Form 10-K

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 þ No o

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. o

As of April 22, 2002, 513,055,059 shares of the Registrant’s common stock were outstanding. The aggregate market value of the common stock held by shareholders other than our executive officers, directors and 10% or greater shareholders of the Registrant as of April 22, 2002 was approximately $6.8 billion.

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 and Section 27A of the Securities Act of 1933. The words “will,” “may,” “designed to,” “believe,” “should,” “anticipate,” “plan,” “expect,” “intend,” “estimate” and similar expressions identify forward-looking statements, which speak only as of the date of this annual report. These forward-looking statements are contained principally under this Item 1, “Business,” and under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Because these forward-looking statements are subject to certain risks and uncertainties, actual results could differ materially from the expectations expressed in the forward-looking statements. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include those described below in this section under “Certain Factors Affecting Operating Results.” We undertake no obligation to update or revise these forward-looking statements to reflect subsequent events or circumstances.

Flextronics International Ltd. (“Flextronics”) is a leading provider of advanced electronics manufacturing services, or EMS, to original equipment manufacturers, or OEMs, primarily in the handheld electronics devices, information technologies infrastructure, communications infrastructure, computer and office automation, and consumer devices industries. We provide a network of design, engineering and manufacturing operations in 28 countries across four continents. Our strategy is to provide customers with end-to-end operational solutions where we take responsibility for engineering, new product introduction and implementation, supply chain management, manufacturing and logistics management, with the goal of delivering a complete packaged product.

In addition to the assembly of printed circuit boards, or PCBs, and complete systems and products, our manufacturing services include the fabrication and assembly of plastic and metal enclosures, the fabrication of PCBs and backplanes (which are PCBs into which other PCBs or cards may be inserted) and the fabrication and assembly of photonics components. Throughout the production process, we offer design and technology services; logistics services, such as materials procurement, inventory management, vendor management, packaging and distribution; and automation of key components of the supply chain through advanced information technologies. Finally, we offer after-market services such as repair and warranty services and network and communications installation and maintenance. By working closely with our customers and being highly responsive to their requirements throughout the design, manufacturing and distribution process, we believe that we can be an integral part of their operations, accelerate their time-to-market and time-to-volume production, and reduce their production costs.

We were incorporated in the Republic of Singapore in May 1990. Through a combination of internal growth and acquisitions, we have become one of the world’s largest EMS providers, with revenues of $13.1 billion in fiscal 2002. In addition, we have increased our manufacturing square footage from 1.5 million square feet on April 1, 1997 to over 16.6 million square feet on March 31, 2002. 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 electronic products.

Our customers include industry leaders such as Alcatel SA (“Alcatel”), Ericsson Telecom AB (“Ericsson”), Hewlett-Packard Company, Microsoft Corporation, Motorola, Inc., Nokia Corporation, Palm, Inc., Philips Electronics, Siemens AG, Sony Ericsson and Xerox Corporation (“Xerox”). Due to our focus on high growth technology sectors, our prospects are influenced by major trends in the markets for communications and Internet infrastructure and wireless and optical devices. 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 (the Americas, Asia and Europe) in order to serve the increased outsourcing needs of both

multinational and regional OEMs. In fiscal 2002, production in the Americas, Asia and Europe, represented 32%, 26% and 42% of our net sales, respectively. For more information about the geographic segments in which we operate, please see Note 12, “Segment Reporting,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.” We have established fully integrated, high volume industrial parks in low-cost regions near our customers’ end markets. Our industrial parks are located in Brazil, China, Hungary, Mexico and Poland. These industrial parks provide 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. We also have a number of regional manufacturing operations located in the Americas, Asia and Europe. In addition, we have established design and engineering centers and product introduction centers which provide engineering expertise in developing new products and preparing them for high volume manufacturing.

With electronic 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 EMS providers in their business and manufacturing strategies. Outsourcing allows OEMs to take advantage of the manufacturing expertise and capital investments of EMS providers, so that OEMs may concentrate on their core competencies, such as product development, marketing and sales. We believe that by developing strategic relationships with EMS 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.

We believe that the market for electronics manufacturing services will continue to grow, driven largely by the need of OEMs for increasing flexibility to respond to rapidly changing markets, technologies and accelerating product life cycles, as well as for advanced manufacturing and engineering capabilities as a result of the increased complexity and reduced size of electronic products.

Our objective is to provide customers with the ability to outsource, on a global basis, a complete product. We intend to achieve this objective by taking responsibility for the engineering, assembly, integration, test, supply chain management and logistics management to accelerate their time-to-market and time-to-volume production. To achieve this objective, we will continue to implement the following strategies:


	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 allows us to respond quickly to frequently changing customer design specifications and production requirements. Our approach allows our customers to focus on their core competencies and thus enables 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 (the Americas, Asia and Europe) to


	serve the increased outsourcing needs of both multinational and regional OEMs. Our global network of manufacturing facilities in 28 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. 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. Our industrial parks enhance our total supply chain management, while providing a low cost solution for our customers. We have strategically established large industrial parks in Brazil, China, Hungary, Mexico and Poland.

	Offer Comprehensive Solutions. We offer a comprehensive range of engineering, assembly, integration, test, supply chain management and logistics management and network services to our customers that simplify the global product development process and provide them meaningful cost savings. 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.

We have actively pursued business acquisitions and strategic transactions with customers to expand our global reach, manufacturing capacity and service offerings, in addition to diversifying and strengthening customer relationships. These activities have enabled us to provide more integrated outsourcing technology solutions with time-to-market and lower cost advantages and have expanded our presence in the global electronics marketplace.

Since the beginning of fiscal 2001, we have completed over 30 acquisitions of other companies, including, among others, The DII Group, Inc., Palo Alto Products International, Lightning Metal Specialties, Chatham Technologies, JIT Holdings, Wave Optics and Instrumentation Engineering. We have also completed several strategic transactions with customers, including Telia, Xerox, Alcatel and Ericsson. Under these arrangements, we generally acquire inventory, equipment and other assets from the OEM, and lease (or in some cases acquire) their manufacturing facilities, while simultaneously entering into multi-year supply agreements for the production of their products.

By enhancing our capability to provide a wide range of related electronics design and manufacturing services to a global market that is increasingly dependent on outsourcing providers, these acquisitions and transactions have enabled us to enhance our competitive position as a leading provider of comprehensive

outsourcing technology solutions. For more information on our acquisitions and strategic customer transactions, please see Note 11, “Business Combinations and Purchases of Assets,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

Our customers consist of a select group of OEMs primarily in the handheld electronics devices, information technologies infrastructure, communications infrastructure and computer and office automation industries. Within these industries, our strategy is to establish relationships with leading companies that seek to outsource significant production volumes of their products. We have focused on building long-term relationships with these customers and expanding our relationship to include additional product lines and services. In fiscal 2002, our ten largest customers accounted for approximately 64% of our net sales. Our largest customer during fiscal 2002 was Ericsson, accounting for approximately 15% of net sales. No other customer accounted for more than 10% of net sales in fiscal 2002.

The following table lists in alphabetical order a representative sample of our largest customers in fiscal 2002 and the products of those customers for which we provide manufacturing services:

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. In addition to our sales force, our executive staff plays an integral role in our sales efforts.

We offer a broad range of integrated services, providing customers with a total design and manufacturing solution that takes a product from its initial design through volume production, test, distribution and into post-sales service and support. Our integrated services include the following:


	Flextronics Design. We offer a comprehensive spectrum of value-added design services for products we manufacture for our customers from product design (hardware, software, mechanical and

test) to semiconductor design. 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 and 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. Additionally, a significant competitive differentiator we possess is our semiconductor design group. We provide application specific integrated circuit, or ASIC, design services to our OEM customers, which include:


	•	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.


	Our semiconductor design group 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. Additionally, 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.

	To assist customers with initial design, we provide computer-aided engineering and computer-aided design, 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.

	Multek. Multek provides PCB and backplane fabrication services. PCBs and backplanes are platforms which provide interconnection for integrated circuits and other electronic components. Backplanes 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 backplanes 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. Our range of services enables us to respond to our customers’ demands for an accelerated transition from prototype to volume production. We have PCB and backplane fabrication service capabilities on four major continents (North America, South America, Europe and Asia).

	The manufacture of complex multilayer interconnect products often requires the use of sophisticated circuit interconnections between layers, referred to as 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 Systems Assembly. Our assembly and manufacturing operations, which reflect 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 controls. 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.

	We provide materials procurement, information technology solutions and logistics services. 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 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.

	We also provide design, industrialization, supply chain management and manufacturing services for the optical component and optical networking industries. We offer a broad range of photonic packaging design and industrialization services to assist in bringing products from schematics to shipment while meeting our customers time-to-market objectives. In addition, we offer advanced process development and volume manufacturing of active and passive photonic devices.

	Flextronics Enclosure Systems. We offer a comprehensive set of custom electronic enclosures and related products and services worldwide. Our services include design, manufacturing and integration of electronics packaging systems from custom enclosure systems, power and thermal subsystems to interconnect subsystems, cabling and cases. In addition to the typical sheet metal and plastic 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.

	Flextronics Logistics. We provide global logistics services and turnkey supply chain solutions for our customers. Our worldwide logistics services include freight forwarding, warehousing/inventory management and outbound/e-commerce solutions through our global supply chain network. We leverage new technologies such as XML links to factories, extranet-based management, vendor managed inventory and build-to-order programs, to simultaneously connect suppliers, manufacturing operations and OEM customers. By joining these logistics solutions with worldwide manufacturing operations and total supply chain management, we can significantly reduce market costs and can create tightly integrated processes and facilities worldwide. Moreover, the combination of these capabilities allows us to react


	quickly to demand signals from our customers worldwide, creating innovative links to suppliers while serving the world market.

	Flextronics Network Services. We offer network and communications installation and maintenance 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. We enhanced our network installation services through our acquisitions of Telcom Global Solutions and Telia’s Orbiant Group in fiscal 2002.

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.

The EMS 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 EMS providers, and current and prospective customers also evaluate our capabilities against the merits of internal production. According to IDC, approximately 60% of the EMS industry’s revenues in calendar 2001 were generated from the top five EMS companies — us, Celestica, Inc., Jabil Circuit, Inc., Sanmina-SCI Corporation and Solectron Corporation. Based on revenues for calendar 2001, we were the largest of these companies.

Some of our competitors may have greater manufacturing, financial or 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 EMS 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 foregoing requirements could seriously harm our business.

Our operations are subject to certain federal, state and local regulatory requirements relating to the use, storage, discharge and disposal of hazardous chemicals used during their manufacturing processes. We believe that our operations are currently in compliance in all material respects with applicable regulations and do not believe that costs of compliance with these laws and regulations will have a material effect on our capital expenditures, operating results or competitive position. Currently we have no commitments with environmental authorities regarding any compliance related matters.

We determine the amount of our accruals for environmental matters by analyzing and estimating the range of possible costs in light of information currently available. The imposition of more stringent standards or requirements under environmental laws or regulations, the results of future testing and analysis undertaken by us at our operating facilities, or a determination that we are potentially responsible for the release of hazardous substances at other sites could result in expenditures in excess of amounts currently estimated to be required for such matters. No assurance can be given that actual costs will not exceed amounts accrued for probable and reasonably estimatible environmental liabilities, which amounted to $8.6 million at March 31, 2002. We do not believe that any of our potential or possible liabilities for environmental matters are material. There can be no assurance that additional environmental matters will not arise in the future or that costs will not be incurred with respect to sites as to which no problem is currently known.

As of March 31, 2002, our global workforce totaled approximately 78,000 employees. 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.

If we do not manage effectively changes in our operations, our business may be harmed.

We have grown rapidly in recent periods. Our global workforce has more than doubled in size over the last two years as a result of internal growth and acquisitions while we have reduced our workforce at some locations and closed certain facilities in connection with our fiscal 2002 and fiscal 2001 restructuring activities. These changes are likely to strain considerably our management control systems 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 in low-cost regions by expanding our facilities and adding new equipment. This 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 that will increase our cost of sales, including substantial increases in depreciation expense and rental expense. If our revenues do not increase sufficiently to offset these expenses, our operating results could be seriously harmed. Our expansion, both through internal growth and acquisitions, has contributed to our incurring significant unusual charges. A detailed description of the amount of these unusual charges is included in Note 9, “Unusual Charges,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

We depend on the handheld electronics devices, information technologies infrastructure, communications infrastructure and computer and office automation industries which continually produce technologically advanced products with short life cycles; our inability to continually manufacture such products on a cost-effective basis could harm our business.

We depend on sales to customers in the handheld devices, information technologies infrastructure, communications infrastructure and computer and office automation industries. For the fiscal 2002, we derived approximately 34% of our revenues from customers in the handheld devices industry, which includes cell phones, pagers and personal digital assistants; approximately 17% of our revenues from providers of information technologies infrastructure, which includes servers, workstations, storage systems, mainframes,

hubs and routers; approximately 18% of our revenues from providers of communications infrastructure, which includes equipment for optical networks, cellular base stations, radio frequency devices, telephone exchange and access switches and broadband devices; approximately 15% of our revenue from customers in the computers and office automation industry, which includes copiers, scanners, graphic cards, desktop and notebook computers and peripheral devices such as printers and projectors; and approximately 10% of our revenues from the consumer devices industry, including set-top boxes, home entertainment equipment, cameras and home appliances. The remaining 6% of our revenue was derived from customers in a variety of other industries, including the medical, automotive, industrial and instrumentation industries. Factors affecting these industries in general could seriously harm our customers and, as a result, us. These factors include:


	•	rapid changes in technology, which result in short product life cycles;

	•	the inability of our customers to successfully market their products, and the failure of these products to gain widespread commercial acceptance; and

	•	recessionary periods in our customers’ markets.

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

Providers of electronics manufacturing services, or EMS, 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. Many of our customers’ industries are experiencing a significant decrease in demand for their products and services. The generally uncertain economic condition of several of the industries of our customers has resulted, and may continue to result, in some of our customers delaying the delivery of some of the products we manufacture for them, and placing purchase orders for lower volumes of products than previously anticipated. Cancellations, reductions or delays by a significant customer or by a group of customers would seriously harm our results of operations by reducing the volumes of products manufactured by us for the customers and delivered in that period, as well as causing a delay in the repayment of our expenditures for inventory in preparation for customer orders and lower asset utilization resulting in lower gross margins.

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 reduce our ability to estimate accurately future customer requirements. This makes it difficult to schedule production and maximize utilization of our manufacturing capacity. We often increase staffing, increase capacity and incur other expenses to meet the anticipated demand of our customers, which may cause reductions in our gross margins if customer orders continue to be delayed or cancelled. Anticipated orders may not materialize, and delivery schedules may be deferred as a result of changes in demand for our customers’ products. 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 could harm our gross profit and operating income.

We experience significant fluctuations in our results of operations. Some of the principal factors that contribute to these fluctuations are:


	•	changes in demand for our services;

	•	our effectiveness in managing manufacturing processes and costs in order to decrease manufacturing expenses;


	•	the mix of the types of manufacturing services we provide, as high-volume and low-complexity manufacturing services typically have lower gross margins than lower volume and more complex services;

	•	changes in the cost and availability of labor and components, which often occur in the electronics manufacturing industry and which affect our margins and our ability to meet delivery schedules;

	•	the degree to which we are able to utilize our available manufacturing capacity;

	•	our ability to manage the timing of our component purchases so that components are available when needed for production, while avoiding the risks of purchasing inventory in excess of immediate production needs; and

	•	local conditions and events that may affect our production volumes, such as labor conditions, political instability and local holidays.

Two of our significant end-markets are the handheld electronics devices market and the consumer devices market. These markets exhibit particular strength toward the end of the calendar year in connection with the holiday season. As a result, we have historically experienced stronger revenues in our third fiscal quarter as compared to our other fiscal quarters.

In addition, many of our customers are currently experiencing increased volatility in demand, and in many cases reduced demand, for their products. This increases the difficulty of anticipating the levels and timing of future revenues from these customers, and could lead them to defer delivery schedules for products or reduce their volumes of purchases. This would lead to a delay or reduction in our revenues from these customers. Further, these customers may be unable to pay us or otherwise meet their commitments under their agreements or purchase orders with us. Any failure by our customers to pay us may result in a reduction of our operating income and may lead to excess capacity at affected facilities. Any of these factors or a combination of these factors could seriously harm our business and result in fluctuations in our results of operations.

We may encounter difficulties with acquisitions, which could harm our business.

Since the beginning of fiscal 2001, we have completed over 30 acquisitions of businesses and we expect to continue to acquire additional businesses in the future. We are currently in preliminary discussions with respect to potential acquisitions and strategic customer transactions, however, we do not have any agreements or commitments to make any material acquisitions or strategic customer transactions. Any future acquisitions may require additional debt or equity financing, or the issuance of shares in the transaction. This could increase our leverage or be dilutive to our existing shareholders. We may not be able to complete acquisitions or strategic customer transactions in the future to the same extent as the past, or at all.

To integrate acquired businesses and operations, we work to 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.

In addition, acquisitions involve a number of other risks and challenges, including:


	•	diversion of management’s attention;

	•	potential loss of key employees and customers of the acquired companies;

	•	lack of experience operating in the geographic market or industry sector of the acquired business;

	•	an increase in our expenses and working capital requirements, which reduces our return on invested capital; and

	•	exposure to unanticipated contingent liabilities of acquired companies.

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.

Since the beginning of fiscal 2001, we have completed several strategic transactions with OEM customers, including, among others, Telia, Xerox, Alcatel and Ericsson. Under these arrangements, we generally acquire inventory, equipment and other assets from the OEM, and lease (or in some cases acquire) their manufacturing facilities, while simultaneously entering into multi-year supply agreements for the production of their products. We intend to continue to pursue these OEM divestiture transactions in the future. There is frequently competition among EMS companies for these transactions, and this competition may increase. These transactions have contributed to a significant portion of our revenue growth, and if we fail to complete similar transactions in the future, our revenue growth could be harmed. As part of these arrangements, we typically enter into manufacturing services agreements with these OEMs. These agreements generally do not require any minimum volumes of purchases by the OEM, and the actual volume of purchases may be less than anticipated. The arrangements entered into with divesting OEMs typically involve many risks, including the following:


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

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

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

	•	we may not achieve anticipated cost reductions and efficiencies at the facility;

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

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

As a result of these and other risks, we may be unable to achieve anticipated levels of profitability under these arrangements, and they may not result in any material revenues or contribute positively to our net income per share. Due to our relationships with Ericsson and Xerox, other OEMs may not wish to obtain logistics or operations management services from us.

Future growth in our revenue depends on new outsourcing opportunities in which we assume additional manufacturing and supply chain management responsibilities from OEMs. To the extent that these opportunities are not available, either because OEMs decide to perform these functions internally or because they use other providers of these services, our future growth would be limited.

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

Sales to our ten largest customers have represented a significant percentage of our net sales in recent periods. Our ten largest customers in fiscal 2002 and fiscal 2001 accounted for approximately 64% and 59%, respectively, of net sales in those periods. Our largest customer during fiscal 2002 was Ericsson, accounting for approximately 15% of net sales. No other customer accounted for more than 10% of net sales in fiscal 2002, and no customer accounted for more than 10% of net sales in fiscal 2001.

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

The EMS 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 have substantially greater market share and manufacturing, financial and marketing resources than us.

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. Certain sectors of the EMS industry are currently experiencing increased price competition, and if this increased level of competition should continue, our revenues and gross margin may be adversely affected.

We may be adversely affected by shortages of required electronic components.

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 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. 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 customers compete in markets that are characterized by rapidly changing technology, evolving industry standards and continuous improvement in products and services. These conditions frequently result in short product life cycles. Our success will depend largely on the success achieved by our customers in developing and marketing their products. If technologies or standards supported by our customers products become obsolete or fail to gain widespread commercial acceptance, our business could be adversely affected.

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

	•	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 taxes or make payments in lieu of taxes.

Several countries in which we are located allow for tax holidays or provide other tax incentives to attract and retain business. These tax incentives expire over various periods from 2002 to 2010 and are subject to certain conditions with which we expect to comply. We have obtained tax holidays or other incentives where available, primarily in China, Malaysia and Hungary. In these three countries, we generated an aggregate of approximately $4.4 billion of our total revenues for the fiscal year ended March 31, 2002. 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 of businesses 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 the Americas, Asia and Europe create a number of logistical and communications challenges. These challenges include managing operations across multiple time zones, directing the manufacture and delivery of products across distances, coordinating procurement of components and raw materials and their delivery to multiple locations, and coordinating the activities and decisions of the core management team, which is based in a number of different countries. Facilities in several different locations may be involved at different stages of the production of a single product, leading to additional logistical difficulties.

Because our manufacturing operations are located in a number of countries throughout Asia, the Americas and Europe, we are subject to the risks of changes in economic and political conditions in those countries, including:


	•	fluctuations in the value of local currencies;

	•	labor unrest and difficulties in staffing;

	•	longer payment cycles;

	•	increases in duties and taxation levied on our products;

	•	imposition of restrictions on currency conversion or the transfer of funds;

	•	limitations on imports or exports of components or assembled products, or other travel restrictions;

	•	expropriation of private enterprises; and

	•	a potential reversal of current favorable 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 countries. In addition, some countries in which we operate, such as Brazil, the Czech Republic, Hungary, Mexico, Malaysia and Poland, have experienced periods of slow or negative growth, high inflation, significant currency devaluations or limited availability of foreign exchange. Furthermore, in countries such as China and Mexico, 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.

Our success depends to a large extent upon the continued services of our executive officers. Generally our employees are not bound by employment or non-competition agreements, and we cannot assure that we will retain our executive officers and other key employees. We could be seriously harmed by the loss of any of our executive officers. In addition, in order to manage our growth, we will need to recruit and retain additional skilled management personnel and if we are not able to do so, our business and our ability to continue to grow could be harmed.

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

The stock market in recent years has experienced significant price and volume fluctuations that have affected the market prices of technology companies. These fluctuations have often been unrelated to or disproportionately impacted by the operating performance of these companies. The market for our ordinary shares may be subject to similar fluctuations. Factors such as fluctuations in our operating results, announcements of technological innovations or events affecting other companies in the electronics industry, currency fluctuations and general market conditions may cause the market price of our ordinary shares to decline.

Our facilities consist of a global network of industrial parks, regional manufacturing operations, design and engineering and product introduction centers, providing over 16.6 million square feet of capacity as of March 31, 2002 (excluding facilities we have identified for closure, as described in Note 9, “Unusual Charges” in the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data”). We own facilities with approximately 1.1 million square feet in the Americas, 2.8 million square feet in Asia and 4.2 million square feet in Europe. We lease facilities with approximately 3.7 million square feet in the Americas, 1.3 million square feet in Asia and 3.5 million square feet in Europe.

Our facilities include large industrial parks, ranging in size from approximately 300,000 to 1.5 million square feet, in Brazil, China, Hungary, Mexico and Poland, and we have recently commenced construction on an additional industrial park in China. We also have regional manufacturing operations, ranging in size from approximately 50,000 to 500,000 square feet, in Austria, Brazil, Canada, China, the Czech Republic, Denmark, Finland, France, Germany, Hungry, India, Indonesia, Israel, Italy, Malaysia, Mexico, Netherlands, Norway, Scotland, Singapore, Sweden and various states throughout the United States. We also have smaller design and engineering centers and product introduction centers at a number of locations in the world’s major electronics markets.

Our facilities are well maintained and suitable for the operations conducted. The productive capacity of our plants is adequate for current needs.

We are subject to legal proceedings, claims, and litigation arising in the ordinary course of business. We defend ourselves vigorously against any such claims. While the outcome of these matters is currently not determinable, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

Our ordinary shares are quoted 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 fiscal 2001 as reported on the Nasdaq National Market.

All share prices have been adjusted to give effect to the two-for-one stock splits effected as bonus issues (the Singapore equivalent of a stock dividend), distributed to our shareholders on October 16, 2000, December 22, 1999 and January 11, 1999.

As of April 22, 2002, there were 3,386 holders of record of our ordinary shares and the closing sale price of the ordinary shares as reported on the Nasdaq National Market was $15.33 per share.

Since inception, we have not declared or paid any cash dividends on our ordinary shares (exclusive of dividends paid by pooled entities prior to acquisition), 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. For more information, please 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.

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.

Under current provisions of the Income Tax Act, Chapter 134 of Singapore, corporate profits are taxed at a rate equal to 24.5%. 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 (meaning the cash amount of the dividend plus the amount of corporate tax

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.

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 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 generally will be short-term capital gain or loss if the share has been held for less than one year, and long-term capital gain or loss if the share has been held for one year or longer. 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, 2002, 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.

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 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.

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.


(1)	In fiscal 2002, we recognized unusual pre-tax charges of $574.4 million primarily associated with the consolidation and closure of several manufacturing facilities.

In fiscal 2001, we recognized unusual pre-tax charges of $973.3 million. Of this amount, $286.5 million related to the issuance of an equity instrument to Motorola. The remaining $686.8 million includes merger-related expenses of approximately $102.4 million and approximately $584.4 million of costs associated with the closure of several manufacturing facilities.

In fiscal 2000, we incurred approximately $3.5 million of merger-related expenses and $7.5 million in costs primarily associated with the closure of several manufacturing facilities.

In fiscal 1999, we incurred approximately $77.3 million of expenses primarily associated with the closure of a semiconductor wafer fabrication facility and wrote-off approximately $2.0 million of in-process research and development associated with an acquisition.

In fiscal 1998, we incurred approximately $12.5 million of merger-related expenses and approximately $8.9 million in costs associated with the closure of a manufacturing operation.


(2)	We completed a stock split during each of fiscal 2001, 2000 and 1999. Each of the stock splits was effected as bonus issues (the Singapore equivalent of a stock dividend). The 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 splits.

This report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. The words “expects,” “anticipates,” “believes,” “intends,” “plans” and similar expressions identify forward-looking statements. In addition, any statements which refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-K with the Securities and Exchange Commission. These forward-looking statements are subject to risks and uncertainties, including, without limitation, those discussed in this section. Accordingly, our future results could differ materially from historical results or from those discussed or implied by these forward-looking statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. For further discussion of our significant accounting policies, refer to Note 2, “Summary of Accounting Policies,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

We review property and equipment 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 comparing its carrying amount to the projected discounted 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 exceeds its fair market value. Please see Note 9, “Unusual Charges” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” for discussion of our adjustments to

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” we evaluate goodwill and other intangibles for impairment, on at least an annual basis and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable from its estimated future cash flows. Recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit, based on projected discounted future results of the unit using a discount rate reflecting our average cost of funds. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second test is performed to measure the amount of impairment loss, if any. To date, we have not recognized any impairment of our goodwill and other intangible assets in connection with our adoption of SFAS 142. However, no assurances can be given that future evaluations of goodwill will not result in charges as a result of future impairment. Refer to Note 2, “Summary of Accounting Policies” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” for further discussion of our goodwill and other intangible assets.

We perform ongoing credit evaluations of our customers’ financial condition and make provisions for doubtful accounts based on the outcome of our credit valuations. We evaluate the collectibility of our accounts receivable based on specific customer circumstances, current economic trends, historical experience and the age of past due receivables. Unanticipated changes in the liquidity or financial position of our customers may require additional provisions for doubtful accounts.

Our inventories are stated at the lower of cost (first-in, first-out basis) or market value. Our industry is characterized by rapid technological change, short-term customer commitments and rapid changes in demand, as well as any other lower of cost or market considerations. We make provisions for estimated excess and obsolete inventory based on our regular reviews of inventory quantities on hand and the latest forecasts of product demand and production requirements from our customers. If actual market conditions or our customers’ product demands are less favorable than those projected, additional provisions may be required.

We recognized unusual charges in each of fiscal years 2002, 2001 and 2000 related to our plans to exit certain activities resulting in the identification of duplicate manufacturing and administrative facilities for closure or consolidation. In connection, with our exit activities, we recorded unusual charges for employee termination costs, long-lived asset impairment and other exit-related costs. These charges were incurred pursuant to formal plans developed by management. The recognition of the unusual charges required that we make certain judgments and estimates regarding the nature, timing and amount of costs associated with the planned exit activity. The estimates of future liabilities may change, requiring the recording of additional unusual charges or the reduction of liabilities already recorded. At the end of each reporting period, we evaluate the remaining accrued balances to ensure that no excess accruals are retained and the utilization of the provisions are for their intended purpose in accordance with developed exit plans. Refer to Note 9, “Unusual Charges,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” for further discussion of our restructuring activities.

We have actively pursued business acquisitions and strategic transactions with customers to expand our global reach, manufacturing capacity and service offerings and to diversify and strengthen customer relationships.

Prior to June 30, 2001, we made several acquisitions, which were accounted for as pooling of interests and our consolidated financial statements have been restated to reflect the combined operations of the merged companies for all periods presented. We also completed other immaterial pooling of interests transactions, for which prior period statements had not been restated. In July 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141, “Business Combinations.” SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method.

We have also made a number of acquisitions and strategic customer transactions, which were accounted for using the purchase method. Accordingly our consolidated financial statements include the operating results of each business from the date of acquisition. Proforma results of operations have not been presented because the effects of these acquisitions were not material on either an individual or an aggregate basis.

For additional information on our acquisitions and strategic customer transactions, please see Note 11, “Business Combinations and Purchases of Assets,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data.”

The following table sets forth, for the periods indicated, certain statements of operations data expressed as a percentage of net sales.

We derive our net sales from the assembly of printed circuit boards, or PCBs, and complete systems and products, fabrication and assembly of plastic and metal enclosures, fabrication of PCBs and backplanes, and fabrication and assembly of photonics components. Throughout the production process, we offer design and technology services; logistics services, such as materials procurement, inventory management, vendor management, packaging, and distribution; and automation of key components of the supply chain through advanced information technologies. We offer other after-market services such as repair and warranty services and network and communications installation and maintenance.

Net sales for fiscal 2002 increased 8% to $13.1 billion from $12.1 billion in fiscal 2001. The increase in sales for fiscal 2002 was primarily a result of the incremental revenues associated with the purchase of several manufacturing facilities during the current fiscal year, and to a lesser extent, the further expansion of sales to certain of our existing customers as well as sales to new customers. During fiscal 2002, our ten largest customers accounted for approximately 64% of net sales, with Ericsson accounting for approximately 15% of net sales. No other customer accounted for more than 10% of net sales during fiscal 2002. The economic downturn experienced by the electronics industry throughout fiscal 2002, which has been driven by a combination of weakening end-market demand (particularly in the telecommunications and networking sectors) and our customers’ inventory imbalances, slowed the rate of growth in our net sales.

Net sales for fiscal 2001 increased 74% to $12.1 billion from $7.0 billion in fiscal 2000. The increase in sales for fiscal 2001 was primarily the result of our ability to continue to expand sales to our existing customers as well as expanding sales to new customers worldwide and, to a lesser extent, the incremental revenue associated with the purchases of several manufacturing facilities during fiscal 2001. During fiscal 2001, our ten largest customers accounted for approximately 59% of net sales, with no customer accounting for more than 10% of net sales.

Gross profit varies from period to period and is affected by a number of factors, including product mix, component costs and availability, product life cycles, unit volumes, startup, expansion and consolidation of manufacturing facilities, capacity utilization, pricing, competition and new product introductions. See Item 1, “Business — Certain Factors Affecting Operating Results — Our operating results vary significantly.”

Gross margin decreased to 3.2% for fiscal 2002 from 3.9% in fiscal 2001. Excluding the unusual pre-tax charges of $464.4 million and $510.5 million in fiscal 2002 and 2001, respectively, gross margin decreased to 6.7% in fiscal 2002 from 8.1% in fiscal 2001. The decrease in our gross margin was the result of several factors, primarily, (i) under-absorbed fixed costs caused by under utilization of capacity, resulting from the economic downturn experienced by the electronics industry, most significantly experienced by our printed circuit fabrication unit and (ii) changes in product mix to higher volume printed circuited board assembly projects and final system assembly projects, which typically have a lower gross margin; and to a lesser extent, (iii) costs associated with the integration of newly acquired operations and (iv) costs associated with the startup of new customers and new projects, which typically carry higher levels of unabsorbed manufacturing overhead costs until the projects reach higher volume production.

Gross margin decreased to 3.9% for fiscal 2001 from 8.9% in fiscal 2000. The decrease in gross margin is primarily attributable to unusual pre-tax charges amounting to $510.5 million, which were associated with the fiscal 2001 plant closures. Excluding unusual pre-tax charges of $510.5 million and $7.5 million in fiscal 2001 and fiscal 2000, respectively, gross margin decreased to 8.1% for fiscal 2001 from 9.0% in fiscal 2000. The decrease in our gross margin was the result of several factors, including (i) costs associated with expanding our facilities, (ii) costs associated with the startup of new customers and new projects, which typically carry higher levels of unabsorbed manufacturing overhead costs until the projects reach higher volume production and (iii) changes in product mix to higher volume printed circuited board assembly projects and final system assembly projects, which typically have a lower gross margin because of high material content.

Increased mix of products that have relatively high material costs as a percentage of total unit costs has historically been a factor that has adversely affected our gross margins. We believe that these 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. See “Certain Factors Affecting Operating Results — If we do not manage effectively changes in our operations, our business may be harmed,” “— Our strategic relationships with major customers creates risks,” and “— We may be adversely affected by shortages of required electronics components.”

We recognized unusual pre-tax charges of approximately $574.4 million during fiscal 2002, of which $530.0 million related to closures of several manufacturing facilities and $44.4 million was primarily for the impairment of investments in certain technology companies. As further discussed below, $464.4 million of the charges relating to facility closures have been classified as a component of Cost of Sales.

Unusual charges recorded in fiscal 2002 by segments are as follows: Americas, $265.8 million; Asia, $70.7 million; Western Europe, $185.4 million; and Central Europe, $52.5 million.

The components of the unusual charges recorded in fiscal 2002 are as follows (in thousands):

In connection with the fiscal 2002 facility closures, we developed formal plans to exit certain activities and involuntarily terminate employees. Management’s plan to exit an activity included the identification of duplicate manufacturing and administrative facilities for closure or consolidation into other facilities. Management currently anticipates that the facility closures and activities to which all of these charges relate will be substantially completed within one year of the commitment dates of the respective exit plans, except for certain long-term contractual obligations.

Of the total pre-tax facility closure costs recorded in fiscal 2002, $153.6 million related to employee termination costs, of which $118.4 million has been classified as a component of Cost of Sales. As a result of the various exit plans, we identified 13,391 employees to be involuntarily terminated related to the various facility closures. As of March 31, 2002, 7,444 employees had been terminated, and another 5,947 employees had been notified that they are to be terminated upon completion of the various facility closures and consolidations. During fiscal 2002, we paid employee termination costs of approximately $86.0 million, related to the fiscal 2002 restructuring activities. The remaining $67.6 million of employee termination costs was classified as accrued liabilities as of March 31, 2002 and is expected to be paid out within one year of the commitment dates of the respective exit plans.

The unusual pre-tax charges recorded in fiscal 2002, included $163.7 million for the write-down of property, plant and equipment associated with various manufacturing and administrative facility closures from their carrying value of $232.6 million. This amount has been classified as a component of Cost of Sales during fiscal 2002. Certain assets will be held for use and remain in service until their anticipated disposal dates pursuant to the exit plans. Since the assets will remain in service from the date of the decision to dispose of these assets to the anticipated disposal date, the assets are being depreciated over this expected period. For assets being held for use, an impairment loss is recognized if the carrying amount of the asset exceeds its fair value. Certain other assets will be held for disposal as these assets are no longer required in operations. Assets held for disposal are no longer being depreciated. For assets being held for disposal, an impairment loss is recognized if the carrying amount of the asset exceeds its fair value less cost to sell. The impaired long-lived assets consisted of machinery and equipment of $105.7 million and building and improvements of $58.0 million.

The unusual pre-tax charges, also included approximately $212.7 million for other exit costs. Approximately $182.3 million of this amount has been classified as a component of Cost of Sales. Other exit costs included contractual obligations totaling $61.6 million, which were incurred directly as a result of the various exit plans. The contractual obligations consisted of facility lease terminations amounting to $27.2 million, equipment lease terminations amounting to $13.2 million and payments to suppliers and third parties to terminate contractual agreements amounting to $21.2 million. We expect to make payments associated with our contractual obligations with respect to facility and equipment leases through the end of fiscal 2007 and with respect to the other contractual obligations with suppliers and third parties through fiscal 2003. Other exit costs also included charges of $98.0 million relating to asset impairments resulting from customer contracts that were breached, when they were terminated by us, as a result of various facility

closures. These asset impairments were determined based on the difference between the carrying amount and the realizable value of the impaired inventory and accounts receivable. We disposed of the impaired assets, primarily through scrapping and write-offs, by the end of fiscal 2002. Also included in other exit costs were charges amounting to $8.0 million for the incremental costs for warranty work incurred by us for products sold prior to the commitment dates of the various exit plans. Other exit costs also included $8.2 million of facility refurbishment and abandonment costs related to certain building repair work necessary to prepare the exited facilities for sale or return the facilities to its landlords. The remaining $36.9 million, primarily included incremental amounts of legal and environmental costs, and various government obligations payable by us as a direct result of the facility closures. We paid approximately $42.5 million of other exit costs related to the current year’s facility closures. Additionally, approximately $111.5 million of non-cash charges were utilized during fiscal 2002. The remaining balance includes approximately $46.7 million, classified as accrued liabilities as of March 31, 2002, which will be substantially paid out within one year of the commitment dates of the respective exit plans; and certain long-term contractual obligations of approximately $12.0 million, classified as other long-term liabilities as of March 31, 2002.

We recognized unusual pre-tax charges of approximately $973.3 million during fiscal year 2001. Of this amount, $493.1 million was recorded in the first quarter and was comprised of approximately $286.5 million related to the issuance of an equity instrument to Motorola combined with approximately $206.6 million of expenses resulting from The DII Group, Inc. and Palo Alto Products International Pte. Ltd. mergers and related facility closures. In the second quarter, unusual pre-tax charges amounted to approximately $48.4 million associated with the mergers with Chatham Technologies, Inc. and Lightning Metal Specialties (and related entities) and related facility closures. In the third quarter, we recognized unusual pre-tax charges of approximately $46.3 million, primarily related to the merger with JIT Holdings Ltd. and related facility closures. During the fourth quarter, we recognized unusual pre-tax charges, amounting to $376.1 million related to closures of several manufacturing facilities and $9.5 million of other unusual charges, specifically for the impairment of investments in certain technology companies.

On May 30, 2000, we entered into a strategic alliance for product manufacturing with Motorola. In connection with this strategic alliance, Motorola paid $100.0 million for an equity instrument that entitled it to acquire 22,000,000 million Flextronics ordinary shares at any time through December 31, 2005, upon meeting targeted purchase levels or making additional payments to us. The issuance of this equity instrument resulted in a one-time non-cash charge equal to the excess of the fair value of the equity instrument issued over the $100.0 million proceeds received. As a result, the one-time non-cash charge amounted to approximately $286.5 million offset by a corresponding credit to additional paid-in capital in the first quarter of fiscal 2001. In June 2001, we entered into an agreement with Motorola under which we repurchased this equity instrument for $112.0 million.

Unusual charges excluding the Motorola equity instrument by segments are as follows: Americas, $553.1 million; Asia, $86.5 million; Western Europe, $32.9 million; and Central Europe, $14.3 million. Unusual charges related to the Motorola equity instrument is not specific to a particular segment, and as such, has not been allocated to a particular geographic segment.

The components of the unusual charges recorded in fiscal 2001 are as follows (in thousands):

In connection with the fiscal 2001 facility closures, we developed formal plans to exit certain activities and involuntarily terminate employees. Management’s plan to exit an activity included the identification of duplicate manufacturing and administrative facilities for closure or consolidation into other facilities. Management currently anticipates that the facility closures and activities to which all of these charges relate will be substantially completed within one year of the commitment dates of the respective exit plans, except for certain long-term contractual obligations. As discussed below, $510.5 million of the charges relating to facility closures have been classified as a component of Cost of Sales during the fiscal year ended March 31, 2001.

Of the total pre-tax facility closure costs recorded in fiscal 2001, $132.5 million related to employee termination costs, of which $68.1 million has been classified as a component of Cost of Sales. As a result of the various exit plans, we identified 11,269 employees to be involuntarily terminated related to the various mergers and facility closures. As of March 31, 2002, substantially all the employees have been terminated. The remaining headcount are working to finalize our exit plans and will be terminated by the end of the first quarter of fiscal 2003. During fiscal 2002, we paid employee termination costs of approximately $47.4 million. The remaining $24.3 million of employee termination costs was classified as accrued liabilities as of March 31, 2002 and is expected to be paid out by the end of the first quarter of fiscal 2003, except for certain long-term contractual obligations, which will be completed by the end of fiscal 2005.

The unusual pre-tax charges recorded in fiscal 2001 included $232.5 million for the write-down of long-lived assets to fair value. This amount has been classified as a component of Cost of Sales during fiscal 2001. Included in the long-lived asset impairment are charges of $229.1 million, which related to property, plant and equipment associated with the various manufacturing and administrative facility closures, which were written down to their fair value of $192.0 million as of March 31, 2001. Certain assets will be held for use and remain in service until their anticipated disposal dates pursuant to the exit plans. Since the assets will remain in

service from the date of the decision to dispose of these assets to the anticipated disposal date, the assets are being depreciated over this expected period. For assets being held for use, an impairment loss is recognized if the carrying amount of the asset exceeds its fair value. Certain other assets will be held for disposal, as these assets are no longer required in operations. Assets held for disposal are no longer being depreciated. For assets being held for disposal, an impairment loss is recognized if the carrying amount of the asset exceeds its fair value less cost to sell. The impaired long-lived assets consisted primarily of machinery and equipment of $153.0 million and building and improvements of $76.1 million. The long-lived asset impairment also included the write-off of the remaining goodwill and other intangibles related to certain closed facilities of $3.4 million.

The unusual pre-tax charges recorded in fiscal 2001 also included approximately $209.9 million for other exit costs, which have been classified as a component of Cost of Sales. Other exit costs included contractual obligations totaling $85.4 million, which were incurred directly as a result of the various exit plans. These contractual obligations consisted of facility lease terminations amounting to $26.5 million, equipment lease terminations amounting to $31.4 million and payments to suppliers and other third parties to terminate contractual agreements amounting to $27.5 million. We expect to make payments associated with its contractual obligations with respect to facility and equipment leases through the end of fiscal 2006. All payments with respect to the other contractual obligations with suppliers and other third parties were paid in fiscal 2002. Other exit costs also included charges of $77.0 million relating to asset impairments resulting from customer contracts that were breached, when they were terminated by us, as a result of various facility closures. These asset impairments were determined based on the difference between the carrying amount and the realizable value of the impaired inventory and accounts receivable. We disposed of the impaired assets, primarily through scrapping and write-offs, by the end of fiscal 2001. Also included in other exit costs were charges amounting to $16.1 million for the incremental costs for warranty work incurred by us for products sold prior to the commitment dates of the various exit plans. Other exit costs also included $11.6 million of facility refurbishment and abandonment costs related to certain building repair work necessary to prepare the exited facilities for sale or return the facilities to its landlords. The remaining $19.8 million of other exit costs recorded were primarily associated with incremental amounts of legal and environmental costs, incurred directly as a result of the various exit plans and facility closures. During fiscal 2002, we paid other exit costs of approximately $81.4 million. Additionally, approximately $3.9 million of other exit costs were non-cash charges utilized during fiscal 2002. The remaining $10.0 million of other exit costs was classified as accrued liabilities as of March 31, 2002 and is expected to be paid out within one year of the commitment dates of the respective exit plans, except for certain long-term contractual obligations, as discussed above.

The direct transaction costs recorded in fiscal 2001 included approximately $64.3 million of costs primarily related to investment banking and financial advisory fees as well as legal and accounting costs associated with the merger transactions. Other direct transaction costs which totaled approximately $38.1 million were mainly comprised of accelerated debt prepayment expense, accelerated executive stock compensation and benefit-related expenses. Approximately $28.2 million of the direct transaction costs were non-cash charges utilized during fiscal 2001. During fiscal 2002, we paid approximately $2.7 million of direct transaction costs. The remaining $0.6 million of direct transaction costs was classified in accrued liabilities as of March 31, 2002 and is expected to be substantially paid out in the first quarter of fiscal 2003.

The following table summarizes the balance of the facility closure costs as of March 31, 2002 and the type and amount of closure costs provisioned for and utilized during fiscal 2001 and 2002.

In fiscal 2000, we recognized unusual pre-tax charges in the Americas business segment of $7.5 million related to the operations of Chatham, which included severance and related charges of approximately $4.4 million and other facility exit costs of approximately $3.1 million.

Additionally, unusual pre-tax charges in the Western Europe business segment of $3.5 million were recorded in fiscal 2000, related to the Kyrel EMS Oyj merger. The unusual charges 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.

Selling, general and administrative expenses, or SG&A, for fiscal 2002 increased to $443.6 million from $430.1 million in fiscal 2001 but decreased as a percentage of net sales to 3.4% in fiscal 2002 from 3.6% in fiscal 2001. The dollar increase in SG&A was primarily due to several business acquisitions completed during fiscal 2002. The percentage decrease in SG&A reflects savings generated by our focus on controlling discretionary spending combined with efficiencies gained from our exit activities, as discussed above in “Unusual Charges.”

SG&A for fiscal 2001 increased to $430.1 million from $320.0 million in fiscal 2000 but decreased as a percentage of net sales to 3.6% in fiscal 2001 from 4.6% in fiscal 2000. The dollar increase in SG&A was primarily due to the continued investment in infrastructure such as sales, marketing, supply-chain management, and information systems. The declining SG&A as a percentage of net sales reflects our continued focus on controlling operating expenses relative to sales growth and gross margin levels.

Goodwill and other intangibles amortization for fiscal 2002 decreased to $12.6 million from $63.5 million for the same period of fiscal 2001. The decrease in goodwill and other intangibles amortization was a direct result of the adoption of SFAS 142, effectively discontinuing the amortization of goodwill. As of March 31, 2002, unamortized goodwill approximated $1.5 billion. Such goodwill is no longer subject to amortization but

Goodwill and other intangibles amortization in fiscal 2001 increased to $63.5 million from $41.3 million in fiscal 2000. This increase was directly the result of the various acquisitions in fiscal 2001, which were accounted for as purchase transactions, which primarily include Irish Express Cargo Ltd., Fico, Inc., Li Xin Industries, Ltd. and Ojala Yhtyma Oy.

Interest and other expense, net increased to $91.9 million in fiscal 2002 from $67.1 million in fiscal 2001. The following table sets forth information concerning the components of interest and other expense, net.

Net interest expense remained relatively flat at $98.1 million in fiscal 2002 from $103.0 million in fiscal 2001. Net interest expense increased to $103.0 million in fiscal 2001 from $61.5 million in fiscal 2000. The increase was primarily attributable to the interest expense associated with the approximately $645.0 million of senior subordinated notes, consisting of $500.0 million of 9.875% notes and €150.0 million of 9.75% notes we issued in June 2000.

In fiscal 2002, there was $4.5 million of foreign exchange loss compared to foreign exchange gain of $4.0 million in fiscal 2001. The foreign exchange loss in fiscal 2002 mainly relates to net non-functional currency monetary liabilities in France, Hungary and Sweden. Additionally, foreign exchange losses in fiscal 2002 included amounts related to changes in fair values of derivative instruments due to hedge ineffectiveness, as a result of our adoption of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” in April 2001. The gains and losses recognized in earnings due to hedge ineffectiveness were immaterial in fiscal 2002. In fiscal 2001, there was $4.0 million of foreign exchange gain compared to $2.1 million foreign exchange loss in fiscal 2000. The foreign exchange gain in fiscal 2001 mainly relates to net non-functional currency monetary liabilities in Singapore, Germany and Hungary.

Other (income) expense, net was $10.8 million of net other income in fiscal 2002 compared to $31.9 million of net other income in fiscal 2001. The decrease in other income, net was strictly due to lower gains recorded on the sale of marketable securities as compared to the $33.4 million gain on sale of marketable securities recorded in fiscal 2001.

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, “Income Taxes,” of the Notes to Consolidated Financial Statements included in Item 8, “Financial Statements and Supplementary Data.”

Our consolidated effective tax rate was a benefit of 37% and 19% for fiscal years 2002 and 2001, respectively. Excluding the unusual charges, the effective income tax rate was 10% and 11% for fiscal years 2002 and 2001, respectively. The consolidated effective tax rate for a particular period varies depending on the amount of earnings from different jurisdictions, operating loss carryforwards, income tax credits, changes in previously established valuation allowances for deferred tax assets based upon management’s current analysis of the realizability of these deferred tax assets, as well as certain tax holidays and incentives granted to us and

At March 31, 2002 we had cash and cash equivalents balances totaling $745.1 million, total bank and other debts amounting to $1.2 billion and $800.0 million available for borrowing under our credit facilities subject to compliance with certain financial ratios.

Cash provided by operating activities was $858.9 million and cash used in operating activities was $469.7 million in fiscal 2002 and 2001, respectively. In fiscal 2000, operating activities used cash amounting to $34.4 million. Cash generated from operating activities in fiscal 2002 was primarily due to significant reductions of inventory and increases in accounts payable. Operating activities used cash in fiscal 2001 primarily as a result of significant increases in accounts receivable and inventory, partially offset by an increase in accounts payable combined with the $446.0 million net loss.

Accounts receivable, net of allowance for doubtful accounts, increased to $1.9 billion at March 31, 2002 from $1.7 billion at March 31, 2001. The increase in accounts receivable was primarily due to an increase of approximately 8% in net sales in fiscal 2002.

Inventories decreased 28% to $1.3 billion at March 31, 2002 from $1.8 billion at March 31, 2001. The decrease in inventories was primarily the result of our focused effort during fiscal 2002 to reduce inventories that were built up for our customers at the end of fiscal 2001, in their anticipation of stronger demand that did not materialize.

Cash used in investing activities was $1.1 billion, $1.1 billion and $879.4 million in fiscal 2002, 2001 and 2000, respectively. Cash used in investing activities in fiscal 2002 was primarily related to:


	•	$330.4 million of net capital expenditures to purchase equipment and the continued expansion of our manufacturing facilities worldwide, for our continued expansion of our industrial park strategy, primarily at our China, Hungary and Poland industrial parks;

	•	$396.3 million for purchases of manufacturing facilities and related asset purchases, related to our acquisitions of several manufacturing operations from Ericsson and Alcatel;

	•	$62.6 million of other investments, of which $53.5 million related to our participation in the asset securitization agreement we entered into in March 2002; and

	•	$314.5 million for acquisitions of businesses, primarily related to Xerox and Telia.

Additionally, we received proceeds of $20.6 million from the sale of marketable securities of various technology companies.


	•	$711.2 million of net capital expenditures to purchase equipment and the continued expansion of our manufacturing facilities worldwide, and specifically for our continued expansion of our industrial park strategy;

	•	$239.0 million for purchases of manufacturing facilities and related asset purchases, comprised primarily of Bosch Telecom GmbH’s Denmark facility, Ascom’s Switzerland facility and Siemens Mobile’s Italy and United States facilities;

	•	$54.4 million primarily for minority investment in the stocks of various technology companies in software and related industries; and

	•	$158.9 million for acquisitions of businesses, primarily related to Fico, Inc., Irish Express Cargo Ltd. and Vextra Design Inc.

Additionally, we received proceeds of $46.9 million from the sale of marketable securities of various technology companies.

Cash provided by financing activities was $ 369.3 million, $1.5 billion and $1.4 billion in fiscal 2002, 2001 and 2000, respectively. Cash provided by financing activities in fiscal 2002 was primarily related to our completion of a secondary offering of our ordinary shares. In January 2002, we sold a total of 20,000,000 ordinary shares at a price of $25.96 per share resulting in net proceeds to us of approximately $503.8 million, which was used to repay our bank borrowings under our credit facility and for general corporate purposes. Additionally, cash provided by financing activities in fiscal 2002 resulted from $57.7 million in proceeds from ordinary shares issued under our stock plans.

Our financing activities in fiscal 2002 used $112.0 million for the repurchase of the equity instrument issued to Motorola and $33.8 million for the repayment of capital lease obligations.

Cash provided by financing activities in fiscal 2001 was primarily related to our completion of two secondary offerings of our ordinary shares and the issuance of our senior subordinated notes. In June 2000, we sold a total of 11,000,000 ordinary shares at a price of $35.63 per share resulting in net proceeds to us of approximately $375.9 million. In July 2000, we sold an additional 1,650,000 ordinary shares at a price of $35.63 per share resulting in net proceeds of $55.7 million, which represented the overallotment option on the public stock offering completed in June 2000. In June 2000, we also issued approximately $645.0 million of our senior subordinated notes. Also, in February 2001, we completed a public stock offering of 27,000,000 ordinary shares at a price of $37.94 per share resulting in net proceeds of $990.1 million. Additionally, cash provided by financing activities in fiscal 2001 resulted from:


	•	$100.0 million of proceeds from the equity instrument issued to Motorola; and

	•	$78.5 million in proceeds from ordinary shares issued under our stock plans.

Additionally, our financing activities in fiscal 2001 used $31.8 million for the repayment of capital lease obligations. Further, a portion of the proceeds of our equity offerings and senior note issuance was used to reduce outstanding bank borrowings. See Note 4, “Bank Borrowings and Long-Term Debt,” of the Notes to Consolidated Financial Statements in Item 8, “Financial Statements and Supplementary Data” for a description of our bank credit facilities and long-term debt.

Our working capital requirements and capital expenditures could continue to increase in order to support future expansions of our operations. It is possible that future acquisitions may be significant and may require the payment of cash. For example, we have entered into a number of transactions in which we have acquired OEM facilities for cash in connection with establishing manufacturing relationships. We believe we will continue to enter into these transactions in the future. 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 shipments and changes in volumes of customer orders.

We believe that our existing cash balances, together with anticipated cash flows from operations, borrowings available under our credit facility and the net proceeds from our recent equity offerings will be sufficient to fund our operations through at least the next twelve months. Historically, we have funded our operations from the proceeds of public offerings of equity and debt securities, cash and cash equivalents generated from operations, bank debt, sales of accounts receivable and capital equipment lease financings. 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. The sale of equity or convertible debt securities could result in dilution to our current shareholders. Further, we may issue debt securities that have rights and privileges senior to those of holders of our ordinary shares, and the terms of this debt could impose restrictions on our operations. Such financings and other transactions may not be available on terms acceptable to us or at all. See Item 1, “Business — Certain Factors Affecting Operating Results — If we do not manage effectively the changes in our operations, our business may be harmed.”

In March 2002, we replaced our existing credit facilities, with an $800.0 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 $400.0 million principal amount of revolving credit loans to us (“Tranche A”) and one providing for up to $400.0 million principal amount of revolving credit loans to our U.S. subsidiary, Flextronics International USA, Inc. (“Tranche B”). Both Tranche A and Tranche B are split one-third to a 364-day and two-thirds to a three-year facility. Borrowings under the Credit Facility bear interest, at either, at our option (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 0.875% and 2.25%, based on our credit ratings and facility usage. We are required to pay a quarterly commitment fee ranging from 0.125% to 0.50% per annum, based on our credit ratings of the unutilized portion of the Credit Facility.

The Credit Facility is unsecured, and contains certain restrictions on our ability to (i) incur certain debt, (ii) make certain investments and (iii) make certain acquisitions of other entities. The Credit Facility also requires that we maintain certain financial covenants, including, among other things, a maximum ratio of total indebtedness to EBITDA (earnings before interest expense, taxes, depreciation, and amortization), a minimum ratio of fixed charge coverage, and a minimum net worth, as defined, during the term of the Credit Facility. Borrowings under the Credit Facility are guaranteed by us and certain of our subsidiaries. As of March 31, 2002, we were in compliance with our covenants.

As of March 31, 2002, our outstanding debt obligations included: (i) borrowings outstanding related to our senior subordinated notes, (ii) amounts drawn by subsidiaries on various lines of credit, (iii) properties financed under mortgage loans, (iv) equipment financed under capital leases and (v) other term obligations. Additionally, we have leased certain of our facilities under operating lease commitments. Future payments due under our debt and lease obligations are as follows (in thousands):

In fiscal 2002, we entered into a receivables securitization agreement and sold a designated pool of qualified trade receivables to a third party qualified special purpose entity, which in turn sold an undivided ownership interest to a conduit, administrated by an unaffiliated financial institution. The agreement, which expires in March 2003, is subject to annual renewal and has a current maximum limit of $250.0 million. As of March 31, 2002, we received net cash proceeds of $105.3 million, which reflects the net accounts receivable sold from the start of the securitization agreement. The accounts receivable balances that were sold were removed from the consolidated balance sheet and the proceeds received from the sale are reflected as cash provided by operating activities in the consolidated statement of cash flows.

In fiscal 2002, we entered into operating leases with respect to properties located in Mexico and Texas. During fiscal 2002, we completed construction on the property in Mexico and began construction on a property in Texas. The amount outstanding on the Mexico and Texas properties as of March 31, 2002, was $22.9 million and $39.4 million, respectively. Upon the expiration of these leases in 2006 and 2008, respectively, we may renew the leases for an additional five years subject to certain approvals and conditions, or arrange a sale of the buildings to a third party. We also have the right to purchase the buildings at fair market value at the end of the lease terms, or to terminate the leases at any time by paying the outstanding termination value. We have provided a residual value guarantee, which means that if the building is sold to a third party, we are responsible for making up any shortfall between the actual sales price and the amount funded under the leases. We believe that the fair market value at March 31, 2002 exceeds the value of the residual guarantee.

We have loaned approximately $8.6 million to various of our executive officers. Each loan is evidenced by a promissory note in favor of Flextronics and is generally secured by a deed of trust on property of the officer. Certain notes are non-interest bearing and others have interest rates ranging from 2.48% to 7.25%. The remaining outstanding balance of the loans, including accrued interest, as of March 31, 2002 was approximately $8.7 million.

Additionally, in connection with an investment partnership, one of our subsidiaries has entered into loans with various of our officers. The only members of the partnership are the various officers. Each loan is evidenced by a full-recourse promissory note in favor of the subsidiary. Interest rates on the notes range from 5.72% to 6.09%. The remaining balance of the loans, including accrued interest, as of March 31, 2002 was approximately $10.3 million.

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 place cash and cash equivalents with various major financial institutions and limit the amount of credit exposure to the greater of 20% of the total investment portfolio or $10.0 million in any single institution. We protect our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in investment grade securities and by constantly positioning the portfolio to respond appropriately to a reduction in credit rating of any investment issuer, guarantor or depository to levels below the credit ratings dictated by our investment policy. 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, 2002, the outstanding amount in the investment portfolio was $459.1 million, comprised mainly of money market funds with an average return of 1.87% for dollar investments and 3.24% for Euro investments.

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, 2002, the outstanding short-term debt, including capitalized leases was $299.0 million. The following table presents principal cash flows and related weighted average interest rates by expected maturity dates for debt obligations, excluding capital leases. The variable interest rate for future years assumes the same rate as March 31, 2002. The information is presented in U.S. dollar equivalents, which is our reporting currency. The instruments’ actual cash flows are denominated in U.S. dollars (US$) and Euro (€), as indicated in parentheses.

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. We try to maintain a fully hedged position for all certain, known transaction exposures. These exposures are primarily, but not limited to, revenues, vendor payments, accrued expenses and inter-company balances in currencies other than the functional currency 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. The credit risk of these forward contracts is minimal since the contracts are with large financial institutions. We hedge committed exposures and these forward contracts generally do not subject us to risk of accounting losses. The gains and losses on forward contracts generally offset the gains and losses on the assets, liabilities and transactions hedged. On April 1, 2001, we adopted SFAS No. 133, as amended by SFAS No. 137 and No. 138, and as such all foreign currency forward contracts are reported on the balance sheet at fair value. The aggregate outstanding contracts at the end of fiscal year 2002 was $475.4 million. The majority of these foreign exchange contracts expire in less than one month and almost all expire within three months. They will settle in Euro, British pound, Japanese yen, Norwegian kronor, Singapore dollar, Swedish kronor, Swiss franc and U.S. dollar.

We have audited the accompanying consolidated balance sheets of Flextronics International Ltd. (a Singapore Company) and subsidiaries (collectively the “Company”) as of March 31, 2002 and 2001 and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended March 31, 2002. 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 did not audit the consolidated statement of operations, shareholders’ equity and cash flows of The DII Group, Inc., a company acquired during fiscal 2001 in a transaction accounted for as a pooling of interests, for the year ended January 2, 2000, as discussed in Note 11. Such statements are included in the consolidated financial statements of Flextronics International Ltd. and reflect total revenues of 19% of the related consolidated total for the year ended March 31, 2000. These statements were audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to amounts included for The DII Group, Inc., is based solely upon the report of the other auditors.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit 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 and the report of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, 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, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2002 in conformity with accounting principles generally accepted in the United States of America.

Our audits and the report of other auditors 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 the purpose 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.

We have audited the consolidated statements of operations, stockholders’ equity and cash flows for the year ended January 2, 2000 (none of which are presented herein) of The DII Group, Inc. and Subsidiaries (the “Company”). These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit 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 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 audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the Company’s results of its operations and its cash flows for the year ended January 2, 2000, in conformity with accounting principles generally accepted in the United States of America.

The accompanying notes are an integral part of these consolidated financial statements.

Flextronics International Ltd. (“Flextronics” or the “Company”) was incorporated in the Republic of Singapore in May 1990. Flextronics provides electronics manufacturing services, or EMS, to original equipment manufacturers, or OEMs, primarily in the handheld electronics devices, information technologies infrastructure, communications infrastructure, computer and office automation, and consumer devices industries. The Company provides a network of design, engineering and manufacturing operations in 28 countries across four continents. Flextronics provides customers with the opportunity to outsource on a global basis, with end-to-end operational solutions where the Company takes responsibility for engineering, new product introduction and implementation, supply chain management, manufacturing and logistics management, with the goal of delivering a complete packaged product. The Company provides complete product design and technology services; logistics services, such as materials procurement, inventory management, vendor management, packaging and distribution; and automation of key components of the supply chain through advanced information technologies. The company also offers other after-market services such as repair and warranty services and network and communications installation and maintenance.

All dollar amounts included in the financial statements are expressed in U.S. dollars unless otherwise designated as Singapore dollars (S$) or Euros (€).

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.

Certain prior years’ balances have been reclassified to conform to the current year’s presentation.

The financial position and results of operations of the Company’s certain Chinese, Danish, certain Italian, Norwegian, Polish, Spanish, Swedish, Swiss and UK subsidiaries are measured using their respective local currencies 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. The Company’s Austrian, Dutch, Finnish, French, German, Hungarian, Irish and certain Italian subsidiaries have adopted the Euro as their functional currency.

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, corporate debt securities and certificates of deposit.

The Company’s short-term investments are comprised of public corporate equity securities and are included within Other Current Assets in the Company’s consolidated balance sheets and carried at fair market value. All investments are generally held in the Company’s name with major financial institutions acting as custodians. 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. During fiscal year 2002, the Company sold all

of its marketable equity securities and realized gains of approximately $2.0 million compared to $33.4 million of realized gains in fiscal year 2001. All of the Company’s short-term investments were classified as available-for-sale. Unrealized 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 consist of the following (in thousands):

The Company also has certain investments in non-publicly traded technology companies. These investments are included within Other Assets in the Company’s consolidated balance sheet and are carried at cost. The Company continuously monitors these investments for impairment and makes appropriate reductions in carrying values when necessary. During fiscal 2002 and 2001, the Company recorded an unusual charge of $38.4 million and $9.5 million, respectively, for other than temporary impairment of its investments in certain of these non-publicly traded companies. See Note 9, “Unusual Charges” for further discussion.

Property, plant and equipment are stated at cost. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the related assets (one to thirty 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, plant and equipment was comprised of the following as of March 31 (in thousands):

The Company reviews property, plant and equipment 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 comparing its carrying amount to projected discounted 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, exceeds its fair market value. Refer to Note 9, “Unusual Charges,” for discussion of the Company’s adjustments to the carrying value of property, plant and equipment.

Financial instruments, which potentially subject the Company to concentrations of credit risk, are primarily accounts receivable, cash equivalents and investments. The Company performs ongoing credit evaluations of its customers’ financial condition and makes provisions 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 of high credit quality. These financial institutions are located in many different locations throughout the world.

In fiscal 2002 and fiscal 2000, Ericsson Telecom AB (“Ericsson”) accounted for approximately 15% and 12% of net sales, respectively. No customer accounted for more than 10% of net sales in fiscal 2001. We have increasingly focused on sales to larger companies and to customers in the telecommunications, networking, consumer electronics and computer industries. In fiscal 2002, 2001 and 2000, our ten largest customers accounted for approximately 64%, 59% and 57% of our net sales, respectively.

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, net of applicable reserves, were as follows (in thousands):

Other current liabilities were comprised of the following as of March 31 (in thousands):

The Company provides for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” SFAS No. 109 requires the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying the applicable statutory tax rate to the differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities.

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 adopted SAB 101 as required in the fourth quarter of fiscal 2001 and the adoption of SAB 101 did not have a material impact on the Company’s consolidated financial statements.

The Company’s net sales are primarily comprised of manufacturing services. Our manufacturing services include the assembly of printed circuit boards, or PCBs, and complete systems and products, fabrication and assembly of plastic and metal enclosures, fabrication of PCBs and backplanes, and fabrication and assembly of photonics components. Throughout the production process, the Company offers other services, including design and technology; logistics, such as materials procurement, inventory management, vendor management, packaging, and distribution; and automation of key components of the supply chain through advanced information technologies. The Company offers after-market services such as repair and warranty services and network installation.

Revenue from manufacturing services is generally recognized upon shipment of the manufactured product. Revenue from other services and after-market services is generally recognized as the services are performed.

Interest and other expense, net was comprised of the following for the years ended March 31 (in thousands):

Basic earnings per share is computed using the weighted average number of ordinary shares outstanding during the applicable periods.

Diluted earnings 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 other equity instruments, and are computed using the treasury stock method.

Earnings per share data were computed as follows for the years ended March 31 (in thousands, except per share amounts):


(1)	Stock options of the Company calculated based on the treasury stock method using average market price for the period, if dilutive. Options to purchase 961,436 shares outstanding during the fiscal year March 31, 2000, 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.

The ordinary share equivalents from stock options and other equity instruments were antidilutive for the fiscal years ended March 31, 2002 and March 31, 2001, and therefore not assumed to be converted for diluted earnings per share computation.

In July 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 and No. 142, “Business Combinations” and “Goodwill and Other Intangible Assets.” SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method. Under SFAS No. 142, goodwill is no longer subject to amortization over its estimated useful life. Rather, goodwill is subject to at least an annual assessment for impairment, applying a fair-value based test. Additionally, an acquired intangible asset should be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented or exchanged, regardless of the acquirer’s intent to do so. Other intangibles will continue to be valued and

amortized over their estimated useful lives; in-process research and development will continue to be written off immediately.

The Company adopted SFAS No. 142 in the first quarter of fiscal 2002 and no longer amortizes goodwill, thereby eliminating annual goodwill amortization of approximately $124.2 million, based on anticipated amortization that would have been incurred under the prior accounting standard for fiscal 2002. Prior to adoption of SFAS No. 142, the Company amortized any excess of cost over net assets acquired (goodwill) using the straight-line method over estimated lives generally ranging from two to fifteen years.

The Company evaluates goodwill and other intangibles for impairment, at least on an annual basis and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable from its estimated future cash flows. Recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit, based on projected discounted future results of the unit using a discount rate reflecting the Company’s average cost of funds. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second test is performed to measure the amount of impairment loss, if any. To date, the Company has not recognized any impairment of its goodwill and other intangible assets in connection with its adoption of SFAS No. 142. However, no assurances can be given that future evaluations of goodwill will not result in charges as a result of future impairment.

During fiscal year 2002, $532.2 million of goodwill resulted from various business acquisitions as further described in Note 11, “Business Combinations and Purchases of Assets,” as well as contingent purchase price adjustments and other adjustments from historical acquisitions.

Net income (loss) for the fiscal years ended March 31, 2001 and 2000 adjusted to exclude goodwill amortization, net of tax are as follows (in thousands):

The proforma effects of the adoption on earnings (loss) per share of the Company for the fiscal years ended March 31, 2001 and 2000 are as follows:

All of the Company’s acquired intangible assets are subject to amortization over their estimated useful lives. Intangible assets are comprised of contractual agreements, patents and trademarks, developed technologies and other acquired intangibles. Contractual agreements are being amortized over periods up to 10 years. Patents and trademarks and developed technologies are being amortized on a straight-line basis over periods of up to 10 years. Other acquired intangibles relate to favorable leases and customer lists, and are amortized on a straight-line basis over one to ten years. No significant residual value is estimated for the intangible assets. During fiscal year 2002, there were $33.7 million of additions to intangible assets. Currently, the Company is in the process of determining the value of its intangible assets acquired from Telia (please see Note 11, “Business Combinations and Purchases of Assets”). Intangible assets amortization for the fiscal years ended March 31, 2002, 2001 and 2000 was approximately $12.6 million, $7.3 million, and $3.6 million, respectively. The components of intangible assets are as follows (in thousands):

Expected future estimated annual amortization expense is as follows (in thousands):

On April 1, 2001, the Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS No. 137 and No. 138. All derivative instruments are recorded on the balance sheet at fair value. If the derivative is designated as a cash flow hedge, the effective portion of changes in the fair value of the derivative is recorded in Other Comprehensive Income (“OCI”) and is recognized in the statement of operations when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges are immediately recognized in earnings. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings in the current period. For derivative instruments not designated as hedging instruments under SFAS 133, changes in fair values are recognized in earnings in the current period. Such instruments are typically forward contracts used to hedge foreign currency balance sheet exposures.

The Company is exposed to foreign currency exchange rate risk inherent in forecasted sales, cost of sales and assets and liabilities denominated in non-functional currencies. The Company has established currency risk management programs to protect against reductions in value and volatility of future cash flows caused by changes in foreign currency exchange rates. The Company enters into short-term foreign currency forward contracts to hedge only those currency exposures associated with certain assets and liabilities, mainly accounts receivable and accounts payable, and cash flows denominated in non-functional currencies.

At March 31, 2002, the fair value of these short-term foreign currency forward contracts was recorded as an asset amounting to $54,000. At the same date the Company had in OCI recorded immaterial deferred gains relating to our foreign currency forward contracts. These gains are expected to be recognized in earnings over the next twelve months. The gains and losses recognized in earnings due to hedge ineffectiveness were immaterial.

In September 2000, the FASB issued SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities — a replacement of FASB Statement No. 125.” The new standard carries forward some provisions of SFAS No. 125, but modifies the methods of accounting for securitizations and other transfers of financial assets and collateral, in addition to requiring additional disclosures. The Company adopted SFAS No. 140 in the first quarter of fiscal 2002. The adoption of SFAS No. 140 did not have a material impact on the financial position or results of operations of the Company.

In October 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” to be effective for all fiscal years beginning after June 15, 2002, with early adoption permitted. SFAS No. 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. The company will adopt SFAS No. 143 in fiscal 2004. The Company does not believe the adoption of SFAS No. 143 will have a material impact on the Company’s financial position or results of operations.

In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 supercedes SFAS No. 121 and requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired and by broadening the presentation of discontinued operations to include more disposal transactions. SFAS No. 144

will be effective for fiscal years beginning after December 15, 2001. The Company will adopt SFAS No. 144 in the first quarter of fiscal year 2003. The Company does not believe the adoption of SFAS No. 144 will have a material impact on the Company’s financial position or results of operations.

The following information relates to fiscal years ended March 31 (in thousands):

In June 2000, the Company issued approximately $645.0 million of senior subordinated notes, consisting of $500.0 million of 9.875% notes and €150.0 million of 9.75% notes. Interest is payable on July 1 and January 1 of each year, commencing January 1, 2001. The notes mature on July 1, 2010. The Company may redeem the notes on or after July 1, 2005. The approximate fair value of the 9.875% senior subordinated notes and the 9.75% euro senior subordinated notes based on broker trading prices was 105.5% and 107.25% of the face value on March 31, 2002, respectively.

Additionally, the Company has $150.0 million in unsecured senior subordinated notes due in 2007 outstanding with an annual interest rate of 8.75%. Interest is payable on April 15 and October 15 of each year. The notes mature on October 15, 2007. The approximate fair value of the unsecured senior subordinated notes based on broker trading prices was 101.25% of the face value on March 31, 2002.

The indentures relating to the notes contain certain covenants that, among other things, limit the ability of the Company and certain of its subsidiaries to (i) incur additional debt, (ii) issue or sell stock of certain subsidiaries, (iii) engage in asset sales, and (iv) make distributions or pay dividends. The covenants are subject to a number of significant expectations and limitations. As of March 31, 2002, the Company was in compliance with its debt covenants.

In March 2002, the Company replaced its existing credit facilities, with an $800.0 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 $400.0 million principal amount of revolving credit loans to the Company and designated subsidiaries (“Tranche A”) and one providing for up to $400.0 million principal amount of revolving credit loans to a U.S. subsidiary of the Company (“Tranche B”). Both Tranche A and Tranche B are split one-third to a 364-day and two-thirds to 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 0.875% and 2.25%, based on the company’s credit ratings and facility usage. The Company is required to pay a quarterly commitment fee ranging from 0.125% to 0.50% per annum, based on the Company’s credit ratings, 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 interest expense, taxes, depreciation, and amortization), a minimum ratio of fixed charge coverage, and a minimum net worth, as defined, during the term of the Credit Facility. Borrowings under the Credit Facility are guaranteed by the Company and certain of its subsidiaries. As of March 31, 2002, there were no borrowings outstanding under the Credit Facility and the Company was in compliance with its covenants.

Certain subsidiaries of the Company have various lines of credit available with annual interest rates generally ranging from 2.13% to 9.0%. These lines of credit expire on various dates through 2003. The Company also has term loans with annual interest rates generally below 8.0% with terms of up to 15 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 up to 10 years and annual interest rates ranging from 2.0% to 9.0% and are secured by the underlying properties with a net book value of approximately $31.8 million at March 31, 2002.

Bank borrowings and long-term debt was comprised of the following at March 31 (in thousands):

Maturities for the Company’s bank borrowings and other long-term debt are as follows for the years ending March 31 (in thousands):

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, “Bank Borrowings and Long-Term Debt”) is determined based on current broker trading prices. The Company’s cash equivalents are comprised of cash deposited in money market accounts, corporate debt securities and certificates of deposit (see Note 2, “Summary of Accounting Policies”). The Company’s investment policy limits the amount of credit exposure to 20% of the total investment portfolio in any single issuer.

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 assets, liabilities and transactions hedged. The Company’s off-balance sheet financial instruments consisted of $200.4 million of aggregate foreign currency forward contracts outstanding at the end of fiscal year 2001. On April 1, 2001, the Company adopted SFAS No. 133, as amended by SFAS No. 137 and No. 138, and as such all foreign currency forward contracts are reported on the balance sheet at fair value. The aggregate outstanding contracts at the end of fiscal year 2002 was $475.4 million. The majority of these foreign exchange contracts expire in less than one month, and almost all expire within three months. They will settle in Euro, British pound, Japanese yen, Norwegian kronor, Singapore dollar, Swedish kronor, Swiss franc and United States dollar.

As of March 31, 2002 and 2001, the Company has financed a total of $81.0 million and $142.8 million, respectively, in machinery and equipment purchases with capital leases. Accumulated depreciation for property and equipment under capital leases totaled $36.8 million and $61.2 million at March 31, 2002 and 2001, respectively. These capital leases have interest rates ranging from 2.09% to 17.9%. The Company also leases certain of its facilities under non-cancelable operating leases. The capital and operating leases expire in various years through 2034 and require the following minimum lease payments for the years ended March 31 (in thousands):

Total rent expense was $93.0 million, $78.7 million, $50.7 million and for the years ended March 31, 2002, 2001 and 2000, respectively.

Included in the above remaining operating lease payments are payments under two leases on properties located in Mexico and Texas in the amounts of $22.9 million and $39.4 million, respectively. Upon the expiration of these leases in 2006 and 2008, respectively, the Company may renew the leases for an additional five years subject to certain approvals and conditions, or arrange a sale of the buildings to a third party. The Company also has the right to purchase the buildings at fair market value at the end of the lease terms, or to terminate the leases at any time by paying the outstanding termination value. The Company has provided a residual value guarantee, which means that if the building is sold to a third party, the Company is responsible for making up any shortfall between the actual sales price and the amount funded under the leases. The Company believes that the fair market value at March 31, 2002 exceeds the value of the residual guarantee.

In fiscal 2002, the Company entered into a receivables securitization agreement and sold a designated pool of qualified trade receivables to a third party qualified special purpose entity, which in turn sold an undivided ownership interest to a conduit, administrated by an unaffiliated financial institution. The agreement, which expires in March 2003, is subject to annual renewal and has a current maximum limit of $250.0 million. As of March 31, 2002, we received net cash proceeds of $105.3 million, which reflects the net accounts receivable sold from the start of the securitization agreement. The accounts receivable balances that were sold were removed from the consolidated balance sheet and the proceeds received from the sale are reflected as cash provided by operating activities in the consolidated statement of cash flows. The Company accounts for its sale of receivables to the qualified special purpose entity, as sales under SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.”

The Company participates in the securitization agreement as an investor conduit. This is to allow the operating subsidiaries to receive full cash payment for sold receivables, less a deferred purchase price receivable, which amounted to $10.0 million on March 31, 2002, representing a reserve for potential credit losses, interest and fees. Depending on the collection performance of sold receivables, the Company’s portion of the total investment varies. On March 31, 2002, the Company’s investment was approximately $53.5 million, classified as Other Assets in the Company’s consolidated balance sheet.

The Company will continue to service, administer and collect the receivables on the behalf of the limited purpose entity and receives a servicing fee approximately 1% of sold receivables per annum, which management has determined approximates market compensation for these services. The Company pays facility and commitment fees of up to 0.24% for unused amounts under the line and program fees of up to 0.34% of outstanding amounts.

We are party to various legal proceedings that arise in the normal course of business. In the opinion of management, the ultimate disposition of these proceedings will not have a material adverse effect on our consolidated financial position, liquidity or results of operations.

The domestic and foreign components of income (loss) before income taxes were comprised of the following for the years ended March 31 (in thousands):

The provision for (benefit from) income taxes consisted of the following for the years ended March 31 (in thousands):

The Singapore statutory income tax rate was approximately 24.5% for each of the years in the two year period ended March 31, 2002 and 26.0% the period ended March 31, 2000. The reconciliation of the income tax expense (benefit) 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):

The components of deferred income taxes are as follows as of March 31 (in thousands):

A deferred tax asset arises from available loss carryforwards and non-deductible accruals. The Company has total tax loss carryforwards of approximately $1.3 billion, 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. Approximately $20.0 million of the valuation allowance relates to income tax benefits arising from the exercise of stock options which will be credited directly to stockholders’ equity and will not be available to benefit the income tax provision in any future period.

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.

The Company does not provide for federal income taxes on the undistributed earnings of its foreign subsidiaries, as such earnings are not intended by management to be repatriated in the foreseeable future. Determination of the amount of the unrecognized deferred tax liability on these undistributed earnings is not practicable.

During fiscal 2002, 2001, and 2000, the Company completed various secondary offerings of its ordinary shares. The Company received net proceeds of approximately $503.8 million (20,000,000 ordinary shares sold) $1.4 billion (39,650,000 ordinary shares sold) and $1.2 billion (67,018,000 ordinary shares sold) in fiscal years 2002, 2001 and 2000, respectively.

In fiscal 2001, the Company effected a 2:1 stock split. A distribution of 209,001,331 ordinary shares occurred on October 16, 2000. In fiscal 2000, the Company effected a 2:1 stock split, resulting in the distribution of 57,497,204 ordinary shares on December 22, 1999. Each of the stock splits was effected as a bonus issue (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 all stock splits.

In connection with the Company’s strategic alliance with Motorola Inc. (“Motorola”) in May 2000, Motorola paid $100.0 million for an equity instrument that entitled it to acquire 22,000,000 million Flextronics ordinary shares at any time through December 31, 2005 upon meeting targeted purchase levels or making additional payments to the Company. The issuance of this equity instrument resulted in a one-time charge equal to the excess of the fair value of the equity instrument issued over the $100.0 million proceeds received. As a result, the one-time non-cash charge amounted to approximately $286.5 million offset by a corresponding credit to additional paid-in capital in the first quarter of fiscal 2001.

In June 2001, the Company entered into an agreement with Motorola under which it repurchased this equity instrument for $112.0 million. The fair value of the equity instrument on the date it was repurchased exceeded the amount paid to repurchase the equity instrument. Accordingly, the Company accounted for the repurchase of the equity instrument as a reduction to shareholders’ equity in the accompanying consolidated statement of shareholders’ equity.

The Company’s 2001 Equity Incentive Plan (the “2001 Plan”) provides for grants of up to 7,000,000 stock options. Additionally, the remaining shares that are available under the Company’s 1993 Share Option Plan (the “1993 Plan”) and any shares issuable upon exercise of the options granted under the 1993 Plan that expire or become unexercisable for any reason without having been exercised in full, will be available for grant under the 2001 Plan. The adoption of the 2001 Plan mandated that no additional options be granted under the 1993 Plan. Any options outstanding under the 1993 Plan will remain outstanding until exercised or until they terminate or expire by their terms. The 2001 Plan contains two separate equity incentive programs including a discretionary option grant program and an automatic option grant program. The discretionary option grant program is administered by the Compensation Committee with respect to officers and directors and by the Chairman of the Company’s Board, with respect to all other employees.

Options issued under the 2001 Plan and 1993 Plan generally vest over 4 years. Options granted under the 2001 Plan expire 10 years from the date of grant. Pursuant to an amendment to the provisions relating to the term of options provided under the 1993 Plan, options granted subsequent to October 1, 2000 expire 10 years from the date of grant, rather than the five-year term previously provided. The 2001 Plan and 1993 Plan provide for option grants at an exercise price equal to the fair market value per ordinary share on the option grant date.

The Company’s 1997, 1998 and 1999 Interim Option Plans provide for grants of up to 2,000,000, 3,144,000, and 5,200,000 stock options, respectively. These plans provide grants of non-statutory stock options to employees and other qualified individuals to purchase ordinary shares of the Company. Options under these plans cannot be granted to executive officers and directors. All Interim Option Plans have an exercise price of not less than 85% of the 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’s Employee Stock Purchase Plan (the “Purchase Plan”) provides for issuance of up to 2,400,000 ordinary shares. The Purchase Plan was approved by the shareholders in October 1997. Under the Purchase Plan, employees may purchase, on a periodic basis, a limited number of ordinary shares 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. The ordinary shares sold under this plan in fiscal 2002, 2001 and 2000, amounted to 767,301, 445,476 and 2,117,740, respectively. The weighted-average fair value of ordinary shares sold under this plan in fiscal 2002, 2001 and 2000 was $20.08, $20.00 and $7.74 per share, respectively.

The following table gives information about equity awards under the Company’s 2001 Plan; 1993 Plan; 1997, 1998 and 1999 Interim Option Plans; and Purchase Plan.


(1)	Of these shares, 6,060,736 shares remain available for grant under the 2001 Plan and 630,623 shares remain available for purchase under the Purchase Plan.

(2)	Of these shares, 2,197,165 shares remain available for grant under the 1999 Interim Option Plan, 177,470 shares remain available for grant under the 1998 Interim Option Plan and 492,364 shares remain available for grant under the 1997 Interim Option Plan.

(3)	The Company has certain option plans and the underlying options of companies, which the Company has merged with or acquired (the “Assumed Plans”). Total stock options assumed under these plans amounted to 8,097,628. These options have a weighted average exercise price of $6.12 per share. 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 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 10 years from the date of grant. No further awards will be made under the Assumed Plans. Statistics regarding the assumed options are not included in the above table.

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):

The following table presents the composition of options outstanding and exercisable as of March 31, 2002 (“Price” and “Life” reflect the weighted average exercise price and weighted average contractual life unless otherwise noted):

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 2002, 2001 and 2000 net income (loss) and earnings (loss) per share would have been adjusted to the proforma amounts indicated below:

In accordance with the disclosure provisions of SFAS No. 123, the fair value of employee stock options granted during fiscal 2002, 2001 and 2000 was estimated at the date of grant using the Black-Scholes model and the following weighted average assumptions:

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 proforma net income (loss) and earnings (loss) per share disclosures may not reflect the associated fair value of the outstanding options.

The Company recognized unusual pre-tax charges of approximately $574.4 million during fiscal 2002, of which $530.0 million related to closures of several manufacturing facilities and $44.4 million was primarily for the impairment of investments in certain technology companies. As further discussed below, $464.4 million of the charges relating to facility closures have been classified as a component of Cost of Sales.

Unusual charges recorded in fiscal 2002 by segments are as follows: Americas, $265.8 million; Asia, $70.7 million; Western Europe, $185.4 million; and Central Europe, $52.5 million.

The components of the unusual charges recorded in fiscal 2002 are as follows (in thousands):

In connection with the fiscal 2002 facility closures, the Company developed formal plans to exit certain activities and involuntarily terminate employees. Management’s plan to exit an activity included the identification of duplicate manufacturing and administrative facilities for closure or consolidation into other facilities. Management currently anticipates that the facility closures and activities to which all of these charges relate will be substantially completed within one year of the commitment dates of the respective exit plans, except for certain long-term contractual obligations.

Of the total pre-tax facility closure costs recorded in fiscal 2002, $153.6 million related to employee termination costs, of which $118.4 million has been classified as a component of Cost of Sales. As a result of the various exit plans, the Company identified 13,391 employees to be involuntarily terminated related to the various facility closures. As of March 31, 2002, 7,444 employees had been terminated, and another 5,947 employees had been notified that they are to be terminated upon completion of the various facility closures and consolidations. During fiscal 2002, the Company paid employee termination costs of approximately $86.0 million, related to the fiscal 2002 restructuring activities. The remaining $67.6 million of employee termination costs was classified as accrued liabilities as of March 31, 2002 and is expected to be paid out within one year of the commitment dates of the respective exit plans.

The unusual pre-tax charges recorded in fiscal 2002 included $163.7 million for the write-down of property, plant and equipment associated with various manufacturing and administrative facility closures from their carrying value of $232.6 million. This amount has been classified as a component of Cost of Sales during fiscal 2002. Certain assets will be held for use and remain in service until their anticipated disposal dates pursuant to the exit plans. Since the assets will remain in service from the date of the decision to dispose of these assets to the anticipated disposal date, the assets are being depreciated over this expected period. For assets being held for use, an impairment loss is recognized if the carrying amount of the asset exceeds its fair value. Certain other assets will be held for disposal as these assets are no longer required in operations. Assets held for disposal are no longer being depreciated. For assets being held for disposal, an impairment loss is recognized if the carrying amount of the asset exceeds its fair value less cost to sell. The impaired long-lived assets consisted of machinery and equipment of $105.7 million and building and improvements of $58.0 million.

payments associated with its contractual obligations with respect to facility and equipment leases through the end of fiscal 2007 and with respect to the other contractual obligations with suppliers and third parties through fiscal 2003. Other exit costs also included charges of $98.0 million relating to asset impairments resulting from customer contracts that were breached, when they were terminated by the Company, as a result of various facility closures. These asset impairments were determined based on the difference between the carrying amount and the realizable value of the impaired inventory and accounts receivable. The Company disposed of the impaired assets, primarily through scrapping and write-offs, by the end of fiscal 2002. Also included in other exit costs were charges amounting to $8.0 million for the incremental costs for warranty work incurred by the Company for products sold prior to the commitment dates of the various exit plans. Other exit costs also included $8.2 million of facility refurbishment and abandonment costs related to certain building repair work necessary to prepare the exited facilities for sale or return the facilities to its landlords. The remaining $36.9 million, primarily included incremental amounts of legal and environmental costs, and various government obligations payable by the Company as a direct result of its facility closures. The Company paid approximately $42.5 million of other exit costs in fiscal 2002, related to the fiscal 2002 facility closures. Additionally, approximately $111.5 million of non-cash charges were utilized during fiscal 2002. The remaining balance includes approximately $46.7 million, classified as accrued liabilities as of March 31, 2002, which will be substantially paid out within one year of the commitment dates of the respective exit plans; and certain long-term contractual obligations of approximately $12.0 million, classified as other long-term liabilities as of March 31, 2002.

The Company recognized unusual pre-tax charges of approximately $973.3 million during fiscal year 2001. Of this amount, $493.1 million was recorded in the first quarter and was comprised of approximately $286.5 million related to the issuance of an equity instrument to Motorola combined with approximately $206.6 million of expenses resulting from The DII Group, Inc. and Palo Alto Products International Pte. Ltd. mergers and related facility closures. In the second quarter, unusual pre-tax charges amounted to approximately $48.4 million associated with the mergers with Chatham Technologies, Inc. and Lightning Metal Specialties (and related entities) and related facility closures. In the third quarter, the Company recognized unusual pre-tax charges of approximately $46.3 million, primarily related to the merger with JIT Holdings Ltd. and related facility closures. During the fourth quarter, the Company recognized unusual pre-tax charges, amounting to $376.1 million related to closures of several manufacturing facilities and $9.5 million of other unusual charges, specifically for the impairment of investments in certain technology companies.

On May 30, 2000, the Company entered into a strategic alliance for product manufacturing with Motorola. In connection with this strategic alliance, Motorola paid $100.0 million for an equity instrument that entitled it to acquire 22,000,000 million Flextronics ordinary shares at any time through December 31, 2005, upon meeting targeted purchase levels or making additional payments to the Company. The issuance of this equity instrument resulted in a one-time non-cash charge equal to the excess of the fair value of the equity instrument issued over the $100.0 million proceeds received. As a result, the one-time non-cash charge amounted to approximately $286.5 million offset by a corresponding credit to additional paid-in capital in the first quarter of fiscal 2001. In June 2001, the Company entered into an agreement with Motorola under which the Company repurchased this equity instrument for $112.0 million.

The components of the unusual charges recorded in fiscal 2001 are as follows (in thousands):

In connection with the fiscal 2001 facility closures, the Company developed formal plans to exit certain activities and involuntarily terminate employees. Management’s plan to exit an activity included the identification of duplicate manufacturing and administrative facilities for closure or consolidation into other facilities. Management currently anticipates that the facility closures and activities to which all of these charges relate will be substantially completed within one year of the commitment dates of the respective exit plans, except for certain long-term contractual obligations. As discussed below, $510.5 million of the charges relating to facility closures have been classified as a component of Cost of Sales during the fiscal year ended March 31, 2001.

Of the total pre-tax facility closure costs recorded in fiscal 2001, $132.5 million related to employee termination costs, of which $68.1 million has been classified as a component of Cost of Sales. As a result of the various exit plans, we identified 11,269 employees to be involuntarily terminated related to the various mergers and facility closures. As of March 31, 2002, substantially all the employees have been terminated. The remaining headcount are working to finalize our exit plans and will be terminated by the end of the first quarter of fiscal 2003. During fiscal 2002, the Company paid employee termination costs of approximately $47.4 million. The remaining $24.3 million of employee termination costs was classified as accrued liabilities as of March 31, 2002 and is expected to be paid by the end of the first quarter of fiscal 2003, except for certain long-term contractual obligations, which will be completed by the end of fiscal 2005.

down to their fair value of $192.0 million as of March 31, 2001. Certain assets will be held for use and remain in service until their anticipated disposal dates pursuant to the exit plans. Since the assets will remain in service from the date of the decision to dispose of these assets to the anticipated disposal date, the assets are being depreciated over this expected period. For assets being held for use, an impairment loss is recognized if the carrying amount of the asset exceeds its fair value. Certain other assets will be held for disposal, as these assets are no longer required in operations. Assets held for disposal are no longer being depreciated. For assets being held for disposal, an impairment loss is recognized if the carrying amount of the asset exceeds its fair value less cost to sell. The impaired long-lived assets consisted primarily of machinery and equipment of $153.0 million and building and improvements of $76.1 million. The long-lived asset impairment also included the write-off of the remaining goodwill and other intangibles related to certain closed facilities of $3.4 million.

The unusual pre-tax charges recorded in fiscal 2001 also included approximately $209.9 million for other exit costs, which have been classified as a component of Cost of Sales. Other exit costs included contractual obligations totaling $85.4 million, which were incurred directly as a result of the various exit plans. These contractual obligations consisted of facility lease terminations amounting to $26.5 million, equipment lease terminations amounting to $31.4 million and payments to suppliers and other third parties to terminate contractual agreements amounting to $27.5 million. The Company expects to make payments associated with its contractual obligations with respect to facility and equipment leases through the end of fiscal 2006. All payments with respect to the other contractual obligations with suppliers and other third parties were paid in fiscal 2002. Other exit costs also included charges of $77.0 million relating to asset impairments resulting from customer contracts that were breached, when they were terminated by the Company, as a result of various facility closures. These asset impairments were determined based on the difference between the carrying amount and the realizable value of the impaired inventory and accounts receivable. The Company disposed of the impaired assets, primarily through scrapping and write-offs, by the end of fiscal 2001. Also included in other exit costs were charges amounting to $16.1 million for the incremental costs for warranty work incurred by us for products sold prior to the commitment dates of the various exit plans. Other exit costs also included $11.6 million of facility refurbishment and abandonment costs related to certain building repair work necessary to prepare the exited facilities for sale or return the facilities to its landlords. The remaining $19.8 million of other exit costs recorded were primarily associated with incremental amounts of legal and environmental costs, incurred directly as a result of the various exit plans and facility closures. During fiscal 2002, the Company paid other exit costs of approximately $81.4 million. Additionally, approximately $3.9 million of other exit costs were non-cash charges utilized during fiscal 2002. The remaining $10.0 million of other exit costs was classified as accrued liabilities as of March 31, 2002 and is expected to be paid out within one year of the commitment dates of the respective exit plans, except for certain long-term contractual obligations, as discussed above.

The direct transaction costs recorded in fiscal 2001 included approximately $64.3 million of costs primarily related to investment banking and financial advisory fees as well as legal and accounting costs associated with the merger transactions. Other direct transaction costs which totaled approximately $38.1 million were mainly comprised of accelerated debt prepayment expense, accelerated executive stock compensation and benefit-related expenses. Approximately $28.2 million of the direct transaction costs were non-cash charges utilized during fiscal 2001. During fiscal 2002, the Company paid approximately $2.7 million of direct transaction costs. The remaining $0.6 million of direct transaction costs was classified in accrued liabilities as of March 31, 2002 and is expected to be substantially paid out in the first quarter of fiscal 2003.

The following table summarizes the balance of the facility closure costs as of March 31, 2002 and the type and amount of closure costs provisioned for and utilized during fiscal 2001 and 2002.

In fiscal 2000, the Company recognized unusual pre-tax charges in the Americas business segment of $7.5 million related to the operations of Chatham, which included severance and related charges of approximately $4.4 million and other facility exit costs of approximately $3.1 million.

The Company has loaned approximately $8.6 million to various executive officers of the Company. Each loan is evidenced by a promissory note in favor of the Company and is generally secured by a deed of trust on property of the officer. Certain notes are non-interest bearing and others have interest rates ranging from 2.48% to 7.25%. The remaining outstanding balance of the loans, including accrued interest, as of March 31, 2002 was approximately $8.7 million.

Additionally, in connection with an investment partnership, one of the Company’s subsidiaries has entered into loans with various officers of the Company. The only members of the partnership are the various officers of the Company. Each loan is evidenced by a full recourse promissory note in favor of the subsidiary. Interest rates on the notes range from 5.72% to 6.09%. The remaining balance of the loans, including accrued interest, as of March 31, 2002 was approximately $10.3 million.

In April 2001, the Company entered into a definitive agreement with Ericsson to provide a substantial portion of Ericsson’s mobile phone production and distribution requirements. The Company assumed responsibility for product assembly, new product prototyping, supply chain management and logistics management in which we process customer orders from Ericsson and configure and ship products to Ericsson’s customers. In connection with this relationship, the Company employed the existing workforce for certain operations, and purchased from Ericsson certain inventory, equipment and other assets, and assumed certain accounts payable and accrued expenses at their net book value of approximately $363.9 million. This acquisition was accounted for as a purchase of assets.

In July 2001, the Company acquired Alcatel SA’s (“Alcatel”) manufacturing facility and related assets located in Laval, France. The acquisition was accounted for as a purchase of assets. In connection with this acquisition, the Company entered into a long-term supply agreement with Alcatel to provide printed circuit board assembly, final systems assembly and various engineering support services. The Company purchased from Alcatel certain inventory, equipment and other assets, and assumed certain accounts payable and accrued expenses at their net book value of approximately $32.4 million.

In October 2001, the Company announced a manufacturing agreement with Xerox Corporation (“Xerox”). The Company acquired Xerox’s manufacturing business operations in Aguascalientes, Mexico; Penang, Malaysia; Resende, Brazil; Toronto, Canada and Venray; Netherlands. The Company has purchased certain assets totaling $165.1 million in fiscal 2002 and estimates an additional $30.0 million of assets to be purchased in the first quarter of fiscal 2003. Additionally, the Company entered into a five-year agreement for the manufacture of certain Xerox office equipment and components.

In December 2001, the Company completed its acquisition of 91% of The Orbiant Group (“Orbiant”) from Telia, Sweden’s largest telecommunications network provider. Orbiant is a provider of services focusing on the design, operation, maintenance and management of telecommunications networks. The cash purchase price, net of cash acquired, amounted to approximately $80.6 million.

During fiscal 2002, the Company completed certain other business acquisitions that were immaterial to the Company’s results from operations and financial position. The aggregate cash purchase price for these acquisition, net of cash acquired, amounted to approximately $68.8 million. Additionally, approximately 7.3 million ordinary shares were issued for the acquisitions, which equated to approximately $163.4 million of purchase price. The fair value of the ordinary shares issued was determined based on the quoted market prices of the Company’s ordinary shares for a reasonable period, generally three days, before and after the date the terms of the acquisitions were agreed and announced. The aggregate purchase price paid for these business acquisitions was allocated to the net assets acquired based on their estimated fair values at the dates of the acquisitions.

The costs of the fiscal 2002 acquisitions, including estimated acquisition closing costs, have been allocated on the basis of the estimated fair value of assets acquired and liabilities assumed. The purchase price for certain of these acquisitions is subject to adjustments for contingent consideration, based upon the businesses achieving specified levels of earnings through December 2004. The contingent consideration has not been recorded as purchase price, pending the outcome of the contingency. Goodwill and intangibles resulting from these acquisitions amounted to approximately $548.8 million. The respective intangibles associated with these acquisitions are amortized over various years, none of which exceed ten years. Also, during the current fiscal year, the Company increased goodwill in the amount of approximately $34.2 million

for contingent purchase price adjustments and other adjustments for historical acquisitions, which included the issuance of approximately 0.6 million ordinary shares.

The acquisitions described above have been accounted for by 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 proforma information has not been presented, as the results of the acquired operations were not material to the Company’s consolidated financials statements on either an individual or an aggregate basis.

In fiscal 2001, Flextronics acquired 100% of the outstanding shares of The DII Group, Inc. (“DII”), Lightning Metal Specialties and related entities (“Lightning”), Chatham Technologies, Inc. (“Chatham”), Palo Alto Products International Pte. Ltd. (“Palo Alto Products International”) and JIT Holdings Ltd. (“JIT”). These acquisitions were accounted for as pooling of interests and the consolidated financial statements have been prepared to give retroactive effect to the mergers.

DII is a leading provider of electronics manufacturing and design services. As a result of the merger, in April 2000, the Company issued approximately 120.8 million ordinary shares for all of the outstanding shares of DII common stock, based upon the exchange ratio of 3.22 Flextronics ordinary shares for each share of DII common stock.

Lightning is a provider of fully integrated electronic packaging systems. As a result of the merger, in August 2000, the Company issued approximately 2.6 million ordinary shares for all of the outstanding shares of Lightning common stock and interests.

Chatham is a leading provider of integrated electronic packaging systems to the communications industry. As a result of the merger, in August 2000, the Company issued approximately 15.2 million ordinary shares for all of the outstanding Chatham capital stock and interests.

DII and Lightning operated under a calendar year end prior to merging with Flextronics and, accordingly, their respective balance sheets, statements of operations, shareholders’ equity and cash flows as of December 31, 1999 and for each of the two years ended December 31, 1999 have been combined with the Company’s consolidated financial statements as of March 31, 2000 and for each of the two fiscal years ended March 31, 2000. Chatham operated under a fiscal year which ended on the Saturday closest to September 30 prior to merging with Flextronics and, accordingly, Chatham’s balance sheets, statements of operations, shareholders’ equity and cash flows as of September 24, 1999 and for each of the two years ended September 24, 1999 have been combined with the Company’s consolidated financial statements as of March 31, 2000 and for each of the two fiscal years ended March 31, 2000.

Starting in fiscal 2001, DII, Lightning and Chatham changed their respective year-ends to conform to the Company’s March 31 year-end. Accordingly, DII’s and Lightning’s operations for the three months ended March 31, 2000, and Chatham’s operations for the six months ended March 31, 2000, have been excluded from the consolidated results of operations for fiscal 2001 and reported as an adjustment to retained earnings. Total net sales, gross profit, selling, general and administrative expenses, operating loss and total net loss related to the omitted periods amounted to approximately $898.3 million, $50.0 million, $66.6 million, $33.0 million and $58.3 million, respectively. During the omitted periods, total cash flows used in operating and investing activities amounted to approximately $24.9 million and $28 million, respectively, and financing activities provided approximately $20.2 million.

The net loss of $58.3 million for the omitted period consisted primarily of the net losses of DII and Chatham, with each company representing about half of the net loss for the omitted period. With respect to

Chatham, the net loss for that acquired company was relatively consistent both before and during the omitted period. In the case of DII, the results for that acquired company during the omitted period was adversely effected by the uncertainties created by the merger with the Company, which closed April 3, 2000. DII experienced several customer cancellations during the omitted period due to customer concerns over the merger and resulting supplier concentration issues. DII also experienced lower employee productivity during the omitted period due to the uncertainty over anticipated employee terminations as a result of the merger. The net loss for Chatham and DII in the omitted period prompted the Company to develop formal plans to exit certain activities, close certain facilities and involuntarily terminate employees in the periods following the acquisitions of each company, which resulted in the unusual charges recorded in fiscal 2001. See Note 9, “Unusual Charges” for further discussion.

Palo Alto Products International is an enclosure design and plastic molding company. The Company merged with Palo Alto Products International in April 2000 by exchanging approximately 7.2 million ordinary shares of Flextronics for all of the outstanding shares of Palo Alto Products International common stock.

JIT is a global provider of electronics manufacturing and design services. The Company merged with JIT in November 2000, by exchanging approximately 17.3 million ordinary shares of Flextronics for all of the outstanding shares of JIT common stock.

Palo Alto Products International and JIT operated under the same fiscal year end as Flextronics, and accordingly, their respective balance sheets, statements of operations, shareholders’ equity and cash flows have been combined with the Company’s consolidated financial statements as of March 31, 1999 and 2000 and for each of the three fiscal years ended March 31, 2000.

The Company also completed several other immaterial pooling of interests transactions. In connection with these mergers, the Company issued approximately 0.7 million ordinary shares. 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 2001, the Company completed several immaterial business acquisitions. 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 proforma information has not been presented, as the results of the acquired operations were not material to the Company’s consolidated financial statements. In connection with these business acquisitions, the Company paid total cash consideration of approximately $146.4 million, net of cash acquired, and issued approximately 9.8 million ordinary shares, which equated to approximately $338.6 million of purchase price. The fair value of the ordinary shares issued were determined based on the quoted market prices of the Company’s ordinary shares for a reasonable period, generally three days, before and after the date the terms of the acquisitions were agreed to and announced.

The aggregate purchase price paid for these business acquisitions was allocated to the net assets acquired based on their estimated fair values at the dates of the acquisitions. The purchase price for certain acquisitions is subject to adjustments for contingent consideration, based upon the businesses achieving specified levels of earnings through December 2003. The contingent consideration has not been recorded as purchase price, pending the outcome of the contingency. The fair value of the net liabilities acquired, amounted to approximately $117.3 million, including estimated acquisition costs. The costs of acquisitions have been allocated on the basis of the estimated fair value of assets acquired and liabilities assumed. Goodwill and intangibles resulting from these acquisitions amounted to approximately $602.3 million. The respective intangibles associated with these acquisitions are amortized over various years, none of which exceed ten years. Also, the Company increased goodwill in the amount of approximately $12.5 million for contingent purchase price adjustments for historical acquisitions.

In fiscal 2000, the Company acquired 100% of the outstanding shares of Kyrel Ems Oyj (“Kyrel”) and PCB Assembly, Inc. (“PCB”). These acquisitions were accounted for as pooling of interests and the consolidated financial statements have been prepared to give retroactive effect to the mergers.

Kyrel is an electronics manufacturing services provider with operations in Finland and France. As a result of the merger, the Company issued approximately 7.3 million ordinary shares in exchange for all the outstanding Kyrel shares. Kyrel operated under a calendar year end, prior to merging with Flextronics, and accordingly, Kyrel’s balance sheets, statements of operations, shareholders’ equity and cash flows as of December 31, 1997 and 1998 and for each of the three years ended December 31, 1998 have been combined with the Company’s consolidated financial statements as of March 31, 1998 and 1999 and for each of the three fiscal years ended March 31, 1999. In fiscal 2000, Kyrel’s fiscal year end was changed to conform to the Company’s fiscal year end. Accordingly, Kyrel’s operations for the three months ended March 31, 1999, have been excluded from the consolidated results of operations for fiscal 2000 and have been reported as an adjustment to retained earnings in the first quarter of fiscal 2000.

PCB is an electronics manufacturing service provider based in the United States. As a result of the merger, the Company issued approximately 2.2 million ordinary shares in exchange for all the outstanding PCB shares, of which approximately 0.2 million ordinary shares are to be issued upon resolution of certain general and specific contingencies. PCB operated under the same fiscal year end as the Company and, accordingly, their respective balance sheets, statements of operations, shareholders’ equity and cash flows have been combined with Flextronics’ consolidated financial statements as of March 31, 1999 and 2000 and for each of the three fiscal years ended March 31, 2000.

The Company also completed several other immaterial pooling of interests transactions in fiscal 2000. In connection with these mergers, the Company issued 1.8 million ordinary shares. 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 2000, the Company acquired several immaterial businesses and made a payment of an earn-out arrangement to the former owners of Great Sino Electronics Technology (a company acquired by DII in August 1998, as further discussed below). 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 proforma information has not been presented, as the results of the acquired operations were not material to the Company’s consolidated financial statements. In connection with these business acquisitions, the Company paid total cash consideration of approximately $51.6 million, net of cash acquired.

The aggregate purchase price paid for these business acquisitions was allocated to the net assets acquired based on their estimated fair values at the dates of the acquisitions. The fair value of the net assets acquired amounted to approximately $17.9 million, including estimated acquisition costs. The costs of acquisitions have been allocated on the basis of estimated fair values of assets acquired and liabilities assumed. Goodwill and intangibles resulting from these acquisitions amounted to approximately $33.7 million. The respective intangibles associated with these acquisitions are amortized over ten years. Also, the Company increased goodwill in the amount of approximately $34.1 million for contingent purchase price adjustments for historical acquisitions during fiscal 2000.

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. Revenues are generally attributable to the country in which the product is manufactured.

Information about segments for the years ended March 31 is as follows (in thousands):


*	Excludes unusual charges related to property, plant and equipment and goodwill impairment charges of $163,724 and $232,534 in fiscal 2002 and fiscal 2001, respectively. See Note 9, “Unusual Charges,” for additional information regarding unusual charges.

For purposes of the preceding tables, “Asia” includes China, India, Malaysia, Singapore, Taiwan and Thailand, “Americas” includes Brazil, Canada, Mexico and the U.S., “Western Europe” includes Denmark, Finland, France, Germany, Netherlands, Norway, Poland, Spain, Sweden, Switzerland and the United Kingdom and “Central Europe” includes Austria, the Czech Republic, Hungary, Ireland, Israel, Italy and Scotland.

Geographic revenue transfers are based on selling prices to unaffiliated companies, less discounts.

During fiscal 2002, Hungary, Malaysia, Mexico and Sweden accounted for approximately 12%, 18%, 16% and 11% of net sales, respectively. No other foreign country accounted for more than 10% of net sales in fiscal 2002. China accounted for approximately 16% of long-lived assets at March 31, 2002. No other foreign country accounted for more than 10% of long-lived assets at March 31, 2002.

During fiscal 2001, China accounted for over 10% of net sales. No other foreign country accounted for more than 10% of net sales in fiscal 2001. China and Hungary accounted for approximately 17% and 11% of long-lived assets at March 31, 2001, respectively. No other foreign country accounted for more than 10% of long-lived assets at March 31, 2001.

During fiscal 2000, China, Hungary and Sweden accounted for approximately 11%, 12% and 12% of net sales, respectively. No other foreign country accounted for more than 10% of net sales in fiscal 2000. China accounted for approximately 24% of long-lived assets at March 31, 2000. No other foreign country accounted for more than 10% of long-lived assets at March 31, 2000.

The following table contains selected unaudited quarterly financial data for fiscal years 2002 and 2001:

The names, ages and positions of our directors and officers as of May 1, 2002 are as follows:

Michael Marks. Mr. Marks has served as our Chief Executive Officer since January 1994. He has served as a member of our Board of Directors since December 1991 and as Chairman of our Board since July 1993. He received a B.A. and M.A. from Oberlin College and a M.B.A. from Harvard Business School.

Robert Dykes. Mr. Dykes has served as our President, Systems Group since February 1999 and our Chief Financial Officer since February 1997. In addition, he served as our Senior Vice President of Finance and Administration from February 1997 to April 1999, and as a member of our Board of Directors from January 1994 to August 1997. Prior to joining Flextronics, Mr. Dykes was Executive Vice President, Worldwide Operations and Chief Financial Officer of Symantec Corporation, an application and system software products company, from 1988 to February 1997. He received a Bachelor of Commerce and Administration from Victoria University in Wellington, New Zealand.

Ronny Nilsson. Mr. Nilsson has served as our President, Flextronics Network Services since January 2002. Prior to his promotion, Mr. Nilsson served as our President, Western Europe Operations from April 1997 to December 2001. From May 1995 to April 1997, he was Vice President and General Manager, Supply and Distribution and Vice President, Procurement, of Ericsson Business Networks. 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 Chief Operating Officer since January 2002. Prior to his promotion, Mr. McNamara served as our President, Americas Operations from April 1997 to December 2001, and as our Vice President, North American Operations from April 1994 to April 1997. Mr. McNamara also serves on the Board of Directors of TheraSense. Mr. McNamara received a B.S. from the University of Cincinnati and an M.B.A. from Santa Clara University.

Ash Bhardwaj. Mr. Bhardwaj has served in various positions since joining us in 1988. He has served as our Senior Vice President of Strategic Accounts since January 2002 and as our President, Asia Pacific since April 1999. He served as our Vice President for the China region from April 1997 to March 1999 and General Manager for the Flextronics plant in Shekou, China from 1988 to February 1999. Mr. Bhardwaj has a degree in Electrical Engineering from Thapar Institute of Engineering and Technology in India and earned an M.B.A. from the Southeastern Louisiana University, Hammond, LA.

Humphrey W. Porter. Mr. Porter has served as our President, Flextronics Europe since January 2002. Prior to his promotion, Mr. Porter served as our President, Central/ Eastern Europe Operations from October 1997 to January 2002. From May 1995 until our acquisition of Neutronics Electronic Industries A.G. in October 1997, he served as Chief Executive Officer of Neutronics. He received a B.S.c. (Hons) C. Eng. M.I. Prod.E. degree from Trent University.

Steven C. Schlepp. Mr. Schlepp has served as President of Multek since April 2000, following our acquisition of DII. From June 1996 to April 2000, he served as Senior Vice President of DII and President of Multilayer Technology, Inc.

Ron Snyder. Mr. Snyder has served as our President, Flextronics Design Services since January 2002. Prior to his promotion, Mr. Snyder served as our President, Flextronics Semiconductor from April 2000, following our acquisition of DII to December 2001. From May 1998 to April 2000, he served as Senior Vice President of DII and President of DII Semiconductor. From March 1994 to May 1998, he served as Senior Vice President, Sales and Marketing and Corporate Development of DII. Mr. Snyder received a B.S. in Accounting and Finance from the University of Colorado.

Thomas J. Smach. Mr. Smach has served as our Vice President of Finance since April 2000, following our acquisition of DII. From August 1997 to April 2000, he served as the Senior Vice President, Chief Financial Officer and Treasurer of DII and from March 1994 to August 1997 as Corporate Controller and Vice President. Mr. Smach received his B.Sc. in Accounting from State University of New York at Binghamton.

Michael J. Moritz. Mr. Moritz has served as a member of our Board of Directors since July 1993. Since 1988, he has been a General Partner of Sequoia Capital, a venture capital firm. Mr. Moritz also serves as a director of Yahoo! Inc., PayPal Inc., Saba Software and several privately-held companies.

Richard L. Sharp. Mr. Sharp has served as a member of our Board of Directors since July 1993. He is Chairman of the Board 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 1984 to 1997, and Chief Executive Officer from 1986 to 2000 and became Chairman of the Board in 1994.

Patrick Foley. Mr. Foley has served as a member of our Board of Directors since October 1997. Mr. Foley served in various positions with DHL Corporation, Inc. and its major subsidiary, DHL Airways, Inc., a global document, package and airfreight delivery company from September 1988 to 2001, most recently as its Chairman, President and Chief Executive Officer. He also serves as a director of Continental Airlines, Inc., Del Monte Corporation, Foundation Health Systems, Inc., Glenborough Realty Trust, Inc.

Chuen Fah Alain Ahkong. Mr. Ahkong has served as a member of our Board of Directors since October 1997. He is a founder of Pioneer Management Services Pte. Ltd., a Singapore-based consultancy firm, and has been the Managing Director of Pioneer since 1990.

Goh Thiam Poh Tommie. Mr. Goh has been a member of our Board of Directors since December 2000. He founded JIT Electronics Pte Ltd in 1988. We acquired JIT in November 2000.

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 2002 Annual General Meeting of Shareholders. Such information is incorporated by reference.

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 2002 Annual General Meeting of Shareholders. Such information is incorporated by reference.

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 2002 Annual General Meeting of Shareholders. Such information is incorporated by reference.


	1.	Financial Statements. See Item 8, “Financial Statements and Supplementary Data.”

	2.	Financial Statement Schedules. The following financial statement schedule is filed as part of this report and should be read together with our financial statements:


	3.	Exhibits. The following exhibits are filed with this annual report on Form 10-K:


*	Certain schedules have been omitted. The Registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.


	On January 11, 2002, we filed a current report on Form 8-K relating to our underwritten public offering of 20,000,000 of our ordinary shares, all of which were sold by us, at a public offering price of $25.96 per share. The underwriting agreement, an opinion of Allen & Gledhill and the related press release were filed as exhibits this report.

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.


	By:	/s/ MICHAEL E. MARKS



	Michael E. Marks
	Chairman of the Board and
	Chief Executive Officer

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.


*	Certain schedules have been omitted. The Registrant agrees to furnish supplementally a copy of any omitted schedule to the Commission upon request.


†	Management contract, compensatory plan or arrangement.

EX-4.04 3 f81104ex4-04.txt EXHIBIT 4.04 EXHIBIT 4.04 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of March 8, 2002, 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, the Issuing Bank 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. ("ABN AMRO"), as agent for the Lenders (in such capacity, "Agent"); (4) ABN AMRO and FLEET NATIONAL BANK, as co-lead arrangers (collectively, in such capacity, the "Co-Arrangers"); (5) DEUTSCHE BANC ALEX. BROWN INC., BANK OF AMERICA, N.A., CITICORP USA, INC. and FLEET NATIONAL BANK, as co-syndication agents (collectively, in such capacity, the "Co-Syndication Agents"); (6) THE BANK OF NOVA SCOTIA, as senior managing agent (in such capacity, the "Senior Managing Agent"); (7) BNP PARIBAS and CREDIT SUISSE FIRST BOSTON, as managing agents (collectively, in such capacity, the "Managing Agents"); and (8) FLEET NATIONAL BANK, as the issuer of letters of credit under Subparagraph 2.01(b), (in such capacity, the "Issuing Bank"). 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 have the meaning given to that term in clause (3) of the introductory paragraph hereof. "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 FIL's 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. "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 January 11, 2002 between FIL and Agent. "Agent's Fees" shall have the meaning given to that term in Subparagraph 2.06(a). "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 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; 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 as provided in the Pricing Grid. "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 and Assumption" shall have the meaning given to that term in Subparagraph 8.05(c). "Assignment Effective Date" shall have, with respect to each Assignment and Assumption, the meaning set forth therein. "Assignor Lender" shall have the meaning given to that term in Subparagraph 8.05(c). 2 "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 Borrowing consisting of Base Rate Loans. "Base Rate Loan" shall mean any 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 Borrowing or any Facility B 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 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 March 8, 2002. "Co-Arrangers" shall have the meaning given to that term in clause (4) of the introductory paragraph hereof. "Combined Total Commitment" shall mean the sum of (a) the Total Facility A Commitment and Total Facility B Commitment plus (b) the "Total Facility A Commitment" and the "Total Facility B Commitment" under the FIUI Credit Agreement. "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 as provided in the Pricing Grid. "Commitment Fees" shall mean, collectively, the Facility A Commitment Fees and the Facility B Commitment Fees. 3 "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, without duplication, 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 (subject to reduction as the underlying liability so guaranteed is reduced from time to time), 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. "Co-Syndication Agents" shall have the meaning given to that term in clause (5) of the introductory paragraph hereof. "Credit Documents" shall mean and include this Agreement, the LC Applications, 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, any Guarantor or any of FIL's Subsidiaries to Agent, the Issuing Bank 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 initial funding of any Loan (and not the selection of a new Interest Period for such Loan or the conversion of such Loan pursuant to Subparagraph 2.03(b)(iii)) provided that such continuation or conversion does not increase the principal amount thereof) or (b) the issuance of any Letter of Credit or any amendment of any Letter of Credit which increases its stated amount or extends it expiration date. "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. 4 "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. "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. "Drawing Payment" shall have the meaning given to that term in Subparagraph 2.01(b)(iii). "EBITDA" shall mean, with respect to FIL for any four quarter 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, including accrued charges until such time that such accrued charges become cash payments; plus (c) An amount, not to exceed $50,000,000 in any consecutive four fiscal quarters, equal to the sum (to the extent deducted in calculating net income or loss in clause (a) above) of all cash charges associated with merger-related expenses and restructuring costs paid in such period (in each case calculated in accordance with GAAP) incurred by FIL and/or its Subsidiaries in connection with any merger, acquisition, or restructuring entered into by FIL and/or any of its Subsidiaries which are otherwise permitted under this Agreement and the FIL Credit Agreement. For purposes of Subparagraph 5.03(a) (and not for purposes of Subparagraph 5.03(b)), if FIL or any of its Subsidiaries acquires (whether by purchase, merger, consolidation or otherwise) all or substantially all of the assets of or property of any other Person, during any period in respect of which EBITDA is to be determined, such EBITDA shall be determined on a pro forma basis in accordance with GAAP and, if applicable, the rules of the Securities and Exchange Commission, as if such acquisition occurred as of the first day of the relevant period. 5 "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. "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 April 3, 2000, as amended, 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. 6 "Facility A" shall mean the revolving credit facility and letter of credit subfacility provided to Borrowers pursuant to Subparagraph 2.01(a). "Facility A Borrowing" shall mean a borrowing consisting of all the Facility A 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 Borrowing. Any reference to a Facility A Borrowing shall include all of the Facility A Loans constituting such Facility A Borrowing. "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 Subparagraph 2.06(b)(i). "Facility A Lender" shall mean, at any time, any Lender then having a Facility A Commitment, a Facility A Loan outstanding or a participation in a Letter of Credit issued and outstanding. "Facility A Loan" shall have the meaning given to that term in Subparagraph 2.01(a)(i). "Facility A Maturity Date" shall mean March 8, 2005. "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 sum at such time of (A) the aggregate principal amount of all Facility A Loans owed to such Lender and outstanding at such time, (B) such Lender's pro rata share of the aggregate amount available for drawing under all Letters of Credit outstanding at such time and (c) such Lender's pro rata share of the aggregate amount of all Reimbursement Obligations outstanding at such time to (ii) the sum at such time of (A) the aggregate principal amount of all Facility A Loans outstanding at such time, (B) the aggregate amount available for drawing under all Letters of Credit outstanding at such time and (C) the aggregate amount of all Reimbursement Obligations outstanding at such time. "Facility B" shall mean the revolving credit facility provided to Borrowers pursuant to Subparagraph 2.01(c). "Facility B Borrowing" shall mean a borrowing consisting of all the Facility B Loans of the same currency and Type (and same Interest Period if LIBOR Loans) made by Facility B Lenders on the same date pursuant to the same Notice of Borrowing. Any reference to a Facility B Borrowing shall include all of the Facility B Loans constituting such Facility B Borrowing. "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 Subparagraph 2.06(b)(ii). 7 "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 have the meaning given to that term in Subparagraph 2.01(c)(i). "Facility B Maturity Date" shall mean March 7, 2003. "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. "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, each of the financial institutions from time to time party thereto and ABN AMRO, as 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: 8 (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 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 Eligible Material Subsidiaries and other 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, subject to the last sentence of this definition, any direct or indirect liability of that Person with respect to any indebtedness, lease, dividend, letter of credit or other obligation (other than endorsements of instruments for collection or deposits in the ordinary course of business) in each case to the extent constituting Indebtedness (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 9 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 (subject to reduction as the underlying liability so guaranteed is reduced from time to time); provided, however, that with respect to (1) any Guaranty Obligation by FIL or any of its Subsidiaries in respect of a primary obligation of FIL or any of its Subsidiaries and (2) any Guaranty Obligation of FIL or any of its Subsidiaries in respect of the primary obligation of a lessor in connection with a synthetic lease transaction entered into by FIL or any of its Subsidiaries, such Guaranty Obligation shall, in each case, be deemed to be equal to the maximum reasonably anticipated liability in respect thereof which shall be deemed to be limited to an amount that actually becomes past due from time to time with respect to such primary obligation. "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, determined 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 but excluding accounts payable for property or services or the deferred purchase price of property to the extent not past due); (c) All obligations of such Person under conditional sale or other title retention agreements with respect to property (other than inventory) 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 Guaranty Obligations of such Person with respect to the Indebtedness of any other Person, and all other Contingent Obligations of such Person; and (f) All obligations of other Persons of the types described in clauses (a) - (e) 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 10 to which the representations and warranties set forth in Subparagraph 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, the time period selected by the applicable Borrower pursuant to Subparagraph 2.02(a) which commences on the date of such Borrowing and ends on the last day of such time period, and thereafter, each subsequent time period selected by the applicable Borrower pursuant to Subparagraph 2.03(b)(ii) 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 (f) 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. "Issuing Bank" shall have the meaning given to that term in clause (8) of the introductory paragraph hereof. "LC Application" shall have the meaning given to that term in Subparagraph 2.01(b)(ii). "LC Issuance Fees" shall have the meaning given to that term in Subparagraph 2.06(c)(ii). "LC Usage Fee Rate" shall mean with respect to any Letter of Credit as of any date of determination, the per annum rate for Letters of Credit determined pursuant to the Pricing Grid as such rate may change as provided in the Pricing Grid. "LC Usage Fees" shall have the meaning given to that term in Subparagraph 2.06(c)(i). "Lenders" shall have the meaning given to that term in clause (2) of the introductory paragraph hereof. Where the context so permits, "Lenders" shall include the Issuing Bank. "Lender Rate Contract" shall mean any Rate Contract entered into by any Borrower or any of FIL's Subsidiaries with a Lender or its Affiliates with respect to Obligations arising under 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 and Assumption) 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. "Letter of Credit" shall have the meaning given to that term in Subparagraph 2.01(b)(i). 11 "LIBO Rate" shall mean, with respect to any Interest Period for any LIBOR 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 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. The LIBO Rate shall be adjusted automatically as to all LIBOR Loans outstanding as of the effective date of any change in the Reserve Requirement. "LIBOR Borrowing" shall mean any Borrowing consisting of LIBOR Loans. "LIBOR Loan" shall mean any Loan 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 Facility A Loan or a Facility B 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 (7) 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 FIL's 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; or (d) the rights and remedies of Agent or any Lender under this Agreement, the other Credit Documents or any related document, instrument or agreement. "Material Subsidiary" shall mean, at any time during any fiscal year of FIL, (i) any Subsidiary of FIL that (A) had revenues during the immediately preceding fiscal year equal to or 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 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 Subparagraph 5.01(a)(i) hereof; (ii) with respect to any Subsidiary of FIL 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, determined on a pro forma basis on the last day of the immediately preceding month equal to 12 or greater than ten percent (10%) of the consolidated total assets of FIL and all of its Subsidiaries (including the assets of such added or created Subsidiary or Subsidiaries) on such date; and (iii) FLX Cyprus Limited, a Cyprus corporation. "maturity" shall mean, with respect to any Loan, Reimbursement Obligation, interest, fee or other amount payable by any Borrower under this Agreement or the other Credit Documents, the date such Loan, Reimbursement Obligation, 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. "Net Proceeds" shall mean, with respect to any issuance and sale of securities by any Person (a) the aggregate cash proceeds received by such Person from such sale less (b) the sum of (i) the actual amount of the reasonable fees and commissions payable to Persons other than such Person making the sale or any Affiliate of such Person and (ii) the reasonable legal expenses and other costs and expenses directly related to such sale that are to be paid by such Person. "Net Worth" shall mean, with respect to FIL at any time, the remainder at such time, determined on a consolidated basis in accordance with GAAP, of (a) the total assets of FIL and its Subsidiaries, minus (b) the total liabilities of FIL and its Subsidiaries. "Non-Excluded Taxes" shall mean all Taxes other than Excluded Taxes. "Note" shall have the meaning given to that term in Subparagraph 2.09(b). "Notice of Borrowing" shall have the meaning given to that term in Paragraph 2.02. "Notice of Interest Period Selection" shall have the meaning given to that term in Subparagraph 2.03(b)(ii). "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). 13 "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. "Pricing Grid" shall mean Schedule II. "Pricing Level" shall mean either Level 1, Level 2, Level 3, Level 4 or Level 5, which shall be determined for each Facility based upon FIL's corresponding Senior Debt Rating as set forth in the Pricing Grid as such Pricing Levels may change as provided 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 Loans (if any) outstanding under Facility B at such time to (ii) the sum of the Total Facility A Commitment and the aggregate principal amount of all Loans (if any) outstanding under Facility B 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, plus such Lender's pro rata share of the aggregate amount available for drawing under all Letters of Credit outstanding at such time, plus such Lender's pro rata share of the aggregate amount of all Reimbursement Obligations outstanding at such time to (ii) the aggregate principal amount of all Lenders' Loans outstanding at such time, plus the aggregate amount available for drawing under all Letters of Credit outstanding at such time, plus the aggregate amount of all Reimbursement Obligations outstanding at such time. 14 "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). "Reimbursement Obligation" shall have the meaning given to that term in Subparagraph 2.01(b)(iii). "Reimbursement Payment" shall have the meaning given to that term in Subparagraph 2.01(b)(iii). "Reportable Event" shall have the meaning given to that term in ERISA and applicable regulations thereunder. "Required Facility A Lenders" shall mean, at any time, Facility A Lenders whose Proportionate Shares of Facility A equal or exceed fifty-one percent (51%) at such time, except at any time any Facility A Lender is a Defaulting Lender. (For the purposes of determining "Facility A Required Lenders" at any time any Facility A Lender is a Defaulting Lender, the "Proportionate Shares" of non-defaulting Facility A Lenders shall be determined excluding from the Total Facility A Commitment the aggregate amounts of the Defaulting Lenders' Facility A Commitments; and "Facility A Required Lenders" shall mean non-defaulting Lenders whose Proportionate Shares as so determined then equal or exceed fifty-one percent (51%).) "Required Facility B Lenders" shall mean, at any time, Facility B Lenders whose Proportionate Shares of Facility B equal or exceed fifty-one percent (51%) at such time, except at any time any Facility B Lender is a Defaulting Lender. (For the purposes of determining "Facility B Required Lenders" at any time any Facility B Lender is a Defaulting Lender, the "Proportionate Shares" of non-defaulting Facility B Lenders shall be determined excluding from the Total Facility B Commitment the aggregate amounts of the Defaulting Lenders' Facility B Commitments; and "Facility B Required Lenders" shall mean non-defaulting Lenders whose Proportionate Shares as so determined then equal or exceed fifty-one percent (51%).) "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 and the Total Facility B Commitment the aggregate amounts of the Defaulting Lenders' Facility A Commitments and B Commitments; 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 (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 15 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. "Responsible Officer" shall mean, with respect to any Borrower, such Borrower's Chief Executive Officer, Chief Financial Officer, Treasurer, Vice President - Finance, Controller, Assistant Treasurer, Director of Treasury Operations, Corporate Secretary or any other officer of any Borrower designated from time to time by its Board of Directors to execute and deliver any document, instrument or agreement hereunder. "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 (i) the Guaranty and (ii) all other instruments, agreements, certificates, opinions and documents delivered to Agent, the Issuing Bank or any Lender to secure the Obligations. "Senior Debt Rating" shall mean with respect to FIL as of any date of determination, the ratings applicable on such date to FIL's senior unsecured long-term debt. "Senior Managing Agent" shall have the meaning given to that term in clause (6) of the introductory paragraph hereof. "Significant Subsidiary" shall mean, at any time during any fiscal year of FIL, (i) any Subsidiary of FIL that (A) had revenues during the immediately preceding fiscal year equal to or greater than $10,000,000, or (B) had net worth on the last day of the immediately preceding fiscal year equal to or greater than $10,000,000. "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) 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 (c) 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, collectively, (a) 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, (b) the Indenture dated as of June 29, 2000 by and between FIL and Chase Manhattan Bank and Trust Company, National Association with respect to up to $1,000,000,000, (c) the Indenture dated as of June 29, 2000 by and between FIL and Chase Manhattan Bank and Trust Company, National Association with respect to up to E 300,000,000, and (d) 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 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, 16 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. "Total Assets" means, with respect to any date of determination, the total assets of FIL shown on FIL's consolidated balance sheet in accordance with GAAP on the last day of the fiscal quarter prior to the date of determination. "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 $266,666,666.67. "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 $133,333,333.33. "Type" shall mean, with respect to any Loan or any Borrowing at any time, the classification of such Loan or Borrowing 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 amount or Dollar Equivalent (as applicable) of (A) the aggregate principal amount of all Facility A Loans outstanding at such time, (B) the aggregate amount available for drawing under all Letters of Credit outstanding at such time, and (C) the aggregate amount of all Reimbursement Obligations outstanding at such time; (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 amount or Dollar Equivalent (as applicable) of the aggregate principal amount of all Facility B Loans outstanding at such time; and (c) With respect to the Total Combined Commitment at any time, the remainder of (i) the Total Combined Commitment at such time minus (ii) the sum of (A) the Unused Facility A Commitment as determined pursuant to clause (a) above, (B) the Unused Facility B Commitment as determined pursuant to clause (b) above, (C) the "Unused Facility A Commitment" under the FIUI Credit Agreement as determined pursuant to clause (a) of the definition of "Unused" set forth in Paragraph 1.01 thereof and (D) the "Unused Facility B Commitment" under the FIUI Credit Agreement as determined pursuant to clause (b) of the definition of "Unused" set forth in Paragraph 1.01 thereof. 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 17 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 shall be determined based on the March 31 fiscal year end consolidated pro forma financial statements of FIL; 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 January 11, 2002 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 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 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. 18 (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 and Letters of Credit. (a) Facility A 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 Maturity Date its pro rata share of such revolving loans in Currencies as Borrowers may request under Facility A (individually, a "Facility A Loan"); provided, however, that no Lender shall have any obligation to make a requested Facility A Loan if, after giving effect to such Loan, the Dollar Equivalent of such Lender's Facility A Loans then outstanding plus such Lender's Proportionate Share of the aggregate amount available for drawing under all Letters of Credit outstanding at such time plus such Lender's Proportionate Share of the aggregate amount of all Reimbursement Obligations outstanding at such time would exceed such Lender's Facility A Commitment at such time. All Facility A 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 Borrowing to be comprised of a Facility A Loan made by each Facility A Lender equal to such Facility A Lender's Proportionate Share of such Facility A Borrowing. Except as otherwise provided herein, Borrowers may borrow, repay and reborrow Facility A Loans until the Facility A Maturity Date. (ii) Scheduled Payments. Borrowers shall repay the principal amount of the Facility A Loans in full on the Facility A Maturity Date. Borrowers shall pay accrued interest on the unpaid principal amount of each Facility A 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 equal to or longer than three (3) months, every three (3) months); and (C) in the case of all Facility A Loans, upon prepayment (to the extent thereof) and at maturity. (b) Letter of Credit Subfacility. (i) Availability. Subject to the terms and conditions of this Agreement (including the amount limitations set forth in Paragraph 2.05), Issuing Bank agrees to issue on behalf of the Borrowers from time to time during the period beginning on the Closing Date and ending on the 19 date thirty (30) days prior to the Facility A Maturity Date such standby letters of credit under Facility A as any Borrower may request under this Subparagraph 2.01(b) (individually, a "Letter of Credit"); provided, however, as follows: (A) The aggregate amount available for drawing under all Letters of Credit at any time outstanding shall not exceed the Dollar Equivalent of $50,000,000; (B) Each Letter of Credit shall be an irrevocable standby letter of credit in Dollars or an Alternative Currency; (C) Each Letter of Credit shall expire on or prior to the date one year after the date of its issuance (but in no event later than the Facility A Maturity Date); and (D) Each Letter of Credit shall be in a form reasonably acceptable to Issuing Bank. Except as otherwise provided herein, Borrowers may request Letters of Credit, cause or allow Letters of Credit to expire and request additional Letters of Credit until the date thirty (30) days prior to the Facility A Maturity Date. (ii) LC Application. Borrowers shall request each Letter of Credit by delivering to Agent and Issuing Bank an irrevocable written application in a form reasonably acceptable to Issuing Bank, appropriately completed (an "LC Application"), which specifies, among other things: (A) The available amount of the requested Letter of Credit (which amount available (1) shall be equal to the maximum amount which may over time be drawn under the Letter of Credit and (2) shall not be less than $1,000,000 (or the Dollar Equivalent thereof)), and the currency of such requested Letter of Credit; (B) The name and address of the beneficiary of the requested Letter of Credit; (C) The expiration date of the requested Letter of Credit; (D) The documentary conditions for drawing under the requested Letter of Credit; (E) The date of issuance for the requested Letter of Credit, which shall be a Business Day; and (F) The applicable Borrower for such Letter of Credit. The applicable Borrower shall give each LC Application to Issuing Bank at least two (2) Business Days before the proposed date of issuance of the requested Letter of Credit. Each LC Application shall be delivered by first-class mail or facsimile to Agent and Issuing Bank at their respective offices or facsimile numbers and during the hours specified in Paragraph 8.01; provided, however, that the applicable Borrower shall promptly deliver to Issuing Bank the original of any LC Application initially delivered by facsimile. Agent shall promptly notify each Facility A Lender of the contents of each LC Application. In the event of any conflict between the terms of this Agreement and the terms of any LC Application or any agreement (other than any Letter of Credit) related thereto (including, without limitation, terms with respect to fees and covenants), the terms of this Agreement shall control. 20 (iii) Disbursement and Reimbursement. (A) Disbursement. Issuing Bank shall notify the requesting Borrower promptly upon receipt by Issuing Bank of the presentment of any demand for payment under any Letter of Credit, together with notice of the amount of such payment and the date such payment is to be made. Subject to the terms and provisions of such Letter of Credit and applicable law, Issuing Bank shall make such payment (a "Drawing Payment") to the appropriate beneficiary. Upon payment by Issuing Bank of each Drawing Payment, the remaining available amount under such Letter of Credit (if any) shall be reduced by the amount of such payment. (B) Time of Reimbursement. On the day each Drawing Payment is to be made by Issuing Bank, Borrowers shall make or cause to be made to Issuing Bank a payment in the amount of such Drawing Payment (a "Reimbursement Payment"); provided, however, that if the requesting Borrower does not receive notice from Issuing Bank by 10:00 a.m. (California time) that a Reimbursement Payment is due, such Reimbursement Payment (together with interest thereon accruing at the Federal Funds Rate for each day from and including the date such Drawing Payment is made but excluding the date such Reimbursement Payment is made) shall instead be due on the next succeeding Business Day after the requesting Borrower receives such notice; provided, further, that Borrowers shall make such Reimbursement Payment to, or cause such Reimbursement Payment to be made to, Agent for the benefit of the Facility A Lenders if, prior to the time such Reimbursement Payment is made, Issuing Bank has notified the applicable Borrower that it has requested the Facility Lenders pursuant to Subparagraph 2.01(b)(iv) to pay to Issuing Bank their respective Proportionate Shares of the Drawing Payment made by Issuing Bank. If any such Reimbursement Payment is made to Agent, Agent shall promptly pay to each Facility A Lender which has paid its Proportionate Share of the Drawing Payment, such Facility A Lender's Proportionate Share of the Reimbursement Payment and shall promptly pay to Issuing Bank the balance of such Reimbursement Payment. (C) Reimbursement Obligation Absolute. The obligation of Borrowers to reimburse Issuing Bank or the Facility A Lenders, as the case may be, for Drawing Payments (such obligation, together with the obligation to pay interest thereon, to be referred to herein collectively as a "Reimbursement Obligation") shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under and without regard to any circumstances, including, without limitation (1) the passage of the Facility A Maturity Date, (2) any lack of validity or enforceability of any of the Credit Documents, (3) the existence of any claim, setoff, defense or other right which Borrowers may have at any time against any beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such beneficiary or transferee may be acting), Issuing Bank, Agent, any other Facility A Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or in the other Credit Documents, or in any unrelated transaction, (4) any breach of contract or dispute between Borrowers, any beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such beneficiary or transferee may be acting), Issuing Bank, any Agent, any Facility A Lender or any other Person, (5) any demand, statement or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect, (6) payment by Issuing Bank under any Letter of Credit against presentation of a demand for payment which does not comply with the terms of such Letter of Credit, (7) any non-application or misapplication by any beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such beneficiary or transferee may be acting) of the proceeds of any drawing under such Letter of Credit or (8) any delay, extension of time, renewal, compromise or other indulgence or modification granted or agreed to by Issuing Bank, Agent or any Facility A Lender, with 21 or without notice to or approval by Borrowers, with respect to Borrowers' indebtedness under this Agreement; provided, however, that this Subparagraph 2.01(b)(iii)(C) shall not abrogate any right which Borrowers may have to seek to enjoin any drawing under any Letter of Credit or to recover damages from Issuing Bank pursuant to Subparagraph 2.01(c)(v). (iv) Facility A Lender Participations; Facility A Loan Funding. (A) Participation Agreement. Each Facility A Lender severally, unconditionally and irrevocably agrees with Issuing Bank to participate in the extension of credit arising from the issuance of each Letter of Credit in an amount equal to such Lender's Proportionate Share of the stated amount of such Letter of Credit from time to time, and the issuance of each Letter of Credit shall be deemed a confirmation by Issuing Bank of such participation in such amount. (B) Participation Funding. Issuing Bank may request the Facility A Lenders to fund their participations in Letters of Credit by paying to Issuing Bank all or any portion of any Drawing Payment made or to be made by Issuing Bank under any Letter of Credit. Issuing Bank shall make such a request by delivering to Agent (with a copy to Borrowers), at any time after the drawing for which such payment is requested has been made upon Issuing Bank, a written request for such payment which specifies the amount of such Drawing Payment and the date on which such Drawing Payment is to be made or was made; provided, however, that Issuing Bank shall not request the Facility A Lenders to make any payment under this Subparagraph 2.01(b)(iv) in connection with any portion of a Drawing Payment for which Issuing Bank has been reimbursed from a Reimbursement Payment by Borrowers unless such Reimbursement Payment has been thereafter recovered by Borrowers or any other Person. Agent shall promptly notify each Facility A Lender of the contents of each such request and of such Facility A Lender's Proportionate Share of the applicable portion of such Drawing Payment. Promptly following receipt of such notice from Agent, each Facility A Lender shall pay to Agent, for the benefit of Issuing Bank, such Facility A Lender's Proportionate Share of the applicable portion of such Drawing Payment. (C) Funding Through Facility A Loans. If, at any time prior to the Facility A Maturity Date, any Reimbursement Obligations are outstanding, Agent may or, upon the written request of Issuing Bank (if one or more Borrower is not then the subject of a bankruptcy proceeding), shall (subject to the terms and conditions of this Subparagraph 2.01(b)(iv)), initiate a Facility A Borrowing in an amount not exceeding the aggregate amount of such outstanding Reimbursement Obligations and use the proceeds of such Facility A Borrowing to repay all or a portion of such Reimbursement Obligations. Agent shall initiate such a Facility A Borrowing by delivering to each Facility A Lender (with a copy to the applicable Borrower) a written notice which specifies the aggregate amount of outstanding Reimbursement Obligations, the amount of the Facility A Borrowing (which initially shall consist of Base Rate Loans), the date of such Facility A Borrowing and the amount of the Facility A Loan to be made by such Facility A Lender as part of such Facility A Borrowing. Each Facility A Lender shall make available to Agent funds in the amount of its Facility A Loan as provided in Subparagraph 2.10(a). After receipt of such funds, Agent shall promptly disburse such funds to Issuing Bank and the Facility A Lenders, as appropriate, in payment of the outstanding Reimbursement Obligations. (D) Obligations Absolute. Each Facility A Lender's obligations to fund its participations under this Subparagraph 2.01(b)(iv) shall be absolute, unconditional and irrevocable and shall not be affected by (1) the passage of the Facility A Maturity Date, (2) the occurrence or existence of any Default, (3) any failure to satisfy any condition set forth in Section III, (4) any event or condition which might have a Material Adverse 22 Effect, (5) the failure of any other Facility A Lender to make any payment under this Subparagraph 2.01(b)(iv), (6) any right of offset, abatement, withholding or reduction which such Lender may have against Issuing Bank, Agent, any Facility A Lender or any Borrower, (7) any event, circumstance or condition set forth in Subparagraph 2.01(b)(iii) or Subparagraph 2.01(b)(v), or (8) any other event, circumstance or condition whatsoever, whether or not similar to any of the foregoing; provided, however, that nothing in this Subparagraph 2.01(b)(iv) shall prejudice any right which any Facility A Lender may have against Issuing Bank for any action by Issuing Bank which constitutes gross negligence or willful misconduct. (v) Liability of Issuing Bank, Etc. Provided that Issuing Bank has used reasonable care in examining all documents presented to it in connection with a demand on any Letter of Credit, Borrowers agree that none of Issuing Bank, Agent or any Facility A Lender (nor any of their respective directors, officers or employees) shall be liable or responsible for (A) the use which may be made of any Letter of Credit or for any acts or omissions of any beneficiary or transferee thereof in connection therewith; (B) any reference which may be made to this Agreement or to any Letter of Credit in any agreements, instruments or other documents relating to obligations secured by such Letter of Credit; (C) the validity, sufficiency or genuineness of documents, or of any endorsement(s) thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged or any statement therein prove to be untrue or inaccurate in any respect whatsoever; (D) payment by Issuing Bank against presentation of documents which do not comply with the terms of any Letter of Credit, including failure of any documents to bear any reference or adequate reference to any Letter of Credit; or (E) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except only that Issuing Bank shall be liable to Borrowers for acts or events described in clauses (A) through (E) above, to the extent, but only to the extent, of any damages suffered by Borrowers (excluding consequential damages) which Borrowers prove were caused by (1) Issuing Bank's willful misconduct or gross negligence in determining whether a drawing made under any Letter of Credit complies with the terms and conditions therefor stated in such Letter of Credit or (2) Issuing Bank's willful misconduct or gross negligence in failing to pay under any Letter of Credit after a drawing by the beneficiary thereof strictly complying with the terms and conditions of such Letter of Credit. Without limiting the foregoing, Issuing Bank may accept a drawing that appears on its face to be in order, without responsibility for further investigation. The determination of whether a drawing has been made under any Letter of Credit prior to its expiration or whether a drawing made under any Letter of Credit is in proper and sufficient form shall be made by Issuing Bank in its sole discretion, which determination shall be conclusive and binding upon Borrowers to the extent permitted by law. Borrowers hereby waive any right to object to any payment made under any Letter of Credit with regard to a drawing that is in the form provided in such Letter of Credit but which varies with respect to punctuation, capitalization, spelling or similar matters of form. (vi) Reports of Issuing Bank. Issuing Bank shall, on a monthly basis if requested by Agent, provide to Agent such information regarding the Letters of Credit as Agent may reasonably request, including the Letters of Credit outstanding, the stated amounts of outstanding Letters of Credit, the expiration dates of outstanding Letters of Credit, the names of the beneficiaries of outstanding Letters of Credit, the amounts of unpaid Reimbursement Obligations and the amounts and times of Drawing Payments and Reimbursement Payments. Promptly upon receipt, Agent shall provide such information to the Facility A Lenders. (c) Facility B 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 Maturity Date its pro rata share of such revolving loans in Currencies as Borrowers may request under Facility B (individually, a "Facility B Loan"); provided, however, 23 that no Facility B Lender shall have any obligation to make a requested Facility B Loan if, after giving effect to such Loan, the Dollar Equivalent of such Lender's Facility B Loans then outstanding would exceed such Lender's Facility B Commitment at such time. All Facility B 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 Borrowing to be comprised of a Facility B Loan made by each Facility B Lender equal to such Facility B Lender's Proportionate Share of such Facility B Borrowing. Except as otherwise provided herein, Borrowers may borrow, repay and reborrow Facility B Loans until the Facility B Maturity Date. (ii) Scheduled Payments. Borrowers shall repay the principal amount of the Facility B Loans in full on the Facility B Maturity Date. Borrowers shall pay accrued interest on the unpaid principal amount of each Facility B 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 equal to or longer than three (3) months, every three (3) months); and (C) in the case of all Facility B Loans, upon prepayment (to the extent thereof) and at maturity. 2.02. Notice of Borrowing. Borrowers shall request each Borrowing by delivering to Agent an irrevocable written notice in the form of Exhibit A, appropriately completed (a "Notice of Borrowing"), which specifies, among other things: (a) Whether such Borrowing is a Borrowing under Facility A or Facility B; (b) The currency and principal amount of such Borrowing, which shall be in the minimum Dollar Equivalent of $5,000,000 or an integral multiple of $1,000,000 in excess thereof; (c) Whether such requested Borrowing is to consist of Base Rate Loans or LIBOR Loans; (d) If such Borrowing is to consist of LIBOR Loans, the initial Interest Period selected by the applicable Borrower for such Borrowing in accordance with Subparagraph 2.03(b)(i); (e) The date of such Borrowing, which shall be a Business Day; and (f) The applicable Borrower for such Borrowing. Borrowers shall give each Notice of Borrowing to Agent at least four (4) Business Days before the date of the requested Borrowing in the case of a Borrowing in an Alternative Currency and at three (3) Business Days before the date of the requested Borrowing in the case of a Borrowing in Dollars consisting of LIBOR Loans and at least one (1) Business Day before the date of the requested Borrowing in the case of a Borrowing in Dollars consisting of Base Rate Loans. Each Notice of Borrowing shall be signed by a Responsible Officer of 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 Borrowing initially delivered by facsimile. Agent shall promptly notify each Lender of the contents of each Notice of 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 Loan is a Base Rate Loan, at a rate per annum on such Loan 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 24 (ii) During such periods as any Loan is a LIBOR Loan, at a rate per annum on such Loan equal at all times during each Interest Period for such Loan 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 Loans in each 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 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 Interest Periods. The initial and each subsequent Interest Period selected by a Borrower for any Borrowing consisting of LIBOR Loans 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 Borrowing shall end after the Facility A Maturity Date; and (D) no Interest Period of a Facility B Borrowing shall end after the Facility B 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 Borrowing in Dollars consisting of LIBOR Loans of the Interest Period selected by such Borrower for the next succeeding Interest Period for such Borrowing. 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 and if no currency is specified then the Borrowing shall be deemed to continue in the same currency as the existing Loan. Agent shall promptly notify each Lender of the contents of each Notice of Interest Period Selection. (iii) Conversion of Borrowings. Each Borrowing initially shall be of the type specified in the applicable Notice of Borrowing and, in the case of a LIBOR Loan, shall have an initial Interest Period as specified in such Notice of Borrowing. Thereafter, the Borrower(s) may elect to convert such Borrowing to a different type or to continue such Borrowing and, in the case of a LIBOR Loan, may elect Interest Periods therefor, all as provided in this Paragraph 2.03. The Borrowers may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. Notwithstanding the foregoing, in no event shall any Borrower be permitted to convert a Loan in one currency into a Loan of a different currency (as opposed to repaying such Loan and thereafter obtaining a new Loan). 2.04. Purpose. Borrowers shall use the proceeds of the initial Loan to repay on the Closing Date all indebtedness outstanding under the Existing FIL Credit Agreement, and thereafter Borrowers shall use the proceeds of the Loans and for their respective working capital and general corporate needs (including capital expenditures). 2.05. Amount Limitations, Commitment Reductions, Etc. 25 (a) Commitment Limitations. The Dollar amount or Dollar Equivalent (as applicable) of the aggregate principal amount of all Facility A Loans outstanding plus the aggregate Dollar amount or Dollar Equivalent (as applicable) available for drawing under all Letters of Credit outstanding at such time plus the aggregate Dollar amount or Dollar Equivalent (as applicable) of all Reimbursement Obligations outstanding at such time shall not exceed the Total Facility A Commitment at such time. The Dollar amount or Dollar Equivalent (as applicable) of the aggregate principal amount of all Facility B 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, Letter of Credit subfacility and the Unused Total Facility B Commitment and for all other purposes herein, the Dollar Equivalent of each Loan and Letter of Credit in an Alternative Currency shall be determined by Agent on the date of such Loan or Letter of Credit, 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 and Letter of Credit 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 five (5) 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 Maturity Date, if, after giving effect to such reduction, the Dollar Equivalent of the aggregate principal amount of all Facility A Loans then outstanding plus the aggregate amount available for drawing under all Letters of Credit outstanding at such time plus the aggregate amount of all Reimbursement Obligations outstanding at such time would exceed the Total Facility A Commitment; (ii) Borrowers may not reduce the Total Facility B Commitment prior to the Facility B Maturity Date if, after giving effect to such reduction, the Dollar Equivalent of the aggregate principal amount of all Facility B 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 Maturity Date, if, after giving effect to such cancellation, any Facility A Loan, Reimbursement Obligation or Letter of Credit would then remain outstanding; and (iv) Borrowers may not cancel the Total Facility B Commitment prior to the Facility B Maturity Date, if, after giving effect to such cancellation, any Facility B Loan would then remain outstanding. Unless sooner terminated pursuant to this Agreement, the Facility A Commitments shall terminate on the Facility A Maturity Date and the Facility B Commitments shall terminate on the Facility B 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 shall be applied ratably to reduce each Facility A Lender's Facility A Commitment in accordance with Subparagraph 2.11(a)(i). Any reduction of the Total Facility B Commitment shall be applied to reduce each Facility B Lender's Facility B Commitment in accordance with Subparagraph 2.11(a)(ii). 26 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 (the "Agent's Fees"). (b) Commitment Fees. Borrowers shall pay to Agent: (i) For the ratable benefit of Facility A Lenders as provided in Subparagraph 2.11(a)(vi), 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 Maturity Date; and (ii) For the ratable benefit of Facility B Lenders as provided in Subparagraph 2.11(a)(vii), 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 Maturity Date. Borrowers shall pay the Commitment Fees in arrears on the last day of each March, June, September and December (commencing March 31, 2002) and on the Facility A Maturity Date and the Facility B 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 Maturity Date or the Facility B Maturity Date, as the case may be, on such prior date). (c) Letter of Credit Fees. (i) Letter of Credit Usage Fees. Borrowers shall pay to Agent, for the ratable benefit of the Facility A Lenders as provided in Subparagraph 2.11(a)(vi), nonrefundable letter of credit fees for the Letters of Credit (the "LC Usage Fees") equal to the greater of (A) the applicable LC Usage Fee Rate (as such rate changes from time to time) on the daily average available amount of each Letter of Credit for the period beginning on the date such Letter of Credit is issued and ending on the date such Letter of Credit expires and (B) five hundred dollars ($500). Borrowers shall pay the LC Usage Fees quarterly in arrears on the last day in each March, June, September and December (commencing March 31, 2002) and on the date the last Letter of Credit expires (or if a demand for payment is made on the last outstanding Letter of Credit on a date prior to the date the last Letter of Credit expires, on such prior date). (ii) Letter of Credit Issuance Fees. Borrowers shall pay to Agent, for the sole benefit of Issuing Bank, nonrefundable issuance fees for the Letters of Credit (the "LC Issuance Fees") equal to the greater of (A) 1/8th of one percent (0.125%) per annum on the daily average undrawn amount of each Letter of Credit for the period beginning on the date such Letter of Credit is issued and ending on the date such Letter of Credit expires and (B) one hundred fifty dollars ($150). Borrowers shall pay the LC Issuance Fees for each Letter of Credit quarterly in arrears on the last day in each March, June, September and December (commencing March 31, 2002) and on the date the last Letter of Credit expires (or if a demand for payment is made on the last outstanding Letter of Credit on a date prior to the date the last Letter of Credit expires, on such prior date). (iii) Other Letter of Credit Fees. In addition to the LC Usage Fees and the LC Issuance Fees, Borrowers shall pay to Agent, for the sole benefit of Issuing Bank, other standard fees of Issuing Bank for drawings under, transfers of and amendments to any Letter of Credit and other administrative actions performed by Issuing Bank in connection with any Letter of Credit, payable at such times and in such amounts as are consistent with Issuing Bank's standard fee policy at the time of such amendment or other action. 27 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 on a day other than the last day of an Interest Period for such LIBOR Loan, 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 Borrowing in Alternative Currency; and (B) not less than three (3) Business Days prior to the prepayment of any Borrowing consisting of LIBOR Loans; and (C) not less than one (1) Business Day prior to any prepayment of a Base Rate Borrowing; 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 Loans then outstanding plus the aggregate amount available for drawing under all Letters of Credit outstanding at such time plus the aggregate amount of all Reimbursement Obligations outstanding at such time exceeds any limitations set forth in Subparagraphs 2.05(a) or 2.05(c), the applicable Borrower(s) shall immediately (A) prepay Loans then outstanding and/or pay any Reimbursement Obligations then outstanding to the extent necessary to eliminate such excess, and (B) to the extent any excess still remains, provide to Agent cash collateral in the amount of such excess. Agent shall hold any such cash in a non-interest bearing account as collateral for the Obligations. Borrowers hereby grant to Agent for the benefit of the Lenders, a security interest in such funds and in such account. (ii) If, at any time, the aggregate principal amount of all Facility B Loans then outstanding exceeds any limitations set forth in Subparagraphs 2.05(a) or 2.05(c), the applicable Borrower(s) shall immediately prepay such Facility B 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 or LIBOR Borrowings 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 28 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 or Reimbursement Payment in the Currency of such Borrowing or Reimbursement Payment, as applicable. 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. (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 Reimbursement Payments or interest thereon, any fees or other amounts) 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 and unpaid Reimbursement Obligations. (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 29 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 thereof and the effective dates of all changes thereto, (iii) the Interest Period for each LIBOR Loan, (iv) the date, amount and currency of each principal and interest payment on each Loan 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, such Lender's Loans under each Facility shall be evidenced by promissory notes in the form of Exhibit B (individually, a "Note"), which shall be (i) payable to the order of such Lender, (ii) dated the Closing Date, and (iii) 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 (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. 30 (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, each participation in each Letter of Credit 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 Reimbursement Payment shall be shared among the Facility A Lenders (including Issuing Bank) which made or funded the applicable Drawing Payment pro rata according to the respective amounts of such Drawing Payment so made or funded by such Lenders; (vi) Each payment of Facility A Commitment Fees and LC Usage Fees shall be shared among Facility A Lenders (except for Defaulting Lenders but including, with respect to LC Usage Fees, Issuing Bank in its capacity as a Lender) 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 Maturity Date, the date upon which such Facility A Lender so became a Facility A Lender; (vii) 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 Maturity Date, the date upon which such Facility B Lender so became a Facility B Lender; (viii) 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 (ix) 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 31 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 (or, with respect to the Facility A Lenders, Reimbursement Obligations) such Lender shall forthwith purchase from such other Lenders such participations in their Loans (or, with respect to the Facility A Lenders, Reimbursement Obligations) 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 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 are not readily available in the amounts necessary for such Borrowing 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 does not adequately and fairly reflect the cost to Lenders of making or maintaining such Borrowing, 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 in the affected currency shall be suspended. Any LIBOR Borrowings 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 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 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 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 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 . Any prepayment of LIBOR Loans made pursuant to the preceding sentence prior to the last day of an Interest Period for such LIBOR Loans 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 shall change the basis of taxation of payments by any Borrower to any such Lender on such a LIBOR Loan, or in respect to such a LIBOR Loan, 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, the jurisdiction of its Applicable Lending Office, or a jurisdiction in 32 which such Participant is doing business without regard to the transactions contemplated by this Agreement); 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), 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 (iii) Shall impose on any Lender any other condition related to any LIBOR Loan, any Letter of Credit 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, any Letter of Credit 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 such increased costs or reduced amounts have been incurred or realized accompanied by a certificate executed by an officer of the applicable Lender setting forth in reasonable detail the basis and calculation of the amount of such increased costs or reduced amounts, which certificate 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 Letters of Credit, 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 such increased costs been incurred or realized accompanied by a certificate executed by an officer of the applicable Lender setting forth in reasonable detail the basis and calculation of the amount of such increased costs, which certificate 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 (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 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) 33 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 Non-Excluded 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 Paragraph 2.13 (i) shall be subject to the mitigation provisions contained in Paragraph 8.03 and (ii) 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"). FIL's Applicable Payment Office shall be deemed to be in Hong Kong unless otherwise designated in writing by FIL. If a Borrower other than FIL does not designate an Applicable Payment Office, such Borrower's Applicable Payment Office shall be deemed to be located in the jurisdiction in which such Borrower is organized. On or prior to the Closing Date (or, with respect to any Lender which is not a party to this Agreement on the Closing Date, on or prior to the date any other Lender becomes a Lender hereunder), each Lender which is not organized under the laws of the jurisdiction of a Borrower's Applicable Payment Office shall 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 (or with reduced deduction or withholding of any such taxes) imposed by the jurisdiction of such Borrower's Applicable Payment Office and promptly deliver to such Borrower such certificates and other evidence as such Borrower shall reasonably request to establish such fact. If, after the Closing Date, any Borrower designates an Applicable Payment Office that is different than such Borrower's then existing Applicable Payment Office, each Lender which is not organized under the laws of the jurisdiction of such new Applicable Payment Office shall, as soon as practicable and in any event within thirty (30) days of such designation (or if not practicable within such period, then as soon as practicable thereafter but in any event within a period of sixty (60) days of such designation), notify the applicable Borrower whether such Lender is entitled to receive payments on its Loans under this Agreement from such Borrower's new Applicable Payment Office for the account of such Lender's Lending Office without deduction or withholding of any income taxes (or with reduced deduction or withholding of any such taxes) imposed by the jurisdiction of such Borrower's new Applicable Payment Office and promptly 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 or any change of such Lender's Applicable Lending Office) which would prevent such Lender from receiving such payments hereunder without any deduction or withholding of such taxes (or with reduced deduction or withholding of any 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 withholding of such taxes (or with reduced deduction or withholding of any such taxes). If any Lender fails to provide to Agent and the applicable Borrower pursuant to this Subparagraph 2.13(b) (or, in the case of an Assignee Participant, Subparagraph 8.05(b)) 34 any notifications, certificates or other evidence required by such provision, such Lender shall not be entitled to any indemnification under Subparagraph 2.13(a) for any Non-Excluded Taxes imposed on such Lender primarily as a result of such failure. (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 file (or, with respect to any claim made by any Lender then a party to this Agreement as a result of the designation of a new Applicable Payment Office by any Borrower, 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 any of the Borrowers shall (a) repay, prepay or convert any LIBOR Loan 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 after delivering the Notice of Borrowing therefor to Agent (whether as a result of the failure to satisfy any applicable conditions or otherwise) or (c) fail to pay when due any principal or interest on any LIBOR Loan, 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 break funding 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 such costs or losses have been 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. Each Lender demanding payment under this Paragraph 2.14 shall deliver to Borrowers, with a copy to Agent, a certificate of an officer of such demanding party 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 a Guaranty in the form of Exhibit C (the "Guaranty"), duly executed all Eligible Material Subsidiaries and other Subsidiaries of FIL that have executed the Guaranty or otherwise elected to become a party thereto, with such changes thereto as may be appropriate based on the law of the applicable jurisdictions. In addition, as soon as practicable and in any event within forty-five (45) days of the Closing Date, FIL shall deliver, or cause to be delivered, to Agent, (A) a Subsidiary Joinder in the form of Attachment 1 to the Guaranty, appropriately completed and duly executed by each of (i) FLX Cyprus Limited, (ii) Flextronics (Malaysia) Sdn Bhd and (iii) IEC Holdings Ltd., (B) favorable written opinions, addressed to Agent for the benefit of the Lenders, covering such legal matters as Agent and the Lenders may reasonably request and otherwise in form and substance satisfactory to Agent and the Lenders, from counsel for each of the above-referenced Subsidiaries and (C) such other instruments, agreements, certificates and documents as Agent may reasonably request to secure, maintain, protect and evidence the obligations of such Subsidiary under the Guaranty. 35 (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 becoming aware 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, or shall not have become, an Eligible Material Subsidiary, Agent shall if requested by FIL release such Subsidiary from its obligations under the Guaranty. (c) Further Assurances. Borrowers shall deliver, and shall cause the Guarantors to deliver, to Agent such other guaranties, guaranty supplements and other instruments, agreements, certificates, opinions and documents as Agent and any Lender 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 Subsidiaries that have executed and delivered the Guaranty pursuant to this Agreement and the FIUI Credit Agreement for each year will equal or exceed 53% 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 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 and Assumption 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 and of Issuing Bank to issue the initial Letter of Credit 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 Each Credit Event. The occurrence of each Credit Event (including the initial Borrowing and the issuance of the initial Letter of Credit) is subject to the further conditions that: 36 (a) Borrowers shall have delivered to Agent (and Issuing Bank, in the case of an LC Application) the Notice of Borrowing, Notice of Interest Period Selection or LC Application, as the case may be, for such Credit Event in accordance with this Agreement; and (b) With respect to each Credit Event involving the making of a Loan or the issuance of a Letter of Credit, 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 and each LC Application 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. 3.03. Covenant to Deliver. Borrowers agree (not as a condition but as a covenant) to deliver to Agent (as applicable) 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 (and Issuing Bank, in the case of an LC Application) shall not constitute a waiver by Agent or any Lender of Borrowers' obligation to deliver such item. 3.04. Conditions Precedent to Adding Designated Borrower. The obligations of the applicable Lenders to make Loans to any Designated Borrower or issue any Letters of Credit on behalf of 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 and shall designate its initial Applicable Payment Office, (c) written approval by all 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 C 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 each Guarantor 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. 37 (c) Enforceability. Each Credit Document executed, or to be executed, by each of the Borrowers and each Guarantor 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 each Guarantor 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. (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 each Guarantor and the performance or consummation of the transactions contemplated thereby, except such as (i) have been made or obtained and are in full force and effect or (ii) are being made or obtained in a timely manner and once made or obtained will be in full force and effect. (f) No Violation or Default. Neither any Borrower, nor any Guarantor nor any of FIL's 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, 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 Guarantor nor any of FIL's Subsidiaries (A) has violated any Environmental Laws, (B) to the knowledge of any Borrower, any Guarantor or any of FIL's Subsidiaries, 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, any Guarantor or any of FIL's 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, any Guarantor or any of FIL's Subsidiaries at law or in equity in any court or before any other Governmental Authority which (i) based upon the written advice of such Person's outside legal counsel, is reasonably likely to be determined adversely and if so adversely determined 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 Guarantor of the Credit Documents or the transactions contemplated thereby. (h) Title; Possession Under Leases. Each Borrower, each Guarantor and each of FIL's Subsidiaries own and have good and indefeasible 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, each Guarantor and FIL's 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 38 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, 2001, furnished by FIL to Agent prior to the date hereof, or in the Financial Statements delivered to Agent pursuant to (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 materially exceed the aggregate value of the assets of such plan. Neither any Borrower nor any ERISA Affiliate has any material 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 is in all material respects 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. Neither any Borrower nor any ERISA Affiliate nor, to the knowledge or any Borrower, 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 all material respects, 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, except to the extent that is not reasonably and substantially likely to have a Material Adverse Effect, 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 except to the extent that is not reasonably and substantially likely to have a Material Adverse Effect. Each Foreign Plan reasonably complies in all material respects with all applicable Governmental Rules. 39 (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 each of FIL's Subsidiaries own, license or otherwise have the full right to use, under validly existing agreements, without known conflict with any rights of others, all 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, except such patents, licenses, trademarks, trade names, trade secrets, service marks, copyrights and all rights with respect thereto which if not validly owned or used would not be reasonably likely to have a Material Adverse Effect. (m) Governmental Charges. Each Borrower and each of FIL's Subsidiaries have filed or caused to be filed all material tax returns, reports and declarations which are required to be filed by them. Each Borrower and each of FIL's 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 and no Letter of Credit 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) (on the Closing Date as of December 31, 2001 and as thereafter 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 Significant Subsidiaries, its jurisdiction of organization, the percentages of shares 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., Flextronics International Latin America (L) Ltd., Flextronics International Sweden AB, Flextronics International Kft. and Flextronics Hungaria Kft. 1. (p) Solvency, Etc. Each of the Borrowers, each Guarantor and each Material Subsidiary 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. Except as otherwise disclosed by a Borrower to the Agent from time to time, no Borrower has actual knowledge of any requirement under any Governmental Rule to make any deduction or withholding of any nature whatsoever from any payment required to be made by any Borrowers 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 relevant jurisdiction. 40 (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, if applicable in the relevant jurisdiction, 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 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 (A) 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, the Guarantors and FIL's 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 41 presentations, Borrowers' best estimates of the future performance of Borrowers, the Guarantors and FIL's Subsidiaries. 4.02. Reaffirmation. Each Borrower shall be deemed to have reaffirmed, for the benefit of the Lenders and Agent, each representation and warranty contained in Paragraph 4.01 on and as of the date of each Credit Event involving the making of a Loan or the issuance of a Letter of Credit (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 fifty-five (55) 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 one hundred (100) 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 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 FIL's Subsidiaries involving potential monetary damages payable by any Borrower or FIL's 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; 42 (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 FIL's 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 FIL's Subsidiaries to its security holders; (vi) As soon as possible and in no event later than (A) fifty-five (55) days after the last day of each fiscal quarter (or one hundred (100) days in the case of the last fiscal quarter of each fiscal year), written notice of any new Significant Subsidiary acquired or established 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 FIL's Subsidiaries, and compliance by such Borrower with the terms of this Agreement and the other Credit Documents as Agent on behalf of itself or one or more Lenders 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 FIL's 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 FIL's 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 FIL's Subsidiaries, to examine the books and records of such Borrower and FIL's Subsidiaries and make copies thereof and to discuss the affairs, finances and business of such Borrower and FIL's 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 FIL's 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) Taxes, Governmental Charges and Other Indebtedness. Each Borrower and FIL's Subsidiaries shall promptly pay and discharge when due (i) all taxes and other Governmental Charges prior 43 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 FIL's 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 taxes, Governmental Charges or 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 or any Letter of Credit, 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 FIL's 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 FIL's 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 FIL's Subsidiaries; (ii) (A) Indebtedness under Capital Leases or under purchase money loans incurred by Borrower or any of FIL's Subsidiaries to finance the acquisition, construction, development or improvement by such Person of real property, fixtures, or equipment or other tangible assets provided that in each case (1) such Indebtedness is incurred by such Person at the time of, or not later than one hundred twenty (120) 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, together with initial or successive refinancings thereof, provided that (A) the principal amount of any such refinancing does not exceed the principal amount of the Indebtedness being refinanced (except to the extent necessary to pay fees, expenses, underwriting discounts and prepayment penalties in connection therewith) and (B) the other terms and provisions of any such refinancing with respect to maturity, redemption, prepayment, default and subordination are no less favorable in any material respect to Lenders than the Indebtedness being refinanced; 44 (iv) Indebtedness of any Borrower or Guarantor 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 or any Guarantor, 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 FIL's 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 FIL's 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) (but only to the extent such Liens are on the assets so financed, the proceeds thereof and any improvements thereon), (iii), (iv) or (v) of Subparagraph 5.02(a); (ii) Liens in favor of any of the Borrowers, any Eligible Material Subsidiary or any Guarantor on all or part of the assets of Subsidiaries of any Borrower, any Eligible Material Subsidiary or any Guarantor securing Indebtedness owing by Subsidiaries of any of the Borrowers, Eligible Material Subsidiary or any Guarantor, as the case may be, to any of the Borrowers or to such other Eligible Material Subsidiary or Guarantor; (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 (taking into account applicable grace periods), 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 any 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, landlords, 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 (taking into account applicable grace periods), 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 a Borrower or any of FIL's Subsidiaries is a party (including "synthetic" leases), and other minor Liens or encumbrances none of which interferes materially with the use of the property, in each case which 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; 45 (viii) Liens in favor of the agent for the benefit of the lenders and the agent under the FIUI Credit Documents; (ix) Liens arising out of cash management, netting or set off arrangements made between banks or financial institutions and FIL or any of its Subsidiaries in the ordinary course of business, or over any asset held with a clearing house, or other Liens comprising rights of set-off arising by operation of law or by agreement; (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; (xi) rights of third parties in equipment or inventory consigned to or by, or otherwise owned by such third party and which is being stored on property owned or leased by, a Borrower or any of FIL's Subsidiaries; (xii) Liens created pursuant to attachment, garnishee orders or other process in connection with pre-judgment court proceedings; and (xiii) precautionary Liens over assets securitized in connection with any securitized transaction permitted under Subparagraph 5.02 (c). (c) Asset Dispositions. None of the Borrowers or any of FIL's 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 securitization or 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 or transfers 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 or transferred 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 damaged, obsolete or worn out assets and scrap, in each case in the ordinary course of business, (v) sales or transfers of assets or property to any Borrower or any Subsidiary from any other Borrower or Subsidiary; (vi) assets sold and leasedback by FIL or its Subsidiaries in the ordinary course of business; and (vii) dispositions of Investments permitted under Subparagraph 5.02(e) for a purchase price that is not less than fair market value of the Investments being sold. (d) Mergers, Acquisitions, Etc. None of the Borrowers or any of FIL's 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 FIL's 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 (ii) Borrowers and FIL's 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; 46 (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 FIL's 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 FIL's 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 or committed on the Closing Date; (iii) Investments received by Borrowers and FIL's 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, the Material Subsidiaries and the Guarantors directly or indirectly 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 FIL's 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); and (ix) 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 FIL's Subsidiaries for all such Investments in any fiscal year (without duplication) does not exceed the sum of (1) ten percent (10%) of the total assets of FIL and its Subsidiaries at the end of the immediately preceding fiscal quarter, plus (2) seventy-five percent (75%) of the Net Proceeds received from the issuance by FIL of any Equity Securities of the type described in clause (a) of the definition of "Equity Securities" during calendar year 2001 or thereafter. (f) Dividends, Redemptions, Etc. None of the Borrowers or any of FIL's 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 47 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 FIL's 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 FIL may pay dividends to or repurchase its capital stock from such Subsidiary's parent; 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 FIL's 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 FIL's 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 FIL's 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 (A) 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, 2001, 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), or (B) in connection with transactions made pursuant to Subparagraphs 5.02(d) or 5.02(e). (j) Accounting Changes. None of the Borrowers or any of FIL's Subsidiaries shall change (i) their fiscal year (currently April 1 through March 31) or (ii) their accounting practices except as required by GAAP. 48 (k) Burdensome Contractual Obligations. None of the Borrowers or any of FIL's Subsidiaries will enter into any Contractual Obligation (excluding this Agreement and the other Credit Documents) that restricts the ability of any wholly-owned Subsidiary of FIL or any other Subsidiary of FIL that had revenues during the immediately preceding fiscal year equal to or greater than $25,000,000 or net worth on the last day of the immediately preceding fiscal year equal to or greater than $25,000,000, 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; provided, however, that the foregoing shall not apply to (i) restrictions or conditions imposed by any Governmental Rule or (ii) customary restrictions and conditions contained in (A) licenses, leases and franchise agreements or (B) relating to the sale of a Subsidiary pending such sale so long as such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is otherwise permitted hereunder. (l) Senior Debt. None of the Borrowers or any of FIL's 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 Fifty Million Dollars ($50,000,000) in the aggregate of loans or other debt or synthetic lease 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. (c) Net Worth. FIL shall not permit its Net Worth on the last day of any fiscal quarter (such date to be referred to herein as a "determination date") to be less than the sum on such determination date of the following: (i) $2,982,000,000; plus (ii) Fifty percent (50%) of FIL's consolidated quarterly net income (ignoring any quarterly losses) for each fiscal quarter ending after December 31, 2001 through and including the fiscal quarter ending on the determination date; plus (iii) Fifty percent (50%) of the Net Proceeds of all Equity Securities issued by FIL and its Subsidiaries (to Persons other than FIL or its Subsidiaries) during any period after the Closing Date and ending on the determination date. 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 any Reimbursement Payment, or (ii) except at final maturity when no grace period shall apply, fail to pay 49 within five (5) 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 FIL's 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 FIL's 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 thirty (30) 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; provided, however, that in the event that such failure cannot reasonably be cured within such thirty (30) day period, and such failure relates to the observance or performance of any of the covenants, obligations, conditions or agreements contained in Subparagraph 4.01(f) hereof with respect to Hazardous Materials or any Environmental Laws or any judgment, consent decree, settlement or compromise in respect of any claim based thereon, it shall not constitute an Event of Default hereunder so long as Borrowers shall have commenced to cure such failure within such thirty (30) day period and shall thereafter diligently pursue such cure to completion, provided further that such failure shall in all events be cured within one hundred and eighty days (180) days after Agent's or such Lender's written notice thereof; 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 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, any Guarantor or any Material Subsidiary 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 $40,000,000 or the effect of such failure is to cause, or permit the holder or holders thereof to cause, Indebtedness of any Borrower, any Guarantor and any Material Subsidiary (other than the Obligations) in an aggregate amount exceeding $40,000,000 to become due (whether at scheduled maturity, by required prepayment, upon acceleration or otherwise); or (ii) any Borrower, any Guarantor or any Material Subsidiary 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 any Borrower, any Guarantor and any Material Subsidiary (other than the Obligations) in an aggregate amount exceeding $40,000,000 to become due (and/or to be secured by cash collateral other than cash collateral obligations not arising from an event of default under any agreement or instrument relating to Indebtedness incurred in connection with a synthetic lease transaction or letters of credit); or (f) Insolvency, Voluntary Proceedings. Any Borrower or any Significant Subsidiary 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 50 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 Borrower or any Significant Subsidiary 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 Significant Subsidiary 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 FIL's Subsidiaries to pay an aggregate amount of $25,000,000 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) to which the insurer does not dispute coverage) shall be rendered against Borrowers and/or FIL's 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 FIL's 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 Borrower or any Guarantor not to be, a legal, valid and binding obligation of any Borrower or any Guarantor 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 (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 to participate in Letters of Credit and of Issuing Bank to issue Letters of Credit, 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 and (c) direct Borrowers to deliver to Agent funds in an amount equal to the aggregate stated amount of all Letters of Credit. 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 and to participate in Letters of Credit, and of the Issuing Bank to issue Letters of Credit shall automatically terminate and (2) all outstanding Obligations payable by Borrowers hereunder shall automatically become immediately due and payable, without 51 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 any of FIL's 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 Guarantor 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 Guarantor 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 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 52 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 FIL's 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 Guarantor 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 FIL's Subsidiaries; (b) have any duty or responsibility to provide any Lender with any credit or other information concerning any Borrower or any of FIL's 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, or (iii) any failure by any Borrower or any Guarantor 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, at which point (and not earlier) 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, Issuing Bank and their respective affiliates may make loans to, accept deposits from and generally engage in any kind of banking or other business with Borrowers and any of FIL's Subsidiaries and affiliates as though Agent was not Agent hereunder and Issuing Bank was not Issuing Bank hereunder . With respect to Loans, if any, made by Agent in its capacity as a Lender and Letters of Credit, if any, issued by Issuing Bank in its capacity as Issuing Bank, Agent and Issuing Bank 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 or Issuing Bank, respectively, and the terms "Lender" and "Lenders" shall include Agent in its capacity as a Lender and Issuing Bank in its capacity as a Lender, respectively. 7.08. Co-Arrangers, Co-Syndication Agents, Senior Managing Agent and Managing Agents. The Co-Arrangers, the Co-Syndication Agents, the Senior Managing Agent and the Managing Agents 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 "Co-Arrangers", "Co-Syndication Agents", "Senior Managing Agent" and "Managing Agents" implies no fiduciary responsibility on the part of any Co-Arranger, Co-Syndication Agent, Senior 53 Managing Agent and Managing Agents to any Person, and the use of such title does not impose on any Co-Arranger, Co-Syndication Agent, Senior Managing Agent and Managing Agents 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, Issuing Bank or Agent under this Agreement or the other Credit Documents shall be in writing and faxed, mailed or delivered, if to any Borrower, Agent or Issuing Bank, 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 or Issuing Bank under Section II shall not be effective until received by Agent or Issuing Bank. Agent: ABN AMRO Bank N.V. Syndications Group 55 East 52nd Street, 7th Floor New York, NY 10055 U.S.A. Attn: John Darmanin Tel. No: (212) 409-7390 Fax. No: (212) 409-7497 With a copy in each case to: ABN AMRO Bank N.V. 1 California Street, 2nd Floor San Francisco, CA 94111 Attn: Peter Hsu Tel: (415) 983-2964 Fax: (415) 983-2960 ABN AMRO Bank N.V. Agency Services 208 South LaSalle Street, Suite 1500 Chicago, IL 60604-1003 Attn: Joycelyn G. Gay Tel. No: (312) 992-5094 Fax. No: (312) 601-3610 54 Issuing Bank: Fleet National Bank 100 Federal Street, 9th Floor Boston, MA 02110 Attn: Angela Moore MA DE 10009H Telephone: (617) 434-5059 Fax No: (617) 434-1709 FIL: Flextronics International Ltd. 11 Ubi Road 1 #07-01/02 Meiban Industrial Building Singapore 408723 Attn: Chairman Telephone: + (65) 844-3366 Fax No: + (65) 842-1103 with copies to: 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 LC Application shall be given by the applicable Borrower to Agent, and in the case of an LC Application, to Issuing Bank, to the office of such Person located at the address referred to above during such office's normal business hours; provided, however, that any such notice received by any such Person after 11:00 a.m. (California time) on any Business Day shall be deemed received by such Person on the next Business Day. In any case where this Agreement authorizes notices, requests, demands or other communications by Borrowers to Agent, Issuing Bank or any Lender to be made by telephone or facsimile, Agent, Issuing Bank 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 or Letter of Credit is issued 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 FIL's 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 (including, with respect to Taxes, only those Taxes that constitute Non-Excluded Taxes) 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, 55 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 or any Letter of Credit, except to the extent such liability arises from the willful misconduct or gross negligence of such Indemnitee. Each request for any indemnity payment by an Indemnitee under this Paragraph 8.03 must be accompanied by a reasonably detailed written explanation identifying the liability, loss, damage or expense regarding which the indemnification is being requested and explaining the basis for such indemnification claim. In addition, if any Lender determines reasonably, in good faith, and in its sole discretion that it has received a refund of, credit or benefit of a deduction resulting from, any Non-Excluded Taxes to which it has been indemnified by Borrowers or with respect to which Borrowers have paid additional amounts pursuant to this Paragraph 8.03 or Paragraph 2.13, it shall pay the amount of such refund, credit or benefit of such deduction to Borrowers (but only to the extent of indemnity payments made, or additional amounts paid, by Borrowers with respect to the Non-Excluded Taxes giving rise to such refund, credit or deduction), net of all incurred out-of-pocket expenses of such Lender and without interest (other than interest paid by the relevant Governmental Authority with respect to such refund, credit or benefit of such deduction); provided, however, that Borrowers shall, upon the written request of such Lender, agree to repay the amount paid over to Borrowers (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Lender in the event such Lender is required by force of law to repay such refund, credit or benefit of such deduction to such Governmental Authority. 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. (a) Any term, covenant, agreement or condition of this Agreement or any other Credit Document which relates solely to Facility A may be amended or waived, and any consent under this Agreement or any other Credit Document which relates solely to Facility A may be given, if such amendment, waiver or consent is in writing and is signed by Borrowers and the Required Facility A Lenders (or Agent on behalf of the Required Facility A Lenders with the written approval of the Required Facility A Lenders); (b) any term, covenant, agreement or condition of this Agreement or any other Credit Document which relates solely to Facility B may be amended or waived, and any consent under this Agreement or any other Credit Document which relates solely to Facility B may be given, if such amendment, waiver or consent is in writing and is signed by Borrowers and the Required Facility B Lenders (or Agent on behalf of the Required Facility B Lenders with the written approval of the Required Facility B Lenders); and (c) any term, covenant, agreement or condition of this Agreement or any other Credit Document which does not relate solely to Facility A or Facility B may be amended or waived, and any consent under this Agreement or any other Credit Document which does not relate solely to Facility A or Facility B 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: (i) Any amendment, waiver or consent which would (A) increase the Total Facility A Commitment, (B) postpone, delay or extend the Facility A Maturity Date, (C) reduce the principal of or interest on the Facility A Loans or any Letter of Credit, 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 with respect to Facility A need not be approved by any Facility B Lender but must be in writing and signed or approved in writing by all Facility A Lenders; (ii) Any amendment, waiver or consent which would (A) increase the Total Facility B Commitment, (B) postpone, delay or extend the Facility B Maturity Date, (C) 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 with respect to Facility B need not be approved by any Facility A Lender but must be in writing and signed or approved in writing by all Facility B Lenders; (iii) Any amendment, waiver or consent which would (A) 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, (B) 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, (C) amend this Paragraph 8.04, (D) amend the definition of 56 Currencies or Required Lenders, or (E) release any Guarantor (except for releases as provided in Paragraph 2.15), must be in writing and signed or approved in writing by all Lenders; (iv) Any amendment, waiver or consent which would (A) 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 (B) 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; (v) Any amendment, waiver or consent which affects the rights or obligations of the Issuing Bank must be signed by the Issuing Bank; and (vi) 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, 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 and assumption in the form of Exhibit D (an "Assignment and Assumption"), 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, Issuing Bank and, if no Default has occurred and is continuing, FIL (which consent of Agent, Issuing Bank and FIL shall not be unreasonably withheld), no Lender may make any Assignment of its Commitment or Loans to any 57 Assignee Lender which is not, immediately prior to such Assignment, a Lender hereunder or an Affiliate thereof; (ii) Without the written consent of Agent, Issuing Bank and, if no Default has occurred and is continuing, FIL (which consent of Agent, Issuing Bank 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 Two Million Five Hundred Thousand Dollars ($2,500,000), 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 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 Two Million Five Hundred Thousand Dollars ($2,500,000), 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 Agent; (iv) Without the written consent of Agent, Issuing Bank 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 to such Assignee Lender 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; (vi) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL, no Lender may make any Assignment of its Facility A Commitment and Facility A Loans under this Agreement to any Assignee Lender unless such Lender concurrently assigns and delegates to such Assignee Lender an equal pro rata interest in its "Facility A Commitment" and "Facility A Loans" under the FIUI Credit Agreement; and (vii) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL, no Lender may make any Assignment of its Facility B Commitment and Facility B Loans under this Agreement to any Assignee Lender unless such Lender concurrently assigns and delegates an equal pro rata interest in its "Facility B Commitment" and "Facility B Loans" under the FIUI Credit Agreement. Upon such execution, delivery, acceptance and recording of each Assignment and Assumption, from and after the Assignment Effective Date determined pursuant to such Assignment and Assumption, (A) each Assignee Lender thereunder shall be a Lender hereunder with Commitments or Loans as set forth on Attachment 1 to such Assignment and Assumption (under the caption "Commitments or Loans After Assignment") and shall have the rights, duties and obligations of such a Lender under this Agreement and 58 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 and Assumption (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 and Assumption 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 and Assumption, 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 and Assumption 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 and Assumption executed by an Assignor Lender and an Assignee Lender (and, to the extent required by Subparagraph 8.05(c), by Borrowers, Agent and Issuing Bank) together with payment to Agent by Assignor Lender of a registration and processing fee of $3,000, Agent shall (i) promptly accept such Assignment and Assumption 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 prior notice to 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 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 59 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, any Guarantor or any of FIL's 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 or any Guarantor 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 60 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. [The first signature page follows.] 61 IN WITNESS WHEREOF, Borrowers, Agent, Co-Arrangers, Co-Syndication Agents, Senior Managing Agent, Managing Agents 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:_______________________________ S-1 CO-ARRANGERS: ABN AMRO BANK N.V., As a Co-Arranger By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ FLEET NATIONAL BANK, As a Co-Arranger By: _______________________________________ Name: _______________________________ Title:_______________________________ S-2 CO-SYNDICATION AGENTS: DEUTSCHE BANC ALEX. BROWN INC., As a Co-Syndication Agent By: _______________________________________ Name: _______________________________ Title:_______________________________ BANK OF AMERICA, N.A., As a Co-Syndication Agent By: _______________________________________ Name: _______________________________ Title:_______________________________ CITICORP USA, INC., As a Co-Syndication Agent By: _______________________________________ Name: _______________________________ Title:_______________________________ FLEET NATIONAL BANK, As a Co-Syndication Agent By: _______________________________________ Name: _______________________________ Title:_______________________________ S-3 SENIOR MANAGING AGENT: THE BANK OF NOVA SCOTIA, As Senior Managing Agent By: _______________________________________ Name: _______________________________ Title:_______________________________ MANAGING AGENTS: BNP PARIBAS, As a Managing Agent By: _______________________________________ Name: _______________________________ Title:_______________________________ CREDIT SUISSE FIRST BOSTON, As a Managing Agent By: _______________________________________ Name: _______________________________ Title:_______________________________ S-4 ISSUING BANK: FLEET NATIONAL BANK, As Issuing Bank By: _______________________________________ Name: _______________________________ Title:_______________________________ S-5 LENDERS: ABN AMRO BANK N.V., As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ AIB INTERNATIONAL FINANCE, As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ BANKERS TRUST COMPANY, As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ BANK OF AMERICA, N.A., As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ S-6 BEAR STEARNS CORPORATE LENDING INC., As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ BNP PARIBAS, As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ CITICORP USA, INC., As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ COMERICA BANK, As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ S-7 CREDIT SUISSE FIRST BOSTON, As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ DANSKE BANK A/S, As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ FLEET NATIONAL BANK, As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ FUJI BANK LIMITED (MIZUHO FINANCIAL GROUP), As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ S-8 GOLDMAN SACHS CREDIT PARTNERS L.P., As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ LEHMAN COMMERCIAL PAPER INC., As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ S-9 THE BANK OF NOVA SCOTIA, As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ UNION BANK OF CALIFORNIA, N.A. As a Lender By: _______________________________________ Name: _______________________________ Title:_______________________________ By: _______________________________________ Name: _______________________________ Title:_______________________________ S-10 SCHEDULE I LENDER'S COMMITMENTS

I-1 The Bank of Nova Scotia $ 25,000,000.00 $ 12,500,000.00 $ 37,500,000.00 Union Bank of California, N.A. $ 8,333,333.33 $ 4,166,666.67 $ 12,500,000.00 ------------------ ------------------ ------------------ TOTAL $ 266,666,666.67 $ 133,333,333.33 $ 400,000,000

I-2 PART B - ADDRESSES FOR NOTICES, ETC. ABN AMRO BANK N.V. Domestic Lending Office: ABN AMRO Bank N.V. 208 South LaSalle Street Suite 1500 Chicago, IL 60604 Eurodollar Lending Office: ABN AMRO Bank N.V. 208 South LaSalle Street Suite 1500 Chicago, IL 60604 Address for Notices: ABN AMRO Bank N.V. 1 California Street, 2nd Floor San Francisco, CA 94111 Attn: Peter Hsu Tel. No: (415) 983-2964 Fax No: (415) 983-2960 ABN AMRO Bank N.V. Agency Services 208 South LaSalle Street, Suite 1500 Chicago, IL 60604-1003 Attn: Joycelyn G. Gay Tel. No: (312) 992-5094 Fax. No: (312) 601-3610 With a copy of all documentation to: ABN AMRO Bank N.V. 208 South LaSalle Street, Suite 1500 Chicago, IL 60604-1003 Attn: Nick Blea Tel. No: (312) 992-5176 Fax. No: (312) 992-5111 Wiring Instructions: ABN AMRO Bank N.V. New York, New York ABA: 026009580 F/O ABN AMRO Bank , N.V., Chicago Branch CPU Account No.: 650001178941 Reference: Agency Services 00433489 Flextronics Intl. Limited I-3 AIB INTERNATIONAL FINANCE Domestic and Eurodollar Lending Office: AIB International Finance International Corporate Banking AIB Bankcentre Ballsbridge, Dublin 4 Address for Notices of Borrowing and Notices of Interest Period Selection: AIB International Finance Business Support, AIB Bankcentre Ballsbridge, Dublin 4 Attn: Ian Finnegan Tel. No.: (353) 1-6412297 Fax No.: (353) 1-6603529 Address for all other notices: (Credit Matters) AIB International Finance AIB International Centre IFSC, Dublin 1 Attn: Eimear Creaven/Patrick Lynam Tel. No.: (353) 1-6412279 Fax No.: (353) 1-6603529 Wiring Instructions: Chase Manhattan Bank, New York ABA No.: 021000021 Swift: CHASUS33 Account No.: 001-1-907599 Account Name: AIB Dublin Reference: Flextronics International Ltd. Attn: Ian Finnegan I-4 BANKERS TRUST COMPANY Domestic and Eurodollar Lending Office: Bankers Trust Company 31 W. 52nd Street New York, NY 10019 Address for Notices of Borrowing and Notices of Interest Period Selection: Bankers Trust Company 90 Hudson Street, 5th Floor Jersey City, NJ 07302 Attn: Bilal Aman Tel. No.: (201) 593-2173 Fax No.: (201) 593-2310 Address for all other notices: (Credit Matters) Bankers Trust Company 31 W. 52nd Street New York, NY 10019 Attn: Alex Bici Tel. No.: (646) 324-2199 Fax No.: (646) 324-7456 Wiring Instructions: Bankers Trust Company New York, NY RT/ABA No.: 021001033 For further credit to: Deutsche Bank, AG New York Account No.: 99401268 Reference: Flextronics International Ltd. Attn: Bilal Aman I-5 BANK OF AMERICA, N.A. Domestic and Eurodollar Lending Office: Bank of America, N.A. 1850 Gateway Blvd. Concord, CA 94520 Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: Bank of America, N.A. Mail Code CA4-706-05-11 1850 Gateway Blvd. Concord, CA 94520 Attn: Michelle L. Widmer Tel. No.: (925) 675-8204 Fax No.: (888) 969-9280 Address for all other notices: (Credit Matters) Bank of America, N.A. Portfolio Management - Technology 3697 555 California Street, 12th Floor Mail Code CA5-705-12-08 San Francisco, CA 94104 Attn: James P. Johnson, Managing Director Tel. No.: (415) 622-6177 Fax No.: (415) 622-4057 Wiring Instructions: Bank of America, N.A., Dallas Texas ABA No.: 111000012 For further credit to Account No.: 3750836479 Reference: Flextronics International Ltd. Attn: SBW004 Credit Services - Michelle L. Widmer I-6 BEAR STEARNS CORPORATE LENDING INC Domestic and Eurodollar Lending Office: Bear Stearns & Co. Inc. 245 Park Avenue, 4th Floor New York, NY 10167 Address for Notices of Borrowing and Notices of Interest Period Selection: Bear Stearns & Co. Inc. 245 Park Avenue, 4th Floor New York, NY 10167 Attn: Ms. Gloria Dombrowski Tel. No.: (212) 272-6043 Fax No.: (212) 272-4844 Address for all other notices: (Credit Matters) Bear Stearns & Co. Inc. 245 Park Avenue, 4th Floor New York, NY 10167 Attn: Victor F. Bulzacchelli Tel. No.: (212) 272-3042 Fax No.: (212) 272-9184 Copy of documents to: Bear Stearns & Co. Inc. 245 Park Avenue, 4th Floor New York, NY 10167 Attn: Kevin Cullen Tel. No.: (212) 272-5742 Fax No.: (212) 272-9184 Wiring Instructions: Citibank, N.A. ABA No.: 0210-00089 Account No.: 0925-3186 Favor of: Bear Stearns Securities, Corp. Further Credit to Account No.: 096-00220-28 Reference: Flextronics International Ltd. Attn: Steve Resnick I-7 BNP PARIBAS Domestic and Eurodollar Lending Office: BNP Paribas 180 Montgomery Street San Francisco, CA 94104 Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: BNP Paribas 180 Montgomery Street San Francisco, CA 94104 Attn: Don Hart, Vice President - Treasury Tel. No.: (415) 956-2511 Fax No.: (415) 989-9041 Swift: BNPAUS6S Address for all other notices: BNP Paribas, Los Angeles Branch 725 South Figueroa Street, Suite 2090 Los Angeles, CA 90017 Attn: Robert Mimaki, Vice President - Corporate Banking High Technology Group Tel. No.: (213) 688-6419 Fax No.: (213) 488-9602 With a copy to: BNP Paribas 180 Montgomery Street San Francisco, CA 94104 Attn: Nancy Mak, Vice President - Loan Operations Tel. No.: (415) 956-0707 Fax No.: (415) 956-4230 Telex: 278900 BNPS UR Wiring Instructions: The Federal Reserve Bank of New York ABA No.: 026007689 BNP Paribas /BNF/ BNP PARIBAS SAN FRANCISCO /ACA/ 14334000176 For further credit to BNP Paribas Los Angeles /RFB/ Principal Payment (or Commitment Fee, Interest Payment, etc.) /OBI/ By order: Flextronics International Ltd. Attn: Jenny Seow I-8 CITICORP USA, INC. Domestic and Eurodollar Lending Office: Citicorp USA, Inc. One Sansome Street, 25th Floor San Francisco, CA 94104 Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: Citicorp USA, Inc. 2 Penn's Way, Suite 200 New Castle, Delaware 19720 Attn: Karen Riley Tel. No.: (302) 894-6084 Fax No.: (302) 894-6120 Address for all other notices (Credit Matters): Citicorp USA, Inc. One Sansome Street, 25th Floor San Francisco, CA 94104 Attn: Avram Spiegel Tel. No.: (415) 627-6358 Fax No.: (415) 632-0307 Wiring Instructions: Citibank N.A. New York, New York ABA No.: 021-000-089 For further credit to: Technology Account No.: 40580062 Reference: Flextronics International Ltd. Attn: Karen Riley I-9 COMERICA BANK Domestic and Eurodollar Lending Office: Comerica Bank One Detroit Center Detroit, Michigan Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: Comerica Bank International Finance Department 333 W. Santa Clara Street San Jose, CA 95113 Attn: Christina Hwang Tel. No.: (408) 556-5221 Fax No.: (408) 556-5232 Address for all other notices: Comerica Bank International Finance Department 333 W. Santa Clara Street San Jose, CA 95113 Attn: Devin Scattini Tel. No.: (408) 556-5120 Fax No.: (408) 556-5232 Wiring Instructions: Comerica Bank One Detroit Center 500 Woodward Avenue Detroit, Michigan RT/ABA No.: 072000096 Account number: 02-21585-90010 Reference: Flextronics International Limited Attn: Ms. Nicole Maguire I-10 CREDIT SUISSE FIRST BOSTON Domestic and Eurodollar Lending Office: Credit Suisse First Boston, Cayman Islands Branch Eleven Madison Avenue New York, NY 10010 Address for Notices of Borrowing and Notices of Interest Period Selection: Credit Suisse First Boston Eleven Madison Avenue New York, NY 10010 Attn: Ed Markowski / Nirmala Durgana Tel. No.: (212) 538-3380 / 3525 Fax No.: (212) 538-3477 / 561-8926 Address for all other notices: (Credit Matters) Credit Suisse First Boston Eleven Madison Avenue New York, NY 10010 Attn: Robert Hetu / Mark Heron Tel. No.: (212) 325-4542 / 9933 Fax No.: (212) 325-8309 / 8319 Wiring Instructions: The Bank of New York, New York, NY ABA No.: 021000018 Account No.: 890-0329-262 Account Name: CSFB NY Loan Clearing Reference: Flextronics International Ltd. I-11 DANSKE BANK A/S Domestic and Eurodollar Lending Office: Danske Bank A/S, Cayman Islands Branch 299 Park Avenue, 14th Floor New York, NY 10171-1499 Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: Danske Bank A/S 299 Park Avenue, 14th Floor New York, NY 10171-1499 Attn: Loan Administration Tel. No.: (212) 984-8462 Fax No.: (212) 984-9570 Address for all business/credit matters: Danske Bank A/S 299 Park Avenue, 14th Floor New York, NY 10171-1499 Attn: Michael K. Crawford - Vice President Tel. No.: (212) 984-8455 Fax No.: (212) 984-9567 Address for documentation matters: Danske Bank A/S 299 Park Avenue, 14th Floor New York, NY 10171-1499 Attn: George B. Wendell - Vice President Tel. No.: (212) 984-8431 Fax No.: (212) 984-9566 Wiring Instructions: Danske Bank A/S New York, NY 10171 ABA No.: 026003719 (Danske Bank, New York Branch) For: Loan Administration Reference: Flextronics International Ltd. I-12 FLEET NATIONAL BANK Domestic and Eurodollar Lending Office: Fleet National Bank 100 Federal Street Boston, MA 02110 Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: Fleet National Bank 100 Federal Street, 9th Floor Boston, MA 02110 Attn: Angela Moore, Loan Administrator Tel. No.: (617) 434-5059 Fax No.: (617) 434-1709 Address for all other notices: Fleet National Bank 435 Tasso Street, Suite 250 Palo Alto, CA 94301 Attn: Lee A. Merkle-Raymond or Gregory Roux Tel. No.: (650) 470-4130/4180 Fax No.: (650) 853-1425 Wiring Instructions: Fleet National Bank Boston, MA ABA No.: 011-000-138 For further credit to: Credit Services Account No.: 1510351-66156 Reference: Flextronics International Ltd. I-13 FUJI BANK, LIMITED (MIZUHO FINANCIAL GROUP) Domestic and Eurodollar Lending Office: The Fuji Bank, Limited 350 South Grand Avenue, Suite 1500 Los Angeles, CA 90071 Address for Notices of Borrowing and Notices of Interest Period Selection: The Fuji Bank, Limited 95 Christopher Columbus Drive, 16th Floor Jersey City, NJ 07302 Attn: Teri Smith Tel. No.: (201) 432-1980 Fax No.: (201) 432-6805 Address for all other notices: (Credit Matters) The Fuji Bank, Limited 350 South Grand Avenue, Suite 1500 Los Angeles, CA 90071 Attn: Mano Mylvaganam, Vice President Tel. No.: (213) 253-4130 Fax No.: (213) 253-4175 Wiring Instructions: The Fuji Bank, Limited, New York, NY ABA No.: 026009700 For further credit to: Loan Admin Dept - LA Account No.: 5204-001-515066 Reference: Flextronics International Ltd. Attn: Teri Smith I-14 GOLDMAN SACHS CREDIT PARTNERS, L.P. Domestic and Eurodollar Lending Office: Goldman Sachs Credit Partners L.P. 8 Broad Street - 6th Floor New York, NY 10004 Address for Notices of Borrowing and Notices of Interest Period Selection: Goldman Sachs Credit Partners L.P. 8 Broad Street - 6th Floor New York, NY 10004 Attn: Sandra Stulberger / Erin Smith or Asa Klasson Tel. No.: (212) 902-5977 / 357-9345 or 902-4694 Fax No.: (212) 357-4597 / 357-4597 Address for all other notices: (Credit Matters) c/o Goldman Sachs & Co. 8 Broad Street - 6th Floor New York, NY 10004 Attn: Barbara Aaron / Sally Wenden Tel. No.: (212) 357-3111 / 9735 Fax No.: (212) 428-1243 Wiring Instructions: Citibank, N.A. ABA No.: 021000089 Account No.: 40717188 Account Name: Goldman Sachs Credit Partners Reference: Flextronics International Ltd. Attn: Bank Loan Operations - Sandra Stulberger I-15 LEHMAN COMMERCIAL PAPER INC. Domestic and Eurodollar Lending Office: (Through March 25, 2002) Lehman Commercial Paper Inc. 101 Hudson Street Jersey City, NJ 07302 (Thereafter) Lehman Commercial Paper Inc. 745 7th Street, 16th Floor New York, NY 10019 Address for Notices of Borrowing and Notices of Interest Period Selection: (Through March 25, 2002) Lehman Commercial Paper Inc. 101 Hudson Street Jersey City, NJ 07302 Attn: Nancy Wong Tel. No.: (201) 524-2248 Fax No.: (201) 524-4298 (Thereafter) Lehman Commercial Paper Inc. 745 7th Street, 16th Floor New York, NY 10019 Attn: TBA Tel. No.: TBA Fax No.: TBA Address for all other notices: (Credit Matters) (Through March, 2002) c/o Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Attn: Andrew Keith, Lehman Loan Portfolio Group Room #2533 Tel. No.: (212) 455-7569 Fax No.: (646) 758-4656 (Thereafter) Lehman Commercial Paper Inc. 745 7th Street, 23rd Floor New York, NY 10019 Attn: TBA Tel. No.: TBA Fax No.: TBA I-16 Wiring Instructions: Citibank, N.A., New York, NY ABA No.: 021000089 Account No.: 30434133 Account Name: LCPI Bank Loans Reference: Flextronics International Ltd. I-17 SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) Domestic and Eurodollar Lending Office: Skandinaviska Enskilda Banken AB (publ) Kungstradgardsgatan 8 106 40 Stockholm, Sweden Address for Notices of Borrowing and Notices of Interest Period Selection: Skandinaviska Enskilda Banken AB (publ) Karlavagen 108 106 40 Stockholm, Sweden Attn: Christine Pearson / Peter Bergengren Tel. No.: 46 8 7638642 / 46 8 7638586 Fax No.: 46 8 6110384 Address for all other notices: (Credit Matters) Skandinaviska Enskilda Banken AB (publ) 2 Cannon Street London EC4M 6XX, United Kingdom Attn: Johan Sonander, Debt Capital Markets Tel. No.: 44 20 7246 4177 Fax No.: 44 20 7236 4178 With a copy to: Skandinaviska Enskilda Banken AB (publ) Ostergatan 39 205 20 Malmo, Sweden Attn: Max Lundberg, SEB Client Relationship Management Tel. No.: (46) 40-6676088 Fax No.: (46) 40-305-480 Wiring Instructions: Bank of New York, New York, NY ABA No.: 021000018 Account No.: 890 0443871 Swift Code: IRVTUS3N Reference: Flextronics International Ltd. I-18 THE BANK OF NOVA SCOTIA Domestic and Eurodollar Lending Office: The Bank of Nova Scotia Atlanta Agency 600 Peachtree Street, N.E., Suite 2700 Atlanta, GA 30308 Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: The Bank of Nova Scotia Atlanta Agency 600 Peachtree Street, N.E., Suite 2700 Atlanta, GA 30308 Attn: Lily Hsie Tel. No.: (404) 877-1523 Fax No.: (404) 888-8998 Address for all other notices: The Bank of Nova Scotia San Francisco Agency 580 California Street, Suite 2100 San Francisco, CA 94104 Attn: Christopher Osborn Tel. No.: (415) 986-1100 Fax No.: (415) 397-0791 Wiring Instructions: The Federal Reserve Bank of New York New York, New York ABA No.: 026-002-532 Account Name: The Bank of Nova Scotia, 1 Liberty Plaza, New York, New York 10006 For further account of: BNS San Francisco Agency Loan Servicing Account Account No.: 0610135 Reference: Flextronics International Ltd. I-19 UNION BANK OF CALIFORNIA, N.A. Domestic and Eurodollar Lending Office: Union Bank of California, N.A. 99 Almaden Boulevard, Suite 200 San Jose, CA 95113 Address for Notices of Borrowing and Notices of Interest Period Selection: Union Bank of California, N.A. 601 Potrero Grande Drive Monterey Park, CA 91754 Attn: Shirley Davis, Commercial Loan Service Officer Tel. No.: (323) 7202870 Fax No.: (323) 724-6198 Address for all other notices: (Credit Matters) Union Bank of California, N.A. 99 Almaden Boulevard, Suite 200 San Jose, CA 95113 Attn: Sarabelle Hitchner, Vice President Tel. No.: (408) 279-7208 Fax No.: (408) 280-7163 Wiring Instructions: Union Bank of California, N.A. ABA No.: 122000496 Account No.: Wire Clearing Account 77070196431 Reference: Flextronics International Ltd. Attn: Commercial Loan Operations I-20 SCHEDULE II PRICING GRID FACILITY A
APPLICABLE MARGIN APPLICABLE FOR MARGIN LIBOR RATE FOR BORROWINGS LIBOR RATE AND LC BORROWINGS USAGE FEE AND LC WHEN USAGE FEE COMBINED WHEN APPLICABLE TOTAL COMBINED FIL'S MARGIN COMMITMENT TOTAL SENIOR FOR USAGE IS COMMITMENT COMMITMENT DEBT PRICING BASE RATE [LESS THAN OR USAGE FEE RATING LEVEL BORROWINGS EQUAL TO] 33% IS > 33% PERCENTAGE - ---------------------------------------------------------------------------------------------- [GREATER THAN OR EQUAL TO] BBB / Baa2 1 0% 0.875% 1.000% 0.175% BBB- / Baa3 2 0% 1.125% 1.250% 0.225% BB+ / Ba1 3 0% 1.250% 1.500% 0.250% BB / Ba2 4 0% 1.500% 1.750% 0.400% [LESS THAN OR EQUAL TO] BB- / Ba3 5 0% 1.750% 2.250% 0.500%
FACILITY B
APPLICABLE MARGIN APPLICABLE FOR MARGIN LIBOR RATE FOR BORROWINGS LIBOR RATE WHEN BORROWINGS COMBINED WHEN APPLICABLE TOTAL COMBINED FIL'S MARGIN COMMITMENT TOTAL SENIOR FOR USAGE IS COMMITMENT COMMITMENT DEBT PRICING BASE RATE [LESS THAN OR USAGE FEE RATING LEVEL BORROWINGS EQUAL TO] 33% IS > 33% PERCENTAGE - --------------------------------------------------------------------------------------------- [GREATER THAN OR EQUAL TO] BBB / Baa2 1 0% 0.875% 1.000% 0.125% BBB- / Baa3 2 0% 1.125% 1.250% 0.175% BB+ / Ba1 3 0% 1.250% 1.500% 0.200% BB / Ba2 4 0% 1.500% 1.750% 0.250% [LESS THAN OR EQUAL TO] BB- / Ba3 5 0% 1.750% 2.250% 0.375%
II-1 EXPLANATION The Applicable Margin with respect to the LIBOR Rate Loans, the LC Usage Fee (as applicable) and the Commitment Fee Percentage will be determined based on FIL's Senior Debt Rating assigned by S&P and Moody's as follows: 1. In the event FIL does not have a Senior Debt Rating from either S&P or Moody's, then such rating agency will be deemed for purposes hereof to have established a Senior Debt Rating for FIL below BB- and Ba3, respectively. 2. If the Senior Debt Rating established or deemed to have been established by S&P and Moody's are split within different categories above, then the lower rating shall apply (with Pricing Level 3 being lower than Pricing Level 2). 3. Any change in FIL's Senior Debt Rating shall be effective on the date such change is first announced by the rating agency making such change. In addition, the Applicable Margin with respect to LIBOR Rate Loans and the LC Usage Fee (as applicable) will change based upon the Total Combined Commitment usage. For example, if the Unused Total Combined Commitment is $450,000,000 (meaning that the Total Combined Commitment usage is $300,000,000 or 40%), the two columns above applicable only when Total Combined Commitment usage is greater than 33% shall apply. II-2 SCHEDULE 3.01 INITIAL CONDITIONS PRECEDENT A. PRINCIPAL CREDIT DOCUMENTS. (1) The Credit Agreement, duly executed by Borrower, each Lender, Agent, each Co-Arranger, each Co-Syndication Agent, the Senior Managing Agent and each Managing Agent; (2) Such Notes as Lenders shall request, each duly executed by the applicable Borrower; and (3) The Guaranty, duly executed by each of the following Subsidiaries: (a) Flextronics International USA, Inc., (b) Flextronics International Latin America (L), Ltd., (c) Multilayer Technology, Inc., (d) Flextronics USA, Inc., (e) Flextronics Enclosures, Inc., (f) Flextronics Manufacturing Mexico, SA de CV, (g) Flextronics Distribution, Inc., (h) Flextronics International Singapore Pte Ltd., (i) Flextronics International Marketing (L) Ltd., (j) Flextronics Holding USA, Inc., (k) Flextronics Holdings UK Limited and (l) Flextronics Technology (Shah Alam) Sdn Bdh, each with such changes thereto as may be appropriate based on the law 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 and any Subsidiary of FIL executing the Guaranty, 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 and any Subsidiary of FIL executing the Guaranty, 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 and any Subsidiary of FIL executing the Guaranty, 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) 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 FIL, any Designated Borrower, each Eligible Material Subsidiary and any Subsidiary of FIL executing the Guaranty, dated the Closing Date, certifying the incumbency, signatures and authority of the officers, 3.01-1 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, 2001, 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, 2001 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, 2001; (4) A copy of the 10-Q report filed by FIL with the Securities and Exchange Commission for the quarter ended December 31, 2001; (5) The consolidated plan and forecast of FIL and its Subsidiaries for the fiscal year to end March 31, 2003 (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 FIL's 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. OPINIONS. Favorable written opinions from each of the following counsel for Borrowers, Guarantors and FIL's 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) Paul, Chong & Nathan, Malaysian counsel for FIL and Flextronics Technology (Shah Alam) Sdn Bdh; (3) Mayer, Brown, Rowe & Maw, 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; and (6) Allen & Gledhill, Singapore counsel for FIL and its Subsidiaries. E. OTHER ITEMS. (1) A duly completed and timely delivered Notice of Borrowing for the applicable Borrowing; 3.01-2 (2) An organization chart for FIL and its Subsidiaries, setting forth the relationship among such Persons; (3) Copy of Subordinated Indenture, certified to be true and complete by the Treasurer of FIL; (4) Evidence that the Obligations of Borrowers under this Agreement and the other Credit Documents constitute "Designated Senior Debt" under the Subordinated Indenture; (5) Evidence that (a) the amounts owing to the lenders and agent under the Existing FIL Credit Agreement on the Closing Date have been repaid in full and/or converted into Loans under this Agreement and (b) the commitments of the lenders and agent under the Existing FIL Credit Agreement are terminated and of no further force and effect; (6) 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 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; (7) 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); (8) All fees and expenses of Agent's counsels through the Closing Date; and (9) 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. 3.01-3 SCHEDULE 4.01(o) SUBSIDIARIES [TO BE PROVIDED BY BORROWERS] 4.01(o)-1 SCHEDULE 5.02(a) EXISTING SECURED INDEBTEDNESS [TO BE PROVIDED BY BORROWERS] 5.02(a)-1 SCHEDULE 5.02(e) EXISTING INVESTMENTS [TO BE PROVIDED BY BORROWERS] 5.02(e)-1 EXHIBIT A NOTICE OF BORROWING [Date] ABN AMRO Bank N.V. as Agent [__________] Attn: [_________] 1. Reference is made to that certain Credit Agreement, dated as of March 8, 2002 (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 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 the 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 Paragraph 2.02 of the Credit Agreement, the undersigned Borrower hereby irrevocably requests a 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 Borrowing and after giving effect to the requested Borrowing: (a) The representations and warranties of Borrowers and FIL's 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 Borrowing to__________ ________________________________________________________________________________ _____________________________________. A-1 IN WITNESS WHEREOF, the undersigned Borrower has executed this Notice of Borrowing on the date set forth above. [________________________________] By:_______________________________________ Name:__________________________________ Title:_________________________________ A-2 EXHIBIT B FORM OF NOTE ______________, ________ February __, 2002 FOR VALUE RECEIVED, the undersigned ("Borrower"), hereby promises to pay to the order of ____________________, a ____________________ ("Lender"), the aggregate outstanding principal balance of all 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] 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 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 Notes referred to in the Credit Agreement, dated as of March 8, 2002, 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 the 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. B-1 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: _____________________ B-2 LOANS AND PAYMENTS OF PRINCIPAL
Loans Payments ------------------------------- ------------------------------------ Amount of Amount of Principal Paid Date Currency Loan Facility Currency or Prepaid Facility - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
B-3 EXHIBIT C FORM OF GUARANTY THIS GUARANTY, dated as of March 8, 2002, 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 March 8, 2002 (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 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 the 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 Borrower for the benefit of its creditors, whether or not any such suit, action, case or other proceeding is voluntary or involuntary. C-1 "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. "Subsidiary Joinder" shall mean an instrument substantially in the form of Attachment 1 hereto. C-2 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. (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: C-3 (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 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; C-4 (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. (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 C-5 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 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. C-6 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 55 East 52nd Street, 7th Floor New York, NY 10055 U.S.A. Attn: John Darmanin Tel. No: (212) 409-7390 Fax. No: (212) 409-7497 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 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 C-7 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 pursue any remedy in Agent's or such Lender's power. C-8 (g) Setoff; Security Interest. (i) In addition to any rights and remedies of Lenders provided by law, each Lender shall have the right, with prior notice to 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. If under the laws of the applicable jurisdiction, a payment by a Guarantor pursuant to this Subparagraph 6(h) to Agent or any Lender may be made without deduction or withholding of any Taxes (or with reduced deduction or withholding of any Taxes), the Agent and such Lender (as applicable) shall, upon written request by the applicable Guarantor, use reasonable efforts to file with the appropriate tax authorities and deliver to Guarantor such certificates and other evidence requested by Guarantor establishing Agent's or Lender's entitlement to such eliminated or reduced withholding. 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. C-9 (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 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 C-10 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.] C-11 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: (408) 576-7233 Facsimile: (408) 526-9215 FLEXTRONICS HOLDING USA, INC. By: -------------------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: 2090 Fortune Drive San Jose, California 95131 U.S.A. Attn: Treasurer Telephone: (408) 576-7233 Facsimile: (408) 526-9215 FLEXTRONICS INTERNATIONAL LATIN AMERICA (L) LTD. By: -------------------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: Level 10, Wisma Oceanic Jalan OKK Awang Besar Labuan, F.T. Malaysia Attn: Bernard Liew Jin Yang Telephone: 65 876 9371 Facsimile: 65 543 1888 C-12 FLEX INTERNATIONAL MARKETING (L) LTD. By: -------------------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: Level 10, Wisma Oceanic Jalan OKK Awang Besar Labuan, F.T. Malaysia Attn: Bernard Liew Jin Yang Telephone: 65 876 9371 Facsimile: 65 543 1888 FLEXTRONICS MANUFACTURING MEX, S.A. DE C.V. By: -------------------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: Carretara Base Aerea Militar 5850 Zappopan, Jalisco 4500 Mexico Attn: Tom Mannion Telephone: (5233) 3818-9261 Facsimile: (5233) 3818-9524 FLEXTRONICS SINGAPORE PTE LTD. By: -------------------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: 36 Robinson Road #18-01 City House Singapore 068877 Attn: Bernard Liew Jin Yang Telephone: 65 876 9371 Facsimile: 65 543 1888 C-13 FLEXTRONICS HOLDINGS UK LIMITED By: -------------------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: 50 Stratton Street London W1X 6NX England Attn: ------------------------ Telephone: ( ) - --- --- ---- Facsimile: ( ) - --- --- ---- MULTILAYER TECHNOLOGY, INC. By: -------------------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: 40 Parker Road Irvine, CA 92618 Attn: Timothy L. Stewart Telephone: (408) 576-7000 Facsimile: (408) 428-1341 FLEXTRONICS USA, INC. By: -------------------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: 6328 Monarch Park Place Niwot, CO 80503 Attn: Timothy L. Stewart Telephone: (408) 576-7000 Facsimile: (408) 428-1341 C-14 FLEXTRONICS ENCLOSURES, INC. By: -------------------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: 1901 S. Meyers Road, Suite 700 Oak Brook Terrace, IL 60181 Attn: Timothy L. Stewart Telephone: (408) 576-7000 Facsimile: (408) 428-1341 FLEXTRONICS DISTRIBUTION, INC. By: -------------------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: 2241 Lundy Avenue San Jose, CA 95131 Attn: Timothy L. Stewart Telephone: (408) 576-7000 Facsimile: (408) 428-1341 FLEXTRONICS TECHNOLOGY (SHAH ALAM) SDN BDH, By: -------------------------------------------- Name: ----------------------------------- Title: ----------------------------------- Address: No. 2 Jalan Astaka, U8/84 Seksyen U* 40150 Shal Alam, Selangor, Malaysia Attn: Bernard Liew Jin Yang Telephone: 65 876 9371 Facsimile: 65 543 1888 C-15 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 March 8, 2002 (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 March 8, 2002, 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 the 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. C(1)-1 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: [( ) - ] --- --- ---- C(1)-2 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. C(2)-1 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. 5.02(e)-1 EXHIBIT D ASSIGNMENT AGREEMENT 5.02(e)-1 EXHIBIT D ASSIGNMENT AND ASSUMPTION This Assignment and Assumption (the "Assignment and Assumption") is dated as of the Assignment Effective Date set forth below and is entered into by and between [Insert name of Assignor Lender] (the "Assignor Lender") and [Insert name of Assignee Lender] (the "Assignee Lender"). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended from time to time, the "Credit Agreement"), receipt of a copy of which is hereby acknowledged by the Assignee Lender. The Standard Terms and Conditions set forth in Attachment 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full. For an agreed consideration, the Assignor Lender hereby irrevocably sells and assigns to the Assignee Lender, and the Assignee Lender hereby irrevocably purchases and assumes from the Assignor Lender, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Assignment Effective Date inserted by the Agent as contemplated below (i) all of the Assignor Lender's rights and obligations in its capacity as a Lender under the Credit Agreement and the other Credit Documents to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor Lender under the respective facilities identified below (including without limitation any Letters of Credit or Guaranties included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor Lender (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other Credit Document or the Loans and other transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as, the "Assigned Interest"). Such sale and assignment is without recourse to the Assignor Lender and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor Lender. 1. Assignor Lender: ______________________________ 2. Assignee Lender: ________________________________ 3. Borrower: [Flextronics International Limited] 4. Agent: ABN AMRO Bank N.V., as agent under the Credit Agreement 5. Credit Agreement: The Credit Agreement dated as of March 8, 2002 among Borrower, each of the financial institutions from time to time listed in Schedule I thereto, Agent and Fleet National Bank, as co-lead arrangers, Deutsche Banc Alex. Brown Inc., Bank of America, N.A., Citicorp USA, Inc. and Fleet National Bank, as co-syndication agents, The Bank of Nova Scotia, as senior managing agent, BNP Paribas and Credit Suisse First Boston, as managing agents and Fleet National Bank as the issuer of letters of credit. 6. Assigned Interest: See Attachment 2. [7. Assignment Effective Date: ______________](1) Assignment Effective Date: _____________ ___, 20___ [TO BE INSERTED BY AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.] ________ (1) To be completed if the Assignor Lender and the Assignee Lender intend that the minimum assignment amount is to be determined as of the Trade Date. The terms set forth in this Assignment and Assumption are hereby agreed to: ASSIGNOR LENDER [NAME OF ASSIGNOR] By:______________________________ Title: ASSIGNEE LENDER [NAME OF ASSIGNEE] By:______________________________ Title: [Consented to and](2) Accepted: [NAME OF AGENT], as Agent By_________________________________ Title: [Consented to:](3) [NAME OF RELEVANT PARTY] By________________________________ Title: ___________________ (2) To be added only if the consent of the Agent is required by the terms of the Credit Agreement. (3) To be added only if the consent of the Borrower and/or other parties (e.g., Issuing Bank) is required by the terms of the Credit Agreement. 2 ATTACHMENT 1 TO ASSIGNMENT AND ASSUMPTION STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION 1. Representations and Warranties. 1.1 Assignor Lender. The Assignor Lender (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any Lien, or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Credit Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Credit Document or any Obligation or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective Obligations under any Credit Document. 1.2. Assignee Lender. The Assignee Lender (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Eligible Assignee Lender under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and after the Assignment Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Agent or any other Lender, and (v) if it is a lender not organized under the laws of the United States, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to Section 2.13(b) of the Credit Agreement, duly completed and executed by the Assignee Lender; and (b) agrees that (i) it will, independently and without reliance on the Agent, the Assignor Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Credit Documents are required to be performed by it as a Lender. 2. Payments. From and after the Assignment Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor Lender for amounts which have accrued to but excluding the Assignment Effective Date and to the Assignee Lender for amounts which have accrued from and after the Assignment Effective Date.(4) 3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in - ------------------- (4) The Agent should consider whether this method conforms to its systems. In some circumstances, the following alternative language may be appropriate: "From and after the Assignment Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee Lender whether such amounts have accrued prior to, on or after the Assignment Effective Date. The Assignor Lender and the Assignee Lender shall make all appropriate adjustments in payments by the Agent for periods prior to the Assignment Effective Date or with respect to the making of this assignment directly between themselves." D-1 any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of California. D-2 ATTACHMENT 2 TO ASSIGNMENT AND ASSUMPTION 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: -------------- $------------ $------------ $------------ $------------ -------------- $------------ $------------ $------------ $------------ -------------- $------------ $------------ $------------ $------------ -------------- $------------ $------------ $------------ $------------
D(1)-1 PART B [ASSIGNEE LENDER] Domestic Lending Office: [------------------------], [------------------------], [------------------------], Eurodollar Lending Office: [------------------------], [------------------------], [------------------------], Address for Notices: Wiring Instructions: D(2)-1 EX-4.05 4 f81104ex4-05.txt EXHIBIT 4.05 EXHIBIT 4.5 CREDIT AGREEMENT THIS CREDIT AGREEMENT, dated as of March 8, 2002, is entered into by and among: (1) FLEXTRONICS INTERNATIONAL USA, INC., a California corporation ("Borrower"); (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. ("ABN AMRO"), as agent for the Lenders (in such capacity, "Agent"); (4) ABN AMRO and FLEET NATIONAL BANK, as co-lead arrangers (collectively, in such capacity, the "Co-Arrangers"); (5) DEUTSCHE BANC ALEX. BROWN INC., BANK OF AMERICA, N.A., CITICORP USA, INC. and FLEET NATIONAL BANK, as co-syndication agents (collectively, in such capacity, the "Co-Syndication Agents"); (6) THE BANK OF NOVA SCOTIA, as senior managing agent (in such capacity, the "Senior Managing Agent"); (7) BNP PARIBAS and CREDIT SUISSE FIRST BOSTON, as managing agents (collectively, in such capacity, the "Managing Agents"); and (8) FLEET NATIONAL BANK, as the issuer of letters of credit under Subparagraph 2.01(b), (in such capacity, the "Issuing Bank"). RECITALS A. Borrower has requested Lenders to provide certain credit facilities to Borrower. 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 have the meaning given to that term in clause (3) of the introductory paragraph hereof. "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 FIL, Borrower or any of FIL's other 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. "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 January 11, 2002 between FIL and Agent. "Agent's Fees" shall have the meaning given to that term in Subparagraph 2.06(a). "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, such Lender's Domestic Lending Office, and (ii) in the case of any LIBOR Loan, such Lender's Euro-Dollar Lending Office. "Applicable Margin" shall mean, with respect to any Borrowing 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; 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 as provided in the Pricing Grid. "Applicable Payment Office" shall mean Borrower's 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 and Assumption" shall have the meaning given to that term in Subparagraph 8.05(c). "Assignment Effective Date" shall have, with respect to each Assignment and Assumption, 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 Borrowing consisting of Base Rate Loans. "Base Rate Loan" shall mean any Loan bearing interest based upon the Base Rate. "Borrower" shall have the meaning given to that term in clause (1) of the introductory paragraph hereof. 2 "Borrowing" shall mean any Facility A Borrowing or any Facility B 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 if such Business Day is related to a Borrowing consisting of LIBOR Loans, 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 March 8, 2002. "Co-Arrangers" shall have the meaning given to that term in clause (4) of the introductory paragraph hereof. "Combined Total Commitment" shall mean the sum of (a) the Total Facility A Commitment and Total Facility B Commitment plus (b) the "Total Facility A Commitment" and the "Total Facility B Commitment" under the FIL Credit Agreement. "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 as provided in the Pricing Grid. "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, without duplication, 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 3 Guaranty Obligations, to the last sentence of the definition of "Guaranty Obligation") be deemed equal to the maximum reasonably anticipated liability in respect thereof (subject to reduction as the underlying liability so guaranteed is reduced from time to time), 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. "Co-Syndication Agents" shall have the meaning given to that term in clause (5) of the introductory paragraph hereof. "Credit Documents" shall mean and include this Agreement, the LC Applications, 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 Borrower, any Guarantor or any of its or FIL's Subsidiaries to Agent, the Issuing Bank 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 initial funding of any Loan (and not the selection of a new Interest Period for such Loan or the conversion of such Loan pursuant to Subparagraph 2.03(b)(iii)) provided that such continuation or conversion does not increase the principal amount thereof) or (b) the issuance of any Letter of Credit or any amendment of any Letter of Credit which increases its stated amount or extends it expiration date. "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. "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, (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 as such in the applicable 4 Assignment and Assumption) 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 will thereafter be maintained and for the account of which all payments of principal of, and interest on, such Lender's Base Rate Loans will thereafter be made. "Drawing Payment" shall have the meaning given to that term in Subparagraph 2.01(b)(iii). "EBITDA" shall mean, with respect to FIL for any four quarter 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, including accrued charges until such time that such accrued charges become cash payments; plus (c) An amount, not to exceed $50,000,000 in any consecutive four fiscal quarters, equal to the sum (to the extent deducted in calculating net income or loss in clause (a) above) of all cash charges associated with merger-related expenses and restructuring costs paid in such period (in each case calculated in accordance with GAAP) incurred by FIL and/or its Subsidiaries in connection with any merger, acquisition, or restructuring entered into by FIL and/or any of its Subsidiaries which are otherwise permitted under this Agreement and the FIUI Credit Agreement. For purposes of Subparagraph 5.03(a) (and not for purposes of Subparagraph 5.03(b)), if FIL or any of its Subsidiaries acquires (whether by purchase, merger, consolidation or otherwise) all or substantially all of the assets of or property of any other Person, during any period in respect of which EBITDA is to be determined, such EBITDA shall be determined on a pro forma basis in accordance with GAAP and, if applicable, the rules of the Securities and Exchange Commission, as if such acquisition occurred as of the first day of the relevant 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 FIL, 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. 5 "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 FIL, 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, (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 and Assumption) 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 will thereafter be maintained and for the account of which all payments of principal of, and interest on, such Lender's LIBOR Loans will thereafter be made. "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 April 3, 2000, as amended, among FIUI, FHUI, 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 FIL Credit Agreement. "Facility" shall mean Facility A or Facility B. "Facility A" shall mean the revolving credit facility and letter of credit subfacility provided to Borrower pursuant to Subparagraph 2.01(a). "Facility A Borrowing" shall mean a borrowing consisting of all the Facility A 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 Borrowing. Any reference to a Facility A Borrowing shall include all of the Facility A Loans constituting such Facility A Borrowing. "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. 6 "Facility A Commitment Fees" shall have the meaning given to that term in Subparagraph 2.06(b)(i). "Facility A Lender" shall mean, at any time, any Lender then having a Facility A Commitment, a Facility A Loan outstanding or a participation in a Letter of Credit issued and outstanding. "Facility A Loan" shall have the meaning given to that term in Subparagraph 2.01(a)(i). "Facility A Maturity Date" shall mean March 8, 2005. "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 sum at such time of (A) the aggregate principal amount of all Facility A Loans owed to such Lender and outstanding at such time, (B) such Lender's pro rata share of the aggregate amount available for drawing under all Letters of Credit outstanding at such time and (c) such Lender's pro rata share of the aggregate amount of all Reimbursement Obligations outstanding at such time to (ii) the sum at such time of (A) the aggregate principal amount of all Facility A Loans outstanding at such time, (B) the aggregate amount available for drawing under all Letters of Credit outstanding at such time and (C) the aggregate amount of all Reimbursement Obligations outstanding at such time. "Facility B" shall mean the revolving credit facility provided to Borrower pursuant to Subparagraph 2.01(c). "Facility B Borrowing" shall mean a borrowing consisting of all the Facility B 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 Borrowing. Any reference to a Facility B Borrowing shall include all of the Facility B Loans constituting such Facility B Borrowing. "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 Subparagraph 2.06(b)(ii). "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 have the meaning given to that term in Subparagraph 2.01(c)(i). "Facility B Maturity Date" shall mean March 7, 2003. "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 7 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. "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. "FHUI" shall mean Flextronics Holding USA, Inc. (formerly known as The DII Group, Inc.), a Delaware corporation. "FIL" shall mean Flextronics International Ltd., a Singapore corporation. "FIL Credit Agreement" shall mean the Credit Agreement dated the date hereof among FIL, each of the financial institutions from time to time party thereto and ABN AMRO, as 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. "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. "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 FIL Credit Agreement on the last day of such period, plus (C) the current portion of the long- 8 term Indebtedness of FIL and its Subsidiaries on the last day of such period (other than the Loans outstanding under Facility B and loans outstanding under Facility B of the FIL 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 FIL, Borrower or any of FIL's other 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 FIL, the Eligible Material Subsidiaries and other Subsidiaries of FIL 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, subject to the last sentence of this definition, any direct or indirect liability of that Person with respect to any indebtedness, lease, dividend, letter of credit or other obligation (other than endorsements of instruments for collection or deposits in the ordinary course of business) in each case to the extent constituting Indebtedness (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 (subject to reduction as the underlying liability so guaranteed is reduced from time to time); provided, however, that with respect to (1) any Guaranty Obligation by FIL or any of its Subsidiaries in respect of a primary obligation of FIL or any of its Subsidiaries and (2) any 9 Guaranty Obligation of FIL or any of its Subsidiaries in respect of the primary obligation of a lessor in connection with a synthetic lease transaction entered into by FIL or any of its Subsidiaries, such Guaranty Obligation shall, in each case, be deemed to be equal to, the maximum reasonably anticipated liability in respect thereof which shall be deemed to be limited to an amount that actually becomes past due from time to time with respect to such primary obligation. "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, determined 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 but excluding accounts payable for property or services or the deferred purchase price of property to the extent not past due); (c) All obligations of such Person under conditional sale or other title retention agreements with respect to property (other than inventory) 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 Guaranty Obligations of such Person with respect to the Indebtedness of any other Person, and all other Contingent Obligations of such Person; and (f) All obligations of other Persons of the types described in clauses (a) - (e) 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 Borrower or 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 Subparagraph 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, the time period selected by Borrower pursuant to Subparagraph 2.02(a) which commences on the date of such Borrowing and ends on the last day of such time period, and thereafter, each subsequent time period selected by Borrower pursuant 10 to Subparagraph 2.03(b)(ii) 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 (f) 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. "Issuing Bank" shall have the meaning given to that term in clause (8) of the introductory paragraph hereof. "LC Application" shall have the meaning given to that term in Subparagraph 2.01(b)(ii). "LC Issuance Fees" shall have the meaning given to that term in Subparagraph 2.06(c)(ii). "LC Usage Fee Rate" shall mean with respect to any Letter of Credit as of any date of determination, the per annum rate for Letters of Credit determined pursuant to the Pricing Grid as such rate may change as provided in the Pricing Grid. "LC Usage Fees" shall have the meaning given to that term in Subparagraph 2.06(c)(i). "Lenders" shall have the meaning given to that term in clause (2) of the introductory paragraph hereof. Where the context so permits, "Lenders" shall include the Issuing Bank. "Lender Rate Contract" shall mean any Rate Contract entered into by FIL, Borrower or any of FIL's other Subsidiaries with a Lender or its Affiliates with respect to Obligations arising under this Agreement. "Letter of Credit" shall have the meaning given to that term in Subparagraph 2.01(b)(i). "LIBO Rate" shall mean, with respect to any Interest Period for any LIBOR 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 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. The LIBO Rate shall be adjusted automatically as to all LIBOR Loans outstanding as of the effective date of any change in the Reserve Requirement. "LIBOR Borrowing" shall mean any Borrowing consisting of LIBOR Loans. 11 "LIBOR Loan" shall mean any Loan 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 Facility A Loan or a Facility B 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 (7) 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 Borrower and its Subsidiaries taken as a whole; (b) the ability of 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; or (d) the rights and remedies of Agent or any Lender under this Agreement, the other Credit Documents or any related document, instrument or agreement. "Material Subsidiary" shall mean, at any time during any fiscal year of FIL, (i) any Subsidiary of FIL that (A) had revenues during the immediately preceding fiscal year equal to or 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 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 Subparagraph 5.01(a)(i) hereof; (ii) with respect to any Subsidiary of FIL 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, determined on a pro forma basis 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 (including the assets of such added or created Subsidiary or Subsidiaries) on such date; and (iii) FLX Cyprus Limited, a Cyprus corporation. "maturity" shall mean, with respect to any Loan, Reimbursement Obligation, interest, fee or other amount payable by Borrower under this Agreement or the other Credit Documents, the date such Loan, Reimbursement Obligation, 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, Borrower, any Material Subsidiary or any ERISA Affiliate. "Net Proceeds" shall mean, with respect to any issuance and sale of securities by any Person (a) the aggregate cash proceeds received by such Person from such sale less (b) the sum of (i) the actual amount of the reasonable fees and commissions payable to Persons other than such Person making the sale 12 or any Affiliate of such Person and (ii) the reasonable legal expenses and other costs and expenses directly related to such sale that are to be paid by such Person. "Net Worth" shall mean, with respect to FIL at any time, the remainder at such time, determined on a consolidated basis in accordance with GAAP, of (a) the total assets of FIL and its Subsidiaries, minus (b) the total liabilities of FIL and its Subsidiaries. "Non-Excluded Taxes" shall mean all Taxes other than Excluded Taxes. "Note" shall have the meaning given to that term in Subparagraph 2.09(b). "Notice of Borrowing" shall have the meaning given to that term in Paragraph 2.02. "Notice of Interest Period Selection" shall have the meaning given to that term in Subparagraph 2.03(b)(ii). "Obligations" shall mean and include all loans, advances, debts, liabilities, and obligations, howsoever arising, owed by 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), 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 Borrower or payable by Borrower 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. "Pricing Grid" shall mean Schedule II. "Pricing Level" shall mean either Level 1, Level 2, Level 3, Level 4 or Level 5, which shall be determined for each Facility based upon FIL's corresponding Senior Debt Rating as set forth in the Pricing Grid as such Pricing Levels may change as provided 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: 13 (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 Loans (if any) outstanding under Facility B at such time to (ii) the sum of the Total Facility A Commitment and the aggregate principal amount of all Loans (if any) outstanding under Facility B 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, plus such Lender's pro rata share of the aggregate amount available for drawing under all Letters of Credit outstanding at such time, plus such Lender's pro rata share of the aggregate amount of all Reimbursement Obligations outstanding at such time to (ii) the aggregate principal amount of all Lenders' Loans outstanding at such time, plus the aggregate amount available for drawing under all Letters of Credit outstanding at such time, plus the aggregate amount of all Reimbursement Obligations 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). "Reimbursement Obligation" shall have the meaning given to that term in Subparagraph 2.01(b)(iii). "Reimbursement Payment" shall have the meaning given to that term in Subparagraph 2.01(b)(iii). "Reportable Event" shall have the meaning given to that term in ERISA and applicable regulations thereunder. "Required Facility A Lenders" shall mean, at any time, Facility A Lenders whose Proportionate Shares of Facility A equal or exceed fifty-one percent (51%) at such time, except at any time any Facility A Lender is a Defaulting Lender. (For the purposes of determining "Facility A Required Lenders" at any time any Facility A Lender is a Defaulting Lender, the "Proportionate Shares" of non-defaulting Facility A Lenders shall be determined excluding from the Total Facility A Commitment the aggregate amounts of the Defaulting Lenders' Facility A Commitments; and "Facility A Required Lenders" shall mean non- 14 defaulting Lenders whose Proportionate Shares as so determined then equal or exceed fifty-one percent (51%).) "Required Facility B Lenders" shall mean, at any time, Facility B Lenders whose Proportionate Shares of Facility B equal or exceed fifty-one percent (51%) at such time, except at any time any Facility B Lender is a Defaulting Lender. (For the purposes of determining "Facility B Required Lenders" at any time any Facility B Lender is a Defaulting Lender, the "Proportionate Shares" of non-defaulting Facility B Lenders shall be determined excluding from the Total Facility B Commitment the aggregate amounts of the Defaulting Lenders' Facility B Commitments; and "Facility B Required Lenders" shall mean non-defaulting Lenders whose Proportionate Shares as so determined then equal or exceed fifty-one percent (51%).) "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 and the Total Facility B Commitment the aggregate amounts of the Defaulting Lenders' Facility A Commitments and B Commitments; 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 Borrowing consisting of LIBOR Loans, 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. "Responsible Officer" shall mean, with respect to Borrower, Borrower's Chief Executive Officer, Chief Financial Officer, Treasurer, Vice President - Finance, Controller, Assistant Treasurer, Director of Treasury Operations, Corporate Secretary or any other officer of Borrower designated from time to time by its Board of Directors to execute and deliver any document, instrument or agreement hereunder. "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 (i) the Guaranty and (ii) all other instruments, agreements, certificates, opinions and documents delivered to Agent, the Issuing Bank or any Lender to secure the Obligations. "Senior Debt Rating" shall mean with respect to FIL as of any date of determination, the ratings applicable on such date to FIL's senior unsecured long-term debt. "Senior Managing Agent" shall have the meaning given to that term in clause (6) of the introductory paragraph hereof. "Significant Subsidiary" shall mean, at any time during any fiscal year of FIL, (i) any Subsidiary of FIL that (A) had revenues during the immediately preceding fiscal year equal to or greater than 15 $10,000,000, or (B) had net worth on the last day of the immediately preceding fiscal year equal to or greater than $10,000,000. "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) 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 (c) 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, collectively, (a) 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, (b) the Indenture dated as of June 29, 2000 by and between FIL and Chase Manhattan Bank and Trust Company, National Association with respect to up to $1,000,000,000, (c) the Indenture dated as of June 29, 2000 by and between FIL and Chase Manhattan Bank and Trust Company, National Association with respect to up to E 300,000,000, and (d) any other document, instrument or agreement evidencing the subordinated indebtedness 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. (All references in this Agreement and the other Credit Documents to Subsidiaries of FIL shall, unless otherwise indicated, include Borrower and its 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. "Total Assets" means, with respect to any date of determination, the total assets of FIL shown on FIL's consolidated balance sheet in accordance with GAAP on the last day of the fiscal quarter prior to the date of determination. "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 $266,666,666.67. "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 $133,333,333.33. "Type" shall mean, with respect to any Loan or any Borrowing at any time, the classification of such Loan or Borrowing by the type of interest rate it then bears, whether an interest rate based upon the Base Rate or LIBO Rate. "Unused" shall mean: 16 (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) (A) the aggregate principal amount of all Facility A Loans outstanding at such time, (B) the aggregate amount available for drawing under all Letters of Credit outstanding at such time, and (C) the aggregate amount of all Reimbursement Obligations outstanding at such time; (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 Loans outstanding at such time; and (c) With respect to the Total Combined Commitment at any time, the remainder of (i) the Total Combined Commitment at such time minus (ii) the sum of (A) the Unused Facility A Commitment as determined pursuant to clause (a) above, (B) the Unused Facility B Commitment as determined pursuant to clause (b) above, (C) the "Unused Facility A Commitment" under the FIL Credit Agreement as determined pursuant to clause (a) of the definition of "Unused" set forth in Paragraph 1.01 thereof and (D) the "Unused Facility B Commitment" under the FIL Credit Agreement as determined pursuant to clause (b) of the definition of "Unused" set forth in Paragraph 1.01 thereof. 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, Borrower, 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 Borrower, 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 shall be determined based on the March 31 fiscal year end consolidated pro forma financial statements of FIL; 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, Borrower, 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 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 Borrower, Lenders and Agent and supersede any and all prior agreements, negotiations, correspondence, understandings and communications among the parties, whether written 17 or oral, respecting the subject matter hereof (excluding the Agent's Fee Letter but including the commitment letter dated as of January 11, 2002 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 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 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 and Letters of Credit. (a) Facility A 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 Borrower from time to time during the period beginning on the Closing Date and ending on the Facility A Maturity Date its pro rata share of such revolving loans in Dollars as Borrower may request under Facility A (individually, a "Facility A Loan"); provided, however, that no Lender shall have any obligation to make a requested Facility A Loan if, after giving effect to such Loan, the aggregate principal amount of all such Lender's Facility A Loans then outstanding plus such Lender's Proportionate Share of the aggregate amount available for drawing 18 under all Letters of Credit outstanding at such time plus such Lender's Proportionate Share of the aggregate amount of all Reimbursement Obligations outstanding at such time would exceed such Lender's Facility A Commitment at such time. All Facility A 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 Borrowing to be comprised of a Facility A Loan made by each Facility A Lender equal to such Facility A Lender's Proportionate Share of such Facility A Borrowing. Except as otherwise provided herein, Borrower may borrow, repay and reborrow Facility A Loans until the Facility A Maturity Date. (ii) Scheduled Payments. Borrower shall repay the principal amount of the Facility A Loans in full on the Facility A Maturity Date. Borrower shall pay accrued interest on the unpaid principal amount of each Facility A 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 equal to or longer than three (3) months, every three (3) months); and (C) in the case of all Facility A Loans, upon prepayment (to the extent thereof) and at maturity. (b) Letter of Credit Subfacility. (i) Availability. Subject to the terms and conditions of this Agreement (including the amount limitations set forth in Paragraph 2.05), Issuing Bank agrees to issue on behalf of Borrower from time to time during the period beginning on the Closing Date and ending on the date thirty (30) days prior to the Facility A Maturity Date such standby letters of credit under Facility A as Borrower may request under this Subparagraph 2.01(b) (individually, a "Letter of Credit"); provided, however, as follows: (A) The aggregate amount available for drawing under all Letters of Credit at any time outstanding shall not exceed $50,000,000; (B) Each Letter of Credit shall be an irrevocable standby letter of credit in Dollars; (C) Each Letter of Credit shall expire on or prior to the date one year after the date of its issuance (but in no event later than the Facility A Maturity Date); and (D) Each Letter of Credit shall be in a form reasonably acceptable to Issuing Bank. Except as otherwise provided herein, Borrower may request Letters of Credit, cause or allow Letters of Credit to expire and request additional Letters of Credit until the date thirty (30) days prior to the Facility A Maturity Date. (ii) LC Application. Borrower shall request each Letter of Credit by delivering to Agent and Issuing Bank an irrevocable written application in a form reasonably acceptable to Issuing Bank, appropriately completed (an "LC Application"), which specifies, among other things: (A) The available amount of the requested Letter of Credit (which amount available (1) shall be equal to the maximum amount which may over time be drawn under the Letter of Credit and (2) shall not be less than $1,000,000); (B) The name and address of the beneficiary of the requested Letter of Credit; (C) The expiration date of the requested Letter of Credit; 19 (D) The documentary conditions for drawing under the requested Letter of Credit; and (E) The date of issuance for the requested Letter of Credit, which shall be a Business Day. Borrower shall give each LC Application to Issuing Bank at least two (2) Business Days before the proposed date of issuance of the requested Letter of Credit. Each LC Application shall be delivered by first-class mail or facsimile to Agent and Issuing Bank at their respective offices or facsimile numbers and during the hours specified in Paragraph 8.01; provided, however, that Borrower shall promptly deliver to Issuing Bank the original of any LC Application initially delivered by facsimile. Agent shall promptly notify each Facility A Lender of the contents of each LC Application. In the event of any conflict between the terms of this Agreement and the terms of any LC Application or any agreement (other than any Letter of Credit) related thereto (including, without limitation, terms with respect to fees and covenants), the terms of this Agreement shall control. (iii) Disbursement and Reimbursement. (A) Disbursement. Issuing Bank shall notify Borrower promptly upon receipt by Issuing Bank of the presentment of any demand for payment under any Letter of Credit, together with notice of the amount of such payment and the date such payment is to be made. Subject to the terms and provisions of such Letter of Credit and applicable law, Issuing Bank shall make such payment (a "Drawing Payment") to the appropriate beneficiary. Upon payment by Issuing Bank of each Drawing Payment, the remaining available amount under such Letter of Credit (if any) shall be reduced by the amount of such payment. (B) Time of Reimbursement. On the day each Drawing Payment is to be made by Issuing Bank, Borrower shall make or cause to be made to Issuing Bank a payment in the amount of such Drawing Payment (a "Reimbursement Payment"); provided, however, that if Borrower does not receive notice from Issuing Bank by 10:00 a.m. (California time) that a Reimbursement Payment is due, such Reimbursement Payment (together with interest thereon accruing at the Federal Funds Rate for each day from and including the date such Drawing Payment is made but excluding the date such Reimbursement Payment is made) shall instead be due on the next succeeding Business Day after Borrower receives such notice; provided, further, that Borrower shall make such Reimbursement Payment to, or cause such Reimbursement Payment to be made to, Agent for the benefit of the Facility A Lenders if, prior to the time such Reimbursement Payment is made, Issuing Bank has notified Borrower that it has requested the Facility Lenders pursuant to Subparagraph 2.01(b)(iv) to pay to Issuing Bank their respective Proportionate Shares of the Drawing Payment made by Issuing Bank. If any such Reimbursement Payment is made to Agent, Agent shall promptly pay to each Facility A Lender which has paid its Proportionate Share of the Drawing Payment, such Facility A Lender's Proportionate Share of the Reimbursement Payment and shall promptly pay to Issuing Bank the balance of such Reimbursement Payment. (C) Reimbursement Obligation Absolute. The obligation of Borrower to reimburse Issuing Bank or the Facility A Lenders, as the case may be, for Drawing Payments (such obligation, together with the obligation to pay interest thereon, to be referred to herein collectively as a "Reimbursement Obligation") shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under and without regard to any circumstances, including, without limitation (1) the passage of the Facility A Maturity Date, (2) any lack of validity or enforceability of any of the Credit Documents, (3) the existence of any claim, setoff, 20 defense or other right which Borrower may have at any time against any beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such beneficiary or transferee may be acting), Issuing Bank, Agent, any other Facility A Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or in the other Credit Documents, or in any unrelated transaction, (4) any breach of contract or dispute between Borrower, any beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such beneficiary or transferee may be acting), Issuing Bank, any Agent, any Facility A Lender or any other Person, (5) any demand, statement or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect, (6) payment by Issuing Bank under any Letter of Credit against presentation of a demand for payment which does not comply with the terms of such Letter of Credit, (7) any non-application or misapplication by any beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such beneficiary or transferee may be acting) of the proceeds of any drawing under such Letter of Credit or (8) any delay, extension of time, renewal, compromise or other indulgence or modification granted or agreed to by Issuing Bank, Agent or any Facility A Lender, with or without notice to or approval by Borrower, with respect to Borrower's indebtedness under this Agreement; provided, however, that this Subparagraph 2.01(b)(iii)(C) shall not abrogate any right which Borrower may have to seek to enjoin any drawing under any Letter of Credit or to recover damages from Issuing Bank pursuant to Subparagraph 2.01(c)(v). (iv) Facility A Lender Participations; Facility A Loan Funding. (A) Participation Agreement. Each Facility A Lender severally, unconditionally and irrevocably agrees with Issuing Bank to participate in the extension of credit arising from the issuance of each Letter of Credit in an amount equal to such Lender's Proportionate Share of the stated amount of such Letter of Credit from time to time, and the issuance of each Letter of Credit shall be deemed a confirmation by Issuing Bank of such participation in such amount. (B) Participation Funding. Issuing Bank may request the Facility A Lenders to fund their participations in Letters of Credit by paying to Issuing Bank all or any portion of any Drawing Payment made or to be made by Issuing Bank under any Letter of Credit. Issuing Bank shall make such a request by delivering to Agent (with a copy to Borrower), at any time after the drawing for which such payment is requested has been made upon Issuing Bank, a written request for such payment which specifies the amount of such Drawing Payment and the date on which such Drawing Payment is to be made or was made; provided, however, that Issuing Bank shall not request the Facility A Lenders to make any payment under this Subparagraph 2.01(b)(iv) in connection with any portion of a Drawing Payment for which Issuing Bank has been reimbursed from a Reimbursement Payment by Borrower unless such Reimbursement Payment has been thereafter recovered by Borrower or any other Person. Agent shall promptly notify each Facility A Lender of the contents of each such request and of such Facility A Lender's Proportionate Share of the applicable portion of such Drawing Payment. Promptly following receipt of such notice from Agent, each Facility A Lender shall pay to Agent, for the benefit of Issuing Bank, such Facility A Lender's Proportionate Share of the applicable portion of such Drawing Payment. (C) Funding Through Facility A Loans. If, at any time prior to the Facility A Maturity Date, any Reimbursement Obligations are outstanding, Agent may or, upon the written request of Issuing Bank (if Borrower is not then the subject of a bankruptcy proceeding), shall (subject to the terms and conditions of this Subparagraph 2.01(b)(iv)), initiate a Facility A Borrowing in an amount not exceeding the aggregate amount of such 21 outstanding Reimbursement Obligations and use the proceeds of such Facility A Borrowing to repay all or a portion of such Reimbursement Obligations. Agent shall initiate such a Facility A Borrowing by delivering to each Facility A Lender (with a copy to Borrower) a written notice which specifies the aggregate amount of outstanding Reimbursement Obligations, the amount of the Facility A Borrowing (which initially shall consist of Base Rate Loans), the date of such Facility A Borrowing and the amount of the Facility A Loan to be made by such Facility A Lender as part of such Facility A Borrowing. Each Facility A Lender shall make available to Agent funds in the amount of its Facility A Loan as provided in Subparagraph 2.10(a). After receipt of such funds, Agent shall promptly disburse such funds to Issuing Bank and the Facility A Lenders, as appropriate, in payment of the outstanding Reimbursement Obligations. (D) Obligations Absolute. Each Facility A Lender's obligations to fund its participations under this Subparagraph 2.01(b)(iv) shall be absolute, unconditional and irrevocable and shall not be affected by (1) the passage of the Facility A Maturity Date, (2) the occurrence or existence of any Default, (3) any failure to satisfy any condition set forth in Section III, (4) any event or condition which might have a Material Adverse Effect, (5) the failure of any other Facility A Lender to make any payment under this Subparagraph 2.01(b)(iv), (6) any right of offset, abatement, withholding or reduction which such Lender may have against Issuing Bank, Agent, any Facility A Lender or Borrower, (7) any event, circumstance or condition set forth in Subparagraph 2.01(b)(iii) or Subparagraph 2.01(b)(v), or (8) any other event, circumstance or condition whatsoever, whether or not similar to any of the foregoing; provided, however, that nothing in this Subparagraph 2.01(b)(iv) shall prejudice any right which any Facility A Lender may have against Issuing Bank for any action by Issuing Bank which constitutes gross negligence or willful misconduct. (v) Liability of Issuing Bank, Etc. Provided that Issuing Bank has used reasonable care in examining all documents presented to it in connection with a demand on any Letter of Credit, Borrower agrees that none of Issuing Bank, Agent or any Facility A Lender (nor any of their respective directors, officers or employees) shall be liable or responsible for (A) the use which may be made of any Letter of Credit or for any acts or omissions of any beneficiary or transferee thereof in connection therewith; (B) any reference which may be made to this Agreement or to any Letter of Credit in any agreements, instruments or other documents relating to obligations secured by such Letter of Credit; (C) the validity, sufficiency or genuineness of documents, or of any endorsement(s) thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged or any statement therein prove to be untrue or inaccurate in any respect whatsoever; (D) payment by Issuing Bank against presentation of documents which do not comply with the terms of any Letter of Credit, including failure of any documents to bear any reference or adequate reference to any Letter of Credit; or (E) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except only that Issuing Bank shall be liable to Borrower for acts or events described in clauses (A) through (E) above, to the extent, but only to the extent, of any damages suffered by Borrower (excluding consequential damages) which Borrower proves were caused by (1) Issuing Bank's willful misconduct or gross negligence in determining whether a drawing made under any Letter of Credit complies with the terms and conditions therefor stated in such Letter of Credit or (2) Issuing Bank's willful misconduct or gross negligence in failing to pay under any Letter of Credit after a drawing by the beneficiary thereof strictly complying with the terms and conditions of such Letter of Credit. Without limiting the foregoing, Issuing Bank may accept a drawing that appears on its face to be in order, without responsibility for further investigation. The determination of whether a drawing has been made under any Letter of Credit prior to its expiration or whether a drawing made under any Letter of Credit is in proper and sufficient form shall be made by Issuing Bank in its sole discretion, which determination shall be conclusive and binding upon Borrower to the extent permitted by law. Borrower hereby waives any right to object to any payment made under any Letter of Credit with regard to a drawing that is in the form provided in such Letter of 22 Credit but which varies with respect to punctuation, capitalization, spelling or similar matters of form. (vi) Reports of Issuing Bank. Issuing Bank shall, on a monthly basis if requested by Agent, provide to Agent such information regarding the Letters of Credit as Agent may reasonably request, including the Letters of Credit outstanding, the stated amounts of outstanding Letters of Credit, the expiration dates of outstanding Letters of Credit, the names of the beneficiaries of outstanding Letters of Credit, the amounts of unpaid Reimbursement Obligations and the amounts and times of Drawing Payments and Reimbursement Payments. Promptly upon receipt, Agent shall provide such information to the Facility A Lenders. (c) Facility B 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 Borrower from time to time during the period beginning on the Closing Date and ending on the Facility B Maturity Date its pro rata share of such revolving loans in Dollars as Borrower may request under Facility B (individually, a "Facility B Loan"); provided, however, that no Facility B Lender shall have any obligation to make a requested Facility B Loan if, after giving effect to such Loan, the aggregate principal amount of such Lender's Facility B Loans then outstanding would exceed such Lender's Facility B Commitment at such time. All Facility B 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 Borrowing to be comprised of a Facility B Loan made by each Facility B Lender equal to such Facility B Lender's Proportionate Share of such Facility B Borrowing. Except as otherwise provided herein, Borrower may borrow, repay and reborrow Facility B Loans until the Facility B Maturity Date. (ii) Scheduled Payments. Borrower shall repay the principal amount of the Facility B Loans in full on the Facility B Maturity Date. Borrower shall pay accrued interest on the unpaid principal amount of each Facility B 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 equal to or longer than three (3) months, every three (3) months); and (C) in the case of all Facility B Loans, upon prepayment (to the extent thereof) and at maturity. 2.02. Notice of Borrowing. Borrower shall request each Borrowing by delivering to Agent an irrevocable written notice in the form of Exhibit A, appropriately completed (a "Notice of Borrowing"), which specifies, among other things: (a) Whether such Borrowing is a Borrowing under Facility A or Facility B; (b) The principal amount of such Borrowing, which shall be in the minimum amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof; (c) Whether such requested Borrowing is to consist of Base Rate Loans or LIBOR Loans; (d) If such Borrowing is to consist of LIBOR Loans, the initial Interest Period selected by Borrower for such Borrowing in accordance with Subparagraph 2.03(b)(i); and (e) The date of such Borrowing, which shall be a Business Day. Borrower shall give each Notice of Borrowing to Agent at least three (3) Business Days before the date of the requested Borrowing in the case of a Borrowing consisting of LIBOR Loans and at least one (1) Business Day before the date of the requested Borrowing in the case of a Borrowing consisting of Base Rate Loans. Each Notice of Borrowing shall be signed by a Responsible Officer of Borrower and delivered by first-class mail or facsimile to 23 Agent at the office or facsimile number and during the hours specified in Paragraph 8.01; provided, however, that Borrower shall promptly deliver to Agent the original of any Notice of Borrowing initially delivered by facsimile. Agent shall promptly notify each Lender of the contents of each Notice of Borrowing. 2.03. Interest. (a) Interest Rates. Borrower 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 Loan is a Base Rate Loan, at a rate per annum on such Loan 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 Loan is a LIBOR Loan, at a rate per annum on such Loan equal at all times during each Interest Period for such Loan 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 Loans in each Borrowing shall, at any given time prior to maturity, bear interest at one, and only one, of the above rates. Each LIBOR 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 Interest Periods. The initial and each subsequent Interest Period selected by Borrower for any Borrowing consisting of LIBOR Loans 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 Borrowing shall end after the Facility A Maturity Date; and (D) no Interest Period of a Facility B Borrowing shall end after the Facility B Maturity Date. (ii) Notice of Interest Period Selection. 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 Borrowing consisting of LIBOR Loans of the Interest Period selected by Borrower for the next succeeding Interest Period for such Borrowing. 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 Borrower shall promptly deliver to Agent the original of any Notice of Interest Period Selection initially delivered by facsimile. If 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 Borrowings. Each Borrowing initially shall be of the type specified in the applicable Notice of Borrowing and, in the case of a LIBOR Loan, shall have an initial Interest Period as specified in such Notice of Borrowing. Thereafter, Borrower may elect to convert such Borrowing to a different type or to continue such Borrowing and, in the case of a LIBOR Loan, may elect Interest Periods therefor, all as provided in this Paragraph 2.03. Borrower may elect different options with respect to different portions of the affected Borrowing, in which 24 case each such portion shall be allocated ratably among Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. 2.04. Purpose. Borrower shall use the proceeds of the initial Loan to repay on the Closing Date all indebtedness outstanding under the Existing FIUI Credit Agreement, and thereafter Borrower shall use the proceeds of the Loans and for their respective working capital and general corporate needs (including capital expenditures). 2.05. Amount Limitations, Commitment Reductions, Etc. (a) Commitment Limitations. The aggregate principal amount of all Facility A Loans outstanding plus the aggregate amount available for drawing under all Letters of Credit outstanding at such time plus the aggregate amount of all Reimbursement Obligations outstanding at such time shall not exceed the Total Facility A Commitment at such time. The aggregate principal amount of all Facility B Loans outstanding at any time shall not exceed the Total Facility B Commitment at such time. (b) Reduction or Cancellation of Commitments. Upon five (5) Business Days prior written notice to Agent, Borrower 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) Borrower may not reduce the Total Facility A Commitment prior to the Facility A Maturity Date, if, after giving effect to such reduction, the aggregate principal amount of all Facility A Loans then outstanding plus the aggregate amount available for drawing under all Letters of Credit outstanding at such time plus the aggregate amount of all Reimbursement Obligations outstanding at such time would exceed the Total Facility A Commitment; (ii) Borrower may not reduce the Total Facility B Commitment prior to the Facility B Maturity Date if, after giving effect to such reduction, the aggregate principal amount of all Facility B Loans then outstanding would exceed the Total Facility B Commitment; (iii) Borrower may not cancel the Total Facility A Commitment prior to the Facility A Maturity Date, if, after giving effect to such cancellation, any Facility A Loan, Reimbursement Obligation or Letter of Credit would then remain outstanding; and (iv) Borrower may not cancel the Total Facility B Commitment prior to the Facility B Maturity Date, if, after giving effect to such cancellation, any Facility B Loan would then remain outstanding. Unless sooner terminated pursuant to this Agreement, the Facility A Commitments shall terminate on the Facility A Maturity Date and the Facility B Commitments shall terminate on the Facility B 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 shall be applied ratably to reduce each Facility A Lender's Facility A Commitment in accordance with Subparagraph 2.11(a)(i). Any reduction of the Total Facility B Commitment shall be applied to reduce each Facility B Lender's Facility B Commitment in accordance with Subparagraph 2.11(a)(ii). 25 2.06. Fees. (a) Agent's Fee. Borrower 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 (the "Agent's Fees"). (b) Commitment Fees. Borrower shall pay to Agent: (i) For the ratable benefit of Facility A Lenders as provided in Subparagraph 2.11(a)(vi), 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 Maturity Date; and (ii) For the ratable benefit of Facility B Lenders as provided in Subparagraph 2.11(a)(vii), 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 Maturity Date. Borrower shall pay the Commitment Fees in arrears on the last day of each March, June, September and December (commencing March 31, 2002) and on the Facility A Maturity Date and the Facility B 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 Maturity Date or the Facility B Maturity Date, as the case may be, on such prior date). (c) Letter of Credit Fees. (i) Letter of Credit Usage Fees. Borrower shall pay to Agent, for the ratable benefit of the Facility A Lenders as provided in Subparagraph 2.11(a)(vi), nonrefundable letter of credit fees for the Letters of Credit (the "LC Usage Fees") equal to the greater of (A) the applicable LC Usage Fee Rate (as such rate changes from time to time) on the daily average available amount of each Letter of Credit for the period beginning on the date such Letter of Credit is issued and ending on the date such Letter of Credit expires and (B) five hundred dollars ($500). Borrower shall pay the LC Usage Fees quarterly in arrears on the last day in each March, June, September and December (commencing March 31, 2002) and on the date the last Letter of Credit expires (or if a demand for payment is made on the last outstanding Letter of Credit on a date prior to the date the last Letter of Credit expires, on such prior date). (ii) Letter of Credit Issuance Fees. Borrower shall pay to Agent, for the sole benefit of Issuing Bank, nonrefundable issuance fees for the Letters of Credit (the "LC Issuance Fees") equal to the greater of (A) 1/8th of one percent (0.125%) per annum on the daily average undrawn amount of each Letter of Credit for the period beginning on the date such Letter of Credit is issued and ending on the date such Letter of Credit expires and (B) one hundred fifty dollars ($150). Borrower shall pay the LC Issuance Fees for each Letter of Credit quarterly in arrears on the last day in each March, June, September and December (commencing March 31, 2002) and on the date the last Letter of Credit expires (or if a demand for payment is made on the last outstanding Letter of Credit on a date prior to the date the last Letter of Credit expires, on such prior date). (iii) Other Letter of Credit Fees. In addition to the LC Usage Fees and the LC Issuance Fees, Borrower shall pay to Agent, for the sole benefit of Issuing Bank, other standard fees of Issuing Bank for drawings under, transfers of and amendments to any Letter of Credit and other administrative actions performed by Issuing Bank in connection with any Letter of Credit, payable at such times and in such amounts as are consistent with Issuing Bank's standard fee policy at the time of such amendment or other action. 26 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), 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 on a day other than the last day of an Interest Period for such LIBOR Loan, all amounts payable to such Lender pursuant to Paragraph 2.14. (b) Optional Prepayments. At its option, Borrower may prepay, in whole or in part, any Borrowing made to it, provided that: (i) 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 Borrowing consisting of LIBOR Loans; and (B) not less than one (1) Business Day prior to any prepayment of a Base Rate Borrowing; 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 Loans then outstanding plus the aggregate amount available for drawing under all Letters of Credit outstanding at such time plus the aggregate amount of all Reimbursement Obligations outstanding at such time exceeds any limitations set forth in Subparagraphs 2.05(a) or 2.05(c), Borrower shall immediately(A) prepay Loans then outstanding and/or pay any Reimbursement Obligations then outstanding to the extent necessary to eliminate such excess, and (B) to the extent any excess still remains, provide to Agent cash collateral in the amount of such excess. Agent shall hold any such cash in a non-interest bearing account as collateral for the Obligations. Borrower hereby grants to Agent for the benefit of the Lenders, a security interest in such funds and in such account. (ii) If, at any time, the aggregate principal amount of all Facility B Loans then outstanding exceeds any limitations set forth in Subparagraphs 2.05(a) or 2.05(c), Borrower shall immediately prepay such Facility B 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 or LIBOR Borrowings designated by Borrower. 2.08. Other Payment Terms. (a) Place and Manner. (i) Borrower 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 Applicable Lending Office. (ii) Borrower 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. 27 (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) Borrower shall pay principal of, interest on and all other amounts related to each Borrowing in Dollars. Borrower 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 Borrower 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 Borrower 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, Borrower 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 Borrower 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 Borrower 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 Borrower under this Agreement or the other Credit Documents (including, without limitation, principal or interest payable on any Loan, any Reimbursement Payments or interest thereon, any fees or other amounts) remains unpaid after such amount is due, 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 and unpaid Reimbursement Obligations. (f) Failure to Pay Agent. Unless Agent shall have received notice from Borrower at least one (1) Business Day prior to the date on which any payment is due to Lenders hereunder that Borrower will not make such payment in full, Agent shall be entitled to assume that 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 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. 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. 28 2.09. Loan Accounts; Notes. (a) Loan Accounts. The obligation of 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 and amount of each Loan made by such Lender, (ii) the interest rates applicable to each such Loan thereof and the effective dates of all changes thereto, (iii) the Interest Period for each LIBOR Loan, (iv) the date and amount of each principal and interest payment on each Loan and (v) such other information as such Lender may determine is necessary for the computation of principal and interest payable to it by 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 Borrower's Obligations hereunder. The Loan Accounts shall constitute prima facie evidence of the matters noted therein. (b) Notes. If any Lender so requests, such Lender's Loans under each Facility shall be evidenced by promissory notes in the form of Exhibit B (individually, a "Note"), which shall be (i) payable to the order of such Lender, (ii) dated the Closing Date, and (iii) otherwise appropriately completed. 2.10. Loan Funding. (a) Lender Funding and Disbursements to Borrower. 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 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 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 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, Borrower shall repay such amount to Agent, on demand, together with interest thereon, for each day from the date such amount was disbursed to 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. 29 2.11. Pro Rata Treatment. (a) Borrowings, Commitment Reductions, Etc. Except as otherwise provided herein: (i) Each Borrowing under Facility A, each participation in each Letter of Credit 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 Reimbursement Payment shall be shared among the Facility A Lenders (including Issuing Bank) which made or funded the applicable Drawing Payment pro rata according to the respective amounts of such Drawing Payment so made or funded by such Lenders; (vi) Each payment of Facility A Commitment Fees and LC Usage Fees shall be shared among Facility A Lenders (except for Defaulting Lenders but including, with respect to LC Usage Fees, Issuing Bank in its capacity as a Lender) 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 Maturity Date, the date upon which such Facility A Lender so became a Facility A Lender; (vii) 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 Maturity Date, the date upon which such Facility B Lender so became a Facility B Lender; (viii) 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 (ix) 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 (or, with respect to the Facility A Lenders, Reimbursement Obligations) such Lender shall forthwith purchase from such other Lenders such participations in their Loans (or, with respect to the Facility A Lenders, Reimbursement Obligations) 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 30 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. 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 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, Agent shall determine (which determination shall be conclusive and binding upon Borrower 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 does not adequately and fairly reflect the cost to Lenders of making or maintaining such Borrowing, Agent shall immediately give notice of such condition to Borrower and the applicable Lenders. After the giving of any such notice and until Agent shall otherwise notify Borrower that the circumstances giving rise to such condition no longer exist, Borrower's right to obtain, continue or convert to Borrowings at the LIBO Rate shall be suspended. Any LIBOR Borrowings outstanding at the commencement of any such suspension shall be repaid at the end of the then current Interest Period for such Borrowings 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, such Lender shall immediately notify Agent and Borrower of such Change of Law. Upon receipt of such notice, (i) Borrower's right to obtain, continue or convert to LIBOR Loans shall be suspended until such time as Agent shall notify Borrower and the applicable Lenders that the circumstances giving rise to such suspension no longer exist, and (ii) Borrower shall, if so requested by such Lender, immediately repay such LIBOR Loans if such Lender shall notify Borrower that such Lender may not lawfully continue to fund and maintain such LIBOR Loans . Any prepayment of LIBOR Loans made pursuant to the preceding sentence prior to the last day of an Interest Period for such LIBOR Loans 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 shall change the basis of taxation of payments by Borrower to any such Lender on such a LIBOR Loan, or in respect to such a LIBOR Loan, 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, the jurisdiction of its Applicable Lending Office, or a jurisdiction in which such Participant is doing business without regard to the transactions contemplated by this Agreement); 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), 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 31 (iii) Shall impose on any Lender any other condition related to any LIBOR Loan, any Letter of Credit 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, any Letter of Credit or its Commitments or to reduce any amount receivable by such Lender hereunder; then Borrower 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 Borrower 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 Borrower receives notice of such increased costs or reduced amounts from the demanding party within twelve (12) months after such increased costs or reduced amounts have been incurred or realized accompanied by a certificate executed by an officer of the applicable Lender setting forth in reasonable detail the basis and calculation of the amount of such increased costs or reduced amounts, which certificate shall constitute prima facie evidence of such costs or amounts. The obligations of Borrower 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 Letters of Credit, 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), Borrower 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 Borrower 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 Borrower receives notice of such increased costs from the demanding party within twelve (12) months after such increased costs been incurred or realized accompanied by a certificate executed by an officer of the applicable Lender setting forth in reasonable detail the basis and calculation of the amount of such increased costs, which certificate shall constitute prima facie evidence of such costs. The obligations of Borrower 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 (ii) any Change of Law or other event or condition which will obligate Borrower to pay any amount pursuant to Subparagraph 2.12(c) or Subparagraph 2.12(d) shall notify Borrower 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 Borrower 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 to which Borrower is 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 Borrower is 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 Borrower 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 32 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 Non-Excluded Taxes are payable by Borrower, as promptly as possible thereafter, Borrower 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 Borrower showing payment thereof. If Borrower fails 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, Borrower 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 Borrower under this Paragraph 2.13 (i) shall be subject to the mitigation provisions contained in Paragraph 8.03 and (ii) shall survive the payment and performance of the Obligations and the termination of this Agreement. (b) Withholding Exemption Certificates. On or prior to the Closing Date (or, with respect to any Lender which is not a party to this Agreement on the Closing Date, on or prior to the date any other Lender becomes a Lender hereunder), each Lender which is not organized under the laws of the United States of America shall notify Borrower whether 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 Applicable Lending Office without deduction or withholding of any income taxes imposed (or with reduced deduction or withholding of any such taxes) imposed by the jurisdiction of such Borrower's Applicable Payment Office and promptly 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 Borrower and Agent of any change of circumstances (including any change in any treaty, law or regulation or any change of such Lender's Applicable Lending Office) which would prevent such Lender from receiving such payments hereunder without any deduction or withholding of such taxes (or with reduced deduction or withholding of any 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 Borrower and Agent a new certificate or form, certifying that such Lender is entitled to receive such payments under this Agreement without deduction or withholding of such taxes(or with reduced deduction or withholding of any such taxes). If any Lender fails to provide to Agent and Borrower pursuant to this Subparagraph 2.13(b) (or, in the case of an Assignee Participant, Subparagraph 8.05(b)) any notifications, certificates or other evidence required by such provision, such Lender shall not be entitled to any indemnification under Subparagraph 2.13(a) for any Non-Excluded Taxes imposed on such Lender primarily as a result of such failure. (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 file any certificate or document requested in writing by 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 Borrower shall (a) repay, prepay or convert any LIBOR Loan on any day other than the last day of an Interest Period therefor (whether a scheduled payment, an optional 33 prepayment or conversion, a mandatory prepayment or conversion, a payment upon acceleration or otherwise), (b) fail to borrow any LIBOR Loan after delivering the Notice of Borrowing therefor to Agent (whether as a result of the failure to satisfy any applicable conditions or otherwise) or (c) fail to pay when due any principal or interest on any LIBOR Loan, Borrower shall, within ten (10) Business Days after demand of such Lender, reimburse such Lender for and hold such Lender harmless from all reasonable break funding costs and losses incurred by such Lender as a result of such repayment, prepayment, conversion or failure; provided, however, that Borrower 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 Borrower receives notice of such costs or losses from the demanding party within twelve (12) months after such costs or losses have been incurred or realized. Borrower understands 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. Each Lender demanding payment under this Paragraph 2.14 shall deliver to Borrower, with a copy to Agent, a certificate of an officer of such demanding party 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 Borrower shall constitute prima facie evidence of such costs and losses. The obligations of Borrower 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 a Guaranty in the form of Exhibit C (the "Guaranty"), duly executed by FIL and all Eligible Material Subsidiaries and other Subsidiaries of FIL that have executed the Guaranty or otherwise elected to become a party thereto, with such changes thereto as may be appropriate based on the law of the applicable jurisdictions. In addition, as soon as practicable and in any event within forty-five (45) days of the Closing Date, FIL shall deliver, or cause to be delivered, to Agent, (A) a Subsidiary Joinder in the form of Attachment 1 to the Guaranty, appropriately completed and duly executed by each of (i) FLX Cyprus Limited, (ii) Flextronics (Malaysia) Sdn Bhd and (iii) IEC Holdings Ltd., (B) favorable written opinions, addressed to Agent for the benefit of the Lenders, covering such legal matters as Agent and the Lenders may reasonably request and otherwise in form and substance satisfactory to Agent and the Lenders, from counsel for each of the above-referenced Subsidiaries and (C) such other instruments, agreements, certificates and documents as Agent may reasonably request to secure, maintain, protect and evidence the obligations of such Subsidiary under the Guaranty. (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, Borrower promptly shall deliver, or cause to be delivered, to Agent, within sixty (60) days of becoming aware 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, or shall not have become, an Eligible Material Subsidiary, Agent shall if requested by FIL release such Subsidiary from its obligations under the Guaranty. (c) Further Assurances. Borrower shall deliver, and shall cause the Guarantors to deliver, to Agent such other guaranties, guaranty supplements and other instruments, agreements, certificates, opinions and documents as Agent and any Lender 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. Borrower 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, Borrower covenants and agrees that it will ensure that the aggregate revenues of the Subsidiaries that have 34 executed and delivered the Guaranty pursuant to this Agreement and the FIL Credit Agreement for each year will equal or exceed 53% 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 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 Borrower, 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 Borrower seeks to exercise such right, they must do so within sixty (60) days after 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 Borrower; 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 and Assumption 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 and of Issuing Bank to issue the initial Letter of Credit 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 Each Credit Event. The occurrence of each Credit Event (including the initial Borrowing and the issuance of the initial Letter of Credit) is subject to the further conditions that: (a) Borrower shall have delivered to Agent (and Issuing Bank, in the case of an LC Application) the Notice of Borrowing, Notice of Interest Period Selection or LC Application, as the case may be, for such Credit Event in accordance with this Agreement; and (b) With respect to each Credit Event involving the making of a Loan or the issuance of a Letter of Credit, 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 FIL, Borrower and FIL's 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 Borrower to Agent of each Notice of Borrowing and each LC Application shall be deemed to be a representation and warranty by 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. 3.03. Covenant to Deliver. Borrower agrees (not as a condition but as a covenant) to deliver to Agent (as applicable) each item required to be delivered to Agent as a condition to the occurrence of any Credit Event if 35 such Credit Event occurs. Borrower expressly agrees that the occurrence of any such Credit Event prior to the receipt by Agent of any such item (and Issuing Bank, in the case of an LC Application) shall not constitute a waiver by Agent or any Lender of Borrower's obligation to deliver such item. SECTION IV. REPRESENTATIONS AND WARRANTIES. 4.01. Borrower's Representations and Warranties. In order to induce Agent and Lenders to enter into this Agreement, Borrower hereby represents and warrants to Agent and Lenders as follows: (a) Due Incorporation, Qualification, etc. Each of Borrower and its 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 Borrower and each Guarantor 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 Borrower and each Guarantor 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 Borrower and each Guarantor 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. (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 Borrower and each Guarantor and the performance or consummation of the transactions contemplated thereby, except such as (i) have been made or obtained and are in full force and effect or (ii) are being made or obtained in a timely manner and once made or obtained will be in full force and effect. (f) No Violation or Default. None of FIL, Borrower, any other Guarantor any of FIL's other 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, 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, none of FIL, Borrower, any other Guarantor or any of FIL's other Subsidiaries (A) has violated any Environmental Laws, (B) to the knowledge of Borrower, any Guarantor or any of FIL's Subsidiaries, has any liability under any Environmental Laws or (C) has received notice or other communication of an investigation or, to the knowledge of Borrower, any Guarantor or any of FIL's 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. 36 (g) Litigation. No actions (including derivative actions), suits, proceedings or investigations are pending or, to the knowledge of Borrower, threatened against Borrower, any Guarantor or any of FIL's Subsidiaries at law or in equity in any court or before any other Governmental Authority which (i) based upon the written advice of such Person's outside legal counsel, is reasonably likely to be determined adversely and if so adversely determined 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 Borrower or any Guarantor of the Credit Documents or the transactions contemplated thereby. (h) Title; Possession Under Leases. Borrower, each Guarantor and each of FIL's Subsidiaries own and have good and indefeasible 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 Borrower, each Guarantor and FIL's 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, 2001, furnished by FIL to Agent prior to the date hereof, or in the Financial Statements delivered to Agent pursuant to (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 FIL, 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 materially exceed the aggregate value of the assets of such plan. Neither FIL, Borrower nor any ERISA Affiliate has any material 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 FIL, Borrower or any ERISA Affiliate of any material liability, fine or penalty. Each Employee Benefit Plan, related trust agreement, arrangement and commitment of FIL, Borrower or any ERISA Affiliate is legally valid and binding and is in all material respects 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. Neither FIL, Borrower nor any ERISA Affiliate nor, to the knowledge or Borrower, 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 FIL, Borrower nor any ERISA Affiliate contributes to or has any material contingent obligations to any Multiemployer Plan. Neither FIL, Borrower nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any 37 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 FIL, 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 all material respects, 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, except to the extent that is not reasonably and substantially likely to have a Material Adverse Effect, 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 except to the extent that is not reasonably and substantially likely to have a Material Adverse Effect. Each Foreign Plan reasonably complies in all material respects with all applicable Governmental Rules. (k) Other Regulations. None of FIL, 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. FIL, Borrower and each of FIL's Subsidiaries own, license or otherwise have the full right to use, under validly existing agreements, without known conflict with any rights of others, all 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, except such patents, licenses, trademarks, trade names, trade secrets, service marks, copyrights and all rights with respect thereto which if not validly owned or used would not be reasonably likely to have a Material Adverse Effect. (m) Governmental Charges. FIL, Borrower and each of FIL's Subsidiaries have filed or caused to be filed all material tax returns, reports and declarations which are required to be filed by them. FIL, Borrower and each of FIL's 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. Borrower does not own any Margin Stock which, in the aggregate, would constitute a substantial part of the assets of Borrower, and no proceeds of any Loan and no Letter of Credit 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) (on the Closing Date as of December 31, 2001 and as thereafter updated on a quarterly basis by Borrower 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 Significant Subsidiaries, its jurisdiction of organization, the percentages of shares 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 38 USA, Inc., Flextronics International Latin America (L) Ltd., Flextronics International Sweden AB, Flextronics International Kft. and Flextronics Hungaria Kft. 1. (p) Solvency, Etc. FIL, Borrower, each Guarantor and each Material Subsidiary 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. Borrower has taken all actions necessary for the Obligations to constitute "Designated Senior Debt" for the purposes of and as defined in the Subordinated Indenture. Borrower 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. Except as otherwise disclosed by a Borrower to the Agent from time to time, Borrower does not have actual knowledge of any requirement under any Governmental Rule to make any deduction or withholding of any nature whatsoever from any payment required to be made by 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 relevant jurisdiction. (s) Foreign Subsidiaries. (i) No Immunities, etc. Each Foreign Subsidiary that is a 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, if applicable in the relevant jurisdiction, 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 execution or notarization, as has been made or is not required to be made until this Agreement, 39 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 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 Borrower or such 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 (A) 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 FIL, Borrower, the Guarantors and FIL's 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, FIL's and Borrower's best estimates of the future performance of FIL, Borrower, the Guarantors and FIL's Subsidiaries. 4.02. Reaffirmation. Borrower shall be deemed to have reaffirmed, for the benefit of the Lenders and Agent, each representation and warranty contained in Paragraph 4.01 on and as of the date of each Credit Event involving the making of a Loan or the issuance of a Letter of Credit (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 Borrower of all Obligations, Borrower will comply, and will cause compliance, with the following affirmative covenants, unless Required Lenders shall otherwise consent in writing: (a) Financial Statements, Reports, etc. 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 fifty-five (55) 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 one hundred (100) 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; 40 (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 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 FIL and Borrower 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 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 FIL, Borrower or any of FIL's Subsidiaries involving potential monetary damages payable by FIL, Borrower or any of FIL's 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 FIL and Borrower setting forth details of such event, condition or Default and the action which FIL and Borrower propose 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 FIL, Borrower or any of FIL's 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 FIL, Borrower or any of FIL's Subsidiaries to its security holders; (vi) As soon as possible and in no event later than (A) fifty-five (55) days after the last day of each fiscal quarter (or one hundred (100) days in the case of the last fiscal quarter of each fiscal year), written notice of any new Significant Subsidiary acquired or established 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 Borrower changes its legal name or the address of its chief executive office, written notice setting forth 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, Borrower or FIL's Subsidiaries, and compliance by Borrower with the terms of this Agreement and the other Credit Documents as Agent on behalf of itself or one or more Lenders 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. 41 (b) Books and Records. FIL, Borrower and FIL's other 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. FIL, Borrower and FIL's other 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 FIL, Borrower and FIL's other Subsidiaries, to examine the books and records of FIL, Borrower and FIL's other Subsidiaries and make copies thereof and to discuss the affairs, finances and business of FIL, Borrower and FIL's other 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. FIL, Borrower and FIL's other 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) Taxes, Governmental Charges and Other Indebtedness. FIL, Borrower and FIL's other 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 FIL, Borrower or FIL's other 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 taxes, Governmental Charges or 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. Borrower shall use the proceeds of the Loans only for the respective purposes set forth in Section II. Borrower shall not use any part of the proceeds of any Loan or any Letter of Credit, 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 Borrower, any Lender or Agent in a violation of Regulations T, U or X issued by the Federal Reserve Board. (g) General Business Operations. FIL, Borrower and FIL's other 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. Borrower shall take, or cause to be taken, all actions necessary to ensure that the Obligations of Borrower are and continue to rank at least pari passu in right of payment with all other unsecured and unsubordinated Indebtedness of Borrower. 5.02. Negative Covenants. Until the termination of this Agreement and the satisfaction in full by Borrower of all Obligations, Borrower will comply, and will cause compliance, with the following negative covenants, unless Required Lenders shall otherwise consent in writing: 42 (a) Indebtedness. None of FIL, Borrower nor any of FIL's other 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 FIL, Borrower or any of FIL's other Subsidiaries; (ii) (A) Indebtedness under Capital Leases or under purchase money loans incurred by FIL, Borrower or any of FIL's other Subsidiaries to finance the acquisition, construction, development or improvement by such Person of real property, fixtures, or equipment or other tangible assets provided that in each case (1) such Indebtedness is incurred by such Person at the time of, or not later than one hundred twenty (120) 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, together with initial or successive refinancings thereof, provided that (A) the principal amount of any such refinancing does not exceed the principal amount of the Indebtedness being refinanced (except to the extent necessary to pay fees, expenses, underwriting discounts and prepayment penalties in connection therewith) and (B) the other terms and provisions of any such refinancing with respect to maturity, redemption, prepayment, default and subordination are no less favorable in any material respect to Lenders than the Indebtedness being refinanced; (iv) Indebtedness of Borrower or any Guarantor to FIL or any Eligible Material Subsidiary or Indebtedness of any Eligible Material Subsidiary to FIL, Borrower, any other Eligible Material Subsidiary or any Guarantor, 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 FIL, Borrower or any of FIL's other 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 FIL, Borrower or any of FIL's other 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) (but only to the extent such Liens are on the assets so financed, the proceeds thereof and any improvements thereon), (iii), (iv) or (v) of Subparagraph 5.02(a); (ii) Liens in favor of any of FIL, Borrower, any Eligible Material Subsidiary or any Guarantor on all or part of the assets of Subsidiaries of FIL, Borrower, any Eligible Material Subsidiary or any Guarantor securing Indebtedness owing by Subsidiaries of any of FIL, Borrower, any Eligible Material Subsidiary or any Guarantor, as the case may be, to any of FIL, Borrower or to such other Eligible Material Subsidiary or Guarantor; (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 (taking into account applicable grace periods), or which are 43 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 FIL, Borrower or any of FIL's other 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, landlords, 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 (taking into account applicable grace periods), 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 FIL, Borrower or any of FIL's other Subsidiaries is a party (including "synthetic" leases), and other minor Liens or encumbrances none of which interferes materially with the use of the property, in each case which 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 arising out of cash management, netting or set off arrangements made between banks or financial institutions and FIL or any of its Subsidiaries in the ordinary course of business, or over any asset held with a clearing house, or other Liens comprising rights of set-off arising by operation of law or by agreement; (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; (xi) rights of third parties in equipment or inventory consigned to or by, or otherwise owned by such third party and which is being stored on property owned or leased by, FIL, Borrower or any of FIL's other Subsidiaries; (xii) Liens created pursuant to attachment, garnishee orders or other process in connection with pre-judgment court proceedings; and (xiii) precautionary Liens over assets securitized in connection with any securitized transaction permitted under Subparagraph 5.02 (c). (c) Asset Dispositions. None of FIL, Borrower or any of FIL's other 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 securitization or 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 44 receivable originated by FIL and its Subsidiaries during such fiscal quarter; (iii) sales or transfers 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 or transferred 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 damaged, obsolete or worn out assets and scrap, in each case in the ordinary course of business; (v) sales or transfers of assets or property to FIL, Borrower or any Subsidiary from FIL, Borrower or any Subsidiary; (vi) assets sold and leasedback by FIL or its Subsidiaries in the ordinary course of business; and (vii) dispositions of Investments permitted under Subparagraph 5.02(e) for a purchase price that is not less than fair market value of the Investments being sold. (d) Mergers, Acquisitions, Etc. None of FIL, Borrower or any of FIL's other 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) FIL, Borrower and any of FIL's other Subsidiaries may merge with each other, provided that (A) in any such merger involving Borrower, 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) FIL, Borrower and FIL's other 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 FIL, Borrower or such Subsidiary or (2) any business reasonably related thereto; and (C) FIL, Borrower or such Subsidiary possess the power to direct or cause the direction of the management and policies of such Person. (e) Investments. None of FIL, Borrower or any of FIL's other 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 or committed on the Closing Date; (iii) Investments received by FIL, Borrower and FIL's other 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 FIL, Borrower, the Material Subsidiaries and the Guarantors directly or indirectly in each other; 45 (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 FIL, Borrower and FIL's other 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); and (ix) 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, Borrower and FIL's other Subsidiaries for all such Investments in any fiscal year (without duplication) does not exceed the sum of (1) ten percent (10%) of the total assets of FIL and its Subsidiaries at the end of the immediately preceding fiscal quarter, plus (2) seventy-five percent (75%) of the Net Proceeds received from the issuance by FIL of any Equity Securities of the type described in clause (a) of the definition of "Equity Securities" during calendar year 2001 or thereafter. (f) Dividends, Redemptions, Etc. None of FIL, Borrower or any of FIL's other 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 FIL, Borrower or any of FIL's other 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 FIL may pay dividends to or repurchase its capital stock from such Subsidiary's parent; 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 FIL, Borrower or any of FIL's other 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 FIL, Borrower 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 46 subject FIL, 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 FIL, Borrower or any of FIL's other 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 FIL, Borrower or any of FIL's other Subsidiaries shall enter into any Contractual Obligation with any Affiliate (other than FIL, Borrower or one of FIL's other Subsidiaries) or engage in any other transaction with any such Affiliate except (A) upon terms at least as favorable to FIL, 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, 2001, 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), or (B) in connection with transactions made pursuant to Subparagraphs 5.02(d) or 5.02(e). (j) Accounting Changes. None of FIL, Borrower or any of FIL's other 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 FIL, Borrower or any of FIL's other Subsidiaries will enter into any Contractual Obligation (excluding this Agreement and the other Credit Documents) that restricts the ability of any wholly-owned Subsidiary of FIL or any other Subsidiary of FIL that had revenues during the immediately preceding fiscal year equal to or greater than $25,000,000 or net worth on the last day of the immediately preceding fiscal year equal to or greater than $25,000,000, 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 Borrower or to any Subsidiary of such Subsidiary; provided, however, that the foregoing shall not apply to (i) restrictions or conditions imposed by any Governmental Rule or (ii) customary restrictions and conditions contained in (A) licenses, leases and franchise agreements or (B) relating to the sale of a Subsidiary pending such sale so long as such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is otherwise permitted hereunder. (l) Senior Debt. None of FIL, Borrower or any of FIL's other 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 Fifty Million Dollars ($50,000,000) in the aggregate of loans or other debt or synthetic lease financing. 5.03. Financial Covenants. Until the termination of this Agreement and the satisfaction in full by Borrower of all Obligations, Borrower will cause FIL to comply 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. 47 (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. (c) Net Worth. FIL shall not permit its Net Worth on the last day of any fiscal quarter (such date to be referred to herein as a "determination date") to be less than the sum on such determination date of the following: (i) $2,982,000,000; plus ---- (ii) Fifty percent (50%) of FIL's consolidated quarterly net income (ignoring any quarterly losses) for each fiscal quarter ending after December 31, 2001 through and including the fiscal quarter ending on the determination date; plus ---- (iii) Fifty percent (50%) of the Net Proceeds of all Equity Securities issued by FIL and its Subsidiaries (to Persons other than FIL or its Subsidiaries) during any period after the Closing Date and ending on the determination date. 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. Borrower shall (i) fail to pay when due any principal of any Loan or any Reimbursement Payment, or (ii) except at final maturity when no grace period shall apply, fail to pay within five (5) 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. FIL, Borrower or any of FIL's other 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. FIL, Borrower or any of FIL's other 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 thirty (30) Business Days after the earlier of (i) Borrower's written acknowledgement of such failure and (ii) Agent's or any Lender's written notice to Borrower of such failure; provided, however, that in the event that such failure cannot reasonably be cured within such thirty (30) day period, and such failure relates to the observance or performance of any of the covenants, obligations, conditions or agreements contained in Subparagraph 4.01(f) hereof with respect to Hazardous Materials or any Environmental Laws or any judgment, consent decree, settlement or compromise in respect of any claim based thereon, it shall not constitute an Event of Default hereunder so long as Borrower shall have commenced to cure such failure within such thirty (30) day period and shall thereafter diligently pursue such cure to completion, provided further that such failure shall in all events be cured within one hundred and eighty days (180) days after Agent's or such Lender's written notice thereof; or (d) Representations and Warranties. Any representation, warranty, certificate, information or other statement (financial or otherwise) made or furnished by or on behalf of 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 48 delivered to Borrower 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) 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 Borrower that such representation, warranty, certificate, information or other statement was false, incorrect, incomplete or misleading in any material respect; or (e) Cross-Default. (i) FIL, Borrower, any Guarantor or any Material Subsidiary 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 $40,000,000 or the effect of such failure is to cause, or permit the holder or holders thereof to cause, Indebtedness of FIL, Borrower, any Guarantor and any Material Subsidiary (other than the Obligations) in an aggregate amount exceeding $40,000,000 to become due (whether at scheduled maturity, by required prepayment, upon acceleration or otherwise); or (ii) FIL, Borrower, any Guarantor or any Material Subsidiary 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 FIL, Borrower, any Guarantor and any Material Subsidiary (other than the Obligations) in an aggregate amount exceeding $40,000,000 to become due (and/or to be secured by cash collateral other than cash collateral obligations not arising from an event of default under any agreement or instrument relating to Indebtedness incurred in connection with a synthetic lease transaction or letters of credit); or (f) Insolvency, Voluntary Proceedings. FIL, Borrower or any Significant Subsidiary 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, 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 FIL, Borrower or any Significant Subsidiary 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, Borrower or any Significant Subsidiary 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 FIL, Borrower and/or FIL's other Subsidiaries to pay an aggregate amount of $25,000,000 or more (exclusive of amounts covered by insurance issued by an insurer not an Affiliate of FIL or Borrower and otherwise satisfying the requirements set forth in Subparagraph 5.01(d) to which the insurer does not dispute coverage) shall be rendered against FIL, Borrower and/or FIL's other 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 FIL, Borrower or any of FIL's other 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 49 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 FIL, Borrower or any other Guarantor not to be, a legal, valid and binding obligation of FIL, Borrower or any other Guarantor 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 (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 Borrower, (a) terminate the Commitments and the obligations of Lenders to make Loans and to participate in Letters of Credit and of Issuing Bank to issue Letters of Credit, and/or (b) declare all outstanding Obligations payable by Borrower 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 and (c) direct Borrower to deliver to Agent funds in an amount equal to the aggregate stated amount of all Letters of Credit. 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 and to participate in Letters of Credit, and of the Issuing Bank to issue Letters of Credit shall automatically terminate and (2) all outstanding Obligations payable by Borrower 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 FIL, Borrower or any of FIL's other 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 50 by FIL, Borrower or any other Guarantor 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 FIL, Borrower or any other Guarantor 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 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 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 Borrower 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 FIL, Borrower and FIL's other 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 FIL, Borrower or any other Guarantor 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 FIL, Borrower or any of FIL's Subsidiaries; (b) have any duty or responsibility to provide any Lender with any credit or other information concerning FIL, Borrower or any of FIL's Subsidiaries which may come into the possession of Agent, except for notices, reports and other documents 51 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 FIL, Borrower, any of FIL's Subsidiaries or any officer, employee or agent of FIL, Borrower or any of FIL's Subsidiaries 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, or (iii) any failure by FIL, Borrower or any other Guarantor 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 Borrower 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 Borrower; provided, however, that Borrower 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, at which point (and not earlier) 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 and Issuing Bank in their Individual Capacity. Agent, Issuing Bank and their respective affiliates may make loans to, accept deposits from and generally engage in any kind of banking or other business with FIL, Borrower and any of FIL's other Subsidiaries and affiliates as though Agent was not Agent hereunder and Issuing Bank was not Issuing Bank hereunder . With respect to Loans, if any, made by Agent in its capacity as a Lender and Letters of Credit, if any, issued by Issuing Bank in its capacity as Issuing Bank, Agent and Issuing Bank 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 or Issuing Bank, respectively, and the terms "Lender" and "Lenders" shall include Agent in its capacity as a Lender and Issuing Bank in its capacity as a Lender, respectively. 7.08. Co-Arrangers, Co-Syndication Agents, Senior Managing Agent and Managing Agents. The Co-Arrangers, the Co-Syndication Agents, the Senior Managing Agent and the Managing Agents 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 "Co-Arrangers", "Co-Syndication Agents", "Senior Managing Agent" and "Managing Agents" implies no fiduciary responsibility on the part of any Co-Arranger, Co-Syndication Agent, Senior Managing Agent and Managing Agents to any Person, and the use of such title does not impose on any Co-Arranger, Co-Syndication Agent, Senior Managing Agent and Managing Agents 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 Borrower, any Lender, Issuing Bank or Agent under this Agreement or the other Credit Documents shall be in writing and faxed, mailed or delivered, if to Borrower, Agent or Issuing Bank, 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 or Issuing Bank under Section II shall not be effective until received by Agent or Issuing Bank. 52 Agent: ABN AMRO Bank N.V. Syndications Group 55 East 52nd Street, 7th Floor New York, NY 10055 U.S.A. Attn: John Darmanin Tel. No: (212) 409-7390 Fax. No: (212) 409-7497 With a copy in each case to: ABN AMRO Bank N.V. 1 California Street, 2nd Floor San Francisco, CA 94111 Attn: Peter Hsu Tel: (415) 983-2964 Fax: (415) 983-2960 ABN AMRO Bank N.V. Agency Services 208 South LaSalle Street, Suite 1500 Chicago, IL 60604-1003 Attn: Joycelyn G. Gay Tel. No: (312) 992-5094 Fax. No: (312) 601-3610 Issuing Bank: Fleet National Bank 100 Federal Street, 9th Floor Boston, MA 02110 Attn: Angela Moore MA DE 10009H Telephone: (617) 434-5059 Fax No: (617) 434-1709 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 LC Application shall be given by Borrower to Agent, and in the case of an LC Application, to Issuing Bank, to the office of such Person located at the address referred to above during such office's normal business hours; provided, however, that any such notice received by any such Person after 11:00 a.m. (California time) on any Business Day shall be deemed received by such Person on the next Business Day. In any case where this Agreement authorizes notices, requests, demands or other communications by Borrower to Agent, Issuing Bank or any Lender to be made by telephone or facsimile, Agent, Issuing Bank 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. Borrower agrees to pay on demand, whether or not any Loan is made or Letter of Credit is issued hereunder, (a) all reasonable fees and expenses, including reasonable attorneys' fees and expenses, 53 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 FIL, Borrower or any of FIL's other 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 Borrower 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, Borrower agrees 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 (including, with respect to Taxes, only those Taxes that constitute Non-Excluded Taxes) 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 Borrower of any proceeds of the Loans or any Letter of Credit, except to the extent such liability arises from the willful misconduct or gross negligence of such Indemnitee. Each request for any indemnity payment by an Indemnitee under this Paragraph 8.03 must be accompanied by a reasonably detailed written explanation identifying the liability, loss, damage or expense regarding which the indemnification is being requested and explaining the basis for such indemnification claim. In addition, if any Lender determines reasonably, in good faith, and in its sole discretion that it has received a refund of, credit or benefit of a deduction resulting from, any Non-Excluded Taxes to which it has been indemnified by Borrower or with respect to which Borrower has paid additional amounts pursuant to this Paragraph 8.03 or Paragraph 2.13, it shall pay the amount of such refund, credit or benefit of such deduction to Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by Borrower with respect to the Non-Excluded Taxes giving rise to such refund, credit or deduction), net of all incurred out-of-pocket expenses of such Lender and without interest (other than interest paid by the relevant Governmental Authority with respect to such refund, credit or benefit of such deduction); provided, however, that Borrower shall, upon the written request of such Lender, agree to repay the amount paid over to Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Lender in the event such Lender is required by force of law to repay such refund, credit or benefit of such deduction to such Governmental Authority. The obligations of Borrower under this Paragraph 8.03 shall survive the payment and performance of the Obligations and the termination of this Agreement. 8.04. Waivers; Amendments. (a) Any term, covenant, agreement or condition of this Agreement or any other Credit Document which relates solely to Facility A may be amended or waived, and any consent under this Agreement or any other Credit Document which relates solely to Facility A may be given, if such amendment, waiver or consent is in writing and is signed by Borrower and the Required Facility A Lenders (or Agent on behalf of the Required Facility A Lenders with the written approval of the Required Facility A Lenders); (b) any term, covenant, agreement or condition of this Agreement or any other Credit Document which relates solely to Facility B may be amended or waived, and any consent under this Agreement or any other Credit Document which relates solely to Facility B may be given, if such amendment, waiver or consent is in writing and is signed by Borrower and the Required Facility B Lenders (or Agent on behalf of the Required Facility B Lenders with the written approval of the Required Facility B Lenders); and (c) any term, covenant, agreement or condition of this Agreement or any other Credit Document which does not relate solely to Facility A or Facility B may be amended or waived, and any consent under this Agreement or any other Credit Document which does not relate solely to Facility A or Facility B may be given, if such amendment, waiver or consent is in writing and is signed by Borrower and the Required Lenders (or Agent on behalf of the Required Lenders with the written approval of the Required Lenders); provided, however that: (i) Any amendment, waiver or consent which would (A) increase the Total Facility A Commitment, (B) postpone, delay or extend the Facility A Maturity Date, (C) reduce the principal of or 54 interest on the Facility A Loans or any Letter of Credit, 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 with respect to Facility A need not be approved by any Facility B Lender but must be in writing and signed or approved in writing by all Facility A Lenders; (ii) Any amendment, waiver or consent which would (A) increase the Total Facility B Commitment, (B) postpone, delay or extend the Facility B Maturity Date, (C) 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 with respect to Facility B need not be approved by any Facility A Lender but must be in writing and signed or approved in writing by all Facility B Lenders; (iii) Any amendment, waiver or consent which would (A) 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, (B) 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, (C) amend this Paragraph 8.04, (D) amend the definition of Currencies or Required Lenders, or (E) release any Guarantor (except for releases as provided in Paragraph 2.15), must be in writing and signed or approved in writing by all Lenders; (iv) Any amendment, waiver or consent which would (A) 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 (B) 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; (v) Any amendment, waiver or consent which affects the rights or obligations of the Issuing Bank must be signed by the Issuing Bank; and (vi) 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 Borrower, Lenders, Agent, all future holders of the Notes and their respective successors and permitted assigns, except that 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 Borrower 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 55 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. Borrower also agrees 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 and assumption in the form of Exhibit D (an "Assignment and Assumption"), 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, Issuing Bank and, if no Default has occurred and is continuing, FIL (which consent of Agent, Issuing Bank 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, Issuing Bank and, if no Default has occurred and is continuing, FIL (which consent of Agent, Issuing Bank 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 Two Million Five Hundred Thousand Dollars ($2,500,000), 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 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 Two Million Five Hundred Thousand Dollars ($2,500,000), 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 Agent; (iv) Without the written consent of Agent, Issuing Bank 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; 56 (vi) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL, no Lender may make any Assignment of its Facility A Commitment and Facility A Loans under this Agreement to any Assignee Lender unless such Lender concurrently assigns and delegates to such Assignee Lender an equal pro rata interest in its "Facility A Commitment" and "Facility A Loans" under the FIL Credit Agreement; and (vii) Without the written consent of Agent and, if no Default has occurred and is continuing, FIL, no Lender may make any Assignment of its Facility B Commitment and Facility B Loans under this Agreement to any Assignee Lender unless such Lender concurrently assigns and delegates to such Assignee Lender an equal pro rata interest in its "Facility B Commitment" and "Facility B Loans" under the FIL Credit Agreement. Upon such execution, delivery, acceptance and recording of each Assignment and Assumption, from and after the Assignment Effective Date determined pursuant to such Assignment and Assumption, (A) each Assignee Lender thereunder shall be a Lender hereunder with Commitments or Loans as set forth on Attachment 1 to such Assignment and Assumption (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 and Assumption (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 and Assumption 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 and Assumption, Borrower, at its 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 Borrower 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 and Assumption 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 Borrower, 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 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 and Assumption executed by an Assignor Lender and an Assignee Lender (and, to the extent required by Subparagraph 8.05(c), by Borrower, Agent and Issuing Bank) together with payment to Agent by Assignor Lender of a registration and processing fee of $3,000, Agent shall (i) promptly accept such Assignment and Assumption 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 Borrower. Agent may, from time to time at its election, prepare and deliver to Lenders and Borrower a revised Schedule I reflecting the names, addresses and respective Commitments or Loans of all Lenders then parties hereto. 57 (f) Confidentiality. Subject to Paragraph 8.12, Agent and Lenders may disclose the Credit Documents and any financial or other information relating to Borrower 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 prior notice to Agent but without prior notice to or consent of Borrower, any such notice and consent being expressly waived by Borrower 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 Borrower any amount owing from such Lender to Borrower. The aforesaid right of set-off may be exercised by such Lender against a or against any trustee in bankruptcy, debtor in possession, assignee for the benefit of creditors, receiver or execution, judgment or attachment creditor of Borrower or against anyone else claiming through or against 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 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, 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 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 BORROWER, 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. Reserved. 8.12. Confidentiality. Neither any Lender nor Agent shall disclose to any Person any information with respect to FIL, Borrower, any Guarantor or any of FIL's other 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 58 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 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 Borrower promptly of such summons or subpoena if not prohibited by any Requirement of Law and, if requested by Borrower and not disadvantageous to such Lender or Agent, to cooperate with Borrower in obtaining a protective order restricting such disclosure, and (ii) any disclosure made in violation of this Agreement shall not affect the obligations of FIL, Borrower or any other Guarantor under this Agreement and the other Credit Documents. 8.13. Consent to Jurisdiction. 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 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 Borrower in any other appropriate jurisdiction, or concurrently in more than one jurisdiction, or to serve process, pleadings and other papers upon Borrower in any manner authorized by the laws of any such jurisdiction. 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. 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 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 Borrower to pay or allow any Lender to collect interest on any Loan or any other Obligation of 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 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 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 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 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 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 Borrower, then the Lenders shall refund to 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, Borrower shall not be required to pay any unearned interest on any 59 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. [The first signature page follows.] 60 IN WITNESS WHEREOF, Borrower, Agent, Co-Arrangers, Co-Syndication Agents, Senior Managing Agent, Managing Agents and Lenders have caused this Agreement to be executed as of the day and year first above written. BORROWER: FLEXTRONICS INTERNATIONAL USA, INC. By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- AGENT: ABN AMRO BANK N.V., As Agent By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- S-1 CO-ARRANGERS: ABN AMRO BANK N.V., As a Co-Arranger By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- FLEET NATIONAL BANK, As a Co-Arranger By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- S-2 CO-SYNDICATION AGENTS: DEUTSCHE BANC ALEX. BROWN INC., As a Co-Syndication Agent By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- BANK OF AMERICA, N.A., As a Co-Syndication Agent By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- CITICORP USA, INC., As a Co-Syndication Agent By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- FLEET NATIONAL BANK, As a Co-Syndication Agent By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- S-3 SENIOR MANAGING AGENT: THE BANK OF NOVA SCOTIA, As Senior Managing Agent By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- MANAGING AGENTS: BNP PARIBAS, As a Managing Agent By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- CREDIT SUISSE FIRST BOSTON, As a Managing Agent By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- S-4 ISSUING BANK: FLEET NATIONAL BANK, As Issuing Bank By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- S-5 LENDERS: ABN AMRO BANK N.V., As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- AIB INTERNATIONAL FINANCE, As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- BANKERS TRUST COMPANY, As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- BANK OF AMERICA, N.A., As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- S-6 S-7 BEAR STEARNS CORPORATE LENDING INC., As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- BNP PARIBAS, As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- CITICORP USA, INC., As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- COMERICA BANK, As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- S-8 S-9 CREDIT SUISSE FIRST BOSTON, As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- DANSKE BANK A/S, As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- FLEET NATIONAL BANK, As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- FUJI BANK LIMITED (MIZUHO FINANCIAL GROUP), As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- S-10 By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- S-11 GOLDMAN SACHS CREDIT PARTNERS L.P., As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- LEHMAN COMMERCIAL PAPER INC., As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- SKANDINAVISKA ENSKILDA BANKEN AB (PUBL), As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- S-12 THE BANK OF NOVA SCOTIA, As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- UNION BANK OF CALIFORNIA, N.A. As a Lender By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- By: ---------------------------------------------- Name: ----------------------------------------- Title: ---------------------------------------- S-13 SCHEDULE I LENDER'S COMMITMENTS
LENDER FACILITY A COMMITMENT FACILITY B COMMITMENT TOTAL - ---------------------------------- --------------------- --------------------- -------------- ABN AMRO Bank N.V. $30,416,666.67 $15,208,333.33 $45,625,000.00 AIB International Finance $5,000,000.00 $2,500,000.00 $7,500,000.00 Bankers Trust Company $28,000,000.00 $14,000,000.00 $42,000,000.00 Bank of America, N.A. $28,000,000.00 $14,000,000.00 $42,000,000.00 Bear Stearns Corporate Lending Inc. $8,333,333.33 $4,166,666.67 $12,500,000.00 BNP Paribas $13,500,000.00 $6,750,000.00 $20,250,000.00 Citicorp USA, Inc. $28,000,000.00 $14,000,000.00 $42,000,000.00 Comerica Bank $3,333,333.33 $1,666,666.67 $5,000,000.00 Credit Suisse First Boston $16,666,666.67 $8,333,333.33 $25,000,000.00 Danske Bank A/S $8,333,333.33 $4,166,666.67 $12,500,000.00 Fleet National Bank $30,416,666.67 $15,208,333.33 $45,625,000.00 Fuji Bank, Limited (Mizuho $8,333,333.33 $4,166,666.67 $12,500,000.00 Financial Group) Goldman Sachs Credit Partners L.P. $8,333,333.33 $4,166,666.67 $12,500,000.00 Lehman Commercial Paper Inc. $8,333,333.33 $4,166,666.67 $12,500,000.00 Skandinaviska Enskilda Banken AB $8,333,333.33 $4,166,666.67 $12,500,000.00 (publ)
I-1 The Bank of Nova Scotia $25,000,000.00 $12,500,000.00 $37,500,000.00 Union Bank of California, N.A. $8,333,333.33 $4,166,666.67 $12,500,000.00 -------------- -------------- -------------- TOTAL $266,666,666.67 $133,333,333.33 $400,000,000

I-2 PART B - ADDRESSES FOR NOTICES, ETC. ABN AMRO BANK N.V. - ------------------ Domestic Lending Office: ABN AMRO Bank N.V. 208 South LaSalle Street Suite 1500 Chicago, IL 60604 Eurodollar Lending Office: ABN AMRO Bank N.V. 208 South LaSalle Street Suite 1500 Chicago, IL 60604 Address for Notices: ABN AMRO Bank N.V. 1 California Street, 2nd Floor San Francisco, CA 94111 Attn: Peter Hsu Tel. No: (415) 983-2964 Fax No: (415) 983-2960 ABN AMRO Bank N.V. Agency Services 208 South LaSalle Street, Suite 1500 Chicago, IL 60604-1003 Attn: Joycelyn G. Gay Tel. No: (312) 992-5094 Fax. No: (312) 601-3610 With a copy of all documentation to: ABN AMRO Bank N.V. 208 South LaSalle Street, Suite 1500 Chicago, IL 60604-1003 Attn: Nick Blea Tel. No: (312) 992-5176 Fax. No: (312) 992-5111 Wiring Instructions: ABN AMRO Bank N.V. New York, New York ABA: 026009580 F/O ABN AMRO Bank , N.V., Chicago Branch CPU Account No.: 650001178941 Reference: Agency Services 00433489 Flextronics Intl. USA Inc. I-3 AIB INTERNATIONAL FINANCE - ------------------------- Domestic and Eurodollar Lending Office: AIB International Finance International Corporate Banking AIB Bankcentre Ballsbridge, Dublin 4 Address for Notices of Borrowing and Notices of Interest Period Selection: AIB International Finance Business Support, AIB Bankcentre Ballsbridge, Dublin 4 Attn: Ian Finnegan Tel. No.: (353) 1-6412297 Fax No.: (353) 1-6603529 Address for all other notices: (Credit Matters) AIB International Finance AIB International Centre IFSC, Dublin 1 Attn: Eimear Creaven/Patrick Lynam Tel. No.: (353) 1-6412279 Fax No.: (353) 1-6603529 Wiring Instructions: Chase Manhattan Bank, New York ABA No.: 021000021 Swift: CHASUS33 Account No.: 001-1-907599 Account Name: AIB Dublin Reference: Flextronics International USA, Inc. Attn: Ian Finnegan I-4 BANKERS TRUST COMPANY - --------------------- Domestic and Eurodollar Lending Office: Bankers Trust Company 31 W. 52nd Street New York, NY 10019 Address for Notices of Borrowing and Notices of Interest Period Selection: Bankers Trust Company 90 Hudson Street, 5th Floor Jersey City, NJ 07302 Attn: Bilal Aman Tel. No.: (201) 593-2173 Fax No.: (201) 593-2310 Address for all other notices: (Credit Matters) Bankers Trust Company 31 W. 52nd Street New York, NY 10019 Attn: Alex Bici Tel. No.: (646) 324-2199 Fax No.: (646) 324-7456 Wiring Instructions: Bankers Trust Company New York, NY RT/ABA No.: 021001033 For further credit to: Deutsche Bank, AG New York Account No.: 99401268 Reference: Flextronics International USA, Inc. Attn: Bilal Aman I-5 BANK OF AMERICA, N.A. - --------------------- Domestic and Eurodollar Lending Office: Bank of America, N.A. 1850 Gateway Blvd. Concord, CA 94520 Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: Bank of America, N.A. Mail Code CA4-706-05-11 1850 Gateway Blvd. Concord, CA 94520 Attn: Michelle L. Widmer Tel. No.: (925) 675-8204 Fax No.: (888) 969-9280 Address for all other notices: (Credit Matters) Bank of America, N.A. Portfolio Management - Technology 3697 555 California Street, 12th Floor Mail Code CA5-705-12-08 San Francisco, CA 94104 Attn: James P. Johnson, Managing Director Tel. No.: (415) 622-6177 Fax No.: (415) 622-4057 Wiring Instructions: Bank of America, N.A., Dallas Texas ABA No.: 111000012 For further credit to Account No.: 3750836479 Reference: Flextronics International USA, Inc. Attn: SBW004 Credit Services - Michelle L. Widmer I-6 BEAR STEARNS CORPORATE LENDING INC Domestic and Eurodollar Lending Office: Bear Stearns & Co. Inc. 245 Park Avenue, 4th Floor New York, NY 10167 Address for Notices of Borrowing and Notices of Interest Period Selection: Bear Stearns & Co. Inc. 245 Park Avenue, 4th Floor New York, NY 10167 Attn: Ms. Gloria Dombrowski Tel. No.: (212) 272-6043 Fax No.: (212) 272-4844 Address for all other notices: (Credit Matters) Bear Stearns & Co. Inc. 245 Park Avenue, 4th Floor New York, NY 10167 Attn: Victor F. Bulzacchelli Tel. No.: (212) 272-3042 Fax No.: (212) 272-9184 Copy of documents to: Bear Stearns & Co. Inc. 245 Park Avenue, 4th Floor New York, NY 10167 Attn: Kevin Cullen Tel. No.: (212) 272-5742 Fax No.: (212) 272-9184 Wiring Instructions: Citibank, N.A. ABA No.: 0210-00089 Account No.: 0925-3186 Favor of: Bear Stearns Securities, Corp. Further Credit to Account No.: 096-00220-28 Reference: Flextronics International USA, Inc. Attn: Steve Resnick I-7 BNP PARIBAS - ----------- Domestic and Eurodollar Lending Office: BNP Paribas 180 Montgomery Street San Francisco, CA 94104 Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: BNP Paribas 180 Montgomery Street San Francisco, CA 94104 Attn: Don Hart, Vice President - Treasury Tel. No.: (415) 956-2511 Fax No.: (415) 989-9041 Swift: BNPAUS6S Address for all other notices: BNP Paribas, Los Angeles Branch 725 South Figueroa Street, Suite 2090 Los Angeles, CA 90017 Attn: Robert Mimaki, Vice President - Corporate Banking High Technology Group Tel. No.: (213) 688-6419 Fax No.: (213) 488-9602 With a copy to: BNP Paribas 180 Montgomery Street San Francisco, CA 94104 Attn: Nancy Mak, Vice President - Loan Operations Tel. No.: (415) 956-0707 Fax No.: (415) 956-4230 Telex: 278900 BNPS UR Wiring Instructions: The Federal Reserve Bank of New York ABA No.: 026007689 BNP Paribas /BNF/ BNP PARIBAS SAN FRANCISCO /ACA/ 14334000176 For further credit to BNP Paribas Los Angeles /RFB/ Principal Payment (or Commitment Fee, Interest Payment, etc.) /OBI/ By order: Flextronics International USA. Inc. Attn: Jenny Seow I-8 CITICORP USA, INC. - ------------------ Domestic and Eurodollar Lending Office: Citicorp USA, Inc. One Sansome Street, 25th Floor San Francisco, CA 94104 Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: Citicorp USA, Inc. 2 Penn's Way, Suite 200 New Castle, Delaware 19720 Attn: Karen Riley Tel. No.: (302) 894-6084 Fax No.: (302) 894-6120 Address for all other notices (Credit Matters): Citicorp USA, Inc. One Sansome Street, 25th Floor San Francisco, CA 94104 Attn: Avram Spiegel Tel. No.: (415) 627-6358 Fax No.: (415) 632-0307 Wiring Instructions: Citibank N.A. New York, New York ABA No.: 021-000-089 For further credit to: Technology Account No.: 40580062 Reference: Flextronics International USA, Inc. Attn: Karen Riley I-9 COMERICA BANK - ------------- Domestic and Eurodollar Lending Office: Comerica Bank One Detroit Center Detroit, Michigan Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: Comerica Bank International Finance Department 333 W. Santa Clara Street San Jose, CA 95113 Attn: Christina Hwang Tel. No.: (408) 556-5221 Fax No.: (408) 556-5232 Address for all other notices: Comerica Bank International Finance Department 333 W. Santa Clara Street San Jose, CA 95113 Attn: Devin Scattini Tel. No.: (408) 556-5120 Fax No.: (408) 556-5232 Wiring Instructions: Comerica Bank One Detroit Center 500 Woodward Avenue Detroit, Michigan RT/ABA No.: 072000096 Account number: 02-21585-90010 Reference: Flextronics International USA, Inc. Attn: Ms. Nicole Maguire I-10 CREDIT SUISSE FIRST BOSTON - -------------------------- Domestic and Eurodollar Lending Office: Credit Suisse First Boston, Cayman Islands Branch Eleven Madison Avenue New York, NY 10010 Address for Notices of Borrowing and Notices of Interest Period Selection: Credit Suisse First Boston Eleven Madison Avenue New York, NY 10010 Attn: Ed Markowski / Nirmala Durgana Tel. No.: (212) 538-3380 / 3525 Fax No.: (212) 538-3477 / 561-8926 Address for all other notices: (Credit Matters) Credit Suisse First Boston Eleven Madison Avenue New York, NY 10010 Attn: Robert Hetu / Mark Heron Tel. No.: (212) 325-4542 / 9933 Fax No.: (212) 325-8309 / 8319 Wiring Instructions: The Bank of New York, New York, NY ABA No.: 021000018 Account No.: 890-0329-262 Account Name: CSFB NY Loan Clearing Reference: Flextronics International USA, Inc. I-11 DANSKE BANK A/S Domestic and Eurodollar Lending Office: Danske Bank A/S, Cayman Islands Branch 299 Park Avenue, 14th Floor New York, NY 10171-1499 Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: Danske Bank A/S 299 Park Avenue, 14th Floor New York, NY 10171-1499 Attn: Loan Administration Tel. No.: (212) 984-8462 Fax No.: (212) 984-9570 Address for all business/credit matters: Danske Bank A/S 299 Park Avenue, 14th Floor New York, NY 10171-1499 Attn: Michael K. Crawford - Vice President Tel. No.: (212) 984-8455 Fax No.: (212) 984-9567 Address for documentation matters: Danske Bank A/S 299 Park Avenue, 14th Floor New York, NY 10171-1499 Attn: George B. Wendell - Vice President Tel. No.: (212) 984-8431 Fax No.: (212) 984-9566 Wiring Instructions: Danske Bank A/S New York, NY 10171 ABA No.: 026003719 (Danske Bank, New York Branch) For: Loan Administration Reference: Flextronics International USA, Inc. I-12 FLEET NATIONAL BANK - ------------------- Domestic and Eurodollar Lending Office: Fleet National Bank 100 Federal Street Boston, MA 02110 Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: Fleet National Bank 100 Federal Street, 9th Floor Boston, MA 02110 Attn: Angela Moore, Loan Administrator Tel. No.: (617) 434-5059 Fax No.: (617) 434-1709 Address for all other notices: Fleet National Bank 435 Tasso Street, Suite 250 Palo Alto, CA 94301 Attn: Lee A. Merkle-Raymond or Gregory Roux Tel. No.: (650) 470-4130/4180 Fax No.: (650) 853-1425 Wiring Instructions: Fleet National Bank Boston, MA ABA No.: 011-000-138 For further credit to: Credit Services Account No.: 1510351-66156 Reference: Flextronics International USA, Inc. I-13 FUJI BANK, LIMITED (MIZUHO FINANCIAL GROUP) - ------------------------------------------- Domestic and Eurodollar Lending Office: The Fuji Bank, Limited 350 South Grand Avenue, Suite 1500 Los Angeles, CA 90071 Address for Notices of Borrowing and Notices of Interest Period Selection: The Fuji Bank, Limited 95 Christopher Columbus Drive, 16th Floor Jersey City, NJ 07302 Attn: Teri Smith Tel. No.: (201) 432-1980 Fax No.: (201) 432-6805 Address for all other notices: (Credit Matters) The Fuji Bank, Limited 350 South Grand Avenue, Suite 1500 Los Angeles, CA 90071 Attn: Mano Mylvaganam, Vice President Tel. No.: (213) 253-4130 Fax No.: (213) 253-4175 Wiring Instructions: The Fuji Bank, Limited, New York, NY ABA No.: 026009700 For further credit to: Loan Admin Dept - LA Account No.: 5204-001-515066 Reference: Flextronics International USA, Inc. Attn: Teri Smith I-14 GOLDMAN SACHS CREDIT PARTNERS, L.P. Domestic and Eurodollar Lending Office: Goldman Sachs Credit Partners L.P. 8 Broad Street - 6th Floor New York, NY 10004 Address for Notices of Borrowing and Notices of Interest Period Selection: Goldman Sachs Credit Partners L.P. 8 Broad Street - 6th Floor New York, NY 10004 Attn: Sandra Stulberger / Erin Smith or Asa Klasson Tel. No.: (212) 902-5977 / 357-9345 or 902-4694 Fax No.: (212) 357-4597 / 357-4597 Address for all other notices: (Credit Matters) c/o Goldman Sachs & Co. 8 Broad Street - 6th Floor New York, NY 10004 Attn: Barbara Aaron / Sally Wenden Tel. No.: (212) 357-3111 / 9735 Fax No.: (212) 428-1243 Wiring Instructions: Citibank, N.A. ABA No.: 021000089 Account No.: 40717188 Account Name: Goldman Sachs Credit Partners Reference: Flextronics International USA, Inc. Attn: Bank Loan Operations - Sandra Stulberger I-15 LEHMAN COMMERCIAL PAPER INC. Domestic and Eurodollar Lending Office: (Through March 25, 2002) Lehman Commercial Paper Inc. 101 Hudson Street Jersey City, NJ 07302 (Thereafter) Lehman Commercial Paper Inc. 745 7th Street, 16th Floor New York, NY 10019 Address for Notices of Borrowing and Notices of Interest Period Selection: (Through March 25, 2002) ------------------------ Lehman Commercial Paper Inc. 101 Hudson Street Jersey City, NJ 07302 Attn: Nancy Wong Tel. No.: (201) 524-2248 Fax No.: (201) 524-4298 (Thereafter) Lehman Commercial Paper Inc. 745 7th Street, 16th Floor New York, NY 10019 Attn: TBA Tel. No.: TBA Fax No.: TBA Address for all other notices: (Credit Matters) (Through March, 2002) c/o Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Attn: Andrew Keith, Lehman Loan Portfolio Group Room #2533 Tel. No.: (212) 455-7569 Fax No.: (646) 758-4656 (Thereafter) Lehman Commercial Paper Inc. 745 7th Street, 23rd Floor New York, NY 10019 Attn: TBA Tel. No.: TBA Fax No.: TBA I-16 Wiring Instructions: Citibank, N.A., New York, NY ABA No.: 021000089 Account No.: 30434133 Account Name: LCPI Bank Loans Reference: Flextronics International USA, Inc. I-17 SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) - --------------------------------------- Domestic and Eurodollar Lending Office: Skandinaviska Enskilda Banken AB (publ) Kungstradgardsgatan 8 106 40 Stockholm, Sweden Address for Notices of Borrowing and Notices of Interest Period Selection: Skandinaviska Enskilda Banken AB (publ) Karlavagen 108 106 40 Stockholm, Sweden Attn: Christine Pearson / Peter Bergengren Tel. No.: 46 8 7638642 / 46 8 7638586 Fax No.: 46 8 6110384 Address for all other notices: (Credit Matters) Skandinaviska Enskilda Banken AB (publ) 2 Cannon Street London EC4M 6XX, United Kingdom Attn: Johan Sonander, Debt Capital Markets Tel. No.: 44 20 7246 4177 Fax No.: 44 20 7236 4178 With a copy to: Skandinaviska Enskilda Banken AB (publ) Ostergatan 39 205 20 Malmo, Sweden Attn: Max Lundberg, SEB Client Relationship Management Tel. No.: (46) 40-6676088 Fax No.: (46) 40-305-480 Wiring Instructions: Bank of New York, New York, NY ABA No.: 021000018 Account No.: 890 0443871 Swift Code: IRVTUS3N Reference: Flextronics International Ltd. I-18 THE BANK OF NOVA SCOTIA - ----------------------- Domestic and Eurodollar Lending Office: The Bank of Nova Scotia Atlanta Agency 600 Peachtree Street, N.E., Suite 2700 Atlanta, GA 30308 Address for Notices of Borrowing, Notices of Interest Period Selection and Notices of Term Loan Conversion: The Bank of Nova Scotia Atlanta Agency 600 Peachtree Street, N.E., Suite 2700 Atlanta, GA 30308 Attn: Lily Hsie Tel. No.: (404) 877-1523 Fax No.: (404) 888-8998 Address for all other notices: The Bank of Nova Scotia San Francisco Agency 580 California Street, Suite 2100 San Francisco, CA 94104 Attn: Christopher Osborn Tel. No.: (415) 986-1100 Fax No.: (415) 397-0791 Wiring Instructions: The Federal Reserve Bank of New York New York, New York ABA No.: 026-002-532 Account Name: The Bank of Nova Scotia, 1 Liberty Plaza, New York, New York 10006 For further account of: BNS San Francisco Agency Loan Servicing Account Account No.: 0610135 Reference: Flextronics International USA, Inc. I-19 UNION BANK OF CALIFORNIA, N.A. - ------------------------------ Domestic and Eurodollar Lending Office: Union Bank of California, N.A. 99 Almaden Boulevard, Suite 200 San Jose, CA 95113 Address for Notices of Borrowing and Notices of Interest Period Selection: Union Bank of California, N.A. 601 Potrero Grande Drive Monterey Park, CA 91754 Attn: Shirley Davis, Commercial Loan Service Officer Tel. No.: (323) 7202870 Fax No.: (323) 724-6198 Address for all other notices: (Credit Matters) Union Bank of California, N.A. 99 Almaden Boulevard, Suite 200 San Jose, CA 95113 Attn: Sarabelle Hitchner, Vice President Tel. No.: (408) 279-7208 Fax No.: (408) 280-7163 Wiring Instructions: Union Bank of California, N.A. ABA No.: 122000496 Account No.: Wire Clearing Account 77070196431 Reference: Flextronics International USA, Inc. Attn: Commercial Loan Operations I-20 SCHEDULE II PRICING GRID FACILITY A
APPLICABLE APPLICABLE MARGIN MARGIN FOR FOR LIBOR RATE LIBOR RATE BORROWINGS AND LC BORROWINGS AND LC APPLICABLE USAGE FEE WHEN USAGE FEE WHEN FIL'S MARGIN COMBINED TOTAL COMBINED TOTAL SENIOR DEBT FOR TOTAL COMMITMENT TOTAL COMMITMENT COMMITMENT FEE RATING PRICING BASE RATE USAGE USAGE PERCENTAGE LEVEL BORROWINGS IS < 33% IS > 33% - > BBB / Baa2 1 0% 0.875% 1.000% 0.175% - BBB- / Baa3 2 0% 1.125% 1.250% 0.225% BB+ / Ba1 3 0% 1.250% 1.500% 0.250% BB / Ba2 4 0% 1.500% 1.750% 0.400% < BB- / Ba3 5 0% 1.750% 2.250% 0.500% -
FACILITY B
APPLICABLE APPLICABLE MARGIN MARGIN FOR FOR APPLICABLE LIBOR RATE LIBOR RATE FIL'S MARGIN BORROWINGS WHEN BORROWINGS WHEN SENIOR FOR COMBINED TOTAL COMBINED TOTAL COMMITMENT FEE DEBT PRICING BASE RATE COMMITMENT USAGE COMMITMENT USAGE PERCENTAGE RATING LEVEL BORROWINGS IS < 33% IS > 33% - > BBB / Baa2 1 0% 0.875% 1.000% 0.125% - BBB- / Baa3 2 0% 1.125% 1.250% 0.175% BB+ / Ba1 3 0% 1.250% 1.500% 0.200% BB / Ba2 4 0% 1.500% 1.750% 0.250% < BB- / Ba3 5 0% 1.750% 2.250% 0.375% -
EXPLANATION The Applicable Margin with respect to the LIBOR Rate Loans, the LC Usage Fee (as applicable) and the Commitment Fee Percentage will be determined based on FIL's Senior Debt Rating assigned by S&P and Moody's as follows: 1. In the event FIL does not have a Senior Debt Rating from either S&P or Moody's, then such rating agency will be deemed for purposes hereof to have established a Senior Debt Rating for FIL below BB- and Ba3, respectively. 2. If the Senior Debt Rating established or deemed to have been established by S&P and Moody's are split within different categories above, then the lower rating shall apply (with Pricing Level 3 being lower than Pricing Level 2). 3. Any change in FIL's Senior Debt Rating shall be effective on the date such change is first announced by the rating agency making such change. In addition, the Applicable Margin with respect to LIBOR Rate Loans and the LC Usage Fee (as applicable) will change based upon the Total Combined Commitment usage. For example, if the Unused Total Combined Commitment is $450,000,000 (meaning that the Total Combined Commitment usage is $300,000,000 or 40%), the two columns above applicable only when Total Combined Commitment usage is greater than 33% shall apply. II-2 SCHEDULE 3.01 INITIAL CONDITIONS PRECEDENT A. PRINCIPAL CREDIT DOCUMENTS. (1) The Credit Agreement, duly executed by Borrower, each Lender, Agent, each Co-Arranger, each Co-Syndication Agent, the Senior Managing Agent and each Managing Agent; (2) Such Notes as Lenders shall request, each duly executed by Borrower; and (3) The Guaranty, duly executed by each of the following Subsidiaries: (a) Flextronics International USA, Inc., (b) Flextronics International Latin America (L), Ltd., (c) Multilayer Technology, Inc., (d) Flextronics USA, Inc., (e) Flextronics Enclosures, Inc., (f) Flextronics Manufacturing Mexico, SA de CV, (g) Flextronics Distribution, Inc., (h) Flextronics International Singapore Pte Ltd., (i) Flextronics International Marketing (L) Ltd., (j) Flextronics Holding USA, Inc., (k) Flextronics Holdings UK Limited and (l) Flextronics Technology (Shah Alam) Sdn Bdh, each with such changes thereto as may be appropriate based on the law of the applicable jurisdictions. B. BORROWER AND MATERIAL SUBSIDIARY CORPORATE DOCUMENTS. (1) The Certificate of Incorporation (or comparable certificate) of FIL, Borrower, each Eligible Material Subsidiary and any Subsidiary of FIL executing the Guaranty, 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, Borrower, each Eligible Material Subsidiary and any Subsidiary of FIL executing the Guaranty, 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, Borrower, each Eligible Material Subsidiary and any Subsidiary of FIL executing the Guaranty, 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) 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 FIL, Borrower, each Eligible Material Subsidiary and any Subsidiary of FIL executing the Guaranty, dated the Closing Date, certifying the incumbency, signatures and authority of the officers, directors and attorneys of 3.01-1 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, 2001, 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, 2001 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, 2001; (4) A copy of the 10-Q report filed by FIL with the Securities and Exchange Commission for the quarter ended December 31, 2001; (5) The consolidated plan and forecast of FIL and its Subsidiaries for the fiscal year to end March 31, 2003 (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 FIL, Borrower or any of FIL's other 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. OPINIONS. Favorable written opinions from each of the following counsel for FIL, Borrower, Guarantors and FIL's other 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) Paul, Chong & Nathan, Malaysian counsel for FIL and Flextronics Technology (Shah Alam) Sdn Bdh; (3) Mayer, Brown, Rowe & Maw, 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; and (6) Allen & Gledhill, Singapore counsel for FIL and its Subsidiaries. E. OTHER ITEMS. 3.01-2 (1) A duly completed and timely delivered Notice of Borrowing for the applicable Borrowing; (2) An organization chart for FIL and its Subsidiaries, setting forth the relationship among such Persons; (3) Copy of Subordinated Indenture, certified to be true and complete by the Treasurer of FIL; (4) Evidence that the Obligations of Borrower under this Agreement and the other Credit Documents constitute "Designated Senior Debt" under the Subordinated Indenture; (5) Evidence that (a) the amounts owing to the lenders and agent under the Existing FIUI Credit Agreement on the Closing Date have been repaid in full and/or converted into Loans under this Agreement and (b) the commitments of the lenders and agent under the Existing FIUI Credit Agreement are terminated and of no further force and effect; (6) A certificate of the Chief Financial Officer of FIL on behalf of 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; (7) 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); (8) All fees and expenses of Agent's counsels through the Closing Date; and (9) 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. 3.01-3 SCHEDULE 4.01(o) SUBSIDIARIES [TO BE PROVIDED BY BORROWER] 4.01(o)-1 SCHEDULE 5.02(a) EXISTING SECURED INDEBTEDNESS [TO BE PROVIDED BY BORROWER] 5.02(a)-1 SCHEDULE 5.02(e) EXISTING INVESTMENTS [TO BE PROVIDED BY BORROWER] 5.02(e)-1 EXHIBIT A NOTICE OF BORROWING [Date] ABN AMRO Bank N.V. as Agent [__________] Attn: [_________] 1. Reference is made to that certain Credit Agreement, dated as of March 8, 2002 (the "Credit Agreement"), among Flextronics International USA, Inc. ("Borrower"), , the financial institutions listed in Schedule I to the Credit Agreement (the "Lenders") and ABN AMRO Bank N.V., as agent for the 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 Paragraph 2.02 of the Credit Agreement, Borrower hereby irrevocably requests a Borrowing to be made upon the following terms: (a) The requested Borrowing is to be under Facility [__]; (b) The principal amount of such Borrowing is 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. Borrower hereby certifies to Lenders and Agent that, on the date of this Notice of Borrowing and after giving effect to the requested Borrowing: (a) The representations and warranties of FIL, Borrower and FIL's other 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 Borrowing to . IN WITNESS WHEREOF, Borrower has executed this Notice of Borrowing on the date set forth above. FLEXTRONICS INTERNATIONAL USA, INC. By: ---------------------------------------- Name: ----------------------------------- Title: ----------------------------------- A-1 A-2 EXHIBIT B FORM OF NOTE ______________, ________ February __, 2002 FOR VALUE RECEIVED, the undersigned ("Borrower"), hereby promises to pay to the order of ____________________, a ____________________ ("Lender"), the aggregate outstanding principal balance of all 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] 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 and amount of each 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 Notes referred to in the Credit Agreement, dated as of March 8, 2002, among Borrower, Lender and the other lenders from time to time parties thereto (collectively, the "Lenders") and ABN AMRO, as agent for the 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. B-1 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: ------------------------------ B-2
LOANS AND PAYMENTS OF PRINCIPAL Loans Payments -------------------------------------------- ------------------------------------------------- Amount of Amount of Principal Paid Date Currency Loan Facility Currency or Prepaid Facility
B-3 EXHIBIT C FORM OF GUARANTY THIS GUARANTY, dated as of March 8, 2002, 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 March 8, 2002 (as amended from time to time, the "Credit Agreement"), among Flextronics International USA, Inc. ("Borrower"), Lenders and Agent, Lenders have agreed to extend certain credit facilities to Borrower upon the terms and subject to the conditions set forth therein. Each Guarantor is a 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 Borrower 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 the 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). "Borrower" 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 Borrower or its property seeking the dissolution, liquidation, reorganization, rearrangement or other relief of 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 Borrower or any substantial part of its property or any general assignment by Borrower C-1 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 Borrower 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 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 Borrower or payable by 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. C-2 "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. 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 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 Borrower 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 Borrower, any other Guarantor or any other guarantor of the Guaranteed Obligations or whether 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. C-3 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 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 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 Borrower, any other Guarantor or any other guarantor of the Guaranteed Obligations, (B) proceed against or exhaust any security received from Borrower, such Guarantor, any other Guarantor or any other guarantor of the Guaranteed Obligations or otherwise marshal the assets of 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 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 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 Borrower or any defense which results from any disability or other defense of Borrower or the cessation or stay of enforcement from any cause whatsoever of the liability of 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; C-4 (vi) Until all obligations of Agent or any Lender to extend credit to Borrower 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 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 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 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 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 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"), C-5 which are not reproduced herein by express declaration that the contents of such articles are known to the Mexican Guarantor. (d) Financial Condition of Borrower, Etc. Each Guarantor is fully aware of the financial condition and affairs of Borrower. Each Guarantor has executed this Guaranty without reliance upon any representation, warranty, statement or information concerning 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 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 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 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 Borrower), each Guarantor may receive regularly scheduled payments from 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 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 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 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 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") C-6 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 55 East 52nd Street, 7th Floor New York, NY 10055 U.S.A. Attn: John Darmanin Tel. No: (212) 409-7390 Fax. No: (212) 409-7497 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 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. C-7 (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 the Base Rate plus two percent (2.00%), such rate to change from time to time as the Base 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, 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. C-8 Each Guarantor waives any right to require Agent or any Lender to proceed against any Person 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 prior notice to 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. If under the laws of the applicable jurisdiction, a payment by a Guarantor pursuant to this Subparagraph 6(h) to Agent or any Lender may be made without deduction or withholding of any Taxes (or with reduced deduction or withholding of any Taxes), the Agent and such Lender (as applicable) shall, upon written request by the applicable Guarantor, use reasonable efforts to file with the appropriate tax authorities and deliver to Guarantor such certificates and other evidence requested by Guarantor establishing Agent's or Lender's entitlement to such eliminated or reduced withholding. 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. C-9 (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. (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 C-10 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 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.] C-11 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: (408) 576-7233 Facsimile: (408) 526-9215 FLEXTRONICS HOLDING USA, INC. By: ------------------------------------ Name: ---------------------------- Title: --------------------------- Address: 2090 Fortune Drive San Jose, California 95131 U.S.A. Attn: Treasurer Telephone: (408) 576-7233 Facsimile: (408) 526-9215 FLEXTRONICS INTERNATIONAL LATIN AMERICA (L) LTD. By: ------------------------------------ Name: ---------------------------- Title: --------------------------- Address: Level 10, Wisma Oceanic Jalan OKK Awang Besar Labuan, F.T. Malaysia Attn: Bernard Liew Jin Yang Telephone: 65 876 9371 Facsimile: 65 543 1888 C-12 FLEX INTERNATIONAL MARKETING (L) LTD. By: ------------------------------------ Name: ---------------------------- Title: --------------------------- Address: Level 10, Wisma Oceanic Jalan OKK Awang Besar Labuan, F.T. Malaysia Attn: Bernard Liew Jin Yang Telephone: 65 876 9371 Facsimile: 65 543 1888 FLEXTRONICS MANUFACTURING MEX, S.A. DE C.V. By: ------------------------------------ Name: ---------------------------- Title: --------------------------- Address: Carretara Base Aerea Militar 5850 Zappopan, Jalisco 4500 Mexico Attn: Tom Mannion Telephone: (5233) 3818-9261 Facsimile: (5233) 3818-9524 FLEXTRONICS SINGAPORE PTE LTD. By: ------------------------------------ Name: ---------------------------- Title: --------------------------- Address: 36 Robinson Road #18-01 City House Singapore 068877 Attn: Bernard Liew Jin Yang Telephone: 65 876 9371 Facsimile: 65 543 1888 C-13 FLEXTRONICS HOLDINGS UK LIMITED By: ------------------------------------ Name: ---------------------------- Title: --------------------------- Address: 50 Stratton Street London W1X 6NX England Attn: ___________________ Telephone: (___) ___-____ Facsimile: (___) ___-____ MULTILAYER TECHNOLOGY, INC. By: ------------------------------------ Name: ---------------------------- Title: --------------------------- Address: 40 Parker Road Irvine, CA 92618 Attn: Timothy L. Stewart Telephone: (408) 576-7000 Facsimile: (408) 428-1341 FLEXTRONICS USA, INC. By: ------------------------------------ Name: ---------------------------- Title: --------------------------- Address: 6328 Monarch Park Place Niwot, CO 80503 Attn: Timothy L. Stewart Telephone: (408) 576-7000 Facsimile: (408) 428-1341 C-14 FLEXTRONICS ENCLOSURES, INC. By: ------------------------------------ Name: ---------------------------- Title: --------------------------- Address: 1901 S. Meyers Road, Suite 700 Oak Brook Terrace, IL 60181 Attn: Timothy L. Stewart Telephone: (408) 576-7000 Facsimile: (408) 428-1341 FLEXTRONICS DISTRIBUTION, INC. By: ------------------------------------ Name: ---------------------------- Title: --------------------------- Address: 2241 Lundy Avenue San Jose, CA 95131 Attn: Timothy L. Stewart Telephone: (408) 576-7000 Facsimile: (408) 428-1341 FLEXTRONICS TECHNOLOGY (SHAH ALAM) SDN BDH, By: ------------------------------------ Name: ---------------------------- Title: --------------------------- Address: No. 2 Jalan Astaka, U8/84 Seksyen U* 40150 Shal Alam, Selangor, Malaysia Attn: Bernard Liew Jin Yang Telephone: 65 876 9371 Facsimile: 65 543 1888 C-15 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 March 8, 2002 (as amended from time to time, the "Credit Agreement"), among Flextronics International USA, Inc. ("Borrower"), Lenders and Agent, Lenders have agreed to extend certain credit facilities to Borrower upon the terms and subject to the conditions set forth therein. B. Lenders' obligations to extend the credit facilities to Borrower under the Credit Agreement are subject, among other conditions, to receipt by Agent of (1) a Guaranty, dated as of March 8, 2002, 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 the 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. C(1)-1 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: [(___) ___-____] C(1)-2 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. C(2)-1 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. 5.02(e)-1 EXHIBIT D ASSIGNMENT AND ASSUMPTION This Assignment and Assumption (the "Assignment and Assumption") is dated as of the Assignment Effective Date set forth below and is entered into by and between [Insert name of Assignor Lender] (the "Assignor Lender") and [Insert name of Assignee Lender] (the "Assignee Lender"). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended from time to time, the "Credit Agreement"), receipt of a copy of which is hereby acknowledged by the Assignee Lender. The Standard Terms and Conditions set forth in Attachment 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full. For an agreed consideration, the Assignor Lender hereby irrevocably sells and assigns to the Assignee Lender, and the Assignee Lender hereby irrevocably purchases and assumes from the Assignor Lender, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Assignment Effective Date inserted by the Agent as contemplated below (i) all of the Assignor Lender's rights and obligations in its capacity as a Lender under the Credit Agreement and the other Credit Documents to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor Lender under the respective facilities identified below (including without limitation any Letters of Credit or Guaranties included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor Lender (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other Credit Document or the Loans and other transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as, the "Assigned Interest"). Such sale and assignment is without recourse to the Assignor Lender and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor Lender. 1. Assignor Lender: ______________________________ 2. Assignee Lender: ________________________________ 3. Borrower: Flextronics International USA, Inc. 4. Agent: ABN AMRO Bank N.V., as agent under the Credit Agreement 5. Credit Agreement: The Credit Agreement dated as of March 8, 2002 among Borrower, each of the financial institutions from time to time listed in Schedule I thereto, Agent and Fleet National Bank, as co-lead arrangers, Deutsche Banc Alex. Brown Inc., Bank of America, N.A., Citicorp USA, Inc. and Fleet National Bank, as co-syndication agents, The Bank of Nova Scotia, as senior managing agent, BNP Paribas and Credit Suisse First Boston, as managing agents and Fleet National Bank as the issuer of letters of credit. 6. Assigned Interest: See Attachment 2. [7. Assignment Effective Date: ______________](1) Assignment Effective Date: _____________ ___, 20___ [TO BE INSERTED BY AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.] 1 To be completed if the Assignor Lender and the Assignee Lender intend that the minimum assignment amount is to be determined as of the Trade Date. The terms set forth in this Assignment and Assumption are hereby agreed to: ASSIGNOR LENDER [NAME OF ASSIGNOR] By:______________________________ Title: ASSIGNEE LENDER [NAME OF ASSIGNEE] By:______________________________ Title: [Consented to and](2) Accepted: [NAME OF AGENT], as Agent By_________________________________ Title: [Consented to:](3) [NAME OF RELEVANT PARTY] By________________________________ Title: 2 To be added only if the consent of the Agent is required by the terms of the Credit Agreement. 3 To be added only if the consent of the Borrower and/or other parties (e.g., Issuing Bank) is required by the terms of the Credit Agreement. 2 ATTACHMENT 1 TO ASSIGNMENT AND ASSUMPTION STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION 1. Representations and Warranties. 1.1 Assignor Lender. The Assignor Lender (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any Lien, or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Credit Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Documents or any collateral thereunder, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Credit Document or any Obligation or (iv) the performance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respective Obligations under any Credit Document. 1.2. Assignee Lender. The Assignee Lender (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Eligible Assignee Lender under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and after the Assignment Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.01 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Agent or any other Lender, and (v) if it is a lender not organized under the laws of the United States, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to Section 2.13(b) of the Credit Agreement, duly completed and executed by the Assignee Lender; and (b) agrees that (i) it will, independently and without reliance on the Agent, the Assignor Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Credit Documents are required to be performed by it as a Lender. 2. Payments. From and after the Assignment Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor Lender for amounts which have accrued to but excluding the Assignment Effective Date and to the Assignee Lender for amounts which have accrued from and after the Assignment Effective Date.(4) 4 The Agent should consider whether this method conforms to its systems. In some circumstances, the following alternative language may be appropriate: "From and after the Assignment Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee Lender whether such amounts have accrued prior to, on or after the Assignment Effective Date. The Assignor Lender and the Assignee Lender shall make all appropriate adjustments in payments by the Agent for periods prior to the Assignment Effective Date or with respect to the making of this assignment directly between themselves." D-1 3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of California. D-2 ATTACHMENT 2 TO ASSIGNMENT AND ASSUMPTION 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: -------------- $------------ $------------ $------------ $------------ -------------- $------------ $------------ $------------ $------------ -------------- $------------ $------------ $------------ $------------ -------------- $------------ $------------ $------------ $------------
D(1)-1 PART B [ASSIGNEE LENDER] Domestic Lending Office: [------------------------], [------------------------], [------------------------], Eurodollar Lending Office: [------------------------], [------------------------], [------------------------], Address for Notices: Wiring Instructions: D(2)-1 EX-21.01 5 f81104ex21-01.txt EXHIBIT 21.01 EXHIBIT 21.01 SUBSIDIARIES OF REGISTRANT
NAMES OF SUBSIDIARY JURISDICTION OF ORGANIZATION - ------------------- ---------------------------- Flextronics International GmbH Austria Flextronics International GmbH & Co. Nfg. KG Austria Hotman Handels GmbH Austria Team Logisitcs NV Belgium Chatham Technologies Do Brasil Ltd. Brazil Flextronics International da Amazonia Ltda. Brazil Flextronics International Equipamentos e Servicios Ltda. Brazil Flextronics International Industrial Ltda. Brazil Flextronics International Technologia Ltda. Brazil Micro Multek S.A. Brazil Ltda. Brazil Telecom Global Solutions International Brazil Flextronics (Canada) Ltd. Canada ICH Ltd. Caymen Islands Telcom Global Solutions Singapore Caymen Islands Telcom International Services Malaysia Caymen Islands Flextronics Enclosures Changzhou Ltd. China Flextronics Computer (Shekou) Ltd. China Flextronics Electronics (Shanghai) Co., Ltd. China Flextronics Industrial (Shenzhen) Co., Ltd. China Flextronics Industrial (Zhuhai) Co., Ltd. China Flextronics International (Beijing) Ltd. China Flextronics Plastic (Shenzhen) Ltd. China Flextronics Plastic (Zhuhai) Limited China Flextronics Plastics Shanghai Co. Ltd. China Flextronics Technology (Nanjing) Company Ltd. China Flextronics Technology (Shenzhen) Co., Ltd. China Flextronics Technology (Zhuhai) Limited China Multek China Limited China Multek Electronics (China) Ltd. China Multek Industries Limited (Zhuhai) China Multek Zhuhai Limited China Ojala Mech Equipment Co. Ltd. (Suzhou) China FLX Cyprus I Ltd. Cyprus FLX Cyprus II Ltd. Cyprus Flextronics International a.s. Czech Republic Flextronics International s.r.o. Czech Republic
Flextronics International Denmark A/S Denmark Flextronics Network Services Denmark A/S Denmark Flextronics Design Finland Oy Finland Flextronics Holding Finland Oy Finland Flextronics International Finland Oy Finland Ojala Yhytma Oy Finland Remix Oy Finland Chatham Technologies Holding France S.A.S. France Chatham Technologies Holding Grollleau S.A. France Flextronics Manufacturing France .SNC France Dovatron Verwaltungs GmbH Germany Flextronics Holding Germany GmbH Germany Flextronics International GmbH & Co., KG Germany Flextronics Network Services GmbH Germany Multek Technology Gmbh & Co., KG Germany Multilayer Technology Geschaeftsfuehrungs GmbH Germany Astron Group Limited Hong Kong Flextronics Manufacturing (HK) Ltd. Hong Kong Flextronics Plastics (Asia Pacific) Ltd. Hong Kong Multek Hong Kong Limited Hong Kong Flextronics Hungary Kft I Hungary Flextronics International Kft. Hungary JIT Electronics (Hungary) Kft. Hungary Flextronics Technologies (India) Private Limited India PT JIT Electronics Indonesia Indonesia Calmwaters Ltd. Ireland Flextronics International Ireland, Ltd. (Limerick) Ireland Flextronics LMS Limited Ireland Flextronics Logistics Limited Ireland Flextronics Research & Development Limited Ireland IEC Holdings Ireland Irish Express Cargo Technology Software Ltd. Ireland Irish Express Cargo, Ltd. Ireland Irish Express Logisitics Ltd. Ireland Lightning Metal Specialties EMF Limited Ireland Nakufreight Limited Ireland Stelton Ltd. Ireland Flextronics International Israel Ltd. Israel O.S. Orbit Semiconductor, Inc. Israel Flextronics Design S.r.l. - Monza Italy Flextronics Holding Italy Spa Italy

Flextronics International Avellino Spa Italy Flextronics International Aguascalientes (L) Ltd. Labuan Flextronics International Latin America (L), Ltd. Labuan Flextronics International Marketing (L) Ltd. Labuan Palo Alto Sales Group Labuan Flextronics - Consultadoria e Servicios Ltda. Madeira Flextronics (Malaysia) Sdn. Bhd. Malaysia Flextronics Industrial (Melaka) Sdn. Bhd. Malaysia Flextronics (Penang) Sdn. Bhd. Malaysia Flextronics Plastics (M) Sdn. Bhd. Malaysia Flextronics Technology (Shah Alam) Sdn. Bhd. Malaysia JIT Electronics (M) Sdn Bhd. Malaysia Jubilee Mould Manufacturing Sdn. Bhd. Malaysia Telcom Global Solutions Malaysia Sdn. Bhd. Malaysia Flextronics International Asia Pacific Limited Mauritius Multek Technologies Limited Mauritius Cumex Electronics S.A. de C.V. Mexico Flextronics Holding Puebla S. de R.L. de C.V. Mexico Flextronics Manufacturing Aguascalientes Mexico Flextronics Manufacturing Mex, S.A. de C.V. Mexico Flextronics Manufacturing Puebla, S. de R.L. de C.V. Mexico Flextronics Network Services Colombia S.A. Mexico Flextronics Network Services Mexico, SA de C.V. Mexico Flextronics Plastics de Mexico, S.A. de C.V. Mexico Flextronics Real Estate Puebla, S. de R.L. de C.V. Mexico Flextronics Servicios Mexico, S. de R.L. de C.V. Mexico IEC Integrated Services S.A. de C.V. Mexico IEC Logistics, S.A. de C.V. Mexico Parque de Technologia Electronica, S.A. de C.V. Mexico Chatham International Holdings B.V. Netherlands Flextronics International Central Europe B.V. Netherlands Flextronics International Europe B.V. Netherlands Flextronics International Holland B.V. Netherlands Flextronics International N.V. Netherlands Flextronics Network Services Holland Netherlands Irish Express Logistics B.V. Netherlands Palo Alto Products International B.V. Netherlands Flextronics International Norway A.S. Norway Flextronics Network Services Norway A.S. Norway Flextronics International Network Services Poland Sp.z.o.o Poland Flextronics International Poland Sp.z.o.o Poland Add Plus Precision Pte. Ltd. Singapore Flextronics International Holdings Pte. Ltd. Singapore Flextronics International Singapore Pte. Ltd. Singapore Flextronics Plastics (Singapore) Pte. Ltd. Singapore

Hi Skill Industries Pte. Ltd. Singapore JIT (China) Pte. Ltd. Singapore JIT Electronics Pte. Ltd. Singapore JIT Logistics Centre Pte. Ltd. Singapore Li Xin Enterprises Pte. Ltd. Singapore Li Xin Mould Manufacturing Pte. Ltd. Singapore Li Xin Plastics Industries Pte. Ltd. Singapore Li Xin Precision Engineering Pte. Ltd. Singapore Li Xin Technology Pte. Ltd. Singapore Palo Alto Products International (Pte.) Ltd. Singapore Raynet Technologies Singapore Telcom Global Solutions Signapore Pte. Ltd. Singapore Chatham Integrationn S.L. Spain Chatham Tech Espana S.L. Spain Evega AB Sweden Flextronics Group Sweden AB Sweden Flextronics Installation AB (Argo) Sweden Flextronics International Sweden AB Sweden Flextronics Network Services Sweden AB Sweden IEC Sweden AB Sweden Multek Sweden AB Sweden Neterna AB Sweden Orbiant Malardalen AB Sweden Orbiant Norra Holding AB Sweden Orbiant Service AB Sweden Orbiant Sodra Holding AB Sweden Orbiant Systems AB Sweden Relacom AB Sweden Swedform AB Sweden Swedform Holdings AB Sweden Swedform International Finance HB Sweden Swedform Metall AB Sweden Wireless Network Management AB Sweden Flextronics International (Switzerland) GmbH Switzerland Flextronics Technology (Switzerland) GmbH Switzerland Flextronics Technology Holding GmbH Switzerland Flextronics International (Taiwan) Limited Taiwan Flextronics International (Thailand) Ltd. Thailand Palo Alto Manufacturing (Thailand) Ltd. Thailand Express Cargo Forwarding Ltd. United Kingdom Flextronics International (UK) Limited United Kingdom Flextronics Design, S.D., Inc. United States - California

Flextronics Distribution, Inc. United States - California Flextronics Enterprise Solutions, Inc. United States - California Flextronics International USA, Inc. United States - California Flextronics Management Co., Inc. United States - California Flextronics Photonics Wave Optics, Inc. United States - California Flextronis Logistics USA, Inc. United States - California Irish Express Logistics, Inc. United States - California Marathon Business Park LLC United States - California Multilayer Technology, Inc. United States - California Chatham International - I, Inc. United States - Delaware Chatham International - II, Inc. United States - Delaware Flextronics Enclosures Systems, Inc. United States - Delaware Flextronics Enclosures, Inc. United States - Delaware Flextronics Holding USA, Inc. United States - Delaware Flextronics International Holding Corp. United States - Delaware Flextronics Mexico, Inc. United States - Delaware Flextronics USA, Inc. United States - Delaware KMOS Semiconductor, Inc. United States - Delaware OEM Press Systems, Inc. United States - Delaware Flextronics Coating, Inc. United States - Illinois Flextronics Metal Specialties, Inc. United States - Illinois Flextronics Tool & Design, Inc. United States - Illinois Flextronics Photonics Fico, Inc. United States - Massachusetts Flextronics Nevada, Inc. United States - Nevada Instrumentation Engineering United States - New Jersey EMC International, Inc. United States - North Carolina Flextronics International NC, Inc. United States - North Carolina Flextronics Photonics PPT, Inc. United States - Oregon Flextronics International PA, Inc. United States - Palo Alto Flextronics Semiconductor Design, Inc. United States - Tenessee Flextronics Network Services USA, Inc. United States - Texas Lightning Manufacturing Solutions LLC United States - Texas Flextronics Semiconductor, Inc. United States - Utah Flextronics Foreign Sales Corporation, Inc. United States - Virgin Islands Flextronics International Andina S.A. Venezuela

EX-23.01 6 f81104ex23-01.txt EXHIBIT 23.01 Exhibit 23.01 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report dated April 25, 2002 included in this Form 10-K for the year ended March 31, 2002, into Flextronics International Ltd.'s previously filed registration statements on Form S-8 Nos. 333-42255, 333-71049, 333-95189, 333-34016, 333-34698, 333-46166, 333-55528, 333-55850, 333-57680, 333-60270, 333-69452 and 333-75526 and on Form S-3 Nos. 333-87139, 333-87601, 333-94941, 333-41646, 333-46200, 333-46770, 333-55530, 333-56230, 333-60968, 333-68238, 333-70492. /s/ Arthur Andersen LLP San Jose, California April 25, 2002 EX-23.02 7 f81104ex23-02.txt EXHIBIT 23.02 Exhibit 23.02 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 333-70492, 333-68238, 333-87601, 333-87139, 333-94941, 333-41646, 333-46200, 333-46770, 333-55530, 333-56230 and 333-60968 of Flextronics International Ltd. on Forms S-3 and Registration Statement Nos. 333-69452, 333-95189, 333-71049, 333-42255, 333-34698, 333-34016, 333-46166, 333-55528, 333-55850, 333-57680 333-60270 and 333-75526 of Flextronics International Ltd. on Forms S-8 of our report dated March 28, 2000 (relating to the consolidated financial statements of The DII Group, Inc. and Subsidiaries for the year ended January 2, 2000 not presented separately herein) appearing in this Annual Report on Form 10-K of Flextronics International Ltd. for the year ended March 31, 2002. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP Denver, Colorado May 2, 2002 EX-99.01 8 f81104ex99-01.txt EXHIBIT 99.01 EXHIBIT 99.01 Flextronics International Ltd. 20 Changi South Lane Singapore 486123 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 50549-0306 Ladies and Gentlemen: Please be advised that Arthur Andersen LLP ("Andersen") has represented to us that its audit of our financial statements as of March 31, 2002 and 2001 and for each of the years in the three-year period ended March 31, 2002, was subject to Andersen's quality control system for the U.S. accounting and auditing practice to provide reasonable assurance that the engagement was conducted in compliance with professional standards and that there was appropriate continuity of Andersen personnel working on the audit, availability of national office consultation, and availability of personnel at foreign affiliates of Andersen to conduct the relevant portions of the audit. Very truly yours, FLEXTRONICS INTERNATIONAL LTD. By: /s/ Thomas J. Smach ------------------------------ Name: Thomas J. Smach Title: Vice President of Finance -----END PRIVACY-ENHANCED MESSAGE-----


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended March 31, 2002

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to


Singapore		Not Applicable
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
PART II
	Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk
	Item 8. Financial Statements and Supplementary Data
	13. Quarterly Financial Data (Unaudited)
	Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
PART III
	Item 10. Directors and Executive Officers of the Registrant
	Item 11. Executive Compensation
	Item 12. Security Ownership of Certain Beneficial Owners and Management
	Item 13. Certain Relationships and Related Transactions
PART IV
	Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II
Exhibit 4.04
Exhibit 4.05
Exhibit 21.01
Exhibit 23.01
Exhibit 23.02
Exhibit 99.01


		Page

PART I
Item 1.	Business		1
Item 2.	Properties		14
Item 3.	Legal Proceedings		14
Item 4.	Submission of Matters to a Vote of Security Holders		14
PART II
Item 5.	Market for the Registrant’s Common Equity and Related Stockholder Matters		15
Item 6.	Selected Financial Data		17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		31
Item 8.	Financial Statements and Supplementary Data		33
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		70
PART III
Item 10.	Directors and Executive Officers of the Registrant		70
Item 11.	Executive Compensation		71
Item 12.	Security Ownership of Certain Beneficial Owners and Management		72
Item 13.	Certain Relationships and Related Transactions		72
PART IV
Item 14.	Exhibits, Financial Statement Schedules and Reports on Form 8-K		72
Signatures			74


Customer		End Products

Alcatel SA		Cellular phones, accessories and telecommunications infrastructure
Ericsson Telecom AB		Cellular phones, business telecommunications systems and GSM infrastructure
Hewlett-Packard Company		Inkjet printers and storage devices
Microsoft Corporation		Computer peripherals and consumer electronics gaming products
Motorola, Inc.		Cellular phones, set-top boxes and telecommunications infrastructure
Nokia Corporation		Cellular phone accessories, cellular phone components, office phones and telecommunications infrastructure
Palm, Inc.		Electronic organizers
Philips Electronics		Consumer electronics products
Siemens AG		Cellular phones and telecommunications infrastructure
Sony Ericsson		Cellular phones
Xerox Corporation		Office equipment and components


		High		Low

FISCAL YEAR ENDED MARCH 31, 2002
	First Quarter	$	33.10	$	12.38
	Second Quarter		29.44		12.53
	Third Quarter		29.99		15.27
	Fourth Quarter		27.65		13.96
FISCAL YEAR ENDED MARCH 31, 2001
	First Quarter	$	38.06	$	22.38
	Second Quarter		44.91		32.38
	Third Quarter		43.00		21.38
	Fourth Quarter		40.13		14.25



		Fiscal Year Ended March 31,

		2002			2001			2000		1999			1998


		(In thousands, except per share amounts)
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Net sales		$	13,104,847		$	12,109,699		$	6,959,122	$	3,952,786		$	2,577,926
Cost of sales			12,224,969			11,127,896			6,335,242		3,512,229			2,246,135
Unusual charges(1)			464,391			510,495			7,519		77,286			8,869

	Gross profit		415,487			471,308			616,361		363,271			322,922
Selling, general and administrative			443,586			430,109			319,952		240,512			169,586
Goodwill and other intangibles amortization			12,615			63,541			41,326		29,156			10,487
Unusual charges(1)			110,035			462,847			3,523		2,000			12,499
Interest and other expense, net			91,853			67,115			69,912		52,234			21,480

	Income (loss) before income taxes		(242,602	)		(552,304	)		181,648		39,369			108,870
Provision for (benefit from) income taxes			(88,854	)		(106,285	)		23,080		(11,634	)		22,378

	Net income (loss)	$	(153,748	)	$	(446,019	)	$	158,568	$	51,003		$	86,492

Diluted earnings (loss) per share(2)		$	(0.31	)	$	(1.01	)	$	0.42	$	0.17		$	0.30

Shares used in computing diluted per share amounts(2)			489,553			441,991			383,119		329,352			297,307



	As of March 31,

	2002		2001		2000		1999		1998


	(In thousands)
CONSOLIDATED BALANCE SHEETS DATA:
Working capital	$	1,394,883	$	1,914,741	$	1,161,535	$	384,084	$	372,870
Total assets		8,644,699		7,571,655		5,134,943		2,783,707		1,862,088
Total long-term debt, excluding current portion		863,293		917,313		645,267		789,471		580,441
Shareholders’ equity		4,455,496		4,030,361		2,376,628		915,305		641,667


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*



		Fiscal Year Ended
		March 31,

		2002			2001			2000

Net sales			100.0	%		100.0	%		100.0	%
Cost of sales			93.3			91.9			91.0
Unusual charges			3.5			4.2			0.1

	Gross margin		3.2			3.9			8.9
Selling, general and administrative			3.4			3.6			4.6
Goodwill and other intangibles amortization			0.1			0.5			0.6
Unusual charges			0.8			3.8			0.1
Interest and other expense, net			0.8			0.6			1.0

	Income (loss) before income taxes		(1.9	)		(4.6	)		2.6
Provision for (benefit from) income taxes			(0.7	)		(0.9	)		0.3

	Net income (loss)		(1.2	)%		(3.7	)%		2.3	%


Facility closure costs:
	Severance		$	153,598		cash
	Long-lived asset impairment			163,724		non-cash
	Other exit costs			212,660		cash/non-cash

		Total facility closure costs		529,982
Other unusual charges				44,444		cash/non-cash

		Total Unusual Charges		574,426

Income tax benefit				(122,948	)

		Net Unusual Charges	$	451,478


															Total
			First			Second			Third			Fourth			Fiscal
			Quarter			Quarter			Quarter			Quarter			2001			Nature of
			Charges			Charges			Charges			Charges			Charges			Charges

Facility closure costs:
	Severance		$	62,487		$	5,677		$	3,606		$	60,703		$	132,473		cash
	Long-lived asset impairment			46,646			14,373			16,469			155,046			232,534		non-cash
	Other exit costs			24,201			5,650			19,703			160,368			209,922		cash/non-cash

		Total facility closure costs		133,334			25,700			39,778			376,117			574,929
Direct transaction costs:
	Professional fees			50,851			7,247			6,250			—			64,348		cash
	Other costs			22,382			15,448			248			—			38,078		cash/non-cash

		Total direct transaction costs		73,233			22,695			6,498			—			102,426

Motorola equity instrument				286,537			—			—			—			286,537		non-cash

Other unusual charges				—			—			—			9,450			9,450		non-cash

		Total Unusual Charges		493,104			48,395			46,276			385,567			973,342

Income tax benefit				(30,000	)		(6,000	)		(6,500	)		(110,000	)		(152,500	)

		Net Unusual Charges	$	463,104		$	42,395		$	39,776		$	275,567		$	820,842


					Long-Lived
					Asset			Other Exit
		Severance			Impairment			Costs			Total

Balance at March 31, 2000		$	—		$	—		$	—		$	—
Activities during the year:
	Provision		132,473			232,534			219,372			584,379
	Cash charges		(60,739	)		—			(23,116	)		(83,855	)
	Non-cash charges		—			(232,534	)		(100,913	)		(333,447	)

Balance at March 31, 2001			71,734			—			95,343			167,077
Activities during the year:
	Provision		153,598			163,724			212,660			529,982
	Cash charges		(133,453	)		—			(123,902	)		(257,355	)
	Non-cash charges		—			(163,724	)		(115,433	)		(279,157	)

Balances at March 31, 2002			91,879			—			68,668			160,547
	Less: current portion		87,896			—			56,707			144,603

	Accrued facility closure costs, net of current portion	$	3,983		$	—		$	11,961		$	15,944



	Year Ending March 31,

Contractual Obligations	2003		2004		2005		2006		2007		Thereafter		Total

Senior subordinated notes		—		—		—		—		—		778,269		778,269
Lines of credit		194,609		—		—		—		—		—		194,609
Capital lease obligations (including interest)		24,414		9,364		2,079		1,468		207		1,409		38,941
Other debt obligations		87,869		26,193		15,635		8,473		4,592		9,920		152,682
Operating lease obligations		107,966		73,769		40,955		27,114		21,057		108,366		379,227


Item 7A.	*Quantitative and Qualitative Disclosures About Market Risk*


	*Fiscal 2002*


	*Fiscal 2001*


	*Fiscal 2000*


	*Contractual Obligations and Commitments*



		Expected Fiscal Year of Maturity

		2003			2004			2005			2006			2007			Thereafter			Total			Fair Value


		(US$ equivalents in thousands)
Total debt, excluding capital lease obligations
	Fixed rate (US$)	$	10,457		$	10,814		$	3,469		$	2,649		$	1,868		$	653,982		$	683,239		$	378,585
	Average interest rate		9.42	%		9.52	%		9.57	%		9.61	%		9.61	%		9.64	%		9.56	%
	Fixed rate (€)		—			—			—			—			—		$	131,487		$	131,487		$	68,557
	Average interest rate																	9.75	%		9.75	%
	Variable rate (US$)	$	272,021		$	15,379		$	12,166		$	5,824		$	2,724		$	2,720		$	310,834		$	306,839
	Average interest rate		4.50	%		6.40	%		6.30	%		3.10	%		4.50	%		4.50	%		4.70	%



			Years Ended March 31,

			2002			2001			2000


			(In thousands, except per share amounts)
Net sales			$	13,104,847		$	12,109,699		$	6,959,122
Cost of sales				12,224,969			11,127,896			6,335,242
Unusual charges				464,391			510,495			7,519

		Gross profit		415,487			471,308			616,361
Selling, general and administrative				443,586			430,109			319,952
Goodwill and other intangibles amortization				12,615			63,541			41,326
Unusual charges				110,035			462,847			3,523
Interest and other expense, net				91,853			67,115			69,912

		Income (loss) before income taxes		(242,602	)		(552,304	)		181,648
Provision for (benefit from) income taxes				(88,854	)		(106,285	)		23,080

		Net income (loss)	$	(153,748	)	$	(446,019	)	$	158,568

Earnings (loss) per share:
	Basic		$	(0.31	)	$	(1.01	)	$	0.44

	Diluted		$	(0.31	)	$	(1.01	)	$	0.42

Shares used in computing per share amounts:
	Basic			489,553			441,991			356,338

	Diluted			489,553			441,991			383,119


														Accumulated
		Ordinary Shares						Additional			Retained			Other						Total
								Paid-in			Earnings			Comprehensive			Deferred			Shareholders’
		Shares			Amount			Capital			(Deficit)			Income (Loss)			Compensation			Equity


		(In thousands)
BALANCE AT MARCH 31, 1999			313,222	(1)	$	1,898	(1)	$	710,420	(1)	$	244,619		$	(32,138	)	$	(9,494	)	$	915,305
	Adjustment to conform fiscal year of pooled entity		—			—			—			(818	)		—			—			(818	)
	Impact of immaterial pooling of interests acquisitions		1,847			6			1,607			(2,062	)		—			—			(449	)
	Issuance of common stock		2,448			14			9,975			—			—			—			9,989
	Exercise of stock options		4,991			29			18,068			—			—			—			18,097
	Ordinary shares issued under Employee Stock Purchase Plan		2,118			13			8,822			—			—			—			8,835
	Tax benefit on employee stock plans		—			—			4,785			—			—			—			4,785
	Sale of ordinary shares in public offering, net of offering costs		67,018			391			1,158,382			—			—			—			1,158,773
	Conversion of convertible notes		14,792			86			84,988			—			—			—			85,074
	Dividends paid to former shareholders		—			—			—			(26,572	)		—			—			(26,572	)
	Deferred stock compensation		—			—			(1	)		—			—			361			360
	Amortization of deferred stock compensation		—			—			—			—			—			4,049			4,049
	Net income		—			—			—			158,568			—			—			158,568
	Change in unrealized gain (loss) on available for sale securities		—			—			—			—			59,704			—			59,704
	Foreign currency translation		—			—			—			—			(19,072	)		—			(19,072	)

BALANCE AT MARCH 31, 2000			406,436			2,437			1,997,046			373,735			8,494			(5,084	)		2,376,628
	Adjustment to conform fiscal year of pooled entities		6,882			40			4,056			(58,306	)		(3,787	)		—			(57,997	)
	Impact of immaterial pooling of interests acquisitions		728			4			2,482			(2,112	)		—			—			374
	Issuance of ordinary shares for acquisitions		10,825			63			365,422			—			—			—			365,485
	Exercise of stock options		11,405			66			69,504			—			—			—			69,570
	Ordinary shares issued under Employee Stock Purchase Plan		445			3			8,911			—			—			—			8,914
	Tax benefit on employee stock plans		—			—			11,537			—			—			—			11,537
	Sale of ordinary shares in public offering, net of offering costs		39,650			228			1,421,443			—			—			—			1,421,671
	Dividends paid to former shareholders		—			—			—			(190	)		—			—			(190	)
	Amortization of deferred stock compensation		—			—			—			—			—			5,084			5,084
	Issuance of equity instrument (Note 9)		—			—			386,537			—			—			—			386,537
	Net loss		—			—			—			(446,019	)		—			—			(446,019	)
	Change in unrealized gain (loss) on available for sale securities		—			—			—			—			(55,851	)		—			(55,851	)
	Foreign currency translation		—			—			—			—			(55,382	)		—			(55,382	)

BALANCE AT MARCH 31, 2001			476,371			2,841			4,266,938			(132,892	)		(106,526	)		—			4,030,361
	Issuance of ordinary shares for acquisitions		7,885			45			182,544			—			—			—			182,589
	Exercise of stock options		7,989			44			42,227			—			—			—			42,271
	Ordinary shares issued under Employee Stock Purchase Plan		767			4			15,407			—			—			—			15,411
	Sale of ordinary shares in public offering, net of offering costs		20,000			109			503,691			—			—			—			503,800
	Repurchase of equity instrument (Note 9)		—			—			(112,000	)		—			—			—			(112,000	)
	Net loss		—			—			—			(153,748	)		—			—			(153,748	)
	Change in unrealized gain (loss) on available for sale securities		—			—			—			—			(3,853	)		—			(3,853	)
	Change in derivative instruments		—			—			—			—			54			—			54
	Foreign currency translation		—			—			—			—			(49,389	)		—			(49,389	)

BALANCE AT MARCH 31, 2002			513,012		$	3,043		$	4,898,807		$	(286,640	)	$	(159,714	)	$	—		$	4,455,496


(1)	Restated to properly reflect treasury stock of The DII Group, Inc. (acquired in a pooling of interests transaction in fiscal 2001).



	March 31, 2002		March 31, 2001

					Unrealized		Fair
	Cost/Fair Value		Cost		Gains (Losses)		Value

Money market funds	$	450,236	$	344,499	$	—	$	344,499
Certificates of deposits		8,877		272		—		272
Corporate debt securities		—		5,264		—		5,264
Corporate equity securities		—		1,622		3,853		5,475

	$	459,113	$	351,657	$	3,853	$	355,510

Included in cash and cash equivalents	$	459,113	$	350,035	$	—	$	350,035
Included in other current assets		—		1,622		3,853		5,475

	$	459,113	$	351,657	$	3,853	$	355,510


	2002			2001

Machinery and equipment	$	1,399,601		$	1,209,422
Buildings		693,764			596,070
Leasehold improvements		98,521			168,764
Computer equipment and software		225,706			167,115
Other, including land		447,585			305,719

		2,865,177			2,447,090
Accumulated depreciation and amortization		(832,682	)		(618,649	)

Property, plant and equipment, net	$	2,032,495		$	1,828,441


	2002		2001

Raw materials	$	939,222	$	1,346,427
Work-in-process		221,846		301,875
Finished goods		131,162		138,753

	$	1,292,230	$	1,787,055


	2002		2001

Income taxes	$	17,869	$	33,777
Accrued payroll		199,658		182,217
Sales taxes and other taxes		119,144		20,797
Accrued expenses for unusual charges (see Note 9)		161,147		170,384
Other accrued liabilities		398,821		328,009

	$	896,639	$	735,184


		As of				As of
		April 1,		Goodwill		March 31,
		2001		Acquired		2002

Segments:
	Asia	$	186,515	$	55,181	$	241,696
	Americas		300,041		232,858		532,899
	Western Europe		346,873		196,785		543,658
	Central Europe		123,862		47,334		171,196

		$	957,291	$	532,158	$	1,489,449



		March 31, 2002							March 31, 2001

		Gross					Net		Gross					Net
		Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
		Amount		Amortization			Amount		Amount		Amortization			Amount

Intangibles:
	Contractual agreements	$	44,168	$	(9,081	)	$	35,087	$	17,304	$	(1,714	)	$	15,590
	Patents and trademarks		206		(93	)		113		7,625		(5,514	)		2,111
	Developed technologies		1,901		(512	)		1,389		1,275		(850	)		425
	Other acquired intangibles		31,276		(19,166	)		12,110		17,629		(9,662	)		7,967

Total		$	77,551	$	(28,852	)	$	48,699	$	43,833	$	(17,740	)	$	26,093


Fiscal Years:
	2003	$	16,077
	2004		13,507
	2005		7,295
	2006		6,284
	2007		4,980
	Thereafter		556

Total amortization expense		$	48,699


2003	$	282,478
2004		26,193
2005		15,635
2006		8,473
2007		4,592
Thereafter		788,189

	$	1,125,560


	Capital			Operating

2003	$	24,414		$	107,966
2004		9,364			73,769
2005		2,079			40,955
2006		1,468			27,114
2007		207			21,057
Thereafter		1,409			108,366

Minimum lease payments		38,941		$	379,227

Amount representing interest		(2,173	)

Present value of minimum lease payments		36,768
Current portion		(16,557	)

Capital lease obligations, net of current portion	$	20,211


			2002			2001

Deferred tax liabilities:
	Fixed assets		$	(16,323	)	$	—
	Intangible assets			—			(6,665	)
	Others			(3,555	)		(803	)

		Total deferred tax liabilities		(19,878	)		(7,468	)

Deferred tax assets:
	Fixed assets			—			15,855
	Intangible assets			8,944			—
	Deferred compensation			60,939			43,147
	Provision for inventory obsolescence			37,792			35,760
	Provision for doubtful accounts			10,963			8,782
	Net operating loss and other carryforwards			508,626			145,274
	Others			50,382			43,715

				677,646			292,533
Valuation allowances				(292,818	)		(102,792	)

		Total deferred tax asset	$	384,828		$	189,741

Net deferred tax asset			$	364,950		$	182,273

The net deferred tax asset is classified as follows:
	Current		$	51,954		$	42,595
	Long-term			312,996			139,678

		Total	$	364,950		$	182,273



	Options Outstanding				Options Exercisable
Range of
Exercise Prices	Amount		Price		Life		Amount		Price

$ 0.39 – $ 5.61		9,849,974	$	3.73		2.90		9,432,591	$	3.70
6.00 – 13.98		9,532,019		9.03		4.26		6,657,655		8.59
14.03 – 18.19		9,967,710		15.33		6.56		2,493,666		14.79
18.53 – 23.19		9,534,444		22.72		8.18		2,902,109		22.55
23.61 – 44.12		6,756,992		28.43		3.42		3,004,103		28.43

Total, March 31, 2002		45,641,139	$	15.00		5.16		24,490,124	$	11.43



		Fiscal Year Ended March 31, 2002									Fiscal Year Ended March 31, 2001

		First		Second			Third		Fourth		First			Second		Third		Fourth


		(In thousands, except per share amounts)
Net sales		$	3,110,598	$	3,244,918		$	3,453,039	$	3,296,292	$	2,676,974		$	3,078,998	$	3,239,293	$	3,114,434
Cost of sales			2,878,803		3,036,169			3,226,461		3,083,536		2,470,408			2,829,406		2,964,034		2,864,048
Unusual charges			—		439,448			—		24,943		83,721			24,268		38,550		363,956

	Gross profit (loss)		231,795		(230,699	)		226,578		187,813		122,845			225,324		236,709		(113,570	)
Selling, general and administrative			108,816		105,488			109,341		119,941		94,918			107,931		113,736		113,524
Goodwill and other intangibles amortization			2,256		3,802			3,053		3,504		9,370			12,505		15,141		26,525
Unusual charges			—		76,647			—		33,388		409,383			24,127		7,726		21,611
Interest and other expense (income), net			22,366		22,184			22,746		24,557		(4,199	)		22,359		22,092		26,863

	Income (loss) before income taxes		98,357		(438,820	)		91,438		6,423		(386,627	)		58,402		78,014		(302,093	)
Provision for (benefit from) income taxes			10,029		(109,015	)		9,449		683		(16,065	)		8,475		10,232		(108,927	)

	Net income (loss)	$	88,328	$	(329,805	)	$	81,989	$	5,740	$	(370,562	)	$	49,927	$	67,782	$	(193,166	)

Diluted earnings (loss) per share		$	0.17	$	(0.69	)	$	0.16	$	0.01	$	(0.88	)	$	0.10	$	0.14	$	(0.41	)

Shares used in computing diluted per share amounts			511,987		481,381			507,942		526,797		418,857			480,801		478,657		468,069


Item 9.	*Changes In and Disagreements With Accountants on Accounting and Financial Disclosure*


Item 10.	*Directors and Executive Officers of the Registrant*


Name	Age		Position

Michael E. Marks		51	Chairman of the Board and Chief Executive Officer
Robert R. B. Dykes		52	President, Systems Group and Chief Financial Officer
Ronny Nilsson		53	President, Flextronics Network Services
Michael McNamara		45	Chief Operating Officer
Ash Bhardwaj		38	President, Asia Pacific Operations and Senior Vice President of Strategic Accounts
Humphrey Porter		54	President, Flextronics Europe
Steven C. Schlepp		45	President, Multek
Ronald R. Snyder		45	President, Flextronics Design Services
Thomas J. Smach		41	Vice President of Finance
Michael J. Moritz		47	Director
Richard L. Sharp		55	Director
Patrick Foley		70	Director
Chuen Fah Alain Ahkong		53	Director
Goh Thiam Poh Tommie		55	Director



			Incorporated By Reference

Exhibit						Filing	Exhibit		Filed
No.		Exhibit	Form		File No.	Date	No.		Herewith

	2.01	Exchange Agreement dated as of June 11, 1999 among the Registrant, Flextronics Holding Finland Oyj, Kyrel EMS Oyj and Seppo Parhankangas		10-K	000-23345	06-29-99		2.3
	2.02	Agreement and Plan of Merger dated November 22, 1999 among the Registrant, Slalom Acquisition Corp. and The DII Group, Inc.*		8-K	000-23354	12-06-99		2.1
	2.03	Agreement and Plan of Reorganization dated July 31, 2000 among the Registrant, Chatham Acquisition Corporation, and Chatham Technologies, Inc.*		8-K	000-23354	09-15-00		2.01
	2.04	Merger Agreement dated August 10, 2000 among the Registrant, JIT Holdings Limited, Goh Thiam Poh Tommie and Goh Mui Teck William, as amended.*		S-3	333-46770	09-27-00		2.4
	2.05	Agreement and Plan of Reorganization dated August 31, 2000 among the Registrant, Lightning Metal Acquisition Corp., Coating Acquisition Corp., Lightning Tool Acquisition Corp., Lightning Metal Specialties, Incorporated, Coating Technologies, Inc., Lightning Tool and Design, Inc., Lightning Metal Specialties E.M.F., Ltd., Lightning Manufacturing Solutions-Europe, Ltd., Lightning Manufacturing Solutions Texas, L.L.C., Lightning Logistics, L.L.C., Papason, L.L.C., 200 Scott Street, L.L.C., 80 Scott Street, L.L.C., 230 Scott Street, L.L.C., 1350 Lively Blvd, L.L.C., D.A.D. Partnership, S.O.N. Partnership, S.O.N. II Partnership, and shareholders and members of such companies.*		S-3	333-46200	09-20-00		2.4
	2.06	Exchange Agreement dated January 14, 2000, among the Registrant, Palo Alto Products International Pte. Ltd., and the shareholders of Palo Alto Products International Pte. Ltd., Palo Alto Manufacturing (Thailand) Ltd., and Palo Alto Plastic (Thailand) Ltd.		10-K	000-23354	06-29-01		2.06
	3.01	Memorandum and New Articles of Association of the Registrant		10-Q	000-23354	02-09-01		3.1
	4.01	Indenture dated as of October 15, 1997 between Registrant and State Street Bank and Trust Company of California, N.A., as trustee		8-K	000-23354	10-22-97		10.1