all material respects as if made on such date (except for representations and warranties expressly made as of a specified date, which shall be true as of such date); and (b) No Default has occurred and is continuing. 4. Please disburse the proceeds of the requested Revolving Loan Borrowing to ___________________________________________________________________ _______________________________________________________________________________. A-1 84 IN WITNESS WHEREOF, the undersigned Borrower has executed this Notice of Revolving Loan Borrowing on the date set forth above. [__________________________________] By: --------------------------------- Name: ---------------------------- Title: --------------------------- A-2 85 EXHIBIT B NOTICE OF TERM LOAN BORROWING [Date] ABN AMRO Bank N.V. as Agent [_________] Attn: [_________] 1. Reference is made to that certain Credit Agreement, dated as of April 3, 2000 (the "Credit Agreement"), among Flextronics International Ltd. ("FIL"), each of the Subsidiaries of FIL designated as borrower from time to time, as approved by all of the Lenders and Guarantors (collectively, "Designated Borrowers"), the financial institutions listed in Schedule I to the Credit Agreement (the "Lenders") and ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). Unless otherwise indicated, all terms defined in the Credit Agreement have the same respective meanings when used herein. 2. Pursuant to Subparagraph 2.01(b) of the Credit Agreement, the undersigned Borrower[s] hereby irrevocably request[s] [a] Term Loan Borrowing[s] to be made on the Facility B Revolving Loan Maturity Date upon the following terms [specify for each Borrowing the currency, principal amount, initial Interest Period and applicable Borrower]:
Principal Initial Interest Currency Amount Period Borrower -------- ------ ------ -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
3. The undersigned Borrower[s] hereby certif[ies][y] to Lenders and Agent that, on the date of this Notice of Term Loan Borrowing and after giving effect to the requested Term Loan Borrowing: (a) The representations and warranties of Borrowers and their Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in the other Credit Documents are true and correct in all material respects as if made on such date (except for representations and warranties expressly made as of a specified date, which shall be true as of such date); and (b) No Default has occurred and is continuing. 4. Please disburse the proceeds of the requested Term Loan Borrowing first to Lenders in such amounts as may be necessary to repay the principal amount of all Revolving Loans owed by the undersigned Borrower[s] outstanding on the Facility B Revolving Loan Maturity Date and the balance, if any, as follows: ________________________________________________________________________________ ___________________________________________________________________________. B-1 86 5. The Applicable Payment Office is located at _____________________________. IN WITNESS WHEREOF, the undersigned Borrower[s] [has][have] executed this Notice of Term Loan Borrowing on the date set forth above. [__________________________________] By: --------------------------------- Name: ---------------------------- Title: --------------------------- [__________________________________] By: --------------------------------- Name: ---------------------------- Title: --------------------------- B-2 87 EXHIBIT C(1) REVOLVING LOAN NOTE ______________, ________ April __, 2000 FOR VALUE RECEIVED, the undersigned ("Borrower"), hereby promises to pay to the order of ____________________, a ____________________ ("Lender"), the aggregate outstanding principal balance of all Revolving Loans made by Lender to Borrower pursuant to the Credit Agreement referred to below (as amended from time to time, the "Credit Agreement"), on or before the Facility [A][B] Revolving Loan Maturity Date specified in the Credit Agreement; and to pay interest on said sum, or such lesser amount, at the rates and on the dates provided in the Credit Agreement. Borrower shall make all payments hereunder, for the account of Lender's Applicable Lending Offices, to Agent as indicated in the Credit Agreement, in the lawful currencies required by the Credit Agreement and in same day or immediately available funds. Borrower hereby authorizes Lender to record on the schedule(s) annexed to this note the date, currency and amount of each Revolving Loan, the Facility pursuant to which made, and the date and amount of each payment or prepayment of principal made by Borrower and agrees that all such notations shall constitute prima facie evidence of the matters noted; provided, however, that the failure of Lender to make any such notation shall not affect Borrower's obligations hereunder. This note is one of the Revolving Loan Notes referred to in the Credit Agreement, dated as of April 3, 2000, among Borrower and the other borrowers from time to time parties thereto, Lender and the other lenders from time to time parties thereto (collectively, the "Lenders") and ABN AMRO, as agent for Lenders. This note is subject to the terms of the Credit Agreement, including the rights of prepayment and the rights of acceleration of maturity set forth therein. Terms used herein have the meanings assigned to those terms in the Credit Agreement, unless otherwise defined herein. The transfer, sale or assignment of any rights under or interest in this note is subject to certain restrictions contained in the Credit Agreement, including Paragraph 8.05 thereof. C(1)-1 88 Borrower shall pay all reasonable fees and expenses, including reasonable attorneys' fees, incurred by Lender in the enforcement or attempt to enforce any of Borrower's obligations hereunder not performed when due. Borrower hereby waives notice of presentment, demand, protest or notice of any other kind. This note shall be governed by and construed in accordance with the laws of the State of California. [_____________] By: --------------------------------- Name: ---------------------------- Title: --------------------------- C(1)-2 89 LOANS AND PAYMENTS OF PRINCIPAL
Loans Payments ---------------------------------------- -------------------------------------------- Amount of Amount of Principal Paid Date Currency Loan Facility Currency or Prepaid Facility - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
C(1)-3 90 EXHIBIT C(2) TERM LOAN NOTE ______________, ________ __________, ____ FOR VALUE RECEIVED, the undersigned ("Borrower"), hereby promises to pay to the order of ____________________, a ____________________ ("Lender"), the principal amount of the following Term Loans made by Lender to Borrower pursuant to the Credit Agreement referred to below (as amended from time to time, the "Credit Agreement"), in a single installment on the Term Loan Maturity Date specified in the Credit Agreement; and to pay interest on said sum at the rates and on the dates provided in the Credit Agreement. [(1) A Term Loan in the principal amount of ___________; (2) A Term Loan in the principal amount of ___________; and (3) A Term Loan in the principal amount of ___________.] Borrower shall make all payments hereunder, for the account of Lender's Applicable Lending Offices, to Agent as indicated in the Credit Agreement, in the lawful currencies required by the Credit Agreement and in same day or immediately available funds. This note is one of the Term Loan Notes referred to in the Credit Agreement, dated as of April 3, 2000, among Borrower and the other borrowers from time to time parties thereto, Lender and the other lenders from time to time parties thereto (collectively, the "Lenders") and ABN AMRO, as agent for Lenders. This note is subject to the terms of the Credit Agreement, including the rights of prepayment and the rights of acceleration of maturity set forth therein. Terms used herein have the meanings assigned to those terms in the Credit Agreement, unless otherwise defined herein. The transfer, sale or assignment of any rights under or interest in this note is subject to certain restrictions contained in the Credit Agreement, including Paragraph 8.05 thereof. C(2)-1 91 Borrower shall pay all reasonable fees and expenses, including reasonable attorneys' fees, incurred by Lender in the enforcement or attempt to enforce any of Borrower's obligations hereunder not performed when due. Borrower hereby waives notice of presentment, demand, protest or notice of any other kind. This note shall be governed by and construed in accordance with the laws of the State of California. [_____________] By: --------------------------------- Name: ---------------------------- Title: --------------------------- C(2)-2 92 EXHIBIT D GUARANTY THIS GUARANTY, dated as of April [_], 2000, is executed by each of the undersigned (each such entity and each entity which hereafter executes and delivers a Subsidiary Joinder in substantially the form of Attachment 1 hereto to be referred to herein as a "Guarantor"), in favor of ABN AMRO BANK N.V., acting as agent (in such capacity, and each successor thereto in such capacity, "Agent") for the financial institutions which are from time to time parties to the Credit Agreement referred to in Recital A below (collectively, "Lenders"). RECITALS A. Pursuant to a Credit Agreement dated as of April 3, 2000 (as amended from time to time, the "Credit Agreement"), among Flextronics International Ltd. ("FIL"), each of the Subsidiaries of FIL designated as borrower from time to time as approved by all Lenders and Guarantors (collectively, "Designated Borrowers"), Lenders and Agent, Lenders have agreed to extend certain credit facilities to FIL and Designated Borrowers (together, "Borrowers") upon the terms and subject to the conditions set forth therein. Each Guarantor (other than FIL) is a direct or indirect Subsidiary of FIL and expects to derive substantial direct and indirect benefit from the transactions contemplated by the Credit Agreement. B. Lenders' obligations to extend the credit facilities to Borrowers under the Credit Agreement are subject, among other conditions, to receipt by Agent of (1) this Guaranty, duly executed by each existing Eligible Material Subsidiary, and (2) Subsidiary Joinders, duly executed by each future Eligible Material Subsidiary. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each Guarantor hereby agrees with Agent, for the ratable benefit of Lenders and Agent, as follows: 1. DEFINITIONS AND INTERPRETATION. (a) Definitions. When used in this Guaranty, the following terms shall have the following respective meanings: "Agent" shall have the meaning given to that term in the introductory paragraph hereof. "Aggregate Guaranty Payments" shall mean, with respect to any Guarantor at any time, the aggregate net amount of all payments made by such Guarantor under this Guaranty (including, without limitation, under Paragraph 5 hereof) at or prior to such time. "Borrowers" shall have the meaning given to that term in the Recital A hereof. "Credit Agreement" shall have the meaning given to that term in the Recital A hereof. "Debtor Relief Proceeding" shall mean any suit, action, case or other proceeding commenced by, against or for any Borrower or its property seeking the dissolution, liquidation, reorganization, rearrangement or other relief of such Borrower or its debts under any applicable bankruptcy, insolvency or debtor relief law or other similar Governmental Rule now or hereafter in effect or seeking the appointment of a receiver, trustee, liquidator, custodian or other similar official for such Borrower or any substantial part of its property or any general assignment by any 1 93 Borrower for the benefit of its creditors, whether or not any such suit, action, case or other proceeding is voluntary or involuntary. "Disallowed Post-Commencement Interest and Expenses" shall mean interest computed at the rate provided in the Credit Agreement and claims for reimbursement, costs, expenses or indemnities under the terms of any of the Credit Documents accruing or claimed at any time after the commencement of any Debtor Relief Proceeding, if the claim for such interest, reimbursement, costs, expenses or indemnities is not allowable, allowed or enforceable against Borrowers in such Debtor Relief Proceeding. "Fair Share" shall mean, with respect to any Guarantor at any time, an amount equal to (i) a fraction, the numerator which is the Maximum Guaranty Amount of such Guarantor and the denominator of which is the aggregate Maximum Guaranty Amounts of all Guarantors, multiplied by (ii) the aggregate amount paid by all Funding Guarantors under this Guaranty at or prior to such time. "FMM Process Agent" shall have the meaning given to that term in Subparagraph 6(l)(iii) hereof. "Fair Share Shortfall" shall mean, with respect to any Guarantor at any time, the amount, if any, by which the Fair Share of such Guarantor at such time exceeds the Aggregate Guaranty Payments of such Guarantor at such time. "FIL" shall have the meaning given to that term in the Recital A hereof. "Funding Guarantor" shall have the meaning given to that term in Paragraph 5 hereof. "Guaranteed Obligations" shall mean and include, with respect to any Guarantor, all loans, advances, debts, liabilities, and obligations, howsoever arising, owed by any Borrower (other than such Guarantor in its capacity as a Borrower if such Guarantor is a Borrower) to Agent or any Lender of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money) individual or joint and several, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising pursuant to the terms of the Credit Documents, including all interest, fees, charges, expenses, attorneys' fees and accountants' fees chargeable to any Borrower or payable by any Borrower thereunder. "Guarantor" shall have the meaning given to that term in the introductory paragraph hereof. "Lenders" shall have the meaning given to that term in the introductory paragraph hereof. "Maximum Guaranty Amount" shall mean, with respect to any Guarantor at any time, (i) the full amount of the Guaranteed Obligations at such time or (ii) if any court of competent jurisdiction determines in any action to enforce this Guaranty that enforcement against such Guarantor for the full amount of the Guaranteed Obligations is not lawful under or would be subject to avoidance under Section 548 of the United States Bankruptcy Code or any applicable provision of any comparable law of any state or other jurisdiction, then the maximum amount lawful and not subject to such avoidance. "Mexican Guarantor" shall mean Flextronics Manufacturing Mex, S.A. de C.V. and its successors or assigns. "Subordinated Obligations" shall have the meaning given to that term in Paragraph 4 hereof. 2 94 "Subsidiary Joinder" shall mean an instrument substantially in the form of Attachment 1 hereto. "Taxes" shall have the meaning given to such term in Subparagraph 6(h). Unless otherwise defined herein, all other capitalized terms used herein and defined in the Credit Agreement shall have the respective meanings given to those terms in the Credit Agreement. (b)Other Interpretive Provisions. The rules of construction set forth in Section I of the Credit Agreement shall, to the extent not inconsistent with the terms of this Guaranty, apply to this Guaranty and are hereby incorporated by reference. Each Guarantor acknowledges receipt of copies of the Credit Agreement and the other Credit Documents. 2. GUARANTY. (a) Payment Guaranty. Each Guarantor unconditionally guarantees and promises to pay and perform as and when due, whether at stated maturity, upon acceleration or otherwise, any and all of the Guaranteed Obligations. If any Debtor Relief Proceeding relating to any Borrower is commenced, each Guarantor further unconditionally guarantees and promises to pay and perform, upon the demand of Agent, any and all of the Guaranteed Obligations (including any and all Disallowed Post-Commencement Interest and Expenses) in accordance with the terms of the Credit Documents, whether or not such obligations are then due and payable by any Guarantor and whether or not such obligations are modified, reduced or discharged in such Debtor Relief Proceeding. This Guaranty is a guaranty of payment and not of collection. (b) Continuing Guaranty. This Guaranty is an irrevocable continuing guaranty of the Guaranteed Obligations which shall continue in effect until all obligations of Lenders to extend credit to all Borrowers have terminated and all of the Guaranteed Obligations have been fully paid. If any payment on any Guaranteed Obligation is set aside, avoided or rescinded or otherwise recovered from Agent or any Lender, such recovered payment shall constitute a Guaranteed Obligation hereunder and, if this Guaranty was previously released or terminated, it automatically shall be fully reinstated, as if such payment was never made. (c) Joint, Several and Independent Obligations. The liability of each Guarantor hereunder is joint and several and is independent of the Guaranteed Obligations. A separate action or actions may be brought and prosecuted against each Guarantor for the full amount of the Guaranteed Obligations irrespective of whether action is brought against any Borrower, any other Guarantor or any other guarantor of the Guaranteed Obligations or whether any Borrower, any other Guarantor or any other guarantor of the Guaranteed Obligations is joined in any such action or actions. (d) Fraudulent Transfer Limitation. If, in any action to enforce this Guaranty, any court of competent jurisdiction determines that enforcement against any Guarantor for the full amount of the Guaranteed Obligations is not lawful under or would be subject to avoidance under Section 548 of the United States Bankruptcy Code or any applicable provision of any comparable law of any state or other jurisdiction, the liability of such Guarantor under this Guaranty shall be limited to the maximum amount lawful and not subject to such avoidance. (e) Termination. Notwithstanding any termination of this Guaranty in accordance with Paragraph 3 hereof, this Guaranty shall continue to be in full force and effect and applicable to any Guaranteed Obligations arising thereafter which arise because prior payments of Guaranteed Obligations are rescinded or otherwise required to be surrendered by Agent or any Lender after receipt. 3. AUTHORIZATIONS, WAIVERS, ETC. 3 95 (a) Authorizations. Each Guarantor authorizes Agent and Lenders, in their discretion, without notice to such Guarantor, irrespective of any change in the financial condition of any Borrower, such Guarantor, any other Guarantor or any other guarantor of the Guaranteed Obligations since the date hereof, and without affecting or impairing in any way the liability of such Guarantor hereunder, from time to time to: (i) Create new Guaranteed Obligations and renew, compromise, extend, accelerate or otherwise change the time for payment or performance of, or otherwise amend or modify the Credit Documents or change the terms of the Guaranteed Obligations or any part thereof, including increase or decrease of the rate of interest thereon; (ii) Take and hold security for the payment or performance of the Guaranteed Obligations and exchange, enforce, waive or release any such security; apply such security and direct the order or manner of sale thereof; and purchase such security at public or private sale; (iii) Otherwise exercise any right or remedy they may have against any Borrower, such Guarantor, any other Guarantor, any other guarantor of the Guaranteed Obligations or any security, including, without limitation, the right to foreclose upon any such security by judicial or nonjudicial sale; (iv) Settle, compromise with, release or substitute any one or more makers, endorsers or guarantors of the Guaranteed Obligations; and (v) Assign the Guaranteed Obligations, this Guaranty or the other Credit Documents in whole or in part to the extent provided in the Credit Agreement and the other Credit Documents. (b) Waivers. Each Guarantor hereby waives: (i) Any right to require Agent or any Lender to (A) proceed against any Borrower, any other Guarantor or any other guarantor of the Guaranteed Obligations, (B) proceed against or exhaust any security received from any Borrower, such Guarantor, any other Guarantor or any other guarantor of the Guaranteed Obligations or otherwise marshal the assets of any Borrower, such Guarantor, any other Guarantor or any other guarantor of the Guaranteed Obligations or (C) pursue any other remedy in Agent's or any Lender's power whatsoever; (ii) Any defense arising by reason of the application by any Borrower of the proceeds of any borrowing; (iii) Any defense resulting from the absence, impairment or loss of any right of reimbursement, subrogation, contribution or other right or remedy of Guarantor against any Borrower, any other Guarantor, any other guarantor of the Guaranteed Obligations or any security, whether resulting from an election by Agent or any Lender to foreclose upon security by nonjudicial sale, or otherwise; (iv) Any setoff or counterclaim of any Borrower or any defense which results from any disability or other defense of any Borrower or the cessation or stay of enforcement from any cause whatsoever of the liability of any Borrower (including, without limitation, the lack of validity or enforceability of any of the Credit Documents); (v) Any defense based upon any law, rule or regulation which provides that the obligation of a surety must not be greater or more burdensome than the obligation of the principal; (vi) Until all obligations of Agent or any Lender to extend credit to all Borrowers have terminated and all of the Guaranteed Obligations have been fully paid, any right of 4 96 subrogation, reimbursement, indemnification or contribution and other similar right to enforce any remedy which Agent, Lenders or any other Person now has or may hereafter have against any Borrower on account of the Guaranteed Obligations, and any benefit of, and any right to participate in, any security now or hereafter received by Agent, any Lender or any other Person on account of the Guaranteed Obligations; (vii) All presentments, demands for performance, notices of non-performance, notices delivered under the Credit Documents, protests, notice of dishonor, and notices of acceptance of this Guaranty and of the existence, creation or incurring of new or additional Guaranteed Obligations and notices of any public or private foreclosure sale; (viii) The benefit of any statute of limitations to the extent permitted by law; (ix) Any appraisement, valuation, stay, extension, moratorium redemption or similar law or similar rights for marshalling; (x) Any right to be informed by Agent or any Lender of the financial condition of any Borrower, any other Guarantor or any other guarantor of the Guaranteed Obligations or any change therein or any other circumstances bearing upon the risk of nonpayment or nonperformance of the Guaranteed Obligations; (xi) Until all obligations of Agent or any Lender to extend credit to any Borrower have terminated and all of the Guaranteed Obligations have been fully paid, any right to revoke this Guaranty; (xii) Any defense arising from an election for the application of Section 1111(b)(2) of the United States Bankruptcy Code which applies to the Guaranteed Obligations; (xiii) Any defense based upon any borrowing or grant of a security interest under Section 364 of the United States Bankruptcy Code; and (xiv) Any right it may have to a fair value hearing to determine the size of a deficiency judgment following any foreclosure on any security for the Guaranteed Obligations. Without limiting the scope of any of the foregoing provisions of this Paragraph 3, each Guarantor hereby further waives (A) all rights and defenses arising out of an election of remedies by Agent or any Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a Guaranteed Obligation, has destroyed such Guarantor's rights of subrogation and reimbursement against any Borrower by the operation of Section 580d of the Code of Civil Procedure or otherwise, (B) all rights and defenses such Guarantor may have by reason of protection afforded to any Borrower with respect to the Guaranteed Obligations pursuant to the antideficiency or other laws of California limiting or discharging the Guaranteed Obligations, including, without limitation, Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure, and (C) all other rights and defenses available to such Guarantor by reason of Sections 2787 to 2855, inclusive, Section 2899 or Section 3433 of the California Civil Code or Section 3605 of the California Commercial Code. (c) The Mexican Guarantor hereby expressly agrees that any rights or privileges that it might have under the laws of Mexico shall not be applicable to this Guaranty, including, but not limited to, any benefit of "orden," "excusion," "division," "quita," "novacion," "prorroga," "espera" or "modificacion," provided in Articles 2813, 2814, 2816, 2817, 2818, 2820, 2821, 2822, 2823, 2827, 2836, 2840, 2842, 2844, 2845, 2846, 2847, 2848, and 2849 of the Civil Code of the Federal District of Mexico and the corresponding articles of the Civil Codes in all States of the United Mexican States ("Mexico"), which are not reproduced herein by express declaration that the contents of such articles are known to the Mexican Guarantor. 5 97 (d) Financial Condition of Borrowers, Etc. Each Guarantor is fully aware of the financial condition and affairs of each Borrower. Each Guarantor has executed this Guaranty without reliance upon any representation, warranty, statement or information concerning any Borrower furnished to such Guarantor by Agent or any Lender and has, independently and without reliance on Agent or any Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of the financial condition and affairs of each Borrower and of other circumstances affecting the risk of nonpayment or nonperformance of the Guaranteed Obligations. Each Guarantor is in a position to obtain, and assumes full responsibility for obtaining, any additional information about the financial condition and affairs of each Borrower and of other circumstances affecting the risk of nonpayment or nonperformance of the Guaranteed Obligations and will, independently and without reliance upon Agent or any Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own appraisals and decisions in taking or not taking action in connection with this Guaranty. 4. SUBORDINATION. Each Guarantor hereby subordinates any and all debts, liabilities and obligations owed to such Guarantor by each Borrower (the "Subordinated Obligations") to the Guaranteed Obligations as provided in this Paragraph 4. (a) Prohibited Payments, Etc. Except during the continuance of a Default (including the commencement and continuation of any Debtor Relief Proceeding relating to any Borrower), each Guarantor may receive regularly scheduled payments from any Borrower on account of Subordinated Obligations. After the occurrence and during the continuance of any Default (including the commencement and continuation of any Debtor Relief Proceeding relating to any Borrower), however, unless Agent otherwise agrees, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations. (b) Prior Payment of Guaranteed Obligations. In any Debtor Relief Proceeding relating to any Borrower, each Guarantor agrees that Agent and Lenders shall be entitled to receive payment of all Guaranteed Obligations (including any and all Disallowed Post-Commencement Interest and Expenses) before such Guarantor receives payment of any Subordinated Obligations. (c) Turn-Over. After the occurrence and during the continuance of any Default (including the commencement and continuation of any Debtor Relief Proceeding relating to any Borrower), each Guarantor shall, if Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for Agent and Lenders and deliver such payments to Agent on account of the Guaranteed Obligations (including any and all Disallowed Post-Commencement Interest and Expenses), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty. (d) Agent Authorization. After the occurrence and during the continuance of any Default (including the commencement and continuation of any Debtor Relief Proceeding relating to any Borrower), Agent is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of each Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Disallowed Post-Commencement Interest and Expenses), and (ii) to require each Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to Agent for application to the Guaranteed Obligations (including any and all Disallowed Post-Commencement Interest and Expenses). 5. CONTRIBUTION AMONG GUARANTORS. Guarantors desire to allocate among themselves, in a fair and equitable manner, their rights of contribution from each other when any payment is made by any Guarantor under this Guaranty. Accordingly, if any payment is made by any Guarantor under this Guaranty (a "Funding Guarantor") that exceeds its Fair Share, the Funding Guarantor shall be entitled to a contribution from each other Guarantor in the amount of such other Guarantor's Fair Share Shortfall, so that all such contributions shall cause each Guarantor's Aggregate Guaranty Payments to equal its Fair Share. The amounts payable as contributions hereunder shall be determined by the Funding Guarantor as of the date on which the related payment or distribution is made by the Funding Guarantor, and such determination shall be binding on the other Guarantors absent manifest error. The 6 98 allocation and right of contribution among Guarantors set forth in this Paragraph 5 shall not be construed to limit in any way the liability of any Guarantor under this Guaranty or the amount of the Guaranteed Obligations. 6. MISCELLANEOUS. (a) Notices. Except as otherwise provided herein, all notices, requests, demands, consents, instructions or other communications to or upon any Guarantor or Agent under this Guaranty or the other Credit Documents shall be in writing and faxed, mailed or delivered, if to Agent, at its facsimile number or address set forth below, or, if to any Guarantor, at its facsimile number or address set forth below its signature below or in the respective Subsidiary Joinder for such Guarantor (or to such other facsimile number or address for any party as indicated in any notice given by that party to the other parties). All such notices and communications shall be effective (i) when sent by any overnight courier service of recognized standing, on the second Business Day following the deposit with such service; (ii) when mailed, first class postage prepaid and addressed through the United States Postal Service, upon receipt; (iii) when delivered by hand, upon delivery; and (iv) when faxed, upon confirmation of receipt. Agent: ABN AMRO Bank N.V. Syndications Group 1325 Avenue of the Americas, 9th Floor New York, NY 10019 U.S.A. Attn: Linda Boardman Tel. No: (212) 314-1724 Fax. No: (212) 314-1712 With copies to: ABN AMRO Bank N.V. 101 California Street, Suite 4550 San Francisco, CA 94111-5812 U.S.A. Attn: Mathew Harvey Tel No: (415) 984-3733 Fax No: (415) 362-3524 (b) Payments. (i) Each Guarantor shall make all payments of the Guaranteed Obligations to Agent, or its order, at the office of Agent and at the times specified in the Credit Documents for the payment of such Guaranteed Obligations. Each Guarantor shall make all other payments hereunder at such office as Agent may designate. Each payment shall be made in same day or immediately available funds not later than 11:00 a.m.(local time of the office of Agent at which such payment is to be made) on the date due. (ii) Each Guarantor shall make all payments of the Guaranteed Obligations hereunder in the currency in which such Guaranteed Obligations are required to be paid by any Borrower pursuant to the Credit Documents and shall make all other payments hereunder in Dollars; provided, however, that, if Agent shall request a Guarantor to pay any amount hereunder which would otherwise be payable in another currency in the lawful currency of the United States, such Guarantor shall pay to Agent the Dollar Equivalent of such amount. (iii) If any sum due from any Guarantor under this Guaranty or any other Credit Document to which such Guarantor is a party or any order, judgment or award given or rendered in relation hereto or thereto has to be converted from the currency (the "first currency") in which the same is payable hereunder or thereunder into another currency (the "second currency") for the purpose of (A) making or filing a claim or proof against such Guarantor with any Governmental Authority, (B) obtaining an order or judgment in any court or other tribunal or (C) enforcing any 7 99 order or judgment given or made in relation hereto, such Guarantor shall, to the fullest extent permitted by law, indemnify and hold harmless each of the Persons to whom such sum is due from and against any loss suffered as a result of any discrepancy between (1) the rate of exchange used for such purpose to convert the amounts in question from the first currency into the second currency and (2) the rate or rates of exchange at which such Person may, using reasonable efforts in the ordinary course of business, purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. The foregoing indemnity shall constitute a separate obligation of each Guarantor distinct from its other obligations hereunder and shall survive the giving or making of any judgment or order in relation to all or any of such obligations. (iv) If any amounts required to be paid by any Guarantor under this Guaranty or any order, judgment or award given or rendered in relation hereto remain unpaid after such amounts are due, such Guarantor shall pay interest on the aggregate, outstanding balance of such amounts from the date due until those amounts are paid in full at a per annum rate equal to: (1) In the case of amounts payable in Dollars, the Base Rate plus two percent (2.00%), such rate to change from time to time as the Base Rate shall change. (2) In the case of amounts payable in any other currency, the Overnight Rate for such currency plus three percent (3.0%), such rate to change from time to time as the Overnight Rate shall change. (c) Expenses. Each Guarantor shall pay on demand (i) all reasonable and documented fees and expenses, including reasonable attorneys' fees and expenses, incurred by Agent in connection with the preparation, execution and delivery of, and the exercise of its duties under, this Guaranty and the preparation, execution and delivery of amendments and waivers hereunder and (ii) all reasonable and documented fees and expenses, including reasonable attorneys' fees and expenses, incurred by Agent and Lenders in connection with the enforcement or attempted enforcement of this Guaranty or any of the Guaranteed Obligations or in preserving any of Agent's or Lenders' rights and remedies (including, without limitation, all such fees and expenses incurred in connection with any "workout" or restructuring affecting the Credit Documents or the Guaranteed Obligations or any bankruptcy or similar proceeding involving Guarantor, any other Guarantor, any Borrower, or any of their affiliates). (d) Waivers; Amendments. This Guaranty may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by each Guarantor and Agent. Each waiver or consent under any provision hereof shall be effective only in the specific instances for the purpose for which given. No failure or delay on Agent's or any Lender's part in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. (e) Successors and Assigns. This Guaranty shall be binding upon and inure to the benefit of Agent, Lenders, Guarantors and their respective successors and assigns; provided, however, that no Guarantor may assign or transfer any of its rights and obligations under this Guaranty without the prior written consent of Agent and Lenders, and, provided, further, that Agent or any Lender may sell, assign and delegate their respective rights and obligations hereunder only as permitted by the Credit Agreement. All references in this Guaranty to any Person shall be deemed to include all permitted successors and assigns of such Person. (f) Cumulative Rights, etc. The rights, powers and remedies of Agent and Lenders under this Guaranty shall be in addition to all rights, powers and remedies given to Agent and Lenders by virtue of any applicable law, rule or regulation of any Governmental Authority, the Credit Agreement, any other Credit Document or any other agreement, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Agent's or any Lender's rights hereunder. Each Guarantor waives any right to require Agent or any Lender to proceed against any Person or to exhaust any Collateral or to pursue any remedy in Agent's or such Lender's power. 8 100 (g) Setoff; Security Interest. (i) In addition to any rights and remedies of Lenders provided by law, each Lender shall have the right, with the prior consent of Agent but without prior notice to or consent of any Guarantor, any such notice and consent being expressly waived by each Guarantor to the extent permitted by applicable law, upon the occurrence and during the continuance of an Event of Default, to set-off and apply against the obligations of each Guarantor any amount owing from such Lender to such Guarantor. The aforesaid right of set-off may be exercised by such Lender against a Guarantor or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of such Guarantor or against anyone else claiming through or against such Guarantor or such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off may not have been exercised by such Lender at any prior time. Each Lender agrees promptly to notify the applicable Guarantor after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. (ii) As security for the obligations of each Guarantor hereunder, each Guarantor hereby grants to Agent and each Lender, for the benefit of all Lenders, a continuing security interest in any and all deposit accounts or moneys of such Guarantor now or hereafter maintained with such Lender. Each Lender shall have all of the rights of a secured party with respect to such security interest. (h) Payments Free of Taxes. All payments made by each Guarantor under this Guaranty shall be made free and clear of, and without deduction or withholding for or on account of, all present and future Non-Excluded Taxes. If any Non-Excluded Taxes are required to be withheld from any amounts payable to Agent or any Lender hereunder, the amounts so payable to Agent or such Lender shall be increased to the extent necessary to yield to Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Guaranty or the other Credit Documents, as applicable. Whenever any Non-Excluded Taxes are payable by any Guarantor, as promptly as possible thereafter, such Guarantor shall send to Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by such Guarantor showing payment thereof. If Guarantors fail to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fail to remit to Agent the required receipts or other required documentary evidence, Guarantors shall indemnify Agent and Lenders for any taxes (including interest or penalties) that may become payable by Agent or any Lender as a result of any such failure. The obligations of Guarantors under this Subparagraph 6(h) shall survive the payment and performance of the Guaranteed Obligations and the termination of this Guaranty. Nothing contained in this Subparagraph 6(h) shall require Agent or any Lender to make available any of its tax returns (or any other information relating to its taxes which it deems to be confidential). (i) Partial Invalidity. If at any time any provision of this Guaranty is or becomes illegal, invalid or unenforceable in any respect under the law or any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Guaranty nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. (j) Jury Trial. EACH OF GUARANTORS, LENDERS AND AGENT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY. (k) Counterparts. This Guaranty may be executed in any number of identical counterparts, any set of which signed by all the Guarantors shall be deemed to constitute a complete, executed original for all purposes. 9 101 (l) Governing Law, Consent to Jurisdiction, Etc. (i) This Guaranty shall be governed by and construed in accordance with the laws of the State of California, except for the purposes of any suit or legal action brought in Mexico in which case it shall be governed by the laws of Mexico. (ii) Each Guarantor irrevocably submits to the non-exclusive jurisdiction of the courts of the State of California and the courts of the United States of America located in the Northern District of California and, in respect of the Mexican Guarantor, the Mexican Guarantor and the Agent, on behalf of Lenders, also irrevocably submit to the jurisdictions of the courts of the Federal District of Mexico, Mexico, and agrees that any legal action, suit or proceeding arising out of or relating to this Guaranty or any of the other Credit Documents may be brought against such party in any such courts. Final judgment against a Guarantor in any such action, suit or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the judgment, or in any other manner provided by law. Nothing in this Subparagraph 6(l) shall affect the right of Agent or any Lender to commence legal proceedings or otherwise sue any Guarantor in any other appropriate jurisdiction, or concurrently in more than one jurisdiction, or to serve process, pleadings and other papers upon any Guarantor in any manner authorized by the laws of any such jurisdiction. Subject to and except as otherwise provided in paragraph (iii) below in respect of the Mexican Guarantor, each Guarantor agrees that process served either personally or by registered mail shall, to the extent permitted by law, constitutes adequate service of process in any such suit. Without limiting the foregoing, each Guarantor hereby appoints, in the case of any such action or proceeding brought in the courts of or in the State of California, CT Corporation, with offices on the date hereof at 818 West Seventh Street, Los Angeles, California 90017, to receive for it and on its behalf, service of process in the State of California with respect thereto, provided each Guarantor may appoint any other person, reasonably acceptable to Agent, with offices in the State of California to replace such agent for service of process upon delivery to Agent of a reasonably acceptable agreement of such new agent agreeing so to act. Each Guarantor irrevocably waives to the fullest extent permitted by applicable law (A) any objection which it may have now or in the future to the laying of the venue of any such action, suit or proceeding in any court referred to in the first sentence above; (B) any claim that any such action, suit or proceeding has been brought in an inconvenient forum; (C) its right of removal of any matter commenced by any other party in the courts of the State of California to any court of the United States of America; (D) any immunity which it or its assets may have in respect of its obligations under this Agreement or any other Credit Document from any suit, execution, attachment (whether provisional or final, in aid of execution, before judgment or otherwise) or other legal process; and (E) any right it may have to require the moving party in any suit, action or proceeding brought in any of the courts referred to above arising out of or in connection with this Agreement or any other Credit Document to post security for the costs of any Guarantor or to post a bond or to take similar action. (iii) The Mexican Guarantor hereby irrevocably appoints CT Corporation, Los Angeles Agency, (the "FMM Process Agent"), with an office on the date hereof in 818 West Seventh Street, Los Angeles, California 90017, in the case of any action, suit or proceeding arising out of or relating to this Guaranty or any of the other Credit Documents brought in the courts of or in the State of California, as its agent to receive for it and on its behalf service of process in the State of California with respect thereto. Such service may be made by mailing or delivering a copy of such process to the Mexican Guarantor in care of the FMM Process Agent at the FMM Process Agent's above address, and the Guarantor hereby irrevocably authorizes and directs the FMM Process Agent to accept such service on its behalf; provided, that for any notice or service of process to be effective under Mexican law, such notice or service of process shall be deemed to have been given or made when delivered either (i) personally, return receipt requested, (ii) by courier delivery or certified mail, return receipt requested, or (iii) by facsimile followed by personal or courier delivery, return receipt requested. The Mexican Guarantor agrees that a final judgment in any such proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. For purposes of perfecting the 10 102 appointment of the FMM Process Agent under the applicable laws of Mexico, the Mexican Guarantor agrees to execute and deliver the power of attorney attached hereto as Attachment 2, formalized before a notary public in Mexico and duly recorded at the Public Registry of Commerce (Registro Publico de Comercio) of the corporate domicile of the Mexican Guarantor, and to execute and deliver any and all other documents (including Mexican notarial deeds) as may be required by the Agent in its sole discretion. [The first signature page follows.] 11 103 IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed as of the day and year first above written. FLEXTRONICS INTERNATIONAL USA INC. By: --------------------------------- Name: ---------------------------- Title: --------------------------- Address: 2090 Fortune Drive San Jose, California 95131 U.S.A. Attn: Treasurer Telephone: [(___) ___-____] Facsimile: [(___) ___-____] THE DII GROUP, INC. By: --------------------------------- Name: ---------------------------- Title: --------------------------- Address: 2090 Fortune Drive San Jose, California 95131 U.S.A. Attn: Treasurer Telephone: [(___) ___-____] Facsimile: [(___) ___-____] FLEXTRONICS INTERNATIONAL LATIN AMERICA (L) LTD. By: --------------------------------- Name: ---------------------------- Title: --------------------------- Address: Level 10, Wisma Oceanic Jalan OKK Awang Besar Labuan, F.T. Malaysia Attn: [___________________] Telephone: [(___) ___-____] Facsimile: [(___) ___-____] FLEX INTERNATIONAL MARKETING (L) LTD. 12 104 By: --------------------------------- Name: ---------------------------- Title: --------------------------- Address: Level 10, Wisma Oceanic Jalan OKK Awang Besar Labuan, F.T. Malaysia Attn: [___________________] Telephone: [(___) ___-____] Facsimile: [(___) ___-____] FLEXTRONICS MANUFACTURING MEX, S.A. DE C.V. By: --------------------------------- Name: ---------------------------- Title: --------------------------- Address: Carretara Base Aerea Militar 5850 Zapopan, Jalisco 4500 Mexico Attn: ___________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ FLEXTRONICS SINGAPORE PTE LTD. By: --------------------------------- Name: ---------------------------- Title: --------------------------- Address: 36 Robinson Road #18-01 City House Singapore 068877 Attn: ___________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ FLEXTRONICS HOLDINGS UK LIMITED By: --------------------------------- Name: ---------------------------- Title: --------------------------- 13 105 Address: 50 Stratton Street London W1X 6NX England Attn: ___________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ 14 106 DOVATRON INTERNATIONAL, INC. By: --------------------------------- Name: ---------------------------- Title: --------------------------- Address: [________________________] [________________________] Attn: ___________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ [__________________________________] By: --------------------------------- Name: ---------------------------- Title: --------------------------- Address: [________________________] [________________________] Attn: ___________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ 15 107 ATTACHMENT 1 SUBSIDIARY JOINDER THIS SUBSIDIARY JOINDER (this "Agreement"), dated as of ____________, ____, is executed by [NEW ELIGIBLE MATERIAL SUBSIDIARY], a _________ [corporation] [partnership] [etc.] ("New Subsidiary") in favor of ABN AMRO BANK N.V., acting as agent (in such capacity, and each successor thereto in such capacity, "Agent") for the financial institutions which are from time to time parties to the Credit Agreement referred to in Recital A below (collectively, the "Lenders"). RECITALS A. Pursuant to a Credit Agreement dated as of April 3, 2000 (as amended from time to time, the "Credit Agreement"), among Flextronics International Ltd. ("FIL"), each of the Subsidiaries of FIL designated as borrowers from time to time as approved by all Lenders and Guarantors (collectively, "Designated Borrowers"), Lenders and Agent, Lenders have agreed to extend certain credit facilities to FIL and Designated Borrowers (collectively, "Borrowers") upon the terms and subject to the conditions set forth therein. B. Lenders' obligations to extend the credit facilities to Borrowers under the Credit Agreement are subject, among other conditions, to receipt by Agent of (1) a Guaranty, dated as of April 3, 2000, duly executed by each existing Eligible Material Subsidiary and any other Subsidiary designated as a Guarantor from time to time, and (2) Subsidiary Joinders, duly executed by each future Eligible Material Subsidiary. C. New Subsidiary is a new Eligible Material Subsidiary and expects to derive substantial direct and indirect benefit from the transactions contemplated by the Credit Agreement. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, New Subsidiary hereby agrees with Agent, for the ratable benefit of Lenders and Agent, as follows: 1. DEFINITIONS AND INTERPRETATION. Unless otherwise defined herein, all capitalized terms used herein and defined in the Guaranty shall have the respective meanings given to those terms in the Guaranty. New Subsidiary acknowledges receipt of copies of the Guaranty, the Credit Agreement and the other Credit Documents. 2. REPRESENTATIONS AND WARRANTIES. On and as of the date of this Agreement (the "Effective Date") and for the ratable benefit of the Agent and Lenders, New Subsidiary hereby makes each of the representations and warranties made by each Guarantor in the Guaranty. 3. AGREEMENT TO BE BOUND. New Subsidiary agrees that, on and as of the Effective Date, it shall become a Guarantor under the Guaranty and shall be bound by all the provisions of the Guaranty to the same extent as if New Subsidiary had executed the Guaranty on the Closing Date. 4. WAIVER. Without limiting the generality of the waivers in the Guaranty, New Subsidiary specifically agrees to be bound by the Guaranty and waives any right to notice of acceptance of its execution of this Agreement and of its agreement to be bound by the Guaranty. 5. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California. (1)-1 108 IN WITNESS WHEREOF, New Subsidiary has caused this Agreement to be executed by its duly authorized officer. [NEW SUBSIDIARY] By: --------------------------------- Name: ---------------------------- Title: --------------------------- Address: [_________________________] [_________________________] [_________________________] Attn: [___________________] Telephone: [(___) ___-____] Facsimile: [(___) ___-____] (1)-2 109 ATTACHMENT 2 To be executed and delivered by the Guarantor in the presence of, and to be certified by, a Mexican Notary Public FORM OF SPECIAL IRREVOCABLE POWER OF ATTORNEY [__________________], S.A. DE C.V. (the "Grantor"), a sociedad anonima de capital variable duly incorporated and validly existing under the laws of the United Mexican States ("Mexico"), hereby grants an irrevocable power of attorney for litigation and collections in favor of [____________________] (the "Attorney-In-Fact"), in terms of the first paragraph of article 2554 of the Civil Code for the Federal District of Mexico and the corresponding articles of the Civil Codes of all States of Mexico. This power of attorney is limited in its scope but is as broad as necessary and may be exercised in any jurisdiction, so that the Attorney-In-Fact, in the name and on behalf of the Grantor, receives any and all notices and service of process of any nature in connection with any suits, actions, proceedings and judgments of all kinds, including, without limitation, judicial, administrative or arbitration proceedings in any way relating to the Guaranty Agreement (the "Guaranty Agreement") dated [___________], 2000 entered into by and among the Grantor, the other Guarantors, the Lenders party thereto and ABN AMRO Bank N.V. as agent. The Grantor hereby appoints as its domicile to receive any notices relating thereto, [_______________] United States of America, or any other domicile of the Attorney-In-Fact notified to the Grantor. This Power of Attorney is granted in satisfaction of a condition set forth in the Guaranty Agreement, and it is therefore irrevocable, in accordance with article 2596 of the Civil Code for the Federal District of Mexico and the corresponding Articles of the Civil Code of all States of Mexico. (2)-1 110 ATTACHMENT 2 To be executed and delivered by the Guarantor in the presence of, and to be certified by, a Mexican Notary Public FORM SPECIAL IRREVOCABLE POWER OF ATTORNEY "NUMERO ___________________________________________________________________ LIBRO _____________________________________________________________________ FOLIO _____________________________________________________________________ En la Ciudad de [_________] a los [____________] dias de mes de [___________] de mil novecientos noventa y nueve, yo, el Licenciado [__________________________], titular de la Notaria numero [____________] del [_______________], hago constar el PODER ESPECIAL IRREVOCABLE, que se consigna al tenor de la siguiente: CLAUSULA UNICA Por medio del presente instrumento, la sociedad denominada [__________________], SOCIEDAD ANONIMA DE CAPITAL VARIABLE (la "Otorgante"), representada como ha quedado dicho, otorga en favor de la sociedad denominada [_______________], un poder especial irrevocable para pleitos y cobranzas, en los terminos de primer parrafo del Articulo dos mil quinientos cincuenta y cuatro del Codigo Civil para el Distrito Federal y correlativos de los Estados de la Republica, que es limitado en cuanto a su objeto, pero tan amplio como sea necesario, para ser ejercido en cualquier jurisdiccion y a efecto de que, en nombre y representacion de la Otorgante, reciba toda clase de notificaciones y emplazamientos de cualquier naturaleza en relacion con cualquier demanda, accion, procedimiento o juicio, incluyendo sin limitacion alguna procedimientos judiciales, administrativos o arbitrales, derivados del Contrato de Garantia (Guaranty Agreement; el "Contrato de Garantia") de fecha [___] de [_______] de 2000, celebrado entre la Otorgante, las acreditantes (Lenders) ahi descritas y ABN AMRO Bank N.V. como agente administrativo. La Otorgante senala como domicilio convencional para recibir cualesquiera de las notificaciones o emplazamientos antes citados el ubicado en [___________________________], Estados Unidos de America, o cualquier otro domicilio que en el futuro designe [__________________________]. El presente poder es irrevocable, en virtud de que se otorga en cumplimiento de una condicion prevista en el Contrato de Garantia en terminos del Articule 2596 del Codigo Civil para el Distrito Federal y correlativos de los Estados de la Republica. D(1)-1 111 EXHIBIT E PLEDGE AGREEMENT THIS PLEDGE AGREEMENT, dated as of [ ], is executed by [____________________], a [________] ("Pledgor"), in favor of ABN AMRO BANK N.V., acting as agent (in such capacity and each successor thereto acting in such capacity, "Agent") for the financial institutions which are from time to time parties to the Credit Agreement referred to in Recital A below (collectively, "Lenders"). RECITALS A. Pursuant to a Credit Agreement, dated as of April 3, 2000 (as amended from time to time, the "Credit Agreement"), among Flextronics International Ltd. ("FIL"), each of the Subsidiaries of FIL designated as borrowers from time to time as approved by all Lenders and Guarantors (collectively, "Designated Borrowers"), Lenders and Agent, Lenders have agreed to extend certain credit facilities to FIL and Designated Borrowers (collectively, "Borrowers") upon the terms and subject to the conditions set forth therein. B. Lenders' obligations to extend the credit facilities to Borrowers under the Credit Agreement are subject, among other conditions, to receipt by Agent of this Agreement, duly executed by Pledgor. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Pledgor hereby agrees with Agent, for the ratable benefit of Lenders and Agent, as follows: 1. DEFINITIONS AND INTERPRETATION. (a) Definitions. When used in this Agreement, the following terms shall have the following respective meanings: "Agent" shall have the meaning given to that term in the introductory paragraph hereof. "Collateral" shall have the meaning given to that term in Paragraph 2 hereof. "Credit Agreement" shall have the meaning given to that term in Recital A hereof. "Equity Securities" of any Person shall mean (a) all common stock, preferred stock, participations, shares, partnership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any of the foregoing. "Lenders" shall have the meaning given to that term in the introductory paragraph hereof. "Pledged Shares" shall mean collectively the Equity Securities pledged to Agent pursuant to Paragraph 2 hereof. "Pledgor" shall have the meaning given to that term in the introductory paragraph hereof. "Secured Obligations" shall mean and include all loans, advances, debts, liabilities, and obligations, howsoever arising, owed by Pledgor to Agent or any Lender of every kind and description (whether or not evidenced by any note or instrument and whether or not for the E-1 112 payment of money) individual or joint and several, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising pursuant to the terms of the Credit Documents, including all interest, fees, charges, expenses, attorneys' fees and accountants' fees chargeable to Pledgor or payable by Pledgor thereunder. "Subsidiary" of any Person shall mean (a) any corporation of which more than 50% of the issued and outstanding Equity Securities having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries, (b) any partnership, joint venture, limited liability company or other association of which more than 50% of the equity interest having the power to vote, direct or control the management of such partnership, joint venture or other association is at the time owned and controlled by such Person, by such Person and one or more of the other Subsidiaries or by one or more of such Person's other Subsidiaries or (c) any other Person included in the Financial Statements of such Person on a consolidated basis. "UCC" shall mean the Uniform Commercial Code as in effect in the State of California from time to time. Unless otherwise defined herein, all other capitalized terms used herein and defined in the Credit Agreement shall have the respective meanings given to those terms in the Credit Agreement, and all terms defined in the UCC shall have the respective meanings given to those terms in the UCC. (b) Other Interpretive Provisions. The rules of construction set forth in Section I of the Credit Agreement shall, to the extent not inconsistent with the terms of this Agreement, apply to this Agreement and are hereby incorporated by reference. 2. PLEDGE. As security for the Secured Obligations, Pledgor hereby pledges and assigns to Agent (for the ratable benefit of Lenders and Agent) and grants to Agent (for the ratable benefit of Lenders and Agent) a security interest in all right, title and interest of Pledgor in and to the property described in subparagraphs (a) - (d) below, whether now owned or hereafter acquired (collectively and severally, the "Collateral"): (a) All of the Equity Securities described in Attachment 1 hereto, whether certificated or uncertificated; (b) All dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed or distributable in respect of or in exchange for any of the property described in subparagraph (a) above; and (c) All proceeds of the foregoing. 3. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants to Lenders and Agent as follows: (a) Pledgor is the record legal and beneficial owner of the Collateral (or, in the case of after-acquired Collateral, at the time Pledgor acquires rights in the Collateral, will be the record legal and beneficial owner thereof). No other Person has (or, in the case of after-acquired Collateral, at the time Pledgor acquires rights therein, will have) any right, title, claim or interest (by way of Lien, purchase option or otherwise) in, against or to the Collateral. (b) Agent has (or in the case of after-acquired Collateral, at the time Pledgor acquires rights therein, will have) a first priority perfected security interest in the Collateral. E-2 113 (c) All Pledged Shares have been (or in the case of after-acquired Pledged Shares, at the time Pledgor acquires rights therein, will have been) duly authorized, validly issued and fully paid and are (or in the case of after-acquired Pledged Shares, at the time Pledgor acquires rights therein, will be) non-assessable. (d) Pledgor has delivered to Agent, together with all necessary stock powers, endorsements, assignments and other necessary instruments of transfer, the originals of all Pledged Shares, other certificated securities, other Collateral and all certificates, instruments and other writings evidencing the same. (e) Set forth in Attachment 1 hereto is a true, complete and accurate list, as of the date of this Agreement, of all Equity Securities of Ineligible Material Subsidiaries owned directly by Pledgor. 4. COVENANTS. Pledgor hereby agrees as follows: (a) Pledgor, at Pledgor's expense, shall promptly procure, execute and deliver to Agent all documents, instruments and agreements and perform all acts which are necessary or desirable, or which Agent may request, to establish, maintain, preserve, protect and perfect the Collateral, the Lien granted to Agent therein and the first priority of such Lien or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the preceding sentence, Pledgor shall (i) procure, execute and deliver to Agent all stock powers, endorsements, assignments, financing statements and other instruments of transfer requested by Agent, (ii) deliver to Agent promptly upon receipt the originals of all Pledged Shares, other certificated securities, other Collateral and all certificates, instruments and other writings evidencing the same and (iii) cause the Lien of Agent to be recorded or registered in the books of any financial intermediary or clearing corporation requested by Agent. (b) Pledgor shall pay promptly when due all taxes and other Governmental Charges, all Liens and all other charges now or hereafter imposed upon, relating to or affecting any Collateral. (c) Pledgor shall appear in and defend any action or proceeding which may affect its title to or Agent's interest in the Collateral. (d) Pledgor shall not surrender or lose possession of (other than to Agent), sell, encumber, lease, rent, option, or otherwise dispose of or transfer any Collateral or right or interest therein except as permitted in the Credit Agreement, and, notwithstanding any provision of the Credit Agreement, Pledgor shall keep the Collateral free of all Liens. 5. VOTING RIGHTS AND DIVIDENDS PRIOR TO DEFAULT. Unless an Event of Default has occurred and is continuing: (a) Pledgor may exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Pledged Shares or any part thereof; provided, however, that Pledgor shall not exercise or refrain from exercising any such rights where the consequence of such action or inaction would be (i) to impair any Collateral, the Lien granted to Agent therein, the first priority of such Lien or Agent's rights and remedies hereunder with respect to any Collateral or (ii) otherwise inconsistent with the terms of this Agreement and the other Credit Documents. (b) Pledgor may receive and retain all dividends and interest paid in cash in respect of the Pledged Shares, except for any such dividends and interest paid in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus. Pledgor shall promptly deliver to Agent to hold as Collateral all dividends and interest which Pledgor is not entitled to receive and retain pursuant to the preceding sentence, in the same form as so received (with any E-3 114 necessary endorsement), and, until so delivered, shall hold such dividends and interest in trust for the benefit of Agent, segregated from the other property or funds of Pledgor. 6. AUTHORIZED ACTION BY AGENT. Pledgor hereby irrevocably appoints Agent as its attorney-in-fact and agrees that Agent may perform (but Agent shall not be obligated to and shall incur no liability to Pledgor or any third party for failure so to do) any act which Pledgor is obligated by this Agreement to perform, and to exercise such rights and powers as Pledgor might exercise with respect to the Collateral, including, without limitation, the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) insure, process, preserve and enforce the Collateral; (d) make any compromise or settlement, and take any action it deems advisable, with respect to the Collateral; (e) pay any Indebtedness of Pledgor relating to the Collateral; and (f) execute UCC financing statements and other documents, instruments and agreements required hereunder; provided, however, that Agent may exercise such powers only after the occurrence and during the continuance of an Event of Default. Pledgor agrees to reimburse Agent upon demand for all reasonable and documented costs and expenses, including reasonable and documented attorneys' fees, Agent may incur while acting as Pledgor's attorney-in-fact hereunder, all of which costs and expenses are included in the Secured Obligations. Pledgor agrees that such care as Agent gives to the safekeeping of its own property of like kind shall constitute reasonable care of the Collateral when in Agent's possession; provided, however, that Agent shall not be required to make any presentment, demand or protest, or give any notice and need not take any action to preserve any rights against any prior party or any other Person in connection with the Secured Obligations or with respect to the Collateral. 7. EVENTS OF DEFAULT. (a) Event of Default. Pledgor shall be deemed in default under this Agreement upon the occurrence and during the continuance of an Event of Default, as that term is defined in the Credit Agreement. (b) Voting Rights and Dividends. Upon the occurrence and during the continuance of an Event of Default: (i) All rights of Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to subparagraph 5(a) hereof and to receive the dividends and interest payments which it would otherwise be authorized to receive and retain pursuant to subparagraph 5(a) hereof shall cease and all such rights shall thereupon become vested in Agent which shall thereupon have the sole right, but not the obligation, to exercise such voting and other consensual rights and to receive and hold as Collateral such dividends and interest payments. (ii) Pledgor shall promptly deliver to Agent to hold as Collateral all dividends and interest received by Pledgor after the occurrence and during the continuance of any Event of Default, in the same form as so received (with any necessary endorsement), and, until so delivered, shall hold such dividends and interest in trust for the benefit of Agent, segregated from the other property or funds of Pledgor. (c) Other Rights and Remedies. In addition to all other rights and remedies granted to Agent by this Agreement, the Credit Agreement, the other Credit Documents, the UCC and other applicable Governmental Rules, Agent may, upon the occurrence and during the continuance of any Event of Default, exercise any one or more of the following rights and remedies: (i) collect, receive, appropriate or realize upon the Collateral or otherwise foreclose or enforce Agent's security interests in any or all Collateral in any manner permitted by applicable Governmental Rules or in this Agreement; (ii) notify any or all issuers of or transfer or paying agents for the Collateral or any applicable clearing corporation, financial intermediary or other Person to register the Collateral in the name of Agent or its nominee and/or to pay all dividends, interest and other amounts payable in respect of the Collateral directly to Agent; (iii) sell or E-4 115 otherwise dispose of any or all Collateral at one or more public or private sales, whether or not such Collateral is present at the place of sale, for cash or credit or future delivery, on such terms and in such manner as Agent may determine; and (iv) require Pledgor to assemble all records and information relating to the Collateral and make it available to Agent at a place to be designated by Agent. In any case where notice of any sale or disposition of any Collateral is required, Pledgor hereby agrees that seven (7) days notice of such sale or disposition is reasonable. (d) Securities Laws. (i) Pledgor acknowledges and recognizes that Agent may be unable to effect a public sale of all or a part of the Pledged Shares and may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obligated to agree, among other things, to acquire the Pledged Shares for their own account, for investment and not with a view to the distribution or resale thereof. Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to Agent than those of public sales, and agrees that such private sales shall be deemed to have been made in a commercially reasonable manner and that Agent has no obligation to delay sale of any Pledged Shares to permit the issuer thereof to register it for public sale under the Securities Act of 1933, as amended, or under any state securities law. (ii) Upon the occurrence and during the continuance of an Event of Default and at Agent's request, Pledgor shall, and shall cause all issuers of Collateral and all officers and directors thereof and all other necessary Persons to, execute and deliver all documents, instruments and agreements and perform all other acts necessary or, in the opinion of Agent, advisable to sell the Collateral in any public or private sale, including any acts requested by Agent to (A) register any Collateral under the Securities Act of 1933, (B) qualify any Collateral under any state securities or "Blue Sky" laws or (C) otherwise permit any such sale to be made in full compliance with all applicable Governmental Rules. 8. MISCELLANEOUS. (a) Notices. Except as otherwise specified herein, all notices, requests, demands, consents, instructions or other communications to or upon Pledgor or Agent under this Agreement shall be given as provided in Paragraph 8.01 of the Credit Agreement. (b) Waivers; Amendments. Any term, covenant, agreement or condition of this Agreement may be amended or waived only as provided in the Credit Agreement. No failure or delay by Agent or any Lender in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. Unless otherwise specified in any such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. (c) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Agent, Lenders, Pledgor and their respective successors and assigns; provided, however, that Pledgor may not assign or transfer any of its rights and obligations under this Agreement without the prior written consent of Agent and Lenders, and, provided, further, that Agent or any Lender may sell, assign and delegate their respective rights and obligations hereunder only as permitted by the Credit Agreement. All references in this Agreement to any Person shall be deemed to include all permitted successors and assigns of such Person. (d) Cumulative Rights, etc. The rights, powers and remedies of Agent and Lenders under this Agreement shall be in addition to all rights, powers and remedies given to Agent and Lenders by virtue of any applicable law, rule or regulation of any Governmental Authority, the Credit Agreement, any other Credit Document or any other agreement, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Agent's or any Lender's rights hereunder. E-5 116 Pledgor waives any right to require Agent or any Lender to proceed against any Person or to exhaust any Collateral or to pursue any remedy in Agent's or such Lender's power. (e) Partial Invalidity. If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. (f) Governing Law. (i) This Agreement shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of laws rules (except to the extent otherwise provided in the UCC). (ii) The Pledgor agrees that for the exclusive benefit of the Agent, the Documentation Agent, the Managing Agents, the Co-Agent and the Lenders, any suit, action or proceeding by the Agent, the Documentation Agent, the Managing Agents, the Co-Agent or the Lenders arising our of or in connection with this Agreement may be brought by the Agent, the Documentation Agent, the Managing Agents, the Co-Agent or the Lenders in any competent court of the State of California or any federal court of the United States of America sitting in the State of California, and the Pledgor submits to the non-exclusive jurisdiction of each such court. The Pledgor further agrees, for the non-exclusive benefit of the Agent, the Documentation Agent, the Managing Agents, the Co-Agent and the Lenders, that nothing contained in this paragraph (f) shall limit the right of the Agent, the Documentation Agent, the Managing Agents, the Co-Agent or the Lenders to take suit, action or proceedings against Pledgor in any other competent jurisdiction. Pledgor irrevocably waives any right it may have to the trial by jury of such proceedings in any such court. [The signature page follows.] E-6 117 IN WITNESS WHEREOF, Pledgor has caused this Agreement to be executed as of the day and year first above written. [____________________] By: --------------------------------- Name: ---------------------------- Title: --------------------------- E-7 118 ATTACHMENT 1 TO PLEDGE AGREEMENT PLEDGED SHARES
Classes of Voting Issued and Shares Owned Shares Jurisdiction Equity Or Outstanding by Pledged to Subsidiary Of Organization Securities Non-Voting Shares Pledgor Agent ---------- --------------- ---------- ---------- ------ ------- -----
E(1)-1 119 EXHIBIT F ASSIGNMENT AGREEMENT THIS ASSIGNMENT AGREEMENT, dated as of the date set forth at the top of Attachment 1 hereto, by and among: (1) The bank designated under item A of Attachment 1 hereto as the Assignor Lender ("Assignor Lender"); and (2) Each bank designated under item B of Attachment 1 hereto as an Assignee Lender (individually, an "Assignee Lender"). RECITALS A. Assignor Lender is one of the Lenders which is a party to the Credit Agreement dated as of April 3, 2000, among Flextronics International Ltd. ("FIL"), each of the Subsidiaries of FIL designated as borrowers from time to time as approved by all Lenders and Guarantors (collectively, "Designated Borrowers"), Assignor Lender and the other financial institutions parties thereto (collectively, the "Lenders") and ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). (Such credit agreement, as amended, supplemented or otherwise modified in accordance with its terms from time to time to be referred to herein as the "Credit Agreement"). B. Assignor Lender wishes to sell, and Assignee Lender wishes to purchase, all or a portion of Assignor Lender's rights under the Credit Agreement pursuant to Subparagraph 8.05(c) of the Credit Agreement. AGREEMENT Now, therefore, the parties hereto hereby agree as follows: 1. Definitions. Except as otherwise defined in this Assignment Agreement, all capitalized terms used herein and defined in the Credit Agreement have the respective meanings given to those terms in the Credit Agreement. 2. Sale and Assignment. Subject to the terms and conditions of this Assignment Agreement, Assignor Lender hereby agrees to sell, assign and delegate to each Assignee Lender and each Assignee Lender hereby agrees to purchase, accept and assume the rights, obligations and duties of a Lender under the Credit Agreement and the other Credit Documents with Commitments or Loans equal to the respective amounts set forth under the caption "Commitments or Loans Assigned" opposite such Assignee Lender's name on Attachment 1 hereto. Such sale, assignment and delegation shall become effective on the date designated in Attachment 1 hereto (the "Assignment Effective Date"), which date shall be, unless Agent shall otherwise consent, at least five (5) Business Days after the date following the date counterparts of this Assignment Agreement are delivered to Agent in accordance with Paragraph 3 hereof. 3. Assignment Effective Notice. Upon (a) receipt by Agent of five (5) counterparts of this Assignment Agreement (to each of which is attached a fully completed Attachment 1), each of which has been executed by Assignor Lender and each Assignee Lender (and, to the extent required by Subparagraph 8.05(c) of the Credit Agreement, by Borrowers and Agent) and (b) payment to Agent of the registration and processing fee specified in Subparagraph 8.05(e) of the Credit Agreement by Assignor Lender, Agent will transmit to Borrowers, Assignor Lender and each Assignee Lender an Assignment Effective Notice substantially in the form of Attachment 2 hereto, fully completed (an "Assignment Effective Notice"). F-1 120 4. Assignment Effective Date. At or before 12:00 noon California time on the Assignment Effective Date, each Assignee Lender shall pay to Assignor Lender, in immediately available or same day funds, an amount equal to the purchase price, as agreed between Assignor Lender and such Assignee Lender (the "Purchase Price"), for each portion of a Commitment or Loan purchased by such Assignee Lender hereunder. Effective upon receipt by Assignor Lender of each Purchase Price payable by each Assignee Lender, the sale, assignment and delegation to such Assignee Lender of such Commitments or Loans as described in Paragraph 2 hereof shall become effective. 5. Payments After the Assignment Effective Date. Assignor Lender and each Assignee Lender hereby agree that Agent shall, and hereby authorize and direct Agent to, allocate amounts payable under the Credit Agreement and the other Credit Documents as follows: (a) All principal payments made after the Assignment Effective Date with respect to each portion of a Loan assigned to an Assignee Lender pursuant to this Assignment Agreement shall be payable to such Assignee Lender. (b) All interest, fees and other amounts accrued after the Assignment Effective Date with respect to each portion of a Loan assigned to an Assignee Lender pursuant to this Assignment Agreement shall be payable to such Assignee Lender. Assignor Lender and each Assignee Lender shall make any separate arrangements between themselves which they deem appropriate with respect to payments between them of amounts paid under the Credit Documents on account of the Commitments or Loans assigned to such Assignee Lender, and neither Agent nor Borrowers shall have any responsibility to effect or carry out such separate arrangements. [6. Delivery of Notes. On or prior to the Assignment Effective Date, Assignor Lender will deliver to Agent the Notes payable to Assignor Lender. On or prior to the Assignment Effective Date, Borrowers will deliver to Agent new Notes for each Assignee Lender and Assignor Lender, in each case in principal amounts reflecting, in accordance with the Credit Agreement, their respective Commitments (as adjusted pursuant to this Assignment Agreement). As provided in Subparagraph 8.05(c) of the Credit Agreement, each such new Note shall be dated the Closing Date. Promptly after the Assignment Effective Date, Agent will send to each of Assignor Lender and the Assignee Lenders its new Notes and will send to Borrowers the superseded Notes payable to Assignor Lender, marked "Replaced."] 7. Delivery of Copies of Credit Documents. [Concurrently with the execution and delivery hereof, Assignor Lender will provide to each Assignee Lender (if it is not already a Lender party to the Credit Agreement) conformed copies of all documents delivered to Assignor Lender on or prior to the Closing Date in satisfaction of the conditions precedent set forth in the Credit Agreement.] 8. Further Assurances. Each of the parties to this Assignment Agreement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Assignment Agreement. 9. Further Representations, Warranties and Covenants. Assignor Lender and each Assignee Lender further represent and warrant to and covenant with each other, Agent and Lenders as follows: (a) Other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, Assignor Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the other Credit Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or the other Credit Documents furnished or the Collateral or any security interest therein. F-2 121 (b) Assignor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrowers or any of their oblations under the Credit Agreement or any other Credit Documents. (c) Each Assignee Lender confirms that it has received a copy of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement. (d) Each Assignee Lender will, independently and without reliance upon Agent, Assignor Lender or any other Lender and based upon 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 the other Credit Documents. (e) Each Assignee Lender appoints and authorizes Agent to take such action as Agent on its behalf and to exercise such powers under the Credit Agreement and the other Credit Documents as Agent is authorized to exercise by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section VII of the Credit Agreement. (f) Each Assignee Lender 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 Credit Documents are required to be performed by it as a Lender. (g) Attachment 1 hereto sets forth administrative information with respect to each Assignee Lender. 10. Effect of this Assignment Agreement. On and after the Assignment Effective Date, (a) each Assignee Lender shall be a Lender with Commitments or Loans as set forth under the caption "Commitments or Loans After Assignment" opposite such Assignee Lender's name on Attachment 1 hereto and shall have the rights, duties and obligations of such a Lender under the Credit Agreement and the other Credit Documents and (b) Assignor Lender shall be a Lender with Commitments or Loans as set forth under the caption "Commitments or Loans After Assignment" opposite Assignor Lender's name on Attachment 1 hereto and shall have the rights, duties and obligations of such a Lender under the Credit Agreement and the other Credit Documents, or, if the Commitments or Loans of Assignor Lender have been reduced to $0, Assignor Lender shall cease to be a Lender and shall have no further obligation to make any Loans. 11. Miscellaneous. This Assignment Agreement shall be governed by, and construed in accordance with, the laws of the State of California. Paragraph headings in this Assignment Agreement are for convenience of reference only and are not part of the substance hereof. F-3 122 IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed by their respective duly authorized officers as of the date set forth in Attachment 1 hereto. --------------------------------, as Assignor Lender By: --------------------------------- Name: ---------------------------- Title: --------------------------- -----------------------------, as an Assignee Lender By: --------------------------------- Name: ---------------------------- Title: --------------------------- -----------------------------, as an Assignee Lender By: --------------------------------- Name: ---------------------------- Title: --------------------------- -----------------------------, as an Assignee Lender By: --------------------------------- Name: ---------------------------- Title: --------------------------- F-4 123 CONSENTED TO AND ACKNOWLEDGED BY: By: --------------------------------- Name: ---------------------------- Title: --------------------------- - ------------------------------------, As Agent By: --------------------------------- Name: ---------------------------- Title: --------------------------- ACCEPTED FOR RECORDATION IN REGISTER: - ------------------------------------, As Agent By: --------------------------------- Name: ---------------------------- Title: --------------------------- F-5 124 ATTACHMENT 1 TO ASSIGNMENT AGREEMENT PART A
Commitments or Loans Commitments or Loans Assigned After Assignment ---------------------------------------- --------------------------------------- Facility B Facility B Facility A Commitment/ Facility A Commitment/ Commitment Loan Commitment Loan ------------------ ----------------- ----------------- ----------------- Assignor Lender: ---------------------- -------------- $------------ $------------ $------------ $------------ Assignee Lenders: ---------------------- -------------- $------------ $------------ $------------ $------------ -------------- $------------ $------------ $------------ $------------ -------------- $------------ $------------ $------------ $------------ -------------- $------------ $------------ $------------ $------------
F(1)-1 125 PART B [ASSIGNEE PARTICIPANT] Lending Office: Address for Notices: Wiring Instructions: F(1)-2 126 PART C ASSIGNMENT EFFECTIVE DATE ________, ____ F(1)-3 127 ATTACHMENT 2 TO ASSIGNMENT AGREEMENT FORM OF ASSIGNMENT EFFECTIVE NOTICE Reference is made to the Credit Agreement, dated as of April 3, 2000, among [[Borrower] ("Borrower")], the financial institutions parties thereto (the "Lenders") and ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). Agent hereby acknowledges receipt of five executed counterparts of a completed Assignment Agreement, a copy of which is attached hereto. [Note: Attach copy of Assignment Agreement.] Terms defined in such Assignment Agreement are used herein as therein defined. 1. Pursuant to such Assignment Agreement, you are advised that the Assignment Effective Date will be __________. 2. Pursuant to such Assignment Agreement, Assignor Lender is required to deliver to Agent on or before the Assignment Effective Date the Notes payable to Assignor Lender. 3. Pursuant to such Assignment Agreement, Borrowers are required to deliver to Agent on or before the Assignment Effective Date the following Notes, each dated _________________ [Insert appropriate date]: [Describe each new Note for Assignor Lender and each Assignee Lender as to principal amount.] 4. Pursuant to such Assignment Agreement, each Assignee Lender is required to pay its Purchase Price to Assignor Lender at or before 12:00 Noon [( time)]on the Assignment Effective Date in immediately available funds. Very truly yours, ABN AMRO BANK N.V. as Agent By: --------------------------------- Name: ---------------------------- Title: --------------------------- F(2)-1 EX-10.27 3 0003.txt EXHIBIT 10.27 1 EXHIBIT 10.27 EXECUTION VERSION ================================================================================ CREDIT AGREEMENT AMONG FLEXTRONICS INTERNATIONAL USA, INC., AND THE DII GROUP AND THE LENDERS NAMED HEREIN AND ABN AMRO BANK N.V., AS AGENT FOR LENDERS AND FLEET NATIONAL BANK AS DOCUMENTATION AGENT AND BANK OF AMERICA, NATIONAL ASSOCIATION AND CITICORP USA, INC. AS MANAGING AGENTS AND THE BANK OF NOVA SCOTIA AS CO-AGENT APRIL 3, 2000 ================================================================================ 2 TABLE OF CONTENTS
PAGE SECTION I. INTERPRETATION......................................... 1 1.01. Definitions............................................... 1 1.02. GAAP...................................................... 16 1.03. Headings.................................................. 16 1.04. Plural Terms.............................................. 16 1.05. Governing Law............................................. 16 1.06. English Language.......................................... 16 1.07. Construction.............................................. 16 1.08. Entire Agreement.......................................... 16 1.09. Calculation of Interest and Fees.......................... 16 1.10. References................................................ 16 1.11. Other Interpretive Provisions............................. 17 SECTION II. CREDIT FACILITIES...................................... 17 2.01. Loans..................................................... 17 2.02. Notice of Borrowing....................................... 18 2.03. Interest.................................................. 20 2.04. Purpose................................................... 21 2.05. Amount Limitations, Commitment Reductions, Etc............ 21 2.06. Fees...................................................... 22 2.07. Prepayments............................................... 22 2.08. Other Payment Terms....................................... 23 2.09. Loan Accounts; Notes...................................... 25 2.10. Loan Funding.............................................. 25 2.11. Pro Rata Treatment........................................ 26 2.12. Change of Circumstances................................... 27 2.13. Taxes on Payments......................................... 28 2.14. Funding Loss Indemnification.............................. 29 2.15. Security.................................................. 30 2.16. Replacement of Lenders.................................... 31
i 3 TABLE OF CONTENTS (CONTINUED)
PAGE SECTION III. CONDITIONS PRECEDENT...................................... 31 3.01. Initial Conditions Precedent................................. 31 3.02. Conditions Precedent to Term Loan Borrowing.................. 31 3.03. Conditions Precedent to Each Credit Event.................... 32 3.04. Covenant to Deliver.......................................... 32 SECTION IV. REPRESENTATIONS AND WARRANTIES............................ 32 4.01. Borrowers' Representations and Warranties.................... 32 4.02. Reaffirmation................................................ 36 SECTION V. COVENANTS................................................. 36 5.01. Affirmative Covenants........................................ 36 5.02. Negative Covenants........................................... 39 SECTION VI. DEFAULT................................................... 43 6.01. Events of Default............................................ 43 6.02. Remedies..................................................... 45 6.03. Lender Rate Contract Remedies................................ 45 SECTION VII. THE AGENT AND RELATIONS AMONG LENDERS..................... 45 7.01. Appointment, Powers and Immunities........................... 45 7.02. Reliance by Agent............................................ 45 7.03. Defaults..................................................... 46 7.04. Indemnification.............................................. 46 7.05. Non-Reliance................................................. 46 7.06. Resignation or Removal of Agent.............................. 46 7.07. Agent in its Individual Capacity............................. 47 7.08. Documentation Agent, Managing Agents and Co-Agent............ 47 SECTION VIII. MISCELLANEOUS............................................. 47 8.01. Notices...................................................... 47 8.02. Expenses..................................................... 48 8.03. Indemnification.............................................. 48 8.04. Waivers; Amendments.......................................... 48
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PAGE 8.05. Successors and Assigns..................................................... 49 8.06. Setoff; Security Interest.................................................. 51 8.07. No Third Party Rights...................................................... 52 8.08. Partial Invalidity......................................................... 52 8.09. Jury Trial................................................................. 52 8.10. Counterparts............................................................... 52 8.11. Borrowers' Liabilities..................................................... 52 8.12. Confidentiality............................................................ 52 8.13. Consent to Jurisdiction.................................................... 53 8.14. Usury...................................................................... 53 8.15. Effect..................................................................... 53
SCHEDULES I Lenders II Pricing Grid 3.01 Initial Conditions Precedent 4.01(o) Subsidiaries 5.02(a) Existing Secured Indebtedness 5.02(e) Existing Investments EXHIBITS A Notice of Revolving Loan Borrowing (2.02(a)) B Notice of Term Loan Borrowing (2.02(b)) C(1) Revolving Loan Note (2.09(b)) C(2) Term Loan Note (2.09(b)) D Guaranty (2.15(a)) E Pledge Agreement (2.15(a)) F Assignment Agreement (8.05(c))
iii 5 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of April 3, 2000, is entered into by and among: (1) FLEXTRONICS INTERNATIONAL USA, INC., a California corporation ("FIUI") and THE DII GROUP, INC., a Delaware corporation ("DII" and together with FIUI, each a "Borrower" and collectively, the "Borrowers"); (2) Each of the financial institutions from time to time listed in Schedule I hereto, as amended from time to time (such financial institutions to be referred to herein collectively as "Lenders"); (3) ABN AMRO BANK N.V., as agent for Lenders (in such capacity, "Agent"); (4) Fleet National Bank, as documentation agent for Lenders (in such capacity, "Documentation Agent"); (5) Bank of America, National Association and Citicorp USA, Inc., as managing agents (collectively, in such capacity, the "Managing Agents"); and (6) The Bank of Nova Scotia, as co-agent (in such capacity, the "Co-Agent"). RECITALS A. Borrowers have requested Lenders to provide certain credit facilities to Borrowers. B. Lenders are willing to provide such credit facilities upon the terms and subject to the conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the above Recitals and the mutual covenants herein contained, the parties hereto hereby agree as follows: SECTION I. INTERPRETATION. 1.01. Definitions. Unless otherwise indicated in this Agreement or any other Credit Document, each term set forth below, when used in this Agreement or any other Credit Document, shall have the respective meaning given to that term below or in the provision of this Agreement or other document, instrument or agreement referenced below. "ABN AMRO" shall mean ABN AMRO Bank N.V. "Affiliate" shall mean, with respect to any Person, each other Person that (a) directly or indirectly, owns or controls, whether beneficially or as a trustee, guardian or other fiduciary, ten percent (10%) or more of any class of Equity Securities of such Person or (b) that controls, is controlled by or is under common control with such Person or any Affiliate of such Person; provided, however, that in no case shall Agent or any Lender be deemed to be an Affiliate of either Borrower or any of its Subsidiaries for purposes of this Agreement. For the purpose of this definition, "control" of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. 6 "Agent" shall have the meaning given to that term in clause (3) of the introductory paragraph hereof. "Agent's Fee Letter" shall mean the letter agreement dated as of February 28, 2000 between FIL and Agent. "Agreement" shall mean this Credit Agreement. "Applicable Lending Office" shall mean, with respect to any Lender and any Borrowing, (i) in the case of any Base Rate Loan or Base Rate Portion, such Lender's Domestic Lending Office, and (ii) in the case of any LIBOR Loan or LIBOR Portion, such Lender's Euro-Dollar Lending Office. "Applicable Margin" shall mean, with respect to any Borrowing or Borrowing Portion at any time, the per annum margin which is determined pursuant to the Pricing Grid and added to the Base Rate or LIBO Rate, as the case may be, for such Borrowing or Portion; provided, however, that each Applicable Margin determined pursuant to the Pricing Grid shall be increased by two percent (2.00%) per annum on the date an Event of Default occurs and shall continue at such increased rate unless and until such Event of Default is cured or waived in accordance with this Agreement. The Applicable Margins shall be determined as provided in the Pricing Grid (subject to the proviso in the preceding sentence) and may change for each Pricing Period. "Applicable Payment Office" shall mean Borrowers' offices located at 2090 Fortune Drive, San Jose, California. "Applicable Rate Page" shall mean the applicable Telerate Page on which appears the London Interbank Offered Rate for deposits in Dollars at such time or, if no such page is then available, the applicable Reuters Screen Page on which such information then appears. "Assignee Lender" shall have the meaning given to that term in Subparagraph 8.05(c). "Assignment" shall have the meaning given to that term in Subparagraph 8.05(c). "Assignment Agreement" shall have the meaning given to that term in Subparagraph 8.05(c). "Assignment Effective Date" shall have, with respect to each Assignment Agreement, the meaning set forth therein. "Assignor Lender" shall have the meaning given to that term in Subparagraph 8.05(c). "Base Rate" shall mean, on any day, the greater of (a) the Prime Rate in effect on such date and (b) the Federal Funds Rate for such day plus one-half percent (0.50%). "Base Rate Borrowing" shall mean any Revolving Loan Borrowing consisting of Base Rate Loans. "Base Rate Loan" shall mean any Revolving Loan bearing interest based upon the Base Rate. "Base Rate Portion" shall mean a portion of a Term Loan Borrowing or a Term Loan bearing interest based upon the Base Rate. "Borrowers" shall have the meaning given to that term in clause (1) of the introductory paragraph hereof. "Borrowing" shall mean any Facility A Revolving Loan Borrowing, any Facility B Revolving Loan Borrowing or any Term Loan Borrowing. 2 7 "Business Day" shall mean any day on which commercial banks are not authorized or required to close in San Francisco, California, New York, New York or Chicago, Illinois, other than Saturday or Sunday, and if such Business Day is related to a Revolving Loan Borrowing consisting of LIBOR Loans or a LIBOR Portion of the Term Loan Borrowing, dealings in Dollar deposits are carried out in the London interbank market and commercial banks are open for business in London. "Capital Adequacy Requirement" shall have the meaning given to that term in Subparagraph 2.12(d). "Capital Leases" shall mean any and all lease obligations that, in accordance with GAAP, are required to be capitalized on the books of a lessee. "Change of Control" shall mean, with respect to FIL (i) the acquisition after the date hereof by any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934 (as amended, the "Exchange Act")) of (A) beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act) of fifty percent (50%) or more of the outstanding Equity Securities of FIL entitled to vote for members of the board of directors, or (B) all or substantially all of the assets of FIL; (ii) during any period of twelve (12) consecutive calendar months, individuals who are directors of FIL on the first day of such period ("Initial Directors") and any directors of FIL who are specifically approved by two-thirds of the Initial Directors and previously-approved Directors shall cease to constitute a majority of the Board of Directors of FIL before the end of such period; or (iii) any other event or condition constituting a "Change of Control" (or similar defined term) under the Subordinated Indenture shall occur or exist. "Change of Law" shall have the meaning given to that term in Subparagraph 2.12(b). "Closing Date" shall mean April 3, 2000. "Co-Agent" shall have the meaning given to that term in clause (6) of the introductory paragraph hereof. "Collateral" shall mean all property in which Agent or any Lender has a Lien to secure the Obligations. "Commitment Fee Percentage" shall mean the per annum percentage which is used to calculate the Commitment Fees. The Commitment Fee Percentage shall be determined as provided in the Pricing Grid and may change for each Pricing Period. "Commitment Fees" shall mean, collectively, the Facility A Commitment Fees and the Facility B Commitment Fees. "Commitments" shall mean, collectively, the Facility A Commitments and the Facility B Commitments. "Compliance Certificate" shall have the meaning given to that term in Subparagraph 5.01(a). "Contingent Obligation" shall mean, with respect to any Person, (a) any Guaranty Obligation of that Person; and (b) any direct or indirect obligation or liability, contingent or otherwise, of that Person (i) in respect of any Surety Instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments or (ii) in respect to any Rate Contract that is not entered into in connection with a bona fide hedging operation that provides offsetting benefits to such Person. The amount of any Contingent Obligation shall (subject, in the case of Guaranty Obligations, to the last sentence of the definition of "Guaranty Obligation") be deemed equal to the maximum reasonably anticipated liability in respect thereof, and shall, with respect to item (b)(ii) of this definition be marked to market on a current basis. 3 8 "Contractual Obligation" of any Person shall mean, any indenture, note, lease, loan agreement, security, deed of trust, mortgage, security agreement, guaranty, instrument, contract, agreement or other form of contractual obligation or undertaking to which such Person is a party or by which such Person or any of its property is bound. "Credit Documents" shall mean and include this Agreement, the Notes, the Security Documents, Lender Rate Contracts and the Agent's Fee Letter, the FIL Credit Documents, all other documents, instruments and agreements delivered to Agent or any Lender pursuant to Section III; and all other documents, instruments and agreements delivered by either Borrower or any of its Guarantors or Subsidiaries to Agent or any Lender in connection with this Agreement on or after the date of this Agreement. "Credit Event" shall mean (a) the making of any Loan, (b) the conversion of any Portion of a Term Loan Borrowing into a LIBOR Portion, (c) the selection of a new Interest Period exceeding one (1) month for any LIBOR Portion of a Term Loan Borrowing, or (d) the selection of a new Interest Period exceeding one (1) month for any LIBOR Borrowing. "Debt/EBITDA Ratio" shall mean, with respect to FIL for any period, the ratio, determined on a consolidated basis in accordance with GAAP, of: (a) The total Indebtedness of FIL and its Subsidiaries on the last day of such period; provided, however, that in computing the foregoing sum, there shall be excluded therefrom any Indebtedness to the extent the proceeds of which are (i) legally segregated from FIL's or such Subsidiaries' other assets and (ii) either (A) only held in the form of cash or cash equivalents or (B) used by FIL or its Subsidiaries for any such purpose as may be approved in advance from time to time by the Required Lenders; to (b) The EBITDA of FIL and its Subsidiaries for such period. "Default" shall mean an Event of Default or any event or circumstance not yet constituting an Event of Default which, with the giving of any notice or the lapse of any period of time or both, would become an Event of Default. "Defaulting Lender" shall mean a Lender which has failed to fund its portion of any Borrowing which it is required to fund under this Agreement and has continued in such failure for three (3) Business Days after written notice from Agent. "DII" shall mean The DII Group, Inc., a Delaware corporation. "DII Acquisition" shall mean the merger of DII with a wholly-owned Subsidiary of Borrower as a result of which the outstanding capital stock of DII shall be converted into the right to receive ordinary shares in Borrower. "Documentation Agent" shall have the meaning given to that term in clause (4) of the introductory paragraph hereof. "Dollars" and "$" shall mean, unless otherwise indicated, the lawful currency of the United States of America and, in relation to any payment under this Agreement, same day or immediately available funds. "Domestic Lending Office" shall mean, with respect to any Lender and its Base Rate Loans and Base Rate Portion, (a) initially, its office designated as such in Part B of Schedule I (or, in the case of any Lender which becomes a Lender by an assignment pursuant to Subparagraph 8.05(c), its office designated 4 9 as such in the applicable Assignment Agreement) and (b) subsequently, such other office or offices as such Lender may designate to Agent as the office at which such Lender's Base Rate Loans and Base Rate Portion will thereafter be maintained and for the account of which all payments of principal of, and interest on, such Lender's Base Rate Loans and Base Rate Portion will thereafter be made. "EBITDA" shall mean, with respect to FIL for any period, the sum, determined on a consolidated basis in accordance with GAAP, of the following: (a) The net income or net loss of FIL and its Subsidiaries for such period before provision for income taxes; plus (b) The sum (to the extent deducted in calculating net income or loss in clause (a) above) of (i) all Interest Expenses of FIL and its Subsidiaries accruing during such period, (ii) all depreciation and amortization expenses of FIL and its Subsidiaries accruing during such period and (iii) other noncash charges for such period. "Eligible Assignee" shall mean (a) a commercial bank, (b) a subsidiary, affiliate or branch of a Lender, or (c) any other financial institution that makes or purchases commercial loans in the ordinary course of business, in each case having a combined capital and surplus of at least $100,000,000. "Eligible Material Subsidiary" shall mean, at any time, any Material Subsidiary that is not then an Ineligible Material Subsidiary. "Employee Benefit Plan" shall mean any employee benefit plan within the meaning of section 3(3) of ERISA maintained or contributed to by either Borrower, any Material Subsidiary or any ERISA Affiliate, other than a Multiemployer Plan. "Environmental Laws" shall mean all the Governmental Rules relating to the protection of human health and the environment, including all Governmental Rules pertaining to the reporting, licensing, permitting, transportation, storage, disposal, investigation or remediation of emissions, discharges, releases, or threatened releases of Hazardous Materials into the air, surface water, groundwater, or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transportation or handling of Hazardous Materials. "Equity Securities" of any Person shall mean (a) all common stock, preferred stock, participations, shares, partnership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any of the foregoing. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may from time to time be amended or supplemented, including any rules or regulations issued in connection therewith. "ERISA Affiliate" shall mean any Person which is treated as a single employer with either Borrower or any Material Subsidiary under Section 414 of the IRC. "Euro-Dollar Lending Office" shall mean, with respect to any Lender and LIBOR Loans and LIBOR Portions, (a) initially, such Lender's office designated as such in Part B of Schedule I (or, in the case of any Lender which becomes a Lender by an assignment pursuant to Subparagraph 8.05(c), its office designated as such in the applicable Assignment Agreement) and (b) subsequently, such other office or offices as such Lender may designate to Agent as the office at which such Lender's LIBOR Loans and LIBOR Portions will thereafter be maintained and for the account of which all payments of principal of, and interest on, such Lender's LIBOR Loans and LIBOR Portions will thereafter be made. 5 10 "Event of Default" shall have the meaning given to that term in Paragraph 6.01. "Existing Secured Indebtedness" shall mean the secured Indebtedness existing on the Closing Date specified on Schedule 5.02(a). "Excluded Taxes" shall mean all Taxes measured by or imposed upon the overall net income of any Lender or one of its Applicable Lending Offices and all franchise taxes imposed upon any Lender, in each case imposed (i) by the jurisdiction under the laws of which such Lender or one of its Applicable Lending Offices is organized or is located, or in which its principal executive office is located, or any nation within which such jurisdiction is located or any political subdivision thereof or (ii) by reason of any connection between the jurisdiction imposing such tax and such Lender or one of its Applicable Lending Offices other than a connection arising solely from such Lender having executed, delivered or performed its obligations under, or received payment under or enforced, this Agreement or any of the other Credit Documents. "Existing FIUI Credit Agreement" shall mean the Credit Agreement dated as of October 27, 1999, among FIUI, ABN AMRO and other lending institutions, and ABN AMRO, as agent for itself and such other lending institutions. "Existing FIUI Credit Documents" shall mean the "Credit Documents" as defined in the Existing FIUI Credit Agreement. "Facility" shall mean Facility A or Facility B. "Facility A" shall mean the revolving credit facility provided to Borrowers pursuant to Subparagraph 2.01(a). "Facility A Commitment" shall mean, with respect to each Lender, the Dollar amount set forth under the caption "Facility A Commitment" opposite such Lender's name on Part A of Schedule I, or, if changed, such Dollar amount as may be set forth for such Lender in the Register. "Facility A Commitment Fees" shall have the meaning given to that term in clause (i) of Subparagraph 2.06(b). "Facility A Lender" shall mean, at any time, any Lender then having a Facility A Commitment or a Facility A Revolving Loan outstanding. "Facility A Maturity Date" shall mean April 3, 2003. "Facility A Proportionate Share" shall mean: (a) With respect to any Facility A Lender at any time prior to the termination of the Facility A Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) such Lender's Facility A Commitment at such time to (ii) the Total Facility A Commitment at such time; and (b) With respect to any Facility A Lender at any time after the termination of the Facility A Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) the aggregate principal amount of such Lender's Facility A Revolving Loans outstanding at such time to (ii) the sum of the aggregate principal amount of all Facility A Revolving Loans outstanding at such time. "Facility A Revolving Loan" shall have the meaning given to that term in clause (i) of Subparagraph 2.01(a). 6 11 "Facility A Revolving Loan Borrowing" shall mean a borrowing consisting of all the Facility A Revolving Loans of the same Type (and same Interest Period if LIBOR Loans) made by Facility A Lenders on the same date pursuant to the same Notice of Revolving Loan Borrowing. Any reference to a Facility A Revolving Loan Borrowing shall include all of the Facility A Revolving Loans constituting such Facility A Revolving Loan Borrowing. "Facility B" shall mean the revolving credit facility and term loan credit facility provided to Borrowers pursuant to Subparagraph 2.01(b) and Subparagraph 2.01(c). "Facility B Commitment" shall mean, with respect to each Lender, the Dollar amount set forth under the caption "Facility B Commitment" opposite such Lender's name on Part A of Schedule I, or, if changed, such Dollar amount as may be set forth for such Lender in the Register. "Facility B Commitment Fees" shall have the meaning given to that term in clause (ii) of Subparagraph 2.06(b). "Facility B Lender" shall mean, at any time, any Lender then having a Facility B Commitment or a Facility B Loan outstanding. "Facility B Loan" shall mean a Facility B Revolving Loan or a Term Loan. "Facility B Proportionate Share" shall mean: (a) With respect to any Facility B Lender at any time prior to the termination of the Facility B Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) such Lender's Facility B Commitment at such time to (ii) the Total Facility B Commitment at such time; and (b) With respect to any Facility B Lender at any time after the termination of the Facility B Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) the aggregate principal amount of such Lender's Facility B Loans outstanding at such time to (ii) the sum of the aggregate principal amount of all Facility B Loans outstanding at such time. "Facility B Revolving Loan" shall have the meaning given to that term in clause (i) of Subparagraph 2.01(b). "Facility B Revolving Loan Borrowing" shall mean a borrowing consisting of all the Facility B Revolving Loans of the same Type (and same Interest Period if LIBOR Loans) made by Facility B Lenders on the same date pursuant to the same Notice of Revolving Loan Borrowing. Any reference to a Facility B Revolving Loan Borrowing shall include all of the Facility B Revolving Loans constituting such Facility B Revolving Loan Borrowing. "Facility B Revolving Loan Maturity Date" shall mean the date 364 days after the date of this Agreement. "Federal Funds Rate" shall mean, for any day, the rate per annum set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor publication, "H.15 (519)") for such day opposite the caption "Federal Funds (Effective)". If on any relevant day, such rate is not yet published in H.15 (519), the rate for such day shall be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor publication, the "Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds Effective Rate". If on any relevant day, such rate is not yet published in either H.15 (519) or the Composite 3:30 p.m. Quotations, the rate for such day shall be the arithmetic means, as 7 12 determined by Agent, of the rates quoted to Agent for such day by three (3) Federal funds brokers of recognized standing selected by Agent for overnight federal funds transactions. "Federal Reserve Board" shall mean the Board of Governors of the Federal Reserve System. "FIL" shall mean Flextronics International Ltd., a Singapore corporation. "FIL Credit Agreement" shall mean the Credit Agreement dated the date hereof among FIL, the designated borrowers from time to time party thereto, each of the financial institutions from time to time party thereto, ABN AMRO Bank N.V., as agent, Fleet National Bank, as documentation agent, Bank of America, National Association and Citicorp USA, Inc., as managing agents, and The Bank of Nova Scotia, as co-agent, as amended or restated from time to time. "FIL Credit Documents" shall mean the FIL Credit Agreement and all agreements, documents and instruments delivered to the agent or any Lender under the FIL Credit Agreement. "FIUI" shall have the meaning given to that term in clause (1) of the introductory paragraph hereof. "Financial Statements" shall mean, with respect to any accounting period for any Person, statements of income, shareholders' equity and cash flows of such Person for such period, and a balance sheet of such Person as of the end of such period, setting forth in each case in comparative form figures for the corresponding period in the preceding fiscal year if such period is less than a full fiscal year or, if such period is a full fiscal year, corresponding figures from the preceding annual audit, all prepared in reasonable detail and in accordance with GAAP. "Foreign Plan" shall mean any employee benefit plan maintained by either Borrower or any of its Subsidiaries which is mandated or governed by any Governmental Rule of any Governmental Authority other than the United States. "Foreign Subsidiary" shall mean any Subsidiary of FIL that is organized under the laws of a jurisdiction other than the United States or a state thereof. "GAAP" shall mean generally accepted accounting principles and practices as in effect in the United States of America from time to time, consistently applied, subject to Paragraph 1.02 hereof. "Governmental Authority" shall mean any domestic or foreign national, state or local government, any political subdivision thereof, any department, agency, authority or bureau of any of the foregoing, or any other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including, without limitation, the Federal Deposit Insurance Corporation, the Federal Reserve Board, the Comptroller of the Currency, any central bank or any comparable authority. "Governmental Charges" shall mean, with respect to any Person, all levies, assessments, fees, claims or other charges imposed by any Governmental Authority upon such Person or any of its property or otherwise payable by such Person. "Governmental Rule" shall mean any law, rule, regulation, ordinance, order, code interpretation, judgment, decree, directive, guidelines, policy or similar form of decision of any Governmental Authority. "Guarantor" shall mean each of the Borrowers and Material Subsidiaries that has executed the Guaranty or otherwise become a party thereto. "Guaranty" shall have the meaning given to that term in Subparagraph 2.15(a). 8 13 "Guaranty Obligation" shall mean, with respect to any Person, any direct or indirect liability of that Person with respect to any indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person, whether or not contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, or (b) to advance or provide funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, or (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof. The amount of any Guaranty Obligation shall be deemed equal to the stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof. "Hazardous Materials" shall mean all pollutants, contaminants and other materials, substances and wastes which are hazardous, toxic, caustic, harmful or dangerous to human health or the environment, including petroleum and petroleum and petroleum products and byproducts, radioactive materials, asbestos and polychlorinated biphenyls. "Indebtedness" of any Person shall mean, without duplication, the following (each, unless otherwise noted, calculated in accordance with GAAP): (a) All obligations of such Person evidenced by notes, bonds, debentures or other similar instruments and all other obligations of such Person for borrowed money (including obligations to repurchase receivables and other assets sold with recourse); (b) All obligations of such Person for the deferred purchase price of property or services (including obligations under letters of credit and other credit facilities which secure or finance such purchase price, and the capitalized amount reported for income tax purposes with respect to obligations under "synthetic" leases); (c) All obligations of such Person under conditional sale or other title retention agreements with respect to property acquired by such Person (to the extent of the value of such property if the rights and remedies of the seller or lender under such agreement in the event of default are limited solely to repossession or sale of such property); (d) All obligations of such Person as lessee under or with respect to Capital Leases; (e) All Contingent Obligations of such Person; and (f) All obligations of other Persons of the types described in clauses (a) - (f) above to the extent secured by (or for which any holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien in any property (including accounts and contract rights) of such Person, even though such Person has not assumed or become liable for the payment of such obligations. "Ineligible Material Subsidiary" shall mean, at any time, any Material Subsidiary (a) that is then prohibited by any applicable Governmental Rule from acting as a Guarantor under the Guaranty, (b) that then would incur, or would cause FIL or either Borrower to incur, a significant increase in its tax liabilities or similar liabilities or obligations as a result of acting as a Guarantor under the Guaranty or (c) that is a Foreign Subsidiary as to which the representations and warranties set forth in Paragraph 4.01(r) would not be true and correct were it to execute the Guaranty. 9 14 "Interest Expenses" shall mean, with respect to any Person for any period, the sum, determined on a consolidated basis in accordance with GAAP, of (a) all interest expenses of such Person during such period (including interest attributable to Capital Leases) plus (b) all fees in respect of outstanding letters of credit paid, accrued or scheduled for payment by such Person during such period. "Interest Period" shall mean, with respect to any LIBOR Borrowing or any LIBOR Portion of the Term Loan Borrowing, the time period selected by the applicable Borrower pursuant to Subparagraph 2.02(a) or Subparagraph 2.02(b) which commences on the date of such Borrowing, or the effective date of any conversion of a Base Rate Portion to a LIBOR Portion, and ends on the last day of such time period, and thereafter, each subsequent time period selected by the applicable Borrower pursuant to clause (ii) of Subparagraph 2.03(b) which commences on the last day of the immediately preceding time period and ends on the last day of that time period. "Investment" of any Person shall mean any loan or advance of funds by such Person to any other Person (other than advances to employees of such Person for moving and travel expenses, drawing accounts and similar expenditures in the ordinary course of business), any purchase or other acquisition of any Equity Securities or Indebtedness of any other Person, any capital contribution by such Person to or any other investment by such Person in any other Person (including any Guaranty Obligations of such Person and any indebtedness of such Person of the type described in clause (h) of the definition of "Indebtedness" on behalf of any other Person); provided, however, that Investments shall not include (a) accounts receivable or other indebtedness owed by customers of such Person which are current assets and arose from sales of inventory in the ordinary course of such Person's business or (b) prepaid expenses of such Person incurred and prepaid in the ordinary course of business. "IRC" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Lenders" shall have the meaning given to that term in clause (2) of the introductory paragraph hereof. "Lender Rate Contract" shall mean any Rate Contract entered into by either Borrower or its Subsidiaries with a Lender or its Affiliates as permitted by this Agreement. "LIBO Rate" shall mean, with respect to any Interest Period for any LIBOR Borrowing or any LIBOR Portion of the Term Loan Borrowing, a rate per annum equal to the quotient (rounded upward if necessary to the nearest 1/100 of one percent) of (a) the arithmetic mean (rounded upward if necessary to the nearest 1/16 of one percent) of the rates per annum appearing on the Applicable Rate Page for Dollars on the second Business Day prior to the first day of such Interest Period at or about 11:00 A.M. (London time) (for delivery of Dollars on the first day of such Interest Period) for a term comparable to such Interest Period, divided by (b) one minus any applicable Reserve Requirement in effect from time to time. If for any reason rates are not available as provided in clause (a) of the preceding sentence, the rate to be used in clause (a) shall be, at the Agent's discretion, (i) the rate per annum at which deposits in Dollars are offered to Agent in the London interbank market or (ii) the rate at which deposits in Dollars are offered to Agent in, or by Agent to major banks in, any offshore interbank market selected by Agent, in each case on the second Business Day prior to the commencement of such Interest Period at or about 10:00 A.M. (New York time) (for delivery on the first day of such Interest Period) for a term comparable to such Interest Period and in an amount approximately equal to the amount of the Loan to be made or funded by Agent as part of such Borrowing or the Portion to be made or funded by Agent as part of the Term Loan Borrowing, as the case may be. The LIBO Rate shall be adjusted automatically as to all LIBOR Loans and LIBOR Portions outstanding as of the effective date of any change in the Reserve Requirement. "LIBOR Borrowing" shall mean any Revolving Loan Borrowing consisting of LIBOR Loans. "LIBOR Loan" shall mean any Revolving Loan or Term Loan bearing interest based upon the LIBO Rate. 10 15 "LIBOR Portion" shall mean a portion of the Term Loan Borrowing bearing interest based upon the LIBO Rate. "Lien" shall mean, with respect to any property, any security interest, mortgage, pledge, lien, charge or other encumbrance in, of, or on such property or the income therefrom, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, Capital Lease or other title retention agreement, or any agreement to provide any of the foregoing. "Loan" shall mean a Revolving Loan or Term Loan. "Loan Account" shall have the meaning given to that term in Subparagraph 2.09(a). "Managing Agents" shall have the meaning given to that term in clause (5) of the introductory paragraph hereof. "Margin Stock" shall have the meaning given to that term in Regulation U issued by the Federal Reserve Board. "Material Adverse Effect" shall mean a material adverse effect on (a) the business, assets, operations or financial condition of FIL and its Subsidiaries, taken as a whole, or either Borrower and its Subsidiaries, taken as a whole; (b) the ability of either Borrower to pay or perform its Obligations in accordance with the terms of this Agreement and the other Credit Documents or the ability of FIL to pay or perform its obligations in accordance with the terms of the FIL Credit Documents; (c) the ability of the Guarantors (taken as a whole) to pay or perform the Obligations in accordance with the terms of this Agreement and the other Credit Documents; (d) the rights and remedies of Agent or any Lender under this Agreement, the other Credit Documents or any related document, instrument or agreement; or (e) the value of the Collateral, Agent's or any Lender's security interest in the Collateral or the perfection or priority of such security interests. "Material Subsidiary" shall mean, at any time during any fiscal year of FIL, any Subsidiary of FIL that (i) (A) had revenues during the immediately preceding fiscal year equal to or greater than five percent (5.0%) of the consolidated total revenues of FIL and all of its Subsidiaries during such preceding year or (B) held assets, excluding investments in Subsidiaries, on the last day of the immediately preceding fiscal year equal to or greater than ten percent (10%) of the consolidated total assets of FIL and all of its Subsidiaries on such date, in each case as set forth or reflected in the audited Financial Statements provided pursuant to clause (i) of Subparagraph 5.01(a) hereof or (ii) with respect to any Subsidiary added or created during such year, (A) had revenues, determined on a pro forma basis as of the most recent twelve months for which financial statements are available, greater than five percent (5%) of the consolidated total revenues of FIL and all of its Subsidiaries during such preceding year or (B) held assets, excluding investments in Subsidiaries, on the last day of the immediately preceding month equal to or greater than ten percent (10%) of the consolidated total assets of FIL and all of its Subsidiaries on such date of the consolidated total revenues of FIL and its Subsidiaries (including such added or created Subsidiary or Subsidiaries) determined on a pro forma basis during such year. "maturity" shall mean, with respect to any Loan, interest, fee or other amount payable by either Borrower under this Agreement or the other Credit Documents, the date such Loan, interest, fee or other amount becomes due, whether upon the stated maturity or due date, upon acceleration or otherwise. "Moody's" shall mean Moody's Investors Service, Inc. and any successor thereto that is a nationally recognized rating agency. "Multiemployer Plan" shall mean any multiemployer plan within the meaning of section 3(37) of ERISA maintained or contributed to by FIL, either Borrower, any Material Subsidiary or any ERISA Affiliate. 11 16 "Non-Excluded Taxes" shall mean all Taxes other than Excluded Taxes. "Note" shall mean a Revolving Loan Note or Term Loan Note. "Notice of Borrowing" shall mean a Notice of Revolving Loan Borrowing or the Notice of Term Loan Borrowing. "Notice of Interest Period Selection" shall have the meaning given to that term in clause (ii) of Subparagraph 2.03(b). "Notice of Revolving Loan Borrowing" shall have the meaning given to that term in Subparagraph 2.02(a). "Notice of Term Loan Borrowing" shall have the meaning given to that term in Subparagraph 2.02(b). "Notice of Term Loan Conversion" shall have the meaning given to that term in clause (iii) of Subparagraph 2.03(b). "Obligations" shall mean and include all loans, advances, debts, liabilities, and obligations, howsoever arising, owed by either Borrower individually or both of the Borrowers jointly and severally to Agent or any Lender of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising pursuant to the terms of this Agreement or any of the other Credit Documents, including all interest, fees, charges, expenses, attorneys' fees and accountants' fees chargeable to Borrowers or payable by Borrowers thereunder. "Participant" shall have the meaning given to that term in Subparagraph 8.05(b). "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any successor thereto. "Permitted Indebtedness" shall have the meaning given to that term in Subparagraph 5.02(a). "Permitted Liens" shall have the meaning given to that term in Subparagraph 5.02(b). "Person" shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, an unincorporated association, a limited liability company, a joint venture, a trust or other entity or a Governmental Authority. "Pledge Agreement" shall have the meaning given to that term in Subparagraph 2.15(a). "Portion" shall mean a portion of the principal amount of the Term Loan Borrowing or any Term Loan. The Term Loan Borrowing shall consist of one or more Portions, and each Term Loan comprising the Term Loan Borrowing shall consist of the same number of Portions, with each such Loan Portion corresponding pro rata to a Borrowing Portion. Any reference to a Portion of the Term Loan Borrowing shall include the corresponding Portion of each Term Loan comprising the Term Loan Borrowing. "Pricing Grid" shall mean Schedule II. "Pricing Period" shall mean (a) the period commencing on the date of this Agreement and ending 45 days after the quarter ended June 30, 2000 and (b) thereafter each period commencing 45 days after the last day of the immediately preceding calendar quarter and ending 45 days after the last day of the next applicable calendar quarter, as explained in the Pricing Grid. 12 17 "Pricing Period Level" shall mean either a Level 1 Period, Level 2 Period, Level 3 Period, Level 4 Period, Level 5 Period or Level 6 Period, which shall be determined based upon FIL's corresponding Debt/EBITDA Ratio for the consecutive four-quarter period ending on the last day of the immediately preceding quarter as set forth in the Pricing Grid; provided that, Level 2 Period pricing, as set forth in the Pricing Grid, will apply during any Pricing Period (other than FIL's first Pricing Period) in which FIL's senior unsecured long-term debt rating from S&P or Moody's is equal to or better than either BBB- or Baa3. Such pricing adjustment (if any) occurring as a result of such debt rating will take place when FIL notifies Agent that such debt rating has been achieved, and will continue until such debt rating drops below BBB- or Baa3 in which case the pricing will be calculated as set forth in the Pricing Grid. "Prime Rate" shall mean the per annum rate publicly announced by ABN AMRO from time to time at its Chicago office as its "prime rate." The Prime Rate is determined by ABN AMRO from time to time as a means of pricing credit extensions to some customers and is neither directly tied to any external rate of interest or index nor necessarily the lowest rate of interest charged by ABN AMRO at any given time for any particular class of customers or credit extensions. Any change in the Base Rate resulting from a change in the Prime Rate shall become effective on the Business Day on which each change in the Prime Rate occurs. "Proportionate Share" shall mean: (a) With respect to any Lender and Facility A at any time, such Lender's Facility A Proportionate Share at such time; (b) With respect to any Lender and Facility B at any time, such Lender's Facility B Proportionate Share at such time; (c) With respect to any Lender without reference to either Facility: (i) At any time prior to the termination of the Facility B Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) the sum of such Lender's Facility A Commitment and Facility B Commitment at such time to (ii) the sum of the Total Facility A Commitment and Total Facility B Commitment at such time; (ii) With respect to any Lender at any time after the termination of the Facility B Commitments and prior to the termination of the Facility A Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) the sum of such Lender's Facility A Commitment and the principal amount of such Lender's Term Loan outstanding at such time to (ii) the sum of the Total Facility A Commitment and the aggregate principal amount of all Term Loans outstanding at such time; and (iii) With respect to any Lender at any time after the termination of both the Facility A Commitments and the Facility B Commitments, the ratio (expressed as a percentage rounded to the eighth digit to the right of the decimal point) of (i) the aggregate principal amount of all of such Lender's Loans outstanding at such time to (ii) the aggregate principal amount of all Lenders' Loans outstanding at such time. "Rate Contracts" shall mean swap agreements (as that term is defined in Section 101 of the Federal Bankruptcy Reform Act of 1978, as amended) and any other agreements or arrangements designed to provide protection against fluctuations in interest rates, currency exchange rates or commodity prices. "Register" shall have the meaning given to that term in Subparagraph 8.05(d). 13 18 "Reportable Event" shall have the meaning given to that term in ERISA and applicable regulations thereunder. "Required Lenders" shall mean, at any time, Lenders whose Proportionate Shares equal or exceed fifty-one percent (51%) at such time, except at any time any Lender is a Defaulting Lender. (For the purposes of determining "Required Lenders" at any time any Lender is a Defaulting Lender, the "Proportionate Shares" of non-defaulting Lenders shall be determined excluding from the Total Facility A Commitment, the Total Facility B Commitment and the aggregate principal amount of all Term Loans the aggregate amounts of the Defaulting Lenders' Facility A Commitments, Facility B Commitments and Term Loans; and "Required Lenders" shall mean non-defaulting Lenders whose Proportionate Shares as so determined then equal or exceed fifty-one percent (51%).) "Requirement of Law" applicable to any Person shall mean (a) the Articles or Certificate of Incorporation and By-laws, Partnership Agreement or other organizational or governing documents of such Person, (b) any Governmental Rule applicable to such Person, (c) any license, permit, approval or other authorization granted by any Governmental Authority to or for the benefit of such Person or (d) any judgment, decision or determination of any Governmental Authority or arbitrator, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Reserve Requirement" shall mean, with respect to any day in an Interest Period for any Revolving Loan Borrowing consisting of LIBOR Loans or any LIBOR Portion of the Term Loan Borrowing, the aggregate of the reserve requirement rates (expressed as a decimal) in effect on such day for eurodollar funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Federal Reserve Board) maintained by a member bank of the Federal Reserve System. As used herein, the term "reserve requirement" shall include, without limitation, any basic, supplemental or emergency reserve requirements imposed on any Lender by any Governmental Authority. "Revolving Loan" shall mean a Facility A Revolving Loan or a Facility B Revolving Loan. "Revolving Loan Borrowing" shall mean a Facility A Revolving Loan Borrowing or a Facility B Revolving Loan Borrowing. "Revolving Loan Note" shall have the meaning given to that term in Subparagraph 2.09(b). "S&P" shall mean Standard & Poor's Rating Services, and any successor thereto that is a nationally recognized rating agency. "Security Documents" shall mean and include the Guaranty, the Pledge Agreements and all other instruments, agreements, certificates, opinions and documents (including Uniform Commercial Code financing statements) delivered to Agent or any Lender in connection with any Collateral or to secure the Obligations. "Solvent" shall mean, with respect to any Person on any date, that on such date (a) the fair value of the property of such Person is greater than the fair value of the liabilities (including contingent, subordinated, matured and unliquidated liabilities) of such Person, (b) the present fair saleable value of the assets of such Person is greater than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature and (d) such Person is not engaged in or about to engage in business or transactions for which such Person's property would constitute an unreasonably small capital. "Subordinated Indenture" shall mean the Indenture dated as of October 15, 1997 by and between FIL and State Street Bank and Trust Company of California, N.A., as trustee, and any other document, instrument or agreement evidencing the subordinating indebtedness thereunder. 14 19 "Subsidiary" of any Person shall mean (a) any corporation of which more than 50% of the issued and outstanding Equity Securities having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries, (b) any partnership, joint venture, limited liability company or other association of which more than 50% of the equity interest having the power to vote, direct or control the management of such partnership, joint venture or other association is at the time owned and controlled by such Person, by such Person and one or more of the other Subsidiaries or by one or more of such Person's other Subsidiaries or (c) any other Person included in the Financial Statements of such Person on a consolidated basis. "Surety Instruments" shall mean all letters of credit (including standby and commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments. "Taxes" shall mean all present and future income, stamp, documentary and other taxes and duties, and all other levies, imposts, charges, fees, deductions and withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority. "Term Loan" shall have the meaning given to that term in clause (ii) of Subparagraph 2.01(c). "Term Loan Borrowing" shall mean a borrowing consisting of all the Term Loans of the same Type (and same Interest Period if LIBOR Loans) made by Facility B Lenders on the Facility B Revolving Loan Maturity Date pursuant to the Notice of Term Loan Borrowing. Any reference to a Term Loan Borrowing shall include all the Term Loans constituting such Term Loan Borrowing. (One or more Term Loan Borrowings may be made on the Facility B Revolving Loan Maturity Date.) "Term Loan Maturity Date" shall mean the date that is one (1) year after the Facility B Revolving Loan Maturity Date. "Term Loan Note" shall have the meaning given to that term in Subparagraph 2.09(b). "Total Facility A Commitment" shall mean, at any time, the sum at such time of Facility A Lenders' Facility A Commitments. The Total Facility A Commitment on the date of this Agreement is One Hundred Seventy Five Million Dollars ($175,000,000). "Total Facility B Commitment" shall mean, at any time, the sum at such time of Facility B Lenders' Facility B Commitments. The Total Facility B Commitment on the date of this Agreement is One Hundred Seventy Five Million Dollars ($175,000,000). "Type" shall mean, with respect to any Revolving Loan, any Revolving Loan Borrowing or any Portion of any Term Loan or the Term Loan Borrowing at any time, the classification of such Loan, Borrowing or Portion by the type of interest rate it then bears, whether an interest rate based upon the Base Rate or LIBO Rate. "Unused" shall mean (a) With respect to the Facility A Commitment at any time, the remainder of (i) the Total Facility A Commitment at such time minus (ii) the aggregate principal amount of all Facility A Revolving Loans outstanding at such time; and (b) With respect to the Facility B Commitment at any time, the remainder of (i) the Total Facility B Commitment at such time minus (ii) the aggregate principal amount of all Facility B Revolving Loans outstanding at such time. 15 20 1.02. GAAP. Unless otherwise indicated in this Agreement or any other Credit Document, all accounting terms used in this Agreement or any other Credit Document shall be construed, and all accounting and financial computations hereunder or thereunder shall be computed, in accordance with GAAP. If GAAP changes during the term of this Agreement such that any covenants contained herein would then be calculated in a different manner or with different components, Borrowers, Lenders and Agent agree to negotiate in good faith to amend this Agreement in such respects as are necessary to conform those covenants as criteria for evaluating FIL's financial condition to substantially the same criteria as were effective prior to such change in GAAP; provided, however, that, until Borrowers, Lenders and Agent so amend this Agreement, all such covenants shall be calculated in accordance with GAAP as in effect immediately prior to such change. Any calculations performed under this Credit Agreement that are based on the total assets or total revenues of FIL and its Subsidiaries and which contemplate the completion of the DII Acquisition shall be determined based on the March 31 fiscal year end consolidated pro forma financial statements of FIL giving effect to the DII Acquisition for such purposes; except with respect to the definition of "Material Subsidiary" herein, which shall be calculated based on a nine (9) month pro forma basis. 1.03. Headings. Headings in this Agreement and each of the other Credit Documents are for convenience of reference only and are not part of the substance hereof or thereof. 1.04. Plural Terms. All terms defined in this Agreement or any other Credit Document in the singular form shall have comparable meanings when used in the plural form and vice versa. 1.05. Governing Law. Unless otherwise expressly provided in any Credit Document, this Agreement and each of the other Credit Documents shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of law rules. 1.06. English Language. This Agreement and the other Credit Documents are executed and shall be construed in the English language. All instruments, agreements, certificates, opinions and other documents to be furnished or communications to be given or made under this Agreement or any other Credit Document shall be in the English language. 1.07. Construction. This Agreement is the result of negotiations among, and has been reviewed by, Borrowers, each Lender, Agent and their respective counsel. Accordingly, this Agreement shall be deemed to be the product of all parties hereto, and no ambiguity shall be construed in favor of or against either Borrower, any Lender or Agent. 1.08. Entire Agreement. This Agreement and each of the other Credit Documents, taken together, constitute and contain the entire agreement of Borrowers, Lenders and Agent and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written or oral, respecting the subject matter hereof (excluding the Agent's Fee Letter but including the commitment letter dated as of February 28, 2000 between FIL and ABN AMRO). 1.09. Calculation of Interest and Fees. All calculations of interest and fees under this Agreement and the other Credit Documents for any period (a) shall include the first day of such period and exclude the last day of such period and (b) shall be calculated on the basis of a year of 360 days for actual days elapsed, except that during any period any Loan or Portion bears interest based upon the Prime Rate, such interest shall be calculated on the basis of a year of 365 or 366 days, as appropriate, for actual days elapsed. 1.10. References. (a) References in this Agreement to "Recitals," "Sections," "Paragraphs," "Subparagraphs," "Exhibits" and "Schedules" are to recitals, sections, paragraphs, subparagraphs, exhibits and schedules therein and thereto unless otherwise indicated. (b) References in this Agreement or any other Credit Document to any document, instrument or agreement (i) shall include all exhibits, schedules and other attachments thereto, (ii) shall include all documents, instruments or agreements issued or executed in replacement thereof if such replacement is 16 21 permitted hereby, and (iii) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified and supplemented from time to time and in effect at any given time if such amendment, modification or supplement is permitted hereby. (c) References in this Agreement or any other Credit Document to any Governmental Rule (i) shall include any successor Governmental Rule, (ii) shall include all rules and regulations promulgated under such Governmental Rule (or any successor Governmental Rule), and (iii) shall mean such Governmental Rule (or successor Governmental Rule) and such rules and regulations, as amended, modified, codified or reenacted from time to time and in effect at any given time. (d) References in this Agreement or any other Credit Document to any Person in a particular capacity (i) shall include any permitted successors to and assigns of such Person in that capacity and (ii) shall exclude such Person individually or in any other capacity. 1.11. Other Interpretive Provisions. The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement or any other Credit Document shall refer to this Agreement or such other Credit Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Credit Document, as the case may be. The words "include" and "including" and words of similar import when used in this Agreement or any other Credit Document shall not be construed to be limiting or exclusive. In the event of any inconsistency between the terms of this Agreement and the terms of any other Credit Document, the terms of this Agreement shall govern. SECTION II. CREDIT FACILITIES. 2.01. Loans. (a) Facility A Revolving Loans. (i) Availability. Subject to the terms and conditions of this Agreement (including the amount limitations set forth in Paragraph 2.05), each Facility A Lender severally agrees to advance to Borrowers from time to time during the period beginning on the Closing Date and ending on the Facility A Revolving Loan Maturity Date its pro rata share of such revolving loans in Dollars as Borrowers may request under Facility A (individually, a "Facility A Revolving Loan"); provided, however, that no Lender shall have any obligation to make a requested Facility A Revolving Loan if, after giving effect to such Loan, the aggregate principal amount of all such Lender's Facility A Revolving Loans then outstanding would exceed such Lender's Facility A Commitment at such time. All Facility A Revolving Loans shall be made on a pro rata basis by Facility A Lenders in accordance with their respective Facility A Proportionate Shares, with each Facility A Revolving Loan Borrowing to be comprised of a Facility A Revolving Loan made by each Facility A Lender equal to such Facility A Lender's Proportionate Share of such Facility A Revolving Loan Borrowing. Except as otherwise provided herein, Borrowers may borrow, repay and reborrow Facility A Revolving Loans until the Facility A Revolving Loan Maturity Date. (ii) Scheduled Payments. Borrowers shall repay the principal amount of the Facility A Revolving Loans in full on the Facility A Revolving Loan Maturity Date. Borrowers shall pay accrued interest on the unpaid principal amount of each Facility A Revolving Loan in arrears (A) in the case of a Base Rate Loan, on the last day of the month of each March, June, September and December, (B) in the case of a LIBOR Loan, on the last day of each Interest Period therefor (and, if any such Interest Period is longer than three (3) months, every three (3) months); and (C) in the case of all Facility A Revolving Loans, upon prepayment (to the extent thereof) and at maturity. (b) Facility B Revolving Loans. (i) Availability. Subject to the terms and conditions of this Agreement (including the amount limitations set forth in Paragraph 2.05), each Facility B Lender severally agrees to 17 22 advance to Borrowers from time to time during the period beginning on the Closing Date and ending on the Facility B Revolving Loan Maturity Date its pro rata share of such revolving loans in Dollars as Borrowers may request under Facility B (individually, a "Facility B Revolving Loan"); provided, however, that no Facility B Lender shall have any obligation to make a requested Facility B Revolving Loan if, after giving effect to such Loan, the aggregate principal amount of all such Lender's Facility B Revolving Loans then outstanding would exceed such Lender's Facility B Commitment at such time. All Facility B Revolving Loans shall be made on a pro rata basis by Facility B Lenders in accordance with their respective Facility B Proportionate Shares, with each Facility B Revolving Loan Borrowing to be comprised of a Facility B Revolving Loan made by each Facility B Lender equal to such Facility B Lender's Proportionate Share of such Facility B Revolving Loan Borrowing. Except as otherwise provided herein, Borrowers may borrow, repay and reborrow Facility B Revolving Loans until the Facility B Revolving Loan Maturity Date. (ii) Scheduled Payments. Borrowers shall repay the principal amount of the Facility B Revolving Loans in full on the Facility B Revolving Loan Maturity Date. Such repayment may be effected with the proceeds of the Term Loan Borrowing pursuant to Subparagraph 2.02(b). Borrowers shall pay accrued interest on the unpaid principal amount of each Facility B Revolving Loan in arrears (A) in the case of a Base Rate Loan, on the last day of the month of each March, June, September and December, (B) in the case of a LIBOR Loan, on the last day of each Interest Period therefor (and, if any such Interest Period is longer than three (3) months, every three (3) months); and (C) in the case of all Facility B Revolving Loans, upon prepayment (to the extent thereof) and at maturity. (c) Term Loan. (i) Availability. Subject to the terms and conditions of this Agreement (including the amount limitations set forth in Paragraph 2.05), each Facility B Lender severally agrees to advance, upon the request of Borrowers pursuant to Subparagraph 2.02(b), to Borrowers on the Facility B Revolving Loan Maturity Date its pro rata share of such term loans in Dollars as Borrowers shall request under Facility B (individually, a "Term Loan"); provided, however, that no Lender shall have any obligation to make requested Term Loans if the aggregate principal amount thereof would exceed such Lender's Facility B Commitment on the Facility B Revolving Loan Maturity Date. The Term Loans shall be made on a pro rata basis by Facility B Lenders in accordance with their respective Facility B Proportionate Shares, with each Term Loan Borrowing to be comprised of a Term Loan by each Facility B Lender equal to such Facility B Lender's Facility B Proportionate Share of such Term Loan Borrowing. Borrowers may not reborrow the principal amount of a Term Loan after repayment or prepayment thereof. (ii) Scheduled Payments. Borrowers shall repay the principal amount of the Term Loans in full in a single installment on the Term Loan Maturity Date. Borrowers shall pay accrued interest on the unpaid principal amount of each Term Loan in arrears (A) in the case of a Base Rate Portion, on the last day of the month of each March, June, September and December, (B) in the case of a LIBOR Portion, on the last day of each Interest Period (and if any such Interest Period is equal to or longer than three (3) months, every three (3) months); and (C) in the case of all Term Loans, upon prepayment (to the extent thereof) and at maturity. 2.02. Notice of Borrowing. (a) Notice of Revolving Loan Borrowing. Borrowers shall request each Revolving Loan Borrowing by delivering to Agent an irrevocable written notice in the form of Exhibit A, appropriately completed (a "Notice of Revolving Loan Borrowing"), which specifies, among other things: (i) Whether such Revolving Loan Borrowing is a Borrowing under Facility A or Facility B; 18 23 (ii) The principal amount of such Revolving Loan Borrowing, which shall be in the minimum amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof; (iii) Whether such requested Revolving Loan Borrowing is to consist of Base Rate Loans or LIBOR Loans; (iv) If such Revolving Loan Borrowing is to consist of LIBOR Loans, the initial Interest Period selected by the applicable Borrower for such Revolving Loan Borrowing in accordance with Subparagraph 2.03(b)(i); (v) The date of such Borrowing, which shall be a Business Day; and (vi) The applicable Borrower for such Revolving Loan Borrowing. Borrowers shall give each Notice of Revolving Loan Borrowing to Agent at least three (3) Business Days before the date of the requested Revolving Loan Borrowing in the case of a Revolving Loan Borrowing consisting of LIBOR Loans and at least one (1) Business Day before the date of the requested Revolving Loan Borrowing in the case of a Revolving Loan Borrowing consisting of Base Rate Loans. Each Notice of Revolving Loan Borrowing shall be signed by the applicable Borrower and delivered by first-class mail or facsimile to Agent at the office or facsimile number and during the hours specified in Paragraph 8.01; provided, however, that Borrowers shall promptly deliver to Agent the original of any Notice of Revolving Loan Borrowing initially delivered by facsimile. Agent shall promptly notify each Lender of the contents of each Notice of Revolving Loan Borrowing. (b) Notice of Term Loan Borrowing. Borrowers shall request each Term Loan Borrowing by delivering to Agent an irrevocable written notice in the form of Exhibit B, appropriately completed (a "Notice of Term Loan Borrowing"), which specifies, among other things: (i) The principal amount of each Term Loan Borrowing, which shall be in the minimum amount of $5,000,000 or an integral multiple of approximately $1,000,000 in excess thereof; (ii) (A) The principal portion of such Term Loan Borrowing which is to be a Base Rate Portion and (2) the principal portion(s) of such Term Loan Borrowing which is (are) to be a LIBOR Portion(s); (iii) If any Portion of such Term Loan Borrowing is initially to be a LIBOR Portion, the initial Interest Period selected by the applicable Borrower for each such Portion in accordance with Subparagraph 2.03(b)(i) ; and (iv) The applicable Borrower for each Term Loan Borrowing. Borrowers shall give the Notice of Term Loan Borrowing to Agent at least three (3) Business Days before the Facility B Revolving Loan Maturity Date in the case of a Term Loan Borrowing if any Portion of the Term Loan Borrowing is initially to be a LIBOR Portion and at least one (1) Business Day before the Facility B Revolving Loan Maturity Date in the case of a Term Loan Borrowing if the only Portion of the Term Loan Borrowing is initially to be a Base Rate Portion. The Notice of Term Loan Borrowing shall be signed by the applicable Borrower(s) and delivered by first-class mail or facsimile to Agent at the office or facsimile number and during the hours specified in Paragraph 8.01; provided, however, that Borrowers shall promptly deliver to Agent the original of the Notice of Term Loan Borrowing if initially delivered by facsimile. Agent shall promptly notify each Lender of the contents of the Notice of Term Loan Borrowing. 19 24 2.03. Interest. (a) Interest Rates. Borrowers shall pay interest on the unpaid principal amount of each Loan from the date of such Loan until the maturity thereof, at one of the following rates per annum: (i) During such periods as any Revolving Loan is a Base Rate Loan or any Portion of such Term Loan is a Base Rate Portion, at a rate per annum on such Loan or Portion equal to the Base Rate plus the Applicable Margin therefor, such rate to change from time to time as the Applicable Margin or Base Rate shall change; and (ii) During such periods as any Revolving Loan is a LIBOR Loan or any Portion of such Term Loan is a LIBOR Portion, at a rate per annum on such Loan or Portion equal at all times during each Interest Period for such Loan or Portion to the LIBO Rate for such Interest Period plus the Applicable Margin therefor, such rate to change from time to time as the Applicable Margin shall change. All Revolving Loans in each Revolving Loan Borrowing shall, at any given time prior to maturity, bear interest at one, and only one, of the above rates. Each LIBOR Loan Borrowing or LIBOR Portion of the Term Loan Borrowing shall be in a minimum amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof. (b) Terms. (i) LIBOR Loan and LIBOR Portion Interest Periods. The initial and each subsequent Interest Period selected by a Borrower for any Revolving Loan Borrowing consisting of LIBOR Loans or any LIBOR Portion of the Term Loan Borrowing shall be one (1), two (2), three (3) or six (6) months; provided, however, that (A) any Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such next Business Day falls in another calendar month, in which case such Interest Period shall end on the immediately preceding Business Day; (B) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; (C) no Interest Period for a Facility A Revolving Loan Borrowing shall end after the Facility A Revolving Loan Maturity Date; (D) no Interest Period of a Facility B Revolving Loan Borrowing shall end after the Facility B Revolving Loan Maturity Date, and (E) no Interest Period for a LIBOR Portion of a Term Loan Borrowing shall end after the Term Loan Maturity Date. (ii) Notice of Interest Period Selection. The applicable Borrower shall notify Agent by an irrevocable written notice in a form acceptable to Agent, appropriately completed (a "Notice of Interest Period Selection"), at least three (3) Business Days prior to the last day of each Interest Period for a Revolving Loan Borrowing consisting of LIBOR Loans or any LIBOR Portion of a Term Loan Borrowing of the Interest Period selected by such Borrower for the next succeeding Interest Period for such Borrowing or Portion. Each Notice of Interest Period Selection shall be given by first-class mail or facsimile to the office or the facsimile number and during the hours specified in Paragraph 8.01; provided, however, that the applicable Borrower shall promptly deliver to Agent the original of any Notice of Interest Period Selection initially delivered by facsimile. If either Borrower fails to notify Agent of the next Interest Period for a Borrowing in accordance with this Subparagraph 2.03(b)(ii), the next Interest Period for such Borrowing shall be one (1) month. Agent shall promptly notify each Lender of the contents of each Notice of Interest Period Selection. (iii) Conversion of Term Loan Portions. Either Borrower may convert any Portion of the Term Loan Borrowing from one Type of Portion to another Type; provided, however, that any conversion of a LIBOR Portion into a Base Rate Portion shall be made on, and only on, the last day of an Interest Period for such LIBOR Portion. Borrowers shall request such a conversion 20 25 by an irrevocable written notice to Agent in a form acceptable to Agent, appropriately completed (a "Notice of Term Loan Conversion"), which specifies, among other things: (A) The Portion of the Term Loan Borrowing which is to be converted; (B) The amount and Type of each Portion of the Term Loan Borrowing into which it is to be converted; (C) If any Portion of the Term Loan Borrowing is to be converted into a LIBOR Portion, the initial Interest Period selected by the applicable Borrower for such Portion in accordance with Subparagraph 2.03(b)(i); and (D) The date of the requested conversion, which shall be a Business Day. Borrowers shall give each Notice of Term Loan Conversion to Agent at least three (3) Business Days before the date of the requested conversion. Each Notice of Term Loan Conversion shall be delivered by first-class mail or facsimile to Agent at the office or to the facsimile number and during the hours specified in Paragraph 8.01; provided, however, that such Borrower shall promptly deliver to Agent the original of any Notice of Term Loan Conversion initially delivered by facsimile. Agent shall promptly notify each Lender of the contents of each Notice of Term Loan Conversion. 2.04. Purpose. (a) Revolving Loans. Borrowers shall use the proceeds of the initial Revolving Loan to repay on the Closing Date all indebtedness outstanding under the Existing FIUI Credit Agreement and to fund the DII Acquisition (including debt refinancing), and thereafter Borrowers shall use the proceeds of the Revolving Loans and for their respective working capital and general corporate needs. (b) Term Loans. Borrowers shall use the proceeds of the Term Loans first to repay all outstanding Facility B Revolving Loans and then for their respective working capital and general corporate needs. Any Facility B Revolving Loans outstanding at the time of the funding of any Term Loan shall be deemed to be converted into Term Loans. 2.05. Amount Limitations, Commitment Reductions, Etc. (a) Commitment Limitations. The aggregate principal amount of all Facility A Revolving Loans outstanding at any time shall not exceed the Total Facility A Commitment at such time. The aggregate principal amount of all Facility B Revolving Loans outstanding at any time shall not exceed the Total Facility B Commitment at such time. The aggregate principal amount of all Term Loans outstanding at any time shall not exceed the Total Facility B Commitment at such time. (b) Reduction or Cancellation of Commitments. Upon four (4) Business Days prior written notice to Agent, Borrowers may permanently reduce the Total Facility A Commitment and/or the Total Facility B Commitment by the amount of Five Million Dollars ($5,000,000) or integral multiples in excess thereof or cancel the Total Facility A Commitment and/or the Total Facility B Commitment in its entirety; provided, however, that: (i) Borrowers may not reduce the Total Facility A Commitment prior to the Facility A Revolving Loan Maturity Date, if, after giving effect to such reduction, the aggregate principal amount of all Facility A Revolving Loans then outstanding would exceed the Total Facility A Commitment; (ii) Borrowers may not reduce the Total Facility B Commitment prior to the Facility B Revolving Loan Maturity Date if, after giving effect to such reduction, the 21 26 aggregate principal amount of all Facility B Revolving Loans then outstanding would exceed the Total Facility B Commitment; (iii) Borrowers may not cancel the Total Facility A Commitment prior to the Facility A Revolving Loan Maturity Date, if, after giving effect to such cancellation, any Facility A Revolving Loan would then remain outstanding; and (iv) Borrowers may not cancel the Total Facility B Commitment prior to the Facility B Revolving Loan Maturity Date, if, after giving effect to such cancellation, any Facility B Revolving Loan would then remain outstanding. Unless sooner terminated pursuant to this Agreement, the Facility A Commitments shall terminate on the Facility A Revolving Loan Maturity Date and the Facility B Commitments shall terminate on the Facility B Revolving Loan Maturity Date. (c) Effect of Commitment Reductions. From the effective date of any reduction of the Total Facility A Commitment or the Total Facility B Commitment, the Commitment Fees payable pursuant to Subparagraph 2.06(b) shall be computed on the basis of the Total Facility A Commitment and/or the Total Facility B Commitment as so reduced. Once reduced or cancelled, the Total Facility A Commitment or the Total Facility B Commitment may not be increased or reinstated without the prior written consent of all Facility A Lenders or Facility B Lenders, as applicable. Any reduction of the Total Facility A Commitment pursuant to Subparagraph 2.05(b) shall be applied ratably to reduce each Facility A Lender's Facility A Commitment in accordance with clause (i) of Subparagraph 2.09(a). Any reduction of the Total Facility B Commitment pursuant to Subparagraph 2.05(b) shall be applied ratably to reduce each Facility B Lender's Facility B Commitment in accordance with clause (ii) of Subparagraph 2.11(a). 2.06. Fees. (a) Agent's Fee. Borrowers shall pay to Agent, for its own account, agent's fees and other compensation in the amounts and at the times set forth in the Agent's Fee Letter. (b) Commitment Fees. Borrowers shall pay to Agent: (i) For the ratable benefit of Facility A Lenders as provided in clause (v) of Subparagraph 2.11(a), commitment fees in Dollars (the "Facility A Commitment Fees") equal to the Commitment Fee Percentage of the daily average Unused amount of the Total Facility A Commitment for the period beginning on the date of this Agreement and ending on the Facility A Revolving Loan Maturity Date; and (ii) For the ratable benefit of Facility B Lenders as provided in clause (vi) of Subparagraph 2.11(a), commitment fees in Dollars (the "Facility B Commitment Fees") equal to the Commitment Fee Percentage of the daily average Unused amount of the Total Facility B Commitment for the period beginning on the date of this Agreement and ending on the Facility B Revolving Loan Maturity Date. Borrowers shall pay the Commitment Fees in arrears on the last day of each March, June, September and December (commencing June 30, 2000) and on the Facility A Revolving Loan Maturity Date and the Facility B Revolving Loan Maturity Date, as the case may be (or if the Total Facility A Commitment or Total Facility B Commitment is cancelled on a date prior to the Facility A Revolving Loan Maturity Date or the Facility B Revolving Loan Maturity Date, as the case may be, on such prior date). 2.07. Prepayments. (a) Terms of all Prepayments. Upon the prepayment of any Loan (whether such prepayment is an optional prepayment under Subparagraph 2.07(b), a mandatory prepayment required by Subparagraph 22 27 2.07(c) or a mandatory prepayment required by any other provision of this Agreement or the other Credit Documents, including a prepayment upon acceleration), the applicable Borrower shall pay to the Lender that made such Loan (i) all accrued interest to the date of such prepayment on the amount prepaid and (ii) if such prepayment is the prepayment of a LIBOR Loan or of a LIBOR Portion on a day other than the last day of an Interest Period for such LIBOR Loan or such LIBOR Portion, all amounts payable to such Lender pursuant to Paragraph 2.14. (b) Optional Prepayments. At its option, either Borrower may prepay, in whole or in part, any Borrowing made to it, provided that: (i) Such Borrower delivers to Agent prior written notice of such prepayment, which notice shall be delivered (A) not less than three (3) Business Days prior to the prepayment of any Revolving Loan Borrowing consisting of LIBOR Loans or any LIBOR Portion or a Term Loan Borrowing; and (B) not less than one (1) Business Day prior to any prepayment of a Base Rate Borrowing or Base Rate Portion; and (ii) Any prepayment in part shall be in a minimum aggregate principal amount equal to $5,000,000 or an integral multiple of $1,000,000 in excess thereof. (c) Mandatory Prepayments. (i) If, at any time, the aggregate principal amount of all Facility A Revolving Loans then outstanding exceeds any limitations set forth in Subparagraph 2.05(c), the applicable Borrower(s) shall immediately prepay such Facility A Revolving Loans in such amounts as Agent shall determine are necessary to eliminate such excess. (ii) If, at any time, the aggregate principal amount of all Facility B Revolving Loans then outstanding exceeds any limitations set forth in Subparagraph 2.05(c), the applicable Borrower(s) shall immediately prepay such Facility B Revolving Loans in such amounts as Agent shall determine are necessary to eliminate such excess. (d) Application of Prepayments. All prepayments of Borrowings shall, to the extent possible, be applied to prepay the Base Rate Borrowings, Base Rate Portions, LIBOR Borrowings or LIBOR Portions designated by either Borrower. 2.08. Other Payment Terms. (a) Place and Manner. (i) Borrowers shall make all payments due to each Lender or Agent hereunder by payments to Agent at Agent's New York office located at the address specified in Paragraph 8.01, with each such payment due to a Lender to be for the account of such Lender and such Lender's Lending Office. (ii) Borrowers shall make all payments hereunder in same day or immediately available funds and without deduction or offset not later than 11:00 a.m. (California time) and on the date due. Agent shall promptly disburse to each Lender each payment received by Agent for the account of such Lender. (b) Date. Whenever any payment due hereunder shall fall due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest or fees, as the case may be. 23 28 (c) Currency of Payment. (i) Borrowers shall pay principal of, interest on and all other amounts related to each Borrowing in Dollars. Borrowers shall pay Commitment Fees and all other amounts payable under this Agreement and the other Credit Documents in Dollars. (ii) If any amounts required to be paid by Borrowers under this Agreement, any other Credit Document or any order, judgment or award given or rendered in relation hereto or thereto has to be converted from the currency (the "first currency") in which the same is payable hereunder or thereunder into another currency (the "second currency") for the purpose of (A) making or filing a claim or proof against Borrowers with any Governmental Authority, (B) obtaining an order or judgment in any court or other tribunal or (C) enforcing any order or judgment given or made in relation hereto, Borrowers shall, to the fullest extent permitted by law, indemnify and hold harmless each of the Persons to whom such amounts are payable from and against any loss suffered as a result of any discrepancy between (1) the rate of exchange used for such purpose to convert the amounts in question from the first currency into the second currency and (2) the rate or rates of exchange at which such Person may, using reasonable efforts in the ordinary course of business, purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. The foregoing indemnity shall constitute a separate obligation of Borrowers distinct from their other obligations hereunder and shall survive the giving or making of any judgment or order in relation to all or any of such obligations. The obligations of Borrowers under this Subparagraph 2.08(c) shall survive the payment and performance of the Obligations and the termination of this Agreement. (d) Late Payments. If any amount required to be paid by either Borrower under this Agreement or the other Credit Documents (including, without limitation, principal or interest payable on any Loan, any fees or any other amount) remains unpaid after such amount is due, such Borrower shall pay interest on the aggregate, outstanding balance of such amount from the date due until such amount is paid in full at a per annum rate equal to the Base Rate plus two percent (2.00%), such rate to change from time to time as the Base Rate shall change. (e) Application of Payments. All payments hereunder shall be applied first to unpaid fees, costs and expenses then due and payable under this Agreement or the other Credit Documents, second to accrued interest then due and payable under this Agreement or the other Credit Documents and finally to reduce the principal amount of outstanding Loans. (f) Failure to Pay Agent. Unless Agent shall have received notice from a Borrower at least one (1) Business Day prior to the date on which any payment is due to Lenders hereunder that such Borrower will not make such payment in full, Agent shall be entitled to assume that such Borrower has made or will make such payment in full to Agent on such date and Agent may, in reliance upon such assumption, cause to be paid to the applicable Lenders on such due date an amount equal to the amount then due such Lenders. If and to the extent such Borrower shall not have so made such payment in full to Agent, each such Lender shall repay to Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to Agent, at a per annum rate equal to the Federal Funds Rate for the first three (3) days and the Base Rate thereafter for any amount in Dollars. A certificate of Agent submitted to any Lender with respect to any amount owing by such Lender under this Subparagraph 2.08(f) shall constitute prima facie evidence of such amount. 24 29 2.09. Loan Accounts; Notes. (a) Loan Accounts. The obligation of each Borrower to repay the Loans made to it by each Lender and to pay interest thereon at the rates provided herein shall be evidenced by an account or accounts maintained by such Lender on its books (individually, a "Loan Account"), except that any Lender may request that its Loans be evidenced by a note or notes pursuant to Subparagraph 2.09(b). Each Lender shall record in its Loan Accounts (i) the date, amount and currency of each Loan made by such Lender, (ii) the interest rates applicable to each such Loan and each Portion thereof and the effective dates of all changes thereto, (iii) the Interest Period for each LIBOR Loan and LIBOR Portion, (iv) the date and amount of each principal and interest payment on each Loan and Portion and (v) such other information as such Lender may determine is necessary for the computation of principal and interest payable to it by each Borrower hereunder; provided, however, that any failure by a Lender to make, or any error by any Lender in making, any such notation shall not affect Borrowers' Obligations hereunder. The Loan Accounts shall constitute prima facie evidence of the matters noted therein. (b) Notes. If any Lender so requests, (i) such Lender's Revolving Loans shall be evidenced by promissory notes in the form of Exhibit C(1) (individually, a "Revolving Loan Note") and (ii) such Lender's Term Loans shall be evidenced by promissory notes in the form of Exhibit C(2) (individually, a "Term Loan Note"), each of which shall be (A) payable to the order of such Lender, (B) dated the Closing Date, and (C) otherwise appropriately completed. 2.10. Loan Funding. (a) Lender Funding and Disbursements to Borrowers. Each Lender shall, before 11:00 a.m. (New York time) on the date of each Borrowing, make available to Agent at Agent's New York office specified in Paragraph 8.01, in immediately available funds, such Lender's applicable Proportionate Share of such Borrowing. After Agent's receipt of such funds and upon satisfaction of the applicable conditions set forth in Section III, Agent shall promptly disburse such funds to the applicable Borrower no later than 1:00 p.m. (California time) in immediately available funds. Agent shall disburse the proceeds of each Borrowing as directed by the applicable Borrower in the applicable Notice of Borrowing. (b) Lender Failure to Fund. Unless Agent shall have received notice from a Lender prior to the date of a Borrowing that such Lender will not make available to Agent such Lender's applicable Proportionate Share of such Borrowing, Agent shall be entitled to assume that such Lender has made or will make such amount available to Agent on the date of such Borrowing in accordance with Subparagraph 2.08(a), and Agent may on such date, in reliance upon such assumption, disburse or otherwise credit to the applicable Borrower a corresponding amount. If any Lender does not make the amount of its applicable Proportionate Share of a Borrowing available to Agent on or prior to the date of such Borrowing, such Lender shall pay to Agent, on demand, interest which shall accrue on such amount from the date of such Borrowing until such amount is paid to Agent at rates equal to the Federal Funds Rate for the first three (3) days and the Base Rate thereafter. A certificate of Agent submitted to any Lender with respect to any amount owing by such Lender under this Subparagraph 2.08(b) shall constitute prima facie evidence of such amount. If the amount of any Lender's applicable Proportionate Share of any Borrowing is not paid to Agent by such Lender within three (3) Business Days after the date of such Borrowing, the applicable Borrower shall repay such amount to Agent, on demand, together with interest thereon, for each day from the date such amount was disbursed to such Borrower until the date such amount is repaid to Agent, at the interest rate applicable at the time to the Loans comprising such Borrowing. (c) Lenders' Obligations Several. The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation hereunder to make its Loan as part of such Borrowing, but no Lender shall be obligated in any way to make any Loan which another Lender has failed or refused to make or otherwise be in any way responsible for the failure or refusal of any other Lender to make any Loan required to be made by such other Lender. 25 30 2.11. Pro Rata Treatment. (a) Borrowings, Commitment Reductions, Etc. Except as otherwise provided herein: (i) Each Borrowing under Facility A and reduction of the Total Facility A Commitment shall be made or shared among Facility A Lenders pro rata according to their respective Facility A Proportionate Shares; (ii) Each Borrowing under Facility B and reduction of the Total Facility B Commitments shall be made or shared among Facility B Lenders pro rata according to their respective Facility B Proportionate Shares; (iii) Each payment of principal on Loans in any Borrowing shall be shared among Lenders which made or funded the Loans in such Borrowing pro rata according to the respective unpaid principal amounts of such Loans then owed to such Lenders; (iv) Each payment of interest on Loans in any Borrowing shall be shared among Lenders which made or funded the Loans in such Borrowing pro rata according to (A) the respective unpaid principal amounts of such Loans then owed to such Lenders so made or funded by such Lenders and (B) the dates on which such Lenders so made or funded such Loans; (v) Each payment of Facility A Commitment Fees shall be shared among Facility A Lenders (except for Defaulting Lenders) pro rata according to (A) their respective Facility A Proportionate Shares and (B) in the case of each Facility A Lender which becomes a Facility A Lender hereunder after the date hereof and before the Facility A Revolving Loan Maturity Date, the date upon which such Facility A Lender so became a Facility A Lender; (vi) Each payment of Facility B Commitment Fees shall be shared among Facility B Lenders (except for Defaulting Lenders) pro rata according to (A) their respective Facility B Proportionate Shares and (B) in the case of each Facility B Lender which becomes a Facility B Lender hereunder after the date hereof and before the Facility B Revolving Loan Maturity Date, the date upon which such Facility B Lender so became a Facility B Lender; (vii) Each payment of interest (other than interest on Loans) shall be shared among Lenders and Agent owed the amount upon which such interest accrues pro rata according to (A) the respective amounts so owed such Lenders and Agent and (B) the dates on which such amounts became owing to such Lenders and Agent; and (v) All other payments under this Agreement and the other Credit Documents shall be for the benefit of the Person or Persons specified. (b) Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of the Loan owed to it as part of any Borrowing in excess of its ratable share of payments on account of all Loans in such Borrowing obtained by all applicable Lenders entitled to such payments, such Lender shall forthwith purchase from such other Lenders such participations in their Loans as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase shall be rescinded and each other applicable Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such other Lender's ratable share (according to the proportion of (i) the amount of such other Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Subparagraph 2.11 (b) may, to the fullest extent permitted by law, exercise 26 31 all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. 2.12. Change of Circumstances. (a) Inability to Obtain Funds, Determine Rates, Etc. If, on or before the first day of any Interest Period for any LIBOR Borrowing or LIBOR Portion, Agent shall determine (which determination shall be conclusive and binding upon Borrowers absent manifest error) that (i) the LIBO Rate for such Interest Period cannot be adequately and reasonably determined due to other circumstances affecting the London interbank market, or (ii) the rate of interest for such Borrowing or Portion does not adequately and fairly reflect the cost to Lenders of making or maintaining such Borrowing or Portion, Agent shall immediately give notice of such condition to the applicable Borrowers and the applicable Lenders. After the giving of any such notice and until Agent shall otherwise notify the applicable Borrowers that the circumstances giving rise to such condition no longer exist, such Borrowers' right to obtain, continue or convert to Borrowings or Portions shall be suspended. Any LIBOR Borrowings or LIBOR Portions outstanding at the commencement of any such suspension shall be repaid at the end of the then current Interest Period for such Borrowings or Portions unless such suspension has then ended. (b) Illegality. If, after the date of this Agreement, the adoption of any Governmental Rule, any change in any Governmental Rule or the application or requirements thereof (whether such change occurs in accordance with the terms of such Governmental Rule as enacted, as a result of amendment or otherwise), any change in the interpretation or administration of any Governmental Rule by any Governmental Authority, or compliance by any Lender with any request or directive (whether or not having the force of law) of any Governmental Authority (a "Change of Law") shall make it unlawful or impossible for any Lender to make or maintain any LIBOR Loan or LIBOR Portion in Dollars, such Lender shall immediately notify Agent and the applicable Borrower of such Change of Law. Upon receipt of such notice, (i) such Borrower's right to obtain, continue or convert to LIBOR Loans or LIBOR Portions in the affected currency shall be suspended until such time as Agent shall notify such Borrower and the applicable Lenders that the circumstances giving rise to such suspension no longer exist, and (ii) such Borrower shall, if so requested by such Lender, immediately repay such LIBOR Loans or LIBOR Portions if such Lender shall notify such Borrower that such Lender may not lawfully continue to fund and maintain such LIBOR Loans or LIBOR Portions. Any prepayment of LIBOR Loans or LIBOR Portions made pursuant to the preceding sentence prior to the last day of an Interest Period for such LIBOR Loans or LIBOR Portions shall be deemed a prepayment thereof for purposes of Paragraph 2.14. (c) Increased Costs. If, after the date of this Agreement, any Change of Law: (i) Shall subject any Lender to any tax, duty or other charge with respect to any LIBOR Loan or LIBOR Portion, or shall change the basis of taxation of payments by either Borrower to any such Lender on such a LIBOR Loan or LIBOR Portion, or in respect to such a LIBOR Loan or LIBOR Portion, under this Agreement (except for changes in the rate of taxation on the overall net income of such Lender imposed by its jurisdiction of incorporation or the jurisdiction of its Applicable Lending Office); or (ii) Shall impose, modify or hold applicable any reserve (excluding any Reserve Requirement or other reserve to the extent included in the calculation of the LIBO Rate for any Loans or Portions), special deposit or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances or loans by, or any other acquisition of funds by any Lender for any LIBOR Loan or LIBOR Portion; or (iii) Shall impose on any Lender any other condition related to any LIBOR Loan or LIBOR Portion or such Lender's Commitments; And the effect of any of the foregoing is to increase the cost to such Lender of making, continuing or maintaining any such LIBOR Loan or LIBOR Portion or its Commitments or to reduce any amount receivable by such Lender hereunder; then Borrowers shall from time to time, within ten (10) Business 27 32 Days after demand by such Lender, pay to such Lender additional amounts sufficient to reimburse such Lender for such increased costs or to compensate such Lender for such reduced amounts; provided, however, that Borrowers shall have no obligation to make any payment to any demanding party under this Subparagraph 2.10(c) on account of any such increased costs or reduced amounts unless Borrowers receive notice of such increased costs or reduced amounts from the demanding party within twelve (12) months after they are incurred or realized. A certificate executed by an officer of the applicable Lender setting forth in reasonable detail the amount of such increased costs or reduced amounts, submitted by such Lender to Borrowers shall constitute prima facie evidence of such costs or amounts. The obligations of Borrowers under this Subparagraph 2.12(c) shall survive the payment and performance of the Obligations and the termination of this Agreement. (d) Capital Requirements. If, after the date of this Agreement, any Lender determines that (i) any Change of Law affects the amount of capital required or expected to be maintained by such Lender or any Person controlling such Lender (a "Capital Adequacy Requirement") and (ii) the amount of capital maintained by such Lender or such Person which is attributable to or based upon the Loans, the Commitments or this Agreement must be increased as a result of such Capital Adequacy Requirement (taking into account such Lender's or such Person's policies with respect to capital adequacy), Borrowers shall pay to such Lender or such Person, within ten (10) Business Days after demand of such Lender, such amounts as such Lender or such Person shall determine are necessary to compensate such Lender or such Person for the increased costs to such Lender or such Person of such increased capital; provided, however, that Borrowers shall have no obligation to make any payment to any demanding party under this Subparagraph 2.12(d) on account of any such increased costs unless Borrowers receive notice of such increased costs from the demanding party within twelve (12) months after they are incurred or realized. A certificate executed by an officer of the applicable Lender setting forth in reasonable detail the amount of such increased costs, submitted by any Lender to Borrowers shall constitute prima facie evidence of such costs. The obligations of Borrowers under this Subparagraph 2.12(d) shall survive the payment and performance of the Obligations and the termination of this Agreement. (e) Mitigation. Any Lender which becomes aware of (i) any Change of Law which will make it unlawful or impossible for such Lender to make or maintain any LIBOR Loan or LIBOR Portion or (ii) any Change of Law or other event or condition which will obligate Borrowers to pay any amount pursuant to Subparagraph 2.12(c) or Subparagraph 2.12(d) shall notify Borrowers and Agent thereof as promptly as practical. If any Lender has given notice of any such Change of Law or other event or condition and thereafter becomes aware that such Change of Law or other event or condition has ceased to exist, such Lender shall notify Borrowers and Agent thereof as promptly as practical. Each Lender affected by any Change of Law which makes it unlawful or impossible for such Lender to make or maintain any LIBOR Loan or LIBOR Portion or to which Borrowers are obligated to pay any amount pursuant to Subparagraph 2.12(c) or Subparagraph 2.12(d) shall use reasonable commercial efforts (including changing the jurisdiction of its Applicable Lending Offices) to avoid the effect of such Change of Law or to avoid or materially reduce any amounts which Borrowers are obligated to pay pursuant to Subparagraph 2.12(c) or Subparagraph 2.12(d) if, in the reasonable opinion of such Lender, such efforts would not be disadvantageous to such Lender or contrary to such Lender's normal banking practices. 2.13. Taxes on Payments. (a) Payments Free of Taxes. All payments made by Borrowers under this Agreement and the other Credit Documents shall be made free and clear of, and, except as provided herein, without deduction or withholding for or on account of, Non-Excluded Taxes. If any Non-Excluded Taxes are required to be withheld from any amounts payable to Agent or any Lender hereunder or under the other Credit Documents, the amounts so payable to Agent or such Lender shall be increased to the extent necessary to yield to Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the other Credit Documents. Whenever any Taxes are payable by Borrowers, as promptly as possible thereafter, Borrowers shall send to Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by Borrowers showing payment thereof. If Borrowers fail to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to Agent the 28 33 required receipts or other required documentary evidence, Borrowers shall indemnify Agent and Lenders for any taxes (including interest or penalties) that may become payable by Agent or any Lender as a result of any such failure. The obligations of Borrowers under this Subparagraph 2.13(a) shall survive the payment and performance of the Obligations and the termination of this Agreement. (b) Withholding Exemption Certificates. Each Lender which is not organized under the laws of the United States of America or a state thereof shall, on or prior to the Closing Date in the case of any such Lender that is a Lender hereunder on the date hereof and on or prior to the date any other Lender becomes a Lender hereunder, deliver to Borrowers and Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 (or successor applicable form), as the case may be, certifying in each case that such Lender is entitled to receive payments on its Loans under this Agreement from Borrower's Applicable Payment Office for the account of such Lender's Domestic Lending Office or Euro-Dollar Lending Office without deduction or withholding of any United States federal income taxes. Each such Lender further agrees (A) promptly to notify the applicable Borrowers and Agent of any change of circumstances (including any change in any treaty, law or regulation) which would prevent such Lender from receiving such payments hereunder without any deduction or withholding of such taxes and (B) if such Lender is still legally entitled to do so, then on or before the date that any certificate or other form delivered by such Lender under this Subparagraph 2.13(b) expires, to deliver to such Borrowers and Agent a new certificate or form, certifying that such Lender is entitled to receive such payments under this Agreement without deduction or such taxes. (c) Mitigation. If Agent or any Lender claims any additional amounts to be payable to it pursuant to this Paragraph 2.13, such Person shall use reasonable commercial efforts to file any certificate or document requested in writing by the applicable Borrower reflecting a reduced rate of withholding or to change the jurisdiction of an Applicable Lending Office if the making of such a filing or such change in the jurisdiction of an Applicable Lending Office would avoid the need for or materially reduce the amount of any such additional amounts which may thereafter accrue and if, in the reasonable opinion of such Person, in the case of a change in the jurisdiction of an Applicable Lending Office, such change would not be disadvantageous to such Person or contrary to such Person's normal banking practices. (d) Tax Returns. Nothing contained in this Paragraph 2.13 shall require Agent or any Lender to make available any of its tax returns (or any other information relating to its taxes which it deems to be confidential). (e) Lender Rate Contracts. Nothing contained in this Paragraph 2.13 shall override or supercede any term or provision of any Lender Rate Contract regarding withholding taxes relating to Rate Contracts. 2.14. Funding Loss Indemnification. If either Borrower shall (a) repay, prepay or convert any LIBOR Loan or LIBOR Portion on any day other than the last day of an Interest Period therefor (whether a scheduled payment, an optional prepayment or conversion, a mandatory prepayment or conversion, a payment upon acceleration or otherwise), (b) fail to borrow any LIBOR Loan or LIBOR Portion after delivering the Notice of Borrowing therefor to Agent (whether as a result of the failure to satisfy any applicable conditions or otherwise), (c) fail to convert any Portion of a Term Loan Borrowing into a LIBOR Portion in accordance with a Notice of Term Loan Conversion delivered to Agent (whether as a result of the failure to satisfy any applicable conditions or otherwise), or (d) fail to pay when due any principal or interest on any LIBOR Loan or LIBOR Portion, such Borrower shall, within ten (10) Business Days after demand of such Lender, reimburse such Lender for and hold such Lender harmless from all reasonable costs and losses incurred by such Lender as a result of such repayment, prepayment, conversion or failure; provided, however, that Borrowers shall have no obligation to make any payment to any demanding party under this Paragraph 2.14 on account of any such costs or losses unless Borrowers receive notice of such costs or losses from the demanding party within twelve (12) months after they are incurred or realized. Borrowers understand that such costs and losses may include, without limitation, losses incurred by a Lender as a result of funding and other contracts entered into by such Lender to fund a LIBOR Loan or LIBOR Portion. Each Lender demanding payment under this Paragraph 2.14 shall deliver to Borrowers, with a copy to Agent, a certificate setting forth the amount of costs and losses for which demand is made, which certificate shall set forth in reasonable detail the calculation of the amount demanded. Such a certificate so delivered to Borrowers shall 29 34 constitute prima facie evidence of such costs and losses. The obligations of Borrowers under this Paragraph 2.14 shall survive the payment and performance of the Obligations and the termination of this Agreement. 2.15. Security. (a) Guaranties, Etc. The Obligations shall be secured by the following: (i) A Guaranty in the form of Exhibit D (the "Guaranty"), duly executed by FIL and all Eligible Material Subsidiaries, with such changes thereto as may be appropriate based on the law of the applicable jurisdictions; and (ii) A Pledge Agreement or Pledge Agreements, each in the form of Exhibit E (individually a "Pledge Agreement"), duly executed by FIL and any Subsidiary that directly owns the stock of any Ineligible Material Subsidiaries, together with the Guaranty executed by any such Subsidiary, with such changes thereto as may be appropriate based on the law of the applicable jurisdictions; provided, however, that (1) in lieu of providing a pledge of stock of Flextronics Industrial (Shenzhen) Co. Ltd. by Flextronics Singapore Pte Ltd., Borrowers shall provide a pledge of the stock of Flextronics Singapore Pte Ltd. and Flextronics Singapore Pte Ltd. shall execute the Guaranty, (2) in lieu of providing a pledge of the stock of Flextronics International Sweden AB by F.L. Tronics Holdings AB and a pledge of the stock of Flextronics International Finland Oy by Flextronics Holding Finland OY, Flextronics Holdings UK Limited shall execute the Guaranty and pledge of the stock of F.L. Tronics Holdings AB and (3) in lieu of providing a pledge of the stock of Flextronics International Kft, FIL shall pledge the stock of Flextronics International GmbH; (4) with respect to Flextronics Singapore Pte Ltd., on or prior to the date such Subsidiary is dissolved and the stock of Flextronics International (Shenzhen) Co. Ltd. is thereafter held by Flextronics International Singapore Pte Ltd., FIL shall promptly provide a pledge of the stock of Flextronics International Singapore Pte Ltd. and Flextronics International Singapore Pte Ltd. shall promptly execute the Guaranty which shall replace the guaranty of Flextronics Singapore Pte Ltd.; (5) if FIL does not dissolve Flextronics International Fremont, Inc. on or before May 31, 2000, Flextronics International Fremont, Inc. shall also promptly execute the Guaranty; and (6) on or prior to April 14, 2000, Dovatron Malaysia Sdn. Bhd. shall execute the Guaranty, in connection with the DII Acquisition. (b) Changes in Material Subsidiaries. (i) If, at any time after the date of this Agreement, any Subsidiary of FIL that is not a Guarantor under the Guaranty shall become an Eligible Material Subsidiary, Borrowers promptly shall deliver, or cause to be delivered, to Agent, within sixty (60) days of any such event, (A) a Subsidiary Joinder in the form of Attachment 1 to the Guaranty, appropriately completed and duly executed by such Subsidiary, and (B) such other instruments, agreements, certificates, opinions and documents as Agent may reasonably request to secure, maintain, protect and evidence the obligations of such Subsidiary under the Guaranty. (ii) If, at any time after the date of this Agreement, any Subsidiary of FIL that is a Guarantor under the Guaranty shall cease to be an Eligible Material Subsidiary, Agent promptly shall release such Subsidiary from its obligations under the Guaranty, subject to the completion by Borrowers (and, if the Equity Securities of such Subsidiary are owned directly by another Subsidiary of FIL, by such other parent Subsidiary) of such actions as may be necessary to grant to Agent, to the extent provided in clause (iii) below, a perfected security interest in the Equity Securities of such Subsidiary. (iii) If, at any time after the date of this Agreement, any Subsidiary of FIL shall become an Ineligible Material Subsidiary, Borrowers shall deliver, or cause to be delivered, to 30 35 Agent, within sixty (60) days of any such event, such instruments, agreements, certificates, opinions and documents (including Uniform Commercial Code financing statements) as Agent may reasonably request to grant, perfect, maintain, protect and evidence security interests in favor of Agent, for the benefit of Agent and Lenders as security for the Obligations, in any and all Equity Securities of such Subsidiary, to the extent such security interests are not prohibited by any applicable Governmental Rule and would not significantly increase the tax liability of FIL and its Subsidiaries. (iv) If, at any time after the date of this Agreement, any Ineligible Material Subsidiary becomes an Eligible Material Subsidiary, upon Borrowers' compliance with clause (i) of Subparagraph 2.15(b) above, Agent shall release the Equity Securities of such Subsidiary from any Pledge Agreement previously delivered with respect to such Subsidiary. (c) Further Assurances. Borrowers shall deliver, and shall cause their Guarantors and their Subsidiaries to deliver, to Agent such other pledge agreements, guaranties, guaranty supplements and other instruments, agreements, certificates, opinions and documents (including Uniform Commercial Code financing statements) as Agent may reasonably request to implement the provisions of Subparagraph 2.15(a) and otherwise to establish, maintain, protect and evidence the rights provided to Agent, for the benefit of Agents and Lenders, pursuant to the Security Documents. Borrowers shall fully cooperate with Agent and Lenders and perform all additional acts reasonably requested by Agent or any Lender to effect the purposes of this Paragraph 2.15. Without limiting the generality of the foregoing, Borrowers covenant and agree that they will ensure that the aggregate revenues of the Material Subsidiaries that have executed and delivered the Guaranty and/or Pledge Agreements pursuant to this Agreement and the FIL Credit Agreement for each year will equal or exceed 75% of the consolidated total revenues of FIL and all of its Subsidiaries as reflected for such year in FIL's annual audited Financial Statements. 2.16. Replacement of Lenders. If any Lender shall (a) become a Defaulting Lender more than one (1) time in a period of twelve (12) consecutive months, (b) continue as a Defaulting Lender for more than three (3) Business Days at any time, (c) suspend its obligation to make or maintain LIBOR Loans or LIBOR Portions pursuant to Subparagraph 2.12(b) for a reason which is not applicable to any other Lender or (d) demand any payment under Subparagraph 2.12(a), 2.12(c) or 2.12(d) for a reason which is not applicable to any other Lender, then Agent may (or upon the written request of Borrowers, shall) replace such Lender (the "affected Lender"), or cause such affected Lender to be replaced, with another lender (the "replacement Lender") satisfying the requirements of an Assignee Lender under Subparagraph 8.05(c), by having the affected Lender sell and assign all of its rights and obligations under this Agreement and the other Credit Documents to the replacement Lender pursuant to Subparagraph 8.05(c); provided, however, that if Borrowers seek to exercise such right, they must do so within sixty (60) days after either Borrower first knows or should have known of the occurrence of the event or events giving rise to such right, and neither Agent nor any Lender shall have any obligation to identify or locate a replacement Lender for Borrowers; and provided, further, that no Lender shall be replaced under this Agreement unless such Lender is also replaced under the FIL Credit Agreement. Upon receipt by any affected Lender of a written notice from Agent stating that Agent is exercising the replacement right set forth in this Paragraph 2.16, such affected Lender shall sell and assign all of its rights and obligations under this Agreement and the other Credit Documents to the replacement Lender pursuant to an Assignment Agreement and Subparagraph 8.05(c) for a purchase price equal to the sum of the principal amount of the affected Lender's Loans so sold and assigned, all accrued and unpaid interest thereon and its ratable share of all fees to which it is entitled. SECTION III. CONDITIONS PRECEDENT. 3.01. Initial Conditions Precedent. The obligations of the applicable Lenders to make the Loans comprising the initial Borrowing are subject to receipt by Agent, on or prior to the Closing Date, of each item listed in Schedule 3.01, each in form and substance satisfactory to Agent and each Lender, and with sufficient copies for, Agent and each Lender. 3.02. Conditions Precedent to Term Loan Borrowing . The obligations of Facility B Lenders to make the Term Loans comprising the Term Loan Borrowing also are subject to receipt by Agent, on or prior to the Facility 31 36 B Revolving Loan Maturity Date, of a Term Loan Note for each Facility B Lender so requesting such a note, duly executed by the applicable Borrower. 3.03. Conditions Precedent to Each Credit Event. The occurrence of each Credit Event (including the initial Borrowing) is subject to the further conditions that: (a) Borrowers shall have delivered to Agent the Notice of Borrowing, Notice of Term Loan Conversion or Notice of Interest Period Selection, as the case may be, for such Credit Event in accordance with this Agreement; and (b) On the date such Credit Event is to occur and after giving effect to such Credit Event, the following shall be true and correct: (i) The representations and warranties of Borrowers and their Subsidiaries set forth in Paragraph 4.01 and in the other Credit Documents are true and correct in all material respects as if made on such date (except for representations and warranties expressly made as of a specified date, which shall be true as of such date); and (ii) No Default has occurred and is continuing or will result from such Credit Event. The submission by either Borrower to Agent of each Notice of Borrowing, each Notice of Term Loan Conversion (other than a notice for a conversion to a Base Rate Portion) and each Notice of Interest Period Selection (other than a notice selecting an Interest Period of one (1) month) shall be deemed to be a representation and warranty by such Borrower that each of the statements set forth above in this Subparagraph 3.03(b) is true and correct as of the date of such notice. 3.04. Covenant to Deliver. Borrowers agree (not as a condition but as a covenant) to deliver to Agent each item required to be delivered to Agent as a condition to the occurrence of any Credit Event if such Credit Event occurs. Borrowers expressly agree that the occurrence of any such Credit Event prior to the receipt by Agent of any such item shall not constitute a waiver by Agent or any Lender of Borrowers' obligation to deliver such item. SECTION IV. REPRESENTATIONS AND WARRANTIES. 4.01. Borrowers' Representations and Warranties. In order to induce Agent and Lenders to enter into this Agreement, Borrowers hereby represent and warrant to Agent and Lenders as follows: (a) Due Incorporation, Qualification, etc. Each of Borrowers and their Subsidiaries (i) is a corporation duly organized, validly existing and, in any jurisdiction in which such legal concept is applicable, in good standing under the laws of its jurisdiction of organization; (ii) has the power and authority to own, lease and operate its properties and carry on its business as now conducted; and (iii) is duly qualified and licensed to do business as a foreign corporation or branch in each jurisdiction where the failure to be so qualified or licensed is reasonably and substantially likely to have a Material Adverse Effect. (b) Authority. The execution, delivery and performance by each of the Borrowers, the Guarantors and their Subsidiaries of each Credit Document executed, or to be executed, by such Person and the consummation of the transactions contemplated thereby (i) are within the power of such Person and (ii) have been duly authorized by all necessary actions on the part of such Person. (c) Enforceability. Each Credit Document executed, or to be executed, by each of the Borrowers, the Guarantors and their Subsidiaries has been, or will be, duly executed and delivered by such Person and constitutes, or will constitute, a legal, valid and binding obligation of such Person, enforceable against such Person in accordance with its terms, except as limited by bankruptcy, insolvency or other laws 32 37 of general application relating to or affecting the enforcement of creditors' rights generally and general principles of equity. (d) Non-Contravention. The execution and delivery by each of the Borrowers, the Guarantors and their Subsidiaries of the Credit Documents executed by such Person and the performance and consummation of the transactions contemplated thereby do not (i) violate any Requirement of Law applicable to such Person; (ii) violate any provision of, or result in the breach or the acceleration of, or entitle any other Person to accelerate (whether after the giving of notice or lapse of time or both), any Contractual Obligation of such Person; or (iii) result in the creation or imposition of any Lien (or the obligation to create or impose any Lien) upon any property, asset or revenue of such Person (except such Liens as may be created in favor of Agent pursuant to this Agreement or the other Credit Documents). (e) Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority or other Person (including the shareholders of any Person) is required in connection with the execution and delivery of the Credit Documents executed by each of the Borrowers, the Guarantors and their Subsidiaries the performance or consummation of the transactions contemplated thereby. (f) No Violation or Default. None of Borrowers, the Guarantors and their Subsidiaries is in violation of or in default with respect to (i) any Requirement of Law applicable to such Person or (ii) any Contractual Obligation of such Person (nor is there any waiver in effect which, if not in effect, would result in such a violation or default), where, in each case, such violation or default is reasonably and substantially likely to have a Material Adverse Effect. Without limiting the generality of the foregoing, none of the Borrowers, the Guarantors and their Subsidiaries (A) has violated any Environmental Laws, (B) has any liability under any Environmental Laws or (C) has received notice or other communication of an investigation or, to the knowledge of either Borrower, the Guarantors or their Subsidiaries, is under investigation by any Governmental Authority having authority to enforce Environmental Laws, where such violation, liability or investigation is reasonably and substantially likely to have a Material Adverse Effect. No Default has occurred and is continuing. (g) Litigation. No actions (including derivative actions), suits, proceedings or investigations are pending or, to the knowledge of either Borrower, threatened against either Borrower, the Guarantors or any of their Subsidiaries at law or in equity in any court or before any other Governmental Authority which (i) is reasonably and substantially likely (alone or in the aggregate) to have a Material Adverse Effect or (ii) seeks to enjoin, either directly or indirectly, the execution, delivery or performance by either Borrower, the Guarantors or any of their Subsidiaries of the Credit Documents or the transactions contemplated thereby. (h) Title; Possession Under Leases. Each Borrower and its Subsidiaries own and have good and marketable title, or a valid leasehold interest in, all their respective material properties and assets as reflected in the most recent Financial Statements delivered to Agent (except those assets and properties disposed of in the ordinary course of business or otherwise in compliance with this Agreement since the date of such Financial Statements) and all respective material assets and properties acquired by such Borrower and its Subsidiaries since such date (except those disposed of in the ordinary course of business or otherwise in compliance with this Agreement). Such assets and properties are subject to no Lien, except for Permitted Liens. (i) Financial Statements. The Financial Statements of FIL and its Subsidiaries which have been delivered to Agent, (i) are in accordance with the books and records of FIL and its Subsidiaries, which have been maintained in accordance with good business practice; (ii) have been prepared in conformity with GAAP; and (iii) fairly present in all material respects the financial conditions and results of operations of FIL and its Subsidiaries as of the date thereof and for the period covered thereby. Neither FIL nor any of its Subsidiaries has any Contingent Obligations, liability for taxes or other outstanding obligations which are material in the aggregate, except as disclosed or reflected in the Financial Statements of FIL dated December 31, 1999, furnished by Borrowers to Agent prior to the date hereof, or in the Financial Statements delivered to Agent pursuant to clause (i) or (ii) of Subparagraph 5.01(a), or except as permitted under Section 5 of this Agreement. 33 38 (j) Employee Benefit Plans. (i) Based on the latest valuation of each Employee Benefit Plan that either Borrower or any ERISA Affiliate maintains or contributes to, or has any obligation under (which occurred within twelve months of the date of this representation), the aggregate benefit liabilities of such plan within the meaning of Section 4001 of ERISA did not exceed the aggregate value of the assets of such plan. No Borrower nor any ERISA Affiliate has any liability with respect to any post-retirement benefit under any Employee Benefit Plan which is a welfare plan (as defined in section 3(1) of ERISA), other than liability for health plan continuation coverage described in Part 6 of Title I(B) of ERISA, which liability for health plan contribution coverage is not reasonably and substantially likely to have a Material Adverse Effect. (ii) Each Employee Benefit Plan complies, in both form and operation, in all material respects, with its terms, ERISA and the IRC, and no condition exists or event has occurred with respect to any such plan which would result in the incurrence by either Borrower or any ERISA Affiliate of any material liability, fine or penalty. Each Employee Benefit Plan, related trust agreement, arrangement and commitment of either Borrower or any ERISA Affiliate is legally valid and binding and in full force and effect. No Employee Benefit Plan is being audited or investigated by any government agency or is subject to any pending or threatened claim or suit. No Borrower nor any ERISA Affiliate nor any fiduciary of any Employee Benefit Plan has engaged in a prohibited transaction under section 406 of ERISA or section 4975 of the IRC. (iii) No Borrower nor any ERISA Affiliate contributes to or has any material contingent obligations to any Multiemployer Plan. No Borrower nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of assets described in Section 4204 of ERISA. No Borrower nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of Section 4241 or Section 4245 of ERISA or that any Multiemployer Plan intends to terminate or has been terminated under Section 4041A of ERISA. (iv) All employer and employee contributions required by any applicable Governmental Rule in connection with all Foreign Plans have been made, or, if applicable, accrued, in accordance with the country-specific accounting practices. The fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Plan funded through insurance or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations, as of the date hereof, with respect to all current and former participants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to determine employer contributions to such Foreign Plan, which actuarial assumptions are commercially reasonable. Each Foreign Plan required to be registered has been registered and has been maintained in good standing with applicable Governmental Authorities. Each Foreign Plan reasonably complies in all material respects with all applicable Governmental Rules. (k) Other Regulations. No Borrower, Guarantor or any Material Subsidiary is subject to regulation under the Investment Company Act of 1940, the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code or any other Governmental Rule that limits its ability to incur Indebtedness. (l) Patent and Other Rights. Each Borrower and its Subsidiaries own, license or otherwise have the full right to use, under validly existing agreements, without known conflict with any rights of others, all material patents, licenses, trademarks, trade names, trade secrets, service marks, copyrights and all rights with respect thereto, which are required to conduct their businesses as now conducted. (m) Governmental Charges. Each Borrower and its Subsidiaries have filed or caused to be filed all tax returns, reports and declarations which are required to be filed by them. Each Borrower and its 34 39 Subsidiaries have paid, or made provision for the payment of, all taxes and other Governmental Charges which have or may have become due pursuant to said returns or otherwise and all other indebtedness, except such Governmental Charges or indebtedness, if any, which are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided or which are not reasonably and substantially likely to have a Material Adverse Effect if unpaid. (n) Margin Stock. No Borrower owns any Margin Stock which, in the aggregate, would constitute a substantial part of the assets of such Borrower, and no proceeds of any Loan will be used to purchase or carry, directly or indirectly, any Margin Stock or to extend credit, directly or indirectly, to any Person for the purpose of purchasing or carrying any Margin Stock. (o) Subsidiaries, Etc. Schedule 4.01(o) (as updated on a quarterly basis by Borrowers in a written notice to Agent no later than the date financial statements are required to be delivered pursuant to Subparagraph 5.01(a)) sets forth each of FIL's Subsidiaries (other than Subsidiaries with less than $100,000 in annual revenues or consolidated assets), its jurisdiction of organization, the classes of its Equity Securities, the number of shares of each such class issued and outstanding, the percentages of shares of each such class owned directly or indirectly by FIL and whether FIL owns such shares directly or, if not, the Subsidiary of FIL that owns such shares. The only Material Subsidiaries on the date of this Agreement are Flextronics International USA, Inc., Flex International Marketing (L) Ltd., Flextronics International Latin America (L) Ltd., Flextronics Manufacturing Mexico, S.A. de C.V., Flextronics International Finland Oy, Flextronics Industrial (Shenzhen) Co. Ltd., Flextronics International GmbH, Flextronics International Sweden AB and Flextronics International Kft. Each Borrower and each of the other Material Subsidiaries is a Subsidiary of FIL. (p) Solvency, Etc. Each of the Borrowers, the Guarantors and their Material Subsidiaries is Solvent and, after the execution and delivery of the Credit Documents and the consummation of the transactions contemplated thereby, will be Solvent. (q) No Withholding, Etc. No Borrower or Guarantor is required by any Governmental Rule to make any deduction or withholding of any nature whatsoever from any payment required to be made by either Borrower or any or Guarantor hereunder or under any other Credit Document. Neither this Agreement nor any of the other Credit Documents is subject to any registration or stamp tax or any other similar or like taxes payable in any jurisdiction. (r) Foreign Guarantors. (i) No Immunities, etc. Each Guarantor is subject to civil and commercial law with respect to its obligations under this Agreement and the other Credit Documents, and the execution, delivery and performance by each such Guarantor of any Credit Documents constitute and will constitute private and commercial acts and not public or governmental acts. Neither such Guarantor nor any of its property, whether or not held for its own account, has any immunity (sovereign or other similar immunity) from any suit or proceeding, from jurisdiction of any court or from set-off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or other similar immunity) under laws of the jurisdiction in which such Guarantor is organized and existing in respect of its obligations under this Agreement and the other Credit Documents. Each such Guarantor has waived every immunity (sovereign or otherwise) to which it or any of its properties would otherwise be entitled from any legal action, suit or proceeding, from jurisdiction of any court and from set-off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) under the laws of the jurisdiction in which such Guarantor is organized and existing in respect of its obligations under this Agreement and the other Credit Documents. The waiver by each such Guarantor described in the immediately preceding sentence is the legal, valid and binding obligation of such Guarantor. 35 40 (ii) No Recordation Necessary. This Agreement and each of the other Credit Documents executed by a Guarantor is in proper legal form under the law of the jurisdiction in which such Guarantor is organized and existing for the enforcement hereof or thereof against such Guarantor under the law of such jurisdiction, and to ensure the legality, validity, enforceability, priority or admissibility in evidence of this Agreement and such other Credit Documents. It is not necessary to ensure the legality, validity, enforceability, priority or admissibility in evidence of this Agreement or any other Credit Document executed by a Guarantor that this Agreement, any other Credit Document or any other document be filed, registered or recorded with, or executed or notarized before, any court or other authority in the jurisdiction in which such Guarantor is organized and existing or that any registration charge or stamp or similar tax be paid on or in respect of this Agreement, any other Credit Document or any other document, except for any such filing, registration or recording, or execution or notarization, as has been made or is not required to be made until this Agreement, any other Credit Document or any other document is sought to be enforced and for any charge or tax as has been timely paid. (iii) Exchange Controls. The execution, delivery and performance by a Guarantor of each of the Credit Documents executed by a Guarantor is, under applicable foreign exchange control regulations of the jurisdiction in which each Guarantor is organized and existing, not subject to any notification or authorization except (A) such as have been made or obtained or (B) such as cannot be made or obtained until a later date (provided any notification or authorization described in immediately preceding clause (B) shall be made or obtained as soon as is reasonably practicable). (s) No Material Adverse Effect. No event has occurred and no condition exists which is reasonably and substantially likely to have a Material Adverse Effect. (t) Accuracy of Information Furnished. The Credit Documents and the other certificates, statements and information (excluding projections) furnished to Agent or any Lender by or on behalf of Borrowers and their Subsidiaries in connection with the Credit Documents and the transactions contemplated thereby, taken as a whole, do not contain and will not contain any untrue statement of a material fact and do not omit and will not omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. All projections have been based upon reasonable assumptions and represent, as of their respective dates of presentations, Borrowers' best estimates of the future performance of Borrowers and their Subsidiaries. 4.02. Reaffirmation. Each Borrower shall be deemed to have reaffirmed, for the benefit of Lenders and Agent, each representation and warranty contained in Paragraph 4.01 on and as of the date of each Credit Event (except for representations and warranties expressly made as of a specified date, which shall be true as of such date). SECTION V. COVENANTS. 5.01. Affirmative Covenants. Until the termination of this Agreement and the satisfaction in full by Borrowers of all Obligations, Borrowers will comply, and will cause compliance, with the following affirmative covenants, unless Required Lenders shall otherwise consent in writing: (a) Financial Statements, Reports, etc. Each Borrower shall furnish to Agent the following, each in such form and such detail as Agent or the Required Lenders shall reasonably request: (i) As soon as available and in no event later than forty-five (45) days after the last day of each fiscal quarter of FIL, a copy of the Financial Statements of FIL and its Subsidiaries (prepared on a consolidated basis) for such quarter and for the fiscal year to date, certified by the chief financial officer, treasurer or controller of FIL to present fairly in all material respects the financial condition, results of operations and other information reflected therein and to have been prepared in accordance with GAAP (subject to normal year-end audit adjustments); 36 41 (ii) As soon as available and in no event later than ninety (90) days after the close of each fiscal year of FIL, (A) copies of the audited Financial Statements of FIL and its Subsidiaries (prepared on a consolidated and consolidating basis) for such year, audited by independent certified public accountants of recognized national standing reasonably acceptable to Agent, (B) copies of the unqualified opinions (or qualified opinions reasonably acceptable to Agent) and (C) if available from such accountants, certificates of such accountants to Agent stating that in making the examination necessary for their opinion they have reviewed this Agreement and have obtained no knowledge of any Default which has occurred and is continuing, or if, in the opinion of such accountants, a Default has occurred and is continuing, a statement as to the nature thereof; (iii) Contemporaneously with the quarterly and year-end Financial Statements required by the foregoing clauses (i) and (ii), a compliance certificate of the chief financial officer, treasurer or controller of FIL and each Borrower (a "Compliance Certificate") which (A) states that no Default has occurred and is continuing, or, if any such Default has occurred and is continuing, a statement as to the nature thereof and what action Borrowers propose to take with respect thereto; and (B) sets forth, for the quarter or year covered by such Financial Statements or as of the last day of such quarter or year (as the case may be), the calculation of the financial ratios and tests provided in the FIL Credit Agreement; (iv) As soon as possible and in no event later than five (5) Business Days after any officer of such Borrower knows of the occurrence or existence of (A) any Reportable Event under any Employee Benefit Plan or Multiemployer Plan; (B) any actual or threatened litigation, suits, claims or disputes against either Borrower or any of its Subsidiaries involving potential monetary damages payable by either Borrower or its Subsidiaries of $10,000,000 or more (alone or in the aggregate); (C) any other event or condition which is reasonably and substantially likely to have a Material Adverse Effect; or (D) any Default; the statement of the chief financial officer, treasurer or controller of such Borrower setting forth details of such event, condition or Default and the action which such Borrower proposes to take with respect thereto; (v) As soon as available and in no event later than five (5) Business Days after they are sent, made available or filed, copies of (A) all registration statements and reports filed by either Borrower or any of their Affiliates with the United States Securities and Exchange Commission (including, without limitation, all 10-Q, 10-K and 8-K reports); and (B) all reports, proxy statements and financial statements sent or made available by either Borrower or any of their Affiliates to its security holders; (vi) As soon as possible and in no event later than (A) forty-five (45) days after the last day of each fiscal quarter (or ninety (90) days in the case of the last fiscal quarter of each fiscal year), written notice of any new Subsidiary acquired or established directly or indirectly by FIL during such quarter, any new Equity Securities of any existing Subsidiary acquired directly or indirectly by FIL during such quarter or any other change in the information set forth in Schedule 4.01(o) during such quarter; and (B) ten (10) days after the date that any entity becomes a Material Subsidiary, written notice setting forth each Subsidiary of FIL that has become a Material Subsidiary and indicating for each such new Material Subsidiary whether such Material Subsidiary is an Eligible Material Subsidiary or Ineligible Material Subsidiary; (vii) As soon as available and in no event later than five (5) Business Days after either Borrower changes its legal name or the address of its chief executive office, written notice setting forth such Borrower's new legal name and/or new address; and (viii) Such other instruments, agreements, certificates, opinions, statements, documents and information relating to the operations or condition (financial or otherwise) of FIL, such Borrower or their Subsidiaries, and compliance by such Borrower with the terms of this Agreement and the other Credit Documents as Agent may from time to time reasonably request. 37 42 In lieu of furnishing to Agent hard copies of the quarterly Financial Statements described in clause (i) above and the annual Financial Statements and auditor's report described in clauses (ii)(A) and (ii)(B) above and the other documents referred to in clause (v) above, Borrowers may make such documents available to Lenders at FIL's website located at www.flextronics.com and through the United States Securities and Exchange Commission's EDGAR system ("EDGAR") or by transmitting such documents electronically to Lenders. The Agent shall provide to any Lender hard copies of such documents upon request if such Lender does not have access to FIL's website or EDGAR. (b) Books and Records. Each Borrower and their Subsidiaries shall at all times keep proper books of record and account which shall be complete and correct in all material respects in accordance with GAAP. (c) Inspections. Each Borrower and their Subsidiaries shall permit Agent and each Lender, or any agent or representative thereof, upon reasonable notice and during normal business hours, to visit and inspect any of the properties and offices of such Borrower and its Subsidiaries, to examine the books and records of such Borrower and its Subsidiaries and make copies thereof and to discuss the affairs, finances and business of such Borrower and its Subsidiaries with, and to be advised as to the same by, their officers, auditors and accountants, all at such times and intervals as Agent or any Lender may reasonably request (which visits and inspections shall be at the expense of Agent or such Lender unless a Default has occurred and is continuing). (d) Insurance. Each Borrower and their Subsidiaries shall (i) carry and maintain insurance of the types and in the amounts customarily carried from time to time during the term of this Agreement by others engaged in substantially the same business as such Person and operating in the same geographic area as such Person, including fire, public liability, property damage and worker's compensation, (ii) carry and maintain each policy for such insurance with financially sound insurers and (iii) deliver to Agent from time to time, as Agent may request, schedules setting forth all insurance then in effect. (e) Governmental Charges and Other Indebtedness. Each Borrower and their Subsidiaries shall promptly pay and discharge when due (i) all taxes and other Governmental Charges prior to the date upon which penalties accrue thereon, (ii) all indebtedness which, if unpaid, could become a Lien upon the property of such Borrower or its Subsidiaries and (iii) subject to any subordination provisions applicable thereto, all other Indebtedness, which in each case, if unpaid, is reasonably and substantially likely to have a Material Adverse Effect, except such Indebtedness as may in good faith be contested or disputed, or for which arrangements for deferred payment have been made, provided that in each such case appropriate reserves are maintained in accordance with GAAP. (f) Use of Proceeds. Each Borrower shall use the proceeds of the Loans only for the respective purposes set forth in Section II. No Borrower shall use any part of the proceeds of any Loan, directly or indirectly, for the purpose of purchasing or carrying any Margin Stock or for the purpose of purchasing or carrying or trading in any securities under such circumstances as to involve such Borrower, any Lender or Agent in a violation of Regulations T, U or X issued by the Federal Reserve Board. (g) General Business Operations. Each of the Borrowers and their Subsidiaries shall (i) preserve and maintain its corporate existence and all of its rights, privileges and franchises reasonably necessary to the conduct of its business, (ii) conduct its business activities in compliance with all Requirements of Law and Contractual Obligations applicable to such Person and (iii) keep all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted, except, in each case, where any failure is not reasonably and substantially likely to have a Material Adverse Effect. (h) Pari Passu Ranking. Each Borrower shall take, or cause to be taken, all actions necessary to ensure that the Obligations of such Borrower are and continue to rank at least pari passu in right of payment with all other unsecured and unsubordinated Indebtedness of such Borrower. 38 43 5.02. Negative Covenants. Until the termination of this Agreement and the satisfaction in full by Borrowers of all Obligations, Borrowers will comply, and will cause compliance, with the following negative covenants, unless Required Lenders shall otherwise consent in writing: (a) Indebtedness. Neither Borrower nor any of their Subsidiaries shall create, incur, assume or permit to exist any Indebtedness except for the following ("Permitted Indebtedness"): (i) Indebtedness that is not secured by a Lien in any asset or property of either Borrower or any of their Subsidiaries; (ii) (A) Indebtedness under Capital Leases or under purchase money loans incurred by Borrower or any of its Subsidiaries to finance the acquisition, construction, development or improvement by such Person of real property, fixtures or equipment provided that in each case (1) such Indebtedness is incurred by such Person at the time of, or not later than ninety (90) days after, the acquisition by such Person of the property so financed and (2) such Indebtedness does not exceed the purchase price of the property (or the cost of constructing, developing or improving the same) so financed, and (B) Indebtedness under initial or successive refinancings of any such Capital Leases or purchase money loans provided that the principal amount of any such refinancing does not exceed the principal amount of the Indebtedness being refinanced; (iii) Existing Secured Indebtedness; (iv) Indebtedness of any Borrower to any other Borrower or any Eligible Material Subsidiary or Indebtedness of any Eligible Material Subsidiary to any Borrower or any other Eligible Material Subsidiary, in each case to the extent otherwise permitted pursuant to Subparagraph 5.02(e) and Subparagraph 5.02(i); and (v) Other Indebtedness that is secured by a Lien on any assets or property of any of the Borrowers or any of their Subsidiaries, provided that the aggregate principal amount of all secured Indebtedness of FIL and its Subsidiaries (other than Existing Secured Indebtedness or Indebtedness secured by cash or cash equivalents to the extent such cash or cash equivalents are proceeds of such Indebtedness), outstanding during any fiscal quarter of FIL does not exceed ten percent (10%) of the consolidated assets of FIL and its Subsidiaries on the last day of the immediately preceding fiscal quarter. (b) Liens. Neither Borrower nor any of their Subsidiaries shall create, incur, assume or permit to exist any Lien on or with respect to any of their assets or property of any character, whether now owned or hereafter acquired, except for the following Liens ("Permitted Liens"): (i) Liens that secure only Indebtedness which constitutes Permitted Indebtedness under clause (ii), (iii) or (iv) of Subparagraph 5.02(a); (ii) Liens in favor of either Borrower or any Eligible Material Subsidiary on all or part of the assets of Subsidiaries of either Borrower or Eligible Material Subsidiary securing Indebtedness owing by Subsidiaries of either Borrower or Eligible Material Subsidiary, as the case may be, to either Borrower or to such other Eligible Material Subsidiary; (iii) Liens to secure taxes, assessments and other government charges in respect of obligations not overdue or Liens on properties to secure claims for labor, material or supplies in respect of obligations not overdue, or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves are being maintained in accordance with generally accepted accounting principles so long as such Liens are not being foreclosed; 39 44 (iv) deposits or pledges made in connection with, or to secure payment of, workmen's compensation, unemployment insurance, old age pensions or other social security obligations and good faith deposits in connection with tenders, contracts or leases to which either Borrower or any of its Subsidiaries is a party or deposits or pledges to secure, or in lieu of, surety, penalty or appeal bonds, performance bonds or other similar obligations; (v) Liens of carriers, warehousemen, mechanics and materialmen, and other like Liens on properties which would not have a Material Adverse Effect and are in respect of obligations not overdue, or which are being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves are being maintained in accordance with generally accepted accounting principles so long as such Liens are not being foreclosed; (vi) encumbrances on real property consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's or lessee's Liens under leases to which either Borrower or any of its Subsidiaries is a party, and other minor Liens or encumbrances none of which interferes materially with the use of the property, which defects do not individually or in the aggregate have a Material Adverse Effect; (vii) Liens in favor of the Agent for the benefit of the Lenders and the Agent under the Credit Documents; (viii) Liens in favor of the agent for the benefit of the lenders and the agent under the FIL Credit Documents; (ix) Liens in favor of Ericsson Business Networks AB under the Pledge Agreement dated March 27, 1997 between Ericsson and Flextronics Holdings AB; (x) Liens securing Indebtedness or other obligations on cash or cash equivalents to the extent such cash or cash equivalents represent proceeds from such Indebtedness or other obligations; and (xi) rights of third parties in equipment or inventory consigned to, or otherwise owned by such third party and which is being stored on property owned or leased by, either Borrower or a Subsidiary. Provided, however, that the foregoing exceptions shall not permit any Lien in any of the Collateral or in any other Equity Securities issued by any Subsidiary of either Borrower and owned by such Borrower or any of its other Subsidiaries, except for Liens in favor of Agent securing the Obligations or pursuant to the FIL Credit Documents. (c) Asset Dispositions. Neither Borrower nor any of their Subsidiaries shall sell, lease, transfer or otherwise dispose of any of their assets or property, whether now owned or hereafter acquired, except for (i) assets or property sold, leased, transferred or otherwise disposed of in the ordinary course of business for fair market value; (ii) sales of accounts receivable in financing transactions, provided that the aggregate principal amount of any accounts receivable sold in any fiscal quarter of FIL shall not exceed thirty percent (30%) of the aggregate principal amount of accounts receivable originated by FIL and its Subsidiaries during such fiscal quarter; (iii) sales of duplicative or excess assets existing as a result of transactions otherwise permitted pursuant to Subparagraph 5.02(d), provided that the aggregate principal amount of any such duplicative assets sold in any fiscal year does not exceed five percent (5%) of all fixed assets of FIL and its Subsidiaries net of depreciation held by FIL and its Subsidiaries as of the end of the immediately preceding fiscal quarter; and (iv) sales or transfers of assets or property to either Borrower or any Material Subsidiary for a purchase price that is less than fair market value; provided, however, that the foregoing exception shall not permit any sale, lease, transfer or other disposition of any Collateral or of any 40 45 other Equity Securities issued by any Subsidiary of either Borrower and owned by either Borrower or any of their other Subsidiaries, except for Liens in favor of Agent securing the Obligations or pursuant to the FIL Credit Documents; and (v) assets sold and leased back by FIL or its Subsidiaries in the ordinary course of business. (d) Mergers, Acquisitions, Etc. Neither Borrower nor any of their Subsidiaries shall consolidate with or merge into any other Person or permit any other Person to merge into them, acquire any Person as a new Subsidiary or acquire all or substantially all of the assets of any other Person, except for the following: (i) Borrowers and their Subsidiaries may merge with each other, provided that (A) in any such merger involving either Borrower, such Borrower is the surviving corporation and (B) no Default has occurred and is continuing on the date of, or will result after giving effect to, any such merger; and (ii) Borrowers and their Subsidiaries may acquire any Person as a new Subsidiary or of all or substantially all of the assets of any Person, provided that: (A) No Default has occurred and is continuing on the date of, or will result after giving effect to, any such acquisition; (B) Such Person is not primarily engaged in any business substantially different from (1) the present business of the acquiring Borrower or Subsidiary or (2) any business reasonably related thereto; and (C) Borrowers or their Subsidiaries possess the power to direct or cause the direction of the management and policies of such Person. (e) Investments. Neither Borrower nor any of their Subsidiaries shall make any Investment except for the following: (i) Investments permitted by the investment policy of FIL set forth in Schedule 5.02(e) or, if any changes to the investment policy of FIL are hereafter duly approved by the Board of Directors of FIL, in any subsequent investment policy which is the most recent investment policy delivered by FIL to Agent with a certificate of FIL's chief financial officer to the effect that such investment policy has been duly approved by FIL's Board of Directors and is then in effect; (ii) Investments listed in Schedule 5.02(e) existing on the date of this Agreement; (iii) Investments received by Borrowers and their Subsidiaries in connection with the bankruptcy or reorganization of customers and suppliers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (iv) Investments by Borrowers and the Material Subsidiaries and the Guarantors in each other; (v) Investments consisting of loans to employees and officers for travel, housing, relocation and other similar expenses incurred in the ordinary course of business; (vi) Investments of Borrowers and their Subsidiaries in interest rate protection, currency swap and foreign exchange arrangements, provided that all such arrangements are entered into in connection with bona fide hedging operations and not for speculation; 41 46 (vii) Deposit accounts; (viii) Investments permitted by Subparagraph 5.02(d); (ix) Investment by FIL or its Subsidiaries of up to $125,000,000 in Chatham Technologies, Inc.; and (x) Other Investments, provided that: (A) No Default has occurred and is continuing on the date of, or will result after giving effect to, any such Investment; and (B) The aggregate consideration paid by FIL and its Subsidiaries for all such Investments in any fiscal year does not exceed five percent (5%) of the total assets of FIL and its Subsidiaries at the end of the immediately preceding fiscal quarter. (f) Dividends, Redemptions, Etc. Neither Borrower nor any of their Subsidiaries shall pay any dividends or make any distributions on its Equity Securities; purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Securities; return any capital to any holder of its Equity Securities as such; make any distribution of assets, Equity Securities, obligations or securities to any holder of its Equity Securities as such; or set apart any sum for any such purpose; except as follows: (i) Either Borrower or any of their Subsidiaries may pay dividends on its capital stock payable solely in such Person's own capital stock, provided that, in the case of any such dividend payable by an Ineligible Material Subsidiary, such dividend is delivered and pledged to Agent to the extent required by Subparagraph 2.15(b); and (ii) Any Subsidiary of either Borrower may pay dividends to or repurchase its capital stock from such Borrower. (g) Change in Business. Neither Borrower nor any of their Subsidiaries shall engage to any material extent, either directly or indirectly, in any business substantially different from (i) their present business or (ii) any business reasonably related thereto. (h) Employee Benefit Plans. (i) Neither Borrower nor any ERISA Affiliate shall (A) adopt or institute any Employee Benefit Plan that is an employee pension benefit plan within the meaning of Section 3(2) of ERISA, (B) take any action which will result in the partial or complete withdrawal, within the meanings of sections 4203 and 4205 of ERISA, from a Multiemployer Plan, (C) engage or permit any Person to engage in any transaction prohibited by section 406 of ERISA or section 4975 of the IRC involving any Employee Benefit Plan or Multiemployer Plan which would subject either Borrower or any ERISA Affiliate to any tax, penalty or other liability including a liability to indemnify, (D) incur or allow to exist any accumulated funding deficiency (within the meaning of section 412 of the IRC or section 302 of ERISA), (E) fail to make full payment when due of all amounts due as contributions to any Employee Benefit Plan or Multiemployer Plan, (F) fail to comply with the requirements of section 4980B of the IRC or Part 6 of Title I(B) of ERISA, or (G) adopt any amendment to any Employee Benefit Plan which would require the posting of security pursuant to section 401(a)(29) of the IRC, where singly or cumulatively, the above would be reasonably and substantially likely to have a Material Adverse Effect. (ii) Neither Borrower nor any of their Subsidiaries shall (A) engage in any transaction prohibited by any Governmental Rule applicable to any Foreign Plan, (B) fail to make full payment when due of all amounts due as contributions to any Foreign Plan or (C) otherwise fail to comply with the requirements of any Governmental Rule applicable to any Foreign Plan, 42 47 where singly or cumulatively, the above would be reasonably and substantially likely to have a Material Adverse Effect. (i) Transactions With Affiliates. Neither Borrower nor any of their Subsidiaries shall enter into any Contractual Obligation with any Affiliate (other than FIL, any other borrower under the FIL Credit Agreement or one of their Subsidiaries) or engage in any other transaction with any such Affiliate except upon terms at least as favorable to such Borrower or such Subsidiary as an arms-length transaction with unaffiliated Persons, except as disclosed or reflected in the Financial Statements of FIL dated December 31, 1999, furnished by Borrowers to Agent prior to the date hereof, or in the Financial Statements delivered to Agent pursuant to clause (i) or (ii) of Subparagraph 5.01(a). (j) Accounting Changes. Neither Borrower nor any of their Subsidiaries shall change (i) their fiscal year (currently April 1 through March 31) or (ii) their accounting practices except as required by GAAP. (k) Burdensome Contractual Obligations. None of the Borrowers, the Guarantors and any of their Subsidiaries will enter into any Contractual Obligation (excluding this Agreement and the other Credit Documents) that restricts the ability of any Subsidiary of FIL to pay or make dividends or distributions in cash or kind, to make loans, advances or other payments of whatsoever nature or to make transfers or distributions of all or any part of their assets to Borrowers or to any Subsidiary of such Subsidiary. SECTION VI. DEFAULT. 6.01. Events of Default. The occurrence or existence of any one or more of the following shall constitute an "Event of Default" hereunder: (a) Non-Payment. Either Borrower shall (i) fail to pay when due any principal of any Loan or (ii) fail to pay within three (3) Business Days after the same becomes due any interest, fee or other payment required under the terms of this Agreement or any of the other Credit Documents; or (b) Specific Defaults. Either Borrower or any of its Subsidiaries shall fail to observe or perform any covenant, obligation, condition or agreement set forth in Paragraph 5.02; or (c) Other Defaults. Either Borrower or any of its Subsidiaries shall fail to observe or perform any other covenant, obligation, condition or agreement contained in this Agreement or the other Credit Documents and such failure shall continue for fifteen (15) Business Days after the earlier of (i) either Borrower's written acknowledgement of such failure and (ii) Agent's or any Lender's written notice to Borrowers of such failure; or (d) Representations and Warranties. Any representation, warranty, certificate, information or other statement (financial or otherwise) made or furnished by or on behalf of either Borrower to Agent or any Lender in or in connection with this Agreement or any of the other Credit Documents, or as an inducement to Agent or any Lender to enter into this Agreement, shall be false, incorrect, incomplete or misleading in any material respect when made (or deemed made) or furnished and either (i) Agent or any Lender has delivered to Borrowers written notice thereof and such representation, warranty, certificate, information or other statement cannot be remedied or (ii) such representation, warranty, certificate, information or other statement continues to be false, incorrect, incomplete or misleading in any material respect thirty (30) days after the earlier of (A) either Borrower's written acknowledgement that such representation, warranty, certificate, information or other statement was false, incorrect, incomplete or misleading in any material respect and (B) Agent's or any Lender's written notice to Borrowers that such representation, warranty, certificate, information or other statement was false, incorrect, incomplete or misleading in any material respect; or (e) Cross-Default. (i) Either Borrower or any of its Subsidiaries shall fail to make any payment on account of any Indebtedness of such Person (other than the Obligations) when due (whether at 43 48 scheduled maturity, by required prepayment, upon acceleration or otherwise) and such failure shall continue beyond any period of grace provided with respect thereto, if the amount of such Indebtedness exceeds $10,000,000 or the effect of such failure is to cause, or permit the holder or holders thereof to cause, Indebtedness of Borrowers and their Subsidiaries (other than the Obligations) in an aggregate amount exceeding $10,000,000 to become due (whether at scheduled maturity, by required prepayment, upon acceleration or otherwise); or (ii) either Borrower or any of its Subsidiaries shall otherwise fail to observe or perform any agreement, term or condition contained in any agreement or instrument relating to any Indebtedness of such Person (other than the Obligations), or any other event shall occur or condition shall exist, if the effect of such failure, event or condition is to cause, or permit the holder or holders thereof to cause, Indebtedness of Borrowers and their Subsidiaries (other than the Obligations) in an aggregate amount exceeding $10,000,000 to become due (and/or to be secured by cash collateral); or (iii) any Event of Default, as defined in the FIL Credit Agreement, shall occur, without regard to any waiver of such Event of Default under the FIL Credit Agreement; or (f) Insolvency, Voluntary Proceedings. Either Borrower, FIL or any of their Subsidiaries shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) be unable, or admit in writing its inability, to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) become insolvent (as such term may be defined or interpreted under any applicable statute), (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi) take any action for the purpose of effecting any of the foregoing; or either Borrower, FIL or any Material Subsidiary shall be dissolved or liquidated in full or in part; or (g) Involuntary Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of FIL, either Borrower or any of their Subsidiaries or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to FIL, either Borrower or any of their Subsidiaries or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within sixty (60) days of commencement; or (h) Judgments. (i) One or more judgments, orders, decrees or arbitration awards requiring Borrowers and/or their Subsidiaries to pay an aggregate amount of $10,000,000 or more (exclusive of amounts covered by insurance issued by an insurer not an Affiliate of Borrowers and otherwise satisfying the requirements set forth in Subparagraph 5.01(d)) shall be rendered against Borrowers and/or their Subsidiaries in connection with any single or related series of transactions, incidents or circumstances and the same shall not be satisfied, vacated or stayed for a period of sixty (60) consecutive days; (ii) any judgment, writ, assessment, warrant of attachment, tax lien or execution or similar process shall be issued or levied against a substantial part of the property of either Borrower or any of their Subsidiaries and the same shall not be released, stayed, vacated or otherwise dismissed within sixty (60) days after issue or levy; or (iii) any other judgments, orders, decrees, arbitration awards, writs, assessments, warrants of attachment, tax liens or executions or similar processes which, alone or in the aggregate, are reasonably and substantially likely to have a Material Adverse Effect are rendered, issued or levied; or (i) Credit Documents. Any Credit Document or any material term thereof shall cease to be, or be asserted by either Borrower or any of their Subsidiaries not to be, a legal, valid and binding obligation of either Borrower or any of their Subsidiaries enforceable in accordance with its terms; or (j) Employee Benefit Plans. Any Reportable Event which constitutes grounds for the termination of any Employee Benefit Plan by the PBGC or for the appointment of a trustee by the PBGC to administer any Employee Benefit Plan shall occur, or any Employee Benefit Plan shall be terminated within the meaning of Title IV of ERISA or a trustee shall be appointed by the PBGC to administer any Employee Benefit Plan; or 44 49 (k) Change of Control. Any Change of Control shall occur; or (l) Material Adverse Effect. Any event(s) or condition(s) which is (are) reasonably and substantially likely to have a Material Adverse Effect shall occur or exist. 6.02. Remedies. At any time after the occurrence and during the continuance of any Event of Default (other than an Event of Default referred to in Subparagraph 6.01(f) or 6.01(g)), Agent may, with the consent of the Required Lenders, or shall, upon instructions from the Required Lenders, by written notice to Borrowers, (a) terminate the Commitments and the obligations of Lenders to make Loans and/or (b) declare all outstanding Obligations payable by Borrowers to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Notes to the contrary notwithstanding. Upon the occurrence or existence of any Event of Default described in Subparagraph 6.01(f) or 6.01(g), immediately and without notice, (1) the Commitments and the obligations of Lenders to make Loans shall automatically terminate and (2) all outstanding Obligations payable by Borrowers hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the Notes to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Agent may exercise any other right, power or remedy available to it under any of the Credit Documents or otherwise by law, either by suit in equity or by action at law, or both. 6.03. Lender Rate Contract Remedies. Notwithstanding any other provision of this Section VI, each Lender or its Affiliate which has entered into a Lender Rate Contract shall have the right, with prior notice to Agent, but without the approval or consent of Agent or any other Lender, (a) to declare an event of default, termination event or other similar event thereunder which will result in the early termination of such Lender Rate Contract, (b) to determine net termination amounts in accordance with the terms of such Lender Rate Contract and to set-off amounts between Lender Rate Contracts of such Lender, and (c) to prosecute any legal action against either Borrower or their Subsidiaries to enforce net amounts owing to such Lender or its Affiliate under such Lender Rate Contracts. SECTION VII. THE AGENT AND RELATIONS AMONG LENDERS. 7.01. Appointment, Powers and Immunities. Each Lender hereby appoints and authorizes Agent to act as its agent hereunder and under the other Credit Documents with such powers as are expressly delegated to Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement or in any other Credit Document, be a trustee for any Lender or have any fiduciary duty to any Lender. Notwithstanding anything to the contrary contained herein Agent shall not be required to take any action which is contrary to this Agreement or any other Credit Document or any applicable Governmental Rule. Neither Agent nor any Lender shall be responsible to any other Lender for any recitals, statements, representations or warranties made by Borrowers or any of their Subsidiaries contained in this Agreement or in any other Credit Document, for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or for any failure by Borrowers or any of their Subsidiaries to perform their respective obligations hereunder or thereunder. Agent may employ agents and attorneys-in-fact and shall not be responsible to any Lender for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Neither Agent nor any of its directors, officers, employees, agents or advisors shall be responsible to any Lender for any action taken or omitted to be taken by it or them hereunder or under any other Credit Document or in connection herewith or therewith, except for its or their own gross negligence or willful misconduct. Except as otherwise provided under this Agreement, Agent shall take such action with respect to the Credit Documents as shall be directed by the Required Lenders. 7.02. Reliance by Agent. Agent shall be entitled to rely upon any certificate, notice or other document (including any cable, telegram, facsimile or telex) believed by it in good faith to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Agent with reasonable care. As to any other matters not expressly provided for by this Agreement, Agent shall not be required to take any action or exercise any 45 50 discretion, but shall be required to act or to refrain from acting upon instructions of the Required Lenders and shall in all cases be fully protected by Lenders in acting, or in refraining from acting, hereunder or under any other Credit Document in accordance with the instructions of the Required Lenders, and such instructions of the Required Lenders and any action taken or failure to act pursuant thereto shall be binding on all of Lenders. 7.03. Defaults. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default unless Agent has received a written notice from a Lender or either Borrower, referring to this Agreement, describing such Default and stating that such notice is a "Notice of Default". If Agent receives such a notice of the occurrence of a Default, Agent shall give prompt notice thereof to Lenders. Agent shall take such action with respect to such Default as shall be reasonably directed by the Required Lenders; provided, however, that until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interest of Lenders. 7.04. Indemnification. Without limiting the Obligations of Borrowers hereunder, each Lender agrees to indemnify Agent, ratably in accordance with their Proportionate Shares, for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against Agent in any way relating to or arising out of this Agreement or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or the enforcement of any of the terms hereof or thereof; provided, however, that no Lender shall be liable for any of the foregoing to the extent they arise from Agent's gross negligence or willful misconduct. Agent shall be fully justified in refusing to take or in continuing to take any action hereunder unless it shall first be indemnified to its satisfaction by Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The obligations of each Lender under this Paragraph 7.04 shall survive the payment and performance of the Obligations, the termination of this Agreement and any Lender ceasing to be a party to this Agreement (with respect to events which occurred prior to the time such Lender ceased to be a Lender hereunder). 7.05. Non-Reliance. Each Lender represents that it has, independently and without reliance on Agent, or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of the business, prospects, management, financial condition and affairs of Borrowers and their Subsidiaries and its own decision to enter into this Agreement and agrees that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own appraisals and decisions in taking or not taking action under this Agreement. Neither Agent nor any of its affiliates nor any of their respective directors, officers, employees, agents or advisors shall (a) be required to keep any Lender informed as to the performance or observance by Borrowers or any of their Subsidiaries of the obligations under this Agreement or any other document referred to or provided for herein or to make inquiry of, or to inspect the properties or books of Borrowers or any of their Subsidiaries; (b) have any duty or responsibility to provide any Lender with any credit or other information concerning Borrowers or any of their Subsidiaries which may come into the possession of Agent, except for notices, reports and other documents and information expressly required to be furnished to Lenders by Agent hereunder; or (c) be responsible to any Lender for (i) any recital, statement, representation or warranty made by Borrowers or any officer, employee or agent of Borrowers in this Agreement or in any of the other Credit Documents, (ii) the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any Credit Document, (iii) the value or sufficiency of the Collateral or the validity or perfection of any of the liens or security interests intended to be created by the Credit Documents, or (iv) any failure by Borrowers to perform its obligations under this Agreement or any other Credit Document. 7.06. Resignation or Removal of Agent. Agent may resign at any time by giving thirty (30) days prior written notice thereof to Borrowers and Lenders, and Agent may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent, which Agent, if not a Lender, shall be reasonably acceptable to Borrowers; provided, however, that Borrowers shall have no right to approve a successor Agent if a Default has occurred and is continuing. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from the duties and obligations thereafter arising hereunder. After any retiring Agent's 46 51 resignation or removal hereunder as Agent, the provisions of this Section VII shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Agent. 7.07. Agent in its Individual Capacity. Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of banking or other business with Borrowers and their Subsidiaries and affiliates as though Agent were not Agent hereunder. With respect to Loans, if any, made by Agent in its capacity as a Lender, Agent in its capacity as a Lender shall have the same rights and powers under this Agreement and the other Credit Documents as any other Lender and may exercise the same as though it were not Agent, and the terms "Lender" or "Lenders" shall include Agent in its capacity as a Lender. 7.08. Documentation Agent, Managing Agents and Co-Agent. Documentation Agent, Managing Agents and Co-Agent do not assume any responsibility or obligation under this Agreement or any of the other Credit Documents or any duties as agents for the Lenders. The title "Documentation Agent", "Managing Agent" and "Co-Agent" implies no fiduciary responsibility on the part of any Documentation Agent, Managing Agent and Co-Agent to any Person, and the use of such title does not impose on any Documentation Agent, Managing Agent and Co-Agent any duties or obligations under this Agreement or any of the other Credit Documents. SECTION VIII. MISCELLANEOUS. 8.01. Notices. Except as otherwise provided herein, all notices, requests, demands, consents, instructions or other communications to or upon either Borrower, any Lender or Agent under this Agreement or the other Credit Documents shall be in writing and faxed, mailed or delivered, if to either Borrower or Agent, at its respective facsimile number or address set forth below or, if to any Lender, at the address or facsimile number specified for such Lender in Part B of Schedule I (or to such other facsimile number or address for any party as indicated in any notice given by that party to the other parties). All such notices and communications shall be effective (a) when sent by an overnight courier service of recognized standing, on the second Business Day following the deposit with such service; (b) when delivered by hand, upon delivery; (c) when faxed, upon confirmation of receipt; or (d) by any other means, upon receipt; provided, however, that any notice delivered to Agent under Section II shall not be effective until received by Agent. Agent: ABN AMRO Bank N.V. Syndications Group 1325 Avenue of the Americas, 9th Floor New York, NY 10019 U.S.A. Attn: Linda Boardman Tel. No: (212) 314-1724 Fax. No: (212) 314-1712 With a copy in each case to: ABN AMRO Bank N.V. 101 California Street, Suite 4550 San Francisco, CA 94111-5812 Attn: Mathew Harvey Tel: (415) 984-3733 Fax: (415) 362-3524 Borrower: Flextronics International USA, Inc. 2090 Fortune Drive San Jose, CA 95131 Attn: Treasurer Tel. No: (408) 576-7233 Fax. No: (408) 526-9215 47 52 Borrower: The DII Group, Inc. 2090 Fortune Drive San Jose, CA 95131 Attn: Treasurer Tel. No: (408) 576-7233 Fax. No: (408) 526-9215 Each Notice of Borrowing, Notice of Interest Period Selection and Notice of Term Loan Conversion shall be given by the applicable Borrower to Agent's New York office located at the address referred to above during such office's normal business hours; provided, however, that any such notice received by Agent after 11:00 a.m. (California time) on any Business Day shall be deemed received by Agent on the next Business Day. In any case where this Agreement authorizes notices, requests, demands or other communications by Borrowers to Agent or any Lender to be made by telephone or facsimile, Agent or any Lender may conclusively presume that anyone purporting to be a person designated in any incumbency certificate or other similar document received by Agent or a Lender is such a person. 8.02. Expenses. Borrowers jointly and severally agree to pay on demand, whether or not any Loan is made hereunder, (a) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Agent in connection with the syndication of the Loans, the preparation, negotiation, execution and delivery of, and the exercise of its duties under, this Agreement and the other Credit Documents, and the preparation, negotiation, execution and delivery of amendments and waivers hereunder and thereunder and (b) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, incurred by Agent and Lenders in the enforcement or attempted enforcement of any of the Obligations or in preserving any of Agent's or Lenders' rights and remedies (including, without limitation, all such fees and expenses incurred in connection with any "workout" or restructuring affecting the Credit Documents or the Obligations or any bankruptcy or similar proceeding involving Borrowers or any of their Subsidiaries). As used herein, the term "reasonable attorneys' fees and expenses" shall include, without limitation, allocable costs and expenses of Agent's and Lenders' in-house legal counsel and staff. The obligations of Borrowers under this Paragraph 8.02 shall survive the payment and performance of the Obligations and the termination of this Agreement. 8.03. Indemnification. To the fullest extent permitted by law, Borrowers jointly and severally agree to protect, indemnify, defend and hold harmless Agent, Lenders and their Affiliates and their respective directors, officers, employees, agents and advisors ("Indemnitees") from and against any and all liabilities, losses, damages or expenses of any kind or nature and from any suits, claims or demands (including in respect of or for reasonable attorney's fees and other expenses) arising on account of or in connection with any matter or thing or action or failure to act by Indemnitees, or any of them, arising out of or relating to the Credit Documents or any transaction contemplated thereby, including without limitation any use by Borrowers of any proceeds of the Loans, except to the extent such liability arises from the willful misconduct or gross negligence of such Indemnitee. Upon receiving knowledge of any suit, claim or demand asserted by a third party that Agent or any Lender believes is covered by this indemnity, Agent or such Lender shall give Borrowers notice of the matter and an opportunity to defend it, at Borrowers' sole cost and expense, with legal counsel satisfactory to Agent or such Lender, as the case may be. Agent or such Lender may also require Borrowers to defend the matter. Any failure or delay of Agent or any Lender to notify Borrowers of any such suit, claim or demand shall not relieve Borrowers of their obligations under this Paragraph 8.03 but shall reduce such obligations to the extent of any increase in those obligations caused solely by any such failure or delay which is unreasonable. The obligations of Borrowers under this Paragraph 8.03 shall survive the payment and performance of the Obligations and the termination of this Agreement. 8.04. Waivers; Amendments. Any term, covenant, agreement or condition of this Agreement or any other Credit Document may be amended or waived, and any consent under this Agreement or any other Credit Document may be given, if such amendment, waiver or consent is in writing and is signed by Borrowers and the Required Lenders (or Agent on behalf of the Required Lenders with the written approval of the Required Lenders); provided, however that: 48 53 (a) Any amendment, waiver or consent which would (i) increase the Total Facility A Commitment, (ii) postpone, delay or extend the Facility A Revolving Loan Maturity Date, (iii) reduce the principal of or interest on the Facility A Loans, the Facility A Commitment Fees or any other fees or amounts payable for the account of all Facility A Lenders hereunder or postpone, delay or extend the scheduled date for payment of any such principal, interest, fees or amounts must be in writing and signed or approved in writing by all Facility A Lenders; (b) Any amendment, waiver or consent which would (i) increase the Total Facility B Commitment, (ii) postpone, delay or extend the Facility B Revolving Loan Maturity Date or the Term Loan Maturity Date, (iii) reduce the principal of or interest on the Facility B Loans, the Facility B Commitment Fees or any other fees or amounts payable for the account of all Facility B Lenders hereunder or postpone, delay or extend the scheduled date for payment of any such principal, interest, fees or amounts must be in writing and signed or approved in writing by all Facility B Lenders; (c) Any amendment, waiver or consent which would (i) reduce the principal of or interest on the Loans or any fees or other amounts payable for the account of all Lenders hereunder or extend the scheduled date for payment of any such principal, interest, fees or amounts, (ii) reduce any fees or other amounts payable for the account of all Lenders hereunder or postpone, delay or extend the scheduled date for payment of any such fees or amounts, (iii) amend this Paragraph 8.04, (iv) amend the definition of Required Lenders, or (v) release any substantial part of the Collateral or any Guarantor (except for releases as provided in Paragraph 2.15), must be in writing and signed or approved in writing by all Lenders; (d) Any amendment, waiver or consent which would (i) increase or decrease the Facility A Commitment of any Facility A Lender (except for a pro rata decrease in the Facility A Commitments of all Facility A Lenders) or (ii) increase or decrease the Facility B Commitment of any Facility B Lender (except for a pro rata decrease in the Facility B Commitments of all Facility B Lenders) must be in writing and signed by such Lender; and (e) Any amendment, waiver or consent which affects the rights or obligations of Agent must be in writing and signed by Agent. No failure or delay by Agent or any Lender in exercising any right under this Agreement or any other Credit Document shall operate as a waiver thereof or of any other right hereunder or thereunder nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right hereunder or thereunder. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. 8.05. Successors and Assigns. (a) Binding Effect. This Agreement and the other Credit Documents shall be binding upon and inure to the benefit of Borrowers, Lenders, Agent, all future holders of the Notes and their respective successors and permitted assigns, except that neither Borrower may assign or transfer any of its rights or obligations under any Credit Document without the prior written consent of Agent and each Lender. (b) Participations. Any Lender may at any time sell to one or more banks or other financial institutions ("Participants") participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under this Agreement and the other Credit Documents. In the event of any such sale by a Lender of participating interests, such Lender's obligations under this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of its Notes for all purposes under this Agreement and Borrowers and Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which any such sale is effected may require the selling Lender to obtain the consent of the Participant in order for such Lender to agree in writing to any amendment, waiver or consent of a type specified in Subparagraph 8.04(a), Subparagraph 8.04(b), Subparagraph 8.04(c) or Subparagraph 8.04(d) to the extent applicable but may not otherwise require the selling Lender to obtain the consent of such Participant to any 49 54 other amendment, waiver or consent hereunder. Borrowers also agree that any Lender which has transferred any participating interest in its Commitments or Loans shall, notwithstanding any such transfer, be entitled to the full benefits accorded such Lender under Paragraph 2.12, Paragraph 2.13, and Paragraph 2.14, as if such Lender had not made such transfer. (c) Assignments. Any Lender may, at any time, sell and assign to any other Lender or any Eligible Assignee (individually, an "Assignee Lender") all or a portion of its rights and obligations under this Agreement and the other Credit Documents (such a sale and assignment to be referred to herein as an "Assignment") pursuant to an assignment agreement in the form of Exhibit F (an "Assignment Agreement"), executed by each Assignee Lender and such assignor Lender (an "Assignor Lender") and delivered to Agent for its acceptance and recording in the Register; provided, however, that: (i) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL (which consent of Agent and FIL shall not be unreasonably withheld), no Lender may make any Assignment of its Commitment or Loans to any Assignee Lender which is not, immediately prior to such Assignment, a Lender hereunder or an Affiliate thereof; (ii) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL (which consent of Agent and FIL shall not be unreasonably withheld), no Facility A Lender may make any Assignment of its Facility A Commitment and Facility A Loans to any Assignee Lender if, after giving effect to such Assignment, the Facility A Commitment (or, after the termination of the Facility A Commitments, the Facility A Loans) of such Lender or such Assignee Lender would be less than Five Million Dollars ($5,000,000), except that a Facility A Lender may make an Assignment which reduces its Facility A Commitment (or, after the termination of the Facility A Commitments, its Facility A Loans) to zero without the written consent of FIL and Administrative Agent; (iii) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL (which consent of Agent and FIL shall not be unreasonably withheld), no Facility B Lender may make any Assignment of its Facility B Commitment and Facility B Loans to any Assignee Lender if, after giving effect to such Assignment, the Facility B Commitment (or, after the termination of the Facility B Commitments, the Facility B Loans) of such Lender or such Assignee Lender would be less than Five Million Dollars ($5,000,000), except that a Facility B Lender may make an Assignment which reduces its Facility B Commitment (or, after the termination of the Facility B Commitments, its Facility B Loans) to zero without the written consent of FIL and Administrative Agent; (iv) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL (which consent of Agent and FIL shall not be unreasonably withheld), no Facility A Lender may make any Assignment of its Facility A Commitment and Facility A Loans which does not assign and delegate an equal pro rata interest in such Facility A Lender's Facility A Commitment, Facility A Loans and all other rights, duties and obligations of such Facility A Lender under this Agreement and the other Credit Documents relating to Facility A; (v) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL (which consent of Agent and FIL shall not be unreasonably withheld), no Facility B Lender may make any Assignment of its Facility B Commitment and Facility B Loans which does not assign and delegate an equal pro rata interest in such Facility B Lender's Facility B Commitment, Facility B Loans and all other rights, duties and obligations of such Facility B Lender under this Agreement and the other Credit Documents relating to Facility B; and (vi) Any Assignor Lender which is, or which has an Affiliate which is, a party to a Lender Rate Contract may not make an Assignment of all of its Commitments or all of its Loans to an Assignee Lender unless such Assignee Lender or its Affiliate shall also assume all obligations of such Assignor Lender or its Affiliate with respect to such Lender Rate Contract. 50 55 Upon such execution, delivery, acceptance and recording of each Assignment Agreement, from and after the Assignment Effective Date determined pursuant to such Assignment Agreement, (A) each Assignee Lender thereunder shall be a Lender hereunder with Commitments or Loans as set forth on Attachment 1 to such Assignment Agreement (under the caption "Commitments or Loans After Assignment") and shall have the rights, duties and obligations of such a Lender under this Agreement and the other Credit Documents, and (B) the Assignor Lender thereunder shall be a Lender with Commitments or Loans as set forth on Attachment 1 to such Assignment Agreement (under the caption "Commitments or Loans After Assignment"), or, if the Commitments or Loans of the Assignor Lender have been reduced to zero, the Assignor Lender shall cease to be a Lender and to have any obligation to make any Loan; provided, however, that any such Assignor Lender which ceases to be a Lender shall continue to be entitled to the benefits of any provision of this Agreement which by its terms survives the termination of this Agreement. Each Assignment Agreement shall be deemed to amend Schedule I to the extent, and only to the extent, necessary to reflect the addition of each Assignee Lender, the deletion of each Assignor Lender which reduces its Commitments or Loans to zero, and the resulting adjustment of Commitments or Loans arising from the purchase by each Assignee Lender of all or a portion of the rights and obligations of an Assignor Lender under this Agreement and the other Credit Documents. On or prior to the Assignment Effective Date determined pursuant to each Assignment Agreement, Borrowers, at their own expense, shall, if requested by Assignee Lenders, execute and deliver to Agent, in exchange for the surrendered Notes, if any, of the Assignor Lender thereunder, new Notes to the order of each Assignee Lender thereunder and, if the Assignor Lender is continuing as a Lender hereunder, new Notes to the order of the Assignor Lender. The Notes surrendered by the Assignor Lender shall be returned by Agent to Borrowers marked "replaced". Each Assignee Lender which becomes a Lender and was not previously such a Lender hereunder shall, prior to becoming such a Lender, deliver such certificates and other evidence as is required by Subparagraph 2.13(b). (d) Register. Agent shall maintain at its address referred to in Paragraph 8.01 a copy of each Assignment Agreement delivered to it and a register (the "Register") for the recordation of the names and addresses of Lenders and the Commitments or Loans of each Lender from time to time. The entries in the Register shall be conclusive in the absence of manifest error, and Borrowers, Agent and Lenders may treat each Person whose name is recorded in the Register as the owner of the Commitments or Loans recorded therein for all purposes of this Agreement. The Register shall be available for inspection by Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Registration. Upon its receipt of an Assignment Agreement executed by an Assignor Lender and an Assignee Lender (and, to the extent required by Subparagraph 8.05(c), by Borrowers and Agent) together with payment to Agent by Assignor Lender of a registration and processing fee of $3,000, Agent shall (i) promptly accept such Assignment Agreement and (ii) on the Effective Date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to Lenders and Borrowers. Agent may, from time to time at its election, prepare and deliver to Lenders and Borrowers a revised Schedule I reflecting the names, addresses and respective Commitments or Loans of all Lenders then parties hereto. (f) Confidentiality. Subject to Paragraph 8.11, Agent and Lenders may disclose the Credit Documents and any financial or other information relating to Borrowers, FIL or any Subsidiary to each other or to any potential Participant or Assignee Lender. (g) Pledges to Federal Reserve Banks. Notwithstanding any other provision of this Agreement, any Lender may at any time assign all or a portion of its rights under this Agreement and the other Credit Documents to a Federal Reserve Bank. No such assignment shall relieve the assigning Lender from its obligations under this Agreement and the other Credit Documents. 8.06. Setoff; Security Interest. (a) Setoff. In addition to any rights and remedies of Lenders provided by law, each Lender shall have the right, with the prior consent of Agent but without prior notice to or consent of Borrowers, any such notice and consent being expressly waived by Borrowers to the extent permitted by applicable 51 56 law, upon the occurrence and during the continuance of an Event of Default, to set-off and apply against the Obligations of either Borrower any amount owing from such Lender to such Borrower. The aforesaid right of set-off may be exercised by such Lender against either Borrower or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of such Borrower or against anyone else claiming through or against such Borrower or such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off may not have been exercised by such Lender at any prior time. Each Lender agrees promptly to notify the applicable Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. (b) Security Interest. As security for the Obligations, each Borrower hereby grants to Agent and each Lender, for the benefit of all Lenders, a continuing security interest in any and all deposit accounts or moneys of such Borrower now or hereafter maintained with such Lender. Each Lender shall have all of the rights of a secured party with respect to such security interest. 8.07. No Third Party Rights. Nothing expressed in or to be implied from this Agreement is intended to give, or shall be construed to give, any Person, other than the parties hereto and their permitted successors and assigns hereunder, any benefit or legal or equitable right, remedy or claim under or by virtue of this Agreement or under or by virtue of any provision herein. 8.08. Partial Invalidity. If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law or any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 8.09. Jury Trial. EACH OF BORROWERS, LENDERS AND AGENT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT. 8.10. Counterparts. This Agreement may be executed in any number of identical counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a complete, executed original for all purposes. 8.11. Borrowers' Liabilities. Each Borrower is jointly and severally liable for the payment and performance of all other Obligations under this Agreement and the other Credit Documents, and each Borrower is liable for the payment and performance of all Obligations under this Agreement and the other Credit Documents as provided in the Guaranty. 8.12. Confidentiality. Neither any Lender nor Agent shall disclose to any Person any information with respect to Borrowers or any of their Subsidiaries which is furnished pursuant to this Agreement or under the other Credit Documents, except that any Lender or Agent may disclose any such information (a) to its own directors, officers, employees, auditors, counsel and other advisors and to its Affiliates; (b) to any other Lender or Agent; (c) which is otherwise available to the public; (d) if required or appropriate in any report, statement or testimony submitted to any Governmental Authority having or claiming to have jurisdiction over such Lender or Agent; (e) if required in response to any summons or subpoena; (f) in connection with any enforcement by Lenders and Agent of their rights under this Agreement or the other Credit Documents or any litigation among the parties relating to the Credit Documents or the transactions contemplated thereby; (g) to comply with any Requirement of Law applicable to such Lender or Agent; (h) to any Assignee Lender or Participant or any prospective Assignee Lender or Participant, provided that such Assignee Lender or Participant or prospective Assignee Lender or Participant agrees to be bound by this Paragraph 8.12; or (i) otherwise with the prior consent of the applicable Borrower; provided, however, that (i) any Lender or Agent served with any summons or subpoena demanding the disclosure of any such information shall use reasonable efforts to notify Borrowers promptly of such summons or subpoena if not prohibited by any Requirement of Law and, if requested by Borrowers and not disadvantageous to such Lender or Agent, to cooperate with Borrowers in obtaining a protective order restricting such disclosure, and (ii) any 52 57 disclosure made in violation of this Agreement shall not affect the obligations of Borrowers and their Subsidiaries under this Agreement and the other Credit Documents. 8.13. Consent to Jurisdiction. Each Borrower irrevocably submits to the non-exclusive jurisdiction of the courts of the State of California and the courts of the United States of America located in the Northern District of California and agrees that any legal action, suit or proceeding arising out of or relating to this Agreement or any of the other Credit Documents may be brought against such party in any such courts. Final judgment against either Borrower in any such action, suit or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the judgment, or in any other manner provided by law. Nothing in this Subparagraph 8.13 shall affect the right of Agent or any Lender to commence legal proceedings or otherwise sue either Borrower in any other appropriate jurisdiction, or concurrently in more than one jurisdiction, or to serve process, pleadings and other papers upon either Borrower in any manner authorized by the laws of any such jurisdiction. Each Borrower agrees that process served either personally or by registered mail shall, to the extent permitted by law, constitute adequate service of process in any such suit. Each Borrower irrevocably waives to the fullest extent permitted by applicable law (a) any objection which it may have now or in the future to the laying of the venue of any such action, suit or proceeding in any court referred to in the first sentence above; (b) any claim that any such action, suit or proceeding has been brought in an inconvenient forum; (c) its right of removal of any matter commenced by any other party in the courts of the State of California to any court of the United States of America; (d) any immunity which it or its assets may have in respect of its obligations under this Agreement or any other Credit Document from any suit, execution, attachment (whether provisional or final, in aid of execution, before judgment or otherwise) or other legal process; and (e) any right it may have to require the moving party in any suit, action or proceeding brought in any of the courts referred to above arising out of or in connection with this Agreement or any other Credit Document to post security for the costs of such Borrower or to post a bond or to take similar action. 8.14. Usury. In no event shall any provision of this Agreement or any other Credit Document ever obligate either Borrower to pay or allow any Lender to collect interest on any Loan or any other Obligation of either Borrower hereunder at a rate greater than the maximum non-usurious rate permitted by applicable law (herein referred to as the "highest lawful rate"), or obligate either Borrower to pay any taxes, assessments, charges, insurance premiums or other amounts to the extent that such payments, when added to the interest payable on the Loans or any other Obligations, would be held to constitute the payment by either Borrower of interest at a rate greater than the highest lawful rate. This provision shall control over any provision to the contrary. Without limiting the generality of the foregoing, in the event the maturity of all or any part of the principal amount of the Obligations of either Borrower shall be accelerated for any reason, then such principal amount so accelerated shall be credited with any interest theretofore paid thereon in advance and remaining unearned at the time of such acceleration. If, pursuant to the terms of this Agreement, any funds are applied to the payment of any part of the principal amount of the Obligations of either Borrower prior to the maturity thereof, then (a) any interest which would otherwise thereafter accrue on the principal amount so paid by such application shall be canceled, and (b) the Obligations of either Borrower remaining unpaid after such application shall be credited with the amount of all interest, if any, theretofore collected on the principal amount so paid by such application and remaining unearned at the date of said application; and if the funds so applied shall be sufficient to pay in full all the Obligations of such Borrower, then the Lenders shall refund to such Borrower all interest theretofore paid thereon in advance and remaining unearned at the time of such acceleration. Regardless of any other provision in this Agreement or any other Credit Document, neither Borrower shall be required to pay any unearned interest on any Obligations or any portion thereof, or be required to pay interest thereon at a rate in excess of the highest lawful rate construed by courts having competent jurisdiction thereof. 8.15. Effect. On the Closing Date and upon the repayment in full of all existing monetary obligations outstanding under the Existing FIUI Credit Agreement, (a) the Existing FIUI Credit Agreement as well as the Existing FIUI Credit Documents shall be terminated and deemed to have been replaced by this Agreement and the other Credit Documents; and (b) all Liens created pursuant to the Existing FIUI Credit Agreement and the other FIUI Credit Documents shall terminate and be released; provided, however, that nothing contained herein shall have any effect on Borrower's obligations to pay amounts (if any) payable under Subparagraph 2.10(c), Subparagraph 2.10(d), Subparagraph 2.11(a), Paragraph 2.12, Paragraph 8.02, or Paragraph 8.03 of the Existing FIUI Credit Agreement which by their terms expressly provide that they shall survive the payment and performance of the Obligations and the termination of the Existing FIUI Credit Agreement. Agent (as agent under the Existing FIUI 53 58 Credit Agreement), from time to time, upon request by Borrower shall, without further consideration other than reimbursement for any costs and expenses, execute, deliver and acknowledge all such documents, agreements, certificates and instruments and do such acts as Borrower may reasonably require to more effectively evidence or effectuate the termination of such Liens. [The first signature page follows.] 54 59 IN WITNESS WHEREOF, Borrowers, Agent, Documentation Agent, Managing Agents, Co-Agent and Lenders have caused this Agreement to be executed as of the day and year first above written. BORROWERS: FLEXTRONICS INTERNATIONAL U.S.A., INC. By: -------------------------------------- Name: ------------------------------- Title: ------------------------------ THE DII GROUP, INC. By: -------------------------------------- Name: ------------------------------- Title: ------------------------------ AGENT: ABN AMRO BANK N.V., As Agent By: -------------------------------------- Name: ------------------------------- Title: ------------------------------ By: -------------------------------------- Name: ------------------------------- Title: ------------------------------ S-1 60 DOCUMENTATION AGENT: FLEET NATIONAL BANK, As Documentation Agent By: -------------------------------------- Name: ------------------------------- Title: ------------------------------ By: -------------------------------------- Name: ------------------------------- Title: ------------------------------ MANAGING AGENTS: BANK OF AMERICA, NATIONAL ASSOCIATION, As a Managing Agent By: -------------------------------------- Name: ------------------------------- Title: ------------------------------ By: -------------------------------------- Name: ------------------------------- Title: ------------------------------ CITICORP USA, INC., As a Managing Agent By: -------------------------------------- Name: ------------------------------- Title: ------------------------------ By: -------------------------------------- Name: ------------------------------- Title: ------------------------------ S-2 61 CO-AGENT AND LENDERS: ABN AMRO BANK N.V., As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- FLEET NATIONAL BANK, As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- BANK OF AMERICA, NATIONAL ASSOCIATION, As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- CITICORP USA, INC., As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- S-3 62 THE BANK OF NOVA SCOTIA, As a Co-Agent and a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE INC., As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- BANQUE NATIONALE DE PARIS, As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- DEN DANKSE BANK AKTIESELSKAB, As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- S-4 63 THE FUJI BANK, LIMITED, LOS ANGELES AGENCY, As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- THE INDUSTRIAL BANK OF JAPAN, LIMITED, As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- THE SUMITOMO BANK, LIMITED, As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- WELLS FARGO BANK, N.A., As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- S-5 64 THE DAI-ICHI KANGYO BANK, LTD., As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- ALLIED IRISH BANK, As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- BANCA DI ROMA S.P.A. - SINGAPORE BRANCH, As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- BANK HAPOALIM, B.M., As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- S-6 65 COMERICA BANK, As a Lender By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: ----------------------------------------- Name: ------------------------------------ Title: ----------------------------------- S-7 66 SCHEDULE II PRICING GRID
- ------------------------------------------------------------------------------------------ APPLICABLE MARGIN APPLICABLE FIL'S FOR MARGIN FOR DEBT/ PRICING BASE RATE LIBOR FACILITY A FACILITY B EBITDA PERIOD BORROWINGS AND BORROWINGS AND COMMITMENT FEE COMMITMENT FEE RATIO LEVEL PORTIONS LIBOR PORTIONS PERCENTAGE PERCENTAGE - ------------------------------------------------------------------------------------------ <1.00 1 0% 0.625% 0.175% 0.150% - >1.00, <1.50 2 0% 0.750% 0.175% 0.150% - >1.50, <2.00 3 0% 0.875% 0.200% 0.175% - >2.00, <2.50 4 0% 1.000% 0.225% 0.200% - >2.50, <3.00 5 0% 1.250% 0.300% 0.250% - >3.00 6 0% 1.750% 0.375% 0.300% - ------------------------------------------------------------------------------------------
EXPLANATION 1. The Applicable Margin For Base Rate Borrowings, Base Rate Portions, LIBOR Borrowings, LIBOR Portions, the Facility A Commitment Fee Percentage and the Facility B Commitment Fee Percentage will be set for each Pricing Period and will vary depending upon whether such period is a Level 1 Period, a Level 2 Period, a Level 3 Period, a Level 4 Period, a Level 5 Period or a Level 6 Period (each a "Pricing Period Level"). The applicable Pricing Period Level will be determined based on FIL's corresponding Debt/EBITDA Ratio for the immediately preceding consecutive four-quarter period. 2. The first Pricing Period, which commences on the date of this Agreement and ends 45 days after the quarter ended June 30, 2000, will be a Level 4 Period. 3. The second Pricing Period, which commences 45 days after the end of June 30, 2000 calendar quarter and ends 45 days after the quarter ended September 30, 2000, will be a Level 1 Period, a Level 2 Period, a Level 3 Period, a Level 4 Period, a Level 5 Period or a Level 6 Period, depending upon FIL's Debt/EBITDA Ratio for the consecutive four-quarter period ending on June 30, 2000. 4. Each Pricing Period thereafter will commence 45 days after the end of the immediately preceding quarter and will end 45 days after the end of the next applicable quarter and will be a Level 1 Period, a Level 2 Period, a Level 3 Period, a Level 4 Period, a Level 5 Period or a Level 6 Period depending upon FIL's Debt/EBITDA Ratio for the consecutive four-quarter period ending on the last day of the immediately preceding quarter. 5. Level 2 pricing will apply during any Pricing Period (other than the first Pricing Period) in which FIL's senior unsecured long-term debt rating from S&P or Moody's is equal to or better than either BBB- or Baa3. Such pricing adjustment (if any) occurring as a result of such debt rating will take place when FIL notifies Agent that such debt rating has been achieved, and will continue until such debt rating drops below BBB- or Baa3 in which case the pricing will be calculated as set forth above. II-1 67 6. Examples: (a) FIL's Debt/EBITDA Ratio is 1.76 for the consecutive four-quarter period ending on June 30, 2000, and FIL's senior unsecured long-term debt rating from S&P or Moody's is less than either BBB- of Baa3. The Pricing Period commencing 45 days after the quarter ended June 30, 2000 through the date which is 45 days after the quarter ended September 30, 2000 will be a Level 3 Period, and the Applicable Margin for LIBOR Borrowings and the LIBOR Portions during such Pricing Period will be 0.875%. (b) FIL's Debt/EBITDA Ratio is 2.10 for the consecutive four-quarter period ending on September 30, 2000, and FIL's senior unsecured long-term debt rating from S&P or Moody's is less than either BBB- of Baa3. The Pricing Period commencing 45 days after the quarter ended September 30, 2000 through the date which is 45 days after the quarter ended December 31, 2000 will be a Level 4 Period, and the Applicable Margin for LIBOR Borrowings and the LIBOR Portions during such Pricing Period will be 1.000%. (c) FIL's senior unsecured long-term debt rating from S&P or Moody's is at least equal to BBB- or Baa3. Commencing after FIL notifies Agent that such debt rating has been achieved, Level 2 pricing will apply, and the Applicable Margin for LIBOR Borrowings and the LIBOR Portions during such Pricing Period will be 0.7500%. II-2 68 SCHEDULE 3.01 INITIAL CONDITIONS PRECEDENT A. PRINCIPAL CREDIT DOCUMENTS. (1) The Credit Agreement, duly executed by each Borrower, each Lender, Agent, Documentation Agent, each Managing Agent and Co-Agent; (2) Such Revolving Notes as the Lenders shall request, each duly executed by the applicable Borrower; (3) The Guaranty, duly executed by FIL, each Eligible Material Subsidiary, Flextronics Holdings UK Limited and Flextronics Singapore Pte Ltd., with such changes thereto as may be appropriate based on the law of the applicable jurisdictions; and (4) Pledge Agreements of FIL and Flextronics Holdings UK Limited, each, duly executed by such Person, with such changes thereto as may be appropriate based on the laws of the applicable jurisdictions. B. FIUI CORPORATE DOCUMENTS. (1) The Certificate of Incorporation of FIUI, certified as of a recent date prior to the Closing Date by the Secretary of State of California; (2) A Certificate of Good Standing (or comparable certificate) for FIUI, certified as of a recent date prior to the Closing Date by the Secretary of State of California; (3) A certificate of the Secretary or an Assistant Secretary of FIUI, dated the Closing Date, certifying (a) that attached thereto is a true and correct copy of the Bylaws of FIUI as in effect on the Closing Date; (b) that attached thereto are true and correct copies of resolutions duly adopted by the Board of Directors of FIUI and continuing in effect, which (i) authorize the execution, delivery and performance by FIUI of this Agreement and the other Credit Documents executed or to be executed by FIUI and the consummation of the transactions contemplated hereby and thereby and (ii) designate the officers authorized so to execute, deliver and perform on behalf of FIUI; and (c) that there are no proceedings for the dissolution or liquidation of FIUI; and (4) A certificate of the Secretary or an Assistant Secretary of FIUI, dated the Closing Date, certifying the incumbency, signatures and authority of the officers of FIUI authorized to execute, deliver and perform this Agreement, the other Credit Documents and all other documents, instruments or agreements related thereto executed or to be executed by FIUI. C. DII CORPORATE DOCUMENTS. (1) The Certificate of Incorporation of DII, certified as of a recent date prior to the Closing Date by the Secretary of State of Delaware; (2) A Certificate of Good Standing (or comparable certificate) for DII, certified as of a recent date prior to the Closing Date by the Secretary of State of Delaware; (3) A certificate of the Secretary or an Assistant Secretary of DII, dated the Closing Date, certifying (a) that attached thereto is a true and correct copy of the Bylaws of DII as in effect on the Closing Date; (b) that attached thereto are true and correct copies of resolutions duly adopted by the Board of Directors of DII and continuing in effect, which (i) authorize the execution, delivery and performance by DII of this Agreement and the other Credit Documents executed or to be executed by DII and the 3.01-1 69 consummation of the transactions contemplated hereby and thereby and (ii) designate the officers authorized so to execute, deliver and perform on behalf of DII; and (c) that there are no proceedings for the dissolution or liquidation of DII; and (4) A certificate of the Secretary or an Assistant Secretary of DII, dated the Closing Date, certifying the incumbency, signatures and authority of the officers of DII authorized to execute, deliver and perform this Agreement, the other Credit Documents and all other documents, instruments or agreements related thereto executed or to be executed by DII. D. OTHER MATERIAL SUBSIDIARY CORPORATE DOCUMENTS. (1) The Certificate of Incorporation (or comparable certificate) of each Eligible Material Subsidiary, any Subsidiary executing a Pledge Agreement or the Guaranty, and any Subsidiary whose shares are being pledged pursuant to a Pledge Agreement, certified as of a recent date prior to the Closing Date by the Secretary of State (or comparable public official) of its jurisdiction of incorporation (or, if any such Subsidiary is organized under the laws of any jurisdiction outside the United States, such other evidence as Agent may request to establish that such Person is duly organized and existing under the laws of such jurisdiction), together with an English translation thereof (if appropriate); (2) To the extent such jurisdiction has the legal concept of a corporation being in good standing and a Governmental Authority in such jurisdiction issues any evidence of such good standing, a Certificate of Good Standing (or comparable certificate) for each Eligible Material Subsidiary, any Subsidiary executing a Pledge Agreement or the Guaranty, and any Subsidiary whose shares are being pledged pursuant to a Pledge Agreement, certified as of a recent date prior to the Closing Date by the Secretary of State (or comparable public official) of its jurisdiction of incorporation (or, if any such Person is organized under the laws of any jurisdiction outside the United States, such other evidence as Agent may request to establish that such Person is duly qualified to do business and in good standing under the laws of such jurisdiction), together with an English translation thereof (if appropriate); (3) A certificate of the Secretary or an Assistant Secretary (or comparable officer) of each Eligible Material Subsidiary, any Subsidiary executing a Pledge Agreement or the Guaranty, and any Subsidiary whose shares are being pledged pursuant to a Pledge Agreement, dated the Closing Date, certifying (a) that attached thereto is a true and correct copy of the Bylaws of such Subsidiary as in effect on the Closing Date (or, if any such Subsidiary is organized under the laws of any jurisdiction outside the United States, any comparable document provided for in the respective corporate laws of that jurisdiction); (b) (except in the case of a Subsidiary which is not executing any Credit Documents) that attached thereto are true and correct copies of resolutions duly adopted by the Board of Directors of such Subsidiary (or other comparable enabling action) and continuing in effect, which (i) authorize the execution, delivery and performance by such Person of the Credit Documents to be executed by such Person and the consummation of the transactions contemplated thereby and (ii) designate the officers, directors and attorneys authorized so to execute, deliver and perform on behalf of such Person; and (c) that there are no proceedings for the dissolution or liquidation of such Person, together with a certified English translation thereof (if appropriate); and (4) A certificate of the Secretary or an Assistant Secretary (or comparable officer) of each Eligible Material Subsidiary and any Subsidiary executing a Pledge Agreement or the Guaranty, dated the Closing Date, certifying the incumbency, signatures and authority of the officers, directors and attorneys of such Person authorized to execute, deliver and perform the Credit Documents to be executed by such Person, together with a certified English translation thereof (if appropriate). E. FINANCIAL STATEMENTS, FINANCIAL CONDITION, ETC. (1) A copy of the audited consolidated and consolidating Financial Statements of FIL and its Subsidiaries for the fiscal year ended March 31, 1999, audited by Arthur Andersen LLP, together with a copy of the unqualified opinion delivered by such accountants in connection with such Financial Statements; 3.01-2 70 (2) A copy of the unaudited Financial Statements of FIL and its Subsidiaries for the fiscal quarter ended December 31, 1999 and for the fiscal year to such date (prepared on a consolidated and consolidating basis), certified by the chief financial officer, treasurer, controller or principal accounting officer of FIL to present fairly the financial condition, results of operations and other information reflected therein and to have been prepared in accordance with GAAP (subject to normal year-end audit adjustments); (3) A copy of the 10-K report filed by FIL with the Securities and Exchange Commission for the fiscal year ended March 31, 1999; (4) A copy of the 10-Q report filed by FIL with the Securities and Exchange Commission for the quarter ended December 31, 1999; (5) The consolidated plan and forecast of FIL and its Subsidiaries for the fiscal year to end March 31, 2001 (reflecting among other events the anticipated Borrowings under this Agreement), including quarterly cash flow projections and quarterly projections of FIL's compliance with the financial tests and ratios specified in the FIL Credit Agreement; and (6) Such other financial, business and other information regarding FIL, either Borrower or any of their Subsidiaries as Agent or any Lender may reasonably request, including information as to possible contingent liabilities, tax matters, environmental matters and obligations for employee benefits and compensation. F. COLLATERAL DOCUMENTS. (1) The stock certificates representing all of the outstanding capital stock of each Subsidiary pledged to Agent pursuant to a Pledge Agreement and existing on the Closing Date, other than subsidiaries whose stock is not in certificated form, together with undated stock powers, duly executed by the Borrower or Subsidiary that owns such stock, in blank and attached thereto; (2) Any other items required by any applicable jurisdiction; (3) Such other documents, instruments and agreements as Agents may reasonably request to establish and perfect the Liens granted to Agent or any Lender in this Agreement, the Security Documents and the other Credit Documents; and (4) Such other evidence as Agent may request to establish that the Liens granted to Agent or any Lender in this Agreement, the Security Documents and the other Credit Documents are perfected and prior to the Liens of other Persons in the Collateral, except for any such Liens which are expressly permitted by the Credit Agreement to be prior. G. OPINIONS. Favorable written opinions from each of the following counsel for Borrowers and their Subsidiaries, each dated the Closing Date, addressed to Agent for the benefit of Agent and Lenders, covering such legal matters as Agent may reasonably request and otherwise in form and substance satisfactory to Agent: (1) Fenwick & West, counsel for FIL and its Subsidiaries; (2) Bruckhaus Westrick Heller L`ber, Austrian counsel for FIL and its Subsidiaries; (3) Mayer, Brown & Platt, English counsel for FIL and its Subsidiaries; (4) Foo, Teo & Associates, Labuan counsel for FIL and its Subsidiaries; (5) Cuesta Campos Y Asociados, S.C., Mexican counsel for FIL and its Subsidiaries; 3.01-3 71 (6) Allen & Gledhill, Singapore counsel for FIL and its Subsidiaries; (7) Magnusson Wahlin Advokatbyra, Swedish counsel for FIL and its Subsidiaries; and (8) Curtis Mallet-Prevost, US counsel for DII and its Subsidiaries. H. OTHER ITEMS. (1) A duly completed and timely delivered Notice of Borrowing for the applicable Borrowing; (2) Copies of the acquisition agreement or similar agreement entered into in connection with the DII Acquisition, duly executed by FIL and DII, together with all exhibits and schedules thereto; (3) Evidence satisfactory to Agent and the Lenders that the DII Acquisition has been effected in accordance with all applicable Governmental Rules; (4) Copies of such other documents, instruments and agreements executed by FII, DII or any other Person in connection with the DII Acquisition as Agent or any Lender may reasonably request; (5) An organization chart for FIL, FIUI, DII and their Subsidiaries, setting forth the relationship among such Persons, certified by the Secretary or an Assistant Secretary of FIL; (6) Evidence of the amounts owing to the lenders and agent under the Existing FIUI Credit Agreement on the Closing Date and instructions for the payment of such amounts; (7) Evidence of the amounts owing on the Closing Date to the lenders and agent under any existing credit or loan agreement or similar financing agreement of DII and instructions for the payment of such amounts; (8) A certificate of the Chief Financial Officer of each Borrower, addressed to Agent and dated the Closing Date, certifying that: (a) The representations and warranties set forth in Paragraph 4.01 and in the other Credit Documents are true and correct in all material respects as of such date (except for such representations and warranties made as of a specified date, which shall be true as of such date); and (b) No Default has occurred and is continuing as of such date; (9) All fees and expenses payable to Agent and Lenders on or prior to the Closing Date (including all fees payable to Agent pursuant to the Agent's Fee Letter); (10) All fees and expenses of Agent's counsels through the Closing Date; and (11) Such other evidence as Agent or any Lender may reasonably request to establish the accuracy and completeness of the representations and warranties and the compliance with the terms and conditions contained in this Agreement and the other Credit Documents. 3.01-4 72 SCHEDULE 4.01(o) SUBSIDIARIES A. PRIOR TO THE CLOSING OF THE DII ACQUISITION:
JURISDICTION ISSUED AND DIRECT OF MATERIAL OUTSTANDING PERCENTAGE OWNER OF SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP SHARES ---------- ------------ ---------- ------------- ---------- ---------- FLEXTRONICS Singapore INTERNATIONAL SINGAPORE PTE. LTD. FLEXTRONICS SINGAPORE Singapore No 6,700,000 auth @ 100% Flextronics PTE. LTD. S$1/share International 36 Robinson Road 4,600,000 Ltd. #18-01 City House issued + paid up Singapore 068877 FLEXTRONICS (MALAYSIA) Malaysia No RM4,025,400 100% Flextronics SDN. BHD. authorized Singapore 7th Floor, Wisma RM2,725,000 Pte. Ltd. Hamzah-Kwong Hing paid up No 1, Leboh Ampang 50100 KL, Malaysia DTM LATIN AMERICA (L), Labuan No 10,000 100% Flextronics LTD. shares $10,000 International Level 10, Wisma $2 Ltd. Oceanic, Jalan OKK paid up Awang Besar 87007 Labuan F.T. Malaysia FLEXTRONICS Labuan Yes 10,000 100% Flextronics INTERNATIONAL MARKETING shares 10000 International (L) LTD. authorized Ltd. Level 10, Wisma Oceanic, $10,000 Jalan OKK Awang Besar paid up 87007 Labuan F.T. Malaysia FLEXTRONICS Labuan Yes 10,000 100% Flextronics INTERNATIONAL LATIN shares $10,000 International AMERICA (L), LTD. $2 Ltd. Level 10, Wisma Oceanic, paid up Jalan OKK Awang Besar 87007 Labuan F.T. Malaysia ASTRON TECHNOLOGIES LTD. Mauritius No US$1M 100% Flextronics 6th Floor, Li Wan Po auth'd US$100K International House paid up Ltd. 12 Remy Ollier Street Port Lois, Mauritius FLEXTRONICS Hong Kong No HK4,000,000 100% Flextronics MANUFACTURING (HK) LTD. authorized International Unit B, 11/F., Block A, HK2 Ltd. Wo paid up Kee Hong Building, 585-609 Castle Peak Road, Kwai Chung, New Territories, Hong Kong
4.01-1 73
JURISDICTION ISSUED AND DIRECT OF MATERIAL OUTSTANDING PERCENTAGE OWNER OF SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP SHARES ---------- ------------ ---------- ------------- ---------- ---------- FLEXTRONICS INDUSTRIAL PRC Yes US$3,500,000 100% Flextronics (SHENZHEN) CO., LTD. authorized Singapore Blk C9, 2nd Industrial US$3,500,000 Pte. Ltd. Zone paid up Xixiang, Shenzhen People's Republic of China FLEXTRONICS COMPUTER PRC No US$1,200,000 100% Flextronics (SHEKOU) LTD. authorized Singapore 5/F. Nanshan Building US$1,200,000 Pte. Ltd. Shekou Industrial Zone paid up Industrial 8 Road Shenzhen. Guangdong, China ZHUHAI DAO MEN CHAO YI PRC No RMB100,000,000 96.25% Flextronics ELECTRONICS CO., LTD. auth'd Manufacturing Sam Chow Industrial City RMB100,000,000 (HK) Ltd. Jin An Town, Doumen, paid up Zhuhai People's Republic of China ASTRON GROUP LTD. Hong Kong No HK6,750,292 99.90% Flextronics 6th Floor, Hole Weal authorized Manufacturing Ind. Bldg. HK6,750,292 (HK) Ltd. 22-28 Tai Chung Road paid up Tsuen Wan, New Territories, Hong Kong FICO INVESTMENT HOLDING Hong Kong No HK10,000 90% Flextronics LTD. HOLDING LTD. authorized International Rm 10, 18/F, Blk B HK10,000 Ltd. Kong Nam Ind. Bldg. paid up 603 Castle Peak Road Tsuen Wan, New Territories, Hong Kong FOREST KEYBOARD PRC No HK 55 million 100% FICO MANUFACTURING authorized HK Investment (SHENZHEN) LTD. 42,981,525 issued Holding Gong Ming Zhen Ltd. Chang Zhen Village Industrial Zone PRC EUROPE FLEXTRONICS Sweden Yes 10,000,000 kr 100% F.L. INTERNATIONAL SWEDEN AB Tronics AB Box 532 371 23 Karlskrona Sweden FLEXTRONICS GROUP Sweden No 100,000 kr 100% Flextronics SWEDEN AB Holdings Box 532 UK Ltd. 371 23 Karlskrona Sweden
4.01-2 74
JURISDICTION ISSUED AND DIRECT OF MATERIAL OUTSTANDING PERCENTAGE OWNER OF SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP SHARES ---------- ------------ ---------- ------------- ---------- ---------- FLEXTRONICS LIMITED Scotland No Authorized 250,000 100% FIUK 4 Livingstone Boulevard ordy shares @ Hamilton International GBPound Technology Park Sterling1 Blantyre Issued 60,000 Scotland G72 0BP ordy shares @ GBPound Sterling1 FLEXTRONICS England No Authorized 190,476 100% Flextronics INTERNATIONAL (UK) LTD. ordy shares @ International 4 Livingstone Boulevard GBPound Ltd. Hamilton International Sterling1 Technology Park Issued 186,588 Blantyre ordy shares @ Scotland G72 0BP GBPound Sterling1 FLEXTRONICS HOLDINGS England No Authorized 500,000 100% Flextronics (UK) LTD. ordy shares @ International 50 Stratton Street GBPound Ltd. London Sterling1 W1X 6NX Issued 1,000 ordy shares @ GBPound Sterling1 FLEXTRONICS KFT Hungary No $15,000 100% FLX Cyprus HU 9600, Sarvar Ltd. Ikervari ut 42 Hungary FLEXTRONICS Austria No ATS 92% Flextronics INTERNATIONAL GMBH 160,000,000.00 International Wienerbergstrasse 7 Ltd. 1810 Vienna, Austria FLEXTRONICS Austria No ATS 25,000,000.00 100% Flextronics INTERNATIONAL GMBH International Friesacher Strasse 3 GmbH 9330 Althofen, Austria FLEXTRONICS Hungary Yes HUF 100% Flextronics INTERNATIONAL KFT. 539,000,000.00 International 8660 Tab GmbH Munkas U. 28, Hungary NEUTRONICS ECOPLAST Hungary No HUF 100% Flextronics MUANYAGIPARI TERMEKEKET 727,290,000.00 International GYARTO KFT. GmbH 9600 Sarvar Ikervari u. 42, Hungary NEUTRONICS COMPONENTS Hungary No ATS 600,000.00 100% Flextronics ELEKTRONIKAI International ALKATRESZGYARTO GmbH VAMSZABADTERULETI KFT. 9600 Sarvar Ikervari u. 42, Hungary MECHA DESIGN S.R.L. Italy No Lit 55% Flextronics Via G&A, Philips 12 160,000,000.00 International 20052 Monza, Italy GmbH
4.01-3 75
JURISDICTION ISSUED AND DIRECT OF MATERIAL OUTSTANDING PERCENTAGE OWNER OF SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP SHARES ---------- ------------ ---------- ------------- ---------- ---------- FLEXTRONICS Netherlands No 100% Flextronics INTERNATIONAL International EUROPE, B.V. Ltd. Koningslaan 34, P.O.Box 74658, 1070 BR Amsterdam, the Netherlands FLX CYPRUS LTD. LTD. Cyprus No auth'd: CYP 100% held Flextronics c/o Chrysanthou & 10,000 iss'd/ in trust by International Christoforou paid up: 2 locals: Ltd. Corner Th. Dervis - CYP 1,000 Christo- Florinis Street fourou and 6th Floor Chrysanthou P. O. Box 1675, CY-1512 Nicosia, Cyprus 1066 FLEXTRONICS Finland Yes 2000 shares, 100% FHFin INTERNATIONAL 506,000 Euros FINDLAND OY Patentti- ja Reekisterihallitus PRH/2 rekisteritoimisto Arkadiankatu 6 A 00100 Helsinki, Finland FLEXTRONICS France No 96% Kyrel EMS Oyj INTERNATIONAL FRANCE SA 2 rue Lavoisier Z.I.Moncel-Les-Luneville 54 300 LUNEVILLE FLEXTRONICS HOLDING Finland No EURO 8,000 100% F.L.Tronics FINLAND OY Holding AB PO Box 23 FIN-39201 Kyroskoski Finland FLEXTRONICS Norway No 100 shares @ 100% F.L. INTERNATIONAL NORWAY AS 1,000 NOK Tronics Televeien 1 Holding AB 4879 Grimstad, Norway HTR TAB Hungary No 100% Neutronics 8660 Tab HTR Munkas U. 28, Hungary Technikai Rendszerszolg altato Kft HTR ZALA Hungary No 100% Neutronics 8660 Tab HTR Munkas U. 28, Hungary Technikai Rendszerszolg altato Kft HTR REAL ESTATE Hungary No 100% Neutronics 8660 Tab HTR Munkas U. 28, Hungary Technikai Rendszerszolg altato Kft KOSKITUONTI OY Finland No 100% Kyrel EMS Oyj Patentti- ja Reekisterihallitus PRH/2 rekisteritoimisto Arkadiankatu 6 A 00100 Helsinki, Finland
4.01-4 76
JURISDICTION ISSUED AND DIRECT OF MATERIAL OUTSTANDING PERCENTAGE OWNER OF SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP SHARES ---------- ------------ ---------- ------------- ---------- ---------- ALFATEL OH Finland No 100% Kyrel EMS Oyj Patentti- ja Reekisterihallitus PRH/2 rekisteritoimisto Arkadiankatu 6 A 00100 Helsinki, Finland KOSTRON OY Finland No 100% Kyrel EMS Patentti- ja Oyj Reekisterihallitus PRH/2 rekisteritoimisto Arkadiankatu 6 A 00100 Helsinki, Finland IGROTTA AB Sweden No 100% Flextronics Box 532 International 371 23 Karlskrona Sweden AB Sweden MOCTOL AB Sweden No 100% Igrotta AB Box 532 371 23 Karlskrona Sweden NOITALL AB Sweden No 100% Igrotta AB Box 532 371 23 Karlskrona Sweden TOLIPIG AB Sweden No 100% Igrotta AB Box 532 371 23 Karlskrona Sweden MARATHON BUSINESS PARK USA No 100% Flextronics LLC International 47951 Westinghouse Drive USA, Inc. Fremont, CA 94539 MEXICO, BRASIL, OTHERS FLEXTRONICS Mexico Yes $50,000 Fixed 99.90% Flextronics MANUFACTURING MEX, SA Capital International DE CV Ltd. Carretara Base Aerea Militar 5850 Zapopan, Jalisco 45100 Mexico DTM PRODUCTS DE MEXICO, Mexico No 99.90% Flextronics S.A. DE C.V. International Carretara Base Aerea Ltd. Militar 5850 Zapopan, Jalisco 45100 Mxico
4.01-5 77
JURISDICTION ISSUED AND DIRECT OF MATERIAL OUTSTANDING PERCENTAGE OWNER OF SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP SHARES ---------- ------------ ---------- ------------- ---------- ---------- Mexico No $50,000 Fixed 99% Flextronics Capital International PARQUE DE TECNOLOGIA Ltd. ELECTRONICA, S.A. DE C.V. Carretara Base Aerea Militar 5850 Zapopan, Jalisco 45100 Mexico FLEXTRONICS Brazil No 100% Flextronics INTERNATIONAL International TECNOLOGIA LTDA Ltd. Al. Jurua, 548 Alphaville, Barueri Sao Paulo, Brazil 06454-070 FLEXTRONICS DO BRASIL Brazil No 99.90% FIT SERVICOS, LTDA Av. das Nacoes Unidas, 12995, 18o. andar, sala F, Sao Paulo, Brazil, 04578-000 FLEXTRONICS Brazil No US 30,000 100% Flextronics INTERNATIONAL authorized International INDUSTRIAL, LTDA Ltd. FLEXTRONICS Netherlands INTERNATIONAL N.V. Antilles Landhuis Joonchi Kaya Richard J. Beaujon z/n P.O. Box 837 Curacao, Netherlands Antilles UNITED STATES FLEXTRONICS California Yes 999 shares 100% Flextronics INTERNATIONAL USA, INC. International 2090 Fortune Drive Ltd. San Jose, CA 95131 FLEXTRONICS California Yes 100% Flextronics INTERNATIONAL - 1500186 International FREMONT, INC. USA Inc. 47951 Westinghouse Drive Fremont, CA 94539 FLEXTRONICS California, No 100% Flextronics DISTRIBUTION, INC. USA International 2241 Lundy Avenue (USA) San Jose, CA 95131 (FIUI-CA) DTM PRODUCTS, INC. Colorado, No 1,000,000 Common 100% Flextronics 6268 Monarch Park Place, USA Stock$10,000 International Niwot, CO 80503 USA
4.01-6 78
JURISDICTION ISSUED AND DIRECT OF MATERIAL OUTSTANDING PERCENTAGE OWNER OF SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP SHARES ---------- ------------ ---------- ------------- ---------- ---------- PROACTIVE CORPORATION Florida No 100% Flextronics 6421 Congress Ave., International Suite 114 Technologia, Ltda. PLEASE CONFIRM: QCOM SP. ZO. O. Poland PLN 780,000 100% Flextronics International ul.Rzeznicka 54/56 Taby AB PL-80-822 Gdansk Poland QCOM AB Sweden 141,943 shares 100% F.L. Tronics Gribbylundsvagen 15 (total of SEK Holdings AB 1,419,430) Box 7314 SE-187 14 Taby, Sweden QCOM FINANS AB Sweden 100 shares 100% Flextronics International Gribbylundsvagen 15 (SEK 100,000) Taby AB Box 7314 SE-187 14 Taby, Sweden FLEXTRONICS Poland 40 shares at PLN 100% F.L. INTERNATIONAL POLAND 100 each Tronics SP. ZO. O. Holdings AB Tczew Poland VASTBRIGHT CABLETRON FLEXTRONICS INTERNATIONAL IRELAND FLEXTRONICS INTERNATIONAL NEW HAMPSHIRE FLEXTRONICS INTERNATIONAL HOLLAND BV FLEXTRONICS HOLDING GERMANY GMBH FLEXTRONICS HOLDING GERMANY AND CO K.G. FLEXTRONICS INTERNATIONAL DENMARK APS FLEISCHER-TRADING, SERVICOS E CONSULTADORIA LDA FLEXTRONICS HOLDING GmBH
4.01-7 79
JURISDICTION ISSUED AND DIRECT OF MATERIAL OUTSTANDING PERCENTAGE OWNER OF SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP SHARES ---------- ------------ ---------- ------------- ---------- ---------- FLEXTRONICS TECHNOLOGY GmBH IN USA: CBA SUMMIT EMC
4.01-8 80 B. After the Closing of the DII Acquisition: To be completed by FII within 30 days of the Closing Date
JURISDICTION ISSUED AND DIRECT OF MATERIAL OUTSTANDING PERCENTAGE OWNER OF SUBSIDIARY ORGANIZATION SUBSIDIARY SHARE CAPITAL OWNERSHIP SHARES ---------- ------------ ---------- ------------- ---------- ----------
4.01-9 81 EXHIBIT A NOTICE OF REVOLVING LOAN BORROWING [Date] ABN AMRO Bank N.V. as Agent Syndications Group 1325 Avenue of the Americas, 9th Floor New York, NY 10019 U.S.A. Attn: Linda Boardman 1. Reference is made to that certain Credit Agreement, dated as of April 3, 2000 (the "Credit Agreement"), among Flextronics International USA, Inc. and The DII Group, Inc. (each a "Borrower" and collectively the "Borrowers"), the financial institutions listed in Schedule I to the Credit Agreement (the "Lenders") and ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). Unless otherwise indicated, all terms defined in the Credit Agreement have the same respective meanings when used herein. 2. Pursuant to Subparagraph 2.02(a) of the Credit Agreement, the undersigned Borrower hereby irrevocably requests a Revolving Loan Borrowing to be made upon the following terms: (a) The requested Borrowing is to be under Facility [__]; (b) The principal amount of such Borrowing are to be __________; (c) Such Borrowing is to consist of [Base Rate] [LIBOR] Loans; (d) If such Borrowing is to consist of LIBOR Loans, the initial Interest Period for such Borrowing is to be __________ month[s]; and (e) The date of such Borrowing is to be __________, ____. 3. The undersigned Borrower hereby certifies to Lenders and Agent that, on the date of this Notice of Revolving Loan Borrowing and after giving effect to the requested Revolving Loan Borrowing: (a) The representations and warranties of Borrowers and their Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in the other Credit Documents are true and correct in all material respects as if made on such date (except for representations and warranties expressly made as of a specified date, which shall be true as of such date); and (b) No Default has occurred and is continuing. 4. Please disburse the proceeds of the requested Revolving Loan Borrowing to___________________________________________________ _______________________________________________________________. A-1 82 IN WITNESS WHEREOF, the undersigned Borrower has executed this Notice of Revolving Loan Borrowing on the date set forth above. [_________________________________] By: -------------------------------- Name: ---------------------------- Title: -------------------------- A-2 83 EXHIBIT B NOTICE OF TERM LOAN BORROWING [Date] ABN AMRO Bank N.V. as Agent Syndications Group 1325 Avenue of the Americas, 9th Floor New York, NY 10019 U.S.A. Attn: Linda Boardman 1. Reference is made to that certain Credit Agreement, dated as of April 3, 2000 (the "Credit Agreement"), among Flextronics International USA, Inc. and The DII Group, Inc. (each a "Borrower" and collectively the "Borrowers"), the financial institutions listed in Schedule I to the Credit Agreement (the "Lenders") and ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). Unless otherwise indicated, all terms defined in the Credit Agreement have the same respective meanings when used herein. 2. Pursuant to Subparagraph 2.01(b) of the Credit Agreement, the undersigned Borrower[s] hereby irrevocably request[s] [a] Term Loan Borrowing[s] to be made on the Facility B Revolving Loan Maturity Date upon the following terms: (a) The principal amount of such Borrowing is to be $__________; and (b) Such Borrowing is to consist initially of the following Portion[s] [specify for each Portion the initial amount and Type and for each LIBOR Portion the initial Interest Period]:
Portion Portion Interest Amount Type Period ------- -------- ----------- $________ __________ __ month[s] $________ __________ __ month[s] $________ __________ __ month[s] $________ __________ __ month[s]
3. The undersigned Borrower[s] hereby certif[ies][y] to Lenders and Agent that, on the date of this Notice of Term Loan Borrowing and after giving effect to the requested Term Loan Borrowing: (a) The representations and warranties of Borrowers and their Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in the other Credit Documents are true and correct in all material respects as if made on such date (except for representations and warranties expressly made as of a specified date, which shall be true as of such date); and (b) No Default has occurred and is continuing. 4. Please disburse the proceeds of the requested Term Loan Borrowing first to Lenders in such amounts as may be necessary to repay the principal amount of all Revolving Loans outstanding on the Facility B Revolving Loan Maturity Date and the balance, if any, to______________________________________ ______________________________________________________________________________. B-1 84 IN WITNESS WHEREOF, the undersigned Borrower[s] [has][have] executed this Notice of Term Loan Borrowing on the date set forth above. [_________________________________] By: --------------------------------- Name: -------------------------- Title: ------------------------- B-2 85 EXHIBIT C(1) REVOLVING LOAN NOTE ______________, ________ April __, 2000 FOR VALUE RECEIVED, the undersigned ("Borrower"), hereby promises to pay to the order of ____________________, a ____________________ ("Lender"), the aggregate outstanding principal balance of all Revolving Loans made by Lender to Borrower pursuant to the Credit Agreement referred to below (as amended from time to time, the "Credit Agreement"), on or before the Facility [A] [B] Revolving Loan Maturity Date specified in the Credit Agreement; and to pay interest on said sum, or such lesser amount, at the rates and on the dates provided in the Credit Agreement. Borrower shall make all payments hereunder, for the account of Lender's Applicable Lending Offices, to Agent as indicated in the Credit Agreement, in Dollars as required by the Credit Agreement and in same day or immediately available funds. Borrower hereby authorizes Lender to record on the schedule(s) annexed to this note the date and amount of each Revolving Loan, the Facility pursuant to which made, and the date and amount of each payment or prepayment of principal made by Borrower and agrees that all such notations shall constitute prima facie evidence of the matters noted; provided, however, that the failure of Lender to make any such notation shall not affect Borrower's obligations hereunder. This note is one of the Revolving Loan Notes referred to in the Credit Agreement, dated as of April 3, 2000, among Borrower, [FIUI] [DII], Lender and the other lenders from time to time parties thereto (collectively, the "Lenders") and ABN AMRO, as agent for Lenders. This note is subject to the terms of the Credit Agreement, including the rights of prepayment and the rights of acceleration of maturity set forth therein. Terms used herein have the meanings assigned to those terms in the Credit Agreement, unless otherwise defined herein. The transfer, sale or assignment of any rights under or interest in this note is subject to certain restrictions contained in the Credit Agreement, including Paragraph 8.05 thereof. C(1)-1 86 Borrower shall pay all reasonable fees and expenses, including reasonable attorneys' fees, incurred by Lender in the enforcement or attempt to enforce any of Borrower's obligations hereunder not performed when due. Borrower hereby waives notice of presentment, demand, protest or notice of any other kind. This note shall be governed by and construed in accordance with the laws of the State of California. [_____________] By: --------------------------------- Name: --------------------------- Title: ----------------------- C(1)-2 87 LOANS AND PAYMENTS OF PRINCIPAL
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C(1)-3 88 EXHIBIT C(2) TERM LOAN NOTE - --------------, -------- ----------, ---- FOR VALUE RECEIVED, the undersigned ("Borrower"), hereby promises to pay to the order of ____________________, a ____________________ ("Lender"), the principal amount of the Term Loan made by Lender to Borrower pursuant to the Credit Agreement referred to below (as amended from time to time, the "Credit Agreement"), in a single installment on the Term Loan Maturity Date specified in the Credit Agreement; and to pay interest on said sum at the rates and on the dates provided in the Credit Agreement. Borrower shall make all payments hereunder, for the account of Lender's Applicable Lending Offices, to Agent as indicated in the Credit Agreement, in Dollars as required by the Credit Agreement and in same day or immediately available funds. This note is one of the Term Loan Notes referred to in the Credit Agreement, dated as of April 3, 2000, among Borrower, [FIUI] [DII], Lender and the other lenders from time to time parties thereto (collectively, the "Lenders") and ABN AMRO, as agent for Lenders. This note is subject to the terms of the Credit Agreement, including the rights of prepayment and the rights of acceleration of maturity set forth therein. Terms used herein have the meanings assigned to those terms in the Credit Agreement, unless otherwise defined herein. The transfer, sale or assignment of any rights under or interest in this note is subject to certain restrictions contained in the Credit Agreement, including Paragraph 8.05 thereof. C(2)-1 89 Borrower shall pay all reasonable fees and expenses, including reasonable attorneys' fees, incurred by Lender in the enforcement or attempt to enforce any of Borrower's obligations hereunder not performed when due. Borrower hereby waives notice of presentment, demand, protest or notice of any other kind. This note shall be governed by and construed in accordance with the laws of the State of California. [_____________] By: --------------------------------- Name: --------------------------- Title: ----------------------- C(2)-2 90 EXHIBIT D GUARANTY THIS GUARANTY, dated as of April 3, 2000, is executed by each of the undersigned (each such entity and each entity which hereafter executes and delivers a Subsidiary Joinder in substantially the form of Attachment 1 hereto to be referred to herein as a "Guarantor"), in favor of ABN AMRO BANK N.V., acting as agent (in such capacity, and each successor thereto in such capacity, "Agent") for the financial institutions which are from time to time parties to the Credit Agreement referred to in Recital A below (collectively, "Lenders"). RECITALS A. Pursuant to a Credit Agreement dated as of April 3, 2000 (as amended from time to time, the "Credit Agreement"), among Flextronics International USA, Inc. and The DII Group, Inc. (each a "Borrower" and collectively, the "Borrowers"), Lenders and Agent, Lenders have agreed to extend certain credit facilities to Borrowers upon the terms and subject to the conditions set forth therein. Each Guarantor (other than FIL) is a direct or indirect Subsidiary of FIL and expects to derive substantial direct and indirect benefit from the transactions contemplated by the Credit Agreement. B. Lenders' obligations to extend the credit facilities to Borrowers under the Credit Agreement are subject, among other conditions, to receipt by Agent of (1) this Guaranty, duly executed by each existing Eligible Material Subsidiary, and (2) Subsidiary Joinders, duly executed by each future Eligible Material Subsidiary. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, each Guarantor hereby agrees with Agent, for the ratable benefit of Lenders and Agent, as follows: 1. DEFINITIONS AND INTERPRETATION. (a)Definitions. When used in this Guaranty, the following terms shall have the following respective meanings: "Agent" shall have the meaning given to that term in the introductory paragraph hereof. "Aggregate Guaranty Payments" shall mean, with respect to any Guarantor at any time, the aggregate net amount of all payments made by such Guarantor under this Guaranty (including, without limitation, under Paragraph 5 hereof) at or prior to such time. "Alternative Currency" shall mean any currency (other than United States Dollars). "Borrowers" shall have the meaning given to that term in the Recital A hereof. "Credit Agreement" shall have the meaning given to that term in the Recital A hereof. "Debtor Relief Proceeding" shall mean any suit, action, case or other proceeding commenced by, against or for any Borrower or its property seeking the dissolution, liquidation, reorganization, rearrangement or other relief of such Borrower or its debts under any applicable bankruptcy, insolvency or debtor relief law or other similar Governmental Rule now or hereafter in effect or seeking the appointment of a receiver, trustee, liquidator, custodian or other similar official for such Borrower or any substantial part of its property or any general assignment by any 1 91 Borrower for the benefit of its creditors, whether or not any such suit, action, case or other proceeding is voluntary or involuntary. "Disallowed Post-Commencement Interest and Expenses" shall mean interest computed at the rate provided in the Credit Agreement and claims for reimbursement, costs, expenses or indemnities under the terms of any of the Credit Documents accruing or claimed at any time after the commencement of any Debtor Relief Proceeding, if the claim for such interest, reimbursement, costs, expenses or indemnities is not allowable, allowed or enforceable against Borrowers in such Debtor Relief Proceeding. "Dollar Equivalent" shall mean, as to any amount denominated in an Alternative Currency as of any date of determination, the amount of Dollars that would be required to purchase the amount of such Alternative Currency based upon the spot selling rate at which ABN AMRO's London office offers to sell such Alternative Currency for Dollars in the London foreign exchange market at approximately 11:00 a.m. London time on such date for delivery two (2) Business Days later. "Fair Share" shall mean, with respect to any Guarantor at any time, an amount equal to (i) a fraction, the numerator which is the Maximum Guaranty Amount of such Guarantor and the denominator of which is the aggregate Maximum Guaranty Amounts of all Guarantors, multiplied by (ii) the aggregate amount paid by all Funding Guarantors under this Guaranty at or prior to such time. "FMM Process Agent" shall have the meaning given to that term in Subparagraph 6(l)(iii) hereof. "Fair Share Shortfall" shall mean, with respect to any Guarantor at any time, the amount, if any, by which the Fair Share of such Guarantor at such time exceeds the Aggregate Guaranty Payments of such Guarantor at such time. "FIL" shall have the meaning given to that term in the Recital A hereof. "Funding Guarantor" shall have the meaning given to that term in Paragraph 5 hereof. "Guaranteed Obligations" shall mean and include, with respect to any Guarantor, all loans, advances, debts, liabilities, and obligations, howsoever arising, owed by any Borrower (other than such Guarantor in its capacity as a Borrower if such Guarantor is a Borrower) to Agent or any Lender of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money) individual or joint and several, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising pursuant to the terms of the Credit Documents, including all interest, fees, charges, expenses, attorneys' fees and accountants' fees chargeable to any Borrower or payable by any Borrower thereunder. "Guarantor" shall have the meaning given to that term in the introductory paragraph hereof. "Lenders" shall have the meaning given to that term in the introductory paragraph hereof. "Maximum Guaranty Amount" shall mean, with respect to any Guarantor at any time, (i) the full amount of the Guaranteed Obligations at such time or (ii) if any court of competent jurisdiction determines in any action to enforce this Guaranty that enforcement against such Guarantor for the full amount of the Guaranteed Obligations is not lawful under or would be subject to avoidance under Section 548 of the United States Bankruptcy Code or any applicable provision of any comparable law of any state or other jurisdiction, then the maximum amount lawful and not subject to such avoidance. 2 92 "Mexican Guarantor" shall mean Flextronics Manufacturing Mex, S.A. de C.V. and its successors or assigns. "Subordinated Obligations" shall have the meaning given to that term in Paragraph 4 hereof. "Subsidiary Joinder" shall mean an instrument substantially in the form of Attachment 1 hereto. "Taxes" shall have the meaning given to such term in Subparagraph 6(h). Unless otherwise defined herein, all other capitalized terms used herein and defined in the Credit Agreement shall have the respective meanings given to those terms in the Credit Agreement. (b) Other Interpretive Provisions. The rules of construction set forth in Section I of the Credit Agreement shall, to the extent not inconsistent with the terms of this Guaranty, apply to this Guaranty and are hereby incorporated by reference. Each Guarantor acknowledges receipt of copies of the Credit Agreement and the other Credit Documents. 2. GUARANTY. (a) Payment Guaranty. Each Guarantor unconditionally guarantees and promises to pay and perform as and when due, whether at stated maturity, upon acceleration or otherwise, any and all of the Guaranteed Obligations. If any Debtor Relief Proceeding relating to any Borrower is commenced, each Guarantor further unconditionally guarantees and promises to pay and perform, upon the demand of Agent, any and all of the Guaranteed Obligations (including any and all Disallowed Post-Commencement Interest and Expenses) in accordance with the terms of the Credit Documents, whether or not such obligations are then due and payable by any Guarantor and whether or not such obligations are modified, reduced or discharged in such Debtor Relief Proceeding. This Guaranty is a guaranty of payment and not of collection. (b) Continuing Guaranty. This Guaranty is an irrevocable continuing guaranty of the Guaranteed Obligations which shall continue in effect until all obligations of Lenders to extend credit to all Borrowers have terminated and all of the Guaranteed Obligations have been fully paid. If any payment on any Guaranteed Obligation is set aside, avoided or rescinded or otherwise recovered from Agent or any Lender, such recovered payment shall constitute a Guaranteed Obligation hereunder and, if this Guaranty was previously released or terminated, it automatically shall be fully reinstated, as if such payment was never made. (c) Joint, Several and Independent Obligations. The liability of each Guarantor hereunder is joint and several and is independent of the Guaranteed Obligations. A separate action or actions may be brought and prosecuted against each Guarantor for the full amount of the Guaranteed Obligations irrespective of whether action is brought against any Borrower, any other Guarantor or any other guarantor of the Guaranteed Obligations or whether any Borrower, any other Guarantor or any other guarantor of the Guaranteed Obligations is joined in any such action or actions. (d) Fraudulent Transfer Limitation. If, in any action to enforce this Guaranty, any court of competent jurisdiction determines that enforcement against any Guarantor for the full amount of the Guaranteed Obligations is not lawful under or would be subject to avoidance under Section 548 of the United States Bankruptcy Code or any applicable provision of any comparable law of any state or other jurisdiction, the liability of such Guarantor under this Guaranty shall be limited to the maximum amount lawful and not subject to such avoidance. (e) Termination. Notwithstanding any termination of this Guaranty in accordance with Paragraph 3 hereof, this Guaranty shall continue to be in full force and effect and applicable to any Guaranteed 3 93 Obligations arising thereafter which arise because prior payments of Guaranteed Obligations are rescinded or otherwise required to be surrendered by Agent or any Lender after receipt. 3. AUTHORIZATIONS, WAIVERS, ETC. (a) Authorizations. Each Guarantor authorizes Agent and Lenders, in their discretion, without notice to such Guarantor, irrespective of any change in the financial condition of any Borrower, such Guarantor, any other Guarantor or any other guarantor of the Guaranteed Obligations since the date hereof, and without affecting or impairing in any way the liability of such Guarantor hereunder, from time to time to: (i) Create new Guaranteed Obligations and renew, compromise, extend, accelerate or otherwise change the time for payment or performance of, or otherwise amend or modify the Credit Documents or change the terms of the Guaranteed Obligations or any part thereof, including increase or decrease of the rate of interest thereon; (ii) Take and hold security for the payment or performance of the Guaranteed Obligations and exchange, enforce, waive or release any such security; apply such security and direct the order or manner of sale thereof; and purchase such security at public or private sale; (iii) Otherwise exercise any right or remedy they may have against any Borrower, such Guarantor, any other Guarantor, any other guarantor of the Guaranteed Obligations or any security, including, without limitation, the right to foreclose upon any such security by judicial or nonjudicial sale; (iv) Settle, compromise with, release or substitute any one or more makers, endorsers or guarantors of the Guaranteed Obligations; and (v) Assign the Guaranteed Obligations, this Guaranty or the other Credit Documents in whole or in part to the extent provided in the Credit Agreement and the other Credit Documents. (b) Waivers. Each Guarantor hereby waives: (i) Any right to require Agent or any Lender to (A) proceed against any Borrower, any other Guarantor or any other guarantor of the Guaranteed Obligations, (B) proceed against or exhaust any security received from any Borrower, such Guarantor, any other Guarantor or any other guarantor of the Guaranteed Obligations or otherwise marshal the assets of any Borrower, such Guarantor, any other Guarantor or any other guarantor of the Guaranteed Obligations or (C) pursue any other remedy in Agent's or any Lender's power whatsoever; (ii) Any defense arising by reason of the application by any Borrower of the proceeds of any borrowing; (iii) Any defense resulting from the absence, impairment or loss of any right of reimbursement, subrogation, contribution or other right or remedy of Guarantor against any Borrower, any other Guarantor, any other guarantor of the Guaranteed Obligations or any security, whether resulting from an election by Agent or any Lender to foreclose upon security by nonjudicial sale, or otherwise; (iv) Any setoff or counterclaim of any Borrower or any defense which results from any disability or other defense of any Borrower or the cessation or stay of enforcement from any cause whatsoever of the liability of any Borrower (including, without limitation, the lack of validity or enforceability of any of the Credit Documents); -4- 94 (v) Any defense based upon any law, rule or regulation which provides that the obligation of a surety must not be greater or more burdensome than the obligation of the principal; (vi) Until all obligations of Agent or any Lender to extend credit to all Borrowers have terminated and all of the Guaranteed Obligations have been fully paid, any right of subrogation, reimbursement, indemnification or contribution and other similar right to enforce any remedy which Agent, Lenders or any other Person now has or may hereafter have against any Borrower on account of the Guaranteed Obligations, and any benefit of, and any right to participate in, any security now or hereafter received by Agent, any Lender or any other Person on account of the Guaranteed Obligations; (vii) All presentments, demands for performance, notices of non-performance, notices delivered under the Credit Documents, protests, notice of dishonor, and notices of acceptance of this Guaranty and of the existence, creation or incurring of new or additional Guaranteed Obligations and notices of any public or private foreclosure sale; (viii) The benefit of any statute of limitations to the extent permitted by law; (ix) Any appraisement, valuation, stay, extension, moratorium redemption or similar law or similar rights for marshalling; (x) Any right to be informed by Agent or any Lender of the financial condition of any Borrower, any other Guarantor or any other guarantor of the Guaranteed Obligations or any change therein or any other circumstances bearing upon the risk of nonpayment or nonperformance of the Guaranteed Obligations; (xi) Until all obligations of Agent or any Lender to extend credit to any Borrower have terminated and all of the Guaranteed Obligations have been fully paid, any right to revoke this Guaranty; (xii) Any defense arising from an election for the application of Section 1111(b)(2) of the United States Bankruptcy Code which applies to the Guaranteed Obligations; (xiii) Any defense based upon any borrowing or grant of a security interest under Section 364 of the United States Bankruptcy Code; and (xiv) Any right it may have to a fair value hearing to determine the size of a deficiency judgment following any foreclosure on any security for the Guaranteed Obligations. Without limiting the scope of any of the foregoing provisions of this Paragraph 3, each Guarantor hereby further waives (A) all rights and defenses arising out of an election of remedies by Agent or any Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a Guaranteed Obligation, has destroyed such Guarantor's rights of subrogation and reimbursement against any Borrower by the operation of Section 580d of the Code of Civil Procedure or otherwise, (B) all rights and defenses such Guarantor may have by reason of protection afforded to any Borrower with respect to the Guaranteed Obligations pursuant to the antideficiency or other laws of California limiting or discharging the Guaranteed Obligations, including, without limitation, Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure, and (C) all other rights and defenses available to such Guarantor by reason of Sections 2787 to 2855, inclusive, Section 2899 or Section 3433 of the California Civil Code or Section 3605 of the California Commercial Code. (c) The Mexican Guarantor hereby expressly agrees that any rights or privileges that it might have under the laws of Mexico shall not be applicable to this Guaranty, including, but not limited to, any benefit of "orden," "excusion," "division," "quita," "novacion," "prorroga," "espera" or "modificacion," provided in Articles 2813, 2814, 2816, 2817, 2818, 2820, 2821, 2822, 2823, 2827, 2836, 5 95 2840, 2842, 2844, 2845, 2846, 2847, 2848, and 2849 of the Civil Code of the Federal District of Mexico and the corresponding articles of the Civil Codes in all States of the United Mexican States ("Mexico"), which are not reproduced herein by express declaration that the contents of such articles are known to the Mexican Guarantor. (d) Financial Condition of Borrowers, Etc. Each Guarantor is fully aware of the financial condition and affairs of each Borrower. Each Guarantor has executed this Guaranty without reliance upon any representation, warranty, statement or information concerning Borrowers furnished to such Guarantor by Agent or any Lender and has, independently and without reliance on Agent or any Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of the financial condition and affairs of each Borrower and of other circumstances affecting the risk of nonpayment or nonperformance of the Guaranteed Obligations. Each Guarantor is in a position to obtain, and assumes full responsibility for obtaining, any additional information about the financial condition and affairs of each Borrower and of other circumstances affecting the risk of nonpayment or nonperformance of the Guaranteed Obligations and will, independently and without reliance upon Agent or any Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own appraisals and decisions in taking or not taking action in connection with this Guaranty. 4. SUBORDINATION. Each Guarantor hereby subordinates any and all debts, liabilities and obligations owed to such Guarantor by each Borrower (the "Subordinated Obligations") to the Guaranteed Obligations as provided in this Paragraph 4. (a) Prohibited Payments, Etc. Except during the continuance of a Default (including the commencement and continuation of any Debtor Relief Proceeding relating to either Borrower), each Guarantor may receive regularly scheduled payments from Borrowers on account of Subordinated Obligations. After the occurrence and during the continuance of any Default (including the commencement and continuation of any Debtor Relief Proceeding relating to either Borrower), however, unless Agent otherwise agrees, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations. (b) Prior Payment of Guaranteed Obligations. In any Debtor Relief Proceeding relating to either Borrower, each Guarantor agrees that Agent and Lenders shall be entitled to receive payment of all Guaranteed Obligations (including any and all Disallowed Post-Commencement Interest and Expenses) before such Guarantor receives payment of any Subordinated Obligations. (c) Turn-Over. After the occurrence and during the continuance of any Default (including the commencement and continuation of any Debtor Relief Proceeding relating to either Borrower), each Guarantor shall, if Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for Agent and Lenders and deliver such payments to Agent on account of the Guaranteed Obligations (including any and all Disallowed Post-Commencement Interest and Expenses), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty. (d) Agent Authorization. After the occurrence and during the continuance of any Default (including the commencement and continuation of any Debtor Relief Proceeding relating to any Borrower), Agent is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of each Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Disallowed Post-Commencement Interest and Expenses), and (ii) to require each Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to Agent for application to the Guaranteed Obligations (including any and all Disallowed Post-Commencement Interest and Expenses). 5. CONTRIBUTION AMONG GUARANTORS. Guarantors desire to allocate among themselves, in a fair and equitable manner, their rights of contribution from each other when any payment is made by any Guarantor under this Guaranty. Accordingly, if any payment is made by any Guarantor under this Guaranty (a "Funding Guarantor") 6 96 that exceeds its Fair Share, the Funding Guarantor shall be entitled to a contribution from each other Guarantor in the amount of such other Guarantor's Fair Share Shortfall, so that all such contributions shall cause each Guarantor's Aggregate Guaranty Payments to equal its Fair Share. The amounts payable as contributions hereunder shall be determined by the Funding Guarantor as of the date on which the related payment or distribution is made by the Funding Guarantor, and such determination shall be binding on the other Guarantors absent manifest error. The allocation and right of contribution among Guarantors set forth in this Paragraph 5 shall not be construed to limit in any way the liability of any Guarantor under this Guaranty or the amount of the Guaranteed Obligations. 6. MISCELLANEOUS. (a) Notices. Except as otherwise provided herein, all notices, requests, demands, consents, instructions or other communications to or upon any Guarantor or Agent under this Guaranty or the other Credit Documents shall be in writing and faxed, mailed or delivered, if to Agent, at its facsimile number or address set forth below, or, if to any Guarantor, at its facsimile number or address set forth below its signature below or in the respective Subsidiary Joinder for such Guarantor (or to such other facsimile number or address for any party as indicated in any notice given by that party to the other parties). All such notices and communications shall be effective (i) when sent by any overnight courier service of recognized standing, on the second Business Day following the deposit with such service; (ii) when mailed, first class postage prepaid and addressed through the United States Postal Service, upon receipt; (iii) when delivered by hand, upon delivery; and (iv) when faxed, upon confirmation of receipt. Agent: ABN AMRO Bank N.V. Syndications Group 1325 Avenue of the Americas, 9th Floor New York, NY 10019 U.S.A. Attn: Linda Boardman Tel. No: (212) 314-1724 Fax. No: (212) 314-1712 With a copy to: ABN AMRO Bank N.V. 101 California Street, Suite 4550 San Francisco, CA 94111-5812 U.S.A. Attn: Mathew Harvey Tel No: (415) 984-3733 Fax No: (415) 362-3524 (b) Payments. (i) Each Guarantor shall make all payments of the Guaranteed Obligations to Agent, or its order, at the office of Agent and at the times specified in the Credit Documents for the payment of such Guaranteed Obligations. Each Guarantor shall make all other payments hereunder at such office as Agent may designate. Each payment shall be made in same day or immediately available funds not later than 11:00 a.m.(local time of the office of Agent at which such payment is to be made) on the date due. (ii) Each Guarantor shall make all payments of the Guaranteed Obligations hereunder in the currency in which such Guaranteed Obligations are required to be paid by either Borrower pursuant to the Credit Documents and shall make all other payments hereunder in Dollars; provided, however, that, if Agent shall request a Guarantor to pay any amount hereunder which would otherwise be payable in another currency in the lawful currency of the United States, such Guarantor shall pay to Agent the Dollar Equivalent of such amount. 7 97 (iii) If any sum due from any Guarantor under this Guaranty or any other Credit Document to which such Guarantor is a party or any order, judgment or award given or rendered in relation hereto or thereto has to be converted from the currency (the "first currency") in which the same is payable hereunder or thereunder into another currency (the "second currency") for the purpose of (A) making or filing a claim or proof against such Guarantor with any Governmental Authority, (B) obtaining an order or judgment in any court or other tribunal or (C) enforcing any order or judgment given or made in relation hereto, such Guarantor shall, to the fullest extent permitted by law, indemnify and hold harmless each of the Persons to whom such sum is due from and against any loss suffered as a result of any discrepancy between (1) the rate of exchange used for such purpose to convert the amounts in question from the first currency into the second currency and (2) the rate or rates of exchange at which such Person may, using reasonable efforts in the ordinary course of business, purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. The foregoing indemnity shall constitute a separate obligation of each Guarantor distinct from its other obligations hereunder and shall survive the giving or making of any judgment or order in relation to all or any of such obligations. (iv) If any amounts required to be paid by any Guarantor under this Guaranty or any order, judgment or award given or rendered in relation hereto remain unpaid after such amounts are due, such Guarantor shall pay interest on the aggregate, outstanding balance of such amounts from the date due until those amounts are paid in full at a per annum rate equal to: (1) In the case of amounts payable in Dollars, the Base Rate plus two percent (2.00%), such rate to change from time to time as the Base Rate shall change. (2) In the case of amounts payable in any other currency, the Overnight Rate for such currency plus three percent (3.0%), such rate to change from time to time as the Overnight Rate shall change. (c) Expenses. Each Guarantor shall pay on demand (i) all reasonable and documented fees and expenses, including reasonable attorneys' fees and expenses, incurred by Agent in connection with the preparation, execution and delivery of, and the exercise of its duties under, this Guaranty and the preparation, execution and delivery of amendments and waivers hereunder and (ii) all reasonable and documented fees and expenses, including reasonable attorneys' fees and expenses, incurred by Agent and Lenders in connection with the enforcement or attempted enforcement of this Guaranty or any of the Guaranteed Obligations or in preserving any of Agent's or Lenders' rights and remedies (including, without limitation, all such fees and expenses incurred in connection with any "workout" or restructuring affecting the Credit Documents or the Guaranteed Obligations or any bankruptcy or similar proceeding involving Guarantor, any other Guarantor, any Borrower, or any of their affiliates). (d) Waivers; Amendments. This Guaranty may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by each Guarantor and Agent. Each waiver or consent under any provision hereof shall be effective only in the specific instances for the purpose for which given. No failure or delay on Agent's or any Lender's part in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. (e) Successors and Assigns. This Guaranty shall be binding upon and inure to the benefit of Agent, Lenders, Guarantors and their respective successors and assigns; provided, however, that no Guarantor may assign or transfer any of its rights and obligations under this Guaranty without the prior written consent of Agent and Lenders, and, provided, further, that Agent or any Lender may sell, assign and delegate their respective rights and obligations hereunder only as permitted by the Credit Agreement. All references in this Guaranty to any Person shall be deemed to include all permitted successors and assigns of such Person. 8 98 (f) Cumulative Rights, etc. The rights, powers and remedies of Agent and Lenders under this Guaranty shall be in addition to all rights, powers and remedies given to Agent and Lenders by virtue of any applicable law, rule or regulation of any Governmental Authority, the Credit Agreement, any other Credit Document or any other agreement, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Agent's or any Lender's rights hereunder. Each Guarantor waives any right to require Agent or any Lender to proceed against any Person or to exhaust any Collateral or to pursue any remedy in Agent's or such Lender's power. (g) Setoff; Security Interest. (i) In addition to any rights and remedies of Lenders provided by law, each Lender shall have the right, with the prior consent of Agent but without prior notice to or consent of any Guarantor, any such notice and consent being expressly waived by each Guarantor to the extent permitted by applicable law, upon the occurrence and during the continuance of an Event of Default, to set-off and apply against the obligations of each Guarantor any amount owing from such Lender to such Guarantor. The aforesaid right of set-off may be exercised by such Lender against a Guarantor or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of such Guarantor or against anyone else claiming through or against such Guarantor or such trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off may not have been exercised by such Lender at any prior time. Each Lender agrees promptly to notify the applicable Guarantor after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. (ii) As security for the obligations of each Guarantor hereunder, each Guarantor hereby grants to Agent and each Lender, for the benefit of all Lenders, a continuing security interest in any and all deposit accounts or moneys of such Guarantor now or hereafter maintained with such Lender. Each Lender shall have all of the rights of a secured party with respect to such security interest. (h) Payments Free of Taxes. All payments made by each Guarantor under this Guaranty shall be made free and clear of, and without deduction or withholding for or on account of, all present and future Non-Excluded Taxes. If any Non-Excluded Taxes are required to be withheld from any amounts payable to Agent or any Lender hereunder, the amounts so payable to Agent or such Lender shall be increased to the extent necessary to yield to Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Guaranty or the other Credit Documents, as applicable. Whenever any Non-Excluded Taxes are payable by any Guarantor, as promptly as possible thereafter, such Guarantor shall send to Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by such Guarantor showing payment thereof. If Guarantors fail to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fail to remit to Agent the required receipts or other required documentary evidence, Guarantors shall indemnify Agent and Lenders for any taxes (including interest or penalties) that may become payable by Agent or any Lender as a result of any such failure. The obligations of Guarantors under this Subparagraph 6(h) shall survive the payment and performance of the Guaranteed Obligations and the termination of this Guaranty. Nothing contained in this Subparagraph 6(h) shall require Agent or any Lender to make available any of its tax returns (or any other information relating to its taxes which it deems to be confidential). (i) Partial Invalidity. If at any time any provision of this Guaranty is or becomes illegal, invalid or unenforceable in any respect under the law or any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Guaranty nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. (j) Jury Trial. EACH OF GUARANTORS, LENDERS AND AGENT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT 9 99 TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY. (k) Counterparts. This Guaranty may be executed in any number of identical counterparts, any set of which signed by all the Guarantors shall be deemed to constitute a complete, executed original for all purposes. (l) Governing Law, Consent to Jurisdiction, Etc. (i) This Guaranty shall be governed by and construed in accordance with the laws of the State of California, except for the purposes of any suit or legal action brought in Mexico in which case it shall be governed by the laws of Mexico. (ii) Each Guarantor irrevocably submits to the non-exclusive jurisdiction of the courts of the State of California and the courts of the United States of America located in the Northern District of California and, in respect of the Mexican Guarantor, the Mexican Guarantor and the Agent, on behalf of Lenders, also irrevocably submit to the jurisdictions of the courts of the Federal District of Mexico, Mexico, and agrees that any legal action, suit or proceeding arising out of or relating to this Guaranty or any of the other Credit Documents may be brought against such party in any such courts. Final judgment against a Guarantor in any such action, suit or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the judgment, or in any other manner provided by law. Nothing in this Subparagraph 6(l) shall affect the right of Agent or any Lender to commence legal proceedings or otherwise sue any Guarantor in any other appropriate jurisdiction, or concurrently in more than one jurisdiction, or to serve process, pleadings and other papers upon any Guarantor in any manner authorized by the laws of any such jurisdiction. Subject to and except as otherwise provided in paragraph (iii) below in respect of the Mexican Guarantor, each Guarantor agrees that process served either personally or by registered mail shall, to the extent permitted by law, constitutes adequate service of process in any such suit. Without limiting the foregoing, each Guarantor hereby appoints, in the case of any such action or proceeding brought in the courts of or in the State of California, CT Corporation, with offices on the date hereof at 818 West Seventh Street, Los Angeles, California 90017, to receive for it and on its behalf, service of process in the State of California with respect thereto, provided each Guarantor may appoint any other person, reasonably acceptable to Agent, with offices in the State of California to replace such agent for service of process upon delivery to Agent of a reasonably acceptable agreement of such new agent agreeing so to act. Each Guarantor irrevocably waives to the fullest extent permitted by applicable law (A) any objection which it may have now or in the future to the laying of the venue of any such action, suit or proceeding in any court referred to in the first sentence above; (B) any claim that any such action, suit or proceeding has been brought in an inconvenient forum; (C) its right of removal of any matter commenced by any other party in the courts of the State of California to any court of the United States of America; (D) any immunity which it or its assets may have in respect of its obligations under this Agreement or any other Credit Document from any suit, execution, attachment (whether provisional or final, in aid of execution, before judgment or otherwise) or other legal process; and (E) any right it may have to require the moving party in any suit, action or proceeding brought in any of the courts referred to above arising out of or in connection with this Agreement or any other Credit Document to post security for the costs of any Guarantor or to post a bond or to take similar action. (iii) The Mexican Guarantor hereby irrevocably appoints CT Corporation, Los Angeles Agency, (the "FMM Process Agent"), with an office on the date hereof in 818 West Seventh Street, Los Angeles, California 90017, in the case of any action, suit or proceeding arising out of or relating to this Guaranty or any of the other Credit Documents brought in the courts of or in the State of California, as its agent to receive for it and on its behalf service of process in the State of California with respect thereto. Such service may be made by mailing or delivering a copy of such process to the Mexican Guarantor in care of the FMM Process Agent at the FMM Process Agent's above address, and the Guarantor hereby irrevocably authorizes and directs the 10 100 FMM Process Agent to accept such service on its behalf; provided, that for any notice or service of process to be effective under Mexican law, such notice or service of process shall be deemed to have been given or made when delivered either (i) personally, return receipt requested, (ii) by courier delivery or certified mail, return receipt requested, or (iii) by facsimile followed by personal or courier delivery, return receipt requested. The Mexican Guarantor agrees that a final judgment in any such proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. For purposes of perfecting the appointment of the FMM Process Agent under the applicable laws of Mexico, the Mexican Guarantor agrees to execute and deliver the power of attorney attached hereto as Attachment 2, formalized before a notary public in Mexico and duly recorded at the Public Registry of Commerce (Registro Publico de Comercio) of the corporate domicile of the Mexican Guarantor, and to execute and deliver any and all other documents (including Mexican notarial deeds) as may be required by the Agent in its sole discretion. [The first signature page follows.] 11 101 IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed as of the day and year first above written. FLEXTRONICS INTERNATIONAL LTD., acting through its Hong Kong branch By: -------------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Address: Room 908, Dominion Center 43-59 Queens Road East Wanchai, Hong Kong Attn: Chief Financial Officer Telephone: (___) ___-____ Facsimile: (408) 428-1300 With a copy to: 2090 Fortune Drive San Jose, CA, 95131 U.S.A. Attn: Treasurer Telephone: (___) ___-____ Facsimile: (408) 428-1300 FLEXTRONICS INTERNATIONAL LATIN AMERICA (L) LTD. By: -------------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Address: Level 10, Wisma Oceanic Jalan OKK Awang Besar Labuan, F.T. Malaysia Attn: ___________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ FLEX INTERNATIONAL MARKETING (L) LTD. 12 102 By: ----------------------------- Name: --------------------- Title: -------------------- Address: Level 10, Wisma Oceanic Jalan OKK Awang Besar Labuan, F.T. Malaysia Attn: ___________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ FLEXTRONICS MANUFACTURING MEX, S.A. DE C.V. By: ----------------------------- Name: --------------------- Title: -------------------- Address: Carretara Base Aerea Militar 5850 Zapopan, Jalisco 4500 Mexico Attn: ___________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ FLEXTRONICS SINGAPORE PTE LTD. By: ----------------------------- Name: --------------------- Title: -------------------- Address: 36 Robinson Road #18-01 City House Singapore 068877 Attn: ___________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ 13 103 FLEXTRONICS HOLDINGS UK LIMITED By: ----------------------------- Name: --------------------- Title: -------------------- Address: 50 Stratton Street London W1X 6NX England Attn: ___________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ FLEXTRONICS INTERNATIONAL USA, INC. By: ----------------------------- Name: --------------------- Title: -------------------- Address: 2090 Fortune Drive San Jose, California 95131 U.S.A. Attn: Treasurer Telephone: (___) ___-____ Facsimile: (___) ___-____ DOVATRON INTERNATIONAL, INC. By: ----------------------------- Name: --------------------- Title: -------------------- Address: Attn: ___________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ 14 104 ATTACHMENT 1 SUBSIDIARY JOINDER THIS SUBSIDIARY JOINDER (this "Agreement"), dated as of ____________, ____, is executed by [NEW ELIGIBLE MATERIAL SUBSIDIARY], a _________ [corporation] [partnership] [etc.] ("New Subsidiary") in favor of ABN AMRO BANK N.V., acting as agent (in such capacity, and each successor thereto in such capacity, "Agent") for the financial institutions which are from time to time parties to the Credit Agreement referred to in Recital A below (collectively, the "Lenders"). RECITALS A. Pursuant to a Credit Agreement dated as of April 3, 2000 (as amended from time to time, the "Credit Agreement"), among Flextronics International USA, Inc. ("FIUI") and The DII Group, Inc. ("DII", and together with FIUI, each a "Borrower" and collectively the "Borrowers"), Lenders and Agent, Lenders have agreed to extend certain credit facilities to Borrowers upon the terms and subject to the conditions set forth therein. B. Lenders' obligations to extend the credit facilities to Borrowers under the Credit Agreement are subject, among other conditions, to receipt by Agent of (1) a Guaranty, dated as of April 3, 2000, duly executed by each existing Eligible Material Subsidiary and any other Subsidiary designated as a Guarantor from time to time, and (2) Subsidiary Joinders, duly executed by each future Eligible Material Subsidiary. C. New Subsidiary is a new Eligible Material Subsidiary and expects to derive substantial direct and indirect benefit from the transactions contemplated by the Credit Agreement. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, New Subsidiary hereby agrees with Agent, for the ratable benefit of Lenders and Agent, as follows: 1. DEFINITIONS AND INTERPRETATION. Unless otherwise defined herein, all capitalized terms used herein and defined in the Guaranty shall have the respective meanings given to those terms in the Guaranty. New Subsidiary acknowledges receipt of copies of the Guaranty, the Credit Agreement and the other Credit Documents. 2. REPRESENTATIONS AND WARRANTIES. On and as of the date of this Agreement (the "Effective Date") and for the ratable benefit of the Agent and Lenders, New Subsidiary hereby makes each of the representations and warranties made by each Guarantor in the Guaranty. 3. AGREEMENT TO BE BOUND. New Subsidiary agrees that, on and as of the Effective Date, it shall become a Guarantor under the Guaranty and shall be bound by all the provisions of the Guaranty to the same extent as if New Subsidiary had executed the Guaranty on the Closing Date. 4. WAIVER. Without limiting the generality of the waivers in the Guaranty, New Subsidiary specifically agrees to be bound by the Guaranty and waives any right to notice of acceptance of its execution of this Agreement and of its agreement to be bound by the Guaranty. 5. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California. (1)-1 105 IN WITNESS WHEREOF, New Subsidiary has caused this Agreement to be executed by its duly authorized officer. [NEW SUBSIDIARY] By: ----------------------------------- Name: --------------------------- Title: -------------------------- Address: [_________________________] [_________________________] [_________________________] Attn: [___________________] Telephone: [(___) ___-____] Facsimile: [(___) ___-____] (1)-2 106 ATTACHMENT 2 To be executed and delivered by the Guarantor in the presence of, and to be certified by, a Mexican Notary Public FORM OF SPECIAL IRREVOCABLE POWER OF ATTORNEY [__________________], S.A. DE C.V. (the "Grantor"), a sociedad anonima de capital variable duly incorporated and validly existing under the laws of the United Mexican States ("Mexico"), hereby grants an irrevocable power of attorney for litigation and collections in favor of [____________________] (the "Attorney-In-Fact"), in terms of the first paragraph of article 2554 of the Civil Code for the Federal District of Mexico and the corresponding articles of the Civil Codes of all States of Mexico. This power of attorney is limited in its scope but is as broad as necessary and may be exercised in any jurisdiction, so that the Attorney-In-Fact, in the name and on behalf of the Grantor, receives any and all notices and service of process of any nature in connection with any suits, actions, proceedings and judgments of all kinds, including, without limitation, judicial, administrative or arbitration proceedings in any way relating to the Guaranty Agreement (the "Guaranty Agreement") dated [___________], 2000 entered into by and among the Grantor, the other Guarantors, the Lenders party thereto and ABN AMRO Bank N.V. as agent. The Grantor hereby appoints as its domicile to receive any notices relating thereto, [_______________] United States of America, or any other domicile of the Attorney-In-Fact notified to the Grantor. This Power of Attorney is granted in satisfaction of a condition set forth in the Guaranty Agreement, and it is therefore irrevocable, in accordance with article 2596 of the Civil Code for the Federal District of Mexico and the corresponding Articles of the Civil Code of all States of Mexico. (2)-1 107 ATTACHMENT 2 To be executed and delivered by the Guarantor in the presence of, and to be certified by, a Mexican Notary Public FORM SPECIAL IRREVOCABLE POWER OF ATTORNEY "NUMERO LIBRO FOLIO En la Ciudad de [_________] a los [____________] dias de mes de [___________] de mil novecientos noventa y nueve, yo, el Licenciado [__________________________], titular de la Notaria numero [____________] del [_______________], hago constar el PODER ESPECIAL IRREVOCABLE, que se consigna al tenor de la siguiente: CLAUSULA UNICA Por medio del presente instrumento, la sociedad denominada [__________________], SOCIEDAD ANONIMA DE CAPITAL VARIABLE (la "Otorgante"), representada como ha quedado dicho, otorga en favor de la sociedad denominada [_______________], un poder especial irrevocable para pleitos y cobranzas, en los terminos de primer parrafo del Articulo dos mil quinientos cincuenta y cuatro del Codigo Civil para el Distrito Federal y correlativos de los Estados de la Republica, que es limitado en cuanto a su objeto, pero tan amplio como sea necesario, para ser ejercido en cualquier jurisdiccion y a efecto de que, en nombre y representacion de la Otorgante, reciba toda clase de notificaciones y emplazamientos de cualquier naturaleza en relacion con cualquier demanda, accion, procedimiento o juicio, incluyendo sin limitacion alguna procedimientos judiciales, administrativos o arbitrales, derivados del Contrato de Garantia (Guaranty Agreement; el "Contrato de Garantia") de fecha [___] de [_______] de 2000, celebrado entre la Otorgante, las acreditantes (Lenders) ahi descritas y ABN AMRO Bank N.V. como agente administrativo. La Otorgante senala como domicilio convencional para recibir cualesquiera de las notificaciones o emplazamientos antes citados el ubicado en [___________________________], Estados Unidos de America, o cualquier otro domicilio que en el futuro designe [__________________________]. El presente poder es irrevocable, en virtud de que se otorga en cumplimiento de una condicion prevista en el Contrato de Garantia en terminos del Articule 2596 del Codigo Civil para el Distrito Federal y correlativos de los Estados de la Republica. D(1)-1 108 EXHIBIT E PLEDGE AGREEMENT THIS PLEDGE AGREEMENT, dated as of [ ], is executed by [____________________], a [________] ("Pledgor"), in favor of ABN AMRO BANK N.V., acting as agent (in such capacity and each successor thereto acting in such capacity, "Agent") for the financial institutions which are from time to time parties to the Credit Agreement referred to in Recital A below (collectively, "Lenders"). RECITALS A. Pursuant to a Credit Agreement, dated as of April 3, 2000 (as amended from time to time, the "Credit Agreement"), among Flextronics International USA, Inc. ("FIUI") and The DII Group, Inc. ("DII", and together with FIUI, each a "Borrower" and collectively the "Borrowers"), Lenders and Agent, Lenders have agreed to extend certain credit facilities to Borrowers upon the terms and subject to the conditions set forth therein. B. Lenders' obligations to extend the credit facilities to Borrowers under the Credit Agreement are subject, among other conditions, to receipt by Agent of this Agreement, duly executed by Pledgor. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Pledgor hereby agrees with Agent, for the ratable benefit of Lenders and Agent, as follows: 1. DEFINITIONS AND INTERPRETATION. (a) Definitions. When used in this Agreement, the following terms shall have the following respective meanings: "Agent" shall have the meaning given to that term in the introductory paragraph hereof. "Collateral" shall have the meaning given to that term in Paragraph 2 hereof. "Credit Agreement" shall have the meaning given to that term in Recital A hereof. "Equity Securities" of any Person shall mean (a) all common stock, preferred stock, participations, shares, partnership interests or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any of the foregoing. "Lenders" shall have the meaning given to that term in the introductory paragraph hereof. "Pledged Shares" shall mean collectively the Equity Securities pledged to Agent pursuant to Paragraph 2 hereof. "Pledgor" shall have the meaning given to that term in the introductory paragraph hereof. "Secured Obligations" shall mean and include all loans, advances, debts, liabilities, and obligations, howsoever arising, owed by Pledgor to Agent or any Lender of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money) individual or joint and several, direct or indirect, absolute or contingent, due E-1 109 or to become due, now existing or hereafter arising pursuant to the terms of the Credit Documents, including all interest, fees, charges, expenses, attorneys' fees and accountants' fees chargeable to Pledgor or payable by Pledgor thereunder. "Subsidiary" of any Person shall mean (a) any corporation of which more than 50% of the issued and outstanding Equity Securities having ordinary voting power to elect a majority of the Board of Directors of such corporation (irrespective of whether at the time capital stock of any other class or classes of such corporation shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person's other Subsidiaries, (b) any partnership, joint venture, limited liability company or other association of which more than 50% of the equity interest having the power to vote, direct or control the management of such partnership, joint venture or other association is at the time owned and controlled by such Person, by such Person and one or more of the other Subsidiaries or by one or more of such Person's other Subsidiaries or (c) any other Person included in the Financial Statements of such Person on a consolidated basis. "UCC" shall mean the Uniform Commercial Code as in effect in the State of California from time to time. Unless otherwise defined herein, all other capitalized terms used herein and defined in the Credit Agreement shall have the respective meanings given to those terms in the Credit Agreement, and all terms defined in the UCC shall have the respective meanings given to those terms in the UCC. (b) Other Interpretive Provisions. The rules of construction set forth in Section I of the Credit Agreement shall, to the extent not inconsistent with the terms of this Agreement, apply to this Agreement and are hereby incorporated by reference. 2. PLEDGE. As security for the Secured Obligations, Pledgor hereby pledges and assigns to Agent (for the ratable benefit of Lenders and Agent) and grants to Agent (for the ratable benefit of Lenders and Agent) a security interest in all right, title and interest of Pledgor in and to the property described in subparagraphs (a) - (d) below, whether now owned or hereafter acquired (collectively and severally, the "Collateral"): (a) All of the Equity Securities described in Attachment 1 hereto, whether certificated or uncertificated; (b) All dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed or distributable in respect of or in exchange for any of the property described in subparagraph (a) above; and (c) All proceeds of the foregoing. 3. REPRESENTATIONS AND WARRANTIES. Pledgor represents and warrants to Lenders and Agent as follows: (a) Pledgor is the record legal and beneficial owner of the Collateral (or, in the case of after-acquired Collateral, at the time Pledgor acquires rights in the Collateral, will be the record legal and beneficial owner thereof). No other Person has (or, in the case of after-acquired Collateral, at the time Pledgor acquires rights therein, will have) any right, title, claim or interest (by way of Lien, purchase option or otherwise) in, against or to the Collateral. (b) Agent has (or in the case of after-acquired Collateral, at the time Pledgor acquires rights therein, will have) a first priority perfected security interest in the Collateral. E-2 110 (c) All Pledged Shares have been (or in the case of after-acquired Pledged Shares, at the time Pledgor acquires rights therein, will have been) duly authorized, validly issued and fully paid and are (or in the case of after-acquired Pledged Shares, at the time Pledgor acquires rights therein, will be) non-assessable. (d) Pledgor has delivered to Agent, together with all necessary stock powers, endorsements, assignments and other necessary instruments of transfer, the originals of all Pledged Shares, other certificated securities, other Collateral and all certificates, instruments and other writings evidencing the same. (e) Set forth in Attachment 1 hereto is a true, complete and accurate list, as of the date of this Agreement, of all Equity Securities of Ineligible Material Subsidiaries owned directly by Pledgor. 4. COVENANTS. Pledgor hereby agrees as follows: (a) Pledgor, at Pledgor's expense, shall promptly procure, execute and deliver to Agent all documents, instruments and agreements and perform all acts which are necessary or desirable, or which Agent may request, to establish, maintain, preserve, protect and perfect the Collateral, the Lien granted to Agent therein and the first priority of such Lien or to enable Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the preceding sentence, Pledgor shall (i) procure, execute and deliver to Agent all stock powers, endorsements, assignments, financing statements and other instruments of transfer requested by Agent, (ii) deliver to Agent promptly upon receipt the originals of all Pledged Shares, other certificated securities, other Collateral and all certificates, instruments and other writings evidencing the same and (iii) cause the Lien of Agent to be recorded or registered in the books of any financial intermediary or clearing corporation requested by Agent. (b) Pledgor shall pay promptly when due all taxes and other Governmental Charges, all Liens and all other charges now or hereafter imposed upon, relating to or affecting any Collateral. (c) Pledgor shall appear in and defend any action or proceeding which may affect its title to or Agent's interest in the Collateral. (d) Pledgor shall not surrender or lose possession of (other than to Agent), sell, encumber, lease, rent, option, or otherwise dispose of or transfer any Collateral or right or interest therein except as permitted in the Credit Agreement, and, notwithstanding any provision of the Credit Agreement, Pledgor shall keep the Collateral free of all Liens. 5. VOTING RIGHTS AND DIVIDENDS PRIOR TO DEFAULT. Unless an Event of Default has occurred and is continuing: (a) Pledgor may exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Pledged Shares or any part thereof; provided, however, that Pledgor shall not exercise or refrain from exercising any such rights where the consequence of such action or inaction would be (i) to impair any Collateral, the Lien granted to Agent therein, the first priority of such Lien or Agent's rights and remedies hereunder with respect to any Collateral or (ii) otherwise inconsistent with the terms of this Agreement and the other Credit Documents. (b) Pledgor may receive and retain all dividends and interest paid in cash in respect of the Pledged Shares, except for any such dividends and interest paid in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus. Pledgor shall promptly deliver to Agent to hold as Collateral all dividends and interest which Pledgor is not entitled to receive and retain pursuant to the preceding sentence, in the same form as so received (with any E-3 111 necessary endorsement), and, until so delivered, shall hold such dividends and interest in trust for the benefit of Agent, segregated from the other property or funds of Pledgor. 6. AUTHORIZED ACTION BY AGENT. Pledgor hereby irrevocably appoints Agent as its attorney-in-fact and agrees that Agent may perform (but Agent shall not be obligated to and shall incur no liability to Pledgor or any third party for failure so to do) any act which Pledgor is obligated by this Agreement to perform, and to exercise such rights and powers as Pledgor might exercise with respect to the Collateral, including, without limitation, the right to (a) collect by legal proceedings or otherwise and endorse, receive and receipt for all dividends, interest, payments, proceeds and other sums and property now or hereafter payable on or on account of the Collateral; (b) enter into any extension, reorganization, deposit, merger, consolidation or other agreement pertaining to, or deposit, surrender, accept, hold or apply other property in exchange for the Collateral; (c) insure, process, preserve and enforce the Collateral; (d) make any compromise or settlement, and take any action it deems advisable, with respect to the Collateral; (e) pay any Indebtedness of Pledgor relating to the Collateral; and (f) execute UCC financing statements and other documents, instruments and agreements required hereunder; provided, however, that Agent may exercise such powers only after the occurrence and during the continuance of an Event of Default. Pledgor agrees to reimburse Agent upon demand for all reasonable and documented costs and expenses, including reasonable and documented attorneys' fees, Agent may incur while acting as Pledgor's attorney-in-fact hereunder, all of which costs and expenses are included in the Secured Obligations. Pledgor agrees that such care as Agent gives to the safekeeping of its own property of like kind shall constitute reasonable care of the Collateral when in Agent's possession; provided, however, that Agent shall not be required to make any presentment, demand or protest, or give any notice and need not take any action to preserve any rights against any prior party or any other Person in connection with the Secured Obligations or with respect to the Collateral. 7. EVENTS OF DEFAULT. (a) Event of Default. Pledgor shall be deemed in default under this Agreement upon the occurrence and during the continuance of an Event of Default, as that term is defined in the Credit Agreement. (b) Voting Rights and Dividends. Upon the occurrence and during the continuance of an Event of Default: (i) All rights of Pledgor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to subparagraph 5(a) hereof and to receive the dividends and interest payments which it would otherwise be authorized to receive and retain pursuant to subparagraph 5(a) hereof shall cease and all such rights shall thereupon become vested in Agent which shall thereupon have the sole right, but not the obligation, to exercise such voting and other consensual rights and to receive and hold as Collateral such dividends and interest payments. (ii) Pledgor shall promptly deliver to Agent to hold as Collateral all dividends and interest received by Pledgor after the occurrence and during the continuance of any Event of Default, in the same form as so received (with any necessary endorsement), and, until so delivered, shall hold such dividends and interest in trust for the benefit of Agent, segregated from the other property or funds of Pledgor. (c) Other Rights and Remedies. In addition to all other rights and remedies granted to Agent by this Agreement, the Credit Agreement, the other Credit Documents, the UCC and other applicable Governmental Rules, Agent may, upon the occurrence and during the continuance of any Event of Default, exercise any one or more of the following rights and remedies: (i) collect, receive, appropriate or realize upon the Collateral or otherwise foreclose or enforce Agent's security interests in any or all Collateral in any manner permitted by applicable Governmental Rules or in this Agreement; (ii) notify any or all issuers of or transfer or paying agents for the Collateral or any applicable clearing corporation, financial intermediary or other Person to register the Collateral in the name of Agent or its nominee and/or to pay all dividends, interest and other amounts payable in respect of the Collateral directly to Agent; (iii) sell or E-4 112 otherwise dispose of any or all Collateral at one or more public or private sales, whether or not such Collateral is present at the place of sale, for cash or credit or future delivery, on such terms and in such manner as Agent may determine; and (iv) require Pledgor to assemble all records and information relating to the Collateral and make it available to Agent at a place to be designated by Agent. In any case where notice of any sale or disposition of any Collateral is required, Pledgor hereby agrees that seven (7) days notice of such sale or disposition is reasonable. (d) Securities Laws. (i) Pledgor acknowledges and recognizes that Agent may be unable to effect a public sale of all or a part of the Pledged Shares and may be compelled to resort to one or more private sales to a restricted group of purchasers who will be obligated to agree, among other things, to acquire the Pledged Shares for their own account, for investment and not with a view to the distribution or resale thereof. Pledgor acknowledges that any such private sales may be at prices and on terms less favorable to Agent than those of public sales, and agrees that such private sales shall be deemed to have been made in a commercially reasonable manner and that Agent has no obligation to delay sale of any Pledged Shares to permit the issuer thereof to register it for public sale under the Securities Act of 1933, as amended, or under any state securities law. (ii) Upon the occurrence and during the continuance of an Event of Default and at Agent's request, Pledgor shall, and shall cause all issuers of Collateral and all officers and directors thereof and all other necessary Persons to, execute and deliver all documents, instruments and agreements and perform all other acts necessary or, in the opinion of Agent, advisable to sell the Collateral in any public or private sale, including any acts requested by Agent to (A) register any Collateral under the Securities Act of 1933, (B) qualify any Collateral under any state securities or "Blue Sky" laws or (C) otherwise permit any such sale to be made in full compliance with all applicable Governmental Rules. 8. MISCELLANEOUS. (a) Notices. Except as otherwise specified herein, all notices, requests, demands, consents, instructions or other communications to or upon Pledgor or Agent under this Agreement shall be given as provided in Paragraph 8.01 of the Credit Agreement. (b) Waivers; Amendments. Any term, covenant, agreement or condition of this Agreement may be amended or waived only as provided in the Credit Agreement. No failure or delay by Agent or any Lender in exercising any right hereunder shall operate as a waiver thereof or of any other right nor shall any single or partial exercise of any such right preclude any other further exercise thereof or of any other right. Unless otherwise specified in any such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. (c) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Agent, Lenders, Pledgor and their respective successors and assigns; provided, however, that Pledgor may not assign or transfer any of its rights and obligations under this Agreement without the prior written consent of Agent and Lenders, and, provided, further, that Agent or any Lender may sell, assign and delegate their respective rights and obligations hereunder only as permitted by the Credit Agreement. All references in this Agreement to any Person shall be deemed to include all permitted successors and assigns of such Person. (d) Cumulative Rights, etc. The rights, powers and remedies of Agent and Lenders under this Agreement shall be in addition to all rights, powers and remedies given to Agent and Lenders by virtue of any applicable law, rule or regulation of any Governmental Authority, the Credit Agreement, any other Credit Document or any other agreement, all of which rights, powers, and remedies shall be cumulative and may be exercised successively or concurrently without impairing Agent's or any Lender's rights hereunder. E-5 113 Pledgor waives any right to require Agent or any Lender to proceed against any Person or to exhaust any Collateral or to pursue any remedy in Agent's or such Lender's power. (e) Partial Invalidity. If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions of this Agreement nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. (f) Governing Law. (i) This Agreement shall be governed by and construed in accordance with the laws of the State of California without reference to conflicts of laws rules (except to the extent otherwise provided in the UCC). (ii) The Pledgor agrees that for the exclusive benefit of the Agent, the Documentation Agent, the Managing Agents, the Co-Agent and the Lenders, any suit, action or proceeding by the Agent, the Documentation Agent, the Managing Agents, the Co-Agent and the Lenders arising our of or in connection with this Agreement may be brought by the Agent, the Documentation Agent, the Managing Agents, the Co-Agent or the Lenders in any competent court of the State of California or any federal court of the United States of America sitting in the State of California, and the Pledgor submits to the non-exclusive jurisdiction of each such court. The Pledgor further agrees, for the non-exclusive benefit of the Agent, the Documentation Agent, the Managing Agents, the Co-Agent and the Lenders, that nothing contained in this paragraph (f) shall limit the right of the Agent, the Documentation Agent, the Managing Agents, the Co-Agent or the Lenders to take suit, action or proceedings against Pledgor in any other competent jurisdiction. Pledgor irrevocably waives any right it may have to the trial by jury of such proceedings in any such court. [The signature page follows.] E-6 114 IN WITNESS WHEREOF, Pledgor has caused this Agreement to be executed as of the day and year first above written. [____________________] By: --------------------------------- Name: ------------------------- Title: ------------------------ E-7 115 ATTACHMENT 1 TO PLEDGE AGREEMENT PLEDGED SHARES
Classes of Voting Issued and Shares Owned Shares Jurisdiction Equity Or Outstanding by Pledged to Subsidiary Of Organization Securities Non-Voting Shares Pledgor Agent ---------- --------------- ---------- ---------- ----------- ------------ ----------
E(1)-1 116 EXHIBIT F ASSIGNMENT AGREEMENT THIS ASSIGNMENT AGREEMENT, dated as of the date set forth at the top of Attachment 1 hereto, by and among: (1) The bank designated under item A of Attachment 1 hereto as the Assignor Lender ("Assignor Lender"); and (2) Each bank designated under item B of Attachment 1 hereto as an Assignee Lender (individually, an "Assignee Lender"). RECITALS A. Assignor Lender is one of the Lenders which is a party to the Credit Agreement dated as of April 3, 2000, among Flextronics International USA, Inc. ("FIUI") and The DII Group, Inc. ("DII", and together with FIUI, each a "Borrower" and collectively the "Borrowers"), Assignor Lender and the other financial institutions parties thereto (collectively, the "Lenders") and ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). (Such credit agreement, as amended, supplemented or otherwise modified in accordance with its terms from time to time to be referred to herein as the "Credit Agreement"). B. Assignor Lender wishes to sell, and Assignee Lender wishes to purchase, all or a portion of Assignor Lender's rights under the Credit Agreement pursuant to Subparagraph 8.05(c) of the Credit Agreement. AGREEMENT Now, therefore, the parties hereto hereby agree as follows: 1. Definitions. Except as otherwise defined in this Assignment Agreement, all capitalized terms used herein and defined in the Credit Agreement have the respective meanings given to those terms in the Credit Agreement. 2. Sale and Assignment. Subject to the terms and conditions of this Assignment Agreement, Assignor Lender hereby agrees to sell, assign and delegate to each Assignee Lender and each Assignee Lender hereby agrees to purchase, accept and assume the rights, obligations and duties of a Lender under the Credit Agreement and the other Credit Documents with Commitments or Loans equal to the respective amounts set forth under the caption "Commitments or Loans Assigned" opposite such Assignee Lender's name on Attachment 1 hereto. Such sale, assignment and delegation shall become effective on the date designated in Attachment 1 hereto (the "Assignment Effective Date"), which date shall be, unless Agent shall otherwise consent, at least five (5) Business Days after the date following the date counterparts of this Assignment Agreement are delivered to Agent in accordance with Paragraph 3 hereof. 3. Assignment Effective Notice. Upon (a) receipt by Agent of five (5) counterparts of this Assignment Agreement (to each of which is attached a fully completed Attachment 1), each of which has been executed by Assignor Lender and each Assignee Lender (and, to the extent required by Subparagraph 8.05(c) of the Credit Agreement, by Borrowers and Agent) and (b) payment to Agent of the registration and processing fee specified in Subparagraph 8.05(e) of the Credit Agreement by Assignor Lender, Agent will transmit to Borrowers, Assignor Lender and each Assignee Lender an Assignment Effective Notice substantially in the form of Attachment 2 hereto, fully completed (an "Assignment Effective Notice"). F-1 117 4. Assignment Effective Date. At or before 12:00 noon (California time) on the Assignment Effective Date, each Assignee Lender shall pay to Assignor Lender, in immediately available or same day funds, an amount equal to the purchase price, as agreed between Assignor Lender and such Assignee Lender (the "Purchase Price"), for each portion of a Commitment or Loan purchased by such Assignee Lender hereunder. Effective upon receipt by Assignor Lender of each Purchase Price payable by each Assignee Lender, the sale, assignment and delegation to such Assignee Lender of such Commitments or Loans as described in Paragraph 2 hereof shall become effective. 5. Payments After the Assignment Effective Date. Assignor Lender and each Assignee Lender hereby agree that Agent shall, and hereby authorize and direct Agent to, allocate amounts payable under the Credit Agreement and the other Credit Documents as follows: (a) All principal payments made after the Assignment Effective Date with respect to each portion of a Loan assigned to an Assignee Lender pursuant to this Assignment Agreement shall be payable to such Assignee Lender. (b) All interest, fees and other amounts accrued after the Assignment Effective Date with respect to each portion of a Loan assigned to an Assignee Lender pursuant to this Assignment Agreement shall be payable to such Assignee Lender. Assignor Lender and each Assignee Lender shall make any separate arrangements between themselves which they deem appropriate with respect to payments between them of amounts paid under the Credit Documents on account of the Commitments or Loans assigned to such Assignee Lender, and neither Agent nor Borrowers shall have any responsibility to effect or carry out such separate arrangements. [6. Delivery of Notes. On or prior to the Assignment Effective Date, Assignor Lender will deliver to Agent the Notes payable to Assignor Lender. On or prior to the Assignment Effective Date, Borrowers will deliver to Agent new Notes for each Assignee Lender and Assignor Lender, in each case in principal amounts reflecting, in accordance with the Credit Agreement, their respective Commitments (as adjusted pursuant to this Assignment Agreement). As provided in Subparagraph 8.05(c) of the Credit Agreement, each such new Note shall be dated the Closing Date. Promptly after the Assignment Effective Date, Agent will send to each of Assignor Lender and the Assignee Lenders its new Notes and will send to Borrowers the superseded Notes payable to Assignor Lender, marked "Replaced."] 7. Delivery of Copies of Credit Documents. [Concurrently with the execution and delivery hereof, Assignor Lender will provide to each Assignee Lender (if it is not already a Lender party to the Credit Agreement) conformed copies of all documents delivered to Assignor Lender on or prior to the Closing Date in satisfaction of the conditions precedent set forth in the Credit Agreement.] 8. Further Assurances. Each of the parties to this Assignment Agreement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Assignment Agreement. 9. Further Representations, Warranties and Covenants. Assignor Lender and each Assignee Lender further represent and warrant to and covenant with each other, Agent and Lenders as follows: (a) Other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, Assignor Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the other Credit Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or the other Credit Documents furnished or the Collateral or any security interest therein. F-2 118 (b) Assignor Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrowers or any of their oblations under the Credit Agreement or any other Credit Documents. (c) Each Assignee Lender confirms that it has received a copy of the Credit Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement. (d) Each Assignee Lender will, independently and without reliance upon Agent, Assignor Lender or any other Lender and based upon 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 the other Credit Documents. (e) Each Assignee Lender appoints and authorizes Agent to take such action as Agent on its behalf and to exercise such powers under the Credit Agreement and the other Credit Documents as Agent is authorized to exercise by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Section VII of the Credit Agreement. (f) Each Assignee Lender 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 Credit Documents are required to be performed by it as a Lender. (g) Attachment 1 hereto sets forth administrative information with respect to each Assignee Lender. 10. Effect of this Assignment Agreement. On and after the Assignment Effective Date, (a) each Assignee Lender shall be a Lender with Commitments or Loans as set forth under the caption "Commitments or Loans After Assignment" opposite such Assignee Lender's name on Attachment 1 hereto and shall have the rights, duties and obligations of such a Lender under the Credit Agreement and the other Credit Documents and (b) Assignor Lender shall be a Lender with Commitments or Loans as set forth under the caption "Commitments or Loans After Assignment" opposite Assignor Lender's name on Attachment 1 hereto and shall have the rights, duties and obligations of such a Lender under the Credit Agreement and the other Credit Documents, or, if the Commitments or Loans of Assignor Lender have been reduced to $0, Assignor Lender shall cease to be a Lender and shall have no further obligation to make any Loans. 11. Miscellaneous. This Assignment Agreement shall be governed by, and construed in accordance with, the laws of the State of California. Paragraph headings in this Assignment Agreement are for convenience of reference only and are not part of the substance hereof. F-3 119 IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed by their respective duly authorized officers as of the date set forth in Attachment 1 hereto. , as -------------------------------- Assignor Lender By: --------------------------------- Name: -------------------------- Title: ------------------------- , as -------------------------------- Assignor Lender By: --------------------------------- Name: -------------------------- Title: ------------------------- , as -------------------------------- Assignor Lender By: --------------------------------- Name: -------------------------- Title: ------------------------- , as -------------------------------- Assignor Lender By: --------------------------------- Name: -------------------------- Title: ------------------------- F-4 120 CONSENTED TO AND ACKNOWLEDGED BY: - --------------------------------- By: -------------------------------- Name: ------------------------ Title: ----------------------- , - ---------------------------------- As Agent By: -------------------------------- Name: ------------------------ Title: ----------------------- ACCEPTED FOR RECORDATION IN REGISTER: , - --------------------------------- As Agent By: -------------------------------- Name: ------------------------ Title: ----------------------- F-5 121 ATTACHMENT 1 TO ASSIGNMENT AGREEMENT PART A
Commitments or Loans Commitments or Loans Assigned After Assignment ---------------------------------------- --------------------------------------- Facility B Facility B Facility A Commitment/ Facility A Commitment/ Commitment Loan Commitment Loan ------------------ ----------------- ----------------- ----------------- Assignor Lender: ---------------------- -------------- $------------ $------------ $------------ $------------ Assignee Lenders: ---------------------- -------------- $------------ $------------ $------------ $------------ -------------- $------------ $------------ $------------ $------------ -------------- $------------ $------------ $------------ $------------ -------------- $------------ $------------ $------------ $------------
F(1)-1 122 PART B [ASSIGNEE PARTICIPANT] Domestic Lending Office: Euro-Dollar Lending Office: Address for Notices: Wiring Instructions: PART C ASSIGNMENT EFFECTIVE DATE ________, ____ F(1)-2 123 ATTACHMENT 2 TO ASSIGNMENT AGREEMENT FORM OF ASSIGNMENT EFFECTIVE NOTICE Reference is made to the Credit Agreement, dated as of April 3, 2000, among Flextronics International USA, Inc. ("FIUI") and The DII Group, Inc. ("DII", and together with FIUI, each a "Borrower" and collectively the "Borrowers"), the financial institutions parties thereto (the "Lenders") and ABN AMRO Bank N.V., as agent for Lenders (in such capacity, "Agent"). Agent hereby acknowledges receipt of five executed counterparts of a completed Assignment Agreement, a copy of which is attached hereto. [Note: Attach copy of Assignment Agreement.] Terms defined in such Assignment Agreement are used herein as therein defined. 1. Pursuant to such Assignment Agreement, you are advised that the Assignment Effective Date will be __________. 2. Pursuant to such Assignment Agreement, Assignor Lender is required to deliver to Agent on or before the Assignment Effective Date the Notes payable to Assignor Lender. 3. Pursuant to such Assignment Agreement, Borrowers are required to deliver to Agent on or before the Assignment Effective Date the following Notes, each dated _________________ [Insert appropriate date]: [Describe each new Note for Assignor Lender and each Assignee Lender as to principal amount.] 4. Pursuant to such Assignment Agreement, each Assignee Lender is required to pay its Purchase Price to Assignor Lender at or before 12:00 Noon [( time)]on the Assignment Effective Date in immediately available funds. Very truly yours, ABN AMRO BANK N.V. as Agent By: --------------------------------- Name: -------------------------- Title: ------------------------- F(2)-1 EX-21.01 4 0004.txt EXHIBIT 21.01 1 EXHIBIT 21.1 EXHIBIT INDEX SUBSIDIARIES OF REGISTRANT
Subsidiary Domiciled - ---------- --------- Althofen Electronics GmbH Austria Flextronics International, Gmbh Austria Flextronics International Technologia Ltda. Brazil The DII Group (BVI) Co Ltd. British Virgin Islands FLX Cyprus Limited Cyprus DOVatron Czech A.S Czech Republic Flextronics International Denmark APS Denmark Sample Rate Systems Oyj Finland Kyrel EMS Oyj. Finland Flextronics Holding GmbH Germany Flextronics Holding Germany and Co. K.G. Germany Flextronics Holding Germany GmbH Germany Multilayer Technology and Co KG Germany Multilayer Technology Geschaftsfuhruntos Germany DOVatron Vernaltunls GMBH Germany Astron Group Limited Hong Kong Flextronics Manufacturing (HK) Ltd. Hong Kong The DII Group Asia Ltd. Hong Kong Ecoplast Muanyagipari Termekeket Gyarto Kft. Hungary Neutronics Components Elektronikai Alkatreszgyyerto Vanszabodtorulaki Kft. Hungary HTR Technikai Rendezerszolgaltato Kft. Hungary Flextronics Hungaria Kereskedelmi es, Kft Hungary Flextronics International Latin America (L) Ltd. Malaysia Flextronics Malaysia Sdn. Bhd. Malaysia Flex International Marketing (L) Ltd. Malaysia DTM Latin America (L) Ltd Malaysia DOVatron Malaysia Sdn. Bhd Malaysia Astron Technologies Ltd. Mauritius Flextronics Manufacturing Mex, S.A. de C.V. Mexico DTM Products de Mexico, S.A. de C.V. Mexico Parque de Technologies Electronics, S.A. de C.V. Mexico DOVatron de Mexico, S.A. de C.V. Mexico Flextronics International Europe BV Netherlands DII Europe B.V. Netherlands DII International Holdings C.V. Netherlands DOVatron (Ireland) B.V. Netherlands Flextronics International Holland BV Netherlands Vastbright PCB Co. Ltd. People's Republic of China Flextronics Computer (Shekou) Ltd. People's Republic of China Flextronics Industrial (Shenzhen) Co., Ltd. People's Republic of China Flextronics Technology (Zhuhai)Co., Limited People's Republic of China Zhuhai Dao Mon Choa Yi Electronics Co., Ltd. People's Republic of China FICO Investment Holding Ltd Hong Kong Forest Keyboard Manufacturing (Shenzhen) Ltd People's Republic of China Advanced Component Labs HK Ltd. People's Republic of China Flextronics Singapore Pte Ltd. Singapore Flextronics International Singapore Pte Ltd. Singapore The DII Group, Inc. Singapore Pte. Ltd Singapore Flextronics Group Sweden AB Sweden F.L. Tronics International Sweden AB Sweden (aka Flextronics International Sweden AB) Igrene AB Sweden Moctol AB Sweden Tolipig AB Sweden Flextronics International Kft. Hungary Flextronics Limited Scotland Flextronics International Finland Oy Finland Flextronics International France SA France Flextronics Holding Finland Oy Finland Flextronics International Norway AS Norway HTR Tab Hungary HTR Zola Hungary HTR Real Estate Hungary
2
Subsidiary Domiciled - ---------- --------- Noitall AB Sweden Energipilot AB Sweden Flextronics Holdings UK Limited United Kingdom Flextronics International (UK) Ltd. United Kingdom Flextronics International Scotland Ltd. United Kingdom Chemtech (U.K.) Ltd. United Kingdom Flextronics International Fremont, Inc., Inc. United States of America DTM Products, Inc. United States of America Flextronics Distributing, Inc. United States of America Flextronics International USA, Inc. United States of America Marathon Business Park, LLC. United States of America Proactive Corporation United States of America The DII Group, Inc. United States of America DOVatron International, Inc. United States of America Dovatron Mexico, Inc. United States of America Dovatron Nevada, Inc. United States of America Design Solutions, Inc. United States of America Multilayer Technology, Inc. United States of America Orbit Semiconductor, Inc. United States of America KMOS Semiconductor, Inc United States of America Cencorp Inc. United States of America PCB Assembly, Inc. United States of America Circuit Board Assemblers, Inc. United States of America EMC International, Inc. United States of America Newport Technology, Inc. United States of America Summit Manufacturing, Inc. United States of America Kosituonti Oy Finland Alfatel Oy Finland Kostron Oy Finland Igrotta AB Sweden Flextronics do Brasil Servicas, Ltda Brazil Flextronics International Technologia Ltda Brazil Flextronics International N.V. Netherlands Antilles
EX-23.01 5 0005.txt EXHIBIT 23.01 1 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report included in Flextronics International Ltd.'s Annual Report on Form 10-K for the year ended March 31, 2000, into the Company's previously filed Registration Statements No's. 333-87139 and 333-87601 on Form S-3 and Registration Statement No.'s 333-42255, 333-71049, 333-95189, 333-34016 and 333-34698 on Form S-8. ARTHUR ANDERSEN LLP San Jose, California June 12, 2000 EX-27.01 6 0006.txt EX-27.01
5 U.S. DOLLARS YEAR MAR-31-2000 APR-01-1999 MAR-31-2000 1,000 618,581 0 648,660 13,663 840,590 2,298,695 793,836 194,498 3,087,082 1,255,604 434,095 0 0 773 1,592,469 3,087,082 4,307,193 4,307,193 4,004,626 4,004,626 159,050 7,095 33,351 136,422 15,507 120,915 0 0 0 120,915 1.11 1.02
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